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Item 1. Business

2025-03-26 compared with 2024-03-26 · 612 added, 421 removed, 15 unchanged (99% of the section changed)

are a pioneer in the development, production, and marketing of innovative Predictive Maintenance (PdM) and Condition Based Monitoring

(CBM) technologies, providing visual sensing and AI-based video analytics solutions for critical systems in the aviation, maritime, industrial

non-destructing-testing industries, transportation, and energy industries.

Some of our products utilize our unique micro visualization

technology in medical devices for complex and minimally invasive medical procedures.

Our technology includes proven video technologies

and products amalgamated into a first-of-its-kind, FDA-cleared minimally invasive surgical device.

At the present time, we derive a substantial

portion of our revenue from applications of our micro visualization technology within the medical field.

Nevertheless, we have recently

secured several contracts for our PdM and CBM systems with major government clients and defense and aviation companies.

Business Model

unique video-based sensors, embedded software, and AI algorithms are being deployed in hard-to-reach locations and harsh environments

aim to become the industry standard for real time, visual based, health monitoring using AI/ML data analytics.

are a pioneer in the development, production and marketing of an innovative visualization AI solution that deploys small cameras to monitor

critical safety components in hard-to-reach locations and harsh environments, across various PdM, and CBM use cases.

We aim to be the

industry benchmark for real-time, visual-based machine and infrastructure health monitoring through AI and machine learning data analytics.

TruVision solution streams visual information to our processing unit, an in-platform, high-performance AI/machine learning

computer, allowing maintenance and operations teams, on the ground and during operations, visibility into areas that are

inaccessible under normal operating conditions or where conditions are not suitable for continuous real-time monitoring.

and informative data, continuously collected and analyzed by our solution on our secured cloud, provides customers with real-time

failure / anomaly detection, events and data recordings, interfacing with platform mission systems and providing real-time alerts

and streaming video or images, all while training our algorithms for ongoing improved accuracy and prediction capabilities.

customers benefit from increased safety, a reduction in downtime, a more efficient data driven operation, increased

mission readiness and lower maintenance costs for their monitored platforms, using the prediction capabilities of our solution to

efficiently plan maintenance work on monitored components.

solution enhances safety and minimizes downtime by enabling real-time visual analysis of any failure occurrences.

Additionally, we leverage

advanced big data analytics to offer predictive insights throughout the entire system lifecycle.

This includes efficient spare parts

management and intelligent performance predictions, ensuring optimal system reliability and efficiency.

Odysight TruVision solution is successfully used by NASA, as we seek to reshape the aerospace, Industry 4.0, transportation and

energy markets with a vison-based technology leveraging AI and machine learning to deliver innovative solutions that transform maintenance

As used in this Annual Report, Industry 4.0, or I4.0, refers to the integration of advanced technologies into manufacturing and industrial

processes to create smart, interconnected systems for improved efficiency and productivity.

Odysight solutions

are already deployed in the aviation and medical sectors.

Our customers include the Israeli Air Force, the Israeli Ministry of

Defense, France-based Safran Aircraft Engines, a global international defense contractor, a leading Fortune 500 medical company as

well as NASA, who came back to us for a repeat order.

Historically, our revenue stream has been derived mainly from the medical

Our 2024 financial results reflect orders and agreements from both the medical and aerospace sectors.

We have recently

secured several contracts for our PdM and CBM systems with major government clients and defense and aviation companies and our

backlog as of December 31, 2024 of approximately $15 million (compared to approximately $2.6 million as of December 31, 2023)

reflects mostly those contracts.

vision-based sensor technology

used in medical devices, our video-based sensor solution (comprising image acquisition, data collection and storage and image processing,

including PdM and CBM) have contributed significantly to visual aids for medical teams in an FDA-cleared minimally invasive surgical

Over time, our technology has proven essential in industries such as aerospace, where visual assessments are crucial for maintaining

performance rates, maintenance, and safety standards for various mechanical systems.

specialize in predictive maintenance and condition-based monitoring, utilizing advanced AI-driven sensor visualization solutions, using

video analytics and algorithms.

Human perception relies significantly on visual sensing, and our technology enables our clients to accurately

observe phenomena that were previously only approximated or conjectured.

core technologies include:

Sensor Technology :

This innovative approach uses micro cameras and specialized AI models to monitor and analyze system health

in real-time, even in hard-to-reach and harsh environments.

and Machine Learning :

We employ sophisticated proprietary AI algorithms to predict potential hazards, optimize maintenance schedules

and enhance operational efficiency.

High-Resolution

Visualization :

Our solution provides detailed visual data, enabling accurate detection and monitoring of issues such as liquid

leaks and bearing malfunctions.

The collected data is continuously analyzed on a secure cloud platform, offering customers both raw data and processed

insights for improved decision-making.

vision-based sensing technology provides solutions across diverse PdM and CBM markets, and in harsh conditions as demonstrated in a variety

of environments, including outer space during NASA’s Robotic Refueling Mission, or RRM3, the Israeli Air Force, the Israeli Ministry

of Defense, a global international defense contractor and a leading Fortune 500 medical company.

“Apache” Use Case

2016, a Boeing AH-64 Apache helicopter crashed when a hidden and rarely inspected safety nut became undone, causing the rotor blades

to dis-attach in-flight and caused a Class A (major) accident with casualties.

We developed a solution that uses vision-based sensors

and trained AI algorithms to monitor and measure the size and number of threads in a bolt in real-time and automatically warn of out-of-synch

events, preventing such critical future events.

solution was further developed to monitor safety critical and other components on the aircraft and today the solution has been procured for

the SH-60 Seahawk helicopter and deployed on the AH-64 Apache and other operational platforms in Israel and globally.

TruVision System Architecture

specialized software collects, processes, detects, and records real time information from multiple sensors.

The data is available in

real-time through a user application or via our technician ground tool.

Our modular integrated solution is comprised of a processing

unit and multiple vision-based sensors that are integrated into hard-to-reach areas and monitoring safety critical components in real

The solution is designed as an open architecture that supports both a full solution by the Odysight TruVision or integration

with existing systems.

Business Model and Value Proposition

unique video-based sensors, embedded software and AI algorithms are currently being deployed in hard-to-reach locations and harsh environments

across a variety of PdM and CBM use cases.

Our solution allows maintenance and operations teams visibility into areas which are inaccessible

under normal circumstances, or where the operating ambience otherwise is not suitable for continuous real-time monitoring and has various

applications which have relevancy in a wide range of industry segments that utilize complicated mechanics requiring ongoing monitoring

and predictive maintenance applications.

Our current business model is a business-to-business (B2B) approach in which we seek to identify

target businesses interested in integrating our micro visualization and AI\ML video analytics technology or commissioning individual

projects using our technology.

We have several successful proofs of concept in airborne platforms of various OEM’s in aerospace

and have completed successful demonstration projects for multiple global elevator systems manufacturers.

As provided above, we are developing

additional applications for our visual solutions portfolio (composed of image acquisition, data collection, and storage and image processing),

including PdM and CBM (we refer to these applications and sectors as Industry 4.0, or I4.0), which generate a number of potential benefits

for our customers.

following graphic demonstrates Odysight.ai’s value proposition, starting with increased safety and reduced down time due to our

ability to visually analyze any failure occurrence in real time, and including more sophisticated benefits like big data analytics that

provide predictive insights regarding to an entire system life cycle, spare parts management and smart prediction regrading system performance.

History and Background

were incorporated as a corporation under the laws of the State of Nevada on March 22, 2013, under the name Intellisense Solutions Inc.

(“Intellisense”).

We were initially engaged in the business of developing web portals to allow companies and individuals

to engage in the purchase and sale of vegetarian food products over the Internet.

However, we were unable to execute our original business

plan, develop significant operations or achieve commercial sales.

received initial funding in March 2014 in the aggregate amount of $19,980 through the sale of Common Stock to two of our former officers

and directors, who purchased in the aggregate 1,998,000 shares of our Common Stock at $0.01 per share.

January 10, 2019, we formed Canna Patch Ltd., or Canna Patch, an Israeli corporation, of which 90% was initially owned by our Company,

and the remaining 10% owned by Rafael Ezra, Canna Patch’s Chief Technology Officer.

Canna Patch did not have any operations and

on December 4, 2019, we sold 100% of our holdings in Canna Patch.

September 16, 2019, Intellisense and Medigus Ltd., an Israeli company traded on the Nasdaq Capital Market, entered into the Exchange

Agreement, pursuant to which, on December 30, 2019, we acquired from Medigus Ltd.

all of the issued and outstanding share capital of

ScoutCam Ltd.

On December 31, 2019, we changed our name to ScoutCam Inc.

Following this acquisition, we integrated and fully adopted

the acquired miniaturized imaging business into our Company as our primary business activity.

On June 5, 2023, we changed our name to

Odysight.ai Inc.

December 1, 2019, Medigus and Odysight.ai Ltd.

consummated a certain Amended and Restated Asset Transfer Agreement, which transferred

and assigned certain assets and intellectual property rights related to its miniaturized imaging business.

On May 18, 2020, in connection

with the Arkin Transaction (as defined below), the Company and Medigus entered into a certain Side Letter Agreement (the “Letter

Agreement”), whereby the parties agreed to amend certain terms of the Amended and Restated Asset Transfer Agreement and the License

April 20, 2020, Odysight.ai entered into an Amended and Restated Intercompany Services Agreement with Medigus (the “Intercompany

Services Agreement”), which effectively amended and restated an intercompany services agreement dated May 30, 2019.

additional information about the Amended and Restated Asset Transfer Agreement, the Letter Agreement and the Intercompany Services Agreement,

refer to – “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” below.

4, 2023, certain of the Company’s stockholders representing more than 50% of the Company’s outstanding share capital voted

by written consent to change our name from “ScoutCam Inc.” to “Odysight.ai Inc.” The Company’s board of

directors approved an amendment and restatement of the Company’s Amended and Restated Bylaws, effective as of June 4, 2023, to reflect

the name change.

In addition, on June 5, 2023, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment

to its Articles of Incorporation to effect the name change, with such request approved as of June 5, 2023.

In addition, the Company’s

trading symbol was changed from “SCTC” to “ODYS”, effective February 13, 2024.

On February 28, 2024, we formed a new company, D.

VIEW Ltd., wholly owned

by Odysight.ai Inc., to act as a local agent for the defense market in Israel.

Our value proposition is based on providing actual condition of a platform in real-time, offering

significant value through enhanced safety, efficiency and cost savings.

Our big data analytics provide predictive insights regarding

an entire system life cycle, spare parts management and smart prediction of system performance.

The operational, financial and quality

benefits of using the Odysight TruVision solution include the following:

The Odysight TruVision solution enhances worker safety without sacrificing productivity and while minimizing planned

and unexpected downtime.

This is made possible by early detection of potential failures, which can prevent accidents and help to ensure

the aircraft operates within safe parameters.

In addition, our technology can endure extreme environments and has wireless capability,

features that allow maintenance teams to conduct monitoring and visual inspection remotely, with such continuous monitoring and real-time

analysis on the ground and in-flight operations reducing the risk of unexpected malfunctions.

Our smarter approach collects data by placing

multiple cameras on or near the moving parts of machines, allowing workers to conduct remote monitoring to assess the condition of a

component or machine without having to touch the mechanical parts themselves, eliminating potential hazards of being exposed to those

parts, including extreme environmental conditions, rotating equipment and accidents while climbing ladders, among others.

Efficiency and Mission Capability.

On average, organizations are estimated to lower their machine failure rates by 70 percent

using a predictive maintenance program.

Conducting condition-based monitoring using technologies that can gather and distribute sensor

data enables maintenance teams to obtain real-time data on the health of a mechanical system, providing automated and precise detection

of issues that minimizes the time needed for manual and human visual inspections and increases the mission capability of the platform.

This provides enough forewarning to apply the appropriate maintenance tasks that will prevent failure.

For example, our vision-based

sensor reduces or replaces a significant part of the visual inspections required by maintenance teams in the aviation or transportation

industries (i.e., checks for completeness, checks for existence, checks for proper installation, etc.), allowing technicians that oversee

rotating and other equipment to conduct real-time monitoring of bearing malfunctions and deformations while the machine is in operation.

Our technology can detect minuscule deformations that will eventually leave the bearings vulnerable to surface fatigue.

AI algorithms

can then forecast the time of failure.

This not only helps ensure that the bearings are replaced, when necessary, but also prevents collateral

damage to nearby components, machines or systems that would occur should the bearings fail.

Predictive maintenance is estimated to cut maintenance costs by 5 to 10 percent.

This is savings on costs related to

inventory management, the personnel needed to install replacement components and more.

Under conventional maintenance programs, in cases

of emergencies and unexpected machine breakdown, these costs can multiply.

With the foresight predictive maintenance provides into the

health of a machine, organizations can reduce the frequency of unexpected machine breakdowns and optimized maintenance schedules, extending

the lifespan of aircraft components and lowering replacement costs.

Using predictive maintenance in lieu of other maintenance approaches

that rely on rigid maintenance scheduling also means that costs are saved on servicing and replacing machine components that are still

in good working order.

Accuracy and Reliability.

As physical assets, machines are vulnerable to deterioration.

Our vision-based system and analysis

ensures consistent and objective detection of issues, reducing human error and enhancing the reliability of maintenance predictions and

interventions.

The data analytics we provide offer maintenance teams with insights that help machines perform optimally as long as possible.

The analysis of machine data from our vision-based sensing solution and analytics will highlight the situations in which components fail

or breakdown frequently.

Maintenance teams can use this information to minimize breakdowns.

Unexpected downtime is expensive, and can be one of the largest money drains in Industry 4.0 organizations.

the unplanned downtime of machines is estimated to cost industrial manufacturers as much as $50 billion annually.

The Odysight TruVision

solution has been designed to eliminate unplanned downtime and allows maintenance teams to keep necessary, planned downtime to a

minimum and at a more convenient, less disruptive schedule.

This is a stark difference from other maintenance approaches, such as preventive

maintenance, that can increase downtime by implementing either insufficient or excessive maintenance.

Training and Support .

Real-time and historical visual information serve as powerful training tools for technicians, improving

their skills and preparedness.

Visual remote access capabilities allow for expert support and collaboration, even across different locations.

current business model is to identify customers interested in adding real-time visualization and analytics to their existing or new

This model includes the initial kit sale including vision-based sensors, processing unit with embedded software and basic

set of algorithms.

This strategy allows for immediate revenue generation from system sales, and also set the base to create a steady

stream of recurring revenue from multi-year software subscriptions services.

solution provides upsell opportunities including expanding algorithmic functionalities, additional applications, fleet management solutions

and improved cloud management.

have commercial agreements and purchase orders for hundreds of airborne systems of various original equipment manufacturers, or OEMs,

in aerospace and have completed successful demonstration projects for various industrial users.

We are in the process of developing additional

applications for our vision-based sensing portfolio, which are anticipated to provide significant benefits to our customers.

believe the Odysight TruVision solution has potential application across diverse industry verticals as it is a core technology.

benefits of vision-based sensor technology become more widely accepted, we believe there are significant market opportunities available

for our product offerings.

on industry reports and our estimates, the global predictive maintenance market was approximately $8 billion in 2024 and is

projected to grow to approximately $34 billion by 2030, at a compound annual growth rate of approximately 30%.

In the aerospace

market alone, which constitutes commercial aviation, military rotorcraft, fixed wing aircraft and UAVs, we believe that our

Aerospace TAM is currently more than $10 billion.

We based our Aerospace TAM calculations on data from third-party industry and

governmental sources regarding the total number of units that could utilize our vision-based sensor technology and on our estimates

of an average selling price and extent of our market penetration.

We believe the TAM for other verticals we are targeting such as

Industry 4.0, transportation and energy eclipse that of aerospace.

addition, the U.S.

Department of Defense has mandated the use of predictive maintenance as a pro-active maintenance strategy to improve

mission readiness and availability.

Competitive Strengths

believe the following strengths have been instrumental to our success.

We intend to continue to build on these strengths to position

us for future growth and drive our profitability:

maintenance algorithmics using AI and machine learning.

Our vision-based platforms use AI and machine learning engines, video

analytics and proprietary algorithms.

Our AI platforms enable our customers to detect anomalies and anticipate maintenance trends in

real-time, improving planning and forecasting.

specialized sensors.

The Odysight TruVision solution utilizes high end device sensor technology coupled with software-defined

With this combination, we develop new solutions for industry-specific requirements, constantly expanding our product offerings.

value proposition.

We designed the Odysight TruVision solution to provide improved operating efficiency and safety, minimize

maintenance costs, reduce downtime and extend operational life.

In addition, our solution may be installed at the design stage as well

Due to these advantages, we believe that our vision-based sensor solutions are appealing to customers seeking the benefits

of condition based monitoring and predictive maintenance solutions in hard-to-reach locations and harsh environments.

long-term growth due to recurring subscription-based model.

Currently, our revenues are derived mostly from sales of the Odysight

TruVision solution.

As we expand the installed base of our solutions, we expect subscriptions for the continued support of our technology

to become the foundation of our recurring revenue for sustainable growth over time.

research and development capabilities and a robust intellectual property portfolio.

We have invested in establishing strong

research and development capabilities, including integrating hardware, software and algorithms to create an exceptional solution in

a single optimized system.

Our deep knowledge and intellectual property is protected by a broad patent portfolio, including 17

issued patents, seven of which are in the U.S., and 55 pending patent applications, 19 of which are in the U.S.

provisional patent applications), as of the date of this Annual Report.

We believe our intellectual property and know-how present a

significant barrier to entry for our competitors.

management team.

We are led by a highly experienced management team with a successful track record in predictive maintenance,

condition-based monitoring, aerospace, software, algorithms, video analytics, optics and system engineering.

Our team, under the leadership

of our CEO Yehu Ofer, who has decades of industry experience, has effectively managed dynamic growth phases in organizations and commercialized

products in various markets.

Our senior management team brings a wealth of industry expertise, with decades of experience in leading

both public and private companies.

Additionally, our board of directors consists of exceptional leaders with a proven track record of

building and managing businesses.

Growth Strategy

believe we are well-positioned as a pioneer of PdM and CBM vision-based sensor technology.

Our significant growth opportunities are

focused on the aerospace vertical where we have achieved sales to leading clientele, as well as expansion into new

New Customers.

We believe there is significant potential to attract new customers in the aerospace vertical, where we already

have leading clients.

Our products, which meet aerospace standards, combined with our management expertise, knowledge, and professional

relationships, provide a strong foundation to engage with prospective clients.

We plan to continue focusing on efficient growth by expanding

our sales and marketing efforts to secure new customers.

On Our Product Roadmap We continue to place a priority on innovation and product development to be competitive in our target

markets over time to win new and expanded business opportunities.

We believe the performance of the Odysight TruVision solution,

in conjunction with the flexibility of our software, will allow us to continue providing new solutions to our customers and further develop

the use cases for our systems across various vertical markets.

Our Technology Leadership .

We believe our ability to enable our customers to optimize their maintenance and leverage applied-AI

solutions will contribute to our continued success.

To support these efforts, we intend to make substantial investments in research and

development, including in the areas of applied machine learning and AI technologies, to expand and strengthen our offerings and develop

next generation products.

Ourselves as Leading PdM and CBM Solution Provider in Aerospace and Expand to New Verticals .

We continue to sign new commercial

agreements in the aerospace vertical and believe our solution is highly relevant and a value add in many aerospace platforms.

we are working to develop new vertical opportunities, including transportation, energy and other industries.

with Global Market Leading Corporations to Leverage their Commercial Position .

We aim to leverage the global market position

of leading corporations that we partner with to maximize our reach and impact.

By partnering with these industry leaders, we believe

that we will expand our market presence, strengthen brand credibility, accelerate growth, and optimize resources through their established

networks, extensive distribution channels, and operational capabilities.

and Marketing

vision is to become a leading provider of visual sensing and AI\ML video analytics, PdM and CBM solutions for the aerospace, other industry

and medical critical system markets.

engage companies seeking to add real time visualization and analytics to their existing or new product(s) or considering the

development of new products that include miniature visualization sensors and failure detection capabilities.

Our approach to the

medical market ordinarily is conducted in two phases.

During the first phase, we conduct the research and development

that is required in order to specify, design, develop, and produce the designated visualization apparatus, for an agreed-upon

compensation amount (e.g., a non-recurrent engineering fee).

During the second phase, we manufacture the apparatus and offer it to

the customer for an agreed-upon transfer price.

the I4.0 domain, which target PdM and CBM applications, we engage with companies that wish to increase the monitoring capabilities of

different elements of a device using our visual monitoring solutions (these include build of image acquisition, data collection and storage,

and image processing capabilities based on AI, ML, cloud, and additional algorithm concepts).

Based on our product portfolio with customized

solutions as needed, this will allow our customers to receive real time alerts on anomalies and failures of monitored components, analyze

and track trends and development of the anomaly, and predict any impending failure of the component as a result of such anomaly over

time and usage.

As a result, we expect customers to benefit from a reduction in downtime, lower maintenance expenses, and increased safety

of their monitored equipment, using the prediction capabilities of the platform to efficiently plan maintenance work on future faulty

Another outcome we expect is more cost-effective management of resources, since components will only need to be replaced

as a result of their actual condition rather than a strict maintenance schedule.

use of a vision-based platform in the fields of PdM and CBM provides richer and more informative data and insights than traditional sensing

Together with the AI and ML models customized for the relevant use cases, we expect this will provide customers with a clearer

view of the status of their equipment, increasing revenues by saving on direct expenses, and increasing the uptime of their equipment.

February 6, 2023, we announced the completion of a major development stage in equipping Elbit Systems Ltd.’s leading defense UAS

aerial platforms with our real time video monitoring system.

Through the program, our unique video-based sensors, embedded software,

machine vision and algorithms support a variety of predictive maintenance and condition-based monitoring use cases for unmanned aerial

vehicles in harsh environments and hard-to-reach locations, as it features a modular open system architecture, enabling seamless integration

with advanced unmanned aerial platforms.

July 31, 2023, we announced a collaboration with the Israel Aerospace Industries (IAI) through which the IAI will utilize our advanced

visual sensing and video analytics technology in a visual based health monitoring system for UH60 (Blackhawk) helicopters.

By harnessing

our multiple highly resilient video-based sensors, embedded software, video analytics and AI algorithms specifically designed for the

UH60 helicopter, this solution will provide real-time insights into the health of UH60 helicopters, improving safety measures, minimizing

downtime, optimizing spare parts management, and enabling the implementation of predictive maintenance strategies.

December 4, 2023, we announced a strategic partnership to develop advanced applications for aerospace and industrial markets worldwide

with SIPAL S.P.A., a leading company in Italy in the engineering sector.

The goal of the collaboration is a next generation maintenance

solution that will allow maintenance crews the ability to review and have real time visual inspection of an aircraft’s internal

system without the need for removing a single panel or a hatch.

February 20, 2024, we announced the receipt of a purchase order for our PdM system for the Israel Air Force Boeing AH-64 Apache

attack helicopter prototype.

The partnership marks a significant milestone, integrating our autonomous, visual monitoring and predictive

maintenance technology into a leading attack helicopter.

There are approximately 2,700 Boeing AH-64 Apache attack helicopters deployed

March 11, 2024, we announced the receipt of a purchase order exceeding $1 million from a major international defense contractor for our

visual sensing and AI analytics solution.

The systems will be installed in upgraded Lockheed Martin (Sikorsky) SH-60 Seahawk Maritime

Rotary Wing Aircraft of the Israel Air Force.

More than 4,000 UH-60 Black Hawk aircraft, and its variants such as the SH-60 Seahawk,

are in service worldwide today.

We estimate that the addressable market of rotary wing aircraft systems worldwide is more than a billion

order to engage new customers, we employ various marketing strategies.

We employ several professional experienced managers in relevant

fields of expertise, in addition to a team of consultants who analyze global trends and designated geographical territories to assist

us in targeting potential customers.

are focused on the aerospace vertical while we target Industry 4.0, transportation and energy markets where there is a growing need for

our vision-based sensor technology.

In the aerospace market we are already generating commercial revenues, in Industry 4.0,

we are executing on proof of concept projects, in transportation, we received our first purchase order in December 2024 and in the energy

market we are conducting initial discussions with potential customers.

our main marketing efforts are focused on the Israeli and U.S.

markets, with some efforts invested in pursuing opportunities in European

and other top tier markets.

are implementing a comprehensive sales and marketing approach that encourages widespread adoption of our products.

Our aim is to sell

the Odysight TruVision solution by targeting the Israeli home market, utilizing global platforms available in the U.S.

and internationally.

This involves addressing operators, OEMs, maintenance and repair organizations, and forming strategic partnerships with entities holding

strong market positions that can benefit from our solution, providing them immediate value and a technological edge, thereby accelerating

our sales and global expansion.

Our direct interaction with OEMs, enables us to work with them from the design phase, providing for seamless

integration of our solutions into their products.

Our sales cycles vary from a few months to a few years, depending on the type and scale

of engagement.

Once a system is deployed, it may be utilized for several years.

engage new customers, we employ various sales and marketing strategies.

We employ several professional experienced sales managers in

relevant fields of expertise, in addition to a team of consultants who analyze global trends and designated geographical territories

to assist us in targeting potential customers.

marketing efforts include, but are not limited to, the following:

third party companies and local consultants as territorial representatives in key markets and leading companies in relevant industries;

business engagements based on leads received through our marketing efforts, through active interaction with key industry influencers,

providing financed proof of concept in order to generate tailored product orders, or via other methods or means;

proof of concept demonstrations in order to evaluate the feasibility of integration for monitoring their systems and to demonstrate

the significant value proposition of our technology to customers;

through personal contacts in the aerospace, critical industry, transportation, maritime, medical, and defense industries;

third-party companies and local consultants as territorial representatives in key markets to target leading companies in relevant

business engagements based on leads received through our marketing efforts or through active interaction with key industry influencers,

proof of concept demonstrations in order to evaluate the feasibility of integration of the Odysight TruVision solution for

monitoring their systems and to demonstrate the significant value proposition of our technology to customers;

through personal contacts in the aerospace, defense, transportation, maritime, energy and medical industries;

participating

in major aerospace, maritime, and vision technology exhibitions as well as industry 4.0 specific events.

in major aerospace, defense, vision technology and other exhibitions as well as Industry 4.0 specific events.

we have four major customers that are expected to generate a substantial portion of our forecasted revenue in the near term.

June 2022 we announced that we completed the verification and validation stage of our endoscopic camera solution with our Fortune 500

client, in January 2023 we announced the receipt of a $1.45 million order from this client, and in October 2023 we announced a solidified

purchase order with this client and that formal commitments under the purchase order amount to a total of $3.3 million for fiscal year

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

February 2023, we announced the completion of a major development stage in equipping Elbit Systems Ltd.’s leading defense UAS aerial

platforms with our real time video monitoring system.

Through the program, our unique video-based sensors, embedded software, machine

vision and algorithms support a variety of predictive maintenance and condition-based monitoring use cases for unmanned aerial vehicles.

Since our technology features a modular open system architecture, it enables seamless integration with advanced unmanned aerial platforms.

July 2023, we announced a collaboration with the Israel Aerospace Industries, or IAI, through which the IAI will utilize our advanced

vision-based sensing and video analytics technology in a vision-based “health monitoring system” for UH-60 (Blackhawk) helicopters.

By harnessing our multiple highly resilient video-based sensors, embedded software, video analytics and AI algorithms specifically designed

for the UH-60 helicopter, this solution will provide real-time insights into the health of UH-60 helicopters, improving safety measures,

minimizing downtime, optimizing spare parts management and enabling the implementation of predictive maintenance strategies.

December 2023, we announced a strategic partnership to develop advanced applications for aerospace and industrial markets worldwide with

SIPAL S.P.A., a leading company in Italy in the engineering sector.

The goal of the collaboration is a next generation maintenance solution

that will allow maintenance crews the ability to obtain and review real time visual inspection of an aircraft’s internal systems

without the need to remove a single panel or a hatch.

February 2024, we announced the receipt of a purchase order for our PdM system for an Israel Air Force Boeing AH-64 Apache attack helicopter

The partnership marks a significant milestone, integrating our autonomous, vision-based monitoring and predictive maintenance

technology into a leading attack helicopter.

There are approximately 2,700 Boeing AH-64 Apache attack helicopters deployed worldwide.

March 2024, we announced the receipt of a purchase order exceeding $1 million from a major international defense contractor for our vision-based

sensor and AI analytics solution.

The system will be installed in upgraded Lockheed Martin (Sikorsky) SH-60 Seahawk Maritime Rotary Wing

Aircraft of the Israel Air Force.

More than 4,000 UH-60 Black Hawk aircraft, and its variants such as the SH-60 Seahawk, are in service

worldwide today.

May 2024, we announced the receipt of a purchase order from Tel Aviv University for the Israeli Ministry of Defense for a bespoke system

based on our proprietary vision-based sensors.

In addition, in the same month, we announced the

receipt of a purchase order for an engine guide vane monitoring system from France-based Safran Aircraft Engines.

September 2024, we announced a purchase order exceeding $10 million with a leading international defense contractor for the integration

of our vision-based sensor technology into a new UAV configuration as well as an existing UAV line.

In the same month, we announced the

receipt of a new repeat purchase order from NASA to support its high-speed aeronautical flight testing on aerospace vehicles.

January 2025, we announced a collaboration with Israel Railways to develop an advanced monitoring and predictive maintenance system designed

to prevent derailments and improve the safety and efficiency of the country’s rail network.

This innovative solution, powered by

artificial intelligence, aims to revolutionize Israel’s railway infrastructure by enhancing the performance, reliability, and safety

of critical track switches.

purchase orders and collaborations generate revenue over a period ranging from a few months to several years.

The variability in project

durations and the potential for delays or changes in client needs further complicate our ability to forecast revenue with precision.

As a result, there is an inherent uncertainty in predicting the exact timing and amount of revenue that will be generated from these

addition to our business development efforts that are mainly based on currently existing or future customer needs, we aim to identify

new market opportunities.

These efforts include systematic analysis of various industrial and medical fields and procedures to identify

These efforts include systematic analysis of various industrial fields and procedures to identify

where visualization solutions, including image analysis, might add value.

When a potential opportunity is identified, we seek to protect

our rights by establishing relevant intellectual property safeguards, developing prototypes for the required application.

In the medical

domain, we currently sell our system to a fortune 500 corporation;

in this respect, we seek to partner with additional relevant companies

to progress our technology into prototypes which, in turn, will be developed into market-ready products.

our rights by establishing relevant intellectual property safeguards and developing prototypes for the required application.

Manufacturing

rely on both in-house manufacturing together with outsourced manufacturing for a portion of the assembly of our vision-based sensor products.

We manufacture the miniature cameras used in our vision-based sensor solution at our Omer location, while the manufacture of the processing

units and handheld devices is outsourced to third parties.

The camera is then assembled in our facilities into a finished system that

is calibrated and tested by us for quality control.

of the components and parts we use in our manufacturing operations are available from more than one source.

However, we obtain certain

components from single source suppliers.

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

are suitable for our CMOS technology mainly in the medical domain is very limited.

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.

of an extended failure of a supplier or suppliers 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.

Any inability or delay in finding a suitable replacement

supplier or suppliers could negatively affect our business, financial condition, results of operations and reputation.

facility in Omer holds the following certifications:

AS9100, ISO13485, IPC-A-610, and IPC-7711/7721.

We have completed the process of implementing the I SO14001

Standard to comply with environmental management systems.

and Development

research and development activities are conducted internally by a team of 32 research and development staff based in Israel.

Our development

strategy is to identify features and products for the hardware and software that enhance and improve the performance of our solutions

for our customers.

The focus of our R&D team is to provide technological innovation and associated intellectual property that expands

the value proposition of our vision-based sensor solutions.

research and development efforts focus on two main areas:

We are advancing our multi-camera technology, which utilizes advanced vision-based sensing and AI/ML processing focusing

on sensing, computing and prediction.

Cloud-Based Products :

We leverage our existing cloud environment to develop proof of concept and innovative industrial solutions.

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

There are currently

several companies that develop and provide monitoring solutions for PdM and CBM.

These monitoring solutions include the sensor itself,

data collection and storage, AI processing, or a combination of these capabilities.

CBM and PdM solutions are usually based on traditional

sensing solutions such as vibration, temperature and acoustic sensors.

Based on our research and discussions with customers, we believe

these traditional sensing methods are limited in their ability to provide an in-depth view of the condition of the monitored components

and usually alert on the occurrence of an anomaly when component failure has already occurred, which is too late in some cases.

an AI perspective, there are several vendors providing off-the-shelf AI capabilities which then require customization per market, use

case, and/or data source.

We believe that our more holistic approach and reliance on vision-based solutions creates richer and more informative

data, leveraged by AI and machine learning algorithms, enabling our customers to more effectively deploy predictive maintenance programs.

believe that our ability to compete successfully depends primarily on the following factors:

to advance our vision-based sensor solution;

our data and AI capabilities;

and attracting customers;

and launching new products and transformative brands;

to changing customer demands in a timely manner;

the value and reputation of our brand;

and retaining a team committed to innovation;

effectiveness

of our products;

effectiveness

of our marketing strategies.

competitors may enter the market, and we are likely to encounter increased competition in the future.

Any business combinations or mergers

among our competitors that result in larger competitors with greater resources or distribution networks, or the acquisition of a competitor

by a major technology corporation seeking to enter this business could further result in increased competition.

Other companies, academic

and research institutions or others may develop new technologies for products that are more effective than our vision-based sensor technology.

Our technologies could be rendered obsolete by such developments.

property is an important aspect of our business and we seek protection for our intellectual property rights as we deem appropriate.

establish and protect our proprietary rights, we rely on a combination of patent, copyright, trade secret and trademark laws, and contractual

restrictions such as confidentiality agreements, licenses and intellectual property assignment agreements.

We strive to protect the proprietary

technologies that we believe are important to our business, including seeking and maintaining patent protection intended to cover our

current and future products and technologies.

of March 20, 2025, our patent portfolio included 17 issued patents, seven of which are in the U.S., and 55 pending patent

applications, 19 of which are in the U.S.

(including provisional patent applications).

The issued U.S.

patents are expected to

expire between 2030 and 2042, in each case taking into account awarded patent term adjustments and extensions, and assuming payment

of all appropriate maintenance, renewal, annuity or other governmental fees.

We have a total of 19 patent families, 12 of which are

in the predictive maintenance field and seven are related to imaging technology.

January 2022, we entered into a patent cross-licensing arrangement with Japan-based Sumita Optical Glass, Inc.

(Sumita), a specialty

optical fiber technology company, pursuant to which we granted a non-exclusive license to Sumita to our patents related to “Small

Diameter Video Camera Heads and Medical Devices and Visualization Probes containing them” in return for payment of royalties and

a grant-back license to Odysight.ai of Sumita’s patent and patent applications related to fiber optics illumination.

For additional

information on our patent portfolio, refer to – “PROPRIETARY RIGHTS AND TECHNOLOGY” below.

we have one major customer, a leading Fortune 500 multinational healthcare corporation, that is expected to generate most of our forecasted

revenue in the near term.

In June 2022, we announced that we completed the verification and validation stage of our endoscopic camera

solution with this client and, on January 26, 2023, we announced that we had received a $1.45 million order from this client.

17, 2023, we announced a solidified purchase order with this client and that formal commitments under the purchase order amount to a

total of $3.3 million for fiscal year 2024.

are currently several companies that develop and provide monitoring solutions for PdM and CBM.

These monitoring solutions can be the

sensor itself, data collection and storage, AI processing, or a combination of these capabilities.

The CBM and PdM solutions are usually

based on traditional sensing solutions such as vibration, temperature, and acoustic sensors.

Based on our research and discussions with

customers, we believe these traditional sensing methods are limited in their ability to provide an in-depth view of the condition of

the monitored components and usually alert on the occurrence of an anomaly when component failure has already occurred, which is too

late in some cases.

From the AI perspective, there are several vendors providing off-the-shelf AI capabilities which then require customization

per market, use case, and/or data source.

We believe that our more holistic approach and reliance on image-based solutions creates richer

and more informative data, leveraged by AI and ML algorithms, enabling our customers to deploy predictive maintenance programs.

Rights and Technology

solution for the market is based on our core intellectual property which we seek to review and patent on a regular basis, where applicable.

We are heavily invested in creating patents for our core technology.

patent portfolio currently contains patent families which we consider material to our business and operating success.

Our intellectual

property rights include patents and patent applications that were transferred to us by Medigus as part of the Addendum No.

and Restated Asset Transfer Agreement (the “Addendum”), the License Agreement and the Letter Agreement, and additional patent

assets developed by us.

For additional information about the License Agreement refer to – “CERTAIN RELATIONSHIPS AND RELATED

PARTY TRANSACTIONS” below.

Under the Addendum, and subject to certain limitations as further set forth therein, Medigus transferred

to us the following material patent families in exchange for a license in connection with the marketing and sale of the Medigus Ultrasonic

Surgical Endostapler:

Patent family related to Integrated Endoscope Irrigation:

this patent family relates to our ability to develop visualization components

and endoscopes, which include irrigation with a smaller outer diameter by saving the space of the tube that is required to lead the fluids

in a conventional manner.

This patent has been granted in Canada, Europe (validated in Germany, Spain, France, Great Britain and Italy),

Israel, Japan (original and divisional), and the United States (three patents), and has one pending continuation in the United States.

The expiration dates for the three patents in the United States are November 28, 2033, February 28, 2033 and February 28, 2033, respectively;

Patent family related to Small Diameter Video Camera Heads and Medical Devices and Visualization Probes containing them:

family relates to our ability to develop cameras, visualization components, and medical devices with a small diameter, thus enabling

the insertion of the camera into smaller cavities or leaving more space in the device for the use and application of other functions,

such as a working channel.

This patent has been granted in Japan, Korea, Israel, the United States (2 patents, original and continuation

in part), and Europe (3 patents revoked after appeal in opposition proceedings).

The expiration dates for these patents are March 16,

2031 (for the patents in the United States), and September 16, 2030 (for patents in each of the other aforementioned jurisdictions).

a result of oppositional proceedings initiated by a third party in 2018, the Opposition Division of the EU Patent Office decided in 2019

to revoke two of the three European patents (EP 2.478.693 and EP 2.621.159) and in 2021 to maintain the third patent (EP 2.621.158).

Following appeal hearings held in early 2024, the Board of Appeals revoked all three patents, with formal written decisions still pending.

The Company will decide whether to petition for further review of this matter after it receives the formal written decisions.

The revocations

are not expected to have a material impact on the Company’s current business operations.

a result of a supplemental examination filed by the Company regarding one of the U.S.

Patents (10,188,275), the U.S.

Patent Office decided

to open reexamination proceedings for 23 of the 24 granted claims.

A Notice of Intent to Issue a Reexamination Certificate was issued on

March 21, 2024 and the certificate is expected to be issued during

the course of 2024.

addition, our intellectual property rights further include the following material patent applications filed by Odysight.ai:

Patent family related to Miniature Precision Medical Device:

these pending patent applications relate to our ability to develop a miniature

precision medical device comprising an endoscope with at least one camera, where at least one sensor of one camera is distally located

at a tip of a shaft of the endoscope.

Surrounding or next to the sensor, such shaft has sufficient space to accommodate at least one

accessory such as, for example, illumination source, irrigation tool, or suctioning tool.

This patent family has pending patent application

in the United States and its expected expiry dates, if issued, will be in 2039-2040.

Patent family related to Medical Ophthalmic Device:

this patent family is related to a tool comprising a hand piece having a flattened

cannulated tip that is adapted to receive flow from a pumping unit, in order to generate a jet of fluid suitable for procedures such

as “hydro-dissecting” cells in the eye.

According to a representation of the invention, the tool comprises a visualization

probe with at least one camera, wherein the sensor of the camera is distally located at the tip of the tool to be inserted into the eye

for imaging from within the eye.

This patent family is pending in China, Europe, Japan, Korea, and the United States.

The patent application’s

expected expiry dates, if issued, will be in 2039-2040.

Patent family related to Systems and Methods for Monitoring Potential Failure in a Machine or a Component Thereof.

This patent family

relates to system and methods for monitoring potential failure in a machine or a component thereof using at least one optical sensor.

Such sensors can be used in conjunction with diagnostic software/hardware tools to display and analyze changes in critical images that

could not have been displayed or analyzed using existing systems.

This patent family includes national phase applications filed in Australia,

Brazil, Canada, China, Europe, Israel, India, Japan, Korea, Singapore and the U.S.

(2 applications, original granted and a pending continuation

application).

The expiry date for the United States patent is January 2043.

have also applied for provisional applications relating

to our predictive maintenance technology and developments and for our medical imaging technology and development.

All of these applications

are expected to have a lifetime of 20 years from filing, if granted.

have also applied for trademark applications covering our brand names.

The trademarks are registered in Israel and international

applications were filed under the Madrid protocol, which are under currently examination procedures.

Opposition proceedings have

been filed by a third party in the European Union Intellectual Property Office against the Company’s EU trademark applications

for “Odysight” and “OdysightAI”.

The opposition proceedings are expected to be finalized in

2024 or 2025.

to the Addendum, on February 7, 2023, we returned the patent family related to Camera Head to Medigus in return for a license from Medigus

to use the same patent family.

our efforts to protect our intellectual property, unauthorized parties may still copy or otherwise obtain and use our technology.

additional information, refer to – “WE MAY NOT BE SUCCESSFUL IN ENFORCING OUR INTELLECTUAL PROPERTY RIGHTS AGAINST THIRD

PARTIES” above.

currently have approximately 49 full-time (or near full-time) employees.

This number is expected to grow.

We may recruit additional employees

to the R&D team.

and Development

R&D organization is responsible for the design, development, testing, and delivery of new technologies, features, products, and

integrations of our component parts.

We currently have approximately 24 employees engaged in research and development.

We intend to continue to invest in our research and development capabilities.

R&D efforts are focused on the following areas:

(i) maturing our multi camera solution based on advanced visual sensing and AI\ML

processing technologies focusing on sensing, computing, and prediction, cooperating with customers for mutual development projects that

demonstrate our technology by reaching customer KPIs and (ii) our industrial cloud-based product, which leverages our already in place

cloud environment to develop mutual proof of concept and minimal valuable product for our customers that enable cloud base solutions

for customer KPIs.

approach to regulation is generally determined based on a given project.

In our engagements with customers operating in the biomedical

sector, we comply with the medical device standards in that corresponding territory, such as the FDA or International Organization for

Standardization (ISO), among others.

optical fiber technology company, pursuant to which we granted a non-exclusive license to Sumita to one of our imaging patent families

in return for payment of royalties and a grant-back license to Odysight.ai of Sumita’s patents and patent applications related

to fiber optics illumination.

To date, only an immaterial amount of royalties has accrued.

often initially submit applications to the USPTO as provisional patent applications.

We sometimes continue by filing non-provisional

patent applications under the Patent Cooperation Treaty, or the PCT, which is an international patent law treaty that provides a unified

procedure for filing a single initial patent application to later seek patent protection for an invention in any number of the member

states of the PCT.

Although a PCT application does not itself issue as a patent, it acts as a placeholder allowing the applicant to seek

protection in any of the member states through national-phase applications.

In other cases, we file national applications claiming priority

under the Paris Convention from the provisional patent applications.

have trademark rights in our trade name and other brand elements in certain jurisdictions, including trademark applications and registrations

in various jurisdictions around the world, including the U.S., Europe, Israel, Australia, Brazil, Canada, Japan and Korea.

pursue the registration of domain names for websites that we use and that we consider material to the marketing of our products, including

the odysight.ai domain.

generally seek to enter into confidentiality agreements and proprietary rights agreements with our employees, consultants, contractors

and suppliers and to control access to, and distribution of, our proprietary information and source code.

However, we cannot guarantee

that all applicable parties have executed such agreements.

Such agreements can also be breached, and we may not have adequate remedies

for any such breach.

property laws, procedures and restrictions provide only limited protection, and any of our intellectual property rights may be challenged,

invalidated, circumvented, infringed, misappropriated or otherwise violated (see “ Item 3 — Legal Proceedings ”).

Furthermore, the laws of certain countries do not protect intellectual property and proprietary rights to the same extent as the laws

of the United States, and we therefore may be unable to protect our proprietary technology in certain jurisdictions.

our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or obtain and use our technology to develop products

and services with the same functionality as our products.

Policing unauthorized use of our technology is difficult.

Our competitors could

also independently develop technologies like ours, and our intellectual property rights may not be broad enough for us to prevent competitors

from selling products and services incorporating those technologies.

For more information regarding the risks relating to intellectual

property, see “Item 1.A — Risk Factors — Risks Related to our Intellectual Property .”

are subject to a variety of laws, regulations and licensing requirements of U.S.

federal, state and local authorities, including Israel.

We are also required to obtain various licenses and permits from state, local and Israeli authorities in connection with the operation

of our business.

that we do not manufacture or distribute end-user products and instead service businesses pursuant to a business-to-business model, we

are subject to fewer regulatory standards commonly associated with manufacturers or distributors.

manufacture and sell the Odysight TruVision solution that contains electronic components, and such components may contain materials

that are subject to government regulation in both the locations where we develop, manufacture and assemble our products, as well as the

locations where we sell our products.

Among other things, certain applicable laws and regulations require or may in the future require

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

or consumers.

If our products fail to comply with applicable regulations, we and/or our products could be subjected to a variety of enforcement

actions or sanctions, such as product recalls, repairs or replacements, warning letters, untitled letters, safety alerts, injunctions,

import alerts, administrative product detentions or seizures or civil penalties.

The occurrence of any of the foregoing could harm our

business, results of operations and financial condition.

we plan to operate on a global basis, we will be required to continually monitor applicable laws and regulations and engage in an ongoing

compliance process to ensure that we and our suppliers are in compliance with existing laws and regulations, even as they change over

If there is an unanticipated or onerous new law or regulation that significantly impacts our use of various components or requires

more expensive components, such law or regulation could materially adversely affect our business, results of operations and financial

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.

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 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.

In addition, we are being audited annually by MEDCERT GmbH,

a German Notified Body.

instance, ISO 13485:2016 is a regulatory benchmark that we comply with while working on our medical device projects.

ISO 13845:2016 is

similar to ISO 9001 in terms of its quality management system (QMS) requirements, however, ISO 13485:2016 is generally considered more

rigorous and comprehensive.

that we do not manufacture or distribute end-user products to the medical sector, and instead service businesses pursuant to a B2B model,

we are subject to fewer regulatory standards commonly associated with medical device manufacturers or distributors.

We develop and manufacture

components for other companies, and therefore our involvement in the regulatory submission demands comparatively less responsibility.

This notwithstanding, we communicate with business customers in order to identify certain regulatory dimensions inherent to a project,

to which we should pay additional attention.

For example, when a component of ours is integrated into a business’s end-user product,

such as for the purpose of touching human tissue, we develop and manufacture our parts and components while taking into account certain

applicable regulatory standards.

These standards might include, inter alia, relevant FDA regulations (e.g.

CFR 21 part 820, the medical

device reporting requirements (MDR), among others) as well as ISO regulations (e.g.

ISO 14644-1, specifically in connection with cleanrooms

and associated controlled environments, among other items, or ISO 10993, in connection with the biological evaluation of medical devices).

Furthermore, we prioritize our team’s compliance with the Restriction of Hazardous Substances Directives (RoHS) and REACH (EC 1907/2006).

if a component part of ours is incorporated into an electronic device for the purpose of being used inside a human body, we comply with

certain FDA requirements as well as IEC 60601 for safety and electrostatic discharge, including the heating of parts at more than 42

degrees Celsius and a variety of additional technical standards designed for the safety and essential performance of electronic medical

Moreover, we perform risk management assessments in accordance with EN ISO 14971:2019 and ISO/TR 24971:2020.

certain instances, our customers prefer that we conduct the testing of its products in internationally certified labs in order to further

guarantee that our component parts satisfy applicable regulatory standards.

In this scenario, we perform the required tests as a service

to the customer and provide the customer with the official test results, specifically in accordance with ISO/IEC 17025:2017, which the

customer can later use in order to apply for the required marketing clearance of its end-user product.

we are seeking to sell our products to customers in the aviation sector, we have completed the process of implementing the AS9100D Standard

to comply with aerospace industry requirements.

company with foreign offices, we are subject to a variety of foreign laws governing our foreign operations, as well as U.S.

that restrict trade and certain practices, such as the Foreign Corrupt Practices Act.

Government Programs

a result of certain agreements between Medigus and Odysight.ai Ltd.

(for additional information about these agreements refer to –

“CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” below), the IIA approved a transfer of IIA know-how developed by Medigus

in the framework of the Bio Medical Photonic Consortium, or the Medigus Consortium, to Odysight.ai.

all rights and obligations with regard to the IIA under the Encouragement of Research, Development and Technological Innovation in the

Industry Law, 5744-1984, or the Innovation Law, in connection with such know-how now apply to Odysight.ai.

following are details regarding the rights and obligations within the framework of our activity in the Medigus Consortium, which continue

to apply to us notwithstanding the termination of the Medigus Consortium:

property rights to information which has been developed belongs to the Medigus Consortium member that developed it.

developing entity is obligated to provide the other members in the Medigus Consortium a license for the use of the new information,

without consideration, provided that the other members do not transfer such information to any entity which is not a member of the

Medigus Consortium.

The provision of a license or of the right to use the new information to a third party is subject to approval

by the administration of the MAGNET Program at the IIA;

Medigus Consortium member is entitled to register a patent for the new information which has been developed by it within the framework

of its activity in the Medigus Consortium.

The foregoing registration does not require approval from the administration of the MAGNET

Program at the IIA;

In addition, we are audited annually by MEDCERT GmbH, a

German Notified Body.

are subject to a number of laws and regulations that involve matters central to our business.

These laws and regulations involve privacy,

data protection, intellectual property, competition and other subjects.

Many of the laws and regulations to which we are subject are

still evolving and being tested in courts and could be interpreted in ways that could harm our business.

In addition, the application

and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which

Because global laws and regulations have continued to develop and evolve rapidly, it is possible that we may not be, or may

not have been, compliant with each such applicable law or regulation.

we expand our operations internationally, we expect to be subject to other laws and regulations governing our international operations,

including regulations administered by the governments of Israel, the U.S.

and the European Union, including applicable export control

regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements

and currency exchange regulations, collectively referred to as trade control laws.

Failure to comply with anti-corruption laws and trade

control laws could subject us to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses.

from the Israel Innovation Authority

May 21, 2023, we were awarded a grant by the IIA.

The purpose of this grant is to support and our production capabilities.

our successfully achieving all predetermined milestones, the maximum grant amount that can be received is NIS 1 million (approximately

US$ 277,777).

of December 31, 2024, we received IIA royalty-bearing grants totaling approximately NIS 515,000 (approximately US$130,000).

are committed to paying royalties to the IIA at a rate of approximately 1.0% to 3.5% on sales proceeds from our products (and related

know-how and services) that were developed, in whole or in part, in connection with the IIA royalty-bearing grants we received under

IIA programs, up to the total amount of royalty-bearing grants received, linked to the U.S.

dollar and bearing annual interest at rates

prescribed by the IIA’s rules and guidelines.

may in the future apply to receive additional grants from the IIA.

However, we cannot predict whether we will receive any future grants,

or the amounts or the terms and conditions of any such grants.

addition, as a result of certain agreements between Xylo Technologies Ltd.

(formerly Medigus Ltd.), an Israeli company traded on

Nasdaq, or Xylo Technologies and Odysight.ai Ltd., the IIA approved a transfer of IIA know-how developed by Xylo Technologies in

the framework of the Bio Medical Photonic Consortium, or the Xylo Technologies Consortium.

Accordingly, all rights and obligations

with regard to the IIA under the Innovation Law, in connection with such know-how, now apply to us.

The rights and obligations

within the framework of our activity in the Xylo Technologies Consortium continue to apply to us notwithstanding the termination of

the Xylo Technologies Consortium and include, among other things, the following:

property rights to information which has been developed belongs to the Xylo Technologies Consortium member that developed it.

the developing entity is obligated to provide the other members in the Xylo Technologies Consortium a license for the use of the

new information, without consideration, provided that the other members do not transfer such information to any entity which is not

a member of the Xylo Technologies Consortium.

The provision of a license or of the right to use the new information to a third-party

is subject to approval by the administration of the MAGNET Program at the IIA;

Xylo Technologies Consortium member is entitled to register a patent for the new information which has been developed by it within

the framework of its activity in the Xylo Technologies Consortium.

The foregoing registration does not require approval from the

administration of the MAGNET Program at the IIA;

know-how and technology developed under the program is subject to the restrictions set forth under the Innovation Law, including

1 unchanged sentence

Such approval may entail additional payments to the IIA, as determined under the Innovation Law and regulations.

relevant to us under the Innovation Law include the following:

Manufacturing Obligation.

The terms of the grants under the Innovation Law require that we manufacture the products developed with

these grants in Israel.

Under the regulations promulgated under the Innovation Law, the products may be manufactured outside Israel

by us or by another entity only if prior approval is received from the IIA (such approval is not required for the transfer of less

than 10% of the manufacturing capacity in the aggregate, in which case a notice should be provided to the IIA).

In general, due to

manufacturing outside Israel, with respect to royalties bearing grants we would be required to pay royalties at an increased rate,

usually 1% in addition to the standard rate and increased royalties cap (between 120% and 300% of the grants, depending on the manufacturing

volume that is performed outside Israel).

Transfer Limitation.

The Innovation Law restricts the ability to transfer, in any manner, know-how funded directly or indirectly

by the IIA (sale of products is not prohibited), unless the IIA approves doing so and subject to the terms of the Innovation Law

and of the IIA’s approval.

other things, transfer of IIA funded know-how outside of Israel requires prior approval of IIA and in certain circumstances is subject

to certain payments to the IIA, calculated according to a formula provided under the Innovation Law.

If we wish to transfer IIA funded

know-how outside of Israel, the terms for approval will be determined according to the character of the transaction and the consideration

paid to us for such transfer.

The IIA approval to transfer know-how created, in whole or in part, in connection with a IIA-funded

project to third party outside Israel where the transferring company remains an operating Israeli entity is subject to payment of

a redemption fee to the IIA calculated according to a formula provided under the Innovation Law that is based, in general, on the

ratio between the aggregate IIA grants to the company’s aggregate investments in the project that was funded by these IIA grants,

multiplied by the transaction consideration, considering statutory depreciation and less royalties already paid to the IIA.

of such know-how to a party outside Israel where the transferring company ceases to exist as an Israeli entity is subject to a redemption

fee formula that is based, in general, on the ratio between aggregate IIA grants received by the company and the company’s

aggregate research and development expenses, multiplied by the transaction consideration considering statutory depreciation and less

royalties already paid to the IIA.

regulations promulgated under the Innovation Law establish a maximum payment of the redemption fee paid to the IIA under the above

mentioned formulas and differentiates between two situations:

(i) in the event that the company transfers its IIA funded know-how,

in whole or in part, or is sold as part of an M&A transaction, and subsequently ceases to conduct business in Israel, the maximum

redemption fee under the above mentioned formulas will be no more than six times the amount received (plus annual interest) for the

applicable know-how being transferred, or the entire amount received from the IIA, as applicable;

(ii) in the event that following

the transactions described above (e.g.

asset sale of IIA funded know-how or transfer as part of an M&A transaction) the company

continues to conduct its research and development activity in Israel (for at least three years following such transfer and maintain

staff of at least 75% of the number of research and development employees it had for the six months before the know-how was transferred

and keeps the same scope of employment for such research and development staff), then the company is eligible for a reduced cap of

the redemption fee of no more than three times the amounts received (plus annual interest) for the applicable know-how being transferred.

In addition, special rules and payment formulas apply for certain kinds of transfers of know-how outside of Israel, such as R&D

Transfer of IIA-funded know-how outside of Israel not according to the R&D Law may give rise to financial exposure

as well as criminal liability.

of the transfer of IIA funded technology to another Israeli company may be granted only if the recipient assumes and abides by the

provisions of the Innovation Law and related regulations, including the restrictions on the transfer of know-how and manufacturing

rights outside of Israel (in addition, there will be an obligation to pay royalties to the IIA from the income of such sale transaction

as part of the royalty payment obligation).

to manufacture products outside of Israel or consent to the transfer of technology, if requested, might not be granted.

the IIA may impose certain conditions on any arrangement under which it permits Odysight.ai to transfer technology or development

out of Israel.

May 21, 2023, the Company was awarded an additional grant by the IIA.

The purpose of this grant is to support and enhance the Company’s

production capabilities.

Subject to the Company successfully achieving all predetermined milestones, the maximum grant amount that can

be received is NIS 1 million.

the Innovation Law and the terms of the grant, royalties on the revenues derived from sales of products developed with IIA funding will

be payable to the Israeli government, generally at the rate of 3%.

The royalty terms shall differ if we receive IIA approval to manufacture

or to transfer the rights to manufacture our products developed by way of the IIA grant outside of Israel.

The obligation to make these

payments terminates upon full repayment of the grant amount, subject to adjustment for fluctuation in the dollar/shekel exchange rate,

plus interest.

to the terms of the grant under the Innovation Law, recipients of funding from the IIA are prohibited from (i) manufacturing products

developed using IIA grants or derived from technology developed with IIA grants outside of Israel and (ii) transferring rights to manufacture

such products outside of Israel.

However, the IIA could, in special cases, approve the transfer of manufacturing or of manufacturing

rights of a product developed in an approved program or which resulted therefrom, outside of Israel.

If we were to receive approval to

manufacture or to transfer the rights to manufacture our products developed with IIA-funding outside of Israel, we would be required

to pay an increased total amount of royalties (possibly up to 300% of the grant plus interest), depending on the portion of total manufacturing

that was performed outside of Israel.

terms of the grant under the Innovation Law prohibit transferring or licensing our IIA-financed technologies, technologies derived therefrom,

and related intellectual property rights and know-how outside of Israel, except under limited circumstances and only with the approval

of the IIA and generally upon making a payment to the IIA.

If received, we could be required to pay the IIA an amount calculated in accordance

with the applicable formula set out in the applicable IIA grant track.

The scope of the support received, the royalties that we already

paid to the IIA, the amount of time that elapsed between the date on which the technology was transferred, the date on which the applicable

project performance period for the IIA grants was completed, the sale price, and the form of transaction are all factors to be taken

into account in calculating the amount of payment to the IIA in connection with a transfer or license of IIA-funded technologies.

repayment amount is subject to a maximum limit calculated in accordance with a formula set forth in the guidelines published by the IIA.

In addition, any decrease in the percentage of manufacturing performed in Israel of any product or technology, as originally declared

in the application to the IIA with respect to such product or technology, could require notification by us to or obtaining the approval

of the IIA, and could result in increased royalty payments to the IIA of up to 300% of the total grant amounts received in connection

with such product or technology, plus interest, depending on the portion of total manufacturing that was performed outside of Israel.

of the transfer or license of technology to residents of Israel is required and could be granted in specific circumstances, but only

if the recipient agrees to abide by the provisions of applicable law, including the restrictions on the transfer of know-how and the

obligation to pay royalties.

An additional royalty payment is generally required to be made from the consideration paid for such transfer.

State of Israel does not own any intellectual property rights in technology developed with IIA funding and there is no restriction on

the export of products manufactured using technology and know-how developed with IIA funding.

The technology and know-how are, however,

subject to transfer of technology and manufacturing rights restrictions as described above.

general, with regard to any IIA-funding, the Innovation Law requires, among other things, that the products developed as part of the

programs under which the grants were given be manufactured in Israel, and restricts the ability to transfer know-how directly or indirectly

funded by the IIA outside of Israel.

A transfer for the purpose of the Innovation Law is generally interpreted very broadly and includes,

among other things, any sale of the IIA-funded know-how, any license to develop the IIA-funded know-how or the products resulting from

such IIA-funded know-how, grant of access to such knowhow, or any other transaction, which, in essence, involves a transfer of IIA-funded

The transfer of IIA-funded know-how outside of Israel requires prior approval and may be subject to payment of a redemption

fee to the IIA, calculated in accordance with a formula provided under the Innovation Law (which is subject to a cap of six times the

total amount of the IIA grants received, plus interest).

These restrictions may impair our ability to sell, license or otherwise transfer

IIA-funded know-how outside of Israel.

general, manufacturing of products developed with IIA-funded know-how outside of Israel also requires prior approval from the IIA.

if we do receive approval to manufacture products developed with IIA-funded know-how outside of Israel, such transfer of manufacturing

capacity outside of Israel may be subject to an increase in the amount of royalties payable, depending on the manufacturing volume that

is performed outside of Israel, and to an increase in the rate of royalties.

This restriction may impair our ability to outsource manufacturing

or engage in our own manufacturing operations for those products or technologies.

restrictions under the Innovation Law (including with respect to the restriction of the transfer of IIA-funded know-how and manufacturing

outside of Israel) continue to apply even after payment of the full amount of royalties payable to the IIA in respect of grants.

upon payment of the redemption fee on a transfer of IIA-funded know-how outside Israel, the obligations towards the IIA (including the

obligation to pay royalties) and restrictions under the Innovation Law cease to apply.

cannot be certain that any approval of the IIA will be obtained on terms that are acceptable to us, or at all.

We may not receive the

required approvals should we wish to transfer IIA-funded know-how and/or manufacture products developed with IIA-funded know-how outside

of Israel in the future.

Furthermore, in the event that we undertake a transaction involving the transfer to a non-Israeli entity of

IIA-funded know-how pursuant to a merger or similar transaction, the consideration available to our shareholders may be reduced by the

amounts we are required to pay to the IIA.

If we fail to satisfy the conditions of the Innovation Law, we may be required to refund the

amounts of the grants previously received, together with interest and penalties, and may become subject to criminal charges.

to prior approval of the IIA, we may transfer the IIA-funded know-how to another Israeli company.

If the IIA-funded know-how is transferred

to another Israeli entity, the transfer would still require IIA approval but will not be subject to the payment of the redemption fee

(however, there may be an obligation to pay royalties to the IIA from the income of such sale transaction as part of the royalty payment

In such case, the acquiring company would have to assume all of the applicable restrictions and obligations towards the

IIA (including the restrictions on the transfer of know-how and manufacturing outside of Israel) as a condition to the IIA’s approval.

by a foreign entity in an IIA-funded company, following which the non-Israeli entity becomes an “interested party” in the

company (e.g., holds, directly or indirectly, at least 5% of the shares of the funded company or has a right to appoint a director),

including an acquisition of 100% of the shares of an IIA-funded company, requires notification to the IIA of the transaction and an undertaking

signed by the non-Israeli investor to comply with the Innovation Law.

Capital Resources

key human capital management objectives are to attract, retain and develop the highest quality talent throughout our company.

these objectives, we strive to provide our employees good working conditions and competitive pay, as well as a wide range of benefits

programs to eligible employees.

We regularly evaluate our benefits programs and policies to meet present and future employee needs and

Programs and policies applicable to our employees generally include, but are not limited to, benefits programs, equity compensation

plans, flexible work schedules, diversity and inclusion initiatives, professional development opportunities, paid time-off policies and

recognition and rewards programs.

of the date of this Annual Report, we have four officers which consists of a Chief Executive Officer, Chief Financial Officer, Chief

Technology Officer and Senior VP of Product Portfolio, all of whom are engaged on a full-time basis.

As of the date of this Annual Report,

we had 61 employees in full- or part-time capacities.

Our employees are all located in Israel.

of our employees are represented by labor unions or covered by collective bargaining agreements.

We believe that we maintain good relations

with all our employees.

of our employment agreements include customary provisions with respect to non-competition, assignment to us of intellectual property

rights developed in the course of employment and confidentiality.

Our consulting agreements with our agents and partners include provisions

with respect to assignment to us of intellectual property rights developed in the course of their engagement as well as confidentiality.

The enforceability of such provisions may be limited under applicable law.

Organizational

were incorporated under the laws of the State of Nevada on March 22, 2013 under the name Intellisense Solutions Inc., or Intellisense.

We were initially engaged in the business of developing web portals to allow companies and individuals to engage in the purchase and

sale of vegetarian food products over the internet.

However, we were unable to execute our original business plan, develop significant

operations or achieve commercial sales.

January 10, 2019, we formed Canna Patch Ltd., or Canna Patch, an Israeli corporation.

Canna Patch did not have any operations and, on

December 4, 2019, we sold 100% of our holdings in Canna Patch.

September 16, 2019, Intellisense and Xylo Technologies entered into an exchange agreement pursuant to which, on December 30, 2019, we acquired

from Xylo Technologies all of the issued and outstanding share capital of ScoutCam Ltd.

On December 31, 2019, we changed our name to ScoutCam Inc.

Following this acquisition, we integrated and fully adopted the acquired miniaturized imaging business into the company as our primary

business activity.

December 1, 2019, Xylo Technologies and Odysight.ai Ltd.

consummated a certain Amended and Restated Asset Transfer Agreement, which transferred

and assigned certain assets and intellectual property rights related to its miniaturized imaging business.

On May 18, 2020, we and Xylo Technologies

entered into a certain Side Letter Agreement, whereby the parties agreed to amend certain terms of the Amended and Restated Asset Transfer

Agreement and related documents.

April 20, 2020, Odysight.ai Ltd.

entered into an Amended and Restated Intercompany Services Agreement with Xylo Technologies, which effectively

amended and restated an intercompany services agreement dated May 30, 2019.

June 5, 2023, we changed our name to Odysight.ai Inc.

In addition, our trading symbol on the OTCQB was changed from “SCTC”

to “ODYS”, effective as of February 13, 2024.

February 28, 2024, we formed D.

VIEW Ltd., a private company organized under the laws of the State of Israel and a wholly owned subsidiary

of Odysight.ai Inc., to act as a local agent for the defense market in Israel.

January 9, 2025, we formed an additional wholly-owned subsidiary, Odysight.Ai Eu S.r.l., a private company organized under the laws of

February 11, 2025, our common stock began trading on the Nasdaq Capital Market under the symbol “ODYS”.

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 1. Business