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Odysight.ai Inc.

Odysight.ai Inc.ODYSEarnings & Financial Report

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What changed in Odysight.ai Inc.'s 10-K — 2023 vs 2024

Top changes in Odysight.ai Inc.'s 2024 10-K

622 paragraphs added · 469 removed · 166 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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By harnessing our multiple highly resilient video-based sensors, embedded software, video analytics and AI algorithms specifically designed for the UH60 helicopter, this solution will provide real-time insights into the health of UH60 helicopters, improving safety measures, minimizing downtime, optimizing spare parts management, and enabling the implementation of predictive maintenance strategies.
By harnessing our multiple highly resilient video-based sensors, embedded software, video analytics and AI algorithms specifically designed for the UH-60 helicopter, this solution will provide real-time insights into the health of UH-60 helicopters, improving safety measures, minimizing downtime, optimizing spare parts management and enabling the implementation of predictive maintenance strategies.
On December 4, 2023, we announced a strategic partnership to develop advanced applications for aerospace and industrial markets worldwide with SIPAL S.P.A., a leading company in Italy in the engineering sector.
In December 2023, we announced a strategic partnership to develop advanced applications for aerospace and industrial markets worldwide with SIPAL S.P.A., a leading company in Italy in the engineering sector.
The provision of a license or of the right to use the new information to a third party is subject to approval by the administration of the MAGNET Program at the IIA; (ii) The Medigus Consortium member is entitled to register a patent for the new information which has been developed by it within the framework of its activity in the Medigus Consortium.
The provision of a license or of the right to use the new information to a third-party is subject to approval by the administration of the MAGNET Program at the IIA; (ii) The Xylo Technologies Consortium member is entitled to register a patent for the new information which has been developed by it within the framework of its activity in the Xylo Technologies Consortium.
However, the developing entity is obligated to provide the other members in the Medigus Consortium a license for the use of the new information, without consideration, provided that the other members do not transfer such information to any entity which is not a member of the Medigus Consortium.
However, the developing entity is obligated to provide the other members in the Xylo Technologies Consortium a license for the use of the new information, without consideration, provided that the other members do not transfer such information to any entity which is not a member of the Xylo Technologies Consortium.
From the AI perspective, there are several vendors providing off-the-shelf AI capabilities which then require customization per market, use case, and/or data source. We believe that our more holistic approach and reliance on image-based solutions creates richer and more informative data, leveraged by AI and ML algorithms, enabling our customers to deploy predictive maintenance programs.
From an AI perspective, there are several vendors providing off-the-shelf AI capabilities which then require customization per market, use case, and/or data source. We believe that our more holistic approach and reliance on vision-based solutions creates richer and more informative data, leveraged by AI and machine learning algorithms, enabling our customers to more effectively deploy predictive maintenance programs.
On February 20, 2024, we announced the receipt of a purchase order for our PdM system for the Israel Air Force Boeing AH-64 Apache attack helicopter prototype. The partnership marks a significant milestone, integrating our autonomous, visual monitoring and predictive maintenance technology into a leading attack helicopter. There are approximately 2,700 Boeing AH-64 Apache attack helicopters deployed worldwide.
In February 2024, we announced the receipt of a purchase order for our PdM system for an Israel Air Force Boeing AH-64 Apache attack helicopter prototype. The partnership marks a significant milestone, integrating our autonomous, vision-based monitoring and predictive maintenance technology into a leading attack helicopter. There are approximately 2,700 Boeing AH-64 Apache attack helicopters deployed worldwide.
We employ several professional experienced managers in relevant fields of expertise, in addition to a team of consultants who analyze global trends and designated geographical territories to assist us in targeting potential customers.
To engage new customers, we employ various sales and marketing strategies. We employ several professional experienced sales managers in relevant fields of expertise, in addition to a team of consultants who analyze global trends and designated geographical territories to assist us in targeting potential customers.
On March 11, 2024, we announced the receipt of a purchase order exceeding $1 million from a major international defense contractor for our visual sensing and AI analytics solution. The systems will be installed in upgraded Lockheed Martin (Sikorsky) SH-60 Seahawk Maritime Rotary Wing Aircraft of the Israel Air Force.
In March 2024, we announced the receipt of a purchase order exceeding $1 million from a major international defense contractor for our vision-based sensor and AI analytics solution. The system will be installed in upgraded Lockheed Martin (Sikorsky) SH-60 Seahawk Maritime Rotary Wing Aircraft of the Israel Air Force.
The goal of the collaboration is a next generation maintenance solution that will allow maintenance crews the ability to review and have real time visual inspection of an aircraft’s internal system without the need for removing a single panel or a hatch.
The goal of the collaboration is a next generation maintenance solution that will allow maintenance crews the ability to obtain and review real time visual inspection of an aircraft’s internal systems without the need to remove a single panel or a hatch.
On September 16, 2019, Intellisense and Medigus Ltd., an Israeli company traded on the Nasdaq Capital Market, entered into the Exchange Agreement, pursuant to which, on December 30, 2019, we acquired from Medigus Ltd. all of the issued and outstanding share capital of ScoutCam Ltd. On December 31, 2019, we changed our name to ScoutCam Inc.
On September 16, 2019, Intellisense and Xylo Technologies entered into an exchange agreement pursuant to which, on December 30, 2019, we acquired from Xylo Technologies all of the issued and outstanding share capital of ScoutCam Ltd. On December 31, 2019, we changed our name to ScoutCam Inc.
The following are details regarding the rights and obligations within the framework of our activity in the Medigus Consortium, which continue to apply to us notwithstanding the termination of the Medigus Consortium: (i) The property rights to information which has been developed belongs to the Medigus Consortium member that developed it.
The rights and obligations within the framework of our activity in the Xylo Technologies Consortium continue to apply to us notwithstanding the termination of the Xylo Technologies Consortium and include, among other things, the following: (i) The property rights to information which has been developed belongs to the Xylo Technologies Consortium member that developed it.
Our marketing efforts include, but are not limited to, the following: ● engaging third party companies and local consultants as territorial representatives in key markets and leading companies in relevant industries; ● initiating business engagements based on leads received through our marketing efforts, through active interaction with key industry influencers, providing financed proof of concept in order to generate tailored product orders, or via other methods or means; ● conducting proof of concept demonstrations in order to evaluate the feasibility of integration for monitoring their systems and to demonstrate the significant value proposition of our technology to customers; ● networking through personal contacts in the aerospace, critical industry, transportation, maritime, medical, and defense industries; and ● participating in major aerospace, maritime, and vision technology exhibitions as well as industry 4.0 specific events. 6 In addition to our business development efforts that are mainly based on currently existing or future customer needs, we aim to identify new market opportunities.
Our marketing efforts include, but are not limited to, the following: ● engaging third-party companies and local consultants as territorial representatives in key markets to target leading companies in relevant industries; ● initiating business engagements based on leads received through our marketing efforts or through active interaction with key industry influencers, ● conducting proof of concept demonstrations in order to evaluate the feasibility of integration of the Odysight TruVision solution for monitoring their systems and to demonstrate the significant value proposition of our technology to customers; ● networking through personal contacts in the aerospace, defense, transportation, maritime, energy and medical industries; and ● participating in major aerospace, defense, vision technology and other exhibitions as well as Industry 4.0 specific events.
We were initially engaged in the business of developing web portals to allow companies and individuals to engage in the purchase and sale of vegetarian food products over the Internet.
We were initially engaged in the business of developing web portals to allow companies and individuals to engage in the purchase and sale of vegetarian food products over the internet. However, we were unable to execute our original business plan, develop significant operations or achieve commercial sales.
On January 10, 2019, we formed Canna Patch Ltd., or Canna Patch, an Israeli corporation, of which 90% was initially owned by our Company, and the remaining 10% owned by Rafael Ezra, Canna Patch’s Chief Technology Officer. Canna Patch did not have any operations and on December 4, 2019, we sold 100% of our holdings in Canna Patch.
On January 10, 2019, we formed Canna Patch Ltd., or Canna Patch, an Israeli corporation. Canna Patch did not have any operations and, on December 4, 2019, we sold 100% of our holdings in Canna Patch.
Accordingly, all rights and obligations with regard to the IIA under the Encouragement of Research, Development and Technological Innovation in the Industry Law, 5744-1984, or the Innovation Law, in connection with such know-how now apply to Odysight.ai.
Accordingly, all rights and obligations with regard to the IIA under the Innovation Law, in connection with such know-how, now apply to us.
(Sumita), a specialty optical fiber technology company, pursuant to which we granted a non-exclusive license to Sumita to our patents related to “Small Diameter Video Camera Heads and Medical Devices and Visualization Probes containing them” in return for payment of royalties and a grant-back license to Odysight.ai of Sumita’s patent and patent applications related to fiber optics illumination.
(Sumita), a specialty optical fiber technology company, pursuant to which we granted a non-exclusive license to Sumita to one of our imaging patent families in return for payment of royalties and a grant-back license to Odysight.ai of Sumita’s patents and patent applications related to fiber optics illumination. To date, only an immaterial amount of royalties has accrued.
On December 1, 2019, Medigus and Odysight.ai Ltd. consummated a certain Amended and Restated Asset Transfer Agreement, which transferred and assigned certain assets and intellectual property rights related to its miniaturized imaging business.
Following this acquisition, we integrated and fully adopted the acquired miniaturized imaging business into the company as our primary business activity. On December 1, 2019, Xylo Technologies and Odysight.ai Ltd. consummated a certain Amended and Restated Asset Transfer Agreement, which transferred and assigned certain assets and intellectual property rights related to its miniaturized imaging business.
On April 20, 2020, Odysight.ai entered into an Amended and Restated Intercompany Services Agreement with Medigus (the “Intercompany Services Agreement”), which effectively amended and restated an intercompany services agreement dated May 30, 2019.
On April 20, 2020, Odysight.ai Ltd. entered into an Amended and Restated Intercompany Services Agreement with Xylo Technologies, which effectively amended and restated an intercompany services agreement dated May 30, 2019. On June 5, 2023, we changed our name to Odysight.ai Inc.
On May 18, 2020, in connection with the Arkin Transaction (as defined below), the Company and Medigus entered into a certain Side Letter Agreement (the “Letter Agreement”), whereby the parties agreed to amend certain terms of the Amended and Restated Asset Transfer Agreement and the License Agreement.
On May 18, 2020, we and Xylo Technologies entered into a certain Side Letter Agreement, whereby the parties agreed to amend certain terms of the Amended and Restated Asset Transfer Agreement and related documents.
In June 2022, we announced that we completed the verification and validation stage of our endoscopic camera solution with this client and, on January 26, 2023, we announced that we had received a $1.45 million order from this client.
In June 2022 we announced that we completed the verification and validation stage of our endoscopic camera solution with our Fortune 500 client, in January 2023 we announced the receipt of a $1.45 million order from this client, and in October 2023 we announced a solidified purchase order with this client and that formal commitments under the purchase order amount to a total of $3.3 million for fiscal year 2024.
On February 6, 2023, we announced the completion of a major development stage in equipping Elbit Systems Ltd.’s leading defense UAS aerial platforms with our real time video monitoring system.
In February 2023, we announced the completion of a major development stage in equipping Elbit Systems Ltd.’s leading defense UAS aerial platforms with our real time video monitoring system. Through the program, our unique video-based sensors, embedded software, machine vision and algorithms support a variety of predictive maintenance and condition-based monitoring use cases for unmanned aerial vehicles.
On July 31, 2023, we announced a collaboration with the Israel Aerospace Industries (IAI) through which the IAI will utilize our advanced visual sensing and video analytics technology in a visual based health monitoring system for UH60 (Blackhawk) helicopters.
Since our technology features a modular open system architecture, it enables seamless integration with advanced unmanned aerial platforms. 9 In July 2023, we announced a collaboration with the Israel Aerospace Industries, or IAI, through which the IAI will utilize our advanced vision-based sensing and video analytics technology in a vision-based “health monitoring system” for UH-60 (Blackhawk) helicopters.
Given that we do not manufacture or distribute end-user products to the medical sector, and instead service businesses pursuant to a B2B model, we are subject to fewer regulatory standards commonly associated with medical device manufacturers or distributors. We develop and manufacture components for other companies, and therefore our involvement in the regulatory submission demands comparatively less responsibility.
We are also required to obtain various licenses and permits from state, local and Israeli authorities in connection with the operation of our business. Given that we do not manufacture or distribute end-user products and instead service businesses pursuant to a business-to-business model, we are subject to fewer regulatory standards commonly associated with manufacturers or distributors.
