In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present stockholders. For instance, pursuant to that certain Securities Exchange Agreement (the “Exchange Agreement”) by and between Intellisense and Medigus, dated September 16, 2019, if ScoutCam achieves US$33.0 million in sales in the aggregate within the first three years following December 30, 2019, the consummation date of such agreement (the “SEA Closing”), we will issue shares of Common Stock to Medigus representing 10% of our issued and outstanding share capital as of December 30, 2019. Similarly, we may issue a substantial number of shares of Common Stock or other securities convertible into or exercisable for Common Stock in connection with capital raising activity, hiring or retaining employees, future acquisitions, raising additional capital in the future to fund our operations, and other business purposes. We have already authorized and plan to authorize in the future an additional number of shares of our Common Stock for issuance under our 2020 Share Incentive Plan, or the 2020 Plan, or similar plan, and may issue equity awards to management, employees and other eligible persons. Additional shares of Common Stock issued by us in the future will dilute an investor’s investment in the Company. In addition, we may seek stockholder approval to increase the amount of the Company’s authorized stock, which would create the potential for further dilution of current investors.

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.

As of June 23, 2020, our directors, collectivelyexecutive officers, principal stockholders and affiliated entities may be deemed to beneficially own, in the aggregate, approximately 100%71.49% of our outstanding common stock. The interests of our may not be, at all times, the samevoting securities as that of our other shareholders. Our officer and directors are not simply passive investors but are also executive officers of the Company, and as such their interests as executives may, at times be adverse to those of passive investors. Where those conflicts exist, our shareholders will be dependent upon our director exercising, indate hereof. As a manner fair toresult, if some or all of our shareholders, her fiduciary duties as officer or as member of the Company’s board of directors. Also, our officers and directors willsuch parties acted together, they would have the ability to controlexert substantial influence over the election of our board of directors and the outcome of most corporate actionsissues requiring shareholder approval including the sale of all or substantially all ofby our assets and amendments to our Articles of Incorporation.stockholders. This concentration of ownership may also have the effect of delaying deferring or preventing a change ofin control of us, whichthe Company that may be disadvantageousfavored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices. This concentration of ownership and influence in management and board decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to minority shareholders.

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our Common Stock is included, we will be required to file periodic reports with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and the rules and regulations thereunder. In order to comply with such requirements, our independent registered auditors will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. Factors such as the number and type of transactions that we engage in and the complexity of our reports cannot accurately be determined at this time and may have a major negative effectquoted on the cost and amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit.

Holders

As of June 23, 2020, there were 75 stockholders of record of our stock price may be more volatile.

Dividends

We have irrevocably elected notnever declared or paid any cash dividends on our Common Stock. We currently intend to avail ourselvesretain future earnings, if any, to this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

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 lossrelated notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Special Note on Forward-Looking Statements” for a discussion of either one would be highly detrimentalthe uncertainties and assumptions associated with these statements. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to our abilitysuch differences include, but are not limited to, conduct ongoing operations.

Accounts Receivable

Accounts receivable are presented in balance sheet net of 650,330 shares is self-underwritten, that is, weallowance for doubtful accounts. ScoutCam estimates the collectibility of its accounts receivable balances and adjusts its allowance for doubtful accounts accordingly.

When revenue recognition criteria are not going to engagemet for a sale transaction that has been billed, the servicesCompany does not recognize deferred revenues or the related account receivable.

Inventories

Inventories include raw materials, inventory in process and finished products and are valued at the lower of an underwriter to sellcost or net realizable value.

The cost is determined on the shares; we intend to sell our shares through our two officersbasis of “first in-first out” basis. Cost of purchased raw materials and directors, who will receive no commissions. They will offerinventory in process includes costs of design, raw materials, direct labor, other direct costs and fixed production overheads. Materials and other supplies held for use in the shares to friends, family members, and business associates, however, there is no guarantee thatproduction of inventories are not written down below cost if the finished products in which they will be ableincorporated are expected to sell anybe sold at or above cost.

The Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following: forecasted sales or usage, estimated current and future market values.

Leases

The Company adopted the new accounting standard Accounting Standards Codification 842 “Leases,” and all the related amendments, on January 1, 2019 and used the standard’s effective date as the Company’s date of initial application. Consequently, financial information was not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The new standard also provides practical expedients for an entity’s ongoing accounting. The adoption of this standard did not have a material effect on the Company’s financial statements. On January 1, 2019, the Company recognized ROU assets of approximately USD 19 thousand and lease liabilities of approximately USD 19 thousand for its operating leases of real estate and vehicles. The Company has elected the short-term lease exception for leases with a term of 12 months or less. As part of this election it will not recognize right-of-use assets and lease liabilities on the balance sheet for leases with terms less than 12 months.

The Company’s leases relate to buildings for the Company’s activities and vehicles leases.

Comparison of the shares. Unless they are successfulThree months Ended March 31, 2020 and the Three months Ended March 31, 2019

The following table summarizes our results of operations for the three month ended March 31, 2020 and 2019, together with the changes in sellingthose items in dollars and as a percentage:

Revenues

For the three months ended March 31, 2020, ScoutCam generated revenues of $40,000, an increase of $16,000 from the three months ended March 31, 2019 revenues.

The increase in revenues was primarily due to an overall increase in the sales of the Company’s component products to occasional customers.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2020 were $130,000, an increase of $21,000 compared to cost of revenues of $109,000 for the three months ended March 31, 2019. The increase was primarily due to an increase in payroll expenses, as result of hiring additional employees and losses in severance pay assets.

Gross Loss

Gross loss for the three months ended March 31, 2020 was $90,000, an increase of $5,000 compared to gross loss of $85,000 for the three months ended March 31, 2019.

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2020, were $255,000, an increase of $168,000, or 193%, compared to $87,000 for the three months ended March 31, 2019. The increase was primarily due to an increase in payroll expenses, as result of an increase in share - based compensation expenses (see note 4 to our interim condensed consolidated financial statements as of March 31, 2020), hiring additional employees and losses in severance pay assets.

Sales and Marketing Expenses

Sales and marketing expenses for the three months ended March 31, 2020, were $52,000, an increase of $11,000, or 27%, compared to $41,000 for the three months ended March 31, 2019. The increase was primarily due to an increase in payroll expenses, as result of hiring additional employees.

General and Administrative Expenses

General and Administrative expenses for the three months ended March 31, 2020, were $1,112,000, an increase of $996,000, or 859%, compared to $116,000 for the three months ended March 31, 2019. The increase was primarily due to an increase in payroll expenses, as result an increase in share - based compensation expenses (see note 4 to our interim condensed consolidated financial statements as of March 31, 2020) and hiring additional employees and an increase in professional services. The increase in professional services resulted from the incorporation of ScoutCam Ltd. as an independent company and in connection with the execution of that certain securities exchange agreement involving ScoutCam Ltd.

Operating loss

We incurred an operating loss of $1,509,000 for the three months ended March 31, 2020, an increase of $1,180,000, or 359%, compared to operating loss of $329,000 for the three months ended March 31, 2019. The increase in operating loss was due to $5,000 increase in gross loss, $168,000 increase in research and development expenses, $11,000 increase in sales and marketing expenses and $996,000 increase in administrative and general expenses.

Comparison of the Year Ended December 31, 2019 and the Year Ended December 31, 2018

Overview

ScoutCam Ltd. was formed in Israel on January 3, 2019, as a wholly owned subsidiary of Medigus, and commenced operations on March 1, 2019. ScoutCam was incorporated as part of the Reorganization of Medigus, which was designed to distinguish ScoutCam’s miniaturized imaging business, or the micro ScoutCam^™ portfolio, from Medigus’s other operations and to enable Medigus to form a separate business unit with dedicated resources focused on the promotion of such technology. In December 2019, Medigus and ScoutCam consummated an Amended and Restated Asset Transfer Agreement, which transferred and assigned certain assets and intellectual property rights related to its miniaturized imaging business.

On March 1, 2019, 12 employees moved from Medigus to ScoutCam. Prior to moving to ScoutCam, the salary costs of those employees were split among all of Medigus’s activities (including the miniaturized imaging business activity). Hence, in the 2018 data provided below, most of the salary costs of these employees are not included. The vast majority of these employees were from the Production and R&D departments. Therefore, their transfer caused large changes in the data of these two line items.

The following table summarizes our results of operations for the years ended December 31, 2019 and 2018, together with the changes in those items in dollars and as a percentage:

Revenues

For the year ended December 31, 2019, ScoutCam generated revenues of $309,000, a decrease of $82,000 from 2018 revenues.

The tables below set forth our revenues by product:

The increase in revenues from miniature camera and related equipment was primarily due to an overall increase in the sales of the Company’s products to occasional customers.

The decrease in revenues from services was primarily due to:

Cost of Revenues

Cost of revenues for the year ended December 31, 2019 were $542,000, an increase of $321,000, or 145%, compared to cost of revenues of $221,000 for the year ended December 31, 2018.

The increase in cost of revenues was due to:

Gross Profit (Loss)

Gross loss for the year ended December 31, 2019 was $233,000, a decrease of $403,000 compared to a gross profit of $170,000 for the year ended December 31, 2018. The decrease was primarily due to changes in profitability margins of the product and services mix and due to an increase in payroll expenses as described above.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2019, were $274,000, an increase of $91,000, or 50%, compared to $183,000 for the year ended December 31, 2018. The increase was primarily due to increase in payroll expenses, as result of the Reorganization. In 2018, the salary cost of R&D employees were split among all of Medigus’s activities. Hence, in the 2018 data provided above, most of the salary costs of these employees are not included.

Sales and Marketing Expenses

Sales and marketing expenses for the year ended December 31, 2019, were $183,000, a decrease of $87,000, or 32%, compared to $270,000 for the year ended December 31, 2018. The decrease was primarily due to decrease in payroll expenses, due to the fact that one of the employees that was classified under sales and marketing in 2018 became the CEO in 2019 and his payroll expenses were not classified under S&M in 2019.

General and Administrative Expenses

General and Administrative expenses for the year ended December 31, 2019, were $1,117,000, an increase of $877,000, or 365%, compared to $240,000 for the year ended December 31, 2018. The increase was primarily due to an increase in payroll expenses, as result of the Reorganization (as described under “Overview”) and an increase in professional services. The increase in professional services is due to establishing ScoutCam Ltd. as an independent company and due to the acquisition of ScoutCam Ltd.

Operating loss

We incurred an operating loss of $1,807,000 for the year ended December 31, 2019, an increase of $1,284,000, or 246%, compared to operating loss of $523,000 for the year ended December 31, 2018. The increase in operating results was due to an increase of $403,000 in gross loss, an increase of $91,000 in research and development expenses, and increase of $877,000 in administrative and general expenses partially offset by an $87,000 decrease in sales and marketing expenses.

Liquidity and Capital Resources

Sources of Liquidity

We generated liquidity primarily from Medigus and from fund raising as described at note 9 to our financial statements for the year ended December 31, 2019.

On June 3, 2019, Medigus executed a capital contribution into ScoutCam of an aggregate amount of US$720,000.

On August 27, 2019, Medigus provided ScoutCam with a line of credit in the aggregate amount of US$500,000, and, in exchange, ScoutCam granted Medigus a capital note that bears an annual interest rate of 4%. The repayment of the credit line amount shall be spread over one year in monthly payments beginning on the Closing Date. As of the date of the Closing Date, ScoutCam has withdrawn the entire amount of the line of credit.

In December 2019, the Company allotted in a private issuance, a total of 3,413,312 units at the price of USD $0.968 per unit. Each unit was comprised of two shares of Common Stock, one Warrant A (defined below) and wetwo Warrants B (defined below). The immediate proceeds (gross) from the issuance of the units amounted to approximately USD 3.3 million. Each Warrant A is exercisable into one share of Common Stock at an exercise price of USD 0.595 per share during the 12 month period following the allotment. Each Warrant B is exercisable into one share of Common Stock at an exercise price of USD 0.893 per share during the 18 month period following the allotment. In addition, a consultant of the Company, Shrem Zilberman Group Ltd. (the “Consultant”) will be entitled to receive the proceeds from this offering, weamount representing 3% of any exercise price of each Warrant A or Warrant B that may have to seek alternative financing to implement our business plan.

As of December 31, 2019, our total assets were $4,757,000. As of December 31, 2018, our total assets were $516,000. The increase of assets was mainly due to an increase of cash and cash equivalents as a result of the private issuance as described above and increase of inventory. As of December 31, 2019, our total liabilities were $2,235,000. As of December 31, 2018, our total liabilities were $634,000. The increase of liabilities was mainly due to an increase of contract liabilities, a loan from Medigus, accrued compensation expenses and other accrued expenses.

During the year ended December 31, 2019, the Company incurred losses of $1,829 thousands and negative cash flow from operating activities of approximately $1,799 thousands. Based on the projected cash flows, the Company’s Management is of the opinion that without further fundraising it will not raisehave sufficient resources to enable it to continue its operating activities, including the development, manufacturing and marketing of its products for a period of at least 12 months from the financial statements issuance date. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans include continuing commercialization of Company’s products and securing sufficient financing through the sale of additional equity securities, debt or capital to implement its planned operations, your entire investment could be lost.

Cash Flows

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight formfollowing table sets forth the basis onsignificant sources and uses of cash for the year end periods set forth below (in dollars):

The following table sets forth the significant sources and uses of cash for the periods set forth below (in dollars):

Operating Activities

For the fiscal year ended December 31, 2019, net cash flows used in operating activities was $1,799,000, compared to net cash flows used in operating activities of $454,000 for the fiscal year ended December 31, 2018, an increase of $1,345,000. The change was mainly due to an increase in net loss, increase in inventory, and partially offset by increase in contract liability, increase in accrued compensation expenses and increase in other current expenses.

For the three months ended March 31, 2020, net cash flows used in operating activities was $1,137,000, compared to net cash flows used in operating activities of $514,000 for the three months ended March 31, 2019, an increase of $623,000. The change was mainly due to an increase in net loss, an increase in inventory and other accrued expenses, which was partially offset by an increase in stock-based compensation.

Investing Activities

For the broker or dealer madefiscal year ended December 31, 2019, net cash flows used in investing activities was $55,000, compared to net cash flows provided in investing activities of $4,000 for the suitability determination. Brokers may be less willingfiscal year ended December 31, 2018. The change was mainly due to execute transactionspurchase of property and equipment during 2019.

For the three months ended March 31, 2020, net cash flows used in securities subjectinvesting activities was $185,000 as compared to $0 for the same period of 2019. The change was due to the “penny stock” rules. This may make it more difficultpurchase of property and equipment during the three months ended March 31, 2020.

Financing Activities

For the fiscal year ended December 31, 2019, net cash flows provided by financing activities was $5,104,000, compared to net cash flows provided by financing activities of $450,000 for investorsthe fiscal year ended December 31, 2018. The change between the two periods is due to disposethe fact that in 2019 we have transfer of our common stockassets to Medigus, capital contribution from Medigus, loan from Medigus and cause a declinecash acquired in connection with the reverse merger.

For the three months ended March 31, 2020, net cash flows provided by financing activities was $828,000, compared to net cash flows provided by financing activities of $604,000 for three months ended March 31, 2019.

Net cash provided by financing activities in the market valuethree months ended March 31, 2020 consisted of our stock. Disclosure also has to be made about the risks of investing$909,000 in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Profit from exchange differences on cash equivalents

During the three months ended March 31, 2020, ScoutCam Ltd. generated profit from exchange differences on cash equivalents of $96,000. This profit represents a change in the Company's cash and cash equivalents as a result of the change in the dollar exchange rate against the NIS during the three months ended March 31, 2020.

Future Funding Requirements

The Company believe that it will require additional financing in order to provide the capital it needs to hit its growth targets.

Off-Balance Sheet Arrangements

ScoutCam Ltd. leases its headquarters in Omer, Israel, with a total of approximately 807 gross square meters. In January 2020, ScoutCam extended the agreement through the end of 2020. The rental payments are linked to the Israeli CPI.

BUSINESS

Overview

We are engaged in the development, production and marketing of innovative miniaturized imaging equipment known as our micro ScoutCam™ technology for use in medical procedures as well as various applications in other industries. Our current business model is that of a B2B approach, in which we seek to identify target businesses interested in integrating our micro ScoutCam™ technology, or commissioning individual projects using our technology. As of the date of this prospectus, we derive a substantial portion of our revenue from applications of our micro ScoutCam™ technology within the Company hadmedical and industrial fields. We have recently begun examining additional applications for our micro ScoutCam™ portfolio outside of the medical device industry, including sectors such as, inter alia, the homeland security and defense, aerospace (including commercial drones, unmanned aerial vehicles (UAV) and manned airplanes), automotive, industrial non-destructing-testing industries, and predictive maintenance (i.e. Industry 4.0) based on Internet of Things (IoT). We plan to further expand the activity in these non-medical spaces.

Pictured above (from left to right) are the Company’s micro ScoutCam^TM 1.0 Lum and micro ScoutCam™ 1.2.

The Company’s eye-endoscope, which includes a camera at the distal tip, integrated illumination and embedded irrigation, which is only 1.2 mm in outer diameter.

Our Corporate 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. 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.

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 common stock outstanding. Accordingly,our Common Stock at $0.01 per share.

On January 10, 2019, we may issue upformed 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 September 16, 2019, Intellisense and Medigus entered into that certain Exchange Agreement. For additional information about the Exchange Agreement, refer to an additional 73,020,000 shares“—Certain Relationships and Related Party Transactions” below.

On December 30, 2019, we acquired ScoutCam Ltd. As a result of common stock. The future issuanceour acquisition of common stock may result in substantial dilutionScoutCam Ltd., we now own all of ScoutCam Ltd.’s issued and outstanding share capital. We plan to integrate and fully adopt ScoutCam Ltd.’s business into our Company as our primary business activity.

ScoutCam Ltd. was formed in the percentageState of our common stock held by our then existing shareholders. We may value any common stock in the futureIsrael on January 3, 2019 as a wholly-owned subsidiary of Medigus, an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.

On April 20, 2020, ScoutCam Ltd. 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. For additional information about the Intercompany Services Agreement, refer to “—Certain Relationships and Related Party Transactions” below.

Sales and Marketing

Our vision is to improve the performance of organizations by offering prestigious tools that enhance the visual technological capabilities of companies across a variety of industries. Our mission is to become a global leader providing innovative, custom-tailored visualization solutions to organizations across a variety of industries based on small and highly resistant cameras and supplementary technologies. Since we are focused on custom-tailored solutions, we have a very limited offering of off-the-shelf products, which are used mainly as demonstrators for new prospects of our technology and capabilities, rather than as a major source of revenue. Moreover, as we focus only on the visualization apparatus and supporting components, including for example a small camera (that consists of a miniature CMOS video sensor, optics, filters, electronics, housing and cables), illumination, cleaning methods (e.g., irrigation), and/or a mechanical structure based on the customer’s needs, in most cases our products are components of the customer’s end-user products rather than independent end-user products.

Certain illustrative examples of our component parts that have been previously integrated into our clients’ end-user products include:

The Company’s micro ScoutCam™ 6.5 Lum, pictured above, was integrated into a NASA-commissioned project, and as a result it became the first micro camera utilized in orbit, and thereafter was successfully operated outside the International Space Station in May 2015 (see: nexis.gsfc.nasa.gov/rrm_phase2vipir.html and youtu.be/O9bmZJATnJs).

Pictured above is a single-use visualization solution that was developed and sold to A.M. Surgical, which was designed to replace expensive and bulky reusable endoscopes used in carpal tunnel surgery by their Stratos surgical device. We prepared both wired and wireless versions. This device was cleared for marketing by the US Food and Drug Administration (FDA) and the wireless version is compliant with FCC regulations.

Our business model includes engaging companies seeking to add a video visualization to their existing or new product(s) or looking into developing new products that include micro video visualization. Accordingly, our customer base is exclusively comprised of businesses, and therefore we are entirely removed from marketing, manufacturing, selling and distributing end-user products to consumers. Our engagement with businesses is ordinarily conducted in two phases. During the first phase, we conduct the research and development that is required in order to specify, design, develop, and product the designated visualization apparatus, all for an agreed compensation (e.g., a non-recurrent engineering fee). During the second phase, we manufacture the apparatus and sell it to the customer for an agreed transfer price. In some cases, upon a customer’s request, we offer complete ‘turn-key’ contracts, in which this prospectus is included, we will be required to file periodic reports withare responsible for most or all product phases, from the Securities and Exchange Commission pursuantspecifications phase to the Securities Exchange Actprovision of 1934components or products that are complete, packaged and ready for sale. In such cases, we may conduct the rulesnecessary regulatory tests and regulations thereunder. handle the required regulatory approvals. In addition, we may also be responsible, as necessary, for, inter alia, packaging, sterilization, labeling and shipment.

Our customers include technology-based companies and organizations of all sizes, from early stage start-ups to large, well-established, international corporations. However, we prefer engaging the latter business partnership as larger corporations provide financial stability, large purchased quantities, recurring revenue, and valid forecasts for extended durations. In addition, we engage customers from various industries, such as biomedical, aerospace, certain sensitive or classified industries, security and defense, and research.

In order to complylocate and secure new customers we employ both active and passive marketing strategies. As part of our active approach, we employ two business development managers who analyze target industries and assess whether micro visualization components may add value to companies operating in those industries. Once we have identified a potentially relevant industry, we approach a variety of target companies and market the benefits of integrating our micro visualization components into their products. As of the current date, we are in the process of expanding our business development team in order to better and more effectively implement the foregoing marketing strategy. In addition, in order to assist us in identifying such industries and target companies, we consult with subject matter experts from various industries.

In addition to the active marketing strategy described above, we also employ a multitude of available marketing channels in order to increase the exposure of our services to relevant industries. These marketing channels include advertising, participating in relevant tradeshows and conferences, web-marketing, which includes a well maintained website, Search Engine Optimization (SEO), social media presence, frequent distributions of press-releases in target countries, as well as conventional marketing means, including brochures, presentations, etc. Additionally, we issue industry-specific marketing materials that are tailored to highlight the relevant features of our technology to a specific target industry.

As described above, we interact with prospects globally in order to engage in and secure new projects by various business development and marketing means, specifically by way of active and passive marketing measures in order to gather interest from potential customers. These efforts may include, but are not limited to, the following:

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. These efforts include systematical analysis of industrial fields as well as medical fields and procedures in order to identify where miniature visualization solutions might benefit and attract value. To this end, we have contracted business development executives with expertise in these fields that are using various resources and interviewing potential uses in identifying the most promising opportunities. When a potential opportunity is identified we protect our rights by establishing the relevant intellectual property safeguards, develop various prototypes that may be relevant for the specific application and engage the key opinion leaders of that field to validate the feasibility of our solutions. Given that we are not a B2C company, our business model does not include commercialization of end-user products; nevertheless, we intend to engage relevant companies to partner with us in order to convert our innovative prototypes into market-ready products, completing the required regulatory clearances, and commercializing them based on revenue share models.

We have certain internal procedures in place for when a potential customer is identified, which when triggered helps provide a roadmap for the ensuing working relationship with that potential customer. Prior to any formal engagement with a potential customer, two of our departments – business development and R&D – work in parallel and in accordance with their own internal procedures. Our business development department prepares what we refer to as a “business protocol” and the R&D team prepares a “technical protocol”. The goal of these two protocols is to define an understanding with the customer that will ordinarily incorporate two phases: (a) an R&D phase, during which the R&D team develops a custom-tailored visualization component that synthesizes our technology and skill with the customer’s stated requirements, our independent registered auditorsspecifications, and business constraints, and which phase generally includes a formal agreement with respect to the Non-Recurrent Engineering (NRE) fee that is typically payable according to a pre-defined set of milestones; and (b) a production phase, during which we manufacture and supply the component part for an agreed upon transfer price.

Over the years, we have implemented a pricing scheme that allows us to separately price services rendered during the previously described first phase. Pricing of this first phase is typically prepared by the engineering team, which provides an assessment of the anticipated costs associated with the R&D of the project, which price will have to review our financial statementsdepend on a quarterly basisgiven customer’s specifications and auditproject vision. Such costs may include, inter alia, engineering labor, any contracts with sub-contractors, tooling, off-the-shelf and newly designed components, materials, prototypes production, testing, management overhead, and travel costs. Once we have completed our financial statementscost estimation for the R&D phase, we issue our quote with a certain margin to the customer.

In order to price the transfer price that will be issued in connection with the aforementioned second phase, the expected Bill-Of Material (BOM) and Cost-Of-Good Sold (COGS) are established and we price it accordingly with a certain margin to the customer. Often times there are certain modifications to the original project outlined and agreed upon in the R&D phase, which might necessitate an increase or decrease to the pricing of the overall project. For that reason, we tend to include a certain margin of flexibility in the final target transfer price. In addition, we usually link the end transfer price with both annual and per-order Minimum Order Quantities (MOQ), in order to reflect the actual production quantity of the COGS as well as to commercially incentivize the customer to order larger quantities.

Both the negotiation process and the contract drafting are usually done in collaboration with the customer, such that both sides can verify throughout the process that the final agreement meets their technological and business expectations. Furthermore, we are keen to maintain close contact with the customer throughout the two phases of our engagement with the customer, including for example, by way of teleconferences, virtual and actual meetings, document exchanges, on-site visits, and reporting of any completion of predefined milestones.

Our Customers

Currently, we have three major customers that generate most of our current and forecasted revenue in the near term: (1) a large international bio-med company that is developing a visualization component for its invasive surgical device, which project generated 10% of our revenues during the fiscal year-end 2019 (2) a medical device company that specializes in orthopedic surgeries and develops and markets minimally invasive surgical devices, which project generated 28% of our revenues during the fiscal year-end 2019, and (3) a commercial vehicle manufacturer in the aerospace sphere that is engineering a prototype for remote diagnostics of jet engines, which project generated 11% of our revenues during the fiscal year-end 2019.

In addition to these three material customers, we are engaged in initial negotiations with multiple potential customers operating in a variety of sectors, including biomedical, aerospace, industry, military and security, and others. We currently consider the biomedical and aerospace industries to be our core target industries, and from which we receive the greatest level of interest and demand. We are pursuing these potential engagements with the goal of securing research and development contracts that may then materialize into multi-year production contracts. We are in various stages of engagement with a variety of customers in all the above mentioned industries.

In the biomedical space, for example, we generally seek to partner with medical device and pharmaceutical companies that develop endoscopes with or without additional functionality. This variation allows the endoscope to be introduced into anatomical parts that were previously irrelevant within the video-endoscope space either because of the outer diameter and/or price. To this end, we focus on an annual basis. Moreover, our legal counsel willsingle-use products that accommodate the global trend to transition from expensive, multi-use products that require thorough a cleaning protocol, but which cannot be sterilized, to single-use products.

In the defense and military space, we have partnered with the research and development apparatus of the Israel Defense Forces, specifically to review and assist in the preparationdevelopment of such reports. Although we believea small and lightweight “basket of cameras” that can be mounted on either a military-grade helmet or a balloon-type device, which would enable the approximately $10,000viewer to 360 degrees of vision from the mounted vantage point, in addition to automatic threat detection.

Lastly, we have estimated for these costs should be sufficientrecently mobilized efforts to market the possibility of employing the micro ScoutCam™ technology for the 12 month period followingpurposes of monitoring the completionproduction of our offering,Printed Circuit Boards (PCBs). Such an application would complement the costs charged by these professionals for such services may vary significantly. Factors such asrising global market trends associated with Industry 4.0 and Internet of Things (IoT), in which machines are programmed to test themselves and their production output, which then automatically alerts the number and typeprocessor of transactions that we engage in andany potential problems at the complexityoutset of our reports cannot accurately be determined at this time and may have a major negative affect on the cost and amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit.

Competition

We previously operated without competition from various reporting requirements thatother companies; however, today there are applicable to other publicseveral companies that are not “emerging growth companies”offer small cameras, including, but not limited to, not beingOpcom, Fujikura-Picoramedic, Awaiba, Fisba and Misumi. We, unlike the aforementioned competitors, offer customized solutions, which includes additional components as needed. Other companies, such as IntraVu, Medit, and SPI Engineering, offer complete small diameter off-the shelf endoscopes/borescopes. We, however, focus instead on customizing and integrating our solutions into a given customer’s device. Certain companies, such as Enable, Myriad Fiber Imaging Tech., Inc, and Precision Optics, act as direct competitors, since they offer similar services.

Proprietary Rights and Technology

As we develop customized components and/or products per specific customer requirements, our various projects are constantly in different stages of development, including: planning, early R&D for a proof of concept, R&D for a prototype, final product/component development, engineering necessary for a production-ready version, and production of initial batches.

Our intellectual property rights include such patents and patent licenses that were granted or transferred by Medigus as part of the Amended and Restated Asset Transfer Agreement, the License Agreement and the Letter Agreement. For additional information about the License Agreement refer to “—Certain Relationships and Related Party Transactions” below. Under the Amended and Restated Asset Transfer Agreement, Medigus transferred two patent families in exchange for a license in connection with the marketing and sale of the Medigus Ultrasonic Surgical Endostapler. In addition, Medigus granted us a license to access, use, improve, develop, market and sell licensed intellectual property, including the right to any future versions, enhancements, improvements and derivative works of such licensed intellectual property in connection with the development and commercialization of the ScoutCam miniature video technology. Under the Letter Agreement, and subject to certain limitations as further set forth therein, Medigus agreed to transfer outright to us the patent families 34802, 11777 and 24994, each of which is further discussed below.

We currently have rights to a total of five (5) patent families, each of which we consider material to our business and operating success, and which include the following:

Employment

We currently have 22 full-time (or near full-time) employees. This number is expected to grow. We may recruit additional engineers to the R&D team, and recruit additional production employees to support an anticipated increase in production commitments to our customers. Additionally, during the fiscal year-end 2019, a small number of our employees devoted an immaterial amount of time to a specific project managed by Medigus. The allocation of time spent on such project was negligible in relation to the aggregate time spent by these employees on projects managed by the Company during the fiscal year-end 2019.

Regulation

Our approach to regulation is generally determined based on a given project. In our engagements with customers operating in the biomedical sector, we comply with the auditor attestationmedical device standards in that corresponding territory, such as the FDA or International Organization for Standardization (ISO), among others. Compliance with these regulations is achieved through the support we receive from two 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. ISO 13845:2016 is similar to ISO 9001 in terms of its quality management system (QMS) requirements, however, ISO 13485:2016 is generally considered more rigorous and comprehensive.

Given that we do not manufacture or distribute end-user products, and instead service businesses pursuant to a B2B model, we are subject to far fewer regulatory standards commonly associated with medical device manufacturers or distributors. We develop components for other companies that thereafter develop, manufacture and distribute our components, and therefore our involvement in the production chain demands comparatively less regulatory compliance. This notwithstanding, we are careful to communicate with the business customer in order to identify certain regulatory dimensions inherent to the project, to which we should pay additional attention. For example, when a component of ours is integrated into a business’s end-user product, such as for the purpose of touching human tissue, we develop and manufacture our parts and components while taking into account certain applicable regulatory standards. These standards might include, inter alia, relevant FDA regulations (e.g. CFR 21 part 820, the medical device reporting requirements (MDR), among others) as well as ISO regulations (e.g. ISO 14644-1, specifically in connection with cleanrooms and associated controlled environments, among other items, or ISO 10993, in connection with the biological evaluation of medical devices). Furthermore, we prioritize our team’s compliance with the Restriction of Hazardous Substances Directives (RoHS) and REACH (EC 1907/2006).

Similarly, if a component part of ours is incorporated into an electronic device for the purpose of being used inside a human body, we ensure compliance with certain FDA requirements as well as IEC 60601, including the heating of parts at more than 42 degrees Celsius, as well as a variety of additional technical standards designed for the safety and essential performance of medical electrical equipment. Moreover, we perform risk management assessments in accordance with EN ISO 14971:2012 and ISO/TR 24971:2013.

In certain instances, our customers prefer that we conduct the testing of its products in internationally certified labs in order to further guarantee our component parts satisfy the applicable regulatory standards. In this scenario, we perform the required tests as a service to the customer and provide the customer with the official test results, specifically in accordance with ISO/IEC 17025:2017, which the customer can later use in order to apply for the required marketing clearance of its end-user product.

Properties

We do not own property and currently lease our principal corporate office, which is located at Suite 7A, Industrial Park, P.O. Box 3030, Omer, Israel 8496500. We believe our leased office sufficiently meets our current needs.

MANAGEMENT

Current Management

The following table sets forth the names and ages of our directors and executive officers:

Prof. Benad Goldwasser has served as chairman of our board of directors since December 26, 2019, and has served as chairman of ScoutCam Ltd.’s board of directors since its inception. Prof. Goldwasser is a serial entrepreneur and retired urology medical doctor. In 2016, Prof. Goldwasser launched a venture capital fund partnered with SAIL, a Shanghai Government investment company. Prof. Goldwasser has served as a member of the board of directors of Innoventric Ltd. since 2017. From 2013-2016 Prof. Goldwasser served as an external director of BioCanCell Ltd. (TASE: BICL). Prof. Goldwasser was the co-founder of Vidamed Inc., Medinol Ltd., Rita Medical Inc., Optonol Ltd. and GI View Ltd. Prof. Goldwasser served as managing director of Biomedical Investments Ltd., an Israeli Venture Capital firm. During his medical career, he served as Chairman of Urology at the Chaim Sheba Medical Center and Professor of Surgery at Tel-Aviv University. Prof. Goldwasser holds an MD and MBA from Tel-Aviv University.

Dr. Yaron Silberman has served as our chief executive officer since December 27, 2019, and has served as chief executive officer of ScoutCam Ltd. since March 2019. Prior to that, since January 2011, Dr. Silberman served as ScoutCam’s VP Sales and Marketing. Dr. Silberman has served as Marketing Director of NiTi Surgical Solutions Ltd., and as Product Manager of Given Imaging Ltd. Dr. Silberman holds a PhD in Computational Neuroscience and Data Processing from Hebrew University of Jerusalem, Israel, an MBA from the College of Management Academic Studies of Rishon Le’Zion, Israel, and a BA in Theoretical Mathematics from The Technion Institute of Technology, Israel.

Tanya Yosef has served as our chief financial officer since December 27, 2019. Ms. Yosef is a certified public accountant with many years of experience, who has served as the Company’s controller since December 2009. During 2008-2009 Ms. Yosef worked in the audit department at Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited. Ms. Yosef holds a BA in Economics and Accounting from the Ben-Gurion University of the Negev.

Shmuel Donnerstein has served on our board of directors since December 26, 2019. Mr. Donnerstein is the chairman and owner of the RB Group. Prior to that, in 1995 Mr. Donnerstein established Open Gallery Door Company, and in 1998 led its merger with Carmiel Timber Plants, which Mr. Donnerstein had acquired prior to the merger. Mr. Donnerstein managed the combined company until 2006. Earlier in his career, Mr. Donnerstein was owner and CEO of Motti Sweets from 1975 until it was acquired by the Strauss Group in 1983. In 2014, Mr. Donnerstein was awarded the Industry Prize from the Manufacturers’ Association of Israel.

Ronen Rosenbloom has served as a member of our Board since December 26, 2019. Mr. Rosenbloom is an independent lawyer working out of a self-owned law firm specializing in white collar offences. Mr. Rosenbloom serves as chairman of the Israeli Money Laundering Prohibition committee and the Prohibition of Money Laundering Committee of the Tel Aviv District, both of the Israel Bar Association. Mr. Rosenbloom previously served as a police prosecutor in the Tel Aviv District. Mr. Rosenbloom holds an LLB from the Ono Academic College, an Israeli branch of University of Manchester.

Issac Zilberman has served as a member of our Board since December 26, 2019. From 2007 through the end of 2016, Mr. Zilberman also served as a special investment advisor at Sullam Holdings L.R. Ltd., a financial services corporation in the Lenny Recanati Group, focusing primarily on investments in high-tech, biotechnology and real estate companies. Mr. Zilberman also serves as a director in other private Israeli companies, and has over 20 years of prior experience as an executive officer of various public and private companies. Mr. Zilberman holds a BA in economics and accounting from Tel Aviv University in Tel Aviv, Israel, and he is a certified public accountant in Israel.

Lior Amit has served on our board of directors since December 26, 2019. Since 2014, Mr. Amit has served as a financial consultant to multiple companies on matters related to, inter alia, mergers and acquisitions. Mr. Amit currently serves as a member of the board of directors for multiple Israeli public and private companies, including in the role of an external or independent director. Mr. Amit holds both a BA in economics and accounting and an MBA from Tel-Aviv University. Mr. Amit is a certified public accountant in Israel.

Dr. Irit Yaniv has served on our board of directors since May 18, 2020. Dr. Yaniv is an experienced and accomplished senior executive in the Medtech industry. She played a significant role in leading Accelmed’s ventures portfolio companies, since 2012. Dr. Yaniv was the co-founder of two of Accelmed’s portfolio companies, each in the field of metabolic disorders (e.g. diabetes and obesity). Currently, she serves as either the chairperson or as an active board member for the aforementioned Israeli portfolio companies. Dr. Yaniv holds an MD from the Ben-Gurion University in Beer Sheva, Israel, and an MBA from the Recanati Business School at Tel Aviv University.

Director Independence

We currently have two independent directors on our board of directors, Professor Benad Goldwasser and Mr. Shmuel Donnerstein. We are not currently subject to listing requirements of Section 404any national securities exchange, which generally stipulates certain requirements that a majority of a company’s board of directors be classified as “independent”. As a result, we are not at this time required to have our board of directors comprised of a majority of “independent directors”. Notwithstanding the foregoing, we have voluntarily adopted the definition of ���independent” as defined under Nasdaq Rule 5605(a)(2), and believe both Professor Goldwasser and Mr. Donnerstein qualify accordingly.

Board Leadership Structure and Role in Risk Oversight

Our board of directors is primarily responsible for overseeing our risk management processes on behalf of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in ourCompany. The board of directors intends going forward to receive and review periodic reports from management, auditors, legal counsel, and proxy statements,others, as considered appropriate regarding our assessment of risks. The board of directors intends to focus on the most significant risks facing the Company and exemptions fromour general risk management strategy, and also will attempt to ensure that risks undertaken by the requirementsCompany are consistent with our board of holding a nonbinding advisory vote ondirectors’ appetite for risk. While the board of directors oversees our risk management, management is responsible for day-to-day risk management processes.

Board Committees

Currently, our board of directors does not have any audit, nominating or compensation committees, or committees performing similar functions.

Director Relationships

There are no family relationships between or among any of our directors or executive officers.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets out the compensation and shareholder approvalpaid, for the twelve-month period ended December 31, 2019, to the following Named Executive Officers:

Employment Agreements

ScoutCam Ltd. has entered into written employment agreements with each of any golden parachute payments not previously approved. We intend to take advantageour non-director executive officers. All of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” for up to five years, or untilagreements contain customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. However, the earliest of (i) the last dayenforceability of the firstnoncompetition provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them to the fullest extent permitted by law to the extent that these liabilities are not covered by directors and officers insurance.

Employment Agreement with Yaron Silberman

Pursuant to the terms of Dr. Yaron Silberman’s employment agreement with ScoutCam Ltd., effective as of February 28, 2019, he is entitled to a monthly salary of NIS 44,400. Dr. Silberman’s employment agreement provides that the Company may terminate his employment by providing sixty (60) days’ prior notice. Dr. Silberman’s employment agreement also provides for the use of a company-paid cellular phone, a leased company car and reimbursement of certain car-related expenses. Dr. Silberman’s agreement includes customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. Dr. Silberman does not have a separate contractual engagement with ScoutCam Inc.

Employment Agreement with Idan Maimon

Pursuant to the terms of Mr. Idan Maimon’s employment agreement with Intellisense Solutions Inc., the previous name of ScoutCam Inc., effective as of April 1, 2019 and terminated on December 26, 2019, Mr. Maimon was entitled to a monthly fee of $1,000. The original term of Mr. Maimon’s agreement was for a period of twelve (12) months, and Mr. Maimon was entitled to resign from his position at any time upon providing thirty (30) days written notice to the Company. Mr. Maimon’s agreement also provided for the reimbursement of all reasonable and pre-approved out-of-pocket expenses incurred in connection with his employment with the Company. Mr. Maimon’s agreement included customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. Mr. Maimon resigned from his position as Chief Executive Officer of the Company on December 26, 2019 and, accordingly, terminated his agreement with the Company.

Employment Agreement with Amir Govrin

Pursuant to the terms of Mr. Amir Govrin’s employment agreement with ScoutCam Ltd., effective as of May 1, 2019, he is entitled to a monthly salary of NIS 37,400. Mr. Govrin’s employment agreement provides that the Company may terminate his employment by providing sixty (60) days’ prior notice. Mr. Govrin’s employment agreement also provides for the use of a company-paid cellular phone, a leased company car and reimbursement of certain car-related expenses. Mr. Govrin’s agreement with ScoutCam Ltd. includes customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. Mr. Govrin does not have a separate contractual engagement with ScoutCam Inc.

Employment Agreement with Gal Golov

Pursuant to the terms of Mr. Gal Golov’s employment agreement with ScoutCam Ltd., effective as of March 1, 2019, he is entitled to a monthly salary of NIS 27,600. Mr. Golov’s employment agreement provides that the Company may terminate his employment by providing sixty (60) days’ prior notice. Mr. Golov’s employment agreement also provides for the use of a company-paid cellular phone and the reimbursement of certain travel-related expenses. Mr. Golov’s agreement with ScoutCam Ltd. includes customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. Mr. Golov does not have a separate contractual engagement with ScoutCam Inc.

Director Compensation

Except for the following agreements, we do not have any written agreements with any of our directors:

Consulting Agreement with Professor Benad Goldwasser

On July 31, 2019, ScoutCam Ltd. and Prof. Benad Goldwasser entered into a consulting agreement, whereby Professor Goldwasser agreed to serve as chairman of the board of directors of ScoutCam Ltd., in consideration for, inter alia, a monthly fee of $10,000 and options representing 5% of our fully-diluted share capital as of the SEA Closing. Pursuant to the terms of this consulting agreement, effective as of March 1, 2019, either the Company or Professor Goldwasser may terminate this agreement by giving the opposite party sixty (60) days��� advance notice in writing; provided, however, that the Company may terminate the agreement for Cause (as defined therein) without advance notice. Prof. Goldwasser’s agreement also provides for the reimbursement of all necessary and customary business expenses incurred in connection with his engagement with the Company. Prof. Goldwasser’s agreement with the Company includes customary provisions regarding noncompetition and confidentiality of information. Professor Goldwasser does not have a separate contractual engagement with ScoutCam Inc.

The following table sets out the compensation paid to directors for services rendered during the fiscal year ended December 31, 2019.

Equity Compensation Plan Information

2020 Share Incentive Plan

We have adopted the 2020 Plan under which our annual gross revenues exceed $1 billion, (ii)we may grant equity-based incentive awards to attract, motivate and retain the date that you become a “large accelerated filer” as defined in Rule 12b-2talent for which we compete.

Authorized Shares. The maximum number of ordinary shares available for issuance under the Exchange Act, which would occur if2020 Plan is equal to the sum of 5,804,895 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. 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.

The administrator also has the authority to amend and rescind rules and regulations relating to the 2020 Plan or terminate the 2020 Plan at any time before the date of expiration of its ten year term.

Eligibility. The 2020 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section 102 of the Israeli Income Tax Ordinance (New Version), 5721-1961 (the “Ordinance”), and Section 3(i) of the Ordinance and for awards granted to our United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Code and Section 409A of the Code.

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.

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. The award agreement will set forth the terms and conditions of the award, including the type of award, number of shares subject to such award, vesting schedule and conditions (including performance goals or measures) and the exercise price, if applicable. Certain awards under the 2020 Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Code, which may impose additional requirements on the terms and conditions of such awards.

Each award will expire seven years from the date of the grant thereof, unless such shorter term of expiration is otherwise designated by the administrator.

Awards. The 2020 Plan provides for the grant of stock options (including incentive stock options and nonqualified stock options), shares of common stock, that isrestricted shares, restricted share units and other share-based awards.

Options granted under the 2020 Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified stock options. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant stockholders).

Exercise. An award under the 2020 Plan may be exercised by providing the company with a written or electronic notice of exercise and full payment of the exercise price for such shares underlying the award, if applicable, in such form and method as may be determined by the administrator and permitted by applicable law. An award may not be exercised for a fraction of a share. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2020 Plan, the administrator may, in its discretion, accept cash, provide for net withholding of shares in a cashless exercise mechanism or direct a securities broker to sell shares and deliver all or a part of the proceeds to the Company or the trustee.

Transferability. Other than by will, the laws of descent and distribution or as otherwise provided under the 2020 Plan, neither the options nor any right in connection with such options are assignable or transferable.

Termination of Employment. In the event of termination of a grantee’s employment or service with the company or any of its affiliates, all vested and exercisable awards held by non-affiliates exceeds $700 millionsuch grantee as of the last business daydate of our most recently completed second fiscal quarter,termination may be exercised within three months after such date of termination, unless otherwise determined by the administrator. After such three month period, all such unexercised awards will terminate and the shares covered by such awards shall again be available for issuance under the 2020 Plan.

In the event of termination of a grantee’s employment or (iii)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 onof termination may be exercised by the grantee or the grantee’s legal guardian, estate, or by a person who acquired the right to exercise the award by bequest or inheritance, as applicable, within twelve months after such date of termination, unless otherwise provided by the administrator. Any awards which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Transactions. In the event of a share split, reverse share split, share dividend, recapitalization, combination or reclassification of our Business Startups Actshares, or any other increase or decrease in the number of 2012,issued shares effected without receipt of consideration by the company (but not including the conversion of any convertible securities of the company), the administrator in its sole discretion shall make an appropriate adjustment in the number of shares related to each outstanding award and to the number of shares reserved for issuance under the 2020 Plan, to the class and kind of shares subject to the 2020 Plan, as well as the exercise price per share of each outstanding award, as applicable, the terms and conditions concerning vesting and exercisability and the term and duration of outstanding awards, or any other terms that the administrator adjusts in its discretion, or the type or class of security, asset or right underlying the award (which need not be only that of the Company, and may be that of the surviving corporation or any affiliate thereof or such other entity party to any of the above transactions); provided that any fractional shares resulting from such adjustment shall be rounded down to the nearest whole share unless otherwise determined by the administrator. In the event of a distribution of a cash dividend to all 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.

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. 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.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Related Party Transactions

The following is a description of transactions since January 1, 2017, to which we may take advantagewere a party or will be a party, in which the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years, and any of our directors, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.

On June 3, 2019, Medigus executed a capital contribution into ScoutCam Ltd. of an aggregate amount of $720,000.

On July 31, 2019, ScoutCam Ltd. and Prof. Benad Goldwasser entered into a consulting agreement, whereby Prof. Goldwasser agreed to serve as chairman of the board of directors of ScoutCam Ltd., effective retroactively to March 1, 2019, in consideration for, inter alia, a monthly fee of $10,000 and options representing 5% of our fully-diluted share capital as of the SEA Closing.

On August 27, 2019, Medigus provided ScoutCam Ltd. with a line of credit in the aggregate amount of US$500,000, and, in exchange, ScoutCam Ltd. granted Medigus a capital note that bears an annual interest rate of 4%. The repayment of the credit line amount is spread over one year in monthly payments beginning on the date of the SEA Closing, being December 30, 2019. As of December 31, 2019, ScoutCam Ltd. has withdrawn the entire amount of the line of credit.

On September 3, 2019, a certain exemptions from various reporting requirementsAsset Transfer Agreement by and between ScoutCam Ltd. and Medigus dated May 28, 2019 became effective, whereby, inter alia, ScoutCam Ltd. transferred certain assets to Medigus representing an aggregate amount of $168,000. Under the terms of the Amended and Restated Asset Transfer Agreement, Medigus transferred certain intellectual property rights and licenses, collectively representing an aggregate of $9.8 million.

On September 16, 2019, Intellisense and Medigus entered into that are applicablecertain Exchange Agreement, pursuant to other public companies,which Medigus assigned, transferred and delivered 100% of its holdings in ScoutCam Ltd. to Intellisense, in exchange for consideration consisting of shares of the Company’s common stock representing 60% of the issued and outstanding share capital of the Company immediately upon the SEA Closing. The Exchange Agreement was conditioned on certain obligations by the respective parties, including, but not limited to, not being required to complythe Company having no less than $3 million in cash on hand upon the SEA Closing, and that the Company bear the costs and expenses in connection with the auditor attestation requirements of Section 404execution of the Sarbanes-Oxley Act, reduced disclosureExchange Agreement. The Exchange Agreement provided that if ScoutCam Ltd. achieves an aggregate amount of $33 million in sales within the first three years immediately after the SEA Closing, the Company will issue to Medigus 2,688,492 shares of the Company’s common stock, which represents 10% of the Company’s issued and outstanding share capital as of the SEA Closing.

On December 1, 2019, Medigus and ScoutCam Ltd. entered into that certain Amended and Restated Asset Transfer Agreement, which transferred and assigned certain assets and intellectual property rights related to its miniaturized imaging business. Under the Amended and Restated Asset Transfer Agreement, Medigus transferred two patent families to ScoutCam Ltd. in exchange for a perpetual, transferable, worldwide, royalty free, sub licensable license, to access and use the transferred patent families in connection with the development, marketing and sale of the Medigus Ultrasonic Surgical Endostapler. In addition, Medigus granted us a non-exclusive license to access, use, improve, develop, market and sell licensed intellectual property, including the right to any future versions, enhancements, improvements and derivative works of such licensed intellectual property in connection with the development and commercialization of the ScoutCam miniature video technology.

As a condition of the aforementioned license, Medigus is prohibited from selling, offering to sell or grant any ownership right in the licensed intellectual property to any potential direct competitor of ScoutCam Ltd. In addition, ScoutCam Ltd. is obligated to provide Medigus with consultancy and support services for no consideration, on matters relating to the management, development, maintenance and commercialization of Medigus’ patent portfolio. The Amended and Restated Asset Transfer Agreement is for an indefinite term and it was contractually permissible to terminate the agreement pursuant to the mutual written consent of the parties prior to closing.

Also on December 1, 2019, ScoutCam Ltd. and Medigus entered into that certain License Agreement granting ScoutCam Ltd. a perpetual, non-exclusive, transferable solely upon an M&A Event (as defined therein), royalty free, license to access, use, improve, develop either by or on behalf of ScoutCam Ltd., market and sell the licensed patent family, including the right to any future versions, enhancements, improvements and derivative works of the licensed intellectual property for the purpose of developing and commercializing the ScoutCam miniature video technology. As a condition to the agreement, Medigus is prohibited from selling, offering to sell or grant any ownership right in the licensed intellectual property to any potential direct competitor of ScoutCam Ltd.

The patent family licensed under the License Agreement includes know-how which was funded through benefits and incentives provided by the IIA. As a result of such funding, the patent family is subject to certain restrictions and obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions frompursuant to the requirements of holding a nonbinding advisory vote on executive compensation and shareholderInnovation Law. The restrictions applicable to patent family licensed pursuant to the License Agreement require approval of the IIA prior to manufacturing products resulting from IIA funded know-how outside of Israel, prior to the transfer of IIA funded know-how out of Israel and prior to a grant of the license out of Israel in connection with the IIA funded know-how. In addition, ScoutCam Ltd. is obligated to notify the IIA of any golden parachute payments not previously approved. We cannot predict ifchange of control and of any non-Israeli entity which becomes an “Interested Party” as defined in the Israeli Companies Law, 5759-1999, as amended. An Interested Party includes a shareholder holdings 5% or more of a company’s issued and outstanding share capital, an entity entitled to appoint a director or the chief executive officer of a company as well as the directors and chief executive officer of a company.

On December 10, 2019 (the “Effective Date”), ScoutCam Ltd. and Shrem Zilberman Group Ltd. (the “Consultant”) entered into a consulting agreement, which agreement will continue in effect until terminated either (i) by the Consultant at any time or (ii) by ScoutCam Ltd. following the first anniversary of the Effective Date, in each case upon giving the opposite party 30 (thirty) days advance written notice. Pursuant to the terms of this agreement, in exchange for certain consulting services, the Consultant received, among other things, an aggregate flat fee of $165,000 and an amount representing 3% of any exercise price related to those warrants issued as part of that certain Securities Purchase Agreement executed by and between the Company and those investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractivelisted therein. Additionally, in the event the total proceeds received as a result thereof exercise of such Warrants will be less than $2 million at the time of their expiration, the Consultant will be required to invest $250,000 in the Company. The owner of the Consultant, Mr. Kfir Zilberman, is the son of a director of the Company, Issac Zilberman, and therefore such agreement has been classified by the Company as a related party transaction.

On February 12, 2020, the Company’s Board of Directors authorized the allotment of options to purchase 2,235,691 shares of Common Stock to Prof. Benad Goldwasser, our Chairman of the Board, representing 5% of our fully-diluted share capital as of the Closing Date as in accordance with that agreement on July 31, 2019, and 1,865,346 options to purchase shares of Common Stock to certain officers of the Company. Each option is convertible into one share of Common Stock at an exercise price of $0.29.

On March 15, 2020, the Company’s Board of Directors approved, among other things, a quarterly fee of $4,000 payable to each of the Company’s currently serving directors, excluding Professor Benad Goldwasser; and an allotment of options to purchase 576,888 shares of Common Stock of the Company to each of the Company’s currently serving directors, excluding Professor Benad Goldwasser. The terms of the options granted to the Company’s currently serving directors include (i) an exercise price of $0.29 (ii) a vesting schedule whereby 25% of the options granted will vest on the first anniversary of March 15, 2020, and 6.25% of the options will vest at the end of each subsequent three-month period thereafter over the course of the following two (2) years; and (iii) an acceleration mechanism pursuant to which any outstanding and unvested option shall immediately accelerate and vest upon the occurrence of certain events, including, inter alia, a merger or sale of all assets of the Company.

On April 20, 2020, Medigus and ScoutCam Ltd. entered into that certain Intercompany Services Agreement, which amended and restated the intercompany services agreement executed between the parties on May 30, 2019. The agreement has an initial term of one year, and renews automatically for additional one-year periods, unless either party provides 60 (sixty) days written notice of non renewal. Either Medigus or ScoutCam Ltd. may terminate the agreement for convenience upon providing 60 (sixty) days prior written notice. The services to be provided by ScoutCam Ltd. include, inter alia, the provision of office space, utilities, car services, insurance and chief financial officer services. In consideration for the foregoing services, ScoutCam Ltd. is entitled to arm’s length service fees based on the most recent transfer pricing analysis as performed by an external expert, which may be a less active trading market for our common stockadjusted from time to time.

On May 18, 2020, in connection with the Arkin Transaction (as defined below), the Company, Medigus and our stock price may be more volatile.

Also on May 18, 2020, and in connection with the Arkin Transaction, the Company, Medigus and Arkin entered into a Voting Agreement, pursuant to which Arkin and Medigus each agreed to vote their respective shares of Common Stock in favor of the election of the opposite party’s designated representative(s), as applicable, to the Board. Each of Arkin’s and Medigus’ rights under the Voting Agreement are contingent upon, inter alia, such party maintaining a certain beneficial ownership threshold in the Company, as defined therein.

On June 23, 2020, the Company and Medigus entered into a certain Conversion Side Letter, pursuant to which the Company converted US$381,136 worth of outstanding credit previously extended by Medigus to the Company, which amount, as of the date thereof, included interest accrued thereon. In accordance with the terms of the Conversion Side Letter, the Company issued to Medigus, at a purchase price of US$0.968, (a) 787,471 shares of Common Stock, (b) warrants to purchase 393,736 shares of Common Stock at an exercise price of US$0.595, and (c) warrants to purchase 787,471 shares of Common Stock at an exercise price of US$0.893.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below provides information regarding the beneficial ownership of our Common Stock as of June 23, 2020, of (i) each of our current directors, (ii) each of the Named Executive Officers, (iii) all of our current directors and officers as a group, and (iv) each person or revised accounting standardsentity known to us who owns more than 5% of our Common Stock.

The percentage of Common Stock beneficially owned is based on 33,764,128 shares of Common Stock outstanding as other public companiesof June 23, 2020. The number and percentage of shares beneficially owned by a person or entity also include shares of Common Stock issuable upon exercise of warrants that are currently exercisable or will become exercisable within 60 days of June 23, 2020. However, these shares are not “emerging growth companies.”

A “combination” is generally defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, with an “interested stockholder” having: (a) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, (c) 10% or more of the earning power or net income of the corporation, and (d) certain other transactions with an interested stockholder or an affiliate or associate of an interested stockholder.

In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) 10% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire the Company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

Control Share Acquisition

The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS apply to “issuing corporations,” which are Nevada corporations with at least 200 stockholders, including at least 100 of whom are stockholders of record who are Nevada residents, and residents of Nevada, and it doeswhich conduct business directly or indirectly in Nevada or throughNevada. The control share statute prohibits an affiliated corporation. The law focuses on the acquisitionacquirer, under certain circumstances, from voting its shares of a “controlling interest” which meanstarget corporation’s stock after crossing certain ownership threshold percentages, unless the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportionsacquirer obtains approval of the voting power of the corporation in the election of directors:

A corporation may have the effect of discouraging takeovers of the corporation.

At this time, we do not have 100 stockholders of record resident ofin Nevada. Therefore, the provisions of the control share acquisition act do not apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply to us, the provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant interest in or control of the Company, regardless of whether such acquisition may be in the interest of our stockholders.