☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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International Financial Reporting Standards as issued by the International Accounting Standards Board ☐

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We are a technology company engaged in development of smart multi-spectral 3D vision software solutions and cellular-based applications. Through our wholly owned subsidiaries, Foresight Automotive Ltd., or Foresight Automotive, Foresight Changzhou Automotive Ltd., or Foresight Changzhou and Eye-Net Mobile Ltd., or Eye-Net Mobile, we develop both “in-line-of-sight” vision ~~systems~~solutions and “beyond-line-of-sight” accident-prevention solutions.

Our 3D vision solutions include modules of automatic calibration ~~sensor fusion~~ and dense three-dimensional (3D) point cloud that can be applied to ~~different~~diverse markets such as automotive, defense, autonomous vehicles, agriculture and heavy industrial equipment. Eye-Net Mobile’s cellular-based solution suite provides real-time pre-collision alerts to enhance road safety and situational awareness for all road users in the urban mobility environment by incorporating cutting-edge artificial intelligence (AI) technology and advanced analytics.

We were incorporated in the State of Israel in September 1977 under the name Golan Melechet Machshevet (1997) Ltd. In April 1987, we became a public company in Israel, and our shares were listed for trade on the Tel Aviv Stock Exchange Ltd., or TASE. On May 16, 2010, we changed our name to Asia Development (A.D.B.M.) Ltd., and on January 12, 2016, we changed our name to Foresight Autonomous Holdings Ltd. Our Ordinary Shares are currently traded on the TASE, and American Depositary Shares, or ADSs, each representing five of our Ordinary Shares, currently trade on the Nasdaq Capital Market, both under the symbol “FRSX”. The Bank of New York Mellon acts as depositary of the ADSs.

Certain information included or incorporated by reference in this annual report on Form 20-F may be deemed to be “forward-looking statements”. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “predict,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20-F which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

You should not put undue reliance on any forward-looking statements. Any forward-looking statements in this annual report on Form 20-F are made as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, the section of this annual report on Form 20-F entitled “Item 4. Information on the Company” contains information obtained from independent industry sources and other sources that we have not independently verified.

Unless otherwise indicated, all references to the “Company,” “we,” “our” and “Foresight” refer to Foresight Autonomous Holdings Ltd. and its ~~subsidiary,~~wholly owned subsidiaries, Foresight Automotive Ltd, an Israeli corporation, Eye-Net Mobile Ltd, an Israeli corporation, and Foresight Automotive’s wholly owned subsidiary, ~~Eye-Net Mobile~~Foresight Changzhou Automotive Ltd, ~~an Israeli~~a Chinese corporation. References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to “Ordinary Shares” are to our Ordinary Shares, no par value. We report our financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

Unless the context otherwise indicates or requires, “Foresight Autonomous Holdings,” ~~“Foresight®~~“Foresight^®,” the Foresight Autonomous Holdings logo and all product names and trade names used by us in this annual report on Form 20-F, including ~~QuadSight®~~ QuadSight^®and Eye-Net™ are our proprietary trademarks and service marks. These trademarks and service marks are important to our business. Although we have omitted the “®” and “^TM” trademark designations for such marks in this annual report on Form 20-F, all rights to such trademarks and service marks are nevertheless reserved.

The risk factors described below are a summary of the principal risk factors associated with an investment in us. These are not the only risks we face. You should carefully consider these risk factors, together with the risk factors set forth in Item 3D. of this Report and the other reports and documents filed by us with the SEC.

You should carefully consider the risks described below, together with all of the other information in this annual report on Form 20-F. If any of these risks actually occurs, our business and financial condition could suffer and the price of the ADSs could decline.

We are a development-stage company and have a limited operating history on which to assess the prospects for our business, have incurred significant losses since the date of our inception, and anticipate that we will continue to incur significant losses until we are able to successfully commercialize our products.

Our significant shareholder, Magna B.S.P. Ltd., or Magna, was incorporated in Israel in 2001. Starting in 2011, Magna began to develop technology devoted to vehicle safety. Magna operated its vehicle safety segment of operations as a separate division for accounting purposes. On October 11, 2015, we entered into a merger agreement, or the Merger, with Magna and Foresight Automotive, whereby we acquired 100% of the share capital of Foresight Automotive from Magna. Since the date of the Merger, we have been operating as a development-stage company and have a limited operating history on which to assess the prospects for our business, have incurred significant losses, and anticipate that we will continue to incur significant losses for the foreseeable future.

Since the date of the Merger, and as of December 31, ~~2020,~~2022, we have incurred net losses of approximately ~~$64.8~~$101.5 million.

We have devoted substantially all of our financial resources to develop our products. We have financed our operations primarily through the issuance of equity securities. The amount of our future net losses will depend, in part, on completing the development of our products, the rate of our future expenditures and our ability to obtain funding through the issuance of our securities, strategic collaborations or grants. We expect to continue to incur significant losses until we are able to successfully commercialize our products. We anticipate that our expenses will increase substantially if and as we:

We have not generated any significant revenue from the sale of our current products and may never be profitable.

We have not yet commercialized any of our products and have not generated any significant revenue since the date of the Merger. Our ability to generate revenue and achieve profitability depends on our ability to successfully complete the development of, and to commercialize, our products. Our ability to generate future revenue from product sales depends heavily on our success in many areas, including but not limited to:

We expect that we will need to raise substantial additional capital before we can expect to become profitable from sales of our products. This additional capital may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

We expect that we will require substantial additional capital to commercialize our products. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including but not limited to:

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of the ADSs and Ordinary Shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or products or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of our products or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

We maintain our cash at financial institutions, some in balances that exceed federally insured limits.

A small portion of our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held in non-interest-bearing and interest-bearing operating accounts may exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. The FDIC took control of one such banking institution, Silicon Valley Bank, or SVB, on March 10, 2023, in which we held funds in certain accounts and as a result, we stood to lose approximately $0.6 million. The FDIC also took control of Signature Bank on March 12, 2023, though we do not hold any accounts at this bank.

On March 13, 2023, the U.S. Federal Reserve announced that account holders would not bear the loss of SVB’s collapse and since that time, we have been able to make payments and move all of the funds held in SVB to other banks in the United States Thus, we do not view the risk as material to our financial condition. However, as the FDIC continues to address the situation with SVB, Signature Bank and other similarly situated banking institutions, the risk of loss in excess of insurance limitations has generally increased. Any material loss that we may experience in the future could have an adverse effect on our ability to pay our operational expenses or make other payments and may require us to move our accounts to other banks, which could cause a temporary delay in making payments to our vendors and employees and cause other operational inconveniences.

Defects in products could give rise to product returns or product liability, warranty or other claims that could result in material expenses, diversion of management time and attention, and damage to our reputation.

Even if we are successful in introducing our products to the market, our products may contain undetected defects or errors that, despite testing, are not discovered until after a product has been used. This could result in delayed market acceptance of those products, claims from distributors, end-users or others, increased end-user service and support costs and warranty claims, damage to our reputation and business, or significant costs to correct the defect or error. We may from time to time become subject to warranty or product liability claims that could lead to significant expenses as we need to compensate affected end-users for costs incurred related to product quality issues.

Any claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, and damage to our reputation, and could cause us to fail to retain or attract customers. Currently, we do not maintain product liability insurance, which will be necessary prior to the commercialization of our products. It is likely that any product liability insurance that we will have in the future will be subject to significant deductibles and there is no guarantee that such insurance will be available or adequate to protect against all such claims, or we may elect to self-insure with respect to certain matters. Costs or payments made in connection with warranty and product liability claims and product recalls or other claims could materially affect our financial condition and results of operations.

Furthermore, the automotive industry in general is subject to litigation claims due to the nature of personal injuries that result from traffic accidents. The emerging technologies of advanced driver assistance systems, or ADAS, and autonomous driving have not yet been litigated or legislated to a point whereby their legal implications are well documented. As a potential provider of such products, we may become liable for losses that exceed the current industry and regulatory norms. In addition, if any of our products are, or are alleged to be, defective, we may be required to participate in a recall of such products if the defect or the alleged defect relates to motor vehicle safety. Depending on the terms under which we supply our products, an auto manufacturer or other ADAS developers to whom we sell our software may hold us responsible for some or all of the entire repair or replacement costs of these products.