Who we are: History and Background We were incorporated as a corporation under the laws of the State of Nevada on March 22, 2013, under the name Intellisense Solutions Inc. (“Intellisense”).
The enforceability of such provisions may be limited under applicable law. Organizational History We were incorporated under the laws of the State of Nevada on March 22, 2013 under the name Intellisense Solutions Inc., or Intellisense.
Among other things, transfer of IIA funded know-how outside of Israel requires prior approval of IIA and in certain circumstances is subject to certain payments to the IIA, calculated according to a formula provided under the Innovation Law.
The transfer of IIA-funded know-how outside of Israel requires prior approval and may be subject to payment of a redemption fee to the IIA, calculated in accordance with a formula provided under the Innovation Law (which is subject to a cap of six times the total amount of the IIA grants received, plus interest).
On February 28, 2024, we formed a new company, D. VIEW Ltd., wholly owned by Odysight.ai Inc., to act as a local agent for the defense market in Israel.
VIEW Ltd., a private company organized under the laws of the State of Israel and a wholly owned subsidiary of Odysight.ai Inc., to act as a local agent for the defense market in Israel. On January 9, 2025, we formed an additional wholly-owned subsidiary, Odysight.Ai Eu S.r.l., a private company organized under the laws of Italy.
These monitoring solutions can be the sensor itself, data collection and storage, AI processing, or a combination of these capabilities. The CBM and PdM solutions are usually based on traditional sensing solutions such as vibration, temperature, and acoustic sensors.
CBM and PdM solutions are usually based on traditional sensing solutions such as vibration, temperature and acoustic sensors.
Nevertheless, we have recently secured several contracts for our PdM and CBM systems with major government clients and defense and aviation companies. Our Business Model Our unique video-based sensors, embedded software, and AI algorithms are being deployed in hard-to-reach locations and harsh environments across a variety of PdM and CBM use cases.
The solution is designed as an open architecture that supports both a full solution by the Odysight TruVision or integration with existing systems. 5 Our Business Model and Value Proposition Our unique video-based sensors, embedded software and AI algorithms are currently being deployed in hard-to-reach locations and harsh environments across a variety of PdM and CBM use cases.
(for additional information about these agreements refer to – “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” below), the IIA approved a transfer of IIA know-how developed by Medigus in the framework of the Bio Medical Photonic Consortium, or the Medigus Consortium, to Odysight.ai.
(formerly Medigus Ltd.), an Israeli company traded on Nasdaq, or Xylo Technologies and Odysight.ai Ltd., the IIA approved a transfer of IIA know-how developed by Xylo Technologies in the framework of the Bio Medical Photonic Consortium, or the Xylo Technologies Consortium.
As a result, we expect customers to benefit from a reduction in downtime, lower maintenance expenses, and increased safety of their monitored equipment, using the prediction capabilities of the platform to efficiently plan maintenance work on future faulty components.
Our customers benefit from increased safety, a reduction in downtime, a more efficient data driven operation, increased mission readiness and lower maintenance costs for their monitored platforms, using the prediction capabilities of our solution to efficiently plan maintenance work on monitored components. Our solution enhances safety and minimizes downtime by enabling real-time visual analysis of any failure occurrences.
Compliance with these regulations is achieved through our QA department and the support we receive from highly experienced quality assurance and regulatory affairs consultants. In addition, we are being audited annually by MEDCERT GmbH, a German Notified Body. For instance, ISO 13485:2016 is a regulatory benchmark that we comply with while working on our medical device projects.
In our engagements with customers operating in the biomedical sector, we comply with the medical device standards in the corresponding territory, such as the FDA or ISO, among others. Compliance with these regulations is achieved through our QA department and the support we receive from highly experienced quality assurance and regulatory affairs consultants.
These efforts include systematic analysis of various industrial and medical fields and procedures to identify where visualization solutions, including image analysis, might add value. When a potential opportunity is identified, we seek to protect our rights by establishing relevant intellectual property safeguards, developing prototypes for the required application.
When a potential opportunity is identified, we seek to protect our rights by establishing relevant intellectual property safeguards and developing prototypes for the required application. Manufacturing and Supply We rely on both in-house manufacturing together with outsourced manufacturing for a portion of the assembly of our vision-based sensor products.
If we were to receive approval to manufacture or to transfer the rights to manufacture our products developed with IIA-funding outside of Israel, we would be required to pay an increased total amount of royalties (possibly up to 300% of the grant plus interest), depending on the portion of total manufacturing that was performed outside of Israel.
Even if we do receive approval to manufacture products developed with IIA-funded know-how outside of Israel, such transfer of manufacturing capacity outside of Israel may be subject to an increase in the amount of royalties payable, depending on the manufacturing volume that is performed outside of Israel, and to an increase in the rate of royalties.
For additional information on our patent portfolio, refer to – “PROPRIETARY RIGHTS AND TECHNOLOGY” below. Our Customers Currently, we have one major customer, a leading Fortune 500 multinational healthcare corporation, that is expected to generate most of our forecasted revenue in the near term.
Currently, we have four major customers that are expected to generate a substantial portion of our forecasted revenue in the near term.
More than 4,000 UH-60 Black Hawk aircraft, and its variants such as the SH-60 Seahawk, are in service worldwide today. We estimate that the addressable market of rotary wing aircraft systems worldwide is more than a billion dollars. In order to engage new customers, we employ various marketing strategies.
More than 4,000 UH-60 Black Hawk aircraft, and its variants such as the SH-60 Seahawk, are in service worldwide today. In May 2024, we announced the receipt of a purchase order from Tel Aviv University for the Israeli Ministry of Defense for a bespoke system based on our proprietary vision-based sensors.
Our R&D efforts are focused on the following areas: (i) maturing our multi camera solution based on advanced visual sensing and AI\ML processing technologies focusing on sensing, computing, and prediction, cooperating with customers for mutual development projects that demonstrate our technology by reaching customer KPIs and (ii) our industrial cloud-based product, which leverages our already in place cloud environment to develop mutual proof of concept and minimal valuable product for our customers that enable cloud base solutions for customer KPIs.
Our research and development efforts focus on two main areas: ● Multi-Camera Solutions : We are advancing our multi-camera technology, which utilizes advanced vision-based sensing and AI/ML processing focusing on sensing, computing and prediction. ● Industrial Cloud-Based Products : We leverage our existing cloud environment to develop proof of concept and innovative industrial solutions.
In addition, on June 5, 2023, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation to effect the name change, with such request approved as of June 5, 2023. In addition, the Company’s trading symbol was changed from “SCTC” to “ODYS”, effective February 13, 2024.
In addition, our trading symbol on the OTCQB was changed from “SCTC” to “ODYS”, effective as of February 13, 2024. On February 28, 2024, we formed D.
The following graphic demonstrates Odysight.ai’s value proposition, starting with increased safety and reduced down time due to our ability to visually analyze any failure occurrence in real time, and including more sophisticated benefits like big data analytics that provide predictive insights regarding to an entire system life cycle, spare parts management and smart prediction regrading system performance.
Our value proposition is based on providing actual condition of a platform in real-time, offering significant value through enhanced safety, efficiency and cost savings. Our big data analytics provide predictive insights regarding an entire system life cycle, spare parts management and smart prediction of system performance.
Transfer of IIA-funded know-how outside of Israel not according to the R&D Law may give rise to financial exposure as well as criminal liability. ● Approval of the transfer of IIA funded technology to another Israeli company may be granted only if the recipient assumes and abides by the provisions of the Innovation Law and related regulations, including the restrictions on the transfer of know-how and manufacturing rights outside of Israel (in addition, there will be an obligation to pay royalties to the IIA from the income of such sale transaction as part of the royalty payment obligation). ● Approval to manufacture products outside of Israel or consent to the transfer of technology, if requested, might not be granted.
If the IIA-funded know-how is transferred to another Israeli entity, the transfer would still require IIA approval but will not be subject to the payment of the redemption fee (however, there may be an obligation to pay royalties to the IIA from the income of such sale transaction as part of the royalty payment obligation).
Our solution allows maintenance and operations teams visibility into areas which are inaccessible under normal circumstances, or where the operating ambience otherwise is not suitable for continuous real-time monitoring and has various applications which have relevancy in a wide range of industry segments that utilize complicated mechanics requiring ongoing monitoring and predictive maintenance applications.
The Odysight TruVision solution streams visual information to our processing unit, an in-platform, high-performance AI/machine learning computer, allowing maintenance and operations teams, on the ground and during operations, visibility into areas that are inaccessible under normal operating conditions or where conditions are not suitable for continuous real-time monitoring.
Such approval may entail additional payments to the IIA, as determined under the Innovation Law and regulations. 10 Obligations relevant to us under the Innovation Law include the following: ● Local Manufacturing Obligation. The terms of the grants under the Innovation Law require that we manufacture the products developed with these grants in Israel.
Such approval may entail additional payments to the IIA, as determined under the Innovation Law and regulations. 14 In general, with regard to any IIA-funding, the Innovation Law requires, among other things, that the products developed as part of the programs under which the grants were given be manufactured in Israel, and restricts the ability to transfer know-how directly or indirectly funded by the IIA outside of Israel.
In the medical domain, we currently sell our system to a fortune 500 corporation; in this respect, we seek to partner with additional relevant companies to progress our technology into prototypes which, in turn, will be developed into market-ready products. In January 2022, we entered into a patent cross-licensing arrangement with Japan-based Sumita Optical Glass, Inc.
We have a total of 19 patent families, 12 of which are in the predictive maintenance field and seven are related to imaging technology. In January 2022, we entered into a patent cross-licensing arrangement with Japan-based Sumita Optical Glass, Inc.
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Item 1. Business Overview Our Mission We are a pioneer in the development, production, and marketing of innovative Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) technologies, providing visual sensing and AI-based video analytics solutions for critical systems in the aviation, maritime, industrial non-destructing-testing industries, transportation, and energy industries.
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Item 1. Business Our Mission We aim to become the industry standard for real time, visual based, health monitoring using AI/ML data analytics.
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Some of our products utilize our unique micro visualization technology in medical devices for complex and minimally invasive medical procedures. Our technology includes proven video technologies and products amalgamated into a first-of-its-kind, FDA-cleared minimally invasive surgical device. At the present time, we derive a substantial portion of our revenue from applications of our micro visualization technology within the medical field.
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Our Company We are a pioneer in the development, production and marketing of an innovative visualization AI solution that deploys small cameras to monitor critical safety components in hard-to-reach locations and harsh environments, across various PdM, and CBM use cases.
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Our current business model is a business-to-business (B2B) approach in which we seek to identify target businesses interested in integrating our micro visualization and AI\ML video analytics technology or commissioning individual projects using our technology.
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We aim to be the industry benchmark for real-time, visual-based machine and infrastructure health monitoring through AI and machine learning data analytics.
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We have several successful proofs of concept in airborne platforms of various OEM’s in aerospace and have completed successful demonstration projects for multiple global elevator systems manufacturers.
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The rich and informative data, continuously collected and analyzed by our solution on our secured cloud, provides customers with real-time failure / anomaly detection, events and data recordings, interfacing with platform mission systems and providing real-time alerts and streaming video or images, all while training our algorithms for ongoing improved accuracy and prediction capabilities.
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As provided above, we are developing additional applications for our visual solutions portfolio (composed of image acquisition, data collection, and storage and image processing), including PdM and CBM (we refer to these applications and sectors as Industry 4.0, or I4.0), which generate a number of potential benefits for our customers.
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Additionally, we leverage advanced big data analytics to offer predictive insights throughout the entire system lifecycle. This includes efficient spare parts management and intelligent performance predictions, ensuring optimal system reliability and efficiency.
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However, we were unable to execute our original business plan, develop significant operations or achieve commercial sales. 4 We received initial funding in March 2014 in the aggregate amount of $19,980 through the sale of Common Stock to two of our former officers and directors, who purchased in the aggregate 1,998,000 shares of our Common Stock at $0.01 per share.
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The Odysight TruVision solution is successfully used by NASA, as we seek to reshape the aerospace, Industry 4.0, transportation and energy markets with a vison-based technology leveraging AI and machine learning to deliver innovative solutions that transform maintenance practices.
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Following this acquisition, we integrated and fully adopted the acquired miniaturized imaging business into our Company as our primary business activity. On June 5, 2023, we changed our name to Odysight.ai Inc.
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As used in this Annual Report, Industry 4.0, or I4.0, refers to the integration of advanced technologies into manufacturing and industrial processes to create smart, interconnected systems for improved efficiency and productivity. Odysight solutions are already deployed in the aviation and medical sectors.
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For additional information about the Amended and Restated Asset Transfer Agreement, the Letter Agreement and the Intercompany Services Agreement, refer to – “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” below.
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Our customers include the Israeli Air Force, the Israeli Ministry of Defense, France-based Safran Aircraft Engines, a global international defense contractor, a leading Fortune 500 medical company as well as NASA, who came back to us for a repeat order. Historically, our revenue stream has been derived mainly from the medical sector.
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On June 4, 2023, certain of the Company’s stockholders representing more than 50% of the Company’s outstanding share capital voted by written consent to change our name from “ScoutCam Inc.” to “Odysight.ai Inc.” The Company’s board of directors approved an amendment and restatement of the Company’s Amended and Restated Bylaws, effective as of June 4, 2023, to reflect the name change.
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Our 2024 financial results reflect orders and agreements from both the medical and aerospace sectors.
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Sales and Marketing Our vision is to become a leading provider of visual sensing and AI\ML video analytics, PdM and CBM solutions for the aerospace, other industry and medical critical system markets.
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We have recently secured several contracts for our PdM and CBM systems with major government clients and defense and aviation companies and our backlog as of December 31, 2024 of approximately $15 million (compared to approximately $2.6 million as of December 31, 2023) reflects mostly those contracts. 4 Our vision-based sensor technology Initially used in medical devices, our video-based sensor solution (comprising image acquisition, data collection and storage and image processing, including PdM and CBM) have contributed significantly to visual aids for medical teams in an FDA-cleared minimally invasive surgical device.
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We engage companies seeking to add real time visualization and analytics to their existing or new product(s) or considering the development of new products that include miniature visualization sensors and failure detection capabilities. Our approach to the medical market ordinarily is conducted in two phases.
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Over time, our technology has proven essential in industries such as aerospace, where visual assessments are crucial for maintaining performance rates, maintenance, and safety standards for various mechanical systems. We specialize in predictive maintenance and condition-based monitoring, utilizing advanced AI-driven sensor visualization solutions, using video analytics and algorithms.
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During the first phase, we conduct the research and development that is required in order to specify, design, develop, and produce the designated visualization apparatus, for an agreed-upon compensation amount (e.g., a non-recurrent engineering fee). During the second phase, we manufacture the apparatus and offer it to the customer for an agreed-upon transfer price.
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Human perception relies significantly on visual sensing, and our technology enables our clients to accurately observe phenomena that were previously only approximated or conjectured.
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In the I4.0 domain, which target PdM and CBM applications, we engage with companies that wish to increase the monitoring capabilities of different elements of a device using our visual monitoring solutions (these include build of image acquisition, data collection and storage, and image processing capabilities based on AI, ML, cloud, and additional algorithm concepts).
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Our core technologies include: ● Vision-Based Sensor Technology : This innovative approach uses micro cameras and specialized AI models to monitor and analyze system health in real-time, even in hard-to-reach and harsh environments. ● AI and Machine Learning : We employ sophisticated proprietary AI algorithms to predict potential hazards, optimize maintenance schedules and enhance operational efficiency. ● High-Resolution Visualization : Our solution provides detailed visual data, enabling accurate detection and monitoring of issues such as liquid leaks and bearing malfunctions. ● Cloud-Based Analytics : The collected data is continuously analyzed on a secure cloud platform, offering customers both raw data and processed insights for improved decision-making.
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Based on our product portfolio with customized solutions as needed, this will allow our customers to receive real time alerts on anomalies and failures of monitored components, analyze and track trends and development of the anomaly, and predict any impending failure of the component as a result of such anomaly over time and usage.
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Our vision-based sensing technology provides solutions across diverse PdM and CBM markets, and in harsh conditions as demonstrated in a variety of environments, including outer space during NASA’s Robotic Refueling Mission, or RRM3, the Israeli Air Force, the Israeli Ministry of Defense, a global international defense contractor and a leading Fortune 500 medical company.
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Another outcome we expect is more cost-effective management of resources, since components will only need to be replaced as a result of their actual condition rather than a strict maintenance schedule. 5 The use of a vision-based platform in the fields of PdM and CBM provides richer and more informative data and insights than traditional sensing methods.
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AH-64 “Apache” Use Case In 2016, a Boeing AH-64 Apache helicopter crashed when a hidden and rarely inspected safety nut became undone, causing the rotor blades to dis-attach in-flight and caused a Class A (major) accident with casualties.
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Together with the AI and ML models customized for the relevant use cases, we expect this will provide customers with a clearer view of the status of their equipment, increasing revenues by saving on direct expenses, and increasing the uptime of their equipment.
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We developed a solution that uses vision-based sensors and trained AI algorithms to monitor and measure the size and number of threads in a bolt in real-time and automatically warn of out-of-synch events, preventing such critical future events.
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Through the program, our unique video-based sensors, embedded software, machine vision and algorithms support a variety of predictive maintenance and condition-based monitoring use cases for unmanned aerial vehicles in harsh environments and hard-to-reach locations, as it features a modular open system architecture, enabling seamless integration with advanced unmanned aerial platforms.
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Our solution was further developed to monitor safety critical and other components on the aircraft and today the solution has been procured for the SH-60 Seahawk helicopter and deployed on the AH-64 Apache and other operational platforms in Israel and globally. Odysight TruVision System Architecture Our specialized software collects, processes, detects, and records real time information from multiple sensors.
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On October 17, 2023, we announced a solidified purchase order with this client and that formal commitments under the purchase order amount to a total of $3.3 million for fiscal year 2024. Competition There are currently several companies that develop and provide monitoring solutions for PdM and CBM.
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The data is available in real-time through a user application or via our technician ground tool. Our modular integrated solution is comprised of a processing unit and multiple vision-based sensors that are integrated into hard-to-reach areas and monitoring safety critical components in real time.
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Proprietary Rights and Technology Our solution for the market is based on our core intellectual property which we seek to review and patent on a regular basis, where applicable. We are heavily invested in creating patents for our core technology. 7 Our patent portfolio currently contains patent families which we consider material to our business and operating success.
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The operational, financial and quality benefits of using the Odysight TruVision solution include the following: Enhanced Safety. The Odysight TruVision solution enhances worker safety without sacrificing productivity and while minimizing planned and unexpected downtime. This is made possible by early detection of potential failures, which can prevent accidents and help to ensure the aircraft operates within safe parameters.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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We are also subject to other risks inherent in the manufacturing of our products and their supply chain, including industrial accidents, natural disasters (including as a result of climate change), environmental events, strikes, and other labor disputes, capacity constraints, disruptions in material or packaging supplies, as well as global shortages, disruptions in supply chain or information technology, loss or impairment of key manufacturing sites or suppliers, product quality control, safety, increase in commodity prices and energy costs, licensing requirements and other regulatory issues, as well as other external factors over which we have no control.
We are also subject to other risks inherent in the manufacturing of our products and their supply chain, including industrial accidents, natural disasters (including as a result of climate change), environmental events, strikes and other labor disputes, capacity constraints, disruptions in material or packaging supplies, global shortages, disruptions in supply chain or information technology, loss or impairment of key manufacturing sites or suppliers, product quality control and safety issues, increase in commodity prices and energy costs, licensing requirements and other regulatory issues, as well as other external factors over which we have no control.
If inventory shortages occur, they could be expected to have a material and adverse effect on our future revenues and ability to effectively project future sales and operating results. We may not be able to manage our strategic partners effectively.
If inventory shortages occur, they could be expected to have a material adverse effect on our future revenues and ability to effectively project future sales and operating results. We may not be able to manage our strategic partners effectively.
Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.
Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.
However, to date the war has not had a material adverse effect on our business. While our executive offices are located in Omer and Ramat Gan, Israel, neither of our sites is located near Israel’s relevant borders where the main impact of the war has been felt.
However, to date the war has not had a material adverse effect on our business. While our offices are located in Omer and Ramat Gan, Israel, neither of our sites is located near Israel’s relevant borders where the main impact of the war has been felt.
This concentration of ownership may also have the effect of delaying or preventing a change in control of the Company that may be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices.
This concentration of ownership may also have the effect of delaying or preventing a change in control that may be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices.
The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the Committee, a body constituted under the Patent Law, will determine whether the employee is entitled to remuneration for his inventions.
The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the “Committee”, a body constituted under the Patent Law, will determine whether the employee is entitled to remuneration for his inventions.
Arkin may seek to cause us to take courses of action that, in his judgment, could enhance his investment in our Company, but which might involve risks to our other stockholders or adversely affect us or our other stockholders.
Arkin may seek to cause us to take courses of action that, in his judgment, could enhance his investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders.
Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development out of Israel. 29 The transfer of IIA-supported technology or know-how or manufacturing or manufacturing rights related to aspects of such technologies outside of Israel may involve the payment of significant penalties and other amounts, depending upon the value of the transferred technology or know-how, the amount of IIA support, the time of completion of the IIA-supported research project and other factors.
Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development out of Israel. 42 The transfer of IIA-supported technology or know-how or manufacturing or manufacturing rights related to aspects of such technologies outside of Israel may involve the payment of significant penalties and other amounts, depending upon the value of the transferred technology or know-how, the amount of IIA support, the time of completion of the IIA-supported research project and other factors.
Under the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights.
Under the Israeli Patent Law, 5727-1967, or the “Patent Law”, inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights.
In case of material escalation of current conditions or the outbreak of a greater regional conflict, it is possible that there will be further military reserve duty call-ups, which may negatively affect our business due to a shortage of skilled labor and loss of institutional knowledge.
In the case of material escalation of current conditions or the outbreak of a greater regional conflict, it is possible that there will be additional military reserve duty call-ups, which may negatively affect our business due to a shortage of skilled labor and loss of institutional knowledge.
The FCPA, the Israeli Anti-Corruption Laws, the UK Bribery Act, and other applicable anti-bribery and anti-corruption laws also may hold us liable for acts of corruption and bribery committed by our third-party business partners, representatives and agents. In addition, we leverage third parties to sell our products and conduct our business abroad.
The FCPA, the Israeli Anti-Corruption Laws and other applicable anti-bribery and anti-corruption laws also may hold us liable for acts of corruption and bribery committed by our third-party business partners, representatives and agents. In addition, we leverage third parties to sell our products and conduct our business abroad.
Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.
Furthermore, the consideration available to our stockholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.
This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders. The interests of Mr. Arkin may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our Company. Also, Mr.
This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders. The interests of Mr. Arkin may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control. In addition, Mr.
We may become subject to the above referenced Statutes if we have 200 or more stockholders of record, at least 100 of whom are residents of the State of Nevada and do business in the State of Nevada directly or through an affiliated corporation.
We may become subject to the above referenced provisions if we have 200 or more stockholders of record, at least 100 of whom are residents of the State of Nevada, and do business in the State of Nevada directly or through an affiliated corporation.
As a result, if some or all of such parties acted together, they would have the ability to exert substantial influence over the election of our board of directors and the outcome of issues requiring approval by our stockholders.
As a result, if some or all of such parties act together, they would have the ability to exert substantial influence over the election of our board of directors and the outcome of issues requiring approval by our stockholders.
This concentration of ownership and influence in management and board decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our Company.
This concentration of ownership and resulting influence in management and / or board decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of us.
Nevertheless, we have experienced some minor disruptions to our routine work, including some difficulties in traveling outside of Israel in the first month of the war and occasional rocket fire on municipalities where our offices are located, requiring our employees to take temporarily shelter for a few minutes at a time in on-site safe rooms.
Nevertheless, we have experienced some minor disruptions to our routine work, including some difficulties in traveling outside of Israel and occasional rocket fire on municipalities where our offices are located, requiring our employees to take temporarily shelter for a few minutes at a time in on-site safe rooms.
If we are unable to establish our own sales, marketing, and distribution capabilities or enter into successful arrangements with third parties to perform these services, we will not be successful in commercializing our technologies or any future products we may develop, and our revenues and profitability may be materially adversely affected.
If we are unable to establish our own sales, marketing and distribution capabilities for the markets we are targeting or enter into successful arrangements with third parties to perform these services, we will not be successful in commercializing our technologies or any future products we may develop, and our revenues and profitability may be materially adversely affected.
Risks Related to Our Common Stock If the ownership of our Common Stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest. Mr.
If the ownership of our common stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest.
Our offices and management team are located in Israel. Accordingly, our business and operations may be affected by economic, political, geopolitical and military conditions in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and Muslim based terrorist organizations active in the region.
Accordingly, our business and operations may be affected by economic, political, geopolitical and military conditions in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and Muslim based terrorist organizations active in the region.
Therefore, if aspects of our technologies are deemed to have been developed with IIA funding, the discretionary approval of an IIA committee would be required for any transfer to third parties outside of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals.
Therefore, if aspects of our technologies are deemed to have been developed with IIA funding, the discretionary approval of an IIA committee would be required for any transfer to third parties outside of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies.
Foreign Corrupt Practices Act, or the FCPA, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977, and the Israeli Prohibition on Money Laundering Law, 5760-2000, collectively, the Israeli Anti-Corruption Laws, and the UK Bribery Act 2010, or UK Bribery Act, and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which we do business, both domestic and abroad.
We are subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977 and the Israeli Prohibition on Money Laundering Law, 5760-2000, collectively, the Israeli Anti-Corruption Laws, and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which we do business, both domestic and abroad.
As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business. Item 1b. unresolved staff comments Not applicable.
As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could adversely affect our business, results of operation and financial condition. Item 1b. unresolved staff comments Not applicable.
Consequently, you may be effectively prevented from pursuing remedies under U.S. federal and state securities laws against us or any of our non-U.S. directors or officers. Exchange rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings. Our reporting and functional currency is the U.S. dollar.
Consequently, you may be unable to pursue remedies under U.S. federal and state securities laws against us or any of our non-U.S. directors or officers. Exchange rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings. Our reporting and functional currency is the U.S. dollar.
Any violation of the FCPA, the Israeli Anti-Corruption Laws, the UK Bribery Act, or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial diversion of management’s attention, a decline in the market price of our Common Stock or overall adverse consequences to our reputation and business, all of which may have an adverse effect on our results of operations and financial condition. 18 Risks Related to Intellectual Property We may not be able to obtain patents or other intellectual property rights necessary to protect our proprietary technology and business.
Any violation of the FCPA, the Israeli Anti-Corruption Laws or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial diversion of management’s attention, a decline in the market price of our common stock or overall adverse consequences to our reputation and business, all of which may have an adverse effect on our results of operations and financial condition.
We do not anticipate paying any cash dividends in the foreseeable future. We have never declared or paid cash dividends, and we do not anticipate paying cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our Common Stock as a source for any future dividend income.
We have never declared or paid cash dividends, and we do not anticipate paying cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our common stock as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends.
As of March 26, 2024, our directors, executive officers, principal stockholders, and affiliated entities may be deemed to beneficially own, in the aggregate, approximately 84.11% of our outstanding voting securities.
As of March 20 , 2025, our directors, executive officers, principal stockholders, and affiliated entities may be deemed to beneficially own, in the aggregate, approximately 78% of our outstanding voting securities.
For example, recruiting, and training a sales force could be expensive and time consuming and could delay any product launch. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
There are risks involved with establishing our own sales, marketing, and distribution capabilities. For example, recruiting and training a sales force could be expensive and time consuming and could delay any product launch. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Negotiating and performing under these arrangements involves significant time and expense, and we may not have sufficient resources to devote to our strategic alliances, particularly those with companies that have significantly greater financial and other resources than we do.
Negotiating and performing under these arrangements involves significant time and expense, and we may not have sufficient resources to devote to our strategic alliances, particularly those with companies that have significantly greater financial and other resources than we do. The anticipated benefits of these arrangements may never materialize and performing under these arrangements may adversely affect our results of operations.
Competition for highly skilled management, technical, research and development, and other employees is intense, and we may not be able to attract or retain highly qualified personnel in the future. Our long-term incentive programs may not be attractive enough or perform sufficiently to attract or retain qualified personnel.
Competition for highly skilled management, technical, research and development and other employees is intense, and we may not be able to attract or retain highly qualified personnel in the future.
If a significant portion of our employees leaves us, we might fail to effectively manage a transition to new personnel, or if we fail to attract and retain qualified and experienced professionals on acceptable terms, our business, financial condition, and results of operations could be adversely affected.
Our long-term incentive programs may not be attractive enough or perform sufficiently to attract or retain qualified personnel. 26 If a significant portion of our employees leave us, we might fail to effectively manage a transition to new personnel, or if we fail to attract and retain qualified and experienced professionals on acceptable terms, our business, financial condition and results of operations could be adversely affected.
In addition, several of our employees, including company officers such as our CEO Yehu Ofer, were called up to military reserve duty, with many such call-ups having since lapsed. As of the date of this Annual Report, Mr. Ofer is subject to military reserve duty a few days a month.
In addition, several of our executives and employees, including company officers such as our CEO were called up to military reserve duty. As of the date of this Annual Report, our CEO is subject to military reserve duty a few days a month.
Were such an escalation to occur, the steps we have taken to mitigate the effects of the war may not be sufficient to prevent material adverse impacts our business, financial condition and results of operations.
Were such an escalation to occur, the steps we have taken to mitigate the effects of the war may not be sufficient to prevent material adverse impacts our business, financial condition and results of operations. It is currently not possible to predict the duration or severity of the ongoing war or its effects on our business, operations and financial conditions.
Even if our board of directors decides to declare and pay dividends, the timing, amount, and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our wholly-owned subsidiary Odysight.ai Ltd., our financial condition, contractual restrictions, and other factors deemed relevant by our board of directors. 26 Risks Related to our Operations in Israel We are subject to the risks of political, economic, health, and military instability in countries outside the United States in which we operate.
Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our wholly-owned subsidiary Odysight.ai Ltd., our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
In addition, this concentration of share ownership may adversely affect the trading price of our Common Stock because investors may perceive disadvantages in owning shares in a company with significant stockholders.
In addition, this concentration of share ownership may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders. 38 We do not anticipate paying any cash dividends in the foreseeable future.
If we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets and third parties to perform these services, we may not be successful in commercializing our products and technology. Given that we are currently as a B2B company, our business is reliant on our ability to successfully attract potential business targets.
If we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets and third parties to perform these services, we may not be successful in commercializing our products and technology.
We rely on highly skilled personnel, and if we are unable to attract, retain, or motivate qualified personnel, we may not be able to operate our business effectively. Our success depends in large part on continued employment of senior management and key personnel who can effectively operate our business, as well as our ability to attract and retain skilled employees.
Our success depends in large part on continued employment of senior management and key personnel who can effectively operate our business, as well as our ability to attract and retain skilled employees.
It may be difficult to acquire jurisdiction and enforce liabilities against any of our officers and directors who are based in Israel.
It may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers. It may be difficult to acquire jurisdiction and enforce liabilities against any of our officers and directors who are based in Israel.
Such risks include, but are not limited to, the following: ● the absence of a lengthy operating history; ● potential for ongoing operating losses; ● operating in multiple currencies; ● our ability to anticipate and adapt to a developing market(s); ● acceptance of our products by the medical and industrial (I4.0) markets and consumers; ● introducing innovation to conservative industries; ● development risks and implementation of new software and algorithm for AI and cloud utilization; ● insufficient capital to fully realize our operating plan; ● a competitive environment; ● the ability to identify, attract, and retain qualified personnel; and ● operating in an environment that is highly regulated by a number of agencies. 14 Because we are subject to these risks, evaluating our business may be difficult, our business strategy may be unsuccessful and we may be unable to address such risks in a cost-effective manner, if at all.
Such risks include, but are not limited to, the following: ● the absence of a lengthy operating history in our current business; ● potential for ongoing operating losses; ● our ability to anticipate and adapt to a developing market(s); ● acceptance of our products in the markets we are targeting; ● introducing innovation to industries that are slow to adopt change; ● development risks and implementation of new software and algorithm for AI and cloud utilization; ● insufficient capital to fully realize our operating plan; ● a competitive environment; ● the ability to identify, attract, and retain qualified personnel; and ● operating in an environment that is highly regulated by a number of agencies.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation.
Often, their share prices have fluctuated in ways unrelated or disproportionate to their operating performance. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.
The degree of market acceptance will depend on a number of factors, including: ● the cost, safety, efficacy/performance, perceived value and convenience of our technology and any current or future product that we may develop; ● the ability of third parties to enter into relationships with us; ● the effectiveness of our sales and marketing efforts; ● the strength of marketing and distribution support for, and timing of market introduction of, competing technology and products; and ● publicity concerning our technology or products or competing technology and products.
The degree of market acceptance will depend on a number of factors, including: ● the cost, safety, efficacy/performance, perceived value and convenience of our technology and any current or future product that we may develop; ● the ability of third parties to enter into relationships with us; ● the effectiveness of our sales and marketing efforts; ● the strength of marketing and distribution support for, and timing of market introduction of, competing technology and products; ● government regulations and economic incentives; ● our ability to scale up our operations to meet anticipated demand; and ● publicity concerning our technology or products or competing technology and products. 21 Our efforts to penetrate industries and educate the marketplace regarding the benefits of our vision-based sensory technology, and reasons to seek the commissioning of products based on our technology, may require significant resources and may never be successful.
Some of those components that we sell are provided to us by a limited number of suppliers. We will be subject to disruptions in our operations if our sole or limited supply contract manufacturers decrease or stop production of components or do not produce components and products of sufficient quantity or quality.
We will be subject to disruptions in our operations if our sole or limited supply contract manufacturers decrease or stop production of components or do not produce components and products of sufficient quantity or quality. Alternative sources for our components will not always be available.
This is the case regarding sensors for the CMOS type technology that are produced by a single supplier in the United States. As we do not have a direct general contract in place with this supplier, there is no contractual commitment on the part of such supplier for any set quantity of such sensors.
As we do not have a direct general contract in place with these suppliers, there is no contractual commitment on the part of such suppliers for any set quantity of such sensors.
The anticipated benefits of these arrangements may never materialize and performing under these arrangements may adversely affect our results of operations. 17 Failure to manage our current partners effectively or enter into new strategic alliances may affect our success in executing our business plan and may adversely affect our business, financial condition, and results of operation.
Failure to manage our current partners effectively or enter into new strategic alliances may affect our success in executing our business plan and may adversely affect our business, financial condition, and results of operation. We may not realize the anticipated benefits of any or all partnerships or may not realize them in the time frame expected.
During 2022, we commenced proactive market penetration into industries other than the biomedical sector, such as the defense and aviation industries. If our technology or any future product that we may develop does not achieve an adequate level of acceptance, or does not garner significant commercial appeal, we may not generate significant revenue and may not become profitable.
If our technology and products or any future product that we may develop does not achieve an adequate level of acceptance, or does not garner significant commercial appeal, we may not generate significant revenue and may not become profitable.
Arkin, who beneficially owns approximately 55.60% of our Common Stock, holds approximately 44.57% of the current voting power in our Company and may exercise warrants and options which could increase his voting power to 55.60%. As a result, Mr.
As of March 20, 2025, Moshe (Mori) Arkin, a member of our board of directors, beneficially owns approximately 42% of our common stock, holds approximately 33% of our current voting power and may exercise warrants and options which could increase his voting power to 42%. As a result, Mr.
Any provision of our amended and restated articles of incorporation, our bylaws or Nevada law that has the effect of delaying or deterring a change in control of our Company could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our Common Stock. 24 The market price of our Common Stock may be highly volatile and such volatility could cause you to lose some or all of your investment.
Any provision of our amended and restated articles of incorporation, our bylaws or Nevada law that has the effect of delaying or deterring a change in control of our Company could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock. 39 If we fail to comply with the rules and regulations under the Sarbanes-Oxley Act, our operating results, our ability to operate our business and investors’ views of us may be harmed.
Certain factors may have a material adverse effect on our business, financial condition, and results of operations.
Any significant adverse change in any of these factors may result in a reduction in sales of Odysight solutions and could have a material adverse effect on our business, results of operations and financial condition.
Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism.
Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could have a material adverse effect on our business and could make it more difficult for us to raise capital. Our insurance policies do not cover losses that may occur as a result of events associated with war and terrorism.
Any armed conflict or political instability in the region would likely negatively affect business conditions and could harm our results of operations. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts.
Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations. 41 Finally, political conditions within Israel may affect our operations.
Furthermore, we have a limited sales and marketing infrastructure and have limited experience in the sale, marketing, or distribution of our technologies beyond the B2B model. To achieve commercial success for our technologies or any future developed product, we will need to establish a sales and marketing infrastructure or to out-license such future products.
To achieve commercial success for our technologies or any future developed product, we will need to establish a sales and marketing infrastructure or to out-license such future products. In the future, we may consider building a focused sales and marketing infrastructure to market any developed products and potentially other products in the United States or elsewhere in the world.
The research and development efforts that contributed to certain technology used by us was financed in part through grants from the Israel Innovation Authority (“IIA”) to Medigus, which was subsequently transferred to Odysight.ai (for more information about such agreements, refer to – “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” below).
The research and development efforts that contributed to certain technology used by us was financed in part through grants from the Israel Innovation Authority, or IIA, to Xylo Technologies, which was subsequently transferred to Odysight.ai Ltd., our wholly-owned subsidiary.
In addition, we may seek stockholder approval to increase the amount of the Company’s authorized stock, which would create the potential for further dilution of current investors. Directors, executive officers, principal stockholders, and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our stockholders do not consider to be in their best interests.
We are unable to predict the effect that sales may have on the prevailing market price of our shares of common stock. Directors, executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our stockholders do not consider to be in their best interests.
Risks Related to Our Business, Operations and Financial Condition We have had a limited operating history and may not be able to successfully operate our business or execute our business plan. Given our limited operating history, it is hard to evaluate our proposed business and prospects.
Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business, financial condition, cash flows and results of operations. 18 Risks Related to Our Business and Financial Condition We have a limited operating history and may not be able to successfully operate our business or execute our business plan.
The terms of such grants require Odysight.ai to comply with the requirements of the Innovation Law.
The terms of such grants require us to comply with the requirements of the Encouragement of Research, Development and Technological Innovation in the Industry Law, 5744-1984, or the Innovation Law.
If we cannot successfully compete with new or existing technologies or future developed products, our marketing and sales will suffer, and we may never be profitable. We expect to compete against existing technologies and proven products in different industries.
We face competition from providers of sensing solutions. If we cannot successfully compete with new or existing technologies or future developed products, our marketing and sales will suffer, and we may never be profitable. Competition among providers of sensing solutions is characterized by extensive research and development efforts and rapid technological progress.
Risk Related to Third Parties Our reliance on third-party suppliers for most of the components of our products could harm our ability to meet demand for our products in a timely and cost-effective manner. We rely on our third-party suppliers to obtain an adequate supply of quality components on a timely basis with favorable terms to manufacture our products.
We rely on our third-party suppliers to obtain an adequate supply of quality components on a timely basis with favorable terms to manufacture our products. Some of those components that we sell are provided to us by a limited number of suppliers.
Sales of a substantial number of shares of our Common Stock in the public market could occur at any time, including by Mr. Moshe Arkin, our largest shareholder, and other significant shareholders.
Sales of a substantial number of our shares of common stock in the public market by our existing shareholders could cause our share price to fall.
Our efforts to penetrate industries and educate the marketplace on the benefits of our technology, and reasons to seek the commissioning of products based on our technology, may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by conventional technologies.
Such efforts to educate the marketplace may require more resources than are required by conventional sensing technologies, and these resources may not available to us.
Any of the following risks could materially and adversely affect our business, strategies, prospects, financial condition, results of operations, and cash flows. In such case, the market price of our common stock could decline.
If any of the following risks actually occurs, our business, financial condition, cash flows and results of operations could be negatively impacted. In that case, the trading price of our shares of common stock would likely decline and you might lose all or part of your investment.
For a description of our cybersecurity risk management and strategy, see Item 1C. Cybersecurity. We incorporate artificial intelligence, or AI, into some of our products. This technology is new and developing and may present both compliance and reputational risks.
Any failure to effectively manage our growth could materially and adversely affect our business, prospects, financial condition, results of operations and cash flows. We incorporate artificial intelligence, or AI, and machine learning, or ML, into some of our products. This technology is new and developing and may present both compliance and reputational risks.
In addition, the breadth of claims allowed in our patents, their enforceability, and our ability to protect and maintain them cannot be predicted with any certainty. The laws of certain countries may not protect intellectual property rights to the same extent as the laws of the United States.
In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States or the laws of the State of Israel.
Though we attempt to ensure the availability of more than one supplier for each important component in any product that we commission, the number of suppliers engaged in the provision of miniature video sensors which are suitable for our CMOS technology mainly in the medical domain is very limited, and therefore in some cases we engage with a single supplier, which may result in our dependency on such supplier.
For example, the number of suppliers engaged in the provision of miniature video sensors which are suitable for our complementary metal-oxide semiconductor, or CMOS, technology that we utilize mainly in the medical domain is very limited.
Our proposed business operations will be subject to numerous risks, uncertainties, expenses, and difficulties associated with early-stage enterprises.
Although we were incorporated in 2013, we have only been pursuing our current business that is focused on the PdM and CBM markets only since 2021. Given our limited operating history, it is hard to evaluate our proposed business and prospects. Our proposed business operations will be subject to numerous risks, uncertainties, expenses, and difficulties associated with early-stage enterprises.
The market price of our Common Stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as: ● the announcement of new products or product enhancements by us or our competitors; ● developments concerning intellectual property rights; ● changes in legal, regulatory, and enforcement frameworks impacting our technology or the application of our technology; ● variations in our and our competitors’ results of operations; ● fluctuations in earnings estimates or recommendations by securities analysts, if our Common Stock is covered by analysts; ● the results of product liability or intellectual property lawsuits; ● future issuances of Common Stock or other securities; ● the addition or departure of key personnel; ● announcements by us or our competitors of acquisitions, investments or strategic alliances; ● current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, Israel’s war or conflicts with Hamas or Lebanon, terrorism or other geopolitical events; ● sanctions imposed by the United States and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability; and ● general market conditions and other events or factors, many of which are beyond our control.
The market price of our shares may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: ● actual or anticipated fluctuations in our revenues or other operating results; ● variations between our actual operating results and the expectations of securities analysts, investors and the financial community; ● any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; ● actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors; ● additional shares being sold into the market by us or our stockholders, or the anticipation of such sales, including if certain of our stockholders sell shares into the market when the applicable “lock-up” period ends for such stockholders; ● announcements by us or our competitors of significant products or features, innovations, acquisitions, strategic partnerships, joint ventures, capital commitments, divestitures or other dispositions; ● loss of relationships with significant customers; ● changes in operating performance and stock market valuations of companies in our industry, including our competitors; ● loss of services from members of management or employees or difficulty in recruiting additional employees; ● future issuances of common stock or other securities; ● worsening of global economic conditions and reduction in demand for our products; ● price and volume fluctuations in the overall stock market, including as a result of general economic trends; ● lawsuits threatened or filed against us, or events that negatively impact our reputation; ● current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, Israel’s war or conflicts with Hamas or Hezbollah or other geopolitical events; ● sanctions imposed by the United States and other countries in response to global conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability; ● the impact of any resurgence of COVID-19 or any of its variants or any other pandemic on us and the national and global economies; ● developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and ● general market conditions and other events or factors, many of which are beyond our control. 37 In addition, extreme price and volume fluctuations in the stock markets have affected and continue to affect the stock prices of many companies.
If we fail to comply with anti-bribery, anti-corruption and anti-money laundering laws, we could be subject to penalties and other adverse consequences. We are subject to the U.S.
If we cannot obtain required government approvals under applicable regulations, we may not be able to sell our solution in certain international jurisdictions, which could adversely affect our financial condition and results of operations. 30 If we fail to comply with anti-bribery, anti-corruption and anti-money laundering laws, we could be subject to penalties and other adverse consequences.
Further, the volatility of our stock price may make our equity compensation less attractive to current and potential employees. 22 We may be unable to keep pace with changes in technology as our business and market strategy evolves. We will need to respond to technological advances in a cost-effective and timely manner in order to remain competitive.
Further, the volatility of our stock price may make our equity compensation less attractive to current and potential employees.
In an inflationary environment, we may be unable to raise the sales prices of our products at or above the rate at which our costs increase, which could reduce our profit margins and have a material adverse effect on our financial results and net income.
We may also have to recall and/or replace defective products, which could also result in adverse publicity and loss of sales, and would result in us incurring costs connected with the recall, which could be material. Any losses not covered by insurance could have a material adverse effect on our business, financial condition and results of operations.
These sales, or the perception in the market that such sales can occur, could reduce the market price of our Common Stock and increase the volatility in the market price of our Common Stock.
Sales of a substantial number of our shares of common stock in the public market, or the perception that these sales might occur, could depress the market price of our shares and could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities.
There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. In the event we require additional capital, the inability to obtain such capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations.
In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
You should carefully consider the following risks, together with all of the other information contained in this Annual Report on Form 10-K, including the sections titled “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
Investing in our shares of common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, in addition to the other information included elsewhere in this Annual Report, including the consolidated financial statements and the related notes, before purchasing our shares of common stock.
The loss of our sole supplier in providing us with miniature sensors for our CMOS technology products mainly in the medical domain, and our inability or delay in finding a suitable replacement supplier, could negatively affect our business, financial condition, results of operations, and reputation.
In the event of an extended failure of a supplier in this area, it is possible that we could experience an interruption in supply until we established new sources or, in some cases, implemented alternative processes and any inability or delay in finding a suitable replacement supplier could negatively affect our business, financial condition, results of operations and reputation.
Additional funding may be dilutive to the interests of existing stockholders. 15 We have a single customer that accounts for a substantial portion of our revenues , and our business would be harmed were we to lose this customer.
We have four customers that account for a substantial portion of our revenues, and our result of our operation could be harmed were we to lose these customers or receive lower than expected purchase orders.
Removed
item 1a. risk factors Risk Factor Summary Below is a summary of the principal factors that make an investment in the Company speculative or risky. This summary does not address all of the risks that we face.
Added
item 1a. risk factors Risk Factor Summary Investing in our securities involves substantial risk. The risks described under the heading “ Risk Factors ” immediately following this summary may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy.
Removed
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below, after this summary, and should be carefully considered.
Added
Some of the more significant challenges include the following: ● We have a limited operating history and may not be able to successfully operate our business or execute our business plan. ● We have a history of losses and anticipate that we will continue to incur significant losses for the foreseeable future. ● We may need to raise additional capital before we can expect to become profitable from sales of our solutions.
Removed
Risks Related to Our Business, Operations and Financial Condition ● We have had a limited operating history and may not be able to successfully operate our business or execute our business plan. ● If we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with business targets and third parties to perform these services, we may not be successful in commercializing our products and technology. ● We may require substantial additional funding, which may not be available to us on acceptable terms, or at all. ● We have a single customer that accounts for a substantial portion of our revenues, and our business would be harmed were we to lose this customer. ● If we fail to effectively manage growth, our business could be impaired. ● Our commercial success depends upon the degree of market acceptance by prospective markets and industries. ● Weakened global economic conditions may harm our industry, business and results of operations. 12 Risk Related to Third Parties ● Our reliance on third-party suppliers for most of the components of our products could harm our ability to meet demand for our products in a timely and cost-effective manner. ● We may not be able to manage our strategic partners effectively. ● We may not have sufficient manufacturing capabilities to satisfy any growing demand for our products.
Added
This additional capital may not be available on acceptable terms, or at all.
Removed
We may be unable to control the availability or cost of producing such products. Risks Related to Competition ● We expect to face competition in the future.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Item 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy. We depend on software applications, information technology systems, computing infrastructure and cloud service providers to operate our business. Certain of these systems are managed, hosted, provided or used by third parties to assist in conducting our business and which have their own cyber security measures in place.
Item 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy. We depend on software applications, information technology systems, computing infrastructure and cloud service providers to operate our business. Certain of these systems are managed, hosted, provided or used by third parties to assist in conducting our business and which have their own cybersecurity measures in place .
For a description of the risks from cybersecurity threats that may materially affect our Company, see “Risk Factors” included elsewhere this Annual Report on Form 10-K, including “ Our data and information systems and network infrastructure may be subject to hacking or other cyber security threats.
For a description of the risks from cybersecurity threats that may materially affect our Company, see “Item 1A. – Risk Factors” included elsewhere this Annual Report on Form 10-K, including “Our data and information systems and network infrastructure may be subject to hacking or other cybersecurity threats.
Our information security policies and procedures are required to be reviewed on a regular basis. 30 We have not experienced a cybersecurity incident that resulted in a material adverse impact to our business or operations; however, there can be no guarantee that we will not experience such an incident in the future.
This collaborative approach allows us to leverage both internal oversight and external expertise to enhance our cybersecurity posture. 43 Our information security policies and procedures are required to be reviewed on a regular basis We have not experienced a cybersecurity incident that resulted in a material adverse impact to our business or operations; however, there can be no guarantee that we will not experience such an incident in the future.
Our Information Security Coordinator will maintain a cyber incident reporting and response process and will provide management notifications based on the seriousness of any incident.
In case of a cyber incident, our cybersecurity team will maintain a cyber incident reporting and response process and will provide management notifications based on the seriousness of any incident. Management will provide periodic reports to our board of directors/audit committee on cybersecurity risks and steps that the Company has taken to address those risks.
Removed
We have appointed an Information Security Coordinator who oversees our information security policies and procedures. The background and experience of our Information Security Coordinator includes managing the development of cyber security products for corporate and oversee security analysis process on multiple products and companies.
Added
To further enhance our understanding of potential threats and prioritize our security efforts, we conducted a comprehensive cybersecurity threat survey in 2024, which included a review of cybersecurity threats.
Added
Based on the findings of this survey, we are actively implementing recommended security measures to mitigate identified risks, with such implementation being conducted with the support and expertise of a professional services company serving as our outsourced cybersecurity partner.
Added
Our cybersecurity team is composed of our Information Security Coordinator, who has several years of experience overseeing cybersecurity and other IT matters, our IT Coordinator and an outsourced cybersecurity partner, who employs various professionals with expertise in the field of cybersecurity.
Added
Our cybersecurity team oversees our internal information security policies and procedures and is responsible for the day-to-day implementation and monitoring of our security controls, including those developed as a result of the 2024 threat survey.
Added
Our outsourced cybersecurity partner provides expert support in areas such as threat intelligence, vulnerability assessments, incident response and ongoing security monitoring.

Item 2. Properties

Properties — owned and leased real estate

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Item 2. properties We do not own property and currently lease our principal corporate office and corporate headquarters, which is also our registered office, and is located at Industrial Park, P.O. Box 3030, Omer, Israel 8496500. Our Omer facility includes approximately 807 square meters of office and laboratory space.
Item 2. properties Our corporate headquarters is located in Omer, which includes approximately 800 square meters of office, manufacturing and laboratory space. The lease agreement for this facility is set to expire in December 2028; however, we retain the right to terminate the lease after three years (in December 2026). We also lease approximately 1,000 square meters in Ramat Gan.
Removed
In addition, we lease approximately 1,000 square meters of office space in Raman Gan, Israel, part of which we sublease to a third party. We believe our leased office space is sufficient to meet our current needs.
Added
The office space in Ramat Gan is leased pursuant to a lease that expires in June 2027. with an option to extend for an additional two years. Our office space in Ramat Gan contains engineering, research and development and administrative functions of the company.
Added
We believe that our Omer and Ramat Gan leases are adequate for our current needs and, should we need additional space, we believe we will be able to obtain additional space on commercially reasonable terms.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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item 3. legal proceedings As a result of oppositional proceedings initiated by a third party in 2018, the Opposition Division of the EU Patent Office decided in 2019 to revoke two of the three European patents (EP 2.478.693 and EP 2.621.159) and in 2021 to maintain the third patent (EP 2.621.158).
As a result of oppositional proceedings initiated by a third-party in 2018, the Opposition Division of the EU Patent Office decided in 2019 to revoke two of the three European patents (EP 2.478.693 and EP 2.621.159) and in 2021 to maintain the third patent (EP 2.621.158).
Following appeal hearings held in early 2024, the Board of Appeals revoked all three patents, with formal written decisions still pending. The Company will decide whether to petition for further review of this matter after it receives the formal written decisions. The revocations are not expected to have a material impact on the Company’s current business operations.
Following appeal hearings held in early 2024, the Board of Appeals revoked all three patents, with formal written decisions issued in July 2024. We have filed a petition for review of the decision regarding two of the three European patents (EP 2.478.693 and EP 2.621.159) and are not appealing the decision regarding the third European patent (EP 2.621.158).
Removed
In addition, one U.S. patent of the same family is currently under reexamination proceedings before the U.S. Patent and Trademark Office. Furthermore, opposition proceedings have been filed in the European Union Intellectual Property Office against the Company’s EU trademark applications for “Odysight” and “OdysightAI”. For additional information about these proceedings refer to – “PROPRIETARY RIGHTS AND TECHNOLOGY” above.
Added
item 3. legal proceedings Other than as described below, we are currently not a party to any legal proceedings that, in the opinion of management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.
Removed
Other than the above, we are not aware of any pending legal proceedings to which we are a party, or to which any director, officer or affiliate of our Company, or any owner of record or beneficially of more than 5% of any class of our voting securities, is a party adverse to us or has a material interest adverse to us. item 4. mine safety disclosures.
Added
We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. As our growth continues, we may become party to an increasing number of litigations and claims.
Added
The outcome of litigations and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows or financial position.
Added
The revocations are not expected to have a material impact on our current business operations. item 4. mine safety disclosures. Not applicable. 44 part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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item 5. market for registrant’s common equity, related stockholder matters and issuer purchases Market Information Our common stock is currently quoted on the OTCQB under the symbol “ODYS” and, until February 13, 2024, was quoted on the OTCQB under the symbol “SCTC”.
item 5. market for registrant’s common equity, related stockholder matters and issuer purchases Market Information On February 11, 2025, our common stock began trading on the Nasdaq Capital Market under the symbol “ODYS”.
Holders As of December 31, 2023, there were 41 stockholders of record of our common stock and 10,443,768 shares of our common stock outstanding. The number of stockholders of record does not include beneficial owners of our common stock, whose shares are held in “street name” in the names of various brokers, dealers, clearing agencies, banks, and other fiduciaries.
The number of stockholders of record does not include beneficial owners of our common stock, whose shares are held in “street name” in the names of various brokers, dealers, clearing agencies, banks, and other fiduciaries. Dividend We have never declared or paid any cash dividends on our common stock.
Dividends We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to increase our working capital and do not anticipate paying any cash dividends in the foreseeable future.
We currently intend to retain future earnings, if any, to increase our working capital and do not anticipate paying any cash dividends in the foreseeable future. Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plan under which the Company’s equity securities are authorized for issuance is set forth in “Part III - Item 12.
Removed
Trading in stocks quoted on the OTCQB is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
Added
Prior to such date, our common stock was quoted on the OTCQB under the same symbol, and, until February 13, 2024, was quoted on the OTCQB under the symbol “SCTC”. Holders As of December 31, 2024, there were 47 stockholders of record of our common stock and 12,612,517 shares of our common stock outstanding.
Removed
OTCQB securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTCQB securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTCQB issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
Added
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report. Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the period from January 1, 2024, to December 31, 2024, we did not purchase any of our equity securities. 45 Item 6. [Reserved]
Removed
Section 15(g) of the Exchange Act Our shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rules 15g-1 through 15g-6 and Rule 15g-9 promulgated thereunder.
Removed
This section and related rules impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses).
Removed
While Section 15(g) and Rules 15g-1 through 15g-6 apply to brokers-dealers, they do not apply to us. Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules. Rule 15g-2 declares unlawful broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a standardized disclosure document.
Removed
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.
Removed
Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.
Removed
Rule 15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation. 32 Rule 15g-6 requires broker-dealers receiving penny stocks to provide their customers with monthly account statements.
Removed
Rule 15g-9 requires broker-dealers to approved the transaction for the customer’s account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination; notify the customer of his rights and remedies in cases of fraud in penny stock transactions; and, the FINRA’s toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker-dealers and their associated persons.
Removed
The application of the penny stock rules may affect your ability to resell your shares. Equity Compensation Plan Information 2020 Share Incentive Plan We have adopted the 2020 Share Incentive Plan, or the 2020 Plan, under which we may grant equity-based incentive awards to attract, motivate, and retain the talent for which we compete. Authorized Shares .
Removed
The maximum number of ordinary shares available for issuance under the 2020 Plan is equal to the sum of 2,824,717 shares, or such number as our board of directors may determine from time to time. Administration. Our board of directors, or a duly authorized committee of our board of directors, will administer the 2020 Plan.
Removed
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 an ordinary share, 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.
Removed
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.
Removed
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.
Removed
Section 102 of the Ordinance allows employees, directors, and officers who are not controlling shareholders 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 shareholders may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits.
Removed
Grant. All awards granted pursuant to the 2020 Plan will be evidenced by an award agreement, in a form approved, from time to time, by the administrator in its sole discretion.
Removed
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.
Removed
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.
Removed
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. 33 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.
Removed
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.
Removed
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.
Removed
An award may not be exercised for a fraction of a share.
Removed
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 the Company or the trustee.
Removed
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.
Removed
For grantees who terminated their employment with the Company 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.
Removed
For grantees who terminated their employment with the Company or any of its 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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
In the event of a distribution of a cash dividend to all shareholders, 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. 34 In the event of a merger or consolidation of our Company, or a sale of all, or substantially all, of the Company’s shares or assets, or other transaction having a similar effect on the Company, 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.
Removed
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. Recent Sales of Unregistered Securities On March 27, 2023, the Company issued 3,294,117 units to certain investors in consideration of $14 million.
Removed
Each such unit consisted of (i) one share of the Company’s common stock and (ii) one warrant to purchase one share of common stock with an exercise price of $5.50 per share. Each warrant is exercisable for three years from the date of issuance.
Removed
The shares of common stock and warrants were issued in a private placement pursuant to Regulation S of the Securities Act of 1933, as amended. See “Liquidity and Capital Resources” for more information. Issuer Purchases of Equity Securities During the period from January 1, 2023, to December 31, 2023, we did not purchase any of our equity securities.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Item 6. [ RESERVED ] 35 item 7. management’s discussion and analysis of financial condition and results of operations 35 item 7a. quantitative and qualitative disclosures about market risk 43 item 8. financial statements and supplementary data 43 item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 44 item 9a. controls and Procedures 44
Item 6. [ RESERVED ] 46 item 7. management’s discussion and analysis of financial condition and results of operations 46 item 7a. quantitative and qualitative disclosures about market risk 53 item 8. financial statements and supplementary data 53 item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 53 item 9a. controls and Procedures 53 Item 9b.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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We recognize stock-based compensation cost for option awards on an accelerated basis over the employee’s requisite service period, and forfeitures are accounted for as they occur. 36 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.
We recognize stock-based compensation cost for option awards on an accelerated basis over the employee’s requisite service period, and forfeitures are accounted for as they occur. 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.
On December 30, 2019, we acquired all of the issued and outstanding share capital of ScoutCam Ltd. and, on December 31, 2029, changed our name to ScoutCam Inc. Following this acquisition, we integrated and fully adopted the acquired miniaturized imaging business into our Company as our primary business activity. On June 5, 2023, we changed our name to Odysight.ai Inc.
On December 30, 2019, we acquired all of the issued and outstanding share capital of ScoutCam Ltd. and, on December 31, 2029, we changed our name to ScoutCam Inc. Following this acquisition, we integrated and fully adopted the acquired miniaturized imaging business into us as our primary business activity. On June 5, 2023, we changed our name to Odysight.ai Inc.
We expect that our selling and marketing expenses will increase as we increase our selling and marketing efforts in the I4.0 domain. General and Administrative Expenses General and administrative expenses primarily consist of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, and administrative functions.
We expect that our sales and marketing expenses will increase as we expand our selling and marketing efforts in the I4.0 domain. General and Administrative Expenses General and administrative expenses primarily consist of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, and administrative functions.
Nevertheless, we have experienced some minor disruptions to our routine work, including some difficulties in traveling outside of Israel in the first month of the war and occasional rocket fire on the municipalities where our offices are located, requiring our employees to take temporarily shelter for a few minutes at a time in on-site safe rooms.
Nevertheless, we have experienced some minor disruptions to our routine work, including some difficulties in traveling outside of Israel and occasional rocket fire on the municipalities where our offices are located, requiring our employees to take temporarily shelter for a few minutes at a time in on-site safe rooms.
As a result of the intensive flight hours flown by all Israeli Air Force platforms as a result of the war and an enhanced Israel Ministry of Defense budget of approximately $12 billion, we have experienced a growing interest in our technology from Israeli government agencies and R&D programs, which may lead to more rapid assimilation of our technology into relevant platforms than we had anticipated prior to the start of the war, positively affecting on our business activity in 2024.
Conversely, as a result of the intensive flight hours flown by all Israeli Air Force platforms as a result of the war and an enhanced Israel Ministry of Defense budget, we have experienced a growing interest in our technology from Israeli government agencies and R&D programs, which may lead to more rapid assimilation of our technology into relevant platforms than we had anticipated prior to the commencement of the war, positively affecting on our business activity.
item 7. management’s discussion and analysis of financial condition and results of operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K.
item 7. management’s discussion and analysis of financial condition and results of operations You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K.
While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this Form 10-K, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.
While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this Annual Report, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.
In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-looking Statements” for a discussion of the uncertainties and assumptions associated with these statements. Our actual results may differ materially from those discussed below.
In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties and assumptions associated with these statements. Our actual results may differ materially from those discussed below.
Sales and Marketing Expenses Sales and marketing expenses primarily consist of payroll expenses, consulting services, promotional materials, exhibitions, demonstration equipment, and certain allocated facility infrastructure costs. Sales and marketing expenses for the year ended December 31, 2023 were $1,109,000, an increase of $410,000, or 59%, compared to $699,000 for the year ended December 31, 2022.
Sales and Marketing Expenses Sales and marketing expenses primarily consist of payroll expenses, consulting services, promotional materials, exhibitions, demonstration equipment, and certain allocated facility infrastructure costs. Sales and marketing expenses for the year ended December 31, 2024 were $1,218,000, an increase of $109,0000, or 10%, compared to $1,109,000 for the year ended December 31, 2023.
Comparison of the Year Ended December 31, 2023 and the Year Ended December 31, 202 2 The following table sets forth the significant sources and uses of cash for the years ended December 31, 2023 and December 31, 2022 (in dollars): 2023 2022 Cash used in Operating Activities (10,009,000 ) (6,095,000 ) Cash provided by (used in) Investing Activities (5,113,000 ) 7,882,000 Cash provided by Financing Activities 13,809,000 - Operating Activities During the year ended December 31, 2023, cash used in operating activities was $10 million, consisting of net loss of $9.4 million, partially offset by a non-cash benefit of $1.8 million and an unfavorable net change in operating assets and liabilities of $2.4 million.
Comparison of the Year Ended December 31, 2024 and the Year Ended December 31, 2023 The following table sets forth the significant sources and uses of cash for the years ended December 31, 2024 and December 31, 2023 (in dollars): 2024 2023 Cash used in Operating Activities (8,217,000 ) (10,009,000 ) Cash provided by (used in) Investing Activities 7,637,000 (5,113,000 ) Cash provided by Financing Activities 9,818,000 13,809,000 Operating Activities During the year ended December 31, 2024, cash used in operating activities was $8.2 million, consisting of net loss of $11.8 million, partially offset by a non-cash benefit of $2.4 million and a favorable net change in operating assets and liabilities of $1.2 million.
During the year ended December 31, 2021, cash used in operating activities was $5.9 million, consisting of net loss of $9 million, partially offset by a non-cash benefit of $2 million and a favorable net change in operating assets and liabilities of $1.1 million. Our non-cash benefit consisted primarily of non-cash charges of $2 million for stock-based compensation.
During the year ended December 31, 2023, cash used in operating activities was $10 million, consisting of net loss of $9.4 million, partially offset by a non-cash benefit of $1.8 million and an unfavorable net change in operating assets and liabilities of $2.4 million. Our non-cash benefit consisted primarily of non-cash charges of $1.7 million for stock-based compensation.
Treasury yield as determined by the U.S. Federal Reserve. We have 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 our stock-based compensation. The weighted average expected life of options was estimated individually in respect of each grant.
Treasury yield as determined by the U.S. Federal Reserve. We have 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 our stock-based compensation.
During the year ended December 31, 2022, cash provided by investing activities was $7.9 million, consisting mainly of withdrawal of short-term deposits, net. Financing Activities During the year ended December 31, 2023, cash provided by financing activities was $13.8 million, consisting of cash proceeds from issuance of shares and warrants in a private placement.
During the year ended December 31, 2023, cash used in investing activities was $5.1 million, consisting mainly of investment of short-term deposits, net. Financing Activities During the year ended December 31, 2024, cash provided by financing activities was $9.8 million, consisting of cash proceeds from issuance of shares in a private placement, net of issuance costs.
In addition, several of our employees, including company officers such as our CEO Yehu Ofer, were called up to military reserve duty, with many such call-ups having since lapsed. As of the date of this Annual Report, Mr. Ofer is subject to military reserve duty a few days a month.
In addition, several of our executives and employees, including company officers such as our CEO, were called up to military reserve duty. As of the date of this Annual Report, our CEO is subject to military reserve duty a few days a month.
We expense research and development costs as incurred. Research and development expenses for the year ended December 31, 2023 were $5,602,000, an increase of $1,405,000, or 33%, compared to $4,197,000 for the year ended December 31, 2022.
We expense research and development costs as incurred. 49 Research and development expenses for the year ended December 31, 2024 were $6,884,000, an increase of $1,282,000, or 23%, compared to $5,602,000 for the year ended December 31, 2023.
General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor, public relations, accounting, auditing, tax services, and insurance costs. General and administrative expenses for the year ended December 31, 2022, were $3,577,000, a decrease of $1,904,000, or 35%, compared to $5,481,000 for the year ended December 31, 2021.
General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor, public relations, accounting, auditing, tax services, and insurance costs. General and administrative expenses for the year ended December 31, 2024 were $5,562,000, an increase of $1,131,000, or 26%, compared to $4,431,000 for the year ended December 31, 2023.
The following table summarizes our results of operations for the years ended December 31, 2023 and 2022, together with the changes in those items in dollars and as a percentage: 2023 2022 % Change Revenues 3,033,000 665,000 356 % Cost of Revenues 2,524,000 1,631,000 55 % Gross Profit (Loss) 509,000 (966,000 ) 153 % Research and development expenses 5,602,000 4,197,000 33 % Sales and marketing expense 1,109,000 699,000 59 % General and administrative expenses 4,431,000 3,577,000 24 % Operating Loss (10,633,000 ) (9,439,000 ) 13 % Revenues As a result of the nature of our target market and the current stage of our development, a substantial portion of our revenue comes from a limited number of customers.
The following table summarizes our results of operations for the years ended December 31, 2024 and 2023, together with the changes in those items in dollars and as a percentage: 2024 2023 % Change Revenues 3,964,000 3,033,000 31 % Cost of Revenues 2,807,000 2,524,000 11 % Gross Profit (Loss) 1,157,000 509,000 127 % Research and development expenses 6,884,000 5,602,000 23 % Sales and marketing expense 1,218,000 1,109,000 10 % General and administrative expenses 5,562,000 4,431,000 26 % Operating Loss (12,507,000 ) (10,633,000 ) 18 % Revenues As a result of the nature of our target market and the current stage of our development, a substantial portion of our revenue comes from a limited number of customers.
Our non-cash benefit consisted primarily of non-cash charges of $1.7 million for stock-based compensation. The unfavorable net change in our operating assets and liabilities was primarily due to an increase in accounts receivable of $1.3 million and decrease in contract liabilities of $1.3 million.
Our non-cash benefit consisted primarily of non-cash charges of $2.4 million for stock-based compensation. The favorable net change in our operating assets and liabilities was primarily due to an increase in accrued compensation expenses of $0.6 million and decrease in inventory of $0.3 million.
While we have offices in Omer and Ramat Gan, Israel, neither of our sites is located near Israel’s relevant borders where the main impact of the war has been felt.
The war has had significant economic, military and social consequences to Israel. To date the war has not had a material adverse effect on our business. While we have offices in Omer and Ramat Gan, Israel, neither of our sites is located near Israel’s relevant borders where the main impact of the war has been felt.
We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model. Calculating the fair value of stock-based awards requires that we make subjective assumptions.
Determining the amount of stock-based compensation to be recorded requires us to develop estimates of the fair value of stock options as of their grant date. We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model. Calculating the fair value of stock-based awards requires that we make subjective assumptions.
We expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.
We expect our expenses will increase in connection with our ongoing activities, particularly as we continue the research and development and the scale up Odysight solutions . We expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company.
Cost of Revenues Cost of revenues for the year ended December 31, 2023, were $2,524,000 an increase of $893,000, or 55%, compared to cost of revenues of $1,631,000 for the year ended December 31, 2022.
Cost of Revenues Cost of revenues for the year ended December 31, 2024, were $2,807,000 an increase of $283,000, or 11%, compared to cost of revenues of $2,524,000 for the year ended December 31, 2023. The increase in cost of revenues was primarily due to an increase in revenues.
The net change in our operating assets and liabilities primarily reflects cash inflows from changes in contract liability of $1.6 million partially offset by cash outflows from changes in contract fulfillment assets of $0.5 million. Investing Activities During the year ended December 31, 2022, cash provided by investing activities was $7.9 million, consisting mainly of withdrawal of short-term deposits, net.
The unfavorable net change in our operating assets and liabilities was primarily due to an increase in accounts receivable of $1.3 million and decrease in contract liabilities of $1.3 million. Investing Activities During the year ended December 31, 2024, cash provided by investing activities was $7.6 million, consisting mainly of withdrawal of short terms deposits, net.
Even if we are successful in raising sufficient capital to implement our business plan, we will, most likely, continue to be unprofitable for the foreseeable future. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.
Even if we are successful in raising sufficient capital to implement our business plan, we will, most likely, continue to be unprofitable for the foreseeable future.
Cash Flows Our primary uses of cash from operating activities have been for headcount-related expenditures, research and development costs, manufacturing costs, marketing and promotional expenses, professional services cost, and costs related to our facilities.
If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts. 51 Cash Flows Our primary uses of cash from operating activities have been for headcount-related expenditures, research and development costs, manufacturing costs, marketing and promotional expenses, professional services cost, and costs related to our facilities.
Comparison of the Year Ended December 31, 2023 and the Year Ended December 31, 2022 Overview The Company’s primary business activities during 2023 were: ● Production and supply of product to a Fortune 500 multinational healthcare corporation. ● Enlarging our focus on R&D activities in the domain of I4.0 (including PdM and CBM in sectors such as aerospace, maritime energy and other heavy machinery, engines and complicated mechanics which have a need for monitoring and predictive maintenance applications).
The weighted average expected life of options was estimated individually in respect of each grant. 48 Comparison of the Year Ended December 31, 2024 and the Year Ended December 31, 2023 Overview Our primary business activity in 2024 was enlarging our focus on R&D activities in the domain of Industry 4.0, including PdM and CBM in sectors such as aerospace, maritime energy and other heavy machinery, engines and complicated mechanics which require ongoing monitoring and predictive maintenance applications.
We currently believe that our existing cash and cash equivalents and short-term deposits will allow us to fund our operating plan through at least the next 12 months. We expect our expenses will increase in connection with our ongoing activities, particularly as we continue the research and development and the scale up process of our I4.0 solutions.
Additional Cash Requirements We plan to continue to invest in long-term growth, and therefore we expect that our expenses will grow. We currently believe that our existing cash and cash equivalents and short-term deposits will allow us to fund our operating plan through at least the next 12 months from the date of this Annual Report.
See also Risk Factors – “Conditions in Israel, including the October 7, 2023 attack by Hamas and other terrorist organizations and Israel’s war against them, if escalated, could negatively affect our operations.” Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States, or U.S.
Risk Factors – Risks Related to our Operations in Israel – Our headquarters and other significant operations are located in Israel and, therefore, our results may be adversely affected by political, economic and military instability in Israel .” 47 Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States, or U.S.
We also benefited from an increase in the number of products sold and supplied to the customer during 2023. Research and Development Expenses Research and development efforts are focused on new product development and on developing additional functionality for our new and existing products.
Research and Development Expenses Research and development efforts are focused on new product development and on developing additional functionality for our new and existing products.
The increase in operating loss was due to increases in research and development expenses, general and administrative expenses and sales and marketing expense, each as described above.
The increase in operating loss was due to increases in research and development expenses, general and administrative expenses and sales and marketing expense, each as described above, partially offset by an increase in gross profit. Backlog Backlog represents booked orders based on purchase orders or hard commitments but not yet recognized as revenue.
Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of $8.9 million and short-term deposits of $8.1 million compared to cash and cash equivalents of $10.1 million and short-term deposits of $3 million as of December 31, 2022.
Backlog as of December 31, 2024 was approximately $15 million compared to approximately $2.6 million as of December 31, 2023. Liquidity and Capital Resources Overview As of December 31, 2024, we had cash, cash equivalents and restricted deposit of $18.5 million compared to cash and cash equivalents and short-term deposits of $17 million as of December 31, 2023.
Stock-Based Compensation We apply 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. Determining the amount of stock-based compensation to be recorded requires us to develop estimates of the fair value of stock options as of their grant date.
Indirect taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. Stock-Based Compensation We apply 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.
For the year ended December 31, 2023, we generated revenues of $3,033,000, an increase of $2,368,000, or 356%, from 2022 revenues.
For the year ended December 31, 2024, we generated revenues of $3,964,000, an increase of $931,000, or 31%, from 2023 revenues. The increase in revenues was primarily due to an increase in revenues from our vision-based platform solutions for PdM and CBM.
Following the attack, Israel’s security cabinet declared war and commenced a military campaign in Gaza against Hamas.
Following the attack, Israel’s security cabinet declared war and commenced a military campaign in Gaza against Hamas. Since the outbreak of the war, the Hezbollah terrorist organization has regularly fired rockets into northern Israel and, in October 2024, Israel invaded southern Lebanon in response to these attacks.
The main effect of this activity was an increase in the number of employees to enable the Company to manage the anticipated increased workload and solution development activity.
The main effect of this activity enabled us to accelerate our growth and support an increased workload and solution development for customers.
Financing Activities During the year ended December 31, 2021, cash provided by financing activities was $22.6 million, consisting primarily of $19.1 million from cash proceeds from issuance of shares and warrants in a private placement and $3.5 million proceeds from the exercise of outstanding warrants.
During the year ended December 31, 2023, cash provided by financing activities was $13.8 million, consisting of cash proceeds from issuance of shares and warrants in a private placement, net of issuance costs. 52 Contractual Obligations and Commitments Operating lease payments represent our commitment for future rent made leases for our offices in Israel and for vehicle leasing.
The increase was primarily due to an increase in payroll expenses (including stock-based compensation) due to additional employee recruitment, materials and subcontractors, rent and maintenance expenses due to increased focus on R&D activities in the domain of I4.0.
The increase in research and development expenses was mainly due to the development of new products and the resulting increase in payroll and related expenses for new employee recruitment, an increase in stock-based compensation from new option grants and procuring materials and services of subcontractors for Industry 4.0 projects.
Cost of Revenues Cost of revenues for the year ended December 31, 2022, were $1,631,000, an increase of $523,000, or 47%, compared to cost of revenues of $1,108,000 for the year ended December 31, 2021.
Gross Profit Gross profit for the year ended December 31, 2024 was $1,157,000, an increase of $648,000, or 127%, compared to a gross profit of $509,000 for the year ended December 31, 2023. The change was due both to an increase in revenues and to an increase in cost of revenues, as described above.
Our solution allows maintenance and operations teams visibility into areas which are inaccessible under normal circumstances, or where the operating ambience otherwise is not suitable for continuous real-time monitoring and has various applications which have relevancy in a wide range of industry segments that utilize complicated mechanics requiring ongoing monitoring and predictive maintenance applications.
The Odysight TruVision solution streams visual information to our processing unit, an in-platform, high-performance AI/machine learning computer, allowing maintenance and operations teams, on the ground and during operations, visibility into areas that are inaccessible under normal operating conditions or where conditions are not suitable for continuous real-time monitoring.
General and administrative expenses for the year ended December 31, 2023 were $4,431,000, an increase of $854,000, or 24%, compared to $3,577,000 for the year ended December 31, 2022. 38 The increase was primarily due to: - an increase in payroll expenses, due to additional employee recruitment; - an increase in patent related expenses due to maintenance, defense, and commercialization efforts involving existing patents; - an increase in professional services expenses due to the hiring of a financial consultant, IR consultant, HR consultant and the appointment of new directors ; - an increase in rent and maintenance, due to our new offices in Ramat Gan; and - In 2022, we benefited from the cancellation of a provision of $129,000 related to additional taxes due following entrance into an agreement with the Israel Tax Authority (the “ITA”).
The increase was primarily due to: - an increase in professional services expenses including financial consultant, IR consultant, HR consultant and the appointment of new directors; - an increase in payroll and related expenses due to the recruitment of a new CFO and cash compensation bonuses paid to senior executives; and - an increase in stock-based compensation from new option grants. 50 Operating loss We incurred an operating loss of $12,507,000 for the year ended December 31, 2024, an increase of $1,874,000, or 18%, compared to operating loss of $10,633,000 for the year ended December 31, 2023.
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We were initially engaged in the business of developing web portals to allow companies and individuals to engage in the purchase and sale of vegetarian food products over the Internet. However, were not able to execute our original business plan, develop significant operations, or achieve commercial sales.
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We are a pioneer in the development, production and marketing of an innovative visualization and artificial intelligence, or AI, solution that deploys small cameras to monitor critical safety components in hard-to-reach locations and harsh environments, across various Predictive Maintenance, or PdM, and Condition Based Monitoring, or CBM, use cases.
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We are a pioneer in the development, production, and marketing of innovative Predictive Maintenance (PdM) and Condition Based Monitoring (CBM) technologies, providing visual sensing and AI-based video analytics solutions for critical systems in the aviation, maritime, industrial non-destructing-testing industries, transportation, and energy industries.
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The rich and informative data, continuously collected and analyzed by our solution on our secured cloud, provides customers with real-time failure / anomaly detection, events and data recordings, interfacing with platform mission systems and providing real-time alerts and streaming video or images, all while training our algorithms for ongoing improved accuracy and prediction capabilities.
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Some of our products utilize our unique micro visualization technology in medical devices for complex and minimally invasive medical procedures. Our technology includes proven video technologies and products amalgamated into a first-of-its-kind, FDA-cleared minimally invasive surgical device.
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Our customers benefit from increased safety, a reduction in downtime and lower maintenance costs for their monitored platforms, using the prediction capabilities of our solution to efficiently plan maintenance work on monitored components. Our solution aims to enhance safety and minimizes downtime by enabling real-time visual analysis of any failure occurrences.
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At the present time, we derive a substantial portion of our revenue from applications of our micro visualization technology within the medical field. 35 Our unique video-based sensors, embedded software, and AI algorithms are being deployed in hard-to-reach locations and harsh environments across a variety of PdM and CBM use cases.
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Additionally, we leverage advanced big data analytics to offer predictive insights throughout the entire system lifecycle.
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Our current business model is a business-to-business (B2B) approach in which we seek to identify target businesses interested in integrating our micro visualization technology or commissioning individual projects using our technology.
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This includes efficient spare parts management and intelligent performance predictions, ensuring optimal system reliability and efficiency. 46 The Odysight TruVision solution is successfully used by NASA as we seek to reshape the aerospace, Industry 4.0, transportation and energy markets with a vison-based technology leveraging AI and machine learning to deliver innovative solutions that transform maintenance practices.
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Since the outbreak of the war, the Hezbollah terrorist organization has regularly fired rockets into northern Israel, other terrorist organizations have done so from western Iraq and the Houthis terrorist organization operating out of Yemen has fired various projectiles and drones against commercial shipping vessels in the Gulf of Aden and Red Sea.
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As used in this Annual Report, Industry 4.0, or I4.0, refers to the integration of advanced technologies into manufacturing and industrial processes to create smart, interconnected systems for improved efficiency and productivity. Odysight solutions are already deployed in the aviation and medical sectors.
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The war has led to consequences and restrictions with respect to the Israeli economy, including a significant call-up of military reservists, most of whom have been released from such service as of the date of this Annual Report. To date the war has not had a material adverse effect on our business.
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Our customers include the Israeli Air Force, the Israeli Ministry of Defense, France-based Safran Aircraft Engines, a global international defense contractor, a leading Fortune 500 medical company as well as NASA, who came back to us for a repeat order. Historically, our revenue stream has been derived mainly from the medical sector.
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Development Services Revenue and Contract Liabilities We determine at contract inception whether development services are distinct from the performance obligation to manufacture the product under development. Revenues from development services that we determine as not distinct from our performance obligation to manufacture the product under development are deferred until commencement of manufacturing and are recognized over the manufacturing term.
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Our 2024 financial results reflect orders and agreements from both the medical and aerospace sectors.
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As a result, during development phase we have deferred all service revenues billed by us to a Fortune 500 multinational healthcare corporation and the respective service costs. Further to the inception of the production phase of the project in the second quarter of 2022, these deferred revenues and costs are recognized over the expected term of production under the contract.
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We have recently secured several contracts for our PdM and CBM systems with major government clients and defense and aviation companies and our backlog as of December 2024 of approximately $15 million (compared to approximately $2.6 million as of December 31, 2023) reflects mostly those contracts.
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The increase in revenues was primarily due to increase in revenues from a Fortune 500 company (see “Customer A” in note 10 to our annual financial statements) due to: - an increase in the number of products sold and supplied to the customer during 2023, and - formalization of negotiations with the customer, according to which the price per unit increased significantly compared to the previous price.
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Public Offering and Nasdaq Listing In February 2025, we closed a public offering, including the exercise of an over-allotment option granted to the underwriter in the public offering. The public offering and the over-allotment option exercise price was $6.50 per share.
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The increase was primarily due to an increase in the number of products sold and supplied to the Fortune 500 company, partially offset by an improvement in the production process which resulted in a reduced scrap rate. 37 Gross Profit (Loss) Gross profit for the year ended December 31, 2023 was $509,000, an increase of $1,475,00, or 153%, compared to a gross loss of $966,000 for the year ended December 31, 2022.
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In the aggregate, we 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. Also in February 2025, listing was approved for our common stock, which began trading on the Nasdaq Capital Market under the symbol “ODYS”.
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The increase was primarily due to an increase in revenues, partially offset by an increase in cost of revenues as described above. The transition from a gross loss to a gross profit is attributable to the formalization of negotiations with the healthcare customer. Under this framework, the unit price experienced a substantial increase compared to its previous rate.
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On November 27, 2024, Israel and Lebanon agreed to a ceasefire, the result of which is uncertain. During the course of the war, other terrorist organizations have fired rockets into Israel, such as various rebel militia groups in Syria and Iraq and the Houthi movement, which controls parts of Yemen.
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The increase was primarily due to an increase in payroll expenses due to additional employee recruitment, as result of enlarging our focus on R&D activities in the domain of I4.0.
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The Houthis movement has also attacked commercial shipping vessels in the Gulf of Aden and Red Sea. In April and October 2024, the Islamic Republic of Iran targeted various sites in Israel with waves of drones, cruise missiles and ballistic missiles. Israel responded on both occasions with air defenses and retaliatory strikes against Iran.
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The increase was primarily due to recent rebranding activities, including expenses related to the changing the name of the Company from “ScoutCam Inc.” to “Odysight.ai Inc.”, which included among other expenses designing a new logo and promotional materials.
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In addition, with the backdrop of the ongoing conflict, some of our Israeli clients and potential clients have not prioritized conducting transactions with us, and the war may have caused some delays in their finalizing purchase orders. We do not believe that such delays have had a material impact on our business.
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In addition, the Company incurred expenses by participating in the Paris Air Show in June 2023, the world’s premier and largest event dedicated to the aviation and space industry. We expect that our selling and marketing expenses will increase as we expand our selling and marketing efforts in the I4.0 domain.
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The war has also increased negative sentiments regarding Israel and Israeli companies in the international community. For example, Israeli defense companies were initially banned from participating in two prestigious industry conferences in France during 2024; however, both bans were later overturned by French courts and did not impact our participation in such conferences.
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General and Administrative Expenses General and administrative expenses primarily consist of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor, public relations, accounting, auditing, tax services, and insurance costs.
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Revenues Ours 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.
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In September 2021, the Company accrued approximately NIS 740,000 ($229,000) for additional taxes due following a VAT audit by the ITA for the years 2019-2021. In July 2022, the Company reached an agreement with the ITA, according to which the amount due in additional taxes was reduced to approximately NIS 340,000 ($100,000).
Added
Revenues are presented net of VAT. We recognize revenue when a customer obtains control over promised goods or services. For each performance obligation, we determine at contract inception whether it satisfies the performance obligation over time or satisfies the performance obligation at a point in time.
Removed
Operating loss We incurred an operating loss of $10,633,000 for the year ended December 31, 2023, an increase of $1,194,000, or 13%, compared to operating loss of $9,439,000 for the year ended December 31, 2022.
Added
Performance obligations are satisfied over time if one of the following criteria is met: (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.
Removed
Comparison of the Year Ended December 31, 2022 and the Year Ended December 31, 2021 Overview The Company’s primary business activities during 2022 were: ● During the second quarter of 2022, the Company completed the development of a product relating to a customer-specific project for a Fortune 500 multinational healthcare corporation and moved from the development phase of the project to its production phase.
Added
If a performance obligation is not satisfied over time, we satisfy 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.
Removed
As a result, during the year ended December 31, 2022, the Company recognized development services revenues and related development costs that have been previously deferred.
Added
We measure 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.

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