What changed in this filing

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Item 1A. Risk Factors

2026-03-19 compared with 2025-03-26 · 503 added, 471 removed, 949 unchanged (51% of the section changed)

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Some of the more significant challenges include the following:

have a limited operating history and may not be able to successfully operate our business or execute our business

have a limited operating history and may not be able to successfully operate our business or execute our business plan.

have a history of losses and anticipate that we will continue to incur significant losses for the foreseeable future.

may need to raise additional capital before we can expect to become profitable from sales of our solutions.

This additional capital

may not be available on acceptable terms, or at all.

Failure to obtain this necessary capital when needed may force us to delay,

limit or terminate our product development efforts or other operations.

expect that we will need to raise additional capital before we can expect to become profitable from sales of our solutions.

This additional

capital may not be available on acceptable terms, or at all.

Failure to obtain the necessary capital when needed may force us to

delay, limit or terminate our product development efforts or other operations.

is difficult to forecast our future performance, which may cause our financial results to fluctuate unpredictably.

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sales cycles are long and unpredictable and require considerable time and expense before executing a customer agreement, which may

make it difficult to predict when, if at all, we will obtain new customers and when we will generate revenue from those

future growth and success are highly dependent upon large-scale adoption of the Odysight TruVision solution in the markets

in which we compete.

If we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships

with business targets and third parties to perform these services, we may not be successful in commercializing our products and technology.

make it difficult to predict when, if at all, we will obtain new customers and when we will generate revenue from those customers.

future growth and success are highly dependent upon large-scale adoption of our solutions in the markets in which we compete.

we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets

and third parties to perform these services, we may not be successful in commercializing our products and technology.

to government entities and highly regulated organizations are subject to a number of challenges and risks.

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Such limitations may prevent us from selling certain

products to third parties without the prior consent of the customers, and may limit our ability to use certain elements of intellectual

products to third parties without prior consent of the customers, and may limit our ability to use certain elements of intellectual

property developed by funds received under these agreements.

If we are unable to ensure that the Odysight TruVision solution interoperates with a variety of hardware and software

platforms that are developed by others, including our partners, we may become less competitive and our business may be harmed.

If we fail to scale our business operations or otherwise manage our future growth effectively as we attempt to grow

our company, we may not be able to produce, market, service and sell the Odysight TruVision solution successfully.

We incorporate artificial intelligence, or AI, and machine learning, or ML, into some of our products.

This technology

is new and developing and may present both compliance and reputational risks.

we are unable to ensure that our solutions interoperate with a variety of hardware and software platforms that are developed by others,

including our partners, we may become less competitive and our business may be harmed.

we fail to scale our business operations or otherwise manage our future growth effectively as we attempt to grow our company, we

may not be able to produce, market, service and sell our solutions successfully.

incorporate artificial intelligence, or AI, and machine learning, or ML, into some of our products.

This technology is new and developing

and may present both compliance and reputational risks.

to make competitive technological advances will put us at a disadvantage and may lead to negative operational and financial outcomes.

We have four customers that account for a substantial portion of our revenues, and our result of our operation could

be harmed were we to lose these customers or receive lower than expected purchase orders.

have three customers that account for a substantial portion of our revenues, and the results of our operations could be harmed were

we to lose these customers or receive lower than expected purchase orders.

reliance on third-party suppliers for most of the components of our products could harm our ability to meet demand for our products

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may not be able to manage our strategic partners effectively.

face competition from providers of sensing solutions.

face competition from providers of sensing, PdM and CBM solutions.

If we cannot successfully compete with new or existing technologies or future

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inability to retain key members of our senior management could impair our future success.

The estimates and forecasts of market opportunity and market

growth included in this Annual Report may prove to be inaccurate, and we cannot assure you our business will grow at similar rates,

or at all, or that we will be able to address, fully or at all, the markets we believe represent our market opportunity.

Adverse conditions in the aerospace, industrial, transportation,

energy and medical markets or the global economy more generally could have adverse effects on our results of operations.

Our business could be adversely affected if we fail to

maintain product quality and product performance at an acceptable cost or if we incur significant losses, increased costs or harm

to our reputation or brand as a result of product liability claims or product recalls.

estimates and forecasts of market opportunity and market growth included in this Annual Report may prove to be inaccurate, and we

cannot assure you our business will grow at similar rates, or at all, or that we will be able to address, fully or at all, the markets

we believe represent our market opportunity.

conditions in the aerospace, industrial, transportation and energy markets or the global economy more generally could have adverse

effects on our results of operations.

business could be adversely affected if we fail to maintain product quality and product performance at an acceptable cost or if we

incur significant losses, increased costs or harm to our reputation or brand as a result of product liability claims or product recalls.

are subject to, and must remain in compliance with, numerous laws and governmental regulations across various countries concerning

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with other unique requirements relating to these matters.

and our third-party vendors face cybersecurity risks and may incur increasing costs in an

effort to mitigate those risks, and if we fail to prevent data security breaches, there may

be damage to our reputation, material financial penalties and legal liability, which would

materially adversely affect our business, results of operations and financial condition.

and our third-party vendors face cybersecurity risks and may incur increasing costs in an effort to mitigate those risks, and if

we fail to prevent data security breaches, there may be damage to our reputation, material financial penalties and legal liability,

which would materially adversely affect our business, results of operations and financial condition.

we are unable to obtain, maintain and protect effective intellectual property rights for our products, we may not be able to compete

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you paid and may lose all or part of your investment.

Sales of a substantial number of our shares of common stock

in the public market by our existing shareholders could cause our share price to fall.

of a substantial number of our shares of common stock in the public market by our existing shareholders could cause our share price

the ownership of our common stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing

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For the years ended December 31, 2025 and 2024, we had net losses of $17 million and $11.8 million, respectively.

have devoted substantially all of our financial resources to the Odysight TruVision solution.

We have financed our operations

primarily through the issuance of equity securities.

We do not expect to be profitable for the foreseeable future as we invest in our

business, build capacity and ramp up operations, and we cannot assure you that we will ever achieve or be able to maintain profitability

in the future.

have devoted substantially all of our financial resources to the development of our solutions.

We have financed our operations primarily

through the issuance of equity securities.

We do not expect to be profitable for the foreseeable future as we invest in our business,

build capacity and ramp up operations, and we cannot assure you that we will ever achieve or be able to maintain profitability in the

Failure to become profitable would materially and adversely affect the value of your investment.

The amount of our future

net losses will depend, in part, on the rate of penetration in the markets we are targeting, the rate of our future expenditures and

our continued ability to obtain funding through the issuance of our securities, strategic collaborations or grants.

We anticipate that

our expenses will increase substantially if and as we:

The amount of our future net

losses will depend, in part, on the rate of penetration in the markets we are targeting, the rate of our future expenditures and our

continued ability to obtain funding through the issuance of our securities, strategic collaborations or grants.

We anticipate that our

expenses will increase substantially if and as we:

the development of our products for a wider portfolio of products;

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additional infrastructure to support our operations as a public company and our product development.

may need to raise additional capital before we can expect to become profitable from sales of Odysight solutions.

expect that we will need to raise additional capital before we can expect to become profitable from sales of our solutions.

This additional

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to meet our anticipated cash requirements over at least the next 12 months from the date of this Annual Report.

We may need to raise

additional capital before we can expect to become profitable from sales of Odysight solutions and may raise additional

capital to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons.

addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional

funds sooner than planned.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely

affect our ability to develop and commercialize our products.

In addition, we cannot guarantee that future financing will be available

in sufficient amounts or on terms acceptable to us, if at all.

Moreover, the terms of any financing may adversely affect the holdings

or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such

issuance, may cause the market price of our shares of common stock to decline.

We nevertheless

expect that we will need to raise additional capital before we can expect to become profitable from sales of our solutions and may raise

additional capital to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other

In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need

to seek additional funds sooner than planned.

Any additional fundraising efforts may divert our management from their day-to-day activities,

which may adversely affect our ability to develop and commercialize our products.

In addition, we cannot guarantee that future financing

will be available in sufficient amounts or on terms acceptable to us, if at all.

Moreover, the terms of any financing may adversely affect

the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility

of such issuance, may cause the market price of our shares of common stock to decline.

incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to restrictive covenants,

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is difficult to forecast our future performance, which may cause our financial results to fluctuate unpredictably.

While in 2023 we had one

major customer, a Fortune 500 medical company, which accounted for approximately 98% of our revenues, for 2024 we had four customers

which accounted for approximately 99% of our revenues in the aggregate.