Our future success depends in part on our ability to retain our executive officers and to attract, retain and motivate other qualified personnel.

We are highly dependent on the services of ~~both~~ Mr. Haim ~~Siboni and Mr. Levy Zruya.~~Siboni. The loss of ~~their~~his services without proper replacement may adversely impact the achievement of our objectives. ~~Messrs.~~Mr. Siboni ~~and Zruya~~ may leave our employment at any time subject to contractual notice periods, as applicable. Also, our performance is largely dependent on the talents and efforts of highly skilled individuals, particularly our software engineers and computer vision professionals. Recruiting and retaining qualified employees, consultants, and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled personnel in our industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition in the industry in which we operate. Moreover, certain of our competitors or other technology businesses may seek to hire our employees. The inability to recruit and retain qualified personnel, or the loss of the services of our executive officers, without proper replacement, may impede the progress of our development and commercialization objectives.

Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

We generally enter into non-competition agreements with our employees. These agreements prohibit our employees from competing directly with us or working for our competitors or clients for a limited period after they cease working for us. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefiting from the expertise that our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer that have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

We depend entirely on the success of our current products in development, and we may not be able to successfully introduce these products and commercialize them.

We have invested almost all of our efforts and financial resources in the research and development of our products in development. As a result, our business is entirely dependent on our ability to complete the development of, and to successfully commercialize, our product candidates. The process of development and commercialization is long, complex, costly and uncertain of outcome.

We may not be able to introduce products acceptable to customers and we may not be able to improve the technology used in our current ~~systems~~solutions in response to changing technology and end-user needs.

The markets in which we operate are subject to rapid and substantial innovation, regulation and technological change, mainly driven by technological advances and end-user requirements and preferences, as well as the emergence of new standards and practices. Even if we are able to complete the development of our products in development, our ability to compete in the ADAS, semi-autonomous and autonomous vehicle markets will depend, in large part, on our future success in enhancing our existing products and developing new ~~systems~~solutions that will address the varied needs of prospective end-users, and respond to technological advances and industry standards and practices on a cost-effective and timely basis to otherwise gain market acceptance.

Even if we successfully introduce our existing products in development, it is likely that new ~~systems~~solutions and technologies that we develop will eventually supplant our existing ~~systems~~solutions or that our competitors will create ~~systems~~solutions that will replace our ~~systems.~~solutions. As a result, any of our products may be rendered obsolete or uneconomical by our or others’ technological advances.

We may not be able to successfully manage our planned growth and expansion.

We expect to continue to make investments in our products in development. We expect that our annual operating expenses will continue to increase as we invest in business development, marketing, research and development, manufacturing and production infrastructure, and develop customer service and support resources for future customers. Failure to expand operational and financial systems timely or efficiently may result in operating inefficiencies, which could increase costs and expenses to a greater extent than we anticipate and may also prevent us from successfully executing our business plan. We may not be able to offset the costs of operation expansion by leveraging the economies of scale from our growth in negotiations with our suppliers and contract manufacturers. Additionally, if we increase our operating expenses in anticipation of the growth of our business and this growth falls short of our expectations, our financial results will be negatively impacted.

If our business grows, we will have to manage additional product design projects, materials procurement processes, and sales efforts and marketing for an increasing number of products, as well as expand the number and scope of our relationships with suppliers, distributors and end customers. If we fail to manage these additional responsibilities and relationships successfully, we may incur significant costs, which may negatively impact our operating results. Additionally, in our efforts to be first to market with new products with innovative functionality and features, we may devote significant research and development resources to products and product features for which a market does not develop quickly, or at all. If we are not able to predict market trends accurately, we may not benefit from such research and development activities, and our results of operations may suffer.

As our future development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales, marketing, financial and legal personnel. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, failure to deliver and timely deliver our products to customers, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional new products. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.

Even if we are successful in introducing our products to the market, the operating results and financial condition of our company may fluctuate from quarter to quarter and year to year and are likely to continue to vary due to several factors, many of which will not be within our control. If our operating results do not meet the guidance that we provide to the marketplace or the expectations of securities analysts or investors, the market price of the ADS will likely decline. Fluctuations in our operating results and financial condition may be due to several factors, including those listed below and those identified throughout this “Risk Factors” section:

Due to all of the foregoing factors, and the other risks discussed herein, you should not rely on quarter-to-quarter comparisons of our operating results as an indicator of our future performance.

The markets in which we participate are competitive. Even if we are successful in completing the development of our products in development, our failure to compete successfully could cause any future revenues and the demand for our products not to materialize or to decline over time.

We aim to sell our products to ~~auto~~automotive manufacturers, heavy and agricultural equipment manufacturers that incorporate ADAS, semi-autonomous and autonomous technologies in their automobiles and/or equipment and other companies that market or develop component parts of these systems. Many of our competitors have extensive track records and relationships within the automotive industry.

Many of our current and potential competitors have longer operating histories and more extensive name recognition than we have and may also have greater financial, marketing, manufacturing, distribution and other resources than we have. Current and future competitors may be able to respond more quickly to new or emerging technologies and changes in customer demands and to devote greater resources to the development, promotion and sale of their products than we can. Our current and potential competitors may develop and market new technologies that render our existing or future products obsolete, unmarketable or less competitive (whether from a price perspective or otherwise). We cannot assure you that we will be able to maintain a competitive position or to compete successfully against current and future sources of competition.

If our relationships with suppliers for our products and services were to terminate or our manufacturing arrangements were to be disrupted, our business could be interrupted.

Our products depend on certain third-party technology and we purchase component parts that are used in our products from third-party suppliers, some of whom may compete with us. While there are several potential suppliers of most of these component parts that we use, we currently choose to use only one or a limited number of suppliers for several of these components. Our reliance on a single or limited number of vendors involves several risks, including:

In addition, we require any new supplier to become “qualified” pursuant to our internal procedures. The qualification process involves evaluations of varying durations, which may cause production delays if we were required to qualify a new supplier unexpectedly. We generally assemble our ~~systems~~solutions and parts based on our internal forecasts and the availability of assemblies, components and finished goods that are supplied to us by third parties, which are subject to various lead times. If certain suppliers were to decide to discontinue production of an assembly, component that we use, the unanticipated change in the availability of supplies, or unanticipated supply limitations, could cause delays in, or loss of, sales, increased production or related costs and consequently reduced margins, and damage to our reputation. If we were unable to find a suitable supplier for a particular component, we could be required to modify our existing products or the end-parts that we offer to accommodate substitute components or compounds.

Discontinuation of operations at our manufacturing sites could prevent us from timely filling customer orders and could lead to unforeseen costs for us.

We plan to assemble and test the ~~systems~~solutions that we sell at subcontractors’ facilities in various locations that are specifically dedicated to separate categories of systems and consumables. Because of our reliance on all of these production facilities, a disruption at any of those facilities could materially damage our ability to supply our products to the marketplace in a timely manner. Depending on the cause of the disruption, we could also incur significant costs to remedy the disruption and resume product shipments. Such disruptions may be caused by, among other factors, pandemics, earthquakes, fire, flood and other natural disasters. Accordingly, any such disruption could result in a material adverse effect on our revenue, results of operations and earnings, and could also potentially damage our reputation.

Our planned international operations will expose us to additional market and operational risks, and failure to manage these risks may adversely affect our business and operating results.

We expect to derive a substantial percentage of our sales from international markets. Accordingly, we will face significant operational risks from doing business internationally, including:

Our failure to manage the market and operational risks associated with our international operations effectively could limit the future growth of our business and adversely affect our operating results.

We may face business disruption and related risks resulting from ~~the recent outbreak of~~ the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

~~Our~~We have been impacted by the COVID-19 pandemic, and we cannot predict the future impacts the COVID-19 pandemic, including the emergence of new strains such as the Omicron or Delta variant, may have on its business, results of operations and ~~business have been disrupted~~financial condition. While COVID-19 is still spreading and ~~could be materially adversely~~the final implications of the pandemic are difficult to estimate at this stage, it is clear that it has affected by the ~~outbreak~~lives of ~~COVID-19. The~~a large portion of the global population. At this time, the pandemic has caused states of emergency to be declared in various countries, including China, where we have significant operations. If travel restrictions ~~imposed~~or quarantines are reimposed in China or globally, ~~quarantines established in certain jurisdictions and~~ various institutions and companies ~~being closed. The COVID-19 has also adversely affected~~may be closed, which would impact our ~~ability~~operations. Numerous government regulations and public advisories, as well as shifting social behaviors, temporarily and from time to ~~conduct our~~time limited or closed non-essential transportation, government functions, business ~~effectively due to disruptions to our capabilities, availability~~activities and productivity of personnel, while we simultaneously attempt to comply with rapidly changing restrictions, such as travel restrictions, curfews and others. In particular, in January 2021, the Government of Israel announced that non-Israeli residents or citizens, except for non-nationals whose lives are based in Israel, are not allowed to enter Israel,person-to-person interactions, and the ~~number~~duration of ~~Israeli citizens permitted~~such trends is difficult to ~~enter the country per day~~predict. While certain COVID-19 mitigation actions have since been relaxed, no assurance can be made that such actions, or other measures, will not be ~~capped at 3,000. In addition, the Ministry of Health~~reimposed in the State of Israel issued guidelines in March 2020, which were most recently updated in March 2021, recommending people avoid gatherings in one space and providing that no gathering of more than 20 people should be held under any circumstances.

~~Employers (including us) are also required to prepare and increase as much as possible the capacity and arrangement for employees to work remotely.~~future. In addition, the U.S. government has restricted travel to the United States from foreign nationals who have ~~recently~~not been ~~in China, Iran, South Africa, and certain European and Latin America countries.~~vaccinated against COVID-19. Although to date these restrictions have not materially impacted our operations other than the ability to travel which resulted ~~with~~within some delays in our trials, demonstrations and installations, the effect on our business, from the spread of COVID-19 and the COVID-19 mitigation actions implemented by the governments of the State of Israel, the United States and ~~elsewhere across the globe,~~other countries, may worsen over time.

Authorities around the world have and may continue implementing similar restrictions on business and individuals in their jurisdictions. ~~We are still assessing our business operations and system supports and the impact COVID-19 may have on our results and financial condition.~~ To date, we have taken action ~~to reduce our operating expenses in the short term,~~ to enable our employees to work remotely from home ~~and taken steps to ensure support continuity to our customers,~~a portion of the time but there can be no assurance that ~~this analysis or remedial~~these measures will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local authorities and any other relevant jurisdiction, or that we determine are in the best interests of our employees.

Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.

A significant invasion, interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with authorized or unauthorized access could negatively impact our business and operations. We could also experience business interruption, information theft and/or reputational damage from cyber-attacks, which may compromise our systems and lead to data leakage either internally or at our third-party providers. Our systems have been, and are expected to continue to be, the target of malware and other cyber-attacks. Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing compromise and/or disruption of our information technology systems and related data.

Our products will be subject to automotive regulations due to the global quality requirements, which could prevent us from marketing our products to vehicle manufacturers.

The automotive regulations are dynamic and changing and effected by the final customer quality requirements as well. Even if we are successful in completing the development of our products, our failure to comply with the different types of regulations and requirements could delay the transfer to production schedule and eventually time to market.

In order to market our products to vehicle manufacturers we will be required to accomplish different type of regulations requirements such as ISO 26262 Functional Safety Regulations (ASIL)~~, IAFT 16949~~ and Auto Spice or other common quality management methodologies. In order to meet the quality requirements, we will have to cooperate with vehicle manufacturers, to receive their customers’ quality requirements that meet the requisite regulation of such customers and implement tools, processes and methodologies. Such processes and tools will require resources and funds and will consume significant time effort until fully fulfilled. We are already investing time and efforts in order to study the global quality and regulations requirements, but we cannot assure, at this time, that we will be able to meet the regulations requirements on time.

Our products are cost sensitive and subject to customers’ aggressive target costs. Our products are ~~subsystems~~sub solutions of modules as part of full semi-autonomous or autonomous systems with low cost product expectations and we may therefore be forced to lower or costs or have lower margins.

The automotive industry is one that continuously strives for cost reduction goals and optimizing the vehicle cost to meet the end customers’ expectations. For example, the target cost of ADAS, semi-autonomous and autonomous systems are being continuously reduced and while our products are cost sensitive to various costs factors, we may fail to meet these reduced market targets costs. We are working to build a robust supply chain network to support our cost reduction efforts and optimize our hardware and software costs, but may not be successful in doing so. If we are unable to reduce our costs in line with industry target cost, our results of operations may be adversely impacted.

Our business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our cybersecurity.

Despite the implementation of security measures intended to secure our data against impermissible access and to preserve the integrity and confidentiality of our data, our internal computer systems, and those of third parties on which we rely, we are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our business. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims, damage to our reputation, regulatory investigations and redresses, and penalties and liabilities.

While we do not currently, we may conduct a substantial amount of business in China. The legal system in China has inherent uncertainties that could have a material adverse effect on our business, financial condition and results of operations.

We have begun to conduct proof of concept, or POC, projects in China and have established a subsidiary in China for these purposes. As a result, we may engage in a substantial amount of business in China in the future. The Chinese legal system is based on written statutes and their legal interpretation by the Standing Committee of the National People’s Congress. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, the Chinese government has been developing a comprehensive system of commercial laws dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively new, there is a general lack of internal guidelines or authoritative interpretive guidance and because of the limited number of published cases and their non-binding nature, interpretation and enforcement of these laws and regulations involve uncertainties. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since Chinese administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems.

If we are unable to obtain and maintain effective intellectual property rights for our products, we may not be able to compete effectively in our markets.

Historically, we have relied on trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and products. Since December 2015, we have also sought patent protection for certain of our products. Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and new products.

We have sought to protect our proprietary position by filing patent applications in Israel, the United States and in other countries, with respect to our novel technologies and products, which are important to our business. Patent prosecution is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.

~~We have~~Foresight Automotive has a growing portfolio of ~~two~~three granted U.S. patents and four pending U.S. non-provisional applications, two ~~full U.S. applications, three full applications~~granted patents with the Israeli Patent Office, ~~three~~one granted patent and five full applications in China, ~~four~~one of which has been allowed, six applications in Europe, four applications in Japan, and one PCT application. Eye-Net Mobile has a growing portfolio of one granted U.S. patent, three U.S. provisional patent applications, one full application with the Israeli Patent Office and one application in ~~Japan.~~Europe. We cannot offer any assurances about which, if any, patent applications will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights ~~necessary for~~to prevent others from exploiting our technology and may affect the successful commercialization of ~~any new products that we may develop.~~our products.

Further, there is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our products, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and any future patents may not adequately protect our intellectual property, provide exclusivity for our new products, or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

If we cannot obtain and maintain effective patent rights for our products, we may not be able to compete effectively, and our business and results of operations would be harmed.

If we are unable to maintain effective proprietary rights for our products, we may not be able to compete effectively in our markets.

In addition to the protection afforded by any patents that may be granted, historically, we have relied on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes that are not easily known, knowable or easily ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining physical security of our premises and physical and electronic security of our information technology systems. Agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently discovered by competitors.

We cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed in violation of our confidentiality agreements or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Also, misappropriation or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secret.

Intellectual property rights of third parties could adversely affect our ability to commercialize our products, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.

It is inherently difficult to conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may be adversely affected if existing patents or patents resulting from patent applications issued to third parties or other third-party intellectual property rights are held to cover our products or elements thereof, or our manufacturing or uses relevant to our development plans. In such cases, we may not be in a position to develop or commercialize products or our product candidates unless we successfully pursue litigation to nullify or invalidate the third-party intellectual property right concerned or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications that if they result in issued patents, could be alleged to be infringed by our new products. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, be forced to abandon our new products or seek a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.

It is also possible that we have failed to identify relevant third-party patents or applications. For example, certain U.S. patent applications that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and in most of the other countries are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our new products or platform technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our new products or the use of our new products. Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing our new products. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our new products that are held to be infringing. We might, if possible, also be forced to redesign our new products so that we no longer infringe the third party’s intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we were the first to file the invention claimed in our owned and licensed patent or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming all other requirements for patentability are met, in the United States prior to 2013, the first to make the claimed invention without undue delay in filing, is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After 2013, the Leahy-Smith America the United States has moved to a first to file system. Changes to the way patent applications will be prosecuted could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business and financial condition.

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

Competitors may infringe our intellectual property. If we were to initiate legal proceedings against a third party to enforce a patent covering one of our new products, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the United States Patent and Trademark Office, or USPTO, or made a misleading statement, during prosecution. The validity of U.S. patents may also be challenged in post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.

Derivation proceedings initiated by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our new products to market.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of the ADSs or Ordinary Shares.

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

We may be subject to claims that former employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our products. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, and defending patents on products, as well as monitoring their infringement in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, which could make it difficult for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to monitor and enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Our principal shareholders, officers and directors beneficially own over ~~13.53%~~11.97% of our outstanding Ordinary Shares. They will therefore be able to exert significant control over matters submitted to our shareholders for approval.

As of March ~~21, 2021,~~20, 2023, our principal shareholders, officers and directors beneficially own approximately ~~13.53%~~11.97% of our Ordinary Shares. This significant concentration of share ownership may adversely affect the trading price for our Ordinary Shares because investors often perceive disadvantages in owning shares in companies with controlling shareholders. As a result, these shareholders, if they acted together, could significantly influence or even unilaterally approve matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of these shareholders may not always coincide with our interests or the interests of other shareholders.

Holders of ADSs must act through the depositary to exercise their rights as our shareholders.

Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying Ordinary Shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholders meeting is generally no less than 35 calendar days, but in some instances, 21 or 14 calendar days. When a shareholder meeting is convened, holders of the ADSs may not receive sufficient notice of a shareholders’ meeting to permit them to withdraw their Ordinary Shares to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders’ meeting unless they first withdraw their Ordinary Shares from the ADS program and convert them into the underlying Ordinary Shares held in the Israeli market in order to allow them to submit to us a request to call a meeting with respect to any specific matter, in accordance with the applicable provisions of the Israeli Companies Law 5759-1999, or the Companies Law, and our amended and restated articles of association.

The Jumpstart Our Business Startups Act, or the JOBS Act, allows us to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the Securities and Exchange Commission, or the SEC, which could undermine investor confidence in our company and adversely affect the market price of the ADSs or our Ordinary Shares.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies” including:

We intend to take advantage of these exemptions until we are no longer an “emerging growth company.” We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of our first sale of equity securities pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual gross revenue of at least ~~$1.07~~$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We cannot predict if investors will find the ADSs or our Ordinary Shares less attractive because we may rely on these exemptions. If some investors find the ADSs or our Ordinary Shares less attractive as a result, there may be a less active trading market for the ADSs or our Ordinary Shares, and our market prices may be more volatile and may decline.

If we are unable to comply with the Nasdaq minimum bid requirement, our ADSs could be delisted from Nasdaq, and as a result we and our shareholders could incur material adverse consequences, including a negative impact on our liquidity, our shareholders’ ability to sell shares and our ability to raise capital.

Our ADSs are currently listed on Nasdaq. Our listing on the Nasdaq Capital Market is conditioned upon our continued compliance with requirement to maintain a minimum bid price of $1.00 per share, pursuant to Nasdaq Listing Rule 5550(a)(2), or the Minimum Bid Requirement.

On May 23, 2022, we were advised that we no longer comply with the Minimum Bid Requirement. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we have been granted a 180-calendar day compliance period, or until November 21, 2022, to regain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of our ADSs must meet or exceed $1.00 per share for at least 10 consecutive business days during the 180-calendar day compliance period. On November 22, 2022, we were informed that we have been granted an additional 180-day compliance period, or until May 22, 2023, to regain compliance with Nasdaq’s Minimum Bid Requirement.

If we are not in compliance by May 22, 2023, Nasdaq will provide notice that our ADSs will be subject to delisting.

We intend to monitor the closing bid price of our ADSs between now and May 22, 2023, and intend to consider available options to cure the deficiency and regain compliance with the Minimum Bid Requirement within the compliance period, including effective a reverse stock split. Our ADSs will continue to be listed and trade on Nasdaq during this period, unaffected by the receipt of the written notice from Nasdaq.

We are diligently working to evidence compliance with the Minimum Bid Requirement; however, there can be no assurance that we will be able to do demonstrate compliance and satisfy Nasdaq’s conditions for continued listing. If we fail to demonstrate compliance with the Minimum Bid Requirement and satisfy Nasdaq’s conditions for continued listing, our Ordinary Shares could be delisted. Delisting from the Nasdaq could have an adverse effect on our business and on the trading of our Ordinary Shares. If a delisting of our Ordinary Shares were to occur, such shares may trade in the over-the-counter market such as on the OTC Bulletin Board or on the “pink sheets.” The over-the-counter market is generally considered to be a less efficient market, and this could diminish investors’ interest in our Ordinary Shares as well as significantly impact the price and liquidity of our Ordinary Shares. Any such delisting may also severely complicate trading of our Ordinary Shares by our shareholders, or prevent them from re-selling their Ordinary Shares at/or above the price they paid.

As a “foreign private issuer” we are permitted to and follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.

Our status as a foreign private issuer also exempts us from compliance with certain SEC laws and regulations and certain regulations of the Nasdaq Stock Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we are not required, under the Securities Exchange Act of 1934, as amended, or the Exchange Act, to file current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we are generally exempt from filing quarterly reports with the SEC. Also, although ~~the Companies Law~~Israeli law requires us to disclose the annual compensation of our five most highly compensated senior officers on an individual basis, this disclosure is not as extensive as that required of a U.S. domestic issuer. For example, the disclosure required under Israeli law would be limited to compensation paid in the immediately preceding year without any requirement to disclose option exercises and vested stock options, pension benefits or potential payments upon termination or a change of control. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act.

These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.

We may be a “passive foreign investment company”, or PFIC, for U.S. federal income tax purposes in the current taxable year or may become one in any subsequent taxable year. There generally would be negative tax consequences for U.S. taxpayers that are holders of the ADSs or our Ordinary Shares if we are or were to become a PFIC.

Based on the projected composition of our income and valuation of our assets, we do not expect to be a PFIC for ~~2020,~~2022, and we do not expect to become a PFIC in the future, although there can be no assurance in this regard. The determination of whether we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income” or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. The tests for determining PFIC status are applied annually and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of the ADSs or our Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will not become a PFIC in the future. If we are a PFIC in any taxable year during which a U.S. taxpayer holds the ADSs or our Ordinary Shares, such U.S. taxpayer would be subject to certain adverse U.S. federal income tax rules. In particular, if the U.S. taxpayer did not make an election to treat us as a “qualified electing fund”, or QEF, or make a “mark-to-market” election, then “excess distributions” to the U.S. taxpayer, and any gain realized on the sale or other disposition of the ADSs or our Ordinary Shares by the U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer’s holding period for the ADSs or Ordinary Shares; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers that have held the ADSs or our Ordinary Shares during a period when we were a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. We do not intend to notify U.S. taxpayers that hold the ADSs or our Ordinary Shares if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers to consider whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. U.S. taxpayers that hold the ADSs or our Ordinary Shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to the ADSs or our Ordinary Shares in the event that we are a PFIC. See “Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Companies” for additional information.

ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable results to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our Ordinary Shares provides that holders and beneficial owners of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction over matters arising under the deposit agreement, applying such law. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we believe are applicable in the case of the deposit agreement or the ADSs. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the federal securities laws. If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us ~~and /~~ and/or the depositary. If a lawsuit is brought against us and / or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different results than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.

Risks Related to Israeli Law and Our Incorporation, Location and Operations in Israel

A major portion of our business is conducted, and a material portion of our operating expenses is incurred, outside the United States, mainly in NIS. Therefore, we are exposed to currency exchange fluctuations in other currencies, particularly in NIS and the risks related thereto. Our primary expenses paid in NIS are employee salaries, fees for consultants and subcontractors and lease payments on our Israeli facilities. As a result, we are affected by foreign currency exchange fluctuations through both translation risk and transaction risk. Thus, we are exposed to the risks that: (a) the NIS may appreciate relative to the dollar; (b) the NIS devalue relative to the dollar; (c) the inflation rate in Israel may exceed the rate of devaluation of the NIS; or (d) the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. Our operations also could be adversely affected if we are unable to effectively hedge against currency fluctuations in the future.

Provisions of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer’s response date.

Israeli tax considerations also may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. See “Taxation—Israeli Tax Considerations and Government Programs” for additional information.

It may be difficult to enforce a judgment of a United States court against us and our officers and directors in Israel or the United States, to assert United States securities laws claims in Israel or to serve process on our officers and directors.

We were incorporated in Israel. All of our executive officers and directors reside outside of the United States, and all of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to United States securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of United States securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not United States law is applicable to the claim. If United States law is found to be applicable, the content of applicable United States law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a United States or foreign court.

Our headquarters, research and development and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

Our executive offices and research and development facilities are located in Israel. In addition, all of our key employees, officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring Arab countries, the Hamas (an Islamist militia and political group that controls the Gaza strip) and the Hezbollah (an Islamist militia and political group based in Lebanon). Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could negatively affect business conditions in Israel in general and our business in particular, and adversely affect our product development, operations and results of operations. Ongoing and revived hostilities or other Israeli political or economic factors, such as, an interruption of operations at the Tel Aviv airport, could prevent or delay shipments of our components or products.

Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions, could harm our results of operations and the market price of our Ordinary Shares, and could make it more difficult for us to raise capital. Parties with whom we do business may sometimes decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. Several countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. Similarly, Israeli companies are limited in conducting business with entities from several countries. For instance, in 2008, the Israeli legislature passed a law forbidding any investments in entities that transact business with Iran. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli government has in the past covered the reinstatement value of certain damages that were caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business.

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial conditions or the expansion of our business. Similarly, Israeli corporations are limited in conducting business with entities from several countries.

~~In addition, Israel is experiencing a level of unprecedented political instability. The~~Furthermore, the Israeli government is currently pursuing extensive changes to Israel’s judicial system, which has ~~been in a transitionary phase since December 2018, when~~sparked widespread protests across Israel. Actual or perceived instability with respect to the current public dispute over changes to the Israeli ~~Parliament,~~legal systems or the ~~Knesset, first resolved to dissolve itself~~impact thereof, may individually or in the aggregate adversely affect the Israeli economy and call for new general elections. Since then, Israel held general elections three times – in April and September of 2019 and in March of 2020. A fourth election took place on March 23, 2021. The Knesset has not passed a budget for the year 2021, and certain government ministries, which may be critical to the operation of our business, are without necessary resources and may not receive sufficient funding moving forward. In the event that the current political stalemate is not resolved during 2021, our ability to ~~conduct our~~do business, ~~effectively may be adversely affected.~~financial condition, results of operations, growth prospects, and share price.

Your rights and responsibilities as a shareholder will be governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.

The rights and responsibilities of the holders of our Ordinary Shares (and therefore indirectly, the ADSs) are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in typical U.S.-based corporations. In particular, a shareholder of an Israeli company has certain duties to act in good faith and fairness toward the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger of the company, and approval of related party transactions that require shareholder approval. See “Item 6. C. Board Practices—Duties of Shareholders” for additional information. In addition, a shareholder who is aware that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company with regard to such vote or appointment. There is limited case law available to assist us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations on holders of our Ordinary Shares that are not typically imposed on shareholders of U.S. corporations.

Our significant shareholder received Israeli government grants for certain of its research and development activities. In course of the Merger with Magna and Foresight Automotive, we assumed, jointly with Magna, certain of its obligations related to such grants. The terms of those grants may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. We may be required to pay penalties in addition to repayment of the grants.

Magna’s research and development efforts related to the technology assigned to Foresight Automotive have been financed in part through royalty-bearing grants in an aggregate amount of approximately ~~$646,000~~$603,000 received from the Israel Innovation Authority, or the IIA, as of ~~March 21, 2021. As of~~ December 31, ~~2020, our contingent liabilities regarding IIA grants received by us were in an aggregate amount of $661,000.~~2022. In course of the Merger with Magna and Foresight Automotive, we were required by the IIA to assume, jointly with Magna, its obligations related to such grants. With respect to the royalty-bearing grants we are committed to pay royalties at a rate of 3% to 5% on sales proceeds from our products that were developed under IIA programs up to the total amount of grants received, linked to the U.S. dollar and bearing interest at an annual London Interbank Offered Rate, or LIBOR, applicable to U.S. dollar deposits. Regardless of any royalty payment, we are further required to comply with the requirements of the Israeli Encouragement of Research, Development and Industrial Initiative Technology Law, 5744-1984, as amended, and related regulations, or the Research Law, with respect to those past grants. When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any transfer to third parties inside or outside of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development out of Israel.

The transfer of IIA-supported technology or know-how outside of Israel may involve the payment of significant amounts, depending upon the value of the transferred technology or know-how, our research and development expenses, the amount of IIA support, the time of completion of the IIA-supported research project and other factors. These restrictions and requirements for payment may impair our ability to sell or otherwise transfer our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. 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.

Our operations may be disrupted as a result of the obligation of management or key personnel to perform military service.

Our employees and consultants in Israel, including members of our senior management, may be obligated to perform one month, and in some cases longer periods, of military reserve duty until they reach the age of 40 (or older, for citizens who hold certain positions in the Israeli armed forces reserves) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant number of our officers, directors, employees and consultants. Such disruption could materially adversely affect our business and operations.

Raising additional capital would cause dilution to our existing shareholders and may affect the rights of existing shareholders.

We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the issuance of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of the ADSs and Ordinary Shares.

Sales of a substantial number of the ADSs or our Ordinary Shares in the public market by our existing shareholders could cause our share price to fall.

Sales of a substantial number of the ADSs or our Ordinary Shares in the public market, or the perception that these sales might occur, could depress the market price of the ADSs or our Ordinary Shares and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of the ADSs or our Ordinary Shares.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our shares, our ADSs or Ordinary Shares price and trading volume could decline.

The trading market for the ADSs or our Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our ADSs or Ordinary Shares, or provide more favorable relative recommendations about our competitors, our ADSs or Ordinary Shares price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our ADSs or Ordinary Shares price or trading volume to decline.

We were incorporated in the State of Israel in September 1977 under the name Golan Melechet Machshevet (1997) Ltd. In April 1987, we became a public company in Israel, and our shares were listed for trade on the TASE. On May 16, 2010, we changed our name to Asia Development (A.D.B.M.) Ltd., and on January 12, 2016, we changed our name to Foresight Autonomous Holdings Ltd. Our Ordinary Shares are currently traded on the TASE, and ADSs representing our Ordinary Shares currently trade on the Nasdaq Capital Market, both under the symbol “FRSX.”

Our significant shareholder, Magna, was incorporated in Israel in 2001. Starting in 2011, Magna began to develop technology devoted to vehicle safety. Magna operated its vehicle safety segment of operations as a separate division for accounting purposes. On October 11, 2015, and pursuant to the Merger, we acquired 100% of the share capital of Foresight Automotive from Magna. On January 5, 2016, we entered into an asset transfer agreement with Magna whereby Magna transferred to us its vehicle safety segment of operations. The asset transfer agreement became effective retroactively on October 11, 2015.

Prior to the Merger, and from July 2015, until October 2015, we did not have any business activity, excluding administrative management.

In January 2019, we spun out our cellular-based V2X accident prevention solution to our wholly owned subsidiary, Eye-Net Mobile.

Our principal executive offices are located at 7 Golda Meir St., Ness Ziona 7403650, Israel. Our telephone number in Israel is +972-077-9709030. Our website address is www.foresightauto.com. The information contained on our website or available through our website is not incorporated by reference into and should not be considered a part of this annual report on Form 20-F, and the reference to our website in this annual report on Form 20-F is an inactive textual reference only. Sullivan & Worcester LLP is our agent in the United States, and its address is 1633 Broadway, New York, NY 10019.

We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, and intend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies including but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the Sarbanes-Oxley Act. We could remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual gross revenue of at least ~~$1.07~~$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exempts us from compliance with certain laws and regulations of the SEC and certain regulations of the Nasdaq Stock Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we are not required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies registered under the Exchange Act.

In ~~2020, 2019~~2022, 2021 and ~~2018,~~2020, our capital expenditures amounted to ~~$50,000, $103,000~~$313,000, $235,000 and ~~$733,000,~~$50,000, respectively. Our current capital expenditures are primarily for computers, software, research and development equipment and office improvements, and we expect to finance these expenditures primarily from cash on hand.

We are a technology company engaged in development of smart multi-spectral 3D vision software solutions and cellular-based applications. Through our wholly owned subsidiaries, Foresight Automotive, ~~Ltd., or~~ Foresight ~~Automotive,~~Changzhou and ~~Eye-Net Mobile Ltd., or~~ Eye-Net Mobile, we develop both “in-line-of-sight” vision ~~systems~~solutions and “beyond-line-of-sight” accident-prevention solutions.

Our 3D vision solutions include modules of automatic calibration ~~sensor fusion~~ and dense 3Dthree-dimensional (3D) point cloud that can be applied to ~~different~~diverse markets such as automotive, defense, autonomous ~~vehicles~~vehicles. agriculture and heavy industrial equipment. Eye-Net Mobile’s cellular-based solution suite provides real-time pre-collision alerts to enhance road safety and situational awareness for all road users in the urban mobility environment by incorporating cutting-edge AIartificial intelligence (AI) technology and advanced analytics.

Our 3D vision solutions are based on stereoscopic vision technology. Stereo technology is an image processing concept which uses two synchronized cameras to mimic human depth perception in order to obtain a 3D view. Our unique solutions include modules of automatic calibration ~~sensor fusion~~ and dense 3D point cloud that can be applied to ~~different~~diverse markets such as automotive, defense, autonomous vehicles, agriculture and heavy industrial equipment. Our QuadSight^® four-camera based vision ~~system~~solution creates and analyzes a 3D image, which foresees possible collisions with road users and other obstacles inherent to roadway (both urban and highway) and off-road environments. This ~~system~~solution provides highly accurate real-time detection with a low rate of false alerts and enables a 24/7 operation in harsh weather and lighting conditions for a complete 3D image of the driving environment in front of the vehicle.

Our powerful proprietary stereoscopic and four-camera technology is based in part on intellectual property that we acquired from Magna in 2016. Magna’s field-proven security technology has been deployed for almost two decades in critical facilities worldwide, including borders, nuclear plants and airports.

Autonomous vehicles require further development and safety is a primary concern for the market. Therefore, vehicle manufacturers are actively pursuing technologies to enhance the safety systems of their vehicles. In 2021, we identified an opportunity to offer a solution that will enhance existing ADAS systems, and we developed the Mono2Stereo™ software-based solution, which can provide a readily available solution to vehicles equipped with Level 2 and Level 2-plus autonomy systems without the need for additional hardware or changes in the design and architecture of the vehicle.

Mono2Stereo is a 3D stereo-vision system that improves the performance of existing cameras by utilizing the overlapping views of existing cameras with different fields of view. Mono2Stereo generates 3D perception, as opposed to 2D, resulting in better distance accuracy, detection of any obstacle, and more robust active safety features.

In recent years, there has been increasing awareness surrounding “autonomous,” “automated” and “self-driving” vehicles. Self-driving vehicles operate without direct driver input while controlling steering, acceleration and braking, and are designed to relieve the driver from having to constantly monitor the roadway while operating in self-driving mode. Self-driving vehicles range from single applications where the driver is required to continuously monitor traffic, to semi-autonomous or fully autonomous driving where the driver increasingly relinquishes control.

Vehicle automation started off in the form of ADAS; however, recent technology advancements have paved the way for partially automated systems. Acceleration in development strategies that drive the acceleration of vehicle autonomy has taken place over the last couple of years in the form of technological advancements, mergers and acquisitions, partnerships and collaborations.

A MarketsandMarkets ~~research~~market report published in ~~June 2020 titled “ADAS Market by System, Component, Vehicle, Level of Autonomy, Offering, EV, and Region - Global Forecast~~February 2023 foresees a significant growth to ~~2030” states that~~ the ~~global~~ ADAS market ~~size~~over the next eight years. The market is projected to ~~grow~~increase from ~~USD 27.0~~an estimated $30.9 billion in ~~2020~~2022 to ~~USD 83.0~~$65.1 billion by 2030, atregistering a compound annual growth rate, or CAGR of ~~11.9%~~9.7%. ~~The~~This growth ~~of this market can be~~is attributed to ~~the~~ increasing ~~stringency of vehicle safety regulations and growing~~ demand for ~~driver assistance systems. In addition, the report estimates that innovative product launches would offer lucrative opportunities for market players~~road safety and strong government support, which has prompted leading vehicle manufacturers to invest in the ~~next 10 years.~~development of ADAS systems.

The evolution of camera-based systems in the automotive industry started with the use of monocular camera systems, which are expected to be replaced by stereo and tri-focal camera systems for Level 3, 4 and 4/5 vehicles.

According to a forecast report published in ~~September 2020,~~July 2022 by the ~~leading~~Insight Partners, the automotive camera market ~~research~~is projected to experience a CAGR of 24.3% over the forecast period 2021-2028, rising from a market value of $6.9 billion in 2021 to $30.14 billion by 2028.

Stereo cameras are an integral part of ADAS, providing features such as lane departure warning, automatic emergency braking, and ~~advisory company, Technavio,~~adaptive cruise control. The demand for automotive stereo cameras is expected to increase as consumers become more aware of the safety benefits of ADAS. This increasing demand is expected to drive the growth of the automotive stereo camera market size has the potential to grow by $425.68 million over the course of 2020 to 2024. The report claims that 35% of the market’s growth will originate from North America during the forecast period.market.

While fully autonomous driving is not expected in the near future, we believe that there will be a gradual evolution and ongoing introductions of semi-autonomous driving capabilities in order to reach more advanced autonomy levels. Such capabilities will begin with hands-free highway driving, which will gradually extend to other types of roadways, such as country and city driving, and ultimately encompass all weather and lighting conditions. The key contributions to the growth of autonomous driving will include increased safety, the development of fail-safe systems, consumer demand, and economic and social benefits.

As the development and adoption of autonomous vehicles continues to grow, the demand for stereo cameras is projected to increase. This is because stereo cameras are a vital component of the sensor suite used in autonomous vehicles, as they provide the necessary depth perception and object recognition capabilities required for safe driving. With the growing trend of autonomous vehicles, the market for stereo cameras is expected to expand in response.

The vast majority of partial autonomous vehicles employ multiple sensors and imaging devices, including radar, laser detectors, or LiDAR, and cameras. Radar-based sensors compare microwaves of emitted and reflected signals and are generally unaffected by weather. Unlike cameras, radar is not as sensitive to non-metal objects and cannot detect lane markings and traffic signs. LiDAR is a sensor that measures distance by illuminating a target with lasers and analyzing the reflected light. A camera, similar to the human eye, gathers a richer amount of data than either a radar or a LiDAR sensor. For that reason, most ~~ADASs~~ADAS rely more heavily on cameras than on other sensors. Relying only on reflected light may reduce performance under certain lighting or weather conditions. For example, LiDAR pulse can be scattered in the fog, whereas infrared cameras are not affected by fog. Also, a 2019 publication by Cornell University argues that the accuracy of a stereo camera is superior and can be a viable and low-cost alternative to LiDAR.

Camera-based systems are the most intuitive to understand as they are similar to human vision. As the current driving environment is designed for human vision without any consideration for automation, it is believed that camera-based systems will always have an important role in semi or fully autonomous driving.

According to a report by Frost & Sullivan published in early 2018, it is predicted that Level 3 vehicles will be equipped with an average of 25 sensors, Level 4 vehicles will be equipped with an average of 27 sensors, and Level 5 vehicles will be equipped with an average of 30 sensors. For each of these levels, stereo cameras and infrared cameras will be used to enable autonomous driving.

In July 2020, a report by Frost & Sullivan titled “Next-generation Perception Sensors for Autonomous Driving in North America and Europe, Forecast to 2030”, considers Foresight Automotive as one of the key disruptor camera sensor providers that tackles the main challenges vision sensor start-ups are addressing, namely, to enable superior sensor performance in challenging weather and lighting conditions. In addition, the report stresses the importance of the use of thermal camera technology for enhanced detection capabilities in harsh weather and lighting conditions for applications such as Autonomous Emergency Braking, Forward Collusion Warning, and Adaptive Cruise Control.

In March 2021, VSI Labs, a leading technology research company that examines the building blocks for autonomous vehicle technologies, reviewed several vision-based companies, including Foresight Automotive, and highlighted Foresight’s unique automatic calibration module which allows stereo camera separation. VSI Labs’ review states that “Stereo vision is not new, but the methods for automatic calibration are…~~.Stereo~~ Stereo cameras (non-active) are able to provide better 3D vision which improves the distance estimation versus mono cameras.” The review further maintains that “By using both visible-light and thermal cameras, Foresight’s stereo system capabilities allow obstacle detection in different harsh weather and lighting conditions, where LiDAR performance is compromised.” The article concludes Foresight’s technology review by stating that “Foresight’s software creates dense 3D point ~~clouds....Foresight’s~~clouds. Foresight’s software product appears to be one of the best current options.”

A September 2021 Forbes article emphasized the importance of stereo thermal cameras for the detection of any objects in harsh weather conditions. Use of our automatic calibration solution allows stereoscopic camera-based safety systems to generate an accurate depth map of the environment, detect any object and understand what is present on the road.

According to a ~~market research~~report by ~~ResearchInChina,~~Research and Markets, published in ~~April 2019,~~January 2022, the global automotive active safety system market (including night vision systems) reached a value of $11.4 billion in 2021 and ~~stereo cameras)~~ is ~~the fastest growing segment of automotive equipment, and the market size is expected~~projected to reach ~~$30~~$28.6 billion ~~in 2025.~~by 2027, exhibiting a CAGR of 16.4% during 2022-2027.

Automobile manufacturers today have already commercialized vehicles with Level 1 and Level 2 autonomy features, and some have even commenced commercializing Level 3 ADAS systems.

We believe that in order to achieve Level 4 and Level 5 autonomous capabilities, among others, the following developments are required: (i) a robust all-weather, day and night 3D environment sensor; (ii) combined software and algorithms that can handle multiple sensor inputs together producing the best possible decision when encountering complex road situations; and (iii) the capability to accurately position a vehicle, specifically in an urban environment, where GPS localization is not sufficiently accurate.

Autonomous driving is based on three main pillars: sensory, processing, and execution.

Our 3D vision-based solution meets both sensing and processing requirements of the autonomous solution.

In the race towards achieving full autonomy, the automotive industry is facing many technological challenges. However, when assessing such challenges within the sensory context, there are two predominant challenges:

During 2020 and 2021, we identified new markets suitable for our unique technology that enables obstacle detection in harsh weather and terrain conditions, including the defense market, the heavy industrial equipment market and the agriculture market. Compared to the traditional automotive market, these markets have an immediate potential in terms of commercialization, and we believe they can be a source of relatively short-term revenues. Although the defense, heavy equipment and agriculture markets differ from the main market that we are targeting, our solutions are also suitable for these markets and does not require substantial dedicated development. We believe that entering these additional markets will allow us to expand and improve our current product capabilities and open new opportunities.

ADAS and autonomous technology offer many advantages on the battlefield. Defense vehicles must be able to adapt to complex conflict zones and operate in the harshest environmental conditions, including off-road driving and zero-visibility sandstorms. Currently, the most commonly used sensors for military vehicles are active LiDAR sensors, which constantly broadcast their location and can be easily detected by the enemy. Our non-active QuadSight technology creates a high-resolution point cloud that provides a unique 3D perception of the environment, leaving no energy signature discernible to an adversary.

According to an October 2022 forecast by MarketsandMarkets, the market for armored vehicles is expected to reach $34.1 billion by 2027, with the combat vehicle sector accounting for $20.2 billion of this total.

In June 2022, Elbit Systems Ltd., or Elbit Systems, showcased an unmanned robotic combat vehicle, equipped with our QuadSight vision solution, at Eurosatory, the world’s leading land and airland defense and security exhibition. Our stereo camera solution empowers autonomous features such as obstacle detection, terrain analysis and navigation plans in the most challenging conditions, including off-road driving and zero-visibility sandstorms.

Advanced technologies, such as ours, provide a myriad of benefits for agriculture and construction machinery. These vehicles can complete standard tasks while operators can handle other high value-added jobs, allowing companies to use their workforce more effectively. In construction, for example, this is critical because of a significant shortage of heavy equipment operators.

Our thermal stereoscopic capabilities have been developed to significantly reduce risks and add value for agriculture and heavy machinery. For example, accuracy and efficacy in detecting obstacles can help reduce fatigue and stress on human heavy machinery operators, resulting in improved safety. In addition, the use of thermal stereo addresses detection challenges that are caused by dust and fertilizer particles, harsh weather, sun glare and complete darkness, and brings added value to precision agriculture and automated machines. Our stereo vision solution provides 3D raw data for obstacle detection, creating 3D terrain maps for precision agriculture, enabling autonomous navigation and automated grain loading.

In May 2022, we signed a memorandum of understanding with SUNWAY-AI Technology (Changzhou) Co., Ltd., or SUNWAY, a global Chinese manufacturer of autonomous and unmanned intelligent vehicle products, for a joint development of an obstacle detection system to be used by unmanned vehicles based on our stereoscopic technology, using both visible light and thermal cameras. SUNWAY intends to incorporate our stereo vision technology into its unmanned agricultural vehicles and heavy machinery.

In addition, our DynamiCal, automatic calibration solution, optimizes existing stereo systems used in agriculture vehicles by overcoming miscalibration challenges caused by changes in temperature and equipment vibrations.

A February 2022 report by Allied Market Research states that the global heavy construction equipment market size was valued at $176.2 billion in 2020, and is projected to reach $273.5 billion by 2030, registering a CAGR of 4.4% from 2021 to 2030. According to Preco, a leading vendor for collision mitigation technology optimized for heavy-duty equipment, 18% of the users of heavy industrial equipment vehicles already have a system for collision mitigation and 48% of the users would consider installing such a system.

According to a market report by MarketsandMarkets published in March 2022, the precision farming market is expected to grow from $8.5 billion in 2022 to $15.6 billion by 2030, at a CAGR of 7.9%.

Generating 3D stereo perception from 2 separate mono cameras with different fields of view

Current ADAS use mono camera-based solutions. Vehicle manufacturers desire to advance existing systems’ performance while keeping the existing hardware in order to avoid integration complexities and design changes that can affect production timelines.

Our Mono2Stereo solution enhances existing vision sensor systems by using proprietary software-based algorithms to create a 3D perception stereo vision solution. This solution is designed to amplify the performance of existing ADAS sensors resulting in better distance accuracy and more robust active safety features.

Throughout 2022, we participated in several paid proof of concept projects with leading Tier One suppliers in the automotive industry to assess our ability to improve distance measurement and object detection capabilities of various ADAS systems, using existing cameras. These projects include evaluations by Hitachi Astemo, Ltd., or Hitachi, a global Japanese Tier One supplier, as well as ZF North America, Inc., or ZF North America, a leading global Tier One technology company.

Generating 3D stereo perception from 2 separate mono cameras with different fields of view

Stereoscopic vision systems must maintain continuous calibration at all times in order to ensure distance accuracy. Mounting stereo cameras on a fixed beam compensates for decalibrations caused by vibrations but may limit camera placement positions and result in installation-related technical complications.

Our ScaleCam solution enables the separation of stereo cameras, allowing flexible placement of cameras on the vehicle, increasing the distance between the cameras, and, as a result, extending obstacle detection range with greater accuracy up to several hundred meters.

Separated cameras require ongoing calibration to optimize distance accuracy. Combined with our DynamiCal auto calibration solution, we are able to compensate for deviations caused by external factors, such as vibrations and temperature changes.

In September 2022, we signed a POC project with a leading U.S. manufacturer of electric vehicles to evaluate its ability to create 3D stereo perception with software only, using the manufacturer’s existing pair of mono cameras mounted on a large baseline (distance between the cameras). We believe that our cost-effective advanced stereo vision technology may be beneficial to electric vehicle manufacturers as they develop more advanced autonomous capabilities, resulting in better distance accuracy and improved active safety features, contributing to a greener and safer future.

The ~~system~~solution is designed to achieve near 100% obstacle detection with the lowest rates of false alerts, under harsh weather and lighting conditions, including complete darkness, rain, haze, fog and glare.

In contrast to other active technologies, QuadSight is a ~~passive~~non-active sensor that ~~does not emit any~~emits no energy during operation. As a result, the QuadSight ~~system~~solution does not interfere with other systems and is hazard-free.

In January 2020, we announced the development of significant advanced features for our QuadSight vision system. The new features include automatic calibration, 3D point cloud and multispectral sensor fusion. The features were developed to meet customer requirements following successful evaluation of several QuadSight system prototypes purchased over the course of 2019.

We believe that our QuadSight multispectral vision ~~system~~solution is the key component that will solve the two main challenges of detecting any obstacle and allowing autonomous vehicles to safely endure extreme weather and lighting conditions.

~~For Level 3, 4~~In November 2022, we signed a commercial agreement with SUNWAY for the development and ~~5 automated~~supply of obstacle detection systems and cloud gateway for driverless vehicles, ~~we plan to introduce our QuadSight system to autonomous vehicle manufacturers~~as well as for ADAS systems for airport ground support vehicles, using both visible light and ~~Tier One automotive system integrators.~~

thermal cameras. Our QuadSight ~~vision solution includes~~stereoscopic technology, including both proprietary software ~~modules~~and cameras, will be licensed to SUNWAY and will serve as the underlying technology for SUNWAY’s ADAS systems, intended for integration into several types of ~~automatic calibration, sensor fusion~~vehicles working closely with aircrafts. Foresight’s passive, non-emitting sensors are a perfect fit for airport vehicles that employ autonomous systems in sensor-filled environments and ~~dense 3D point cloud. These modules~~ can ~~be applied to different markets such as automotive, defense, autonomous vehicles and heavy industrial equipment.~~benefit from non-interfering solutions.

Stereoscopic vision systems require continuous camera calibration in order to create an accurate stereoscopic 3D perception. External factors, such as small vibrations or temperature changes, trigger miscalibration. A miscalibrated system may lead to inaccurate 3D perception of the environment and affect the decision-making mechanism of any automated system.

We have developed DynamiCal - a proprietary automatic calibration software solution designed to ensure that stereo cameras remain calibrated at all times regardless of their configuration or position on a vehicle, in order to create accurate and continuous 3D depth perception.

In September 2020, we announced the completion of a commercial version of our groundbreaking automatic calibration software, which allows us to offer this software also as a standalone product. The automatic calibration solution allows vehicle manufacturers flexible placement of sensors, whether on a rigid base or as separate units, while ensuring accurate perception and improving the sensors’ detection capabilities. In addition, this solution is suitable for different levels of autonomy and can be deployed even on vehicles equipped with level 1 or level 2 autonomy levels, as well as within existing vehicles equipped with stereo vision sensors.

In addition to applications of the automatic calibration solution infor the automotive world, we are looking into different markets that can benefit from our proprietary innovation such as unmanned ground systems, agriculture, heavy machinery, aviation, unmanned aerial vehicles and drones, medical robotics, manufacturing, and mobile phones.

Point cloud provides 3D raw data that can be used for obstacle detection, terrain analysis and autonomous vehicle sensor fusion. The use of stereoscopic technology is designed to offer a non-emitting and cost-effective solution for generating a high-resolution point cloud.

Our Percept3D point cloud solution provides rich and accurate per pixel information that enables precise object detection. The use of passive sensors, such as visible-light and thermal cameras, leaves no energy signature, making the Percept3D an ideal for use in the defense industry.

Semi and fully autonomous vehicle markets are considered relatively new markets with increasing competition and a great potential for sensor module and system providers. For our ~~QuadSight system,~~vision solutions, we believe that our main competitors are dedicated, large companies focusing on technologies that enable detection ~~in adverse weather conditions~~and 3D perception such as radar and LiDAR technologies. As the world of stereo vision is moving towards enhancing existing stereo systems, there are a few companies that offer extended stereo capabilities, similar to our automatic calibration solution. However, our Mono2Stereo solution, which allows the creation of 3D stereo perception from two mono cameras, is a unique IP-protected solution, and, to the best of our knowledge, does not have any direct competition. Additionally, as the automotive industry comes to understand the value that thermal cameras have to offer to autonomous vehicles, the number of thermal cameras manufacturers and providers are expected to increase. To the best of our knowledge, ~~Foresight is still~~we are the only company that uses thermal imaging in a stereoscopic configuration, allowing us to generate an accurate depth map and offer a unique dense 3D point cloud based on thermal cameras. Additionally, as the world of stereo vision is moving towards enhancing existing stereo systems, there are a few companies that offer extended stereo capabilities, similar to our automatic calibration solution.

Many of our competitors, either on their own or through their strategic partners, enjoy better brand recognition and have substantially greater financial, technical, manufacturing, marketing and human resources than we do. These competitors also have significantly greater experience in the research and development of automotive sensors and a better infrastructure and are already commercializing those products around the world.

We launched our QuadSight demo system in the first quarter of 2018 at the Consumers Electronics Show in Las Vegas, Nevada. The proof of concept of the system was completed by the third quarter of 2018 and we have performed numerous live technological demonstrations to potential customers and collected data from road trials.

A typical sales cycle of our ~~QuadSight~~3D vision ~~system, or of the different modules we offer,~~solutions, consists primarily of the following steps:

~~The QuadSight solution is offered in different configurations~~Our stereoscopic 3D vision solutions are modular and can be customized to meet customer needs:

To date, we have ~~sold eleven prototype systems and demonstrated our products to many leading passenger and~~signed a commercial ~~manufacturers in Europe, Japan, the United States and China, as well as to~~agreement with Elbit Systems, ~~Land Ltd.,~~ a leading defense company in ~~Israel, which~~Israel. We have successfully completed several POC projects with notable customers, including a leading European OEM, a global Japanese Tier One supplier - Hitachi, a leading global Tier One technology company, ZF North America, as well as a leading American manufacturer of electric vehicles. Furthermore, we are presently engaged in multiple POC projects with leading OEMs and Tier One suppliers in Japan, Europe and China. We have ~~already~~successfully completed a development project for a customized 3D perception solution to meet the requirements of the Israeli Defense Forces, or IDF. The customized solution was showcased in June 2022 by Elbit on an unmanned ground robotic combat vehicle at Eurosatory, the world’s leading land and airland defense and security exhibition in Paris. We have also signed a commercial agreement ~~with. We aim~~with SUNWAY for up to ~~sell additional prototype~~$51 million for the development and supply of obstacle detection systems ~~and make additional technical demonstrations~~for driverless vehicles, as well as for ADAS systems for airport ground support vehicles.

Our focus for 2023 is to (1) increase the number of customers engaged in ~~2021. These systems and demonstrations~~POC projects in order to allow ~~the customers~~them to test and evaluate the performance of our ~~technology. Following the testing and evaluation of~~technology (2) engage with customers in co-development projects, allowing us to tailor our ~~technology, we will tailor the products~~solutions to each customer’s individual ~~needs. We intend to build a global commercial infrastructure to effectively support the commercialization~~needs; and (3) initiate sales of our ~~products. Meaningful commercialization efforts will commence when we believe that the completion of a release-candidate version of a given product is imminent.~~products to SUNWAY-AI’s customers for airport ground vehicles.

In April 2020, we signed a strategic cooperation agreement with FLIR Systems, Inc., the world’s largest and leading commercial company specializing in the design and production of thermal imaging cameras, components, and imaging sensors. According to the agreement, FLIR will develop, market and distribute our QuadSight vision ~~system,~~solution, combined with FLIR Systems’ infrared cameras, to a wide range of prospective customers.

In May 2020, we joined the All Weather Autonomous Real logistics operations and Demonstrations (AWARD) Consortium. The AWARD Consortium, which also includes participants, such as Continental Teves AG & Co. oHG, Terberg Benschop BV. and EasyMile, among others, applied to the European Commission to win funding for a large-scale project aimed to develop and safely operate autonomous heavy-duty vehicles in harsh weather conditions. In December 2020, the European Commission awarded a grant of nearly 20 million Euros for the AWARD consortium. Foresight will provide its QuadSight® multispectral vision solution to the project and is expected to receive approximately $1 million, out of which approximately $0.5 million has been received.

Additionally, in May 2020, we announced the sale of a prototype of our QuadSight ~~system~~solution to a leading, multi-billion-dollar European Tier One supplier of subsystems for rail and commercial vehicles. The sale took place following successful technