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Item 1A. Risk Factors

2025-03-26 compared with 2024-03-26 · 1255 added, 785 removed, 165 unchanged (93% of the section changed)

Factor Summary

is a summary of the principal factors that make an investment in the Company speculative or risky.

This summary does not address all

of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can

be found below, after this summary, and should be carefully considered.

Related to Our Business, Operations and Financial Condition

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

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.

may require substantial additional funding, which may not be available to us on acceptable terms, or at all.

have a single customer that accounts for a substantial portion of our revenues, and our business would be harmed

were we to lose this customer.

we fail to effectively manage growth, our business could be impaired.

commercial success depends upon the degree of market acceptance by prospective markets and industries.

global economic conditions may harm our industry, business and results of operations.

Related to Third Parties

in our securities involves substantial risk.

The risks described under the heading “ Risk Factors ” immediately following

this summary may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all

or part of our strategy.

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 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.

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

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

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.

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

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 the 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.

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.

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.

may not have sufficient manufacturing capabilities to satisfy any growing demand for our products.

We may be unable to control the

availability or cost of producing such products.

Related to Competition

expect to face competition in the future.

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.

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

consequences.

Related to Intellectual Property

may not be able to obtain all possible patents or other intellectual property rights necessary to protect our proprietary technology

and business.

may not be successful in enforcing our intellectual property rights against third parties.

may be subject to infringement claims and other litigation, which could adversely affect our business.

regulation of non-practicing patent holders may adversely affect our business.

Risk Factors Related to Our Business

business and operations may suffer in the event of computer system failures, cyber-attacks, or deficiencies in our cyber-security.

may be subject to product liability claims, product actions, including product recalls, and other field or regulatory actions that

could be expensive, divert management’s attention, and harm our business.

of our technologies potential applications for our products will be required and there is no assurance of regulatory approval.

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

operate our business effectively.

data and information systems and network infrastructure may be subject to hacking or other cybersecurity threats.

incorporate artificial intelligence, or AI, into some of our products.

This technology is new and developing and may present both

compliance and reputational risks.

Related to Our Common Stock

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.

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.

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

the manufacturing, use, distribution and sale of our vision-based sensor products.

Some of our customers also require that we comply

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.

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

effectively in our markets.

property rights of third parties could adversely affect our ability to commercialize our products, and we might be required to litigate

or obtain licenses from third parties in order to develop or market our products.

Such litigation or licenses could be costly or

not available on commercially reasonable terms.

market price of our shares of common stock may be volatile or may decline steeply or suddenly regardless of our operating performance,

and we may not be able to meet investor or analyst expectations.

You may not be able to resell your shares at or above the price

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.

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

significant corporate decisions and may result in conflicts of interest.

resales of Common Stock may cause the market price of our Common Stock to drop significantly, even if our business is doing well.

on the OTC Markets is volatile, sporadic and often thin, which could depress the market price of our Common Stock and make it difficult

for our stockholders to resell their Common Stock.

Anti-takeover

provisions contained in our articles and bylaws, as well as provisions of Nevada law, could impair a takeover attempt.

market price of our Common Stock may be highly volatile and such volatility could cause you to lose some or all of your investment.

Common Stock is currently a “penny stock,” which imposes additional sales practice requirements on broker-dealers that

sell such securities.

with the reporting requirements of federal securities laws can be expensive.

investors’ ownership in the Company may be diluted in the future.

executive officers, principal stockholders, and affiliated entities own a significant percentage of our capital stock, and they may

make decisions that our stockholders do not consider to be in their best interests.

do not anticipate paying any cash dividends in the foreseeable future.

Related to our Operations in Israel

are subject to the risks of political, economic, health, and military instability in countries outside the United States in which

in Israel, including the October 7, 2023 attack by Hamas and other terrorist organizations and Israel’s war against them, if

escalated, could negatively affect our operations.

instances of political, economic, or military instability in Israel, if escalated, could impede our ability to operate and harm our

financial results.

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

rate fluctuations between foreign currencies and the U.S.

Dollar may negatively affect our earnings.

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

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

may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result

in litigation and adversely affect our business.

factors may have a material adverse effect on our business, financial condition, and results of operations.

You should carefully consider

the following risks, together with all of the other information contained in this Annual Report on Form 10-K, including the sections

titled “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results

of Operations” and our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

the following risks could materially and adversely affect our business, strategies, prospects, financial condition, results of operations,

and cash flows.

In such case, the market price of our common stock could decline.

Our business, prospects, financial condition, or results

of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Related to Our Business, Operations and Financial Condition

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

our limited operating history, it is hard to evaluate our proposed business and prospects.

Our proposed business operations will be subject

to numerous risks, uncertainties, expenses, and difficulties associated with early-stage enterprises.

Such risks include, but are not

limited to, the following:

absence of a lengthy operating history;

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

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

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

in our shares of common stock involves a high degree of risk.

You should carefully consider the risks and uncertainties described below,

in addition to the other information included elsewhere in this Annual Report, including the consolidated financial statements and the

related notes, before purchasing our shares of common stock.

If any of the following risks actually occurs, our business, financial condition,

cash flows and results of operations could be negatively impacted.

In that case, the trading price of our shares of common stock would

likely decline and you might lose all or part of your investment.

Additional risks and uncertainties that we are unaware of or that we

deem immaterial may also become important factors that adversely affect our business, financial condition, cash flows and results of

Related to Our Business and Financial Condition

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

we were incorporated in 2013, we have only been pursuing our current business that is focused on the PdM and CBM markets only since 2021.

Given our limited operating history, it is hard to evaluate our proposed business and prospects.

Our proposed business operations will

be subject to numerous risks, uncertainties, expenses, and difficulties associated with early-stage enterprises.

Such risks include,

but are not limited to, the following:

absence of a lengthy operating history in our current business;

for ongoing operating losses;

in multiple currencies;

ability to anticipate and adapt to a developing market(s);

of our products by the medical and industrial (I4.0) markets and consumers;

innovation to conservative industries;

of our products in the markets we are targeting;

innovation to industries that are slow to adopt change;

risks and implementation of new software and algorithm for AI and cloud utilization;

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our business could be harmed.

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

have incurred net losses nearly every year since our inception and every year since 2021, when we began pursuing our current business

that is focused on the PdM and CBM markets.

We have incurred an accumulated deficit of approximately $46 million as of December 31,

For the years ended December 31, 2024 and 2023, we had net losses of $11.8 million and $9.4 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.

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 development of our products for a wider portfolio of products;

a sales, marketing, distribution and technical support infrastructure to support the ramp up of our operations;

to maintain, protect and expand our intellectual property portfolio;

to attract and retain skilled personnel;

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.

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.

on our current business plan, we believe our current cash and cash equivalents and anticipated cash flow from operations, will be sufficient

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.

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

such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property

rights and other operating restrictions that could adversely impact our ability to conduct our business.

We could also be required to

seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we

may be required to relinquish rights to some of our technologies or products or otherwise agree to terms unfavorable to us, any of which

may have a material adverse effect on our business, operating results and prospects.

Even if we believe that we have sufficient funds

for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic

considerations.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue

one or more of our research or development programs or the commercialization of our products or be unable to expand our operations or

otherwise capitalize on our business opportunities, as desired, which could materially adversely affect our business, financial condition

and results of operations.

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.

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

is measured and defined differently by companies within our industry.

We refer to “backlog” as our booked orders based on

purchase orders or hard commitments but not yet recognized as revenue.

Backlog is not a comprehensive indicator of future revenue and

is not a measure of profitability.

Orders included in backlog may be cancelled or rescheduled by customers.

A variety of conditions,

both specific to the individual customer and generally affecting the customer’s industry, may cause customers to cancel, reduce

or delay orders that were previously made or anticipated.

Projects may remain in backlog for extended periods of time.

Given these factors,

our backlog at any point in time may not accurately represent the revenue that we will realize during any period, and our backlog as

of the end of a fiscal year may not be indicative of the revenue we expect to earn in the following fiscal year.

Inability to realize

revenue from our backlog could have an adverse effect on our business.

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 customers.

the vision-based sensor markets which we are targeting, the decision to adopt our products generally requires the approval of multiple

technical and business decision makers, including security, compliance, procurement, operations and IT.

In addition, before a customer

will commit to deploy our products at scale, they require extensive education about our products, multiple testing opportunities and

engagement in protracted pricing negotiations.

As a result, it is difficult to predict when we will obtain new customers and begin generating

revenue from these customers.

addition, the size of potential customers may lead to extended sales cycles.

For instance, we invest resources into sales to large organizations

that typically undertake a significant evaluation and negotiation process due to their size, organizational structure and approval requirements.

Large organizations typically demand additional features, support services and pricing concessions during the negotiation process or

require additional security management or control features.

As part of our sales cycle, we may incur significant expenses before executing

a definitive agreement with a prospective customer and before we are able to generate any revenue from such agreement.

We have no assurance

that the substantial time and money spent on our sales efforts will generate significant revenue.

If conditions in the marketplace generally

or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will

be unable to recover any of these expenses.

If we are not successful in targeting, supporting and streamlining our sales processes and

if revenue expected to be generated from a prospective customer is not realized in the time period expected or not realized at all, our

ability to grow our business, and our operating results and financial condition, may be adversely affected.

If our sales cycles lengthen,

our future revenue could be lower than expected, which would have an adverse impact on our operating results and could cause our stock

price to decline.

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

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

cost, safety, efficacy/performance, perceived value and convenience of our technology and any current or future product that we may

ability of third parties to enter into relationships with us;

effectiveness of our sales and marketing efforts;

strength of marketing and distribution support for, and timing of market introduction of, competing technology and products;

regulations and economic incentives;

ability to scale up our operations to meet anticipated demand;

concerning our technology or products or competing technology and products.

efforts to penetrate industries and educate the marketplace regarding the benefits of our vision-based sensory technology, and reasons

to seek the commissioning of products based on our technology, may require significant resources and may never be successful.

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

not available to us.

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.

that we are currently as a B2B company, our business is reliant on our ability to successfully attract potential business targets.

we have a limited sales and marketing infrastructure and have limited experience in the sale, marketing, or distribution of our technologies

beyond the B2B model.

To achieve commercial success for our technologies or any future developed product, we will need to establish a

sales and marketing infrastructure or to out-license such future products.

that we are a business-to-business, or B2B, and business-to-government, or B2G, company, our business is reliant on our ability to successfully

attract potential business targets.

Furthermore, we have a limited sales and marketing infrastructure and have limited experience in

the sale, marketing or distribution of our technologies beyond the B2B and B2G model.

To achieve commercial success for our technologies

or any future developed product, we will need to establish a sales and marketing infrastructure or to out-license such future products.

the future, we may consider building a focused sales and marketing infrastructure to market any developed products and potentially other

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costs and expenses associated with creating an independent sales and marketing organization.

we are unable to establish our own sales, marketing, and distribution capabilities or enter into successful arrangements with third parties

to perform these services, we will not be successful in commercializing our technologies or any future products we may develop, and our

revenues and profitability may be materially adversely affected.

may require substantial additional funding, which may not be available to us on acceptable terms, or at all.

cash and short-term deposit balance as of December 31, 2023 was $17 million.

We may require additional funding to fund and grow our operations

and to develop certain products.

There can be no assurance that financing will be available in amounts or on terms acceptable to us,

In the event we require additional capital, the inability to obtain such capital will restrict our ability to grow and may

reduce our ability to continue to conduct business operations.

If we require and are unable to obtain additional financing, we will likely

be required to curtail our development plans.

In that event, current stockholders would likely experience a loss of most or all of their

Additional funding may be dilutive to the interests of existing stockholders.

have a single customer that accounts for a substantial portion of our revenues , and our business

would be harmed were we to lose this customer.

currently have one major customer, a leading Fortune 500 multinational healthcare corporation, which accounted for approximately 98%

and 81% of our revenues for 2023 and 2022, respectively, and is expected to generate most of our forecasted revenue in the near term.

Were we to lose this customer, our revenues would decline significantly, and our business would be harmed.

we fail to effectively manage growth, our business could be impaired.

business strategy contemplates a period of rapid growth which may put a strain on our administrative and operational resources, and our

funding requirements.

Our ability to effectively manage growth will require us to successfully expand the capabilities of our operational

and management systems, and to attract, train, manage, and retain qualified personnel.

There can be no assurance that we will be able

to do so, particularly if losses continue and we are unable to obtain sufficient financing.

If we are unable to appropriately manage

growth, our business, prospects, financial condition, and results of operations could be adversely affected.

commercial success depends upon the degree of market acceptance by such prospective markets and industries as defense and aviation, as

well as by the medical community.

current business model is that of a B2B approach in which we seek to identify target businesses interested in integrating our technology

or commissioning individual projects using our technology.

Any product that we commission or that is brought to the market may or may

not gain market acceptance by prospective customers.

The commercial success of our technologies, current products, and any future product

that we may develop depends in part on the medical community as well as other industries for various use cases, depending on the acceptance

by such industries of our products as a useful and cost-effective solution compared to current technologies.

During 2022, we commenced

proactive market penetration into industries other than the biomedical sector, such as the defense and aviation industries.

If our technology

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:

cost, safety, efficacy/performance, perceived value and convenience of our technology and any current or future product that we may

ability of third parties to enter into relationships with us;

effectiveness of our sales and marketing efforts;

strength of marketing and distribution support for, and timing of market introduction of, competing technology and products;

concerning our technology or products or competing technology and products.

efforts to penetrate industries and educate the marketplace on the benefits of our technology, and reasons to seek the commissioning

of products based on our technology, may require significant resources and may never be successful.

Such efforts to educate the marketplace

may require more resources than are required by conventional technologies.

global economic conditions may harm our industry, business and results of operations.

overall performance depends in part on worldwide economic conditions.

Global financial developments and downturns seemingly unrelated

to us or may harm us.

The United States and other key international economies have been affected from time to time by falling demand

for a variety of goods and services, restricted credit, reduced liquidity, reduced corporate profitability, volatility in credit, equity

and foreign exchange markets, bankruptcies, inflation and overall uncertainty with respect to the economy, including with respect to

tariff and trade issues.

Weak economic conditions or the perception thereof, or significant uncertainty regarding the stability of financial

markets related to stock market volatility, inflation, recession, changes in tariffs, trade agreements, or governmental fiscal, monetary

and tax policies, among others, could adversely impact our business, financial condition and operating results.

recently, inflation rates in the U.S.

have been higher than in previous years, which may result in decreased demand for our products

and services, increases in our operating costs including our labor costs, constrained credit and liquidity, reduced government spending

and volatility in financial markets.

The Federal Reserve has raised, and may again raise, interest rates in response to concerns over

inflation risk.

Increases in interest rates on credit and debt that would increase the cost of any borrowing that we may make from time

to time and could impact our ability to access the capital markets.

Increases in interest rates, especially if coupled with reduced government

spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.

In an inflationary environment, we may be unable to raise the sales prices of our products at or above the rate at which our costs increase,

which could reduce our profit margins and have a material adverse effect on our financial results and net income.

We also may experience

lower than expected sales and potential adverse impacts on our competitive position if there is a decrease in consumer spending or a

negative reaction to our pricing.

A reduction in our revenue would be detrimental to our profitability and financial condition and could

also have an adverse impact on our future growth.

Related to Third Parties

we are unable to establish our own sales, marketing and distribution capabilities for the markets we are targeting or enter into successful

arrangements with third parties to perform these services, we will not be successful in commercializing our technologies or any future

products we may develop, and our revenues and profitability may be materially adversely affected.

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

sell to governmental agency customers, as well as to customers in highly regulated industries such as defense.

Sales to such entities

are subject to a number of challenges and risks.

Selling to such entities can be highly competitive, expensive and time consuming, often

requiring significant upfront time and expense without any assurance that these efforts will generate a sale.

Government demand and payment

for our products and services may be impacted by public sector budgetary cycles and funding reductions or delays, which may adversely

affect public sector demand for our products and services.

Government contracting requirements may change and restrict our ability to

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.

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

than terms agreed to with other customers.

Government entities and highly regulated organizations typically have longer implementation

cycles, sometimes require acceptance provisions that can lead to a delay in revenue recognition, can have more complex IT and data environments

and may expect greater payment flexibility from vendors.

with governmental entities may also include preferential pricing terms, such as “most favored customer” pricing.

that we are successful in being awarded a government contract, the award may be subject to appeals, disputes or litigation, including

but not limited to bid protests by unsuccessful bidders.

a government contractor or subcontractor, we must comply with laws, regulations and contractual provisions relating to the formation,

administration and performance of government contracts, which affect how we and our partners do business with government agencies.

a result of actual or perceived noncompliance with government contracting laws, regulations or contractual provisions, we may be subject

to non-ordinary course audits and internal investigations, which may prove costly to our business, divert management time or limit our

ability to continue selling our products and services to our government customers.

These laws and regulations may impose other added

costs on our business, and failure to comply with these or other applicable regulations and requirements could lead to claims for damages

from our partners, downward contract price adjustments or refund obligations, civil or criminal penalties, and termination of contracts

and suspension or debarment from government contracting for a period of time with government agencies.

Any such damages, penalties, disruption

or limitation in our ability to do business with a government would adversely impact, and could have a material adverse effect on, our

business, results of operations, financial condition, public perception and growth prospects.

and highly regulated entities may have statutory, contractual or other legal rights to terminate contracts with us or our partners for

convenience or for other reasons.

Any such termination may adversely affect our ability to contract with other government customers as

well as our reputation, business, financial condition and results of operations.

All these factors

can add further risk to business conducted with these customers.

If sales expected from a government entity or highly regulated organization

for a particular period are not realized in that period or at all, our business, financial condition, results of operations and growth

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

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

new products and solutions.

Such undertakings are typically limited to specific products or components, apply only in specific segments,

and are limited in their duration.

Such exclusivity provisions and limitations, however, may affect our ability to sell these products

to third parties in the restricted markets or utilizing intellectual property developed under such agreements, which could slow or prevent

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 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.

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

expanding existing production facilities and establishing new facilities, and implementing administrative infrastructure, systems and

Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully.

to expand operational and financial systems in a timely or efficient manner may result in operating inefficiencies, which could increase

costs and expenses to a greater extent than we anticipate and may also prevent us from successfully executing our business plan.

not be able to offset the costs of operation expansion by leveraging the economies of scale from our growth in negotiations with our

suppliers and contract manufacturers.

Additionally, if we increase our operating expenses in anticipation of the growth of our business

and this growth falls short of our expectations, our financial results will be materially adversely impacted.

our business grows, we will have to manage additional product design projects, materials procurement processes and sales and marketing

efforts for an increasing number of products, as well as expand the number and scope of our relationships with suppliers, distributors

and end customers.

If we fail to manage these additional responsibilities and relationships successfully, we may incur significant costs,

which may materially adversely impact our operating results.

Additionally, in our efforts to be first to market with new products with

innovative functionality and features, we may devote research and development resources to products and product features for which a

market does not develop quickly, or at all.

If we are not able to predict market trends accurately, we may not benefit from such research

and development activities, and our results of operations may suffer.

our future development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales,

marketing, financial and legal personnel.

Our management may need to divert a disproportionate amount of its attention away from our

day-to-day activities and devote a substantial amount of time to manage these growth activities.

In particular, a period of significant

growth in the number of personnel could place a strain upon our management systems and resources.

We may not be able to effectively manage

the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities,

failure to deliver or timely deliver our products to customers, loss of employees and reduced productivity among remaining employees.

In addition, our expected growth could require significant capital expenditures and may divert financial resources from other projects,

such as the development of additional new products.

future will depend in part on the ability of our officers and other key employees to implement and improve financial and management controls,

reporting systems and procedures on a timely basis and to expand, train, motivate and manage our workforce.

Our current and planned personnel,

systems, procedures and controls may be inadequate to support our future operations.

If our management is unable to effectively manage

our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced and we may not

be able to implement our business strategy.

we have no experience to date in high-volume manufacturing of our products and we cannot assure that we will be able to develop efficient,

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.

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.

rely on AI and machine learning in the operation of some our vision-based sensing products.

The AI models that we use are trained using

various data sets.

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.

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.

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

our research and development results, which could result in excessive research and development expenses or delays.

If we are unable to

keep up with technological developments in the industry and anticipate market trends, or if new technologies render our technologies

or solutions obsolete, customers may no longer be attracted to our products.

As a result, our business, results of operations and financial

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

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.

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

7 unchanged sentences

Alternative sources for our components will not always be available.

we attempt to ensure the availability of more than one supplier for each important component in any product that we commission, 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, and therefore in some cases we engage with a single supplier, which may result in our dependency on such supplier.

is the case regarding sensors for the CMOS type technology that are produced by a single supplier in the United States.

have a direct general contract in place with this supplier, there is no contractual commitment on the part of such supplier for any set

quantity of such sensors.

The loss of our sole supplier in providing us with miniature sensors for our CMOS technology products mainly

in the medical domain, and our inability or delay in finding a suitable replacement supplier, could negatively affect our business, financial

condition, results of operations, and reputation.

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 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.

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

natural disasters (including as a result of climate change), environmental events, strikes and other labor disputes, capacity constraints,

disruptions in material or packaging supplies, as well as global shortages, disruptions in supply chain or information technology, loss

or impairment of key manufacturing sites or suppliers, product quality control, safety, increase in commodity prices and energy costs,

licensing requirements and other regulatory issues, as well as other external factors over which we have no control.

If such an event

were to occur, it could have an adverse effect on our business, financial condition, and results of operations.

disruptions in material or packaging supplies, global shortages, disruptions in supply chain or information technology, loss or impairment

of key manufacturing sites or suppliers, product quality control and safety issues, increase in commodity prices and energy costs, licensing

requirements and other regulatory issues, as well as other external factors over which we have no control.

If such an event were to occur,

it could have an adverse effect on our business, financial condition and results of operations.

addition, if we cannot supply current products or future potentially developed products due to a lack of components or are unable to

1 unchanged sentence

If inventory shortages occur, they could be expected

to have a material and adverse effect on our future revenues and ability to effectively project future sales and operating results.

to have a material adverse effect on our future revenues and ability to effectively project future sales and operating results.

may not be able to manage our strategic partners effectively.

10 unchanged sentences

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

may not have sufficient manufacturing capabilities to satisfy any growing demand for our products.

We may be unable to control the availability

or cost of producing such products.

current manufacturing capabilities may not reach the required production levels necessary in order to meet growing demands for any products

we may commission or future products we may develop.

There can be no assurance that our products can be manufactured at our desired commercial

quantities, in compliance with our requirements, and at an acceptable cost.

Any such failure could delay or prevent us from shipping

said products and marketing our technologies in accordance with our target growth strategies.

Related to Competition

expect to face competition in the future.

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.

expect to compete against existing technologies and proven products in different industries.

In addition, some of these competitors,

either alone or together with their collaborative partners, operate larger research, and development programs than we do, and may have

substantially greater financial resources than we do, as well as significantly greater experience in obtaining regulatory approvals applicable

to the commercialization of relevant competitive technologies and future products.

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

consequences.

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 the UK Bribery Act 2010,

or UK Bribery Act, and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which we do business,

both domestic and abroad.

These laws generally prohibit us and our employees from improperly influencing government officials or commercial

parties in order to obtain or retain business, direct business to any person or gain any advantage.

The FCPA, the Israeli Anti-Corruption

Laws, the UK Bribery Act, and other applicable anti-bribery and anti-corruption laws also may hold us liable for acts of corruption and

bribery committed by our third-party business partners, representatives and agents.

In addition, we leverage third parties to sell our

products and conduct our business abroad.

We and our third-party business partners, representatives and agents may have direct or indirect

interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for

the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors,

channel partners and agents, even if we do not explicitly authorize such activities.

These laws also require that we keep accurate books

and records and maintain internal controls and compliance procedures designed to prevent any such actions.

While we have policies and

procedures to address compliance with such laws, we cannot provide complete assurance that our employees and agents will not take actions

in violation of our policies or applicable law, for which we may be ultimately held responsible.

Our potential exposure for violating

these laws increases as our international presence expands and we increase sales and operations in foreign jurisdictions.

Any violation

of the FCPA, the Israeli Anti-Corruption Laws, the UK Bribery Act, or other applicable anti-bribery, anti-corruption 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.

Related to Intellectual Property

may not be able to obtain patents or other intellectual property rights necessary to protect our proprietary technology and business.

may seek to patent concepts, components, processes, designs and methods, and other inventions and technologies that we consider to have

commercial value or that will likely give us a technological advantage.

Despite devoting resources to the research and development of

proprietary technology, we may not be able to develop technology that is patentable or protectable.

Patents may not be issued in connection

with pending patent applications, and claims allowed may not be sufficient to allow them to use the inventions that they create exclusively.

Furthermore, any patents issued could be challenged, re-examined, held invalid or unenforceable, or circumvented and may not provide

sufficient protection or a competitive advantage.

In addition, despite efforts to protect and maintain patents, competitors and other

third parties may be able to design around their patents or develop products similar to our work products that are not within the scope

of their patents.

Finally, patents provide certain statutory protection only for a limited period of time that varies depending on the

jurisdiction and type of patent.

and protection of the rights sought in patent applications and patents can be costly, lengthy, and uncertain, often involve complex legal

and factual issues, and consume significant time and resources.

In addition, the breadth of claims allowed in our patents, their enforceability,

and our ability to protect and maintain them cannot be predicted with any certainty.

The laws of certain countries may not protect intellectual

property rights to the same extent as the laws of the United States.

Even if our patents are held to be valid and enforceable in a certain

jurisdiction, any legal proceedings that we may initiate against third parties to enforce such patents will likely be expensive, take

significant time, and divert management’s attention from other business matters.

We cannot assure that any of our issued patents

or pending patent applications provide any protectable, maintainable, or enforceable rights or competitive advantages to us.

addition to patents, we plan to rely on a combination of copyrights, trademarks, trade secrets, and other related laws and confidentiality

procedures and contractual provisions to protect, maintain, and enforce our proprietary technology and intellectual property rights in

the United States and other countries.

However, our ability to protect our brands by registering certain trademarks may be limited.

addition, while we will generally enter into confidentiality and nondisclosure agreements with our employees, consultants, contract manufacturers,

distributors and resellers, and with others to attempt to limit access to and distribution of our proprietary and confidential information,

it is possible that:

misappropriation of our

proprietary and confidential information, including technology, will nevertheless occur;

our confidentiality agreements

will not be honored or may be rendered unenforceable;

third parties will independently

develop equivalent, superior, or competitive technology or products;

disputes will arise with

our current or future strategic licensees, customers, or others concerning the ownership, validity, enforceability, use, patentability,

or registrability of intellectual property;

unauthorized disclosure

of our know-how, trade secrets, or other proprietary or confidential information will occur.

may not be successful in enforcing our intellectual property rights against third parties.

copying and use of our intellectual property or infringement of our intellectual property rights may result in the loss of revenue to

us and cause us other harm.

We seek diligently to enforce our intellectual property rights.

Although we devote significant resources

to developing and protecting our technologies and evaluating potential competitors of our technologies for infringement of our intellectual

property rights, these infringements may nonetheless go undetected or may arise in the future.

In the ordinary course of business, we

encounter companies that we suspect are infringing on our intellectual property rights.

When we encounter a company that we suspect is

infringing our intellectual property rights, we may try to analyze their products and/or try to negotiate a license arrangement with

If we try and are unable to negotiate a license or secure the agreement of such alleged infringing party to cease its activities,

we must make decisions as to how best to enforce our intellectual property rights.

process of negotiating a license with a third party can be lengthy and may take months or even years in some circumstances.

are successful in securing a license agreement, there can be no assurance that our technologies will be used in a product that is ultimately

brought to market, achieves commercial acceptance or results in significant royalties to us.

We generally incur expense prior to entering

into our license agreements, generating a license fee, and establishing a royalty stream from each customer.

We may incur costs in any

particular period before any associated revenue stream begins, if at all.

Further, it is possible that third parties who we believe are

infringing our intellectual property rights are unwilling to license our intellectual property from us on terms we can accept, or at

we cannot persuade a third party who we believe is infringing our technology to enter into a license with us, we may be required to consider

other alternatives to enforce our rights, including commencing litigation.

The decision to commence litigation over infringement of a

patent is complex and may lead to several risks to us, including the following, among others:

time, significant expense and distraction to management of managing such litigation;

uncertainty of litigation and its potential outcomes;

possibility that in the course of such litigation, the defendant may challenge the validity of our patents, which could result in

a re-examination or post grant review of our patents and the possibility that our patents may be limited in scope or invalidated

potential that the defendant may successfully persuade a court that their technology or products do not infringe our intellectual

property rights;

impact of such litigation on other licensing relationships we have or seek to establish, including the timing of renewing or entering

into such relationships, as applicable, as well as the terms of such relationships;

publicity to us or harm to relationships we have with customers or others.

enforcement of patent protection throughout the world is generally established on a country-by-country basis and we may not have as much

success enforcing our patents in foreign jurisdictions as in the United States.

Further, in some instances, certain foreign governmental

entities that might infringe our intellectual property rights may enjoy sovereign immunity from such claims.

Consequently, effective

protection of our intellectual property rights may be unavailable or limited.

in any litigation we consider commencing may have substantially greater financial and management resources necessary to manage litigation

than we have.

Further, such potential defendants may also have their own substantial patent portfolio.

Patent litigation can endure for

years and result in millions of dollars of expenses.

If our counterparties in such litigation have substantially greater resources than

we have, we may not be able to withstand the time, expense, or distraction of the litigation, even though we may have a better litigation

position than such counterparties.

In such instances we may not recover the expenses of litigation, and we may be required to enter into

settlement agreements that would be adverse to us or our intellectual property portfolio.

foregoing and other factors may cause us not to file or continue litigation against alleged infringers of our intellectual property rights,

or may cause us not to file for, or pursue, patent protection for our inventive technology, in certain jurisdictions.

Our failure to

seek to enforce our intellectual property rights may weaken our ability to enforce our intellectual property in the future or make our

efforts to license our intellectual property rights more difficult.

we fail to protect our intellectual property rights adequately, if there are adverse changes in applicable laws, or if we become involved

in litigation relating to our intellectual property rights or the intellectual property rights of others, our business could be seriously

In such cases, the value ascribed to our intellectual property could diminish, we may incur significant legal expenses that could

harm our results of operations, and our patents or other intellectual property rights may be limited or invalidated.

Any of the foregoing

could have a negative effect on the value of our Common Stock.

may be subject to infringement claims and other litigation, which could adversely affect our business.

more companies engage in business activities relating to predictive maintenance solutions, and develop corresponding intellectual property

rights, it is increasingly likely that claims may arise which assert that some of our products or services infringe upon other parties’

intellectual property rights.

These claims could subject us to costly litigation and divert management resources.

These claims may require

us to pay significant damages, cease production of infringing products, terminate our use of infringing technology, or develop non-infringing

technologies.

In these circumstances, continued use of our technology may require that we acquire licenses to the intellectual property

that is the subject of the alleged infringement, and we might not be able to obtain these licenses on commercially reasonable terms or

Our use of protected technology may result in liability that could threaten our continued operation.

of the contracts with our customers include indemnity and similar provisions regarding our non-infringement of third-party intellectual

property rights.

As deployment of our technology increases, and more companies enter our markets, the likelihood of a third-party lawsuit

resulting from these provisions increases.

If an infringement arose in a context governed by such a contract, we may have to refund to

our customer amounts already paid to us or pay significant damages, or we may be sued by the party whose intellectual property has allegedly

been infringed upon.

regulation of non-practicing patent holders may adversely affect our business.

policymakers and commercial participants have proposed reforming U.S.

patent laws and regulations in a manner that may limit a patent-holder’s

ability to enforce its patents against others to the extent that the holder is not practicing the subject matter of the patent at issue.

International Trade Commission has also recently taken certain actions that have been viewed as unfavorable to patentees seeking

recourse in this forum.

While we cannot predict what form any new patent reform laws or regulations may ultimately take, or what impact

they may have on our business, any laws or regulations that restrict our ability to enforce our patent rights against third parties could

have a material adverse effect on our business.

Risk Factors Related to Our Business

business and operations may suffer in the event of computer system failures, cyber-attacks, or deficiencies in our cyber-security.

incidents involving our information technology systems and those of third parties on which we rely have occurred in the past, such as

phishing attacks, although none of these incidents have been material to our business.

Such security incidents may occur in the future.

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable

to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks

or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside

our organization.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer

hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted

attacks and intrusions from around the world have increased.

If such an event were to occur and cause interruptions in our operations,

it could result in a material disruption of our product development programs.

To the extent that any disruption or security breach was

to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information,

we could incur material legal claims and liability, and damage to our reputation, and the further development of our product candidates

could be delayed.

We face an increasingly difficult challenge to attract and retain highly qualified security personnel to assist us

in combatting these security threats.

may be subject to product liability claims, product actions, including product recalls, and other field or regulatory actions that could

be expensive, divert management’s attention, and harm our business.

business exposes us to potential liability risks, product actions, and other field or regulatory actions that are inherent in the manufacturing,

marketing and sale of medical devices, or any other products that we may develop for a target business.

We may be held liable if such

products cause injury or death or are found otherwise unsuitable or defective during usage.

Our products incorporate mechanical and electrical

parts, complex computer software, and other sophisticated components, any of which can contain errors or failures.

Complex computer software

is particularly vulnerable to errors and failures, especially when first introduced.

In addition, new products or enhancements to our

existing products may contain undetected errors or performance problems that, despite testing, are discovered only after installation.

any of our products are defective, whether due to design or manufacturing defects, improper use of the product, or other reasons, we

may voluntarily or involuntarily undertake an action to remove, repair, or replace the product at our expense.

In some circumstances

we will be required to notify regulatory authorities of an action pursuant to a product failure.

cannot ensure that provisions in our customer contracts will be legally sufficient to protect us if we are subjected to legal action.

In addition, our errors and omissions and product liability insurance coverage may not be completely adequate, may not continue to be

available on reasonable terms or in sufficient amounts to cover one or more large claims, or the insurer may disclaim coverage as to

some types of future claims.

The successful assertion of any large claim against us could seriously harm our business.

Even if not successful,

these claims may result in significant legal and other costs, be a distraction to our management and harm our reputation.

of our technologies potential applications for our products will be required and there is no assurance of regulatory approval.

effect of government regulation and the need for compliance may delay marketing of our technologies and future potentially developed

products for a considerable period of time, impose costly procedures upon our activities, and provide an advantage to larger companies

that compete with us.

There can be no assurance that we will be able to achieve regulatory compliance for any of our products.

delay in achieving such regulatory compliance would materially and adversely affect the marketing of any contemplated products and the

ability to earn product revenue.

Further, regulation of manufacturing facilities by state, local, and other authorities is subject to

Any additional regulation could result in limitations or restrictions on our ability to utilize any of our technologies, thereby

adversely affecting our operations.

Various federal and foreign statutes and regulations also govern or influence the manufacturing,

safety, labeling, storage, record keeping, and marketing of our products.

The process of compliance with relevant U.S.

and foreign statutes

and regulations are time-consuming and require the expenditure of substantial resources.

In addition, these requirements and processes

vary widely from country to country.

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.

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

There 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 PdM and CBM 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 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.

compete primarily on the basis of product range, product features, industry certifications, reliability, brand, reputation and service

We believe we have a competitive advantage as the sole company we are aware of that is developing and marketing vision-based

sensing which target PdM and CBM applications, providing comprehensive solutions as well as superior products for vision systems across

a broad range of markets, applications and geographies.

However, we expect our competitors to continue to develop and introduce new products

and to enhance their existing products, which could cause a decline in demand for our products.

Our competitors may also improve their

manufacturing processes or expand their manufacturing capacity, which could make it more difficult or expensive for us to compete successfully.

In addition, our competitors could enter into exclusive arrangements with our existing or potential customers or suppliers, which could

limit our ability, or make it significantly more expensive, to produce our products or to generate sales.

of our competitors may have greater financial, technical and marketing resources than we do and may be able to devote greater resources

to promoting and selling their products.

Unlike many of our competitors who specialize in a single or limited number of product lines,

we have a portfolio of product lines and must allocate resources across these businesses.

As a result, we may invest less in certain

areas of our business than our competitors invest in competing businesses, and our competitors may therefore have greater financial,

technical and marketing resources available to them with respect to these businesses.

of our competitors may also incur fewer expenses than we do in creating, marketing and selling certain products and may face fewer risks

in introducing new products to the market.

This circumstance results from the nature of our business model, which is based on providing

innovative and high-quality vision-based sensing products and therefore may require that we spend a proportionately greater amount on

research and development than some of our competitors.

If our pricing and other factors are not sufficiently competitive, or if there

is an adverse reaction to our product decisions, we may lose market share in certain areas, which could adversely affect our business,

financial condition and results of operations.

insurance coverage may be inadequate to protect against the potential hazards incident to our business.

maintain property, product liability, cybersecurity, casualty and directors and officers’ liability insurance coverage, but such

insurance may not provide adequate coverage against potential claims, including losses resulting from interruptions in our production

capability, product liability claims relating to the products we manufacture or claims relating to safety incidents.

Consistent with

market conditions in the insurance industry, premiums and deductibles for some of our insurance policies have been increasing and may,

in the future, increase substantially.

In some instances, some types of insurance may become available only for reduced amounts of coverage,

In addition, our insurers could deny coverage for claims.

If we were to incur a significant liability for which we were not

fully insured or that our insurers disputed, our business, financial condition or results of operations could be materially adversely

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

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

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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programs may not be attractive enough or perform sufficiently to attract or retain qualified personnel.

a significant portion of our employees leaves us, we might fail to effectively manage a transition to new personnel, or if we fail to

a significant portion of our employees leave us, we might fail to effectively manage a transition to new personnel, or if we fail to

attract and retain qualified and experienced professionals on acceptable terms, our business, financial condition and results of operations

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the volatility of our stock price may make our equity compensation less attractive to current and potential employees.

may be unable to keep pace with changes in technology as our business and market strategy evolves.

will need to respond to technological advances in a cost-effective and timely manner in order to remain competitive.

The need to respond

to technological changes may require us to make substantial, unanticipated expenditures.

There can be no assurance that we will be able

to respond successfully to technological change.

data and information systems and network infrastructure may be subject to hacking or other cybersecurity threats.

If our security measures

are breached and an unauthorized party obtains access to our proprietary business information, our information systems may be perceived

as being insecure, which could harm our business and reputation and our proprietary business information could be misappropriated, which

could have an adverse effect on our business and results of operations.

Company stores and transmits its proprietary information on its computer systems.

Despite our security measures, our information systems

and network infrastructure may be vulnerable to cyber-attacks or could be breached due to an employee error or other disruption that

could result in unauthorized disclosure of sensitive information that has the potential to significantly interfere with our business

Breaches of our security measures could expose us to a risk of loss or misuse of this information, litigation and potential

Since techniques used to obtain unauthorized access or to sabotage information systems change frequently and generally are

not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures

in advance of such an attack on our systems.

In addition, we use third party vendors to store our proprietary information who use cyber

or “cloud” storage of information as part of their service or product offerings, and despite our attempts to validate the

security of such services, our proprietary information may be misappropriated by other parties.

In the event of an actual or perceived

breach of our security, or the security of one of our vendors, the market perception of the effectiveness of our security measures could

be harmed and we could suffer damage to our reputation or our business.

Additionally, misappropriation of our proprietary business information

could prove competitively harmful to our business.

For a description of our cybersecurity risk management and strategy, see Item 1C.

Cybersecurity.

incorporate artificial intelligence, or AI, into some of our products.

This technology is new and developing and may present both compliance

and reputational risks.

we develop our own algorithms and learning capabilities in the artificial intelligence (“AI”) capabilities that we incorporate

into some of our products, and because the software solutions we create, implement, and maintain are often critical to some of our potential

customers’ platforms, we may experience some system and service failures, schedule or delivery delays and other problems in connection

with our AI work.

If we experience these problems, we may lose revenue due to adverse customer reactions, including postponement, cancellation

or failure to renew contracts;

be required to provide additional services to a customer at no charge;

receive negative publicity, which

could damage our reputation and adversely affect our ability to attract or retain customers;

and suffer legal action for substantial

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.

estimates and forecasts of market size and opportunity and of market growth included in this Annual Report are subject to significant

uncertainty and are based on assumptions and estimates that may not prove to be accurate.

The estimates and forecasts in this Annual

Report of the size of the markets that we may be able to address and the growth in these markets are subject to many assumptions and

may prove to be inaccurate.

Further, we may not be able to address fully the markets that we believe we can address, and we cannot be

sure that these markets will grow at historical rates or the rates we expect for the future.

Even if we are able to address the markets

that we believe represent our market opportunity and even if these markets experience the growth we expect, we may not grow our business

at similar rates, or at all.

Our growth is subject to many factors, including our success in implementing our business strategy, which

is subject to many risks and uncertainties.

Accordingly, the estimates and forecasts of market size and opportunity and of market growth

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

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 .”

International

operations will expose us to additional market and operational risks, and failure to manage these risks may adversely affect our business

and operating results.

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

Accordingly, we expect face significant

operational risks from doing business internationally, including:

in foreign currency exchange rates;

longer sales and payment cycles;

greater difficulties in collecting accounts receivable;

adverse tax consequences;

protection of intellectual property rights in certain countries, particularly in Asia and South America;

in staffing and managing foreign operations, including cultural differences between countries and language barriers;

and business practices favoring local competition;

and difficulties of customizing products for foreign countries;

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;

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.

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

in diplomatic and trade relationships and increasing instances of terrorism worldwide.

Some of these risks may be affected by Israel’s

overall economic, political and military situation.

See “Item 1A.

Risk Factors – Risks Related to our Operations

in Israel – Our headquarters and other significant operations are located in Israel and, therefore, our results may be adversely

affected by political, economic and military instability in Israel ” for further information.

failure to manage the market and operational risks associated with our international operations effectively could limit the future growth

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

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.

Related to Regulation

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.

order to maintain and increase our net sales and reach and sustain profitable operations, we must produce high-quality products on a

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

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

are, or are alleged to be, defective or have resulted in harm to persons or to property.

We may in the future incur significant liabilities

if product liability lawsuits against us are successful.

We may also have to recall and/or replace defective products, which could also

result in adverse publicity and loss of sales, and would result in us incurring costs connected with the recall, which could be material.

Any losses not covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

Real or perceived quality issues, including those arising in connection with product liability lawsuits, warranty claims or recalls,

could also result in adverse publicity, which could harm our brand and reputation and cause our sales to decline rapidly.

any such issues may be seized on by competitors in efforts to increase their market share.

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

manufacturing, use, distribution and sale of our vision-based sensor products.

Some of our customers also require that we comply with

other unique requirements relating to these matters.

develop, manufacture and sell a vision-based sensor 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, 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.

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

of the aerospace and transportation safety market.

safety regulations are an important factor for our business.

Historically, these regulations have imposed ever-more stringent safety

regulations for the aerospace and transportation industries.

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

features for relevant products being sold in such industries.

we believe increasing aerospace and transportation safety standards will present a market opportunity for our vision-based sensor products,

government safety regulations are subject to change based on a number of factors that are not within our control, including new scientific

or technological data, adverse publicity regarding industry recalls and safety risks, accidents involving our products, domestic and

foreign political developments or considerations and litigation relating to our products and our competitors’ products.

in government regulations, as well as changes or evolution in court doctrines in interpreting those regulations, especially in the aerospace

and transportation industries, could adversely affect our business.

If government priorities shift and we are unable to adapt to changing

regulations or to court interpretations of those regulations, our business may be materially and adversely affected.

and international regulators impose more stringent compliance and reporting requirements in response to product recalls and safety issues

in the automotive and aeronautic industry.

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

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.

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

consequences.

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,

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

These laws generally

prohibit us and our employees from improperly influencing government officials or commercial parties in order to obtain or retain business,

direct business to any person or gain any advantage.

The FCPA, the Israeli Anti-Corruption Laws and other applicable anti-bribery and

anti-corruption laws also may hold us liable for acts of corruption and bribery committed by our third-party business partners, representatives

In addition, we leverage third parties to sell our products and conduct our business abroad.

We and our third-party business

partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies or

state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these third-party business

partners and intermediaries, our employees, representatives, contractors, channel partners and agents, even if we do not explicitly authorize

such activities.

laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent

any such actions.

While we have policies and procedures to address compliance with such laws, we cannot provide complete assurance that

our employees and agents will not take actions in violation of our policies or applicable law, for which we may be ultimately held responsible.

Our potential exposure for violating these laws increases as our international presence expands and we increase sales and operations

in foreign jurisdictions.

Any violation of the FCPA, the Israeli Anti-Corruption Laws or other applicable anti-bribery, anti-corruption

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.

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

advocacy groups, other market participants and other stakeholder groups.

Such scrutiny may result in increased costs, enhanced compliance

or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations.

If our ESG practices

and reporting do not meet investor or other stakeholder expectations, we may be subject to investor or regulator engagement regarding

such matters.

Our failure to comply with any applicable ESG rules or regulations could lead to penalties and adversely impact our reputation,

access to capital and employee retention.

Such ESG matters may also impact our third-party contract manufacturers and other third parties

on which we rely, which may augment or cause additional impacts on our business, financial condition or results of operations.

or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements

could adversely affect our business, financial condition and prospects.

global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements

and regulations governing the collection, use, disclosure, retention and security of personal data.

Implementation standards and enforcement

practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations,

standards or perception of their requirements may have on our business.

This evolution may create uncertainty in our business, affect

our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance

of more onerous obligations in our contracts, result in liability or impose additional costs on us.

The cost of compliance with these

laws, regulations and standards is high and is likely to increase in the future.

Any failure or perceived failure by us to comply with

federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal

information could result in negative publicity, government investigations, fines and enforcement actions, claims by third parties and

damage to our reputation, any of which could have a material adverse effect on our business, financial condition and prospects.

our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and

face increased scrutiny or attention from regulatory authorities.

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

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

Although we work to comply with applicable laws, regulations

and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted

and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations

with which we must comply.

Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators

or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could

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.

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

we cannot guarantee that these measures will be effective or that attempted security breaches or disruptions would not be successful

For example, these security measures could be compromised as a result of a security breach by an unauthorized person, employee

error, malfeasance, faulty password management or other irregularity and result in persons obtaining unauthorized access to our systems.

Even if the vulnerabilities that may lead to the foregoing are identified, we may be unable to adequately investigate or remediate due

to attackers using tools and techniques that are designed to circumvent controls, avoid detection and remove or obfuscate forensic evidence.

A breach or circumvention of our systems or the systems of third parties, including by ransomware, social engineering, phishing or other

attacks, could result in disruptions to our business operations;

unauthorized access to (or the loss of company access to) competitively

sensitive, confidential, personal or other critical data or systems;

loss of customers;

financial losses;

regulatory investigations,

enforcement actions and fines;

and misuse or corruption of critical data, personal data and proprietary information, any of which could

addition to our own databases, we use third-party service providers to store, process and transmit confidential, personal or sensitive

information on our behalf.

A data security breach could occur in the future either at their location or within their systems that could

affect our personal or confidential information.

Similar security risks exist with respect to our third-party vendors that we rely on

for aspects of our IT support services, pickup and delivery services, and administrative functions, including the systems owned, operated

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.

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.

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

our competitors could result in negative publicity for our entire industry that indirectly harms our reputation and diminishes demand

for our products and services.

Practices regarding the collection, use, storage, transmission and security of personal information have

recently come under increased public scrutiny.

Any failure or perceived failure by us to prevent information security breaches or to

comply with privacy policies or privacy-related legal obligations could cause our customers to lose trust in us and our services.

perception that the confidentiality or privacy of information is unsafe or vulnerable when using our services could damage our reputation

and substantially harm our business, financial condition and results of operations.

secure processing, storage, maintenance and transmission of critical customer and business information are vital to our operations and

our business strategy.

Although we devote resources to protecting such information and take what we believe to be reasonable measures,

including a formal and dedicated IT department and limiting the amount of any data we store, to protect sensitive information from compromises

such as unauthorized access, disclosure or modification or lack of availability, our information technology and infrastructure may still

be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other disruptions.

Related to Intellectual Property

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

effectively in our markets.

Historically,

we have relied on patents, copyrights, trade secret protection and confidentiality agreements to protect the intellectual property related

to our technologies and products.

Our success depends in large part on our ability to obtain and maintain patent and other intellectual

property protection in the United States and in other countries with respect to our proprietary technologies and products.

have sought to protect our proprietary position by filing patent applications in Israel, the United States and other countries with respect

to our novel technologies and products, which are important to our business.

Patent prosecution is expensive and time consuming, and

we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain

patent protection.

patent portfolio consists of an aggregate of 17 patents and 55 pending patent applications, as described in “ Business —

Intellectual Property .” We cannot offer any assurances about which, if any, patent applications will issue, the breadth of

any such patent or whether any issued patents will be found invalid or otherwise unenforceable or will be threatened by third parties.

Any successful opposition or other challenge to these patents or to any other patents owned by or licensed to us after patent issuance

could deprive us of rights necessary for the successful commercialization of any new products that we may develop.

there is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate

a patent or prevent a patent from issuing from a pending patent application.

Even if patents do successfully issue, and even if such

patents cover our products, third parties may challenge their validity, enforceability or scope, which may result in such patents being

narrowed, found unenforceable or invalidated.

Furthermore, even if they are unchallenged, our patent applications and any future patents

may not adequately protect our intellectual property, provide exclusivity for our new products or prevent others from designing around

Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact

on our business.

we cannot obtain and maintain effective patent rights for our products, we may not be able to compete effectively, and our business and

results of operations would be harmed.

property rights of third parties could adversely affect our ability to commercialize our products, and we might be required to litigate

or obtain licenses from third parties in order to develop or market our products.

Such litigation or licenses could be costly or not

available on commercially reasonable terms.

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.

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.

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.

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.

If we are unable to successfully

settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming

litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing our new products.

If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing

our new products that are held to be infringing.

We might, if possible, also be forced to redesign our new products so that we no longer

infringe the third-party’s intellectual property rights.

Any of these events, even if we were ultimately to prevail, could require

us to divert substantial financial and management resources that we would otherwise be able to devote to our business, and our business

could suffer as a result.

policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement

or defense of any issued patents.

in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any

patents that may issue from our patent applications or narrow the scope of our patent protection.

The laws of foreign countries may not

protect our rights to the same extent as the laws of the United States.

Publications of discoveries in scientific literature often lag

behind actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18

months after filing, or in some cases not at all.

We therefore cannot be certain that we were the first to file the invention claimed

in our owned and licensed patents or pending applications, or that we or our licensor were the first to file for patent protection of

such inventions.

Assuming all other requirements for patentability are met, in the United States prior to March 15, 2013, the first to

make the claimed invention without undue delay in filing is entitled to the patent, while outside the United States, the first to file

a patent application is entitled to the patent.

Since March 15, 2013, the United States has moved to a first to file system.

to the way patent applications will be prosecuted could increase the uncertainties and costs surrounding the prosecution of our patent

applications and the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business

and financial condition.

may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.

may or might have infringed our intellectual property.

If we were to initiate legal proceedings against a third-party to enforce a patent

covering one of our products, the defendant could counterclaim that the patent covering our products is invalid and/or unenforceable.

In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace.

for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of patentable subject

matter, novelty, non-obviousness or enablement.

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.

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

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

respect to our patent or patent applications or those of our licensors.

An unfavorable outcome could require us to cease using the related

technology or to attempt to license rights to it from the prevailing party.

Our business could be harmed if the prevailing party does

not offer us a license on commercially reasonable terms.

Our defense of litigation or interference proceedings may fail and, even if

successful, may result in substantial costs and distract our management and other employees.

In addition, the uncertainties associated

with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our research programs, license

necessary technology from third parties, or enter into development partnerships that would help us bring our new products to market.

because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some

of our confidential information could be compromised due to disclosure during this type of litigation.

There could also be public announcements

of the results of hearings, motions, or other interim proceedings or developments.

If securities analysts or investors perceive these

results to be negative, it could have a material adverse effect on the price of our shares of common stock.

may be subject to claims challenging the inventorship of our intellectual property.

may be subject to claims that former employees, collaborators, partners or other third parties have an interest in, or right to compensation,

with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor.

For example, we may become involved in inventorship disputes arising from conflicting obligations of consultants or others who are or

were involved in developing our products or from conflicting, ambiguous or complex legal clauses.

Litigation may be necessary to defend

against these and other claims challenging inventorship or claiming the right to compensation.

If we fail in defending any such claims,

in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to

use, valuable intellectual property.

Such an outcome could have a material adverse effect on our business.

Even if we are successful

in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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.

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.

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

Failure to adequately protect

our technologies and intellectual property could result in competitors offering similar products, potentially resulting in the loss of

some or all of our competitive advantage and a decrease in revenue which would adversely affect our business, prospects, financial condition

and operating results.

Patent, trademark, and trade secret laws vary significantly throughout the world.

Some foreign countries do not

protect intellectual property rights to the same extent as do the laws of the United States or the State of Israel.

Further, some license

provisions protecting against unauthorized use, copying, transfer and disclosure of our offerings may be unenforceable under the laws

of certain jurisdictions and foreign countries.

Policing the unauthorized use of our intellectual property in foreign jurisdictions may

be difficult or impossible.

Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United

States or Israel.

Changes in the law or adverse court rulings may also negatively affect our ability to prevent others from using our

companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.

legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets

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

to assert claims against us.

We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any,

may not be commercially meaningful.

Accordingly, our efforts to monitor and enforce our intellectual property rights around the world

may be inadequate or insufficient to obtain a significant commercial advantage from the intellectual property that we develop or license.

We use machine learning, artificial intelligence and automated decision making in our research and development process.

We may not be

able to protect our intellectual property rights related to products or services created by or based exclusively on machine learning,

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

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

development, and there is uncertainty and ongoing litigation in different jurisdictions as to the degree and extent of protection warranted

for artificial intelligence and machine learning systems and relevant system inputs and outputs.

If we fail to obtain protection for

the intellectual property rights concerning our automated decision making, artificial intelligence and machine learning technologies,

or later have our intellectual property rights invalidated or otherwise diminished, our competitors may be able to take advantage of

our research and development efforts to develop competing products.

rely on licenses to use the intellectual property rights of third parties.

If we fail to comply with our obligations in our intellectual

property licenses with third parties, we could lose rights that are important to our business.

rely, and expect to continue to rely, on certain intellectual property that is licensed from third-party licensors, including licenses

to artificial intelligence and machine learning algorithms.

Such licensors may be infringing upon the intellectual property rights of

others or may not have sufficient rights to the licensed technology in all jurisdictions in which we may operate.

Disputes with licensors

over uses or terms could result in the payment of additional royalties or penalties by us, cancellation or non-renewal of the underlying

license or litigation.

In the event that we cannot renew and/or expand existing licenses, we may be required to discontinue or limit

our use of the operations, products or offerings that include or incorporate the licensed intellectual property or technology.

discontinuation or limitation could have a material adverse impact on our business, financial condition and results of operation

Related to Our Common Stock

market price of our shares of common stock may be volatile or may decline steeply or suddenly regardless of our operating performance,

and we may not be able to meet investor or analyst expectations.

You may not be able to resell your shares at or above the price you

paid and may lose all or part of your investment.

market price of our shares may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control,

or anticipated fluctuations in our revenues or other operating results;

between our actual operating results and the expectations of securities analysts, investors and the financial community;

forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information

or our failure to meet expectations based on this information;

of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow

us or our failure to meet these estimates or the expectations of investors;

shares being sold into the market by us or our stockholders, or the anticipation of such sales, including if certain of our stockholders

sell shares into the market when the applicable “lock-up” period ends for such stockholders;

announcements

by us or our competitors of significant products or features, innovations, acquisitions, strategic partnerships, joint ventures,

capital commitments, divestitures or other dispositions;

of relationships with significant customers;

in operating performance and stock market valuations of companies in our industry, including our competitors;

of services from members of management or employees or difficulty in recruiting additional employees;

issuances of common stock or other securities;

of global economic conditions and reduction in demand for our products;

and volume fluctuations in the overall stock market, including as a result of general economic trends;

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;

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

impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate

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;

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

market conditions and other events or factors, many of which are beyond our control.

addition, extreme price and volume fluctuations in the stock markets have affected and continue to affect the stock prices of many companies.

Often, their share prices have fluctuated in ways unrelated or disproportionate to their operating performance.

In the past, securities

class action litigation has often 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.

It could also require us to make

substantial payments to satisfy judgments or to settle litigation.

active, liquid trading market for our shares of common stock may not develop or be sustained.

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

guarantee an active public market for our shares of common stock will develop or be sustained.

If an active and liquid trading market

does not develop, you may have difficulty selling or may not be able to sell any of the shares that you purchase.

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

of a substantial number of our shares of common stock in the public market, or the perception that these sales might occur, could depress

the market price of our shares and could impair our ability to raise capital through a future sale of, or pay for acquisitions using,

our equity securities.

We are unable to predict the effect that sales may have on the prevailing market price of our shares of common

executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make

decisions that our stockholders do not consider to be in their best interests.

of March 20 , 2025, our directors, executive officers, principal stockholders, and affiliated entities may be deemed to beneficially

own, in the aggregate, approximately 78% of our outstanding voting securities.

As a result, if some or all of such parties act

together, they would have the ability to exert substantial influence over the election of our board of directors and the outcome of issues

requiring approval by our stockholders.

This concentration of ownership may also have the effect of delaying or preventing a change in

control that may be favored by other stockholders.

This could prevent transactions in which stockholders might otherwise recover a premium

for their shares over current market prices.

This concentration of ownership and resulting influence in management and / or board decision-making

could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares

of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of us.

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

significant corporate decisions and may result in conflicts of interest.

Arkin, who beneficially owns approximately 55.60% of our Common Stock, holds approximately 44.57% of the current voting power in our

Company and may exercise warrants and options which could increase his voting power to 55.60%.

of March 20, 2025, Moshe (Mori) Arkin, a member of our board of directors, beneficially owns approximately 42% of our common stock,

holds approximately 33% of our current voting power and may exercise warrants and options which could increase his voting power to

As a result, Mr.

Arkin will likely control

any action requiring a stockholder vote, including:

Arkin will likely control any action requiring a stockholder vote, including:

the election of directors;

mergers, consolidations and acquisitions;

all or substantially all of our assets and other decisions affecting our capital structure;

the amendment of our amended and restated

certificate of incorporation and our amended and restated bylaws;

consolidations and acquisitions;

the sale of all or substantially all of our assets and other decisions affecting our capital structure;

the amendment of our amended and restated certificate of incorporation and our amended and restated bylaws;

and our winding up and dissolution.

This concentration of ownership

may delay, deter or prevent acts that would be favored by our other stockholders.

This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders.

The interests of Mr.

Arkin may not always coincide

with our interests or the interests of our other stockholders.

This concentration of ownership may also have the effect of delaying,

preventing or deterring a change in control of our Company.

Arkin may seek to cause us to take courses of action that, in his

judgment, could enhance his investment in our Company, but which might involve risks to our other stockholders or adversely affect us

or our other stockholders.

As a result, the market price of our Common Stock could decline or stockholders might not receive a premium

over the then-current market price of our Common Stock upon a change in control.

In addition, this concentration of share ownership may

adversely affect the trading price of our Common Stock because investors may perceive disadvantages in owning shares in a company with

significant stockholders.

we ever list on Nasdaq, we may be considered a “controlled company” within the meaning of Nasdaq rules and, as a result,

may rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

a result of the concentration of voting power described above, we may be considered a “controlled company”, for example by

Nasdaq if we ever list on The Nasdaq Stock Market, which we do not expect to be able to do, if ever, until after we file our Annual Report

on Form 10-K for the fiscal year ended December 31, 2023 in March or April 2024, at the earliest.

Under these rules, a listed company

of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and

may elect not to comply with certain corporate governance requirements, including:

the requirement that a majority of our board of directors

consist of “independent directors” as defined under the rules of Nasdaq;

the requirement that we have a compensation committee

that is composed entirely of directors who meet the Nasdaq independence standards for compensation committee members;

and the requirement

that our director nominations be made, or recommended to our full board of directors, by our independent directors or by a nominations

committee that consists entirely of independent directors.

no decision has been made about whether or not to rely on such exemptions, if we do rely on any or all of these exemptions, you may not

have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

resales of Common Stock may cause the market price of our Common Stock to drop significantly, even if our business is doing well.

of a substantial number of shares of our Common Stock in the public market could occur at any time, including by Mr.

Moshe Arkin, our

largest shareholder, and other significant shareholders.

These sales, or the perception in the market that such sales can occur, could

reduce the market price of our Common Stock and increase the volatility in the market price of our Common Stock.

Further, the sale of

a substantial portion of shares of our Common Stock could result in a change of control, which could impact the market price and liquidity

of our Common Stock.

on the OTC Markets is volatile, sporadic and often thin, which could depress the market price of our Common Stock and make it difficult

for our stockholders to resell their Common Stock.

Common Stock is currently quoted on the OTCQB tier of the OTC Markets.

Trading in securities quoted on the OTC Markets is often thin

and characterized by wide fluctuations in trading prices due to many factors, some of which may have little to do with our operations

or business prospects.

This volatility could depress the market price of our Common Stock for reasons unrelated to operating performance.

Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading

of securities listed on a stock exchange like NASDAQ or the NYSE.

Although in June 2021 we filed an application with The Nasdaq Stock

Market to list our Common Stock, we did not complete the process and do not expect to be able to do so, if ever, until after we file

our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 in March or April 2024, at the earliest.

Our Common Stock

has a history of thin trading.

During the 52-week period ended February 29, 2024, trades were only reported on 78 trading days.

factors may result in investors having difficulty reselling any shares of our Common Stock .

Arkin may not always coincide with our interests or the interests of our other stockholders.

This concentration of ownership may also

have the effect of delaying, preventing or deterring a change in control.

In addition, Mr.

Arkin may seek to cause us to take courses

of action that, in his judgment, could enhance his investment in us, but which might involve risks to our other stockholders or adversely

affect us or our other stockholders.

As a result, the market price of our common stock could decline or stockholders might not receive

a premium over the then-current market price of our common stock upon a change in control.

In addition, this concentration of share ownership

may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company

with significant stockholders.

do not anticipate paying any cash dividends in the foreseeable future.

have never declared or paid cash dividends, and we do not anticipate paying cash dividends in the foreseeable future.

Therefore, you

should not rely on an investment in our common stock as a source for any future dividend income.

Our board of directors has complete

discretion as to whether to distribute dividends.

Even if our board of directors decides to declare and pay dividends, the timing, amount

and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus,

the amount of distributions, if any, received by us from our wholly-owned subsidiary Odysight.ai Ltd., our financial condition, contractual

restrictions and other factors deemed relevant by our board of directors.

securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they

adversely change their recommendations or publish negative reports regarding our business or shares of common stock, our share price

and trading volume could decline.

trading market for our shares of common stock will be influenced by the research and reports that industry or securities analysts may

publish about us, our business, our market or our competitors.

We do not have any control over these analysts and we cannot provide any

assurance that analysts will cover us or provide favorable coverage.

If any of the analysts who may cover us adversely change their recommendation

regarding our shares of common stock, or provide more favorable relative recommendations about our competitors, our share price would

likely decline.

If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we

could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

Anti-takeover

12 unchanged sentences

We may become subject

to the above referenced Statutes if we have 200 or more stockholders of record, at least 100 of whom are residents of the State of Nevada

and do business in the State of Nevada directly or through an affiliated corporation.

to the above referenced provisions if we have 200 or more stockholders of record, at least 100 of whom are residents of the State of

Nevada, and do business in the State of Nevada directly or through an affiliated corporation.

provision of our amended and restated articles of incorporation, our bylaws or Nevada law that has the effect of delaying or deterring

1 unchanged sentence

stock and could also affect the price that some investors are willing to pay for our common stock.

market price of our Common Stock may be highly volatile and such volatility could cause you to lose some or all of your investment.

market price of our Common Stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such

announcement of new products or product enhancements by us or our competitors;

concerning intellectual property rights;

in legal, regulatory, and enforcement frameworks impacting our technology or the application of our technology;

in our and our competitors’ results of operations;

in earnings estimates or recommendations by securities analysts, if our Common Stock is covered by analysts;

results of product liability or intellectual property lawsuits;

issuances of Common Stock or other securities;

addition or departure of key personnel;

announcements

by us or our competitors of acquisitions, investments or strategic alliances;

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

Hamas or Lebanon, terrorism or other geopolitical events;

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

impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate

market and economic instability;

market conditions and other events or factors, many of which are beyond our control.

addition, the stock market has experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other

life sciences company stocks.

The volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not relate

to the operating performance of the companies represented by the stock.

In the past, securities class action litigation has often been

initiated against companies following periods of volatility in their stock price.

This type of litigation could result in substantial

costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments

or to settle litigation.

Common Stock is currently a “penny stock,” which imposes additional sales practice requirements on broker-dealers that sell

such securities.

SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price

less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions.

Our Common Stock is currently

a “penny stock” and is subject to Rule 15g-9 under the Securities Exchange Act of 1934, or the Penny Stock Rule.

imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers

and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000,

or $300,000 together with their spouses).

For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination

for the purchaser and have received the purchaser’s written consent to the transaction prior to sale.

As a result, this rule may

affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in

the secondary market, thus possibly making it more difficult for us to raise additional capital.

any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure

schedule required by the SEC relating to the penny stock market.

Disclosure is also required to be made about sales commissions payable

to both the broker-dealer and the registered representative and current quotations for the securities.

Finally, monthly statements are

required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market

in penny stock.

can be no assurance that our Common Stock will qualify for exemption from the Penny Stock Rule.

Even if our Common Stock were exempt

from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Securities Exchange Act of 1934, or the Exchange Act, which

gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a

restriction would be in the public interest.

penny stock rules may make it difficult for stockholders to sell their shares of our Common Stock.

Because of the rules and restrictions

applicable to a penny stock, there is less trading in penny stocks and the market price of our Common Stock may be adversely affected.

Also, many brokers choose not to participate in penny stock transactions.

Accordingly, stockholders may not always be able to resell

their shares of our Common Stock publicly at times and prices that they feel are appropriate.

with the reporting requirements of federal securities laws can be expensive.

are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange

Act, and other federal securities laws.

The costs of preparing and filing annual and quarterly reports and other information with the

SEC and furnishing audited reports to stockholders are substantial.

Failure to comply with the applicable securities laws could result

in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business

and financials, the value of our stock, and the ability of stockholders to resell their stock.

investors’ ownership in the Company may be diluted in the future.

the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests

of our present stockholders.

We have in the past and may continue to issue a substantial number of shares of Common Stock or other securities

convertible into or exercisable for Common Stock in connection with capital raising activity, hiring, or retaining employees, future

acquisitions, raising additional capital in the future to fund our operations, and other business purposes.

We expect to authorize in

the future a substantial number of shares of our Common Stock for issuance under a stock option or similar plan, and may issue equity

awards to management, employees, and other eligible persons.

Additional shares of Common Stock issued by us in the future will dilute

an investor’s investment in the Company.

In addition, we may seek stockholder approval to increase the amount of the Company’s

authorized stock, which would create the potential for further dilution of current investors.

executive officers, principal stockholders, and affiliated entities own a significant percentage of our capital stock, and they may make

decisions that our stockholders do not consider to be in their best interests.

of March 26, 2024, our directors, executive officers, principal stockholders, and affiliated entities may be deemed to beneficially

own, in the aggregate, approximately 84.11% of our outstanding voting securities.

As a result, if some or all of such parties acted

together, they would have the ability to exert substantial influence over the election of our board of directors and the outcome of issues

requiring approval by our stockholders.

This concentration of ownership may also have the effect of delaying or preventing a change in

control of the Company that may be favored by other stockholders.

This could prevent transactions in which stockholders might otherwise

recover a premium for their shares over current market prices.

This concentration of ownership and influence in management and board

decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking

to acquire shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our

do not anticipate paying any cash dividends in the foreseeable future.

have never declared or paid cash dividends, and we do not anticipate paying cash dividends in the foreseeable future.

Therefore, you

should not rely on an investment in our Common Stock as a source for any future dividend income.

Our board of directors has complete

discretion as to whether to distribute dividends.

Even if our board of directors decides to declare and pay dividends, the timing, amount,

and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus,

the amount of distributions, if any, received by us from our wholly-owned subsidiary Odysight.ai Ltd., our financial condition, contractual

restrictions, and other factors deemed relevant by our board of directors.

we fail to comply with the rules and regulations under the Sarbanes-Oxley Act, our operating results, our ability to operate our business

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.

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

of our common stock currently trade on Nasdaq under the symbol “ODYS”.

Nasdaq has rules for continued listing, including,

without limitation, minimum market capitalization and other requirements.

Failure to maintain our listing (i.e., being de-listed from

Nasdaq) would make it more difficult for stockholders to sell our common stock and more difficult to obtain accurate price quotations

on our common stock.

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

Our ability to issue additional securities for

financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely

affected if our common stock is not traded on a national securities exchange.

Related to our Operations in Israel

are subject to the risks of political, economic, health, and military instability in countries outside the United States in which we

of our products are produced in Israel, India, China, and other countries which are particularly subject to risks of political, economic,

health, and military instability.

This instability could result in wars, riots, nationalization of industry, currency fluctuations, and

labor unrest or unavailability.

These conditions could have an adverse impact on our ability to manufacture, ship, and operate in these

regions and, depending on the extent and severity of these conditions, could result in a reduction in customer orders and sales to certain

regions and end-markets and materially and adversely affect our overall financial condition and operating results.

We have principal

manufacturing facilities and operations located in Israel.

Accordingly, our business will be directly influenced by the political, economic,

and military conditions affecting Israel at any given time.

in Israel, including the October 7, 2023 attack by Hamas and other terrorist organizations and Israel’s war against them, if escalated,

could negatively affect our operations.

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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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.

Since the outbreak of the war,

the Hezbollah terrorist organization has regularly fired rockets into northern Israel, other terrorist organizations have done so from

western Iraq and the Houthis terrorist organization operating out of Yemen has fired various projectiles and drones against commercial

shipping vessels in the Gulf of Aden and Red Sea.

Moreover, these conditions may escalate in the future into a greater regional conflict.

war has led to consequences and restrictions with respect to the Israeli economy, including a significant call-up of military reservists,

most of whom have been released from such service as of the date of this Annual Report.

However, to date the war has not had a material

adverse effect on our business.

While our executive 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 in the first month of the war 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

In addition, several of our employees, including company officers such as our CEO Yehu Ofer, were called up to military reserve

duty, with many such call-ups having since lapsed.

As of the date of this Annual Report, Mr.

Ofer is subject to military reserve duty

a few days a month.

We have taken various measures to mitigate the effects of the war, including adopting work-from-home measures, increased

employee overtime and third-party outsourcing where needed, and reviewing our business continuity plan.

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

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

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.

In addition, although the intensive flight hours

flown by all Israeli Air Force platforms as a result of the war has caused an increase of interest in our technology from Israeli government

agencies and R&D programs, we may not be successful in turning these expressions of interest into orders for our products.

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

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

instances of political, economic or military instability in Israel, if escalated, could impede our ability to operate and harm our financial

addition to the ongoing war with Hamas, other political, economic, and military conditions in Israel and the surrounding region may directly

affect our business and operations.

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

between Israel and its neighboring countries.

We have never experienced any material interruption in our operations attributable to these

factors, in spite of several Middle East crises.

A change in the security and political situation in Israel and in the economy could

have a material adverse effect on our business, operating results, and financial condition.

recent years, Israel has been subject to certain political instability and an increased number of elections were held.

Actual or perceived

political instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely

affect the Israeli economy and, in turn, our business, financial condition, results of operations and growth prospects.

Changes in the

Israeli economy could make it more difficult for us to operate our business and could have a material adverse effect on our business,

reputation, financial condition, results of operation and cash flow.

the beginning of 2023, the newly formed government commenced a legislative process to effect changes in the Israeli legal system.

financial, legal, and commercial organizations and entities have claimed that such changes will weaken the Israeli legal system and,

as a result, could lead to negative impact on the economic and financial conditions of the State of Israel.

At this stage, where most

of the proposed legislation has not become effective and its scope is not fully determined, we cannot assess the likelihood of the legislation

going into effect or the possible impact of these changes.

addition to Hamas, Israel is engaged in sporadic armed conflicts with Hezbollah, an Islamist terrorist group that controls large portions

of southern Lebanon, and with Iranian-backed military forces in Syria.

In addition, Iran has threatened to attack Israel and may be developing

nuclear weapons.

Some of these hostilities have been accompanied by missiles being fired from Lebanon against civilian targets in various

parts of Israel, including areas in which some of our employees and consultants may be located, and negatively affected business conditions

The global shipping industry is also experiencing disruptions due attacks by Houthi militants from Yemen on commercial shipping

in the Gulf of Aden and Red Sea, which has caused the rerouting of shipping away from the Suez Canal.

Any hostilities involving Israel

or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results

of operations.

commercial insurance does 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 you 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 conflict or political instability in the region would

likely negatively affect business conditions and could harm our results of operations.

in the past, the State of Israel and Israeli companies have been subjected to economic boycotts.

Several countries still restrict business

with the State of Israel and with Israeli companies and may do so in the future as a result of the war with Hamas or for other reasons.

These restrictive laws and policies may have an adverse impact on our operating results, financial condition, or the expansion of our

A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our

Israeli citizens are also obligated to perform several days, and in some cases more, of annual military reserve duty each year until

they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a

military conflict, may be called to active duty.

As has been the case with the ongoing war with Hamas, in response to increases in terrorist

activity, there have been periods of significant call-ups of military reservists.

It is possible that there will be additional military

reserve duty call-ups in the future.

Our operations could be disrupted by such call-ups, which may include the call-up of members of

our management.

Such disruption could materially adversely affect our business, prospects, financial condition, and results of operations.

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.

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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process, and certain matters of procedure would still be governed by the Israeli law.

Consequently, you may be effectively prevented

from pursuing remedies under U.S.

Consequently, you may be unable to pursue remedies

federal and state securities laws against us or any of our non-U.S.

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

Innovation Authority (“IIA”) to Medigus, which was subsequently transferred to Odysight.ai (for more information about such

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

The terms of such grants require

Odysight.ai 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.

We may not receive those approvals.

Furthermore, the IIA may impose certain conditions on any arrangement under which it

permits us to transfer technology or development out of 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.

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

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Furthermore, the consideration available to

our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such

our stockholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such

as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.

Company has applied for and been awarded an additional IIA-funded grant, to support and enhance the Company’s production capabilities.

Subject to successfully achieving certain predetermined milestones, the Company will receive a maximum grant amount of NIS 1 million.

The grant shall subject the Company to certain restrictions on transfer of manufacturing rights and know-how outside of Israel and will

require royalty payments on revenues derived from sales of the products developed from the IIA funding.

may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result

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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, a body

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

Recent case law

clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that in certain

circumstances, such waiver does not necessarily have to be explicit.

The Committee will examine, on a case-by-case basis, the general

contractual framework between the parties, using interpretation rules of the general Israeli contract laws.

Further, the Committee has

not yet determined one specific formula for calculating this remuneration (but rather uses the criteria specified in the Patent Law).

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.

law clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that in

certain circumstances, such waiver does not necessarily have to be explicit.

The Committee will examine, on a case-by-case basis, the

general contractual framework between the parties, using interpretation rules of the general Israeli contract laws.

Further, the Committee

has not yet determined one specific formula for calculating this remuneration (but rather uses the criteria specified in the Patent Law).

Although we generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals assign to us

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As a consequence of such claims, we could be required to pay additional remuneration or royalties

to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.

to our current and/or former employees, or be forced to litigate such claims, which could adversely affect our business, results of operation

and financial condition.

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