Our first revenues from the predictive maintenance and condition-based

monitoring markets were generated in 2023.

As of the date of this Annual Report, we have not received a purchase order from the Fortune

500 medical company customer with respect to 2025, and we do not expect to receive such purchase order for 2025, or if we do, it may

be substantially lower in quantity than our 2024 purchase order from this customer.

As this customer has accounted for the vast majority

of our revenues to date, a lack of a sufficient order may lead to a significant decrease in our revenues in the near term, which in turn

could result in us engaging in certain cost-cutting measures.

Furthermore, because we do not yet have an established commercial operating

history, and because the market for our products may rapidly evolve, it is hard for us to predict our future performance.

it may be difficult to evaluate our business and prospects and any predictions about our future performance may not be accurate.

2024 and 2025, we had three customers that accounted for approximately 98% of our revenues in the aggregate.

A lack of a sufficient

orders from new and existing customers may lead to a significant decrease in our revenues in the near term, which in turn could

result in us engaging in certain cost-cutting measures.

Furthermore, because of our short commercial operating history, and because

the market for our products may rapidly evolve, it is hard for us to predict our future performance.

Therefore, it may be difficult

to evaluate our business and prospects and any predictions about our future performance may not be accurate.

may not be realized or may not result in revenue or profit.

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price to decline.

future growth and success are highly dependent upon large-scale adoption of the Odysight TruVision solution in the markets we compete.

future growth and success are highly dependent upon large-scale adoption of our solutions in the markets in which we compete.

we are establishing ourselves as a leading vision-based sensor technology company, our future growth depends upon large-scale adoption

of the Odysight TruVision solution.

Although we anticipate continued market penetration for the Odysight TruVision solution,

there is no guarantee of such future demand, or that our products will remain competitive.

If our technology and products or any future

product that we may develop does not achieve an adequate level of acceptance, or does not garner significant commercial appeal, we may

not generate significant revenue and may not become profitable.

of our solutions.

Although we anticipate continued market penetration for our solutions, there is no guarantee of such future

demand, or that our products will remain competitive.

If our technology and products or any future product that we may develop does not

achieve an adequate level of acceptance, or does not garner significant commercial appeal, we may not generate significant revenue and

may not become profitable.

The degree of market acceptance will depend on a number of factors, including:

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to educate the marketplace may require more resources than are required by conventional sensing technologies, and these resources may

not available to us.

not be available to us.

we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets

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products in the United States or elsewhere in the world.

There are risks involved with establishing our own sales, marketing, and distribution

capabilities.

For example, recruiting and training a sales force could be expensive and time consuming and could delay any product launch.

This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

There are risks involved with establishing our own sales,

marketing, and distribution capabilities.

For example, recruiting and training a sales force could be expensive and time consuming and

could delay any product launch.

This may be costly, and our investment would be lost if we cannot retain or reposition our sales and

marketing personnel.

that may inhibit our efforts to commercialize any future products on our own include:

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sell into the government sector.

Government demand and payment for the Odysight TruVision solution is affected by public sector

budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our products.

Government demand and payment for our solutions is affected by public sector budgetary cycles and funding

authorizations, with funding reductions or delays adversely affecting public sector demand for our products.

governmental and highly regulated entities may demand contract terms that differ from our standard arrangements and may be less favorable

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prospects could be materially and adversely affected.

agreement with one of our customers includes exclusivity provisions, and other agreements include limitations on our ability to sell

products to other customers, and restrictions on the use of intellectual property.

Such limitations may prevent us from selling certain

products to third parties without prior consent of the customers, and may limit our ability to use certain elements of intellectual property

developed by funds received under these agreements.

of our commercial agreements with a customer includes exclusivity provisions affecting our ability to sell the underlying product to

third parties in the same segment, while certain other commercial agreements, with the Israeli Ministry of Defense for example, include

agreement with one of our customers includes exclusivity provisions, and other agreements include limitations on our ability

to sell products to other customers, and restrictions on the use of intellectual property.

Such limitations may prevent us from selling

certain products to third parties without prior consent of the customers, and may limit our ability to use certain elements of intellectual

property developed by funds received under these agreements.

commercial agreements with one of our customers includes exclusivity provisions affecting our ability to sell the underlying product

to third parties in the same segment, while certain other commercial agreements, with the Israeli Ministry of Defense for example, include

restrictions on the sale of the products developed under these agreements, and limitations on the use of certain elements of intellectual

Such agreements may also require payment of royalties to the Ministry of Defense in the event of sale of such products to third

believe that such exclusivity provisions and limitations promote the development, trust and help facilitate the penetration of innovative

believe that such exclusivity provisions and limitations promote trust with our customers and help facilitate the penetration of innovative

new products and solutions.

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our future growth.

we are unable to ensure that the Odysight TruVision solution interoperates with a variety of hardware and software platforms that are

developed by others, including our partners, we may become less competitive and our business may be harmed.

Odysight TruVision solution must integrate with a variety of hardware and software platforms, and we need to continuously modify

and enhance the Odysight TruVision solution to adapt to changes in hardware and software technologies.

Third-party services and

products are constantly evolving, and we may not be able to modify Odysight TruVision solution to assure their compatibility with

that of other third parties as they continue to develop or emerge in the future, or we may not be able to make such modifications in

a timely and cost-effective manner.

In addition, some of our competitors may be able to disrupt the operations or compatibility of the

Odysight TruVision solution with their products or services, or exert strong business influence on our ability to, and terms on

which we, operate the Odysight TruVision solution.

Should any of our competitors modify their products or standards in a manner

that degrades the functionality of the Odysight TruVision solution or gives preferential treatment to our competitors or competitive

products, whether to enhance their competitive position or for any other reason, the interoperability of the Odysight TruVision

solution with these products could decrease and our business, results of operations and financial condition would be harmed.

not permitted or able to integrate with these and other third-party applications in the future, our business, results of operations and

financial condition would be harmed.

we are unable to ensure that our solutions interoperate with a variety of hardware and software platforms that are developed by others,

including our partners, we may become less competitive and our business may be harmed.

solutions must integrate with a variety of hardware and software platforms, and we need to continuously modify and enhance our solutions

to adapt to changes in hardware and software technologies.

Third-party services and products are constantly evolving, and we may not

be able to modify our solutions to assure their compatibility with that of other third parties as they continue to develop or emerge

in the future, or we may not be able to make such modifications in a timely and cost-effective manner.

In addition, some of our competitors

may be able to disrupt the operations or compatibility of our solutions with their products or services, or exert strong business influence

on our ability to, and terms on which we operate our solutions.

Should any of our competitors modify their products or standards in

a manner that degrades the functionality of our solutions or gives preferential treatment to our competitors or to competitive products,

whether to enhance their competitive position or for any other reason, the interoperability of our solutions with these products could

decrease, and our business, results of operations and financial condition would be harmed.

If we are not permitted or are unable to integrate

with these or with other third-party applications in the future, our business, results of operations and financial condition would be

we fail to scale our business operations or otherwise manage our future growth effectively as we attempt to grow our company, we may

not be able to produce, market, service and sell the Odysight TruVision solution successfully.

not be able to produce, market, service and sell our solutions successfully.

intend to expand our operations significantly, which will require hiring, retaining and training new personnel, controlling expenses,

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automated, low-cost manufacturing capabilities and processes, and reliable sources of component supply, that will enable us to meet the

quality, price, engineering, design and production standards, as well as the production volumes, required to successfully market the

Odysight TruVision solution as our operations expand.

Any failure to effectively manage our growth could materially and adversely

affect our business, prospects, financial condition, results of operations and cash flows.

quality, price, engineering, design and production standards, as well as the production volumes, required to successfully market our

solutions as our operations expand.

Any failure to effectively manage our growth could materially and adversely affect our business,

prospects, financial condition, results of operations and cash flows.

incorporate artificial intelligence, or AI, and machine learning, or ML, into some of our products.

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If our AI models are incorrectly designed or implemented or do not receive pictures or visual data, they may produce

inaccurate or unreliable results, negatively impacting the performance and reliability of the Odysight TruVision solution.

effectiveness of our AI models depends on the quality and completeness of the data used for training.

If the data is incomplete, inadequate,

or biased, it could lead to suboptimal model performance, impairing the functionality of the Odysight TruVision solution.

malfunction or unexpected behavior in our AI-driven systems could disrupt our operations, leading to increased downtime and higher maintenance

costs for our customers, and potential loss of revenue.

