Odysight.ai Inc. 10-K

item 9a. controls and Procedures Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. 53 Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2024, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2024. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting on December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework, in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on that assessment under those criteria, management has determined that, as of December 31, 2024, our internal control over financial reporting was effective. Attestation Independent Report of the Registered Public Accounting Firm This annual report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report on Form 10-K. Changes in Internal Control over Financial Reporting There were no changes in internal control over financial reporting during the year ended December 31, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. Item 9b. Other information During the quarter ended December 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K). We use our website (www.odysight.ai) as a channel of distribution for Company information. The information we post on our website may be deemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website are not, however, a part of this Annual Report. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable 54 part iii Item 10. Directors, Executive Officers and corporate governance Directors, Executive Officers, Promoters and Control Persons The following table sets forth the names and ages of our directors and executive officers: Name Age Position Executive Officers Yehu Ofer 59 Chief Executive Officer Einav Brenner 43 Chief Financial Officer Eli Israeli 54 Chief Technology Officer Jacob Avinu 42 Senior VP of Product Portfolio Directors Prof. Benad Goldwasser (4) 74 Chairman of the Board Jackson Schneider (4) 60 Director Ronit Rubin (1)(3)(4) 60 Director Moshe (Mori) Arkin 72 Director Inbal Kreiss (1)(3)(2)(4) 58 Director Zeev Vurembrand (1)(3)(2)(4) 73 Director Nir Nimrodi (2)(4) 56 Director Dr. Carlo Papa 53 Director (1) Member of our audit committee (2) Member of our compensation committee (3) Member of our nominating and corporate governance committee (4) Independent director under the rules of Nasdaq Executive Officers Yehu Ofer has served as our Chief Executive Officer since October 2022. Mr. Ofer served as a colonel (now retired) in the Israeli Air Force, or the “IAF”, commanding two operational squadrons before commanding “Wing 15”, the optic and electronic intelligence wing of the IAF. In his last position, Mr. Ofer served as Israel Defense Attaché to Italy, Greece, Serbia, and Croatia, where he oversaw the largest ever government-to-government transaction between Israel and Italy. Upon his retirement from the Israel Defense Forces in 2013, Mr. Ofer joined Elbit Systems Ltd. in its electro-optics unit as a technology development and program manager in airborne optic and laser solutions. Mr. Ofer also managed Elbit System’s aerospace division as VP of large-scale development programs and VP of the Brazil business unit. Before leaving Elbit Systems, in October 2022, to become our CEO, Mr. Ofer served as VP of Global Business Development, Marketing and Sales for Elbit Systems, a position he held since 2020. Mr. Ofer holds an MBA degree from the University of Haifa, a Bachelor of Economics and Logistics degree (cum laude) from Bar Ilan University in Tel Aviv, and a degree from the National Security College in Tel Aviv. Mr. Ofer has served as a member of the board of directors of Aerospace Industrial Scan Ltd. since August 2024, Robotican Ltd since September 2024 and of the International Board of the Weizmann Institute since November 2023. Einav Brenner has served as our Chief Financial Officer since May 2024. From May 2022 until becoming our CFO, Ms. Brenner served as the VP Finance of Solato Ltd. In this capacity, Ms. Brenner supported the establishment of global company activities, including strategic decision making and significant commercial agreements, building financial and operational teams and infrastructure, and handling fund raising and investor relations. From July 2017 to May 2022, Ms. Brenner served as Executive Director of Finance at RedHill Biopharma Ltd. (NASDAQ: RDHL), where she facilitated fund raising activities, managed complex transactions and legal aspects, and was responsible for Securities and Exchange Commission filings and financial reporting. Prior to this, Ms. Brenner served in various financial positions at Vizrt Inc., Viola Ventures and PricewaterhouseCoopers. Ms. Brenner is a CPA (Israel), holds a Bachelor of Accounting, Economics and Business Administration, and an MBA in Financial Management, both from Tel Aviv University. 55 Jacob Avinu has served as our Senior VP of Product Portfolio since November 2022. Mr. Avinu has more than 15 years of experience in development, operations, and leadership in a variety of industries, including aviation and aerospace. He joined Odysight.ai from Elbit Systems, where since 2018 he led the advanced capabilities R&D group in helmet-mounted displays and sensors, a key segment within the company’s aerospace division. Before joining Elbit Systems, Mr. Avinu served for six years in the IAF as a computer vision system engineer and commander of the electronic systems development group. Mr. Avinu holds a Master of Science degree from Ben-Gurion University of the Negev in Beer-Sheva, Israel with a focus on electro-optical engineering, and a Bachelor of Science degree in electrical engineering from Ort Braude College of Engineering in Karmiel Israel. Mr. Avinu also studied practical engineering and electronics at the Israeli Air Force Academy. Eli Israeli has served as our Chief Technology Officer since October 2023. Before joining us, Mr. Israeli served from January 2022 to September 2023 as CTO at Gadfin, where he spearheaded the development and execution of Gadfin’s technology strategy. From December 2019 to February 2022, Mr. Israeli served as the Senior Vice President of System Engineering, Program Management, and Customer Success at IAI headquarters. His career includes a variety of other roles, including Chairman of the consortium of AI Academy–- Artificial Intelligence Training; Director of Program Management, Ground-Based & Missiles Defense Systems at IAI; Director of System Engineer and Product Management, Civil Aircraft Protection Systems at the Israel Ministry of Defense – DDR&D; Senior Systems Engineer, Unmanned Aerial Vehicle at the Israeli Air Force; and Director of R&D and Program Management, MALE Unmanned Aerial System at the Israeli Ministry of Defense - DDR&D. Mr. Israeli holds an MSc in System Engineering and Program Management from the Technion – Israel Institute of Technology in Haifa, Israel, and a BSc in electrical engineering and Bachelor of Education from Tel Aviv University. Directors Prof. Benad Goldwasser has served as chairman of our board of directors since December 2019, and has served as chairman of Odysight.ai Ltd.’s board of directors since its inception. Prof. Goldwasser is a serial entrepreneur and retired urology medical doctor. In 2016, Prof. Goldwasser helped launch a venture capital fund together with SAIL, a Shanghai Government investment company. Prof. Goldwasser has served as a member of the board of directors of Innoventric Ltd. since 2017. From January 2021 to January 2025, Prof. Goldwasser served as Chairman of the Board of Directors of Inspira Technologies Ltd (Nasdaq: IINN). From 2013-2016 Prof. Goldwasser served as an external director of BioCanCell Ltd. (TASE: BICL). Prof. Goldwasser was the co-founder of Vidamed Inc., Medinol Ltd., Rita Medical Inc., Optonol Ltd. and GI View Ltd. Prof. Goldwasser served as managing director of Biomedical Investments Ltd., an Israeli Venture Capital firm. During his medical career, he served as Chairman of Urology at the Chaim Sheba Medical Center and Professor of Surgery at Tel-Aviv University. Prof. Goldwasser holds MD and MBA degrees from Tel-Aviv University . Jackson Schneider has served on our board of directors since December 2023. Mr. Schneider is currently an Adjunct Professor Senior at Columbia University in New York. From January 2014 to November 2022, Mr. Schneider served as President and CEO of Embraer Defense & Security, a leading Latin American aerospace and defense company and, from August 2020 to August 2022, he served as a visiting senior research fellow (non-resident) in the Department of War Studies at King’s College in London. Before this, Mr. Schneider served in other capacities for Embraer and in a series of senior management positions for Mercedes-Benz Do Brasil LTDA, Daimler-Chrysler (Mercedes-Benz), and Unilever do Brasil. Mr. Schneider also served on the board of directors of Tempest S.A., Visiona Tecnologia Aerospacial S.A., and OGMA, the Portugal Aerospace Industry, each affiliated with Embraer, until April 2023. He currently serves on the advisory board or board of directors of Sonda Tecnologias (Brazil), Abra Aviation Group (London), CBMM (Brazil) and Mercedes-Benz Do Brasil. In addition, Mr. Schneider has served in leadership roles in various industry associations and is currently the President of the Superior Council for Trade and Commerce in the Federation of Industries of the State of Sao Paulo. He holds a law degree from 1982 to 1986 from UFRGS/UNB and an MBA from the Business School Sao Paulo in Brazil in partnership with the Rotman School in Toronto, Canada. Ronit Rubin has served on our board of directors since December 2023. Ms. Rubin is currently EMEA President for AllCloud, a professional services company providing organizations with the tools for cloud enablement and transformation, a position she has held since 2016. Prior to this, Ms. Rubin served as VP, Business Division and VP, Information Technology at Partner Communications Ltd. and as VP, Information Technology at Cal-Israel Credit Cards Ltd. From 1984-2006, Ms. Rubin served in various roles for the navy of the Israeli Defense Forces, including as Commander, Computers Unit and Head of Information Systems Department. She currently serves as a board member of CardCom Technology. Ms. Rubin holds a BA in Economics & Logistics from Bar-Ilan University in Ramat Gan, Israel, and an MA in Business Management from Ben-Gurion University of the Negev in Be’er Sheva, Israel. 56 Moshe (Mori) Arkin has served on our board of directors since February 2021. Mr. Arkin is a leading life science and pharmaceutical entrepreneur and serves as the chairman of Arkin Capital, which he founded in 2009. Mr. Arkin has served as chairman of the board of directors of Sol Gel Technologies Ltd. (NASDAQ: SLGL) since 2014 and sits on the board of directors of several private pharmaceutical and medical device companies, including Digma Medical, a company developing systems to treat insulin resistance present in type 2 diabetes and other metabolic syndrome diseases, and Valcare Medical, a company developing heart valve devices. From 2005 to 2008, Mr. Arkin served as the head of generics at Perrigo Company, and from 2005 until 2011, as a member of its board of directors. Prior to joining Sol Gel Technologies Ltd., Mr. Arkin served as a director of cCAM Biotherapeutics Ltd., a company focused on the discovery and development of novel immunotherapies to treat cancer from 2012 until its acquisition in 2015 by Merck & Co., Inc. Mr. Arkin served as chairman of Agis Industries Ltd. from 1972 until its acquisition by Perrigo Company in 2005. Mr. Arkin holds a B.A. degree in psychology from the Tel Aviv University, Israel. Inbal Kreiss has served on our board of directors since April 2021. Ms. Kreiss is currently the Chief of Innovation at the Systems, Missiles and Space Division of the IAI, a position she has held since April 2020, and Chairwoman of RAKIA, Scientific and Technological Mission to the International Space Station, a position she has held since April 2021. Since 2013, Ms. Kreiss has served as Deputy Director of the Space Division at IAI, leading the development, construction, launch and operation of observation and communication satellites for both Israeli and foreign users. Since January 2025, Ms. Kreiss is also serving as a member of the board of Phoenix Financial Ltd (TLV:PHOE). Prior to that, Ms. Kreiss held various leadership positions within IAI, including chief engineer of Israel’s Arrow 2 anti-ballistic missile defense system from 2000 to 2006, and project manager of the Arrow 3 exo-atmospheric interceptor from 2007 to 2013. Ms. Kreiss holds a B.Sc degree in chemical engineering from the Technion, Israeli Institute of Technology, an Executive Masters in Business Administration degree from Tel Aviv University, and completed a visiting research fellowship at the Aeronautics & Astronautics Department of the Massachusetts Institute of Technology. Zeev Vurembrand has served on our board of directors since May 2021. Mr. Vurembrand is currently the Chief Executive Officer and Owner of Vurembrand Management & Innovation Ltd., a position he has held since March 2019, and has been a member of the board of Bezeq the Israeli Telecommunication Corp. Ltd. (TASE: BEZQ) since 2017. Mr. Vurembrand also served as chairman of the board of Lageen Ltd. from 2019 until December 2023. From 2013 until 2019, Mr. Vurembrand was the Chief Executive Officer of Kupat Holim Meuhedet, Israel’s third largest health care organization. From 2008 until 2013, he was the Chief Executive Officer of Alon Holding Blue Square – Israel Ltd., and prior to that, from 2007 until 2008, he was the Chief Executive Officer of Phoenix Investments and Finance Ltd. Earlier in his career, from 2002 until 2007, Mr. Vurembrand was the Chief Executive Officer of Clalit Health Services Group, Israel’s largest health care organization. Mr. Vurembrand has served on numerous boards of directors, including Africa Israel Residences LTD. (TASE: AFRE) from 2014 until 2016, Discount Bank (TASE:DSCT) 2006 until 2007, U-Bank from 2005 until 2006, Blue Square Israel (TASE: BSI) from 2001 until 2006, and Dikla Medical Insurance Ltd. from 1995 until 2002. Mr. Vurembrand has also served on the board of trustees of Bar Ilan University since 2019. Mr. Vurembrand holds a B.Sc degree in industrial engineering and management from the Technion, Israeli Institute of Technology. Nir Nimrodi has served on our board of directors since August 2023. Mr. Nimrodi has over 25 years’ experience working in start-ups and large global businesses in the life sciences, pharmaceutical, and biotechnology industries. From May 2019 to November 2024, Mr. Nimrodi was the chairman and chief executive officer of Accellix Inc., a life sciences company. From 2014 to April 2019, Mr. Nimrodi was the chief business officer of Intrexon (currently Precigen, Inc.). Prior to this, he held several executive roles at Life Technologies Inc. (now part of Thermo Fisher), and was chief executive officer at Proneuron Biotechnologies Inc. and Mindsense Biosystems Ltd. In addition, Mr. Nimrodi currently serves as a member of the board of Evogene Ltd. (NASDAQ: EVGN) and at the private company Scopio Labs. From July 2022 to December 2024, Mr. Nimrodi served as a member of the board of Genesee Scientific. Mr. Nimrodi holds a B.A. in Economics and an MBA from Tel-Aviv University. 57 Dr. Carlo Papa has served on our board of directors since September 2024 and as Chairman of Odysight.ai EU since January 2025. Dr. Papa has served as Chief Economics Advisor at Berkeley Research Group since January 2025, Senior Fellow at the Columbia Center on Sustainable Investment at Columbia University since August 2024 and as a member of the Impact Advisory Board of SACE, Italy’s export credit agency, since June 2023. From April 2015 to June 2024, Dr. Papa served as Managing Director of the Enel Foundation, an Italian think-tank, and as Global Head of Relationships with academic and research institutions for Enel Group. Dr. Papa previously served as Chief Innovation Officer at Enel Green Power and has held several positions with the Enel Group, including Chief of Staff of the Chairman’s Office, Head of Business Development for Russia and Ukraine (Power Generation Division) and co-founder of and Investment Manager for Enel Capital Corporate Venture Fund. Dr. Papa currently serves on the board, advisory board or executive committee of Italy’s National PhD in Sustainable Development and Climate Change, the UN’s Council Engineers for Energy Transition and Harambee Africa. Dr. Papa received a BSc in Economics - MSc in Management and Finance from Palermo University in Italy, an EMBA Trium Global Executive from London School of Economics, Stern NYU, HEC Paris and a PhD in Management Engineering from Tor Vergata University in Rome. Staggered Board Our board of directors is divided into three classes. Zeev Vurembrand, Nir Nimrodi and Dr. Carlo Papa are our Class I directors, with their terms of office to expire at our 2025 annual meeting of stockholders. Jackson Schneider, Ronit Rubin and Inbal Kreiss are our Class II directors, with their terms of office to expire at our 2026 annual meeting of stockholders. Professor Benad Goldwasser and Moshe (Mori) Arkin are our Class III directors, with their terms of office to expire at our 2027 annual meeting of stockholders. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified. Our board of directors may consider a broad range of factors relating to the qualifications and background of nominees to serve as director, which may include various diversity factors. We have no formal policy regarding board diversity. Our officers hold office until the earlier of their death, resignation or removal by our board of directors or until their successors have been selected. They serve at the pleasure of our board of directors. Board Observer Ori Amsalem, a principal at Arkin Capital (the chairman of which is our board member, Mr. Arkin), serves as a non-voting observer of our board since May 2023. Family Relationships There are no family relationships between or among any of our directors or executive officers. Involvement in Legal Proceedings To our knowledge, there have been no material legal proceedings that would require disclosure under the federal securities laws that are material to an evaluation of the ability of our directors or executive officers. Code of Ethics We have adopted a code of business conduct and ethics that applies to all of our directors, officers, and employees (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions). We have made the code of business conduct and ethics available on our website at www.odysight.ai. We will disclose promptly by posting such disclosure on our website any amendment to or waiver from the code of business conduct and ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as required by law or SEC regulations. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report. 58 Insider Trading Policy We adopted an insider trading policy that governs the purchase, sale and/or other transactions of our securities by our directors, officers and employees that it believes is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and listing standards applicable to us. A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In addition, with regard to our trading in its own securities, it is our policy to comply with the federal securities laws and applicable listing standards. Clawback Policy Our Board of Directors has adopted an Executive Officer Clawback Policy (the “Clawback Policy”), in accordance with the Nasdaq listing standards and Exchange Act Rule 10D-1, which applies to our current and former executive officers. Under the Clawback Policy, we are required to recoup the amount of any Erroneously Awarded Compensation (as defined in the Clawback Policy) on a pre-tax basis within a specified lookback period in the event of any Accounting Restatement (as defined in the Clawback Policy), subject to limited impracticability exception. Policies and Practices Related to the Grant of Certain Equity Awards Under our insider trading policy, our board of directors or any committee thereof shall consider our possession of material non-public information in connection with the timing of each grant of equity under our equity incentive plans, and determine whether a grant of equity should be delayed or otherwise modified due to the possession of such information at such time. Board Leadership Structure and Role in Risk Oversight Risk assessment and oversight are an integral part of our governance and management processes. Our board of directors encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. While our board of directors has a fiduciary duty to monitor and assess strategic risk exposure, our audit committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to monitor and control these exposures, overseeing cybersecurity risks and assisting the board of directors in its oversight over enterprise risk management. The audit committee also approves or disapproves any related person transactions. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance guidelines and manages risks associated with the independence of the board of directors. Board Committees Our board of directors has established an audit committee, compensation committee and a nominating and corporate governance committee and adopted written characters for each of these committees, which are available on our website at www.odysight.ai. Our board of directors may establish other committees as it deems necessary or appropriate from time to time. 59 Audit Committee The members of the audit committee are Ms. Kreiss, Ms. Rubin, and Mr. Vurembrand, with Mr. Vurembrand as its designated chairperson, all of whom meet the independence criteria established by Nasdaq. The board of directors has determined that Mr. Vurembrand qualifies as an “audit committee financial expert” as defined by SEC rules adopted pursuant to the Exchange Act. Nasdaq requires that audit committees have at least three directors and that all directors be independent, as defined in the Nasdaq requirements and Rule 10A-3 under the Exchange Act. The audit committee assists the board of directors in its oversight of financial reporting practices and the quality and integrity of our financial reports including compliance with legal and regulatory requirements, the independent auditors’ qualifications and independence, and the performance of our internal control function. The audit committee is responsible for the appointment of our independent auditors. The audit committee oversees our internal controls and risk assessment and management policies and meets with our independent auditor and management regarding our internal controls and other matters. The audit committee is responsible for periodically reviewing our code of business conduct and ethics and has established procedures for the receipt, retention, and treatment of complaints received by us regarding accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. The audit committee is also responsible for approving or ratifying related person transactions pursuant to our related person transaction approval policy contained in the audit committee charter. Compensation Committee The members of the compensation committee are Ms. Kreiss, Mr. Nimrodi, and Mr. Vurembrand, with Ms. Kreiss as its designated chairperson, all of whom meet the independence criteria established by Nasdaq. The compensation committee is charged with the responsibility for setting executive compensation, reviewing certain compensation programs, administering our equity incentive plans, reviewing and discussing with management the compensation discussion and analysis required in proxy statements (if and when applicable), preparing a report on executive compensation required by SEC rules to be included in proxy statements (if and when applicable) and making other recommendations to the board of directors. Nominating and Corporate Governance Committee The members of the nominating and corporate governance committee are Ms. Kreiss, Ms. Rubin, and Mr. Vurembrand, with Mr. Vurembrand as its designated chairperson, as its designated chairperson, all of whom meet the independence criteria established by Nasdaq. The purpose of the nominating committee is to assist the board of directors in identifying qualified individuals to become directors, help to develop and implement corporate governance guidelines and monitor board effectiveness. Committee Charters Our audit committee charter, compensation committee charter, nominating and corporate governance committee charter and other corporate governance information are available under the Corporate Governance section of the Investors page of our website located at www.odysight.ai, or by writing to our Secretary at our offices at Suite 7A, Industrial Park, P.O. Box 3030, Omer, Israel 8496500. Compensation committee interlocks and insider participation None of the members of our compensation committee is a current or former officer or employee. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, including any entity whose executive officers served as a director or member of our compensation committee. 60 item 11. Executive Compensation Summary Compensation Table The following sets forth information about the compensation paid to or accrued by our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K, as of December 31, 2024. Name and Principal Position Year Base Salary (4) Bonus Stock Awards (5) Option Awards (5) (6) Nonequity incentive plan compensation Nonqualified deferred compensation earnings All Other Compensation (7) Total $ in thousands Yehu Ofer, 2024 $ 385 $ 100 $ - $ 584 $ - $ - $ 39 $ 1,108 Chief Executive Officer (1) 2023 $ 349 $ - $ - $ 355 $ - $ - $ 40 $ 744 Einav Brenner, 2024 $ 151 $ 32 $ - $ 481 $ - $ - $ 9 $ 673 Chief Financial Officer (2) Jacob Avinu, 2024 $ 284 $ 32 $ - $ 195 $ - $ - $ 27 $ 538 Senior VP Product Portfolio (3) 2023 $ 278 $ 33 $ - $ 47 $ - $ - $ 28 $ 386 (1) Consists of Mr. Ofer’s compensation earned in his capacity as the Chief Executive Officer of our wholly-owned subsidiary, Odysight.ai Ltd. Mr. Ofer did not earn any compensation in his capacity as the Chief Executive Officer of Odysight.ai Inc and any of our other subsidiaries. (2) Consists of Ms. Brenner’s compensation earned in her capacity as then Chief Financial Officer of our wholly-owned subsidiary, Odysight.ai Ltd. Ms. Brenner did not earn any compensation in her capacity as the Chief Financial Officer of Odysight.ai Inc and any of our other subsidiaries. Ms. Brenner’s employment commenced on May 5, 2024. (3) Consists of Mr. Avinu’s compensation earned in his capacity as the Senior VP Product Portfolio of our wholly-owned subsidiary, Odysight.ai Ltd. (4) Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each named executive officer’s scope of responsibility and accountability. Base salary amounts include management insurance (which includes pension, disability insurance and severance pay) and payments towards such employee’s education fund, and Israeli social security. Each named executive officer also receives gross-up payments for the taxes on these benefits. The amounts included here are the U.S. dollar equivalent from NIS. The conversion rate used was the average of the 2023 and 2024 rates between the U.S. dollar and NIS, as published by the Bank of Israel. (5) The amount shown in the “Option Awards” and “Stock Awards” columns represents the aggregate grant date fair value of awards computed in accordance with ASC 718, not the actual amounts paid to or realized by the Named Executive Officer during 2024 and 2023. The ASC 718 fair value amount as of the grant date for stock options generally is spread over the number of months of service required for the grant to vest. (6) The fair value of each stock option award is estimated as of the date of grant using the Black-Scholes valuation model. The 2024 figures are unaudited numbers. (7) For 2024 and 2023, referenced amount is for car lease and other related vehicle expenses. 61 On September 16, 2024, our board of directors, upon recommendation of our compensation committee, approved (i) a cash compensation bonus of NIS 375,000 to Yehu Ofer, our Chief Executive Officer, and an award to him of 120,000 options to purchase shares of our common stock, (ii) a cash compensation bonus of NIS 60,000 to Einav Brenner, our Chief Financial Officer, and an award to her of 30,000 options to purchase shares of our common stock and (iii) a cash compensation bonus of NIS 120,000 to Jacob Avinu, our Senior VP of Product Portfolio, and an award to him of 40,000 options to purchase shares of common stock. So long as the executive continues as a service provider with us, the options will vest with respect to one-third of the shares of common stock on the first anniversary of the grant date and, with respect to the balance of the shares of common stock, will vest over two years in eight equal quarterly installments following the first anniversary of the grant date. The options are subject to acceleration of vesting in the event of a change of control. On March 10, 2025, our b oard of directors, upon recommendation of our compensation committee, approved the following with regard to Mr. Ofer: (i) an increase in monthly base salary from NIS 80,000 to NIS 90,000, effective January 1, 2025 , with such monthly base salary remaining subject to adjustments for inflation as announced from time to time in accordance with Israeli law , (ii) a cash compensation bonus of $142,500 and (iii) an award of 150,000 options to purchase shares of our common stock. The foregoing options were awarded to Mr. Ofer pursuant to our 2024 Stock Incentive Plan and have an exercise price of $6.50 per share. So long as Mr. Ofer continues as a service provider with us , the options will vest with respect to one-third of the shares of common stock on the first anniversary of the grant date and, with respect to the balance of the shares of common stock, will vest over two years in eight equal quarterly installments following the first anniversary of the grant date. The options are subject to acceleration of vesting in the event of a change of control of the Company. On the same date, our board of directors, upon recommendation of the compensation committee, approved a cash compensation bonus of $95,000 to Ms. Brenner. Employment Agreements We, or through our wholly-owned subsidiary, Odysight.ai Ltd., have entered into written employment agreements with each of our executive officers. All of these agreements contain customary provisions regarding noncompetition, confidentiality of information, and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. In addition, our officers and directors are covered by directors and officers’ insurance, and we have entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them to the fullest extent permitted by law to the extent that these liabilities are not covered by directors and officers’ liability insurance. In connection with the appointment of Mr. Ofer as our Chief Executive Officer, we entered into an employment agreement with Mr. Ofer. The agreement provides for a monthly base salary of NIS 70,000, subject to adjustments for inflation as announced from time to time in accordance with Israeli law. The agreement also provides that Mr. Ofer is entitled to receive an equity grant of options to purchase a total of 300,000 shares of our common stock, par value $0.001 per share, at an exercise price of $4.50 per share, which shall vest and become exercisable as follows: 33.33% of the shares covered by Mr. Ofer’s options on the first anniversary of his service as CEO, and 8.33% of the shares covered by Mr. Ofer’s options at the end of each subsequent three-month period thereafter over the course of the subsequent two years. Furthermore, Mr. Ofer’s options will immediately vest upon the occurrence of the following (i) the sale of all or substantially all of the assets of the Company, (ii) the sale of more than 50% of our common stock in a non-public sale, (iii) the dissolution or liquidation of the Company or (iv) any merger, share exchange, consolidation or other reorganization or business combination if immediately after such transaction either (A) the persons who were our directors immediately prior to such transaction do not constitute at least a majority of the directors of the surviving entity or (B) the persons who hold a majority of the voting capital stock of the surviving entity are not the persons who held a majority of the voting capital stock of the Company immediately prior to such transaction. Additionally, we agreed to pay Mr. Ofer both (i) a signing bonus in the aggregate amount of NIS 70,000 and (ii) an annual bonus pursuant to certain pre-determined measurable objectives agreed to with Mr. Ofer and approved by the board of directors by January 31 with respect to each calendar year, with the Company agreeing to recommend to the board of directors a grant of restricted stock in lieu of Mr. Ofer’s bonus through such time we are profitable and subject to meeting applicable objectives. In accordance with the terms of Mr. Ofer’s employment agreement, he will also receive additional benefits customary for an executive officer of his experience and for companies of similar stature and standing to that of us. Effective January 1, 2025, Mr. Ofer’s monthly base salary was NIS 90,000. 62 In connection with the appointment of Einav Brenner as our Chief Financial Officer, we entered into an employment agreement with Ms. Brenner that provides for the terms and conditions of her employment. The employment agreement provides for a monthly base salary of NIS 60,000. The employment agreement also provides that Ms. Brenner is entitled to receive an equity grant of options to purchase a total of 70,000 shares of our common stock which shall vest and become exercisable as follows: 33.33% of the shares covered by the options on the first anniversary of her service, and 8.33% of the shares covered by the options at the end of each subsequent three-month period thereafter over the course of the subsequent two years. Additionally, we agreed to pay Ms. Brenner a signing bonus in the aggregate amount of NIS 60,000 pursuant to certain objectives. In accordance with the terms of Ms. Brenner’s employment agreement, she will also receive additional benefits customary for an executive officer of her experience and for companies of similar stature and standing to that of the Company. In connection with the appointment of Mr. Avinu as our Senior VP Product Portfolio, we entered into an employment agreement with Mr. Avinu. The agreement provides for a monthly salary of NIS 60,000. The agreement also provides that Mr. Avinu is entitled to receive an equity grant of options to purchase a total of 100,000 shares of our common stock, par value $0.001 per share, at an exercise price of $4.50 per share, which shall vest and become exercisable as follows: 33.33% of the shares covered by Mr. Avinu’s options on the first anniversary of his service as SVP Product, and 8.33% of the shares covered by Mr. Avinu’s options at the end of each subsequent three-month period thereafter over the course of the subsequent two years. Additionally, the agreement provides to Mr. Avinu: (i) a signing bonus in the aggregate amount of NIS 50,000 (ii) a performance bonus in the aggregate amount of NIS 120,000 pursuant to certain objectives and (iii) we will consider, at our sole discretion, after the first and second years following his employment, granting Mr. Avinu additional options / RSUs pursuant to certain objectives, subject to the approval of such grant by the CEO and our board of directors. In accordance with the terms of Mr. Avinu’s employment agreement, he will also receive additional benefits customary for an executive officer of his experience and for companies of similar stature and standing to that of the Company. In October 2024, the Board of Directors approved a salary increase for Mr. Avinu in the amount of NIS 3,000 per month. Outstanding Equity Awards The following table provides information regarding equity awards for each of our named executive officers as of December 31, 2024. Options Award Stock Awards Name and Position No. of Securities Underlying Unexercised Options (#) Exercisable No. of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Vesting Schedule Option Expiration Date Number of Units of Stock That Have Not Vested (#) Market Value of Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested Yehu Ofer, 199,995 100,005 - 4.50 (1) November 14, 2029 - - - Chief Executive 62,495 87,505 - 3.00 (1) July 9, 2030 - - - Officer - 120,000 - 4.80 (1) September 16, 3031 Einav Brenner, - 70,000 - 4.50 (1) June 13, 2031 - - - Chief Financial Officer - 30,000 - 4.80 (1) September 16, 3031 - - - Jacob Avinu, 66,665 33,335 - 4.50 (1) November 14, 2029 - - - 8,332 11,668 - 3.00 (1) July 9, 2030 - - - Senior VP Product Portfolio - 40,000 - 4.80 (1) September 16, 3031 - - - (1) 33.33% of the options granted will vest on the first anniversary date of the option grant, and 8.33% of the options will vest at the end of each subsequent three-month period thereafter over the course of the following two years. Pursuant to an acceleration mechanism, any outstanding and unvested options shall immediately accelerate and vest upon the occurrence of certain events, including, inter alia, a merger or sale of all our assets. 63 Retirement or Similar Benefit Plans We do not have any arrangements or plans that provide for the payment of retirement or similar benefits to our directors or executive officers. Resignation, Retirement, Other Termination, or Change in Control Arrangements We have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement or other termination of our directors or executive officers, or a change in control of our Company or a change in our directors’ or executive officers’ responsibilities following a change in control. However, the vast majority of the options we have granted to our directors, executive officers and employees will become fully vested upon a change of control. Director Compensation The following table sets out the compensation earned or paid to directors for services rendered during the year ended December 31, 2024. Name Fees Earned or Paid in Cash Stock Awards (*) Option Awards (*) Non-Equity Incentive Plan Compensation Nonqualified Deferred Compensation Earnings All Other Compensation Total $ in thousands Prof. Benad Goldwasser $ 120 $ - $ 292 - - $ - $ 412 Dr. Carlo Papa (1) $ 70 (2) $ - $ 148 - $ - $ 218 Moshe (Mori) Arkin $ 16 $ - $ 73 - - $ - $ 89 Inbal Kreiss $ 32 $ - $ 73 - - $ - $ 105 Zeev Vurembrand $ 32 $ - $ 73 - - $ - $ 105 Ronit Rubin $ 24 $ - $ 73 - - $ - $ 97 Jackson Schneider $ 80 $ - $ 73 - - $ - $ 153 Nir Nimrodi $ 24 $ - $ 73 - - $ - $ 97 (1) Served as a director of Odysight.ai Inc. since September 16, 2024. (2) Includes compensation earned as Chairman of Odysight.ai EU. (*) The amount shown in the “Stock Awards” and “Option Awards” columns represents the aggregate grant date fair value of awards computed in accordance with ASC 718, not the actual amounts paid to or realized by the directors during fiscal year 2024. The fair value of each stock option award is estimated as of the date of grant using the Black-Scholes valuation model. 64 On July 31, 2019, we entered into a consulting agreement with Prof. Goldwasser, whereby Prof. Goldwasser agreed to serve as chairman of our board of directors. Effective retroactively to March 1, 2019, services as chairman under the agreement were provided in consideration for a monthly fee of $10,000 and a grant of options to purchase our common stock representing 5% of the fully diluted share capital of the Company post issuance of the then-next financing round, subject to certain limitations. The options, which will have a six-year term, will vest in eight equal semi-annual installments over a period of four years with an exercise price per share calculated based on a 25% discount on the sale price of the common stock in the then-next fund raising of the Company and accelerated vesting upon closing of a material transaction resulting in change of control of the Company and/or in case Prof. Goldwasser is dismissed not for cause, with other terms and limitations as provided in the consulting agreement. On March 15, 2020, our board of directors approved a quarterly fee of $4,000 payable to each of our currently serving directors, excluding Prof. Goldwasser. On each of April 9, 2021 and August 12, 2021, our board of directors approved the same terms for directors appointed subsequent to March 15, 2020. On May 15, 2022, the board of directors approved a quarterly fee in the amount of $2,000 payable to a director for each committee on which such director serves, if any, with such fee in addition to any other fees to which such director is entitled as a member of the board of directors or any other committee. On November 22, 2023, our board of directors approved a separate compensation arrangement with Mr. Schneider, subject to his election as a director, which took place on December 6, 2023. In light of the special role and contributions that Mr. Schneider is expected to make to the operation of the Company, the board of directors approved compensation that includes an annual fee of $80,000, which will be paid on a monthly basis in equal installments, and a recommendation to the board of directors to grant Mr. Schneider options to purchase a total of 50,000 shares of common stock at an exercise price per share equal to $3.00 per share, vesting over a period of three years and such other terms as provided in a Director Service Agreement signed between Mr. Schneider and the Company. On September 16, 2024, we entered into a director appointment and services agreement with Dr. Papa, who was appointed as a member of our board on the same date, pursuant to which Dr. Papa will receive an annual fee of €30,000 for such service, to be paid in equal quarterly installments, a grant of options to purchase 30,000 shares of our common stock at an exercise price of $4.80 per share, one-third of which will vest on the first anniversary of the grant date and the remaining amount vesting over the following two years in eight equal quarterly installments, and such other terms as provided in the agreement. The options are subject to acceleration of vesting in the event of a change of control of the Company. On February 18, 2025, Odysight.ai EU entered into a two-year agreement with Dr. Papa, who will serve as Odysight.ai EU’s president and legal representative, effective as of January 9, 2025. Pursuant to the agreement, Dr. Papa will receive: (i) an annual fee of €120,000 for such service, to be paid in equal monthly installments, (ii) a signing bonus of €20,000, (iii) an entry bonus equal to an amount of €40,000 reflecting Dr. Papa’s prior effort and support in the development of the Italian subsidiary and (iv) such other insurance, termination fees and other benefits as provided in the agreement. On March 10, 2025, our board of directors, upon recommendation of our compensation committee, approved a one-time cash compensation bonus of $130,000 to Prof. Goldwasser . From time to time our directors, including those with separate compensation arrangements with the Company as described above, receive periodic grants of equity securities for their service as directors. 65 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder matters Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information with respect to the beneficially owned holdings of: (1) each person known to us to be the beneficial owner of more than 5% of our common stock; (2) each of our directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. Applicable percentage ownership is based on 16,307,321 shares of common stock outstanding as of March 20, 2025. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated. Unless otherwise indicated below, the address for each beneficial owner listed in the table below is c/o Odysight.ai Inc., Suite 7A, Industrial Park, P.O. Box 3030, Omer, Israel 8496500. Name and Address of Owner Shares of Common Stock Owned Beneficially Percent of Class Moshe (Mori) Arkin (2) 7,926,329 41.9 % Prof. Benad Goldwasser (3) 727,978 4.3 % Yehu Ofer (4) 356,826 2.1 % Jacob Avinu (5) 94,998 * % Zeev Vurembrand (6) 48,524 * % Inbal Kreiss (7) 33,524 * % Jackson Schneider (8) 20,831 * % Eli Israeli (9) 17,499 * % Nir Nimrodi (10) 17,499 * % Ronit Rubin (11) 12,499 * % Einav Brenner - - % Carlo Papa - - % Directors and officers as a group (12 individuals) 9,256,507 46.2 % Phoenix Financial Ltd. (12) 3,777,878 21.1 % The More Group (13) 2,200,832 13.1 % Sudoku Capital Ltd. (14) 1,153,846 7.1 % Kranot Hishtalmut (15) 820,737 5.0 % * Less than 1% (1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners named in the table have, to our knowledge, direct ownership of and sole voting and investment power with respect to the shares of common stock beneficially owned by them. (2) Based in part upon information contained in a Schedule 13G filed on March 6, 2025 by Mr. Arkin to report holdings as of February 10, 2025. The securities included herein are held (i) by Mr. Arkin directly or by M. Arkin (1999) Ltd., a company wholly-owned by Mr. Arkin, as follows: (a) 2,959,143 shares of common stock, (b) options to acquire 39,081 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 25, 2025 and (c) warrants to acquire 222,223 shares of common stock that are current exercisable; and (ii) by Phoenix Insurance Company Ltd. on behalf of Mr. Arkin, as follows: (a) 2,352,941 shares of common stock and (b) warrants to acquire 2,352,941 shares of common stock that are currently exercisable. (3) Includes (i) options to purchase 534,037 shares of common stock which are currently exercisable or will become exercisable within 60 days of March 20, 2025 and (ii) 75,000 shares of common stock beneficially owned directly by Prof. Goldwasser’s spouse. (4) Includes options to purchase 337,493 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. (5) Includes options to purchase 94,998 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. (6) Consists of options to purchase 33,524 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. (7) Includes options to purchase 33,524 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. (8) Includes options to purchase 20,831 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. 66 (9) Consists of options to purchase 17,499 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. (10) Includes options to purchase 17,499 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. (11) Includes options to purchase 12,499 shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. (12) Based in part on information contained in a Schedule 13G filed on November 14, 2024 by Phoenix Financial Ltd. to report holdings as of September 30, 2024. The securities reported herein include 1,620,189 warrants to purchase shares of common stock that are currently exercisable or will become exercisable within 60 days of March 20, 2025. Securities reported in the Schedule 13G are beneficially owned by various direct or indirect, majority or wholly-owned subsidiaries of Phoenix Financial Ltd., which manage their own funds and/or the funds of others, including for holders of exchange-traded notes or various insurance policies, members of pension or provident funds, unit holders of mutual funds and portfolio management clients. Each of the subsidiaries of Phoenix Financial Ltd. operates under independent management and makes its own independent voting and investment decisions. Not included as beneficially owned by Phoenix Financial Ltd. are shares of common stock and warrants to acquire shares of common stock that are currently exercisable, each as held by Phoenix Insurance Company Ltd. on behalf of Mr. Arkin and included in the shares of common stock that are beneficially owned by Mr. Arkin, as indicated in footnote 4 above. The business address of Phoenix Financial Ltd. is Derech Hashalom 53, Givataim 53454, Israel. (13) Based upon information contained in the Schedule 13G filed on March 13, 2025 by the Y.D. More Investment Ltd., or Y.D. More, to report holdings as of February 10, 2025. The securities reported herein include warrants to purchase 432,099 shares of common stock that are currently exercisable. Y.D More is an Israeli public company controlled through a voting agreement among the following individuals and entities, each of which is a Reporting Person in the Schedule 13G: (a) Yosef Meirov, directly and through B.Y.M. Mor Investments Ltd., a company he controls with Michael Meirov and Dotan Meirov, (b) Benjamin Meirov (c) Yosef Levy and (d) Eli Levy through Elldot Ltd., a wholly owned company. Other reporting persons in the Schedule 13G include More Mutual Funds Management (2013) Ltd. and More Investment House Portfolio Management Ltd., each of which is a wholly-owned subsidiaries of Y.D. More, and More Provident Funds and Pension Ltd., which is a majority-owned subsidiary of Y.D. More. The business address of the More Group is 2 Ben Gurion Street, Ramat Gan, Israel. (14) Based on information provided to or available to us. Sudoku Capital Ltd. is an entity affiliated with Shmuel Harlap. The business address of Sudoku Capital Ltd. is Sokolov 62, Ramat Hasharon, Israel. (15) Based on information contained in a Schedule 13G filed on February 20, 2025 by Kranot Hishtalmut Le Morim Ve Gananot Hevera Menahelet Ltd. and Kranot Hishtalmut Le Morim Tichoniim Hevera Menahelet Ltd. (the “Management Companies”) to report holdings as of February 14, 2025. The Management Companies, which manage various education funds (referred to in Hebrew as “Kranot hishtalmut”), operate under independent management and make their own independent voting and investment decisions. Any economic interest or beneficial ownership in any of the securities is held for the benefit of the members of the education funds. The business address of the Management Companies is 8 Sderot Sha’ul HaMelech St., Tel Aviv 64733, Israel. Securities Authorized for Issuance under Equity Compensation Plans. In February 2020, our board of directors approved the 2020 Share Incentive Plan, or the 2020 Plan. The 2020 Plan initially included a pool of 580,890 shares of common stock for grant to our employees, consultants, directors and other service providers. On March 15, 2020, our board of directors approved an increase to the 2020 Plan’s option pool by an additional 64,099 shares of common stock. On June 22, 2020, our board of directors approved an increase to the 2020 Plan’s option pool by an additional 401,950 shares of common stock. During the second quarter of 2021, our board of directors approved an increase to the 2020 Plan’s option pool by an additional 777,778 shares of common stock. During the first quarter of 2023, our board of directors approved an increase to the 2020 Plan’s option pool by an additional 1,000,000 shares of common stock. In June 2024, our board of directors approved the 2024 Share Incentive Plan, or the 2024 Plan. The 2024 Plan initially included a pool of 234,484 shares of common stock, representing the number of shares remaining available for grant under the 2020 Plan. These shares are available for future grant to our employees, consultants, directors and other service providers. Shares that were subject to awards granted under either the 2020 Plan or the 2024 Plan that have expired or were cancelled or become un-exercisable for any reason without having been exercised in full shall become available for future grant under the 2024 Plan. In July 2024, our board of directors approved an increase to the 2024 Plan’s option pool by an additional 850,000 shares of common stock. The following table provides certain information as of December 31, 2024, with respect to our equity compensation plans under which our equity securities are authorized for issuance: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders - - - Equity compensation plans not approved by security holders 3,374,057 3.92 209,818 Total 67 2020 Share Incentive Plan We have adopted the 2020 Plan, under which we previously granted equity-based incentive awards to attract, motivate, and retain the talent for which we compete. With adoption of the 2024 Share Incentive Plan, described below, we make awards under that plan and have ceased making new awards under the 2020 Plan. Authorized Shares . The maximum number of shares of common stock which were available for issuance under the 2020 Plan is equal to the sum of 2,824,717 shares. Administration. Our board of directors, or a duly authorized committee of our board of directors, will administer the 2020 Plan. Under the 2020 Plan, the administrator has the authority, subject to applicable law, to interpret the terms of the 2020 Plan and any award agreements or awards granted thereunder, designate recipients of awards, determine and amend the terms of awards, including the exercise price of an option award, the fair market value of a share of common stock, the time and vesting schedule applicable to an award or the method of payment for an award, accelerate or amend the vesting schedule applicable to an award, prescribe the forms of agreement for use under the 2020 Plan, and take all other actions and make all other determinations necessary for the administration of the 2020 Plan. The administrator also has the authority to amend and rescind rules and regulations relating to the 2020 Plan or terminate the 2020 Plan at any time before the date of expiration of its ten-year term. Eligibility. The 2020 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section 102 of the Israeli Income Tax Ordinance (New Version), 5721-1961 (the “Ordinance”), and Section 3(i) of the Ordinance and for awards granted to our United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Internal Revenue Code (the “Code”) and Section 409A of the Code. Section 102 of the Ordinance allows employees, directors, and officers who are not controlling stockholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options. Our non-employee service providers and controlling stockholders may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits. Grant. All awards granted pursuant to the 2020 Plan were evidenced by an award agreement, in a form approved, from time to time, by the administrator in its sole discretion. The award agreement was set forth the terms and conditions of the award, including the type of award, number of shares subject to such award, vesting schedule and conditions (including performance goals or measures), and the exercise price, if applicable. Certain awards under the 2020 Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Code, which may impose additional requirements on the terms and conditions of such awards. Each award will expire seven years from the date of the grant thereof, unless such shorter term of expiration is otherwise designated by the administrator. Awards. The 2020 Plan provides for the grant of stock options (including incentive stock options and nonqualified stock options), shares of common stock, restricted shares, restricted share units, and other share-based awards. Options granted under the 2020 Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified stock options. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant stockholders). Exercise. An award under the 2020 Plan may be exercised by providing the company with a written or electronic notice of exercise and full payment of the exercise price for such shares underlying the award, if applicable, in such form and method as may be determined by the administrator and permitted by applicable law. An award may not be exercised for a fraction of a share. With regard to tax withholding, exercise price, and purchase price obligations arising in connection with awards under the 2020 Plan, the administrator may, in its discretion, accept cash, provide for net withholding of shares in a cashless exercise mechanism, or direct a securities broker to sell shares and deliver all or a part of the proceeds to us or the trustee. Transferability. Other than by will, the laws of descent and distribution, or as otherwise provided under the 2020 Plan, neither the options nor any right in connection with such options are assignable or transferable. Termination of Employment. For grantees who terminated their employment with us or any of its affiliates prior to July 5, 2022, all vested and exercisable awards held by such grantees as of the date of termination may be exercised within three months, unless otherwise determined by the administrator. For grantees who terminated their employment with us or any of our affiliates after July 5, 2022, all vested and exercisable awards held by such grantees as of the date of termination may be exercised within three years, unless otherwise determined by the administrator. After such three month or three-year period, as applicable, all such unexercised awards will terminate, and the shares covered by such awards shall again be available for issuance under the 2020 Plan. 68 In the event of termination of a grantee’s employment or service with the company or any of its affiliates due to such grantee’s death, permanent disability, or retirement, all vested and exercisable awards held by such grantee as of the date of termination may be exercised by the grantee or the grantee’s legal guardian, estate, or by a person who acquired the right to exercise the award by bequest or inheritance, as applicable, within twelve months after such date of termination, unless otherwise provided by the administrator. Any awards which are unvested as of the date of such termination or which are vested but not then exercised within the twelve-month period following such date, will terminate and the shares covered by such awards shall again be available for issuance under the 2020 Plan. Notwithstanding any of the foregoing, if a grantee’s employment or services with the company or any of its affiliates is terminated for “cause” (as defined in the 2020 Plan), all outstanding awards held by such grantee (whether vested or unvested) will terminate on the date of such termination and the shares covered by such awards shall again be available for issuance under the 2020 Plan. Transactions. In the event of a share split, reverse share split, share dividend, recapitalization, combination, or reclassification of our shares, or any other increase or decrease in the number of issued shares effected without receipt of consideration by the company (but not including the conversion of any convertible securities of the company), the administrator in its sole discretion shall make an appropriate adjustment in the number of shares related to each outstanding award and to the number of shares reserved for issuance under the 2020 Plan, to the class and kind of shares subject to the 2020 Plan, as well as the exercise price per share of each outstanding award, as applicable, the terms and conditions concerning vesting and exercisability, and the term and duration of outstanding awards, or any other terms that the administrator adjusts in its discretion, or the type or class of security, asset, or right underlying the award (which need not be only that of the Company, and may be that of the surviving corporation or any affiliate thereof or such other entity party to any of the above transactions); provided that any fractional shares resulting from such adjustment shall be rounded down to the nearest whole share unless otherwise determined by the administrator. In the event of a distribution of a cash dividend to all stockholders, the administrator may determine, without the consent of any holder of an award, that the exercise price of an outstanding and unexercised award shall be reduced by an amount equal to the per share gross dividend amount distributed by the Company, subject to applicable law. In the event of a merger or consolidation of our Company, or a sale of all, or substantially all, of our shares or assets, or other transaction having a similar effect on us, or change in the composition of the board of directors, or liquidation or dissolution, or such other transaction or circumstances that the board of directors determines to be a relevant transaction, then without the consent of the grantee, the administrator may but is not required to (i) cause any outstanding award to be assumed or substituted by such successor corporation, or (ii) regardless of whether or not the successor corporation assumes or substitutes the award (a) provide the grantee with the option to exercise the award as to all or part of the shares, and may provide for an acceleration of vesting of unvested awards, or (b) cancel the award and pay in cash, shares of the company, the acquirer, or other corporation which is a party to such transaction, or other property as determined by the administrator as fair in the circumstances. Notwithstanding the foregoing, the administrator may upon such event amend, modify, or terminate the terms of any award as it shall deem, in good faith, appropriate. 2024 Share Incentive Plan We have adopted the 2024 Plan, under which we may grant equity-based incentive awards to attract, motivate, and retain the talent for which we compete. Authorized Shares . The maximum number of shares of common stock available for issuance under the 2024 Plan is equal to the sum of 1,084,484 shares, or such number as our board of directors may determine from time to time. Awards granted under either the 2020 Plan or the 2024 Plan that have expired or was cancelled or become un-exercisable for any reason without having been exercised in full, the shares that were subject thereto shall become available for future grant under the 2024. Administration. Our board of directors, or a duly authorized committee of our board of directors, will administer the 2024 Plan. Under the 2024 Plan, the administrator has the authority, subject to applicable law, to interpret the terms of the 2024 Plan and any award agreements or awards granted thereunder, designate recipients of awards, determine and amend the terms of awards, including the exercise price of an option award, the fair market value of a share of common stock, the time and vesting schedule applicable to an award or the method of payment for an award, accelerate or amend the vesting schedule applicable to an award, prescribe the forms of agreement for use under the 2024 Plan, and take all other actions and make all other determinations necessary for the administration of the 2024 Plan. The administrator also has the authority to amend and rescind rules and regulations relating to the 2024 Plan or terminate the 2024 Plan at any time before the date of expiration of its ten-year Eligibility. The 2024 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section 102 of the Israeli Income Tax Ordinance (New Version), 5721-1961 (the “Ordinance”), and Section 3(i) of the Ordinance and for awards granted to our United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Internal Revenue Code (the “Code”) and Section 409A of the Code. Section 102 of the Ordinance allows employees, directors and officers who are not controlling stockholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options. Our non-employee service providers and controlling stockholders may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits. 69 Grant. All awards granted pursuant to the 2024 Plan will be evidenced by an award agreement, in a form approved, from time to time, by the administrator in its sole discretion. The award agreement will set forth the terms and conditions of the award, including the type of award, number of shares subject to such award, vesting schedule and conditions (including performance goals or measures), and the exercise price, if applicable. Certain awards under the 2024 Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Code, which may impose additional requirements on the terms and conditions of such awards. Each award will expire seven years from the date of the grant thereof, unless such shorter term of expiration is otherwise designated by the administrator. Awards. The 2024 Plan provides for the grant of stock options (including incentive stock options and nonqualified stock options), shares of common stock, restricted shares, restricted share units, and other share-based awards. Options granted under the 2024 Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified stock options. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant stockholders). Exercise. An award under the 2024 Plan may be exercised by providing the company with a written or electronic notice of exercise and full payment of the exercise price for such shares underlying the award, if applicable, in such form and method as may be determined by the administrator and permitted by applicable law. An award may not be exercised for a fraction of a share. With regard to tax withholding, exercise price, and purchase price obligations arising in connection with awards under the 2024 Plan, the administrator may, in its discretion, accept cash, provide for net withholding of shares in a cashless exercise mechanism, or direct a securities broker to sell shares and deliver all or a part of the proceeds to us or the trustee. Transferability. Other than by will, the laws of descent and distribution, or as otherwise provided under the 2024 Plan, neither the options nor any right in connection with such options are assignable or transferable. Termination of Employment. In the event of termination of a grantee’s employment or service with the company or any of its affiliates (other than by reason of death, disability, or retirement), all vested and exercisable awards held by such grantees as of the date of termination may be exercised within three months after such date of termination, unless otherwise determined by the administrator. After such three month period, all such unexercised awards will terminate, and the shares covered by such awards shall again be available for issuance under the 2024 Plan. In the event of termination of a grantee’s employment or service with the company or any of its affiliates due to such grantee’s death, permanent disability, all vested and exercisable awards held by such grantee as of the date of termination may be exercised by the grantee or the grantee’s legal guardian, estate, or by a person who acquired the right to exercise the award by bequest or inheritance, as applicable, within one year after such date of termination, unless otherwise provided by the administrator. Any awards which are unvested as of the date of such termination or which are vested but not then exercised within the twelve-month period following such date, will terminate and the shares covered by such awards shall again be available for issuance under the 2024 Plan. In the event of termination of a grantee’s employment or service with the company or any of its affiliates due to such grantee’s retirement, all vested and exercisable awards held by such grantee at the time of such retirement may be exercised by the grantee within three months after the date of such retirement, unless otherwise provided by the administrator. Any awards which are unvested as of the date of such termination or which are vested but not then exercised within the three months period following such date, will terminate and the shares covered by such awards shall again be available for issuance under the 2024 Plan. Notwithstanding any of the foregoing, if a grantee’s employment or services with the company or any of its affiliates is terminated for “Cause” (as defined in the 2024 Plan), all outstanding awards held by such grantee (whether vested or unvested) will terminate on the date of such termination and the shares covered by such awards shall again be available for issuance under the 2024 Plan. Transactions. In the event of a share split, reverse share split, share dividend, recapitalization, combination, or reclassification of our shares, or any other increase or decrease in the number of issued shares effected without receipt of consideration by the company (but not including the conversion of any convertible securities of the company), the administrator in its sole discretion shall make an appropriate adjustment in the number of shares related to each outstanding award and to the number of shares reserved for issuance under the 2024 Plan, to the class and kind of shares subject to the 2024 Plan, as well as the exercise price per share of each outstanding award, as applicable, the terms and conditions concerning vesting and exercisability, and the term and duration of outstanding awards, or any other terms that the administrator adjusts in its discretion, or the type or class of security, asset, or right underlying the award (which need not be only that of the Company, and may be that of the surviving corporation or any affiliate thereof or such other entity party to any of the above transactions); provided that any fractional shares resulting from such adjustment shall be rounded down to the nearest whole share unless otherwise determined by the administrator. In the event of a distribution of a cash dividend to all stockholders, the administrator may determine, without the consent of any holder of an award, that the exercise price of an outstanding and unexercised award shall be reduced by an amount equal to the per share gross dividend amount distributed by us, subject to applicable law. In the event of a merger or consolidation of our Company, or a sale of all, or substantially all, of our shares or assets, or other transaction having a similar effect on the Company, or liquidation or dissolution, or such other transaction or circumstances that the board of directors determines to be a relevant transaction, then without the consent of the grantee, the administrator may but is not required to (i) cause any outstanding award to be assumed or substituted by such successor corporation, or (ii) regardless of whether or not the successor corporation assumes or substitutes the award (a) provide the grantee with the option to exercise the award as to all or part of the shares, and may provide for an acceleration of vesting of unvested awards, or (b) cancel the award and pay in cash, shares of the company, the acquirer, or other corporation which is a party to such transaction, or other property as determined by the administrator as fair in the circumstances. Notwithstanding the foregoing, the administrator may upon such event amend, modify, or terminate the terms of any award as it shall deem, in good faith, appropriate. Change in Control We are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control. 70 Item 13. Certain relationships and related transactions, and director independence Related Party Transactions In addition to the compensation arrangements, including employment, termination of employment, and change in control arrangements, discussed, when required, in the sections titled “ Management ” and “ Executive Compensation ,” the following is a description of each transaction for the prior two year period and each currently proposed transaction in which: ● we have been or are to be a participant; ● the amount involved exceeded or exceeds $120,000; and ● any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest. On March 16, 2023, we entered into and consummated securities purchase agreements with (i) Phoenix Insurance Company Ltd. (for Mr. Arkin, who currently serves as a director on our board of directors, through his individual retirement account) and (ii) Phoenix Insurance and Phoenix Amitim, in connection with the sale and issuance of an aggregate of 3,294,117 units, at a purchase price of $4.25 per unit, and for an aggregate purchase price of $14,000,000. Each unit consists of: (i) one share of common stock and (ii) one warrant to purchase one share of common stock with an exercise price of $5.50 (the “Warrants”). The Warrants are immediately exercisable and will expire three years from the date of issuance and will be subject to customary adjustments. In connection with the private placement, we undertook to file a Registration Statement on Form S-1 with the SEC covering the resale of the shares of common stock issued pursuant to the private placement, the shares of common stock underlying the Warrants issued pursuant to the private placement, and any other shares of common stock and shares of common stock underlying warrants to the extent previously issued to Mr. Arkin, Phoenix Insurance or Phoenix Amitim. We further undertook that the Registration Statement on Form S-1 would not include any shares of common stock or other securities for the account of any other holder without the prior written consent of Mr. Arkin, Phoenix Insurance and Phoenix Amitim. As with Mr. Arkin, Phoenix Insurance and Phoenix Amitim are our existing stockholders. The shares of common stock and warrants were issued pursuant to Regulation S of the Securities Act. During 2023 we received development services in the amount of $29,000 from Smartec R&D Ltd., a company owned by our former CTO, Amir Govrin. On July 16, 2024, we issued 2,144,583 shares of our common stock in consideration for a purchase price of $4.80 per share to new and existing investors, including Mr. Arkin (via M. Arkin (1999) Ltd.), who currently serves as a director on our board of directors, and The Phoenix Holdings, through Phoenix Insurance and Phoenix Amitim. We raised approximately $10 million in the private placement. The shares of common stock were issued pursuant to Regulation S of the Securities Act. In February 2025, one or more entities affiliated with the More Group and Sudoku Capital Ltd. (an entity affiliated with Shmuel Harlap), purchased 1,046,672 shares and 1,153,846 shares, respectively , of our common stock in our underwritten public offering. More Group was a more than 5% beneficial owner of our common stock prior to the underwritten public offering while Sudoku Capital became a more than 5% beneficial owner following its participation in the underwritten public offering. Indemnification Agreements We have entered into indemnification agreements with all of our directors and named executive officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Nevada law against certain liabilities that may arise by reason of their service to us, and, subject to certain exceptions and repayment conditions, to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and executive officers. Policies and Procedures for Related Party Transactions The audit committee is responsible for approving or ratifying related person transactions pursuant to our related person transaction approval policy contained in the audit committee charter. In reviewing and approving any such related person transactions, the audit committee shall consider all relevant facts and circumstances, including whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. The audit committee shall have the authority to establish guidelines for related person transactions and intercompany arrangements where it deems it to be appropriate. 71 Director Independence We have been approved to list our common stock on Nasdaq. Under the rules of Nasdaq, independent directors must comprise a majority of a listed company’s board of directors within one year following the listing date of the company’s securities, and a director will only qualify as an “independent director” if that that company’s board of directors affirmatively determines that such person does not have a relationship with the company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Professor Benad Goldwasser, Mr. Jackson Schneider, Ms. Inbal Kreiss, Ms. Ronit Rubin, Mr. Zeev Vurembrand and Mr. Nir Nimrodi do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent”. Item 14. Principal accounting fees and services Audit and Accounting Fees The following table sets forth the fees billed to our Company for professional services rendered by Brightman Almagor Zohar & Co., a firm in the Deloitte global network, for the fiscal years ended December 31, 2023 and December 31, 2024: Services Year Ended December 31, 2024 Year Ended December 31, 2023 $ in thousands Audit fees (1) $ 145 $ 110 Tax fees (2) $ 15 $ — Total fees $ 160 $ 110 (1) Audit fees consist of audit and review services, consents and review of documents filed with the SEC. (2) Tax fees consist of services related to representing us before the ITA in a VAT assessment. Audit Committee Administration of Engagement The audit committee maintains a pre-approval policy that provides guidelines for the audit, audit-related, tax, and other permissible non-audit services that may be provided by the independent registered public accounting firm (the independent auditors) in order to ensure that the provision of such services does not impair the auditor’s independence. Under this policy, the audit committee annually pre-approves the audit fee and terms of the engagement, as set forth in the engagement letter, along with a specified list of audit-related and tax services. If any service to be provided by the independent auditors has not received pre-approval during this annual process, it will require specific pre-approval by the audit committee. 72 Part IV Item 15. exhibits AND financial statement schedules (a) Exhibits. Exhibit No. Exhibit Description 2.1 Securities Exchange Agreement, dated September 16, 2019, by and among Medigus Ltd. and Intellisense Solutions Inc. (incorporated by reference to Exhibit 10.1 to the report on Form 8-K filed by Medigus Ltd. on September 17, 2019) 3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1.1 to our Registration Statement on Form S-1 filed with the SEC on July 17, 2023) 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed with the SEC on June 8, 2023) 4.1* Description of the Registrant’s Securities 10.1+ Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 27, 2025) 10.2 Amended and Restated Asset Transfer Agreement, by and between Odysight.ai Ltd. and Medigus Ltd., dated December 1, 2019 (incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed with the SEC on December 31, 2019) 10.3+ Consulting Agreement by and between Odysight.ai Ltd. and Prof. Benad Goldwasser, dated July 31, 2019 (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K filed with the SEC on December 31, 2019) 10.4 2020 Share Incentive Plan (incorporated by reference to Exhibit 10.3 to our Annual Report on Form 10-K filed with the SEC on March 28, 2023) 10.5 2024 Share Incentive Plan (incorporated by reference to Exhibit 10.4 to our Registration Statement on Form S-1 filed with the SEC on June 24, 2024) 10.6 Form of Notice of Option Grant and Option Agreement 2020 Share Incentive Plan (incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K filed with the SEC on March 28, 2023) 10.7 Form of Notice of RSU Grant and RSU Agreement 2020 Share Incentive Plan (incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K filed with the SEC on March 28, 2023) 10.8+ Employment Agreement of Eli Israeli, dated September 19, 2023 (incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-1/A filed with the SEC on December 20, 2023) 10.9** Addendum No. 1 to the Amended and Restated Asset Transfer Agreement, dated July 27, 2020, by and between Odysight.ai Ltd. and Medigus Ltd. (incorporated by reference to Exhibit 10.30 to our Registration Statement on Form S-1/A filed with the SEC on October 19, 2021) 10.10+ Employment Agreement of Yehu Ofer, dated July 13, 2022 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on October 18, 2022) 10.11+ Employment Agreement of Jacob Avinu, dated September 20, 2022 (incorporated by reference to Exhibit 10.14 to our Registration Statement on Form S-1 filed with the SEC on July 17, 2023) 10.12 Stock Purchase Agreement, dated March 16, 2023, by and between Odysight.ai Inc. and the Investors defined therein (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 17, 2023) 10.13 Stock Purchase Agreement, dated March 16, 2023, by and between Odysight.ai Inc. and the Investors defined therein (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on March 17, 2023) 10.14 Form of Warrant to Purchase Shares of common stock (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on March 17, 2023) 10.15 Registration Rights Agreement, dated March 16, 2023, among Odysight.ai Inc. and the Investors defined therein (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on March 17, 2023) 10.16 Registration Rights Agreement, dated March 16, 2023, among Odysight.ai Inc. and the Investors defined therein (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on March 17, 2023) 10.17+ Director Appointment and Service Agreement of Jackson Schneider, dated December 6, 2023 (incorporated by reference to Exhibit 10.18 to our Registration Statement on Form S-1/A filed with the SEC on December 20, 2023) 10.18+ Employment Agreement of Einav Brenner, dated February 21, 2024 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on May 6, 2024) 10.19 Form of Subscription Order (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on July 15, 2024) 10.20+* Director Appointment and Service Agreement of Carlo Papa, dated September 16, 2024. 10.21 Form of Underwriting Agreement (incorporated herein by reference to Exhibit 1.1 to our Registration Statement on Form S-1, as amended, filed with the SEC on January 28, 2025) 10.22+* Agreement between Carlo Papa and Odysight.ai EU, dated February 18, 2025. 19.1* Insider Trading Policy 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to our Registration Statement on Form S-1/A filed with the SEC on January 24, 2025) 23.1* Consent Brightman Almagor Zohar & Co., a firm in the Deloitte global network, an independent registered public accounting firm 31.1* Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and Principal Financial Officer 32.1* Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and Principal Financial Officer 97.1*+ Executive Officer Clawback Policy 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) * Filed herewith ** Certain confidential information contained in this exhibit, marked by brackets, was omitted because it is both (i) not material and (ii) would likely cause competitive harm to us if publicly disclosed. “[***]” indicates where the information has been omitted from this exhibit + Management contract or compensatory plan or arrangement (b) Financial Statement Schedules. Schedules have been omitted because the information required to be set out therein is not applicable or is shown in the financial statements or notes thereto. Item 16. Form 10-K summary Not applicable. 73 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ODYSIGHT.AI INC. By: /s/ Yehu Ofer Name: Yehu Ofer Title: Chief Executive Officer Date: March 26, 2025 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Yehu Ofer Chief Executive Officer March 26, 2025 Yehu Ofer (Principal Executive Officer) /s/ Einav Brenner Chief Financial Officer March 26, 2025 Einav Brenner (Principal Financial and Accounting Officer) /s/ Benad Goldwasser Chairman of the Board March 26, 2025 Benad Goldwasser /s/ Ronit Rubin Director March 26, 2025 Ronit Rubin /s/ Jackson Shneider Director March 26, 2025 Jackson Shneider /s/ Nir Nimrodi Director March 26, 2025 Nir Nimrodi /s/ Mori Arkin Director March 26, 2025 Mori Arkin /s/ Inbal Kreiss Director March 26, 2025 Inbal Kreiss /s/ Zeev Vurembrand Director March 26, 2025 Zeev Vurembrand /s/ Carlo Papa Director March 26, 2025 Carlo Papa 74 ODYSIGHT.AI INC. TABLE OF CONTENTS Page Consolidated Financial Statements – in US Dollars (USD) in thousands Report of Independent Registered Public Accounting Firm (PCAOB ID 1197 ) F-2 Consolidated Balance Sheets F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Changes in Shareholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to the Consolidated Financial Statements F-9 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Odysight.ai Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Odysight.ai Inc. and its Subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in shareholders’ equity and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue — Customization and Development Services — Refer to Note 2l and 9 to the consolidated financial statements Critical Audit Matter Description The Company recognizes revenue from customization and development services that represent a single performance obligation over the duration of the respective contract (“over time”). These revenues are recognized commensurate with the progress of services, as products are produced and services are rendered, based on the effort expanded through the reporting date relative to total estimated effort to satisfy the performance obligation. During the year ended December 31, 2024 the Company recognized revenues from customization and development services in the amount of $863 thousands. The accounting for these contracts requires management to make judgments related to the total estimated amount and cost of man hours and materials required to satisfy the performance obligation. F- 2 We identified revenue from customization and development services as a critical audit matter because of the judgments made by management in estimating the total effort to satisfy the performance obligation. This required a high degree of auditor judgment and an increased extent of effort, in relation to our audit as whole. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to revenues from customization and development services included the following, among others: ● We obtained understanding of the contractual terms. ● We tested the accuracy of the actual effort incurred through the reporting date to satisfy the performance obligation by performing a sample of actual costs and obtaining supporting documents. ● We evaluated reasonability of estimated total effort to satisfy the performance obligation by: – Inquiring of Company research and development personnel to understand the process used to develop management’s estimate. – Comparing the amount of effort incurred to date to management’s historical estimates and inquiring regarding differences. – Performing sensitivity analysis over total estimated effort. ● We tested the mathematical accuracy of management’s calculation of effort expanded through the reporting date relative to total estimated effort. /s/ Brightman Almagor Zohar & Co. Certified Public Accountants A Firm in the Deloitte Global Network Tel Aviv, Israel March 26, 2025 We have served as the Company’s auditor since 2020. F- 3 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) CONSOLIDATED BALANCE SHEETS Note 2024 2023 December 31, Note 2024 2023 USD in thousands Assets CURRENT ASSETS: Cash and cash equivalents 18,164 8,945 Restricted deposit 322 - Short terms deposits - 8,096 Accounts receivable 1,510 1,372 Inventory 3 203 504 Other current assets 588 432 Total current assets 20,787 19,349 NON-CURRENT ASSETS: Contract fulfillment assets 9 1,017 1,256 Property and equipment, net 4 407 477 Operating lease right-of-use assets 10 1,113 1,380 Severance pay asset 259 271 Other non-current assets 96 96 Total non-current assets 2,892 3,480 TOTAL ASSETS 23,679 22,829 Liabilities and shareholders’ equity CURRENT LIABILITIES: Accounts payable 442 287 Contract liabilities - short term 9 702 527 Operating lease liabilities - short term 10 539 470 Accrued compensation expenses 1,124 546 Related parties 7 120 41 Other current liabilities 5 368 211 Total current liabilities 3,295 2,082 NON-CURRENT LIABILITIES: Contract liabilities - long term 9 1,373 1,795 Operating lease liabilities - long term 10 508 856 Liability for severance pay 259 261 Other non-current liabilities - 28 Total non-current liabilities 2,140 2,940 TOTAL LIABILITIES 5,435 5,022 SHAREHOLDERS’ EQUITY: 8 Common stock, $ 0.001 par value; 300,000,000 shares authorized as of December 31, 2024 and December 31, 2023, 12,612,517 and 10,443,768 shares issued and outstanding as of December 31, 2024 and December 31, 2023 13 10 Additional paid-in capital 64,205 52,004 Accumulated deficit ( 45,974 ) ( 34,207 ) TOTAL SHAREHOLDERS’ EQUITY 18,244 17,807 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 23,679 22,829 The accompanying notes are an integral part of these consolidated financial statements. F- 4 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS Note 2024 2023 Year ended December 31, Note 2024 2023 USD in thousands (except per share data) REVENUES 9 3,964 3,033 COST OF REVENUES 11 2,807 2,524 GROSS PROFIT 1,157 509 RESEARCH AND DEVELOPMENT EXPENSES 12 6,884 5,602 SALES AND MARKETING EXPENSES 13 1,218 1,109 GENERAL AND ADMINISTRATIVE EXPENSES 14 5,562 4,431 OPERATING LOSS ( 12,507 ) ( 10,633 ) OTHER INCOME - 200 FINANCING INCOME, NET 740 988 LOSS BEFORE TAXES ON INCOME ( 11,767 ) ( 9,445 ) TAXES ON INCOME - - NET LOSS ( 11,767 ) ( 9,445 ) Net loss per share (basic and diluted, in USD) ( 1.03 ) ( 0.98 ) Weighted average common shares (basic and diluted, in thousands) 11,445 9,668 The accompanying notes are an integral part of these consolidated financial statements. F- 5 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Amount capital deficit equity Common stock Additional paid-in capital Accumulated deficit Total Shareholders’ equity Number in thousands Amount USD in thousands Balance at January 1, 2024 10,444 $ 10 $ 52,004 $ ( 34,207 ) $ 17,807 Stock based compensation (see note 8) - - 2,386 - 2,386 Issuance of shares upon RSU vesting (see note 8) 24 - * - * - - Issuance of shares (see note 8) 2,145 3 9,815 - 9,818 Net loss - - - ( 11,767 ) ( 11,767 ) Balance at December 31, 2024 12,613 $ 13 $ 64,205 $ ( 45,974 ) $ 18,244 Common stock Additional paid-in capital Accumulated deficit Total Shareholders’ equity Number in thousands Amount USD in thousands Balance at January 1, 2023 7,122 $ 7 $ 36,541 $ ( 24,762 ) $ 11,786 Balance 7,122 $ 7 $ 36,541 $ ( 24,762 ) $ 11,786 Stock based compensation (see note 8) - - 1,664 - 1,664 Issuance of shares upon RSU vesting (see note 8) 28 - * - * - - Issuance of shares and warrants (see note 8) 3,294 3 13,799 - 13,802 Net loss - - - ( 9,445 ) ( 9,445 ) Balance at December 31, 2023 10,444 $ 10 $ 52,004 $ ( 34,207 ) $ 17,807 Balance 10,444 $ 10 $ 52,004 $ ( 34,207 ) $ 17,807 * Represents an amount of less than $1 thousand. The accompanying notes are an integral part of these consolidated financial statements. F- 6 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS 2024 2023 Year ended December 31, 2024 2023 USD in thousands CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ( 11,767 ) ( 9,445 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 123 284 Stock based compensation 2,386 1,664 Profit (Loss) from exchange differences on cash and cash equivalents 19 ( 159 ) Interest and exchange differences from operating lease liability ( 12 ) - Severance pay asset and liability 10 50 Interest income in respect of deposits 84 ( 49 ) CHANGES IN OPERATING ASSET AND LIABILITY: Increase in accounts receivable ( 138 ) ( 1,312 ) Decrease in inventory 301 126 Decrease in operating lease liability ( 379 ) ( 391 ) Decrease in right-of-use asset 379 381 Decrease (increase) in other current and non-current assets ( 156 ) ( 247 ) Increase (decrease) in account payable 155 ( 10 ) Decrease in contract fulfillment assets 239 239 Increase (decrease) in current and non-current contract liabilities ( 247 ) ( 1,322 ) Increase in accrued compensation expenses 578 181 Increase (decrease) in related parties 79 ( 17 ) Increase (decrease) in other current and non-current liabilities 129 18 Net cash flows used in operating activities ( 8,217 ) ( 10,009 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 53 ) ( 113 ) Withdrawal of short terms deposits 8,000 21,500 Investment in short terms deposits and restricted deposit ( 310 ) ( 26,500 ) Net cash flows provided by (used in) investing activities 7,637 ( 5,113 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of shares and warrants 9,818 13,809 Net cash flows provided by financing activities 9,818 13,809 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,238 ( 1,313 ) BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,945 10,099 PROFITS (LOSS) FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS ( 19 ) 159 BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR 18,164 8,945 F- 7 Non cash activities - Year ended December 31, 2024 2023 USD in thousands SUPPLEMENTAL INFORMATION FOR CASH FLOW: Right-of-use assets obtained in exchange for operating lease liabilities 167 1,506 Termination of right-of-use assets in exchange for cancellation of operating lease obligations ( 55 ) ( 52 ) F- 8 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – GENERAL : a . Odysight.ai Inc (the “Company”), formerly known as ScoutCam Inc., was incorporated under the laws of the State of Nevada on March 22, 2013. The Company’s wholly owned subsidiary, Odysight.ai Ltd (“Odysight.ai”), formerly known as ScoutCam Ltd., was incorporated in the State of Israel on January 3, 2019, and was merged into the Company on December 31, 2019, in a share exchange transaction, following which the surviving operations of the merged entity were the operations of Odysight.ai. On February 28, 2024, D. VIEW Ltd., a wholly owned subsidiary of the Company was incorporated in the State of Israel to act as a local representative for the defense market in Israel. On January 9, 2025, Odysight.Ai Eu S.r.l., a wholly owned subsidiary of the Company was incorporated under the laws of Italy. References to the Company include the subsidiaries unless the context indicates otherwise. The Company, through its subsidiaries, provides vision-based platform solutions for the Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) markets with its visualization and AI platform. The Company’s video sensor-based solutions and its embedded software, and AI algorithms are deployed in hard-to-reach locations and harsh environments across a variety of PdM and CBM use cases and allow maintenance and operations teams visibility into areas which are inaccessible under normal operation, or where the operating ambience is not suitable for continuous real-time monitoring. Some of the Company’s products utilize micro visualization technology in medical devices for minimally invasive medical procedures. On February 11, 2025, Company’s completed its uplist and its common stock began trading on the Nasdaq Capital Market under the symbol “ODYS”. Prior to such date, the Company was quoted on the OTCQB under the same symbol. b. Since the incorporation of Odysight.ai, and through December 31, 2024, the Company accumulated a deficit of approximately $ 46 million and its activities have been funded mainly by its shareholders. The Company’s management believes the Company’ cash and cash resources will allow the Company to fund its operating plan through at least the next 12 months from the filing date of these Consolidated Financial Statements. However, the Company expects to continue to incur significant research and development and other costs related to its ongoing operations, which may require the Company to obtain additional funding in order to continue its future operations until becoming profitable. F- 9 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES : a. Basis of preparation : The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) applied on a consistent basis. b. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates its assumptions on an ongoing basis, including those related to contingencies and inventory impairment, as well as estimates used in applying its revenue recognition policy. Actual results may differ from these estimates. c. Functional currency A majority of Odysight.ai’s revenues are generated in U.S. dollars. The substantial majority of Odysight.ai costs are incurred in U.S. dollars and New Israeli Shekels (“NIS”). Odysight.ai management believes that the U.S. dollar is the currency of the primary economic environment in which Odysight.ai operates. Thus, the functional currency of Odysight.ai is the U.S. dollar. Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Balances in non-U.S. dollar currencies are translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S. dollar transactions and other items in the statements of operations (indicated below), the following exchange rates are used: (i) for transactions exchange rates at transaction dates and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization) historical exchange rates. Currency transaction gains and losses are presented in financial income or expenses, as appropriate. d. Cash and Cash Equivalents The Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash. e. Short-term bank deposits Bank deposits with maturities of more than three months but less than one year are included in short-term bank deposits. Such short-term bank deposits are stated at cost which approximates fair market value. F- 10 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued) : f. Restricted deposit The restricted deposits consist of funds that are contractually restricted as to usage or withdrawal due to guarantees made to the Company’s client. g. Accounts receivable Accounts receivable are presented in the Company’s consolidated balance sheets net of allowance for doubtful accounts. The Company estimates the collectability of its accounts receivable balances and adjusts its allowance for doubtful accounts accordingly. When revenue recognition criteria are not met for a sale transaction that has been billed, the Company does not recognize deferred revenues or the related account receivable. As of December 31, 2024 and 2023, no allowance for doubtful accounts was recorded. h. Property and equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the estimated useful lives. The annual depreciation rates are as follows: SCHEDULE OF PROPERTY AND EQUIPMENT ANNUAL DEPRECIATION RATES % Machinery and laboratory equipment 10 %- 15 % Office furniture and equipment 10 % Computers and computer software 33 % Leasehold improvements Over the shorter of the lease term (including options if any) or useful life i. Severance pay Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. Pursuant to Section 14 of the Severance Compensation Act, 1963 (“Section 14”), all of the Odysight.ai’s employees in Israel are entitled to a monthly contribution, at a rate of 8.33 % of their monthly salary, made in their name with insurance companies. Contributions under Section 14 relieve Odysight.ai from any future severance payment obligation with respect to those employees. The aforementioned contributions are not recorded as an asset on the Company’s balance sheet and there is no liability recorded, as the Company does not have a future obligation to make any additional payments. The asset and the liability for severance pay presented in the balance sheets reflects employees that began employment prior to automatic application of Section 14. The severance pay liability of Odysight.ai to its employees that began employment prior to automatic application of Section 14 is based upon the number of years of service and the latest monthly salary of such employees and is partly covered by regular deposits with recognized pension funds and deposits with severance pay funds. Under labor laws, these deposits are in the employees’ names and, subject to certain limitations, are the property of the employees. Odysight.ai records the obligation as if it were payable at each balance sheet date on an undiscounted basis. F- 11 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued) : j. Stock-Based Compensation The Company applies the fair value recognition provisions of ASC 718, Compensation—Stock Compensation, or ASC 718, for stock-based awards granted to employees, directors, and other providers for their services. The Company measures and recognizes compensation expense for its equity classified stock-based awards granted under its plan based on estimated fair values on the grant dates. The Company calculates the estimated fair value of option awards on the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires a number of assumptions, of which the most significant are the stock price volatility and the expected option term. The Company’s expected dividend rate is zero since the Company does not currently pay cash dividends on its stocks and does not anticipate doing so in the foreseeable future. Volatility is derived from the historical volatility of publicly traded set of peer companies. The risk-free interest rates used in the Black-Scholes calculations are based on the prevailing U.S. Treasury yield as determined by the U.S. Federal Reserve. The weighted average expected life of options was estimated individually in respect of each grant. Each of the above factors requires the Company to use judgment and make estimates in determining the percentages and time periods used for the calculation. If the Company were to use different percentages or time periods, the estimated fair value of option awards could be materially different. The Company recognizes stock-based compensation cost for option awards on an accelerated basis over the employee’s requisite service period, forfeitures are accounted for as they occur. k. Inventories Inventories include raw materials, inventory in process and finished products and are valued at the lower of cost or net realizable value. Inventories are stated at a lower of cost, determined by the first-in, first-out method, or market based on net realizable value. Costs of purchased raw materials and inventory in process include costs of design, raw materials, direct labor, other direct costs and fixed production overheads. The inventories are adjusted for estimated excess and obsolescence and written down to net realizable value based upon estimates of future demand, technology developments and market conditions. l. Revenue recognition a) Revenue measurement The Company’s revenues are measured according to the ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, revenues are measured according to the amount of consideration that the Company expects to be entitled to receive in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. Revenues are presented net of VAT. b) Revenue recognition The Company recognizes revenue when a customer obtains control over promised goods or services. For each performance obligation, the Company determines at contract inception whether it satisfies the performance obligation over time or satisfies the performance obligation at a point in time. Performance obligations are satisfied over time if one of the following criteria is met: F- 12 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued) : (a) the customer simultaneously receives and consumes the benefits provided by the Company’s performance; (b) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (c) the Company’s performance does not create an asset with an alternative use for the Company and the Company has an enforceable right to payment for performance completed to date. If a performance obligation is not satisfied over time, the Company satisfies the performance obligation at a point in time. Revenues from product customization and development contracts in which the performance obligation is satisfied over time are recognized over the duration of the contract and commensurate with the progress of services. The Company measures the progress of services using the input method, based on the effort expended relative to the estimated total effort to satisfy the performance obligation. Revenues from product sales are recognized at a point in time when the customer obtains control of the Company’s product, typically upon shipment to the customer. Indirect taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. F- 13 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued) : m. Cost of revenues Cost of revenue consists of products purchased from sub-contractors, raw materials for in-house assembly line, shipping and handling costs to customers, salary, employee-related expenses, depreciation and overhead expenses. Cost of revenues are expensed commensurate with the recognition of the respective revenues. Costs deferred in respect of deferral of revenues are recorded as contract fulfilment assets on the Company’s balance sheet and are written down to the extent the contract is expected to incur losses. n. Research and development costs Research and development costs are expensed as incurred and includes salaries and employee-related expenses, overhead expenses, material, and third-party contractors’ charges. o. Income taxes Income taxes are accounted for using the asset and liability approach under ASC-740, “Income Taxes”. The asset and liability approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The measurement of current and deferred tax liabilities and assets is based on provisions of the relevant tax law. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. Uncertain tax positions are accounted for in accordance with the provisions of ASC 740-10, under which a company may recognize the tax benefit from an uncertain tax position claimed or expected to be claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxation authorities, based on the technical merits of the position, at the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Interest and penalties, if any, related to unrecognized tax benefits are recognized in tax expense. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. p. Legal contingencies The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. From time to time, the Company may become involved in legal proceedings or subject to claims arising in its ordinary course of business. Such matters are generally subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues for contingencies when the loss is probable and can reasonably estimate the amount of any such loss. F- 14 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued): q. Basic and diluted net loss per share of common stock : Basic net loss per share of common stock is computed by dividing net loss, as adjusted, to include the weighted average number of shares of common stock outstanding during the year. Diluted net loss per share of common stock is computed by dividing net loss, as adjusted, by the weighted average number of shares of common stock outstanding during the year, plus the number of shares of common stock that would have been outstanding if all potentially dilutive shares of common stock had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per Share”. All outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share for the years ended December 31, 2024 and December 31, 2023, since all such securities have an anti-dilutive effect. r. Leases In accordance with ASC 842, the Company determines whether an arrangement is or contains a lease based on the facts and circumstances present at inception of an arrangement. An arrangement is or contains a lease if the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Arrangements that are determined to be leases at inception are recognized as long-term right-of-use (“ROU”) assets and short and long-term lease liabilities in the consolidated balance sheet at lease commencement. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future fixed lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company applies its incremental borrowing rate based on the economic environment at commencement date in determining the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases or payments are recognized on a straight-line basis over the lease term. The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less. s. New accounting pronouncements The Company adopted the following accounting standards during the year: In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures” (“ASU 2023-07”) to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses on an interim and annual basis. All disclosure requirements of ASU 2023-07 are also required for entities with a single reportable segment. ASU 2023-07 is effective starting January 1, 2024 and should be applied on a retrospective basis to all periods presented. The adoption of this ASU did not have a material impact on the Company’s financial statements (see also Note 16 ). Recently issued accounting pronouncements, not yet effective In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance is intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis. Early adoption is permitted, with the option to apply the standard retrospectively. The Company is currently evaluating the impact that ASU 2023-09 will have on its related disclosures, and the transition method. In November 2024, the FASB issued ASU 2024-03, “Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires the disaggregation of certain expenses in the financial statements notes, to provide enhanced transparency into the expense captions presented on the face of the consolidated statement of operations. ASU 2024-03 is effective for annual reporting periods beginning January 1, 2027 and interim periods beginning January 1, 2028 and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2024-03 will have on its related disclosures, and the transition method. F- 15 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - INVENTORY : SCHEDULE OF INVENTORY 2024 2023 December 31, 2024 2023 USD in thousands Raw materials and supplies 172 445 Work in progress 19 34 Finished goods 12 25 Inventory Net 203 504 During the years 2024 and 2023, no impairment occurred. NOTE 4 - PROPERTY AND EQUIPMENT, NET : SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT NET 2024 2023 December 31, 2024 2023 USD in thousands Cost: Machinery and laboratory equipment 629 626 Leasehold improvements, office furniture and equipment 177 171 Computers and computer software 281 237 Total property and equipment, gross 1,087 1,034 Less: accumulated deprecation ( 680 ) ( 557 ) Total property and equipment, net 407 477 Depreciation expenses were $ 123 thousand and $ 284 thousand for the years ended December 31, 2024 and 2023, respectively. F- 16 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – OTHER CURRENT LIABILITIES : SCHEDULE OF OTHER CURRENT LIABILITIES 2024 2023 December 31, 2024 2023 USD in thousands Government authorities 79 52 Accrued expenses 261 132 Other payables 28 27 Total other current liabilities 368 211 NOTE 6 - INCOME TAXES : a. Basis of taxation 1. Tax rates applicable to the income of the Israeli subsidiaries: Odysight.ai is taxed according to Israeli tax laws. The Israeli corporate tax rate from the year 2018 and onwards is 23 %. 2. Tax rates applicable to the income of the U.S. company: The Company is taxed according to U.S. tax laws. The U.S. corporate tax rate from the year 2018 and onwards is 21 %. b. Deferred income taxes: Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows: SCHEDULE OF COMPONENT OF DEFERRED TAX ASSET 2024 2023 December 31, 2024 2023 USD in thousands Operating loss carryforward 34,433 25,006 Net deferred tax asset before valuation allowance 7,991 5,786 Valuation allowance ( 7,991 ) ( 5,786 ) Net deferred tax - - As of December 31, 2024, the Company has provided a full valuation allowance of $ 7,991 thousand in respect of deferred tax assets resulting from tax loss carryforwards and other temporary differences. Management currently believes that because the Company has a history of losses, it is more likely than not that the deferred tax regarding the loss carryforward and other temporary differences will not be realized in the foreseeable future. F- 17 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - INCOME TAXES (Continued): c. Available carryforward tax losses: As of December 31, 2024, the Company has an accumulated tax loss carryforward of approximately $ 34,433 thousand. Carryforward tax losses in Israel are of unlimited duration. Under the Tax Cut and Jobs Act of 2017 (the “Tax Act”) (subject to modifications under the Coronavirus Aid, Relief, and Economic Security Act), federal net operating losses (NOL) incurred in taxable years ending after December 31, 2017 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. Such limitations may result in the expiration of net operating losses before utilization. d. The main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowance in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization of such deferred taxes. NOTE 7 – RELATED PARTIES : Related Parties Balances: SCHEDULE OF BALANCES WITH RELATED PARTIES 2024 2023 December 31, 2024 2023 USD in thousands Directors (directors’ accrued compensation) 120 31 Smartec R&D Ltd. - 10 Related parties 120 41 F- 18 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 - EQUITY : Increase of the authorized share capital On February 5, 2021, the Company increased its authorized share capital of the Company by an additional 225,000,000 shares of common stock par value $ 0.001 per share, such that the authorized share capital of the Company following such increase shall be consisting of 300,000,000 shares of common stock. a. Private placement: 1. On March 29, 2021, the Company issued to certain investors, including Arkin, a major stockholder of the Company, of which Moshe (Mori) Arkin, a director of the company, is the owner, 2,469,156 units in exchange for an aggregate purchase price of $ 20 million. Each such unit consisted of (i) one share of common stock and (ii) one warrant to purchase one share of common stock with an exercise price of $ 10.35 per share . Each such warrant is exercisable until the close of business on March 31, 2026 . Pursuant to the terms of the foregoing warrants, following April 1, 2024, if the closing price of Company common stock equal or exceeds 135 % of the aforementioned exercise price (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions after the issue date of the warrants) for any thirty (30) consecutive trading days, the Company may force the exercise of the warrants, in whole or in part, by delivering to these investors a notice of forced exercise. 2. On March 16, 2023, the Company consummated a private placement with (i) Moshe Arkin and (ii) The Phoenix Insurance Company Ltd. and Shotfut Menayot Israel – Phoenix Amitim, for the sale of an aggregate amount of 3,294,117 units, at a purchase price of $ 4.25 per unit resulting in gross proceeds of $ 14,000,000 . Each unit consisted of: (i) one share of common stock and (ii) one warrant to purchase one share of common stock with an exercise price of $ 5.50 per share. The warrants are immediately exercisable and will expire three years from the date of issuance and will be subject to customary adjustments. 3. On July 16, 2024, the Company issued 2,144,583 shares of its common stock in consideration for a purchase price of $ 4.80 per share to new and existing investors, including Mori Arkin and The Phoenix Holdings, through Phoenix Insurance and Phoenix Amitim. The gross proceeds from the issuance of securities offered amounted to approximately $ 10.3 million. After deducting issuance costs, the Company received proceeds of approximately $ 9.8 million. F- 19 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 – EQUITY (continued): Warrants: As of December 31, 2024, the Company had the following outstanding warrants to purchase common stock: SCHEDULE OF STOCK WARRANTS OUTSTANDING TO PURCHASE COMMON STOCK Number of Shares of Exercise Price common stock Issuance Expiration Per Share Underlying Warrant Date Date ($) Warrants March 2021 Warrant March 29, 2021 March 31, 2026 10.35 2,469,156 March 2023 Warrant March 27, 2023 March 26, 2026 5.50 3,294,117 5,763,273 b. Stock-based compensation to employees, directors and service providers: In February 2020, the Company’s Board of Directors approved the 2020 Share Incentive Plan (the “Plan”). The Plan initially included a pool of 580,890 shares of common stock for grant to Company employees, consultants, directors and other service providers. On March 15, 2020, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the Plan by an additional 64,099 shares of common stock. On June 22, 2020, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the Plan by an additional 401,950 shares of common stock. During the second quarter of 2021, the Company’s Board of Directors approved an increase to the Company’s option pool pursuant to the Plan by an additional 777,778 shares of common stock. During the first quarter of 2023, the Company’s Board of Directors approved an increase to the option pool pursuant to the Plan by an additional 1,000,000 shares of common stock. In June 2024, the Company’s Board of Directors approved the 2024 Share Incentive Plan (the “2024 Plan”). The 2024 Plan initially included a pool of 234,484 shares of common stock, representing the number of shares remaining available for grant under the 2020 Plan. These shares are available for future grant to Company employees, consultants, directors and other service providers. Shares that were subject to awards granted under either the 2020 Plan or the 2024 Plan that have expired or were cancelled or become un-exercisable for any reason without having been exercised in full shall become available for future grant under the 2024 Plan. In July, 2024, the Company’s Board of Directors approved an increase to the 2024 Plan’s option pool by an additional 850,000 shares of common stock. The 2020 Plan and 2024 Plan each provide for the grant of stock options (including incentive stock options and nonqualified stock options), shares of common stock, restricted shares, restricted share units, and other share-based awards. F- 20 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 – EQUITY (continued): Stock Option Activity The following summarizes stock option activity: SCHEDULE OF STOCK OPTION ACTIVITY Amount of options Weighted average exercise price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (in thousands) $ $ in thousands Outstanding - January 1, 2023 1,560,040 3.64 5.17 2,116 Granted 986,000 3.15 - - Forfeited ( 90,971 ) 3.28 - - Outstanding - December 31, 2023 2,455,069 3.46 5.04 312 Granted 795,500 4.77 - - Forfeited ( 23,335 ) 3.00 - - Outstanding - December 31, 2024 3,227,234 3.78 4.66 13,605 Options Exercisable - December 31, 2024 1,765,468 3.48 3.45 7,986 As of December 31, 2024, the aggregate intrinsic value of options granted is calculated as the difference between the exercise price and the closing price on the same date. The Company estimates the fair value of stock option awards on the grant date using the Black-Scholes option pricing model. The weighted-average grant date fair value per option granted during the year ended December 31, 2024 was $ 4.86 . The fair value of each award is estimated using Black-Scholes option-pricing model based on the following assumptions: based on underlying value of shares of $ 5.55 - 5.75 , exercise price of $ 4.5 -$ 4.8 , expected volatility of 100.61 %- 101.39 %, term of the options – 7 years and risk-free interest rate 3.51 %- 4.23 %. Volatility is derived from the historical volatility of publicly traded set of peer companies. The risk-free interest rates used in the Black-Scholes calculations are based on the prevailing U.S. Treasury yield as determined by the U.S. Federal Reserve. The Company has not paid dividends and does not anticipate paying dividends in the foreseeable future. Accordingly, no dividend yield was assumed for purposes of estimating the fair value of the Company’s stock-based compensation. The weighted average expected life of options was estimated individually in respect of each grant. The unrecognized compensation expense calculated under the fair-value method for stock options expected to vest as of December 31, 2024 is approximately $ 3.4 million and is expected to be recognized over a weighted-average period of 1.43 years. During 2024 and 2023, the Company’s Board of Directors authorized the grant of options to purchase 60,000 shares of common stock of the Company and 150,000 shares of common stock of the Company, respectively, to Prof. Goldwasser, the Chairman of the Board. During 2024, the Company’s Board of Directors authorized the grant of options to purchase 120,000 shares of common stock of the Company to directors of the Company. During 2024 and 2023, the Company’s Board of Directors authorized the grant of options to purchase 285,000 shares of common stock of the Company and 225,000 shares of common stock of the Company, respectively, to certain officers of the Company. Compensation expense recorded by the Company in respect of its stock-based employees, directors and service providers compensation awards in accordance with ASC 718-10 for the year ended December 31, 2024 and 2023 amounted to $ 2,329 thousand and $ 1,548 thousand, respectively. F- 21 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 – EQUITY (continued): c. Restricted stock unit (“RSU”) to employees and service providers: Each RSU will vest based on continued service which is generally over three years. The grant date fair value of the award will be recognized as stock-based compensation expense over the requisite service period. The fair value of restricted stock units was estimated on the date of grant based on the fair value of the Company’s common stock. The following table summarizes RSU activity for December 31, 2024: SCHEDULE OF STOCK OPTION ACTIVITY Amount of RSUs Weighted Average Grant Date Fair Value per Share Weighted Average Remaining Contractual Term (years) $ Outstanding - December 31, 2023 39,585 4.08 6.3 Granted - - - Forfeited - - - Vested ( 24,166 ) 4.42 - Unvested and Outstanding - December 31, 2024 15,419 3.56 5.5 Compensation expense recorded by the Company in respect of its stock-based employees, directors and service providers compensation awards in accordance with ASC 718-10 for the year ended December 31, 2024 and 2023 amounted to $ 57 thousand and $ 116 thousand, respectively. The unrecognized compensation expense calculated under the fair-value method for RSUs expected to vest as of December 31, 2024 is approximately $ 13 thousand and is expected to be recognized over a weighted-average period of 0.92 years. The following table sets forth the total stock-based payment expenses resulting from options and RSU granted, included in the statements of operation and comprehensive income: SCHEDULE OF STOCK-BASED PAYMENT EXPENSE 2024 2023 Year ended on December 31, 2024 2023 USD in thousands Cost of revenues 35 22 Research and development 665 522 Sales and marketing expenses 265 126 General and administrative 1,421 994 Total expenses 2,386 1,664 F- 22 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 – REVENUES AND ENTITY WIDE DISCLOSURES : a. Disaggregation of revenue ( 1) During the second quarter of 2022, the Company completed the development of a customer-specific project for a Fortune 500 multinational healthcare corporation (“customer A”) and moved from the development phase of the project to its production phase. As a result, during the year ended December 31, 2024, the Company recognized development services revenues and related development costs that had been previously deferred, in the amounts of $ 422 thousand and $ 239 thousand, respectively. The amounts were recognized based on the expected manufacturing term of the product, which the Company estimates at 7 years. In addition, following the commencement of the production phase, the Company recognized product revenues of $ 2,578 thousand during the year ended December 31, 2024 from the sale of units of the product developed in the context of these development services. ( 2) During the year ended December 31, 2024 the Company recognized revenues from customization and development services in which the performance obligation is satisfied over time in the amount of $ 863 thousand. b. Revenues by geographical area (based on the location of customers) The following is a summary of revenues within geographic areas: SCHEDULE OF REVENUES WITHIN GEOGRAPHIC AREAS 2024 2023 Year ended on December 31, 2024 2023 USD in thousands United States 3,014 2,983 Israel 911 27 Other 39 23 Revenue 3,964 3,033 c. Major customers Set forth below is a breakdown of Company’s revenue by major customers (major customer –revenues from these customers constituted at least 10% of total revenues in a certain year): SCHEDULE OF MAJOR CUSTOMER BREAKDOWN OF COMPANY’S REVENUE Year ended on December 31, 2024 2023 USD in thousands Customer A 3,000 2,977 Customer B 531 27 F- 23 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 – REVENUES AND ENTITY WIDE DISCLOSURES (continued) : d. Contract fulfillment assets and Contract liabilities: SCHEDULE OF CONTRACT FULFILLMENT ASSETS AND CONTRACT LIABILITIES 2024 2023 December 31, 2024 2023 USD in thousands Contract fulfillment assets 1,017 1,256 Contract liabilities 2,075 2,322 Contract liabilities include deferred service and advance payments. The change in contract fulfillment assets: 2024 2023 December 31, 2024 2023 USD in thousands Balance at beginning of year 1,256 1,495 Contract costs recognized during the period ( 239 ) ( 239 ) Balance at end of year 1,017 1,256 The change in contract liabilities: 2024 2023 December 31, 2024 2023 USD in thousands Balance at beginning of year 2,322 3,644 Deferred revenue relating to new sales 253 - Revenue recognized during the year ( 500 ) ( 1,322 ) Balance at end of year 2,075 2,322 Remaining Performance Obligations Remaining Performance Obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that are expected to be invoiced and recognized as revenue in future periods. As of December 31, 2024, the total RPO amounted to approximately $15 million. The total RPO amount includes an amount exceeding $10 million related to a long-term purchase order agreement signed in the third quarter of 2024 with a leading international defense contractor. F- 24 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - LEASES a. Omer office space In December 2020, Odysight.ai entered into a lease agreement for office space in Omer, Israel (“Original Space”), with the 36-month term for such agreement beginning on January 1, 2021. In March 2021, Odysight.ai entered into a lease agreement for additional office space in Omer, Israel (“Additional Space”), with the term for such agreement ending in December 31, 2023. On June 25, 2023, Odysight.ai entered into an amendment to these agreements pursuant to which the lease for the Additional Space was shortened and ended on June 30, 2023 and th e lease for the Original Space was extended for an additional five years until December 31, 2028. It was also agreed that Odysight.ai has an option to terminate the agreement for the Original Space after three years. Odysight.ai expect that the lease period will be three years. Monthly lease payments under the agreement for the Original Space are approximately $ 7 thousand. b. Ramat Gan office space In May 2023, Odysight.ai entered into an additional lease agreement for office space in Ramat Gan, Israel. The agreement is for 48 months beginning on July 1, 2023 and the Company has an option to extend the lease period for an additional two years. The Company does not currently expect to extend the lease period. Monthly lease payments under the agreement are in the amount of approximately $ 25 thousand. Odysight.ai subleases part of the additional office space in Ramat Gan to an unrelated third party for approximately $ 7 thousand per month. In addition, the Company leases vehicles under various operating lease agreements. On December 31, 2024, the Company’s ROU assets and lease liabilities for operating leases totaled $ 1,113 thousand and $ 1,047 thousand, respectively. On December 31, 2023, the Company’s ROU assets and lease liabilities for operating leases totaled $ 1,380 thousand and $ 1,326 thousand, respectively. Operating lease expenses were $ 514 thousand and $ 403 thousand for the years ended December 31, 2024 and 2023, respectively. Supplemental cash flow information related to operating leases during the period presented was as follows: SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO OPERATING LEASES 2024 2023 Year ended December 31, 2024 2023 USD in thousands Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases 514 479 Lease term and discount rate related to operating leases as of the period presented were as follows: SCHEDULE OF LEASE TERM AND DISCOUNT RATE RELATED TO OPERATING LEASES December 31, 2024 2023 USD in thousands Weighted-average remaining lease term (in years) 1.1 1.5 Weighted-average discount rate- leases vehicles 6 % 6 % Weighted-average discount rate- leases offices 12.8 % 12.8 % F- 25 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 – LEASES (continued) : The maturities of lease liabilities under operating leases as of December 31, 2024 are as follows: SCHEDULE OF MATURITIES LEASE LIABILITIES UNDER OPERATING LEASES USD in thousands Remainder of fiscal year 2025 563 2026 455 2027 160 Total undiscounted lease payments 1,178 Less: Imputed interest ( 131 ) Total lease liabilities 1,047 NOTE 11 – COST OF REVENUES: SCHEDULE OF COST OF REVENUES 2024 2023 Year ended December 31, 2024 2023 USD in thousands Salaries and related expenses 1,175 836 Stock-based compensation 35 22 Materials and subcontractors 1,345 1,429 Depreciation 42 63 Travel expenses 27 - Vehicle expenses 38 49 Rent and maintenance and other expenses 145 125 COST OF REVENUES 2,807 2,524 NOTE 12 – RESEARCH AND DEVELOPMENT EXPENSES : SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSES 2024 2023 Year ended December 31, 2024 2023 USD in thousands Salaries and related expenses 3,985 3,561 Stock-based compensation 665 521 Materials and subcontractors 1,535 767 Depreciation 58 164 Travel expenses 65 41 Vehicle expenses 133 110 Rent and maintenance and other expenses 443 438 Research and Development expenses 6,884 5,602 NOTE 13 – SALES AND MARKETING EXPENSES : SCHEDULE OF SALES AND MARKETING EXPENSES 2024 2023 Year ended December 31, 2024 2023 USD in thousands Salaries and related expenses 251 142 Stock-based compensation 265 126 Business development and marketing 581 667 Exhibitions 84 152 Vehicle expenses 19 15 Other expenses 18 7 Sales And Marketing Expenses 1,218 1,109 NOTE 14 – GENERAL AND ADMINISTRATIVE EXPENSES : SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES 2024 2023 Year ended December 31, 2024 2023 USD in thousands Salaries and related expenses 1,503 1,132 Stock-based compensation 1,421 994 Professional services 1,467 1,037 Patents 395 486 Depreciation 23 56 Insurance 211 182 Vehicle expenses 94 100 Rent and maintenance and other expenses 448 444 General and Administrative expenses 5,562 4,431 F- 26 ODYSIGHT.AI INC. (Formerly known as ScoutCam Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 15 - COMMITMENTS AND CONTINGENCIES On April 2023, the Company received approval from the Israel Innovation Authority (previously the Office of the Chief Scientist), (the “IIA”) to support and enhance the Company’s production line and capabilities in the next 24 months until April 2025. Pursuant to the agreement with the IIA relating to the program, the Company has to pay royalties of 3% to the IIA up to the amount IIA funding received and the accrued interest repayment of the grant is contingent upon the Company successfully completing its enhancement plans and generating sales from the enhancements preformed. The Company has no obligation to repay these grants if its enhancement plans are not completed or aborted or if it generates no sales. NOTE 16 — SEGMENT REPORTING Segment information is prepared on the same basis that the chief executive officer, who is the Company’s chief operating decision maker, manages the business, makes business decisions and assesses performance. The Company has one reportable segment specializing in vision-based platform solutions as described in Note 1. The Chief Executive Officer assesses performance for this segment and decides how to allocate resource. The measure of segment assets is reported on the balance sheet as total assets. The chief executive officer performs the assessment of segment performance by using the reported measure of segment profit or loss to monitor budget versus actual results. The table below summarizes the significant expense categories regularly reviewed by the CODM for the years ended December 31, 2024 and 2023: SCHEDULE OF SEGMENT REPORTING INFORMATION 2024 2023 Year ended December 31, 2024 2023 USD in thousands Revenues 3,964 3,033 Cost of Sales (*) 2,730 2,440 Research and Development expenses (*) 6,160 4,917 Sales and marketing (*) 951 983 General and Administrative expenses (*) 4,121 3,378 Other segment items: Share-based payments 2,386 1,664 Depreciation 123 284 Other income - 200 Finance income, net 740 988 Net loss 11,767 9,445 (*) Excluding share-based payments, depreciation expense and finance income, net NOTE 17 - SUBSEQUENT EVENTS : a. On January 9, 2025, the Company formed a wholly-owned subsidiary, Odysight.Ai Eu S.r.l., a private company organized under the laws of Italy. b. On February 12, 2025, the Company completed a U.S. underwritten public offering issuing 3,307,692 shares of the Company’s common stock at a public offering price of $ 6.50 per share. The Company also granted the underwriters a 30-day over-allotment option to purchase up to an additional 496,153 shares at a purchase price of $ 6.50 per share. On February 14, 2025, the Company sold an additional 345,432 shares of common stock as a result of a partial exercise of the over-allotment option at the public offering price of $ 6.50 per share. Following the exercise of the over-allotment option, the Company sold a total of 3,653,124 shares of common stock, generating gross proceeds of approximately $ 23.7 million, prior to the deduction of underwriting discounts, commissions, and estimated offering expenses. c. On February 11, 2025, the Company’s common stock began trading on the Nasdaq Capital Market under the symbol “ODYS”. F- 27