Additionally, failures in the performance of our AI models could damage our reputation,

erode customer trust, and result in loss of business and negative publicity.

inaccurate or unreliable results, negatively impacting the performance and reliability of our solutions.

The effectiveness of our AI

models depends on the quality and completeness of the data used for training.

If the data is incomplete, inadequate, or biased, it could

lead to suboptimal model performance, impairing the functionality of our solutions.

Any malfunction or unexpected behavior in our AI-driven

systems could disrupt our operations, leading to increased downtime and higher maintenance costs for our customers, and potential loss

Additionally, failures in the performance of our AI models could damage our reputation, erode customer trust, and result

in loss of business and negative publicity.

to make competitive technological advances will put us at a disadvantage and may lead to negative operational and financial outcomes.

technological changes in the market for the Odysight TruVision solution could make our products less competitive or obsolete,

either generally or for particular applications.

Our future success will depend upon our ability to develop and introduce a variety of

new capabilities and enhancements to our existing product and service offerings, as well as introduce a variety of new product offerings,

to address the changing needs of the markets in which it offers products.

Delays in introducing the Odysight TruVision solution

and enhancements, the failure to choose correctly among technical alternatives or the failure to offer innovative products or enhancements

at competitive prices may cause existing and potential customers to purchase our competitors’ products.

If we are unable to devote

adequate resources to develop new products or cannot otherwise successfully develop new products or enhancements that meet customer requirements

on a timely basis, our products may no longer be as marketable as compared to competitors and we could lose a substantial portion of

our market share in those products, resulting in a potential decline in our revenue and greater operating losses.

technological changes in the market for our solutions could make our products less competitive or obsolete, either generally or for particular

applications.

Our future success will depend upon our ability to develop and introduce a variety of new capabilities and enhancements

to our existing product and service offerings, as well as introduce a variety of new product offerings, to address the changing needs

of the markets in which it offers products.

Delays in introducing solutions and enhancements, the failure to choose correctly among technical

alternatives or the failure to offer innovative products or enhancements at competitive prices may cause existing and potential customers

to purchase our competitors’ products.

If we are unable to devote adequate resources to develop new products or cannot otherwise

successfully develop new products or enhancements that meet customer requirements on a timely basis, our products may no longer be as

marketable as compared to competitors and we could lose a substantial portion of our market share in those products, resulting in a potential

decline in our revenue and greater operating losses.

addition, research and development activities are inherently uncertain, and as such, we might encounter practical difficulties in commercializing

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condition would be materially and adversely affected.

have four customers that account for a substantial portion of our revenues, and our result of our operation could be harmed were we

have three customers that account for a substantial portion of our revenues, and the results of our operations could be harmed were we

to lose these customers or receive lower than expected purchase orders.

While in 2023 we had one

major customer which accounted for approximately 98% of our revenues, in 2024 we had four customers which accounted for approximately

99% of our revenues in the aggregate.

Our first revenues from the predictive maintenance and condition-based monitoring markets were

generated in 2023.

As of the date of this Annual Report, we have not received a purchase order from the Fortune 500 medical company customer

with respect to a 2025, and we do not expect to receive such purchase order for 2025, or if we do, it may be substantially lower in quantity

than our 2024 purchase order from this customer.

As this customer has accounted for the vast majority of our revenues to date, a lack

of a sufficient order may lead to a significant decrease in our revenues in the near term, which in turn could result in us engaging

in certain cost-cutting measures.

In addition, if we lose this or any of our other customers or we receive lower than expected purchase

orders, our revenues would decline significantly, and our business would be harmed.

2024 and 2025, we had three customers that accounted for approximately 98% of our revenues in the aggregate.

A lack of a sufficient orders

from new and existing customers may lead to a significant decrease in our revenues in the near term, which in turn could result in us

engaging in certain cost-cutting measures.

In addition, if we lose this or any of our other customers or we receive lower than expected

purchase orders, our revenues would decline significantly, and our business would be harmed.

reliance on third-party suppliers for most of the components of our products could harm our ability to meet demand for our products in

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components from single source suppliers.

For example, the number of suppliers engaged in the provision of miniature video sensors which

are suitable for our complementary metal-oxide semiconductor, or CMOS, technology that we utilize mainly in the medical domain is very

As we do not have a direct general contract in place with these suppliers, there is no contractual commitment on the part of

such suppliers for any set quantity of such sensors.

In the event of an extended failure of a supplier in this area, it is possible that

we could experience an interruption in supply until we established new sources or, in some cases, implemented alternative processes and

any inability or delay in finding a suitable replacement supplier could negatively affect our business, financial condition, results

of operations and reputation.

In the event of an extended failure of one or more of these suppliers, it is possible

that we could experience an interruption in supply until we established new sources or, in some cases, implemented alternative processes.

Any inability or delay in finding a suitable replacement supplier or suppliers could negatively affect our business, financial condition,

results of operations and reputation.

However, we perform periodic supply chain risk analysis and seek to procure

required components to enable consistency in production of our solutions.

are also subject to other risks inherent in the manufacturing of our products and their supply chain, including industrial accidents,

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These parties are often large, established companies.

Negotiating and performing under these arrangements involves significant

Negotiation of and performance under these arrangements involves significant

time and expense, and we may not have sufficient resources to devote to our strategic alliances, particularly those with companies that

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any or all partnerships or may not realize them in the time frame expected.

face competition from providers of sensing solutions.

If we cannot successfully compete with new or existing technologies or future developed

products, our marketing and sales will suffer, and we may never be profitable.

face competition from providers of sensing, PdM and CBM solutions.

If we cannot successfully compete with new or existing technologies

or future developed products, our marketing and sales will suffer, and we may never be profitable.

among providers of sensing solutions is characterized by extensive research and development efforts and rapid technological progress.

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future success depends substantially on the continued services of our executive officers and certain other key employees, including,

but not limited to, Yehu Ofer, our Chief Executive Officer, Einav Brenner, our Chief Financial Officer, Eli Israeli, our Chief Technology

Officer and Jacob Avinu, our Senior VP of Product Portfolio.

If one or more of our executive officers were unable or unwilling to continue

in their present position, we might not be able to replace them easily or at all.

In addition, if any of our executive officers joins

a competitor or forms a competing company, we may lose experience, know-how, key professionals and staff members as well as business

Some of these executive officers could develop vision-based sensor technologies that could compete with and take customers

and market share away from us.

Should we lose the services of any member of our senior management team or key personnel, replacing such

personnel could involve a prolonged search, diverting management time and attention, and we may not be able to locate and hire a qualified

We do not carry key-man insurance to mitigate the financial effect of losing the services of any member of our management

but not limited to, Yehu Ofer, our Chief Executive Officer, Einav Brenner, our Chief Financial Officer, and Eilam Sagi, our

Chief Business Officer.

If one or more of our executive officers were unable or unwilling to continue in their present position, we might

not be able to replace them easily or at all.

In addition, if any of our executive officers joins a competitor or forms a competing company,

we may lose experience, know-how, key professionals and staff members as well as business partners.

Some of these executive officers

could develop vision-based sensor technologies that could compete with and take customers and market share away from us.

Should we lose

the services of any member of our senior management team or key personnel, replacing such personnel could involve a prolonged search,

diverting management time and attention, and we may not be able to locate and hire a qualified replacement.

We do not carry key-man insurance

to mitigate the financial effect of losing the services of any member of our management team.

rely on highly skilled personnel, and if we are unable to attract, retain or motivate qualified personnel, we may not be able to operate

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included in this Annual Report may not be indicative of our future growth.

business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the

ongoing conflict between Russia and Ukraine.

global economy has been negatively impacted by the military conflict between Russia and Ukraine.

Furthermore, governments in the United

States, United Kingdom, European Union and Australia, among others, have each imposed export controls on certain products and/or financial

and economic sanctions relating to Russia, including on certain industry sectors and parties in Russia.

Although we have no operations

in Russia or Ukraine, we believe some shortages in materials, increased costs for raw material and other supply chain issues are at least

business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by

geopolitical events, including the ongoing conflicts in the Middle East and between Russia and Ukraine.

business is affected by the economic health of the global economy.

If the conditions in the global economy remain uncertain or

continue to be volatile, or if they deteriorate, including as a result of the impact of military conflicts, such as the war between

Russia and Ukraine and ongoing conflicts in the Middle East, terrorism or other geopolitical events, our business, operating results and

financial condition may be adversely affected.

Furthermore, governments in the United States, United Kingdom, European

Union and Australia, among others, have each imposed export controls on certain products and/or financial and economic sanctions

relating to Russia, including on certain industry sectors and parties in Russia.

Although we have no operations in Russia or

Ukraine, we believe some shortages in materials, increased costs for raw material and other supply chain issues are at least

partially attributable to the negative impact of the Russia-Ukraine military conflict on the global economy.

Further escalation of geopolitical

tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among

other things, cyberattacks, additional supply disruptions, lower consumer demand and changes to foreign exchange rates and financial

markets, any of which may adversely affect our business and supply chain.

In addition, the effects of the ongoing conflict could heighten

many of our known risks described herein under “ Risk Factors .”

Further escalation of

geopolitical tensions related to military conflicts, including increased trade barriers or restrictions on global trade, could

result in, among other things, cyberattacks, additional supply disruptions, lower consumer demand and changes to foreign exchange

rates and financial markets, any of which may adversely affect our business and supply chain.

In addition, the effects of the

ongoing conflict could heighten many of our known risks described herein under “ Risk Factors .”

International

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the future, we expect to derive a substantial percentage of our sales from international markets.

Accordingly, we expect face significant

Accordingly, we expect to face significant

operational risks from doing business internationally, including:

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with a wide variety of complex foreign laws, treaties and regulations;

worldwide health crisis, such as the COVID-19 pandemic, which may cause us, third-party vendors and manufacturers and/or customers

to temporarily suspend our or their respective operations in the affected city or country;

worldwide health crisis, such as a pandemic, which may cause us, third-party vendors and manufacturers and/or customers to temporarily

suspend our or their respective operations in the affected city or country;

trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign

subject to the laws, regulations and the court systems of many jurisdictions.

international trade conflicts could have negative consequences on the demand for our products and services outside Israel.

international trade conflicts could have negative consequences on the demand for our products and services outside of Israel.

of doing business internationally include political and economic instability in the countries of our customers and suppliers, changes

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of our business and materially adversely affect our results of operations.

conditions in the aerospace, industrial, transportation and energy markets or the global economy more generally could

have adverse effects on our results of operations.

we make strategic planning decisions based on the assumption that the aerospace, industrial, transportation and energy markets that

we are targeting will grow, our business is dependent, in large part on, and directly affected by, business cycles and other factors

affecting the aerospace, industrial, transportation, energy and medical markets and the global economy generally.

Aerospace and

transportation in particular are highly cyclical markets and depend on general economic conditions and other factors, including c onsumer

spending and preferences, changes in interest rates and credit availability, consumer confidence, fuel costs, fuel availability,

environmental impact, governmental incentives and regulatory requirements and political volatility, especially in energy-producing

countries and growth markets.

In addition, our production and sales are affected by our customers’ ability to continue

operating in response to challenging economic conditions and in response to labor relations issues, regulatory requirements, trade

agreements and other factors.

Any significant adverse change in any of these factors may result in a reduction in sales of Odysight solutions and could have a material adverse effect on our business, results of operations and financial

tariffs, including those implemented by the U.S., may increase the costs of importing our products and increase our supply chain costs, which could potentially reduce profit margins and affect our competitive

or international social, political, regulatory and economic conditions or in laws and policies governing trade, manufacturing,

development and investment in the countries where we currently conduct our business could adversely affect our business, reputation, financial

condition and results of operations.

Changes or proposed changes in U.S.

or other countries’ trade policies may result in restrictions

and economic disincentives on international trade.

Since 2025, the

government has imposed, or is currently considering imposing, tariffs on certain products and trade partners, including Israel.

On February 20, 2026, the Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”) does not

authorize a U.S.

President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the

tariffs imposed under IEEPA (the “incremental tariffs”) was within the exclusive jurisdiction of the U.S.

International Trade.

In response to this ruling, the U.S.

President signed a proclamation imposing a new 10% global tariff under

Section 122 of the Trade Act of 1974, effective February 24, 2026, and subsequently increased these tariffs to 15% on February 21,

Section 122 tariffs are subject to a 150-day statutory limit unless extended by Congress.

In addition, the Office of the U.S.

Trade Representative has announced it will initiate new Section 301 investigations into trading partners’ unfair practices,

which could result in additional tariffs.

current products are manufactured outside the United States, and, as a result, the trade tariffs, including those implemented by the

U.S., may increase the costs associated with importing our finished products.

Although we believe that such tariffs will not have a material

impact on our business operations, the additional cost on goods imported to the U.S.

as a result of the tariffs could directly affect

our profit margins when borne by us, or, when borne by our U.S.

customers, could effectively lead to a higher purchase price for our

Such an increase may drive our customers to seek local alternatives that do not carry the tariff burden, potentially decreasing

the demand for our products and affecting our market share.

Additionally, the U.S.

trade tariffs may increase our supply chain costs,

including the cost of components sourced from our suppliers in various countries due to abrupt supply and demand shifts.

of the consequences of this tariff policy, we may need to obtain components from other sources or third parties.

Furthermore, the uncertainty

and volatility introduced by these tariffs complicate decision making, planning and forecasting for our customers as well as for us,

making it more difficult to predict future costs and financial outcomes accurately.

The potential for further U.S.

tariff changes and

retaliatory tariffs or other actions by affected countries, and the increased volatility in global financial markets that could result,

may exacerbate these challenges, making it difficult for us to predict future costs and financial outcomes accurately.

Any of these factors

may reduce our profit margins and affect our competitive position.

Changes in tax laws

could have a material adverse effect on our business, cash flow, results of operations or financial conditions.

subject to tax laws, regulations, and policies of several taxing jurisdictions.

Changes in tax laws, as well as other factors, could cause

us to experience fluctuations in our tax obligations and effective tax rates and otherwise adversely affect our tax positions and/or our

tax liabilities.

In July 2025, legislation commonly known as the One Big Beautiful Bill Act (OBBBA) was signed into law, which

enacts significant changes to U.S tax and related laws, including but not limited to current deduction of domestic research expenses,

increasing the limit of the deduction of interest expense to thirty percent of EBITDA and one hundred percent bonus depreciation on eligible

property acquired after January 19, 2025.

Further, many countries, and organizations such as the Organization for Economic Cooperation

and Development, have proposed implementing changes to existing tax laws.

Any of these developments or changes in federal, state or international

tax laws or tax rulings could adversely affect our effective tax rate and our operating results.

There can be no assurance that our effective

tax rates, tax payments or tax credits and incentives will not be adversely affected by these or other developments or changes in law.

conditions in the aerospace, industrial, transportation and energy markets or the global economy more generally could have adverse effects

on our results of operations.

we make strategic planning decisions based on the assumption that the aerospace, industrial, transportation and energy markets that we

are targeting will grow, our business is dependent, in large part on, and directly affected by business cycles and other factors affecting

the aerospace, industrial, transportation and energy markets and the global economy generally.

Aerospace and transportation in particular

are highly cyclical markets and depend on general economic conditions and other factors, including c onsumer spending and

preferences, changes in interest rates and credit availability, consumer confidence, fuel costs, fuel availability, environmental impact,

governmental incentives and regulatory requirements and political volatility, especially in energy-producing countries and growth markets.

In addition, our production and sales are affected by our customers’ ability to continue operating in response to challenging economic

conditions and in response to labor relations issues, regulatory requirements, trade agreements and other factors.

Any significant adverse

change in any of these factors may result in a reduction in sales of our solutions and could have a material adverse effect on our business,

results of operations, and financial condition.

macro-economic conditions, such as a rise in interest rates, inflation in the cost of goods and services including labor, a recession

or an economic slowdown in the United States or internationally, including as a result of continuing uncertainty from any resurgence

of the COVID-19 or other pandemic outbreaks, the ongoing Russia-Ukraine military conflict or conflicts in the Middle East, could adversely

affect demand for the Odysight TruVision solution and make it difficult to accurately forecast and plan our future business activities.

markets have been experiencing volatility and disruption due to interest rate and inflation increases as well as the continued escalation

of geopolitical tensions.

Although our business has not yet been materially negatively impacted by such inflationary pressures, we cannot

be certain that neither we nor our customers will be materially impacted by continued inflationary pressures.

We may find that we need

to give higher than normal raises to employees or start new employees at higher wage and/or benefit rates, while not be able to price

the higher costs through to customers.

or an economic slowdown in the United States or internationally, including as a result of a pandemic, the ongoing Russia-Ukraine military

conflict or conflicts in the Middle East, could adversely affect demand for our solutions and make it difficult to accurately forecast

and plan our future business activities.

markets have in recent years experienced volatility and disruption due to interest rate and inflation increases as well as the continued

escalation of geopolitical tensions.

Although our business has not yet been materially negatively impacted by such inflationary pressures,

we cannot be certain that neither we nor our customers will be materially impacted by continued inflationary pressures.

We may find that

we need to give higher than normal raises to employees or to start new employees at higher wage and/or benefit rates, while being unable

to price the higher costs through to customers.

Related to Regulation

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large-scale basis at acceptable manufacturing costs and yields.

If we are unable to maintain the quality and performance of the Odysight

TruVision solution at acceptable costs, our brand, the market acceptance of our products and our results of operations would suffer.

As we regularly modify our product lines and introduce changes to our manufacturing processes or incorporate new raw materials, we may

encounter unanticipated issues with product quality or production delays.

Regulatory, safety or reliability developments, many of which

may be outside of our control, could also cause delays or otherwise impair commercial adoption of our products, which would adversely

affect our growth.

While we engage in product testing in an effort to identify and address any product quality issues before we introduce

products to market, unanticipated product quality or performance issues may be identified only after a product has been introduced and

If we are unable to maintain the quality and performance of our solutions

at acceptable costs, our brand, the market acceptance of our products and our results of operations would suffer.

As we regularly modify

our product lines and introduce changes to our manufacturing processes or incorporate new raw materials, we may encounter unanticipated

issues with product quality or production delays.

Regulatory, safety or reliability developments, many of which may be outside of our

control, could also cause delays or otherwise impair commercial adoption of our products, which would adversely affect our growth.

we engage in product testing in an effort to identify and address any product quality issues before we introduce products to market,

unanticipated product quality or performance issues may be identified only after a product has been introduced and sold.

addition, we face the risk of exposure to product liability or other claims, including class action lawsuits, in the event our products

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the submission of annual reports to certain governmental agencies certifying that such products comply with applicable performance standards,

the maintenance of manufacturing, testing and distribution records, and the reporting of certain product defects to such regulatory agency

the maintenance of manufacturing, testing and distribution records, and the reporting of certain product defects to such regulatory agencies

or consumers.

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addition, some of our customers may require that we comply with unique requirements specific to their operations.

For example, there

Federal Aviation Administration and International Civil Aviation Organization requirements for certain airplane models to

be subject to CE certification, a regulatory standard that verifies certain products are safe for sale and use in much of Europe, These

and other requirements are applicable for the Odysight TruVision solution in various jurisdictions across the globe.

our engagements with customers operating in the biomedical sector, we comply with the medical device standards in the corresponding territory,

such as the FDA or International Organization for Standardization, or ISO, among others.

Compliance with these regulations is achieved

through our QA department and the support we receive from highly experienced quality assurance and regulatory affairs consultants.

addition, we are audited annually by MEDCERT GmbH, a German Notified Body.

there exist U.S.

Federal Aviation Administration and International Civil Aviation Organization requirements for certain airplane models

to be subject to CE certification, a regulatory standard that verifies certain products are safe for sale and use in much of Europe.

These and other requirements are applicable for our solutions in various jurisdictions across the globe.

business may be adversely affected by changes in aerospace and transportation safety regulations or concerns that drive further regulation

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regulations for the aerospace and transportation industries.

These safety regulations often require, or customers demand, more safety

These safety regulations often require, or customers may demand, more safety

features for relevant products being sold in such industries.

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As the mechanical components that carry our products go into production, we may become subject

to stringent requirements, including a duty to report, subject to strict timing requirements, safety defects with our products.

rules and regulations may impose potentially significant civil penalties for violations including the failure to comply with such reporting

to stringent requirements, including a duty to report safety defects with our products, subject to strict timing requirements.

and regulations may impose potentially significant civil penalties for violations, including the failure to comply with such reporting

If we cannot rapidly address any safety concerns or defects with our products, our business, results of operations and financial

condition may be adversely affected.

may be prohibited from selling the Odysight TruVision to certain countries if we are unable to obtain Israeli authorization regarding

the export of our products, or if current or future export laws limit or otherwise restrict our business.

we expand our operations internationally, we may be prohibited from selling the Odysight TruVision solution to certain countries

if we are unable to obtain certain governmental authorizations required to comply with Israeli laws regulating the export of our products

The export regulations and the governing policies applicable to our business are subject to change.

In some cases, explicit

authorization from the Israeli may be needed to export our products.

We cannot provide assurance that such export authorizations will

be available in the future for the Odysight TruVision solution.

If and when our operations expand into other markets, we may have

to comply with other governments’ regulations regarding the export of our products.

Non-compliance with applicable export regulations

could potentially expose us to fines, penalties and sanctions.

If we cannot obtain required government approvals under applicable regulations,

we may not be able to sell our solution in certain international jurisdictions, which could adversely affect our financial condition

and results of operations.

may be prohibited from selling our solutions in certain countries if we are unable to obtain Israeli authorization regarding the export

of our products, or if current or future export laws limit or otherwise restrict our business.

we expand our operations internationally, we may be prohibited from selling our solutions in certain countries if we are unable to obtain

certain governmental authorizations required to comply with Israeli laws regulating the export of our products from Israel.

regulations and the governing policies applicable to our business are subject to change.

In some cases, explicit authorization from the

Israeli government may be needed to export our products.

We cannot provide assurance that such export authorizations will be available

in the future for our solutions.

If and when our operations expand into other markets, we may have to comply with other governments’

regulations regarding the export of our products.

Non-compliance with applicable export regulations could potentially expose us to fines,

penalties and sanctions.

If we cannot obtain required government approvals under applicable regulations, we may not be able to sell our

solution in certain international jurisdictions, which could adversely affect our financial condition and results of operations.

we fail to comply with anti-bribery, anti-corruption and anti-money laundering laws, we could be subject to penalties and other adverse

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are subject to the U.S.

Foreign Corrupt Practices Act, or the FCPA, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977 and

the Israeli Prohibition on Money Laundering Law, 5760-2000, collectively, the Israeli Anti-Corruption Laws, and other anticorruption,

Foreign Corrupt Practices Act, or the FCPA, to Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977

and the Israeli Prohibition on Money Laundering Law, 5760-2000, collectively, the Israeli Anti-Corruption Laws, and to other anticorruption,

anti-bribery and anti-money laundering laws in the jurisdictions in which we do business, both domestic and abroad.

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laws and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant

legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S.

government contracts,

substantial diversion of management’s attention, a decline in the market price of our common stock or overall adverse consequences

to our reputation and business, all of which may have an adverse effect on our results of operations and financial condition.

legal fees, loss of export privileges, severe criminal or civil sanctions, suspension or debarment from U.S.

government contracts, substantial

diversion of management’s attention, a decline in the market price of our common stock or overall adverse consequences to our reputation

and business, all of which may have an adverse effect on our results of operations and financial condition.

of, and evolving expectations for, sustainability and environmental, social, and governance, or ESG, initiatives could increase our costs

or otherwise adversely impact our business.

companies have recently faced scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder

companies have in recent years faced scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder

advocacy groups, other market participants and other stakeholder groups.

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For example, the State of Israel has implemented data protection laws

and regulations, including the Israeli Protection of Privacy Law of 1981.

and regulations, including the Israeli Protection of Privacy Law, 5741-1981.

Although we work to comply with applicable laws, regulations

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result in additional cost and liability to us, damage our reputation and adversely affect our business, financial condition and prospects.

and our third-party vendors face cybersecurity risks and may incur increasing costs in an effort to mitigate those risks, and if we fail

to prevent data security breaches, there may be damage to our reputation, material financial penalties and legal liability, which would

materially adversely affect our business, results of operations and financial condition.

rely on systems and websites, including some that are managed by third parties, that allow for the storage and transmission of proprietary

or confidential information regarding our customers, employees and others, including personal information.

We face numerous and evolving

cybersecurity risks that threaten the confidentiality, integrity and availability of our systems and confidential information, including

malicious code embedded in open-source software, or misconfigurations, “bugs” or other vulnerabilities in commercial software

that is integrated into our (or our suppliers’ or service providers’) IT systems, products or services.

The risk of a data

security breach or a disruption has generally increased in number, intensity and sophistication over time.

Techniques used to compromise

or sabotage systems change frequently, may originate from less regulated and remote areas of the world and be difficult to detect, and

generally are not recognized until launched against a target.

As a result, we may be vulnerable to, and unable to anticipate or detect,

data security breaches and data loss.

In addition, data security breaches can also occur as a result of a breach by us or our employees

or by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information.

and our third-party vendors face cybersecurity risks and may incur increasing costs in an effort to mitigate those

risks, and if we fail to prevent data security breaches, there may be damage to our reputation, material financial penalties and legal

liability, which would materially adversely affect our business, results of operations and financial condition.

rely on systems and websites, including some that are managed by third parties, such as cloud infrastructure, that allow for the storage

and transmission of proprietary or confidential information regarding our customers, employees and others, including personal information.

We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our systems and confidential

information, including malicious code embedded in open-source software, or misconfigurations, “bugs” or other vulnerabilities

in commercial software that is integrated into our (or our suppliers’ or service providers’) IT systems, products or services.

The risk of a data security breach or a disruption has generally increased in number, intensity and sophistication over time.

used to compromise or sabotage systems change frequently, may originate from less regulated and remote areas of the world and be difficult

to detect, and generally are not recognized until launched against a target.

As a result, we may be vulnerable to, and unable to anticipate

or detect data security breaches and data loss.

In addition, data security breaches can also occur as a result of a breach by us or our

employees or by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential

have implemented various controls, systems and processes intended to secure our systems and the information on such systems.

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or controlled by other unaffiliated operators, to the extent we rely on such other systems to deliver services to our customers.

to monitor our third-party service providers’ data security is limited.

ability to monitor our third-party service providers’ data security is limited.

As a result, we are subject to the risk that cyber-attacks

on, or other security incidents affecting, our third-party service providers may adversely affect our business, even if an attack or

breach does not directly impact our systems.

on, or other security incidents affecting our third-party service providers may adversely affect our business, even if an attack or breach

does not directly impact our systems.

It is also possible that security breaches sustained by, or other security incidents affecting

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is inherently difficult to conclusively assess our freedom to operate without infringing on third-party rights.

Our competitive

position may be adversely affected if existing patents or patents resulting from patent applications by third parties or other

third-party intellectual property rights are held to cover our products or elements thereof, or our manufacturing or uses relevant

to our development plans.

In such cases, we may not be in a position to develop or commercialize our products unless we successfully

pursue litigation to nullify or invalidate the third-party intellectual property right concerned or enter into a license agreement

with the intellectual property right holder, if available on commercially reasonable terms.

There may also be pending patent

applications that, if they result in issued patents, could be alleged to be infringed by our new products.

Our competitive position

may be adversely affected if existing patents or patents resulting from patent applications by third parties or other third-party intellectual

property rights are held to cover our products or elements thereof, or our manufacturing or uses relevant to our development plans.

such cases, we may not be in a position to develop or commercialize our products unless we successfully pursue litigation to nullify

or invalidate the third-party intellectual property right concerned or enter into a license agreement with the intellectual property

right holder, if available on commercially reasonable terms.

There may also be published or yet unpublished pending patent applications

by third parties that, if they result in issued patents, could be alleged to be infringed by our new products.

If such an infringement

claim should be brought against us and be successful, we may be required to pay substantial damages, be forced to abandon our new

products or seek a license from any patent holders.

No assurances can be given that a license will be available on commercially

reasonable terms, if at all.

claim should be brought against us and be successful, we may be required to pay substantial damages, be forced to abandon our new products

or seek a license from any patent holders.

No assurances can be given that a license will be available on commercially reasonable terms,

is also possible that we have failed to identify relevant third-party patents or applications.

Patent applications in the United States

and in many other countries are published approximately 18 months after the earliest filing for which priority is claimed, with such

earliest filing date being commonly referred to as the priority date.

Therefore, patent applications covering our new products or solution

technologies could have been filed by others without our knowledge.

Additionally, pending patent applications which have been published

can, subject to certain limitations, be later amended in a manner that could cover our solution technologies, our new products or the

use of our new products.

and in many other countries are published approximately 18 months after the earliest filing date for which priority is claimed, with

such earliest filing date being commonly referred to as the priority date.

Therefore, patent applications covering our new products or

solution technologies could have been filed by others without our knowledge.

Additionally, pending patent applications which have been

published can, subject to certain limitations, be later amended in a manner that could cover our solution technologies, our new products

or the use of our new products.

Third-party intellectual property right holders may also actively bring infringement claims against us.

guarantee that we will be able to successfully settle or otherwise resolve such infringement claims.

We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims.

If we are unable to successfully

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Grounds for an unenforceability assertion could be an allegation that someone connected

with prosecution of the patent withheld relevant information from the United States Patent and Trademark Office, or USPTO, or made a

misleading statement, during prosecution.

The validity of U.S.

with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution.

validity of U.S.

patents may also be challenged in post-grant proceedings before the USPTO.

The outcome following legal assertions of invalidity and unenforceability is unpredictable.

The outcome following legal assertions of

invalidity and unenforceability is unpredictable.

proceedings initiated by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with

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may not be able to protect our intellectual property rights throughout the world.

prosecuting, and defending patents on products or technologies, as well as monitoring their infringement in all countries throughout

the world would be prohibitively expensive, and our intellectual property rights in some countries can be less extensive than those in

the United States.

In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as

federal and state laws in the United States or the laws of the State of Israel.

substantial part of our commercial success will depend on our ability to maintain, establish and protect our intellectual property assets,

maintain trade secret protection, register patents and trademarks, and operate without infringing the proprietary rights of third parties

throughout the world.

Our patent portfolio consists of an aggregate of 16 patents and 46 pending patent applications (including provisional

patent applications) filed or registered in various jurisdictions worldwide, as described in “ Business — Intellectual

may use our technologies to develop their own products in jurisdictions where we have not obtained patent protection, and may also export otherwise infringing products to territories where we have patent protection, but

enforcement is not as strong as that in the United States.

prosecuting and defending patents on products or technologies, as well as monitoring their infringement in all countries throughout the

world would be prohibitively expensive.

In addition, the scope of protection we obtain in various countries may be different or narrower

than the scope obtained in the United States.

Therefore, our intellectual property rights in some countries can be less extensive than

those in the United States.

In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent

as federal and state laws in the United States or the laws of the State of Israel.

substantial part of our commercial success will depend on our ability to maintain, establish and protect our intellectual property

assets, maintain trade secret protection, register patents and trademarks and operate without infringing the proprietary rights of

third parties throughout the world.

Our patent portfolio consists of an aggregate of 18 patents and 63 pending patent

applications (including provisional patent applications) filed or registered in various jurisdictions worldwide, as described in

“ Business — Intellectual Property.

may use our technologies to develop their own products in jurisdictions where we have not obtained patent protection, and may also export

otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United

These products may compete with our products.

Future patents or other

intellectual property rights may not be effective or sufficient to prevent them from competing.

Future patents or other intellectual property rights may not be effective or sufficient

to prevent them from competing.

success depends, at least in part, on our ability to protect our core technologies and intellectual property.

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and other intellectual property protection, which could make it difficult for us to stop the marketing of competing products in violation

of our intellectual property rights generally.

Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful,

could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents

at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties

of our intellectual property rights.

Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could

result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at

risk of being invalidated or interpreted narrowly, put our patent applications at risk of not issuing, and could provoke third parties

to assert claims against us.

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artificial intelligence and automated decision making.

addition, the Odysight TruVision solution uses machine learning, artificial intelligence, and automated decision making technologies,

including proprietary artificial intelligence or machine learning algorithms relying in part on open-source third-party software, and

is making significant investments to continuously improve the use of such technologies.

There are significant risks involved in developing,

maintaining and deploying machine learning, artificial intelligence and automated decision making technologies and there can be no assurance

that the usage of such technologies will always enhance our products or services or be cost effective and more generally beneficial to

our business, including our efficiency or profitability.

In particular, if these artificial intelligence or machine learning models or

automated decision making technologies are incorrectly designed or implemented;

trained or reliant on incomplete, inadequate, inaccurate,

biased or otherwise poor quality data or on data to which we do not have sufficient rights;

and/or are adversely impacted by unforeseen

defects, technical challenges, cybersecurity threats or material performance issues, the performance of our products, services, and

business, as well as our reputation and the reputations of our customers, could suffer or we could incur liability through the violation

of laws or contracts to which we are a party or through other civil claims.

Further, our ability to continue to develop or use such models

or technologies may be dependent on access to specific third-party software and infrastructure, such as processing hardware or third-party

artificial intelligence models, and we cannot control the availability or pricing of such third-party software and infrastructure.

addition, market acceptance and consumer perceptions of artificial intelligence and machine learning technologies is uncertain at this

addition, our solutions use machine learning, artificial intelligence and automated decision making technologies, including proprietary

artificial intelligence or machine learning algorithms relying in part on open-source third-party software, and we make significant investments

to continuously improve the use of such technologies.

There are significant risks involved in developing, maintaining and deploying machine

learning, artificial intelligence and automated decision making technologies and there can be no assurance that the usage of such technologies

will always enhance our products or services or be cost effective and more generally beneficial to our business, including our efficiency

or profitability.

In particular, if these artificial intelligence or machine learning models or automated decision making technologies

are incorrectly designed or implemented;

trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data

or on data to which we do not have sufficient rights;

and/or are adversely impacted by unforeseen defects, technical challenges, cybersecurity

threats or material performance issues, the performance of our products, services, and business, as well as our reputation and the reputations

of our customers, could suffer or we could incur liability through the violation of laws or contracts to which we are a party or through

other civil claims.

Further, our ability to continue to develop or use such models or technologies may be dependent on access to specific

third-party software and infrastructure, such as processing hardware or third-party artificial intelligence models, and we cannot control

the availability or pricing of such third-party software and infrastructure.

In addition, market acceptance and consumer perceptions

of artificial intelligence and machine learning technologies is uncertain at this point.

number of aspects of intellectual property protection in the field of artificial intelligence and machine learning are currently under

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threatened or filed against us, or events that negatively impact our reputation;

or anticipated impact of military conflict, including the conflict between Russia and Ukraine, Israel’s war or conflicts with

Hamas or Hezbollah or other geopolitical events;

or anticipated impact of military conflict, including Israel’s war or conflicts with Iran and terrorist organizations in the Middle East or other geopolitical

imposed by the United States and other countries in response to global conflicts, including the one in Ukraine, may also adversely

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market and economic instability;

impact of any resurgence of COVID-19 or any of its variants or any other pandemic on us and the national and global economies;

impact of a pandemic on us and the national and global economies;

in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies;

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In the past, securities

class action litigation has often been initiated against companies following periods of volatility in their stock price.

class action litigation hasoften been initiated against companies following periods of volatility in their stock price.

litigation could result in substantial costs and divert our management’s attention and resources.

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and investors’ views of us may be harmed.

404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires public companies to conduct an annual review and evaluation

of their internal controls.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that

we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently.

Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could

have a material adverse effect on our business.

We could lose investor confidence in the accuracy and completeness of our financial reports,

which could have an adverse effect on the price of our common stock.

are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act, including

Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which requires public companies to conduct an annual

review and evaluation of their internal controls.

Ensuring that we have adequate internal financial and accounting controls and

procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort

that will need to be evaluated frequently.

Our failure to maintain the effectiveness of our internal controls in accordance with the

requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business.

We could lose investor confidence in

the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common

can be no assurances that our common stock will not be subject to potential delisting if we do not continue to maintain the listing requirements

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Related to our Operations in Israel

headquarters and other significant operations are located in Israel and, therefore, our business, financial condition and results of

operation may be adversely affected by political, economic and military instability in Israel.

headquarters and other significant operations are located in Israel and therefore our business, financial condition and results of operation

may be adversely affected by political, economic and military instability in Israel.

offices and management team are located in Israel.

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Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred

between Israel and its neighboring countries and Muslim based terrorist organizations active in the region.

These conflicts have involved

missile strikes, hostile infiltrations and terrorism against civilian targets in various parts of Israel, which from time to time have

negatively affected business conditions in Israel.

October 7, 2023, the Hamas organization launched a series of deadly terror attacks on civilian and military targets skirting the

Gaza Strip in the southern part of Israel and fired rockets on many of the communities in southern and central Israel.

Following the

attack, Israel’s security cabinet declared war and commenced a military campaign in Gaza against Hamas.

In addition, since the commencement of these events, there

have been growing hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and on

other fronts from various extremist groups in the region, such as various rebel militia groups in Syria and Iraq and the Houthi movement, which controls parts of Yemen.

In addition, the

Houthi movement launched attacks on commercial shipping in the Gulf of Aden and Red Sea, resulting in

widespread rerouting of cargo ships and some shipping companies ceasing shipments to Israel.

Israel has carried out a number of

targeted strikes on sites belonging to these terror organizations and, in October 2024, Israel began ground operations against

Hezbollah in Lebanon culminating in a ceasefire agreed to between Israel and Lebanon on November 27, 2024, the result of

which is uncertain.

In addition, Iran, on two occasions, launched direct attacks on Israel involving hundreds of drones and

missiles, prompting Israeli air defenses and retaliatory strikes, and Iran has threatened to continue to attack Israel.

war has had significant economic, military and social consequences to Israel.

However, to date the war has not had a material adverse

effect on our business.

While our offices are located in Omer and Ramat Gan, Israel, neither of our sites is located near Israel’s

relevant borders where the main impact of the war has been felt.

Nevertheless, we have experienced some minor disruptions to our routine

work, including some difficulties in traveling outside of Israel and occasional rocket fire on municipalities where our offices are located,

requiring our employees to take temporarily shelter for a few minutes at a time in on-site safe rooms.

In addition, several of our executives

and employees, including company officers such as our CEO were called up to military reserve duty.

As of the date of this Annual Report,

our CEO is subject to military reserve duty a few days a month.

In addition, with the backdrop of the ongoing conflict, some of our Israeli

clients and potential clients have not prioritized conducting transactions with us, and the war may have caused some delays in their

finalizing purchase orders.

We do not believe that such delays have had a material impact on our business.

the case of material escalation of current conditions or the outbreak of a greater regional conflict, it is possible that there will

be additional military reserve duty call-ups, which may negatively affect our business due to a shortage of skilled labor and loss of

institutional knowledge.

Were such an escalation to occur, the steps we have taken to mitigate the effects of the war may not be sufficient

to prevent material adverse impacts our business, financial condition and results of operations.

is currently not possible to predict the duration or severity of the ongoing war or its effects on our business, operations and financial

The ongoing conflict is rapidly evolving and developing, and could disrupt our business and operations, interrupt our sources

and availability of supply and hamper our ability to raise additional funds or sell our securities, among other possible negative effects.

addition, some countries around the world restrict doing business with Israel and Israeli companies, and additional countries may do

so if hostilities in Israel or political instability in the region continue or increase.

In addition, there have been increased efforts

by countries, activists and organizations to cause companies and consumers to boycott Israeli goods and services.

For example, Israeli

defense companies were initially banned from participating in two prestigious industry conferences in France during 2024;

however, both

bans were later overturned by French courts and did not impact our participation in such conferences.

In addition, in January 2024 the

International Court of Justice, or ICJ, issued an interim ruling in a case filed by South Africa against Israel alleging genocide amid

and in connection with the war in Gaza, and ordered Israel to take measures to prevent genocidal acts, prevent and punish incitement

to genocide, and take steps to provide basic services and humanitarian aid to civilians in Gaza, among others.

On November 21, 2024,

the International Criminal Court, or ICC, issued arrest warrants for Israeli Prime Minister Benjamin Netanyahu and former Israeli Minister

of Defense Yoav Gallant based on allegations of war crimes including using starvation as a method of warfare, murder and other inhumane

Companies and businesses may terminate, and may have already terminated, certain commercial relationships with Israeli companies

following the ICJ and ICC decisions.

The foregoing efforts by countries, activists and organizations, particularly if they become more

widespread, as well as rulings by the ICJ, ICC and other international tribunals, may materially and adversely impact our business and

supply chains.

the event that our facilities are damaged or our ongoing operations are disrupted as a result of hostile actions, our ability to deliver

or provide products and services in a timely manner to meet our contractual obligations to customers and vendors could be materially

and adversely affected.

Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading

partners could have a material adverse effect on our business and could make it more difficult for us to raise capital.

Our insurance

policies do not cover losses that may occur as a result of events associated with war and terrorism.

Although the Israeli government

currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure that

this government coverage will be maintained or that it will sufficiently cover our potential damages.

Any losses or damages incurred

by us could have a material adverse effect on our business.

Any armed conflicts or political instability in the region would likely negatively

affect business conditions and could harm our results of operations.

political conditions within Israel may affect our operations.

Israel held five general elections between 2019 and 2022, and prior to

October 2023, the Israeli government pursued extensive changes to Israel’s judicial system, which sparked extensive political debate

In response to such initiative, many individuals, organizations and institutions, both within and outside of Israel, voiced

concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors

to invest or transact business in Israel, increased currency fluctuations, downgrades in credit rating, increased interest rates, increased

volatility in security markets and other changes in macroeconomic conditions.

To date, the proposed changes to Israel’s judicial

system have been substantially put on hold.

If such changes are again pursued by the government and approved by the parliament, this

may have an adverse effect on our business, our results of operations and our ability to raise additional funds, if necessary.

between Israel and its neighboring countries and terrorist organizations active in the region.

These conflicts have involved missile

strikes, hostile infiltrations and terrorism against civilian targets in various parts of Israel, which from time to time have negatively

affected business conditions in Israel.

October 2023, Hamas launched a series of terror attacks on civilian and military targets adjacent to the Gaza Strip in southern Israel.

Israel subsequently declared war and commenced a military campaign against Hamas.

While the parties reached a framework in October 2025

that contemplates a potential permanent end to the war with Hamas, there can be no assurance that any ceasefire will be sustained or

will result in a lasting resolution.

Furthermore, Israel has experienced hostilities on other fronts, including with Hezbollah along

Israel’s northern border, attacks and threats from the Houthis in Yemen and two major direct confrontations with Iran.

situation escalated significantly in late February 2026 when Israel and the United States preemptively attacked Iran to eliminate its

nuclear and ballistic missile capabilities.

As part of this conflict, Iran launched missile and drone attacks toward population centers

and military installations in Israel, Europe and neighboring countries in the Gulf region, and also launched counter-strikes against

forces and allied bases throughout the Gulf region.

In early March 2026, Hezbollah joined the conflict and carried out missile attacks

against Israel, leading to Israeli retaliatory strikes and limited ground incursions.

The conflict between Israel, Iran and Hezbollah

is currently ongoing and developing.

Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas

in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq.

Continued military escalation,

retaliatory actions or broader regional involvement may adversely affect economic conditions, disrupt markets and create uncertainty

that could negatively impact our business, financial condition and results of operations.

hostilities have included missiles and drones being fired against civilian targets in areas where our employees and business

partners are located.

Although these conflicts have not had a material adverse effect on our business to date, we have experienced

disruptions to work routines, periodic travel limitations and occasional rocket fire requiring employees at our Omer and Ramat Gan

offices to take temporary shelter.

Our offices were closed on certain days during the current conflict with Iran and Hezbollah

pursuant to instructions from Israel’s Home Front Command.

To mitigate these effects, we have adopted work-from-home measures,

increased employee overtime and utilized third-party outsourcing where necessary.

Furthermore, many of our employees and executives

are obligated to perform military reserve duty.

Since October 2023, several of our executives, including our CEO, have been

periodically called up to active duty.

Our operations could be disrupted by future call-ups and by the absence of a significant

number of our employees or key management members.

ongoing conflict also threatens Israel’s economy, as evidenced by credit rating downgrades by Moody’s and Standard &

Poor’s in late 2024.

Because the intensity and duration of the security situation remain difficult to predict, any extension or

expansion of the war to other fronts could impact Israel’s economy in general, harm our operations and disrupt our ability to raise

parties with whom we do business may sometimes decline to travel to Israel during periods of heightened unrest or tension, forcing us

to make alternative arrangements when necessary to meet our business partners.

In addition, some countries restrict doing business with

Israel and Israeli companies.

There have been increased efforts by countries, activists and organizations to boycott Israeli goods and

This includes specific efforts targeting Israeli defense companies, such as attempts to ban their participation in industry

Such actions could materially and adversely impact our business and supply chains.

our insurance policies do not cover losses that may occur as a result of war and terrorism.

While the Israeli government currently covers

the reinstatement value of direct damages caused by such acts, there is no assurance this coverage will be maintained or will sufficiently

cover our potential damages.

Any significant damage to our facilities or disruption of trade between Israel and its trading partners

could have a material adverse effect on our business.

may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers.

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result, we are exposed to the currency fluctuation risks relating to the recording of our expenses in U.S.

We may, in the future,

decide to enter into currency hedging transactions.

As a result, our operating results are exposed primarily to movements in

the USD/NIS exchange rate.

Appreciation of the NIS against the U.S.

dollar increases the U.S.

dollar cost of our shekel-denominated expenses

and may adversely impact our net loss or net income (if any).

We have only recently

decided to enter into currency hedging transactions.

These measures, however, may not adequately protect us from material adverse effects.

exchange rates may fluctuate due to many factors, including interest-rate differentials between markets, capital flows, monetary policy

decisions, geopolitical events, global macroeconomic developments and investor sentiment toward Israel and regional markets.

These factors

may cause the NIS to appreciate or depreciate against the U.S.

dollar independent of local inflation levels.

If the NIS strengthens without

a corresponding increase in our foreign-currency revenues, our U.S.

dollar-measured costs will rise.

rate movements have impacted and may continue to impact our consolidated revenues and operating results.

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rates and global financial markets is expected to continue due to the ongoing global political and economic uncertainty.

of the NIS relative to the U.S.

dollar and other currencies has fluctuated significantly.

For example, the shekel appreciated on average

by 12.5% relative to the U.S.

dollar in 2025, after depreciating by 0.5% in 2024 and by 3.1% in 2023, thereby increasing, in 2025, the

dollar cost of our shekel-denominated expenses.

Any significant revaluation of the NIS may materially and adversely affect our cash

flows, revenues and financial condition.

Fluctuations in the NIS exchange rate, or even the appearance of instability in such exchange

rate, could adversely affect our ability to operate our business.

technology developed and used by us received Israeli government grants for certain research and development activities.

those grants require us to satisfy specified conditions in addition to repayment of the grants upon certain events.

research and development efforts that contributed to certain technology used by us was financed in part through grants from the Israel

Innovation Authority, or IIA, to Xylo Technologies, which

was subsequently transferred to Odysight.ai Ltd., our wholly-owned subsidiary.

The terms of such grants require us to comply with the

requirements of the Encouragement of Research, Development and Technological Innovation in the Industry Law, 5744-1984, or the Innovation

When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Innovation Law restrict

the transfer outside of Israel of such know-how, and the manufacturing or manufacturing rights of such products, technologies or know-how,

without the prior approval of the IIA.

Therefore, if aspects of our technologies are deemed to have been developed with IIA funding,

the discretionary approval of an IIA committee would be required for any transfer to third parties outside of Israel of know-how or manufacturing

or manufacturing rights related to those aspects of such technologies.

We may not receive those approvals, which would prevent such transfers

and therefore limit the flexibility of our business operations outside of Israel.

Furthermore, the IIA may impose certain conditions

on any arrangement under which it permits us to transfer technology or development out of Israel.

research and development efforts that contributed to certain technology used by us was financed in part through grants from the IIA,

to Xylo Technologies, which was subsequently transferred to Odysight.ai Ltd., our wholly-owned subsidiary.

The terms of such grants require

us to comply with the requirements of the Innovation Law.

When a company develops know-how, technology or products using IIA grants,

the terms of these grants and the Innovation Law restrict the transfer outside of Israel of such know-how, and the manufacturing or manufacturing

rights of such products, technologies or know-how, without the prior approval of the IIA.

Therefore, if aspects of our technologies are

deemed to have been developed with IIA funding, the discretionary approval of an IIA committee would be required for any transfer to

third parties outside of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies.

may not receive those approvals, which would prevent such transfers and therefore limit the flexibility of our business operations outside

Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or

development out of Israel.

transfer of IIA-supported technology or know-how or manufacturing or manufacturing rights related to aspects of such technologies outside

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significant portion of our intellectual property has been developed by our employees in the course of their employment for us.

the Israeli Patent Law, 5727-1967, or the “Patent Law”, inventions conceived by an employee in the course and as a result

of or arising from his or her employment with a company are regarded as “service inventions,” which belong to the employer,

absent a specific agreement between the employee and employer giving the employee service invention rights.

The Patent Law also provides

that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the “Committee”,

the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee in the course and as a result of or arising

from his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific

agreement between the employee and employer giving the employee service invention rights.

The Patent Law also provides that if there

is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the “Committee”,

a body constituted under the Patent Law, will determine whether the employee is entitled to remuneration for his inventions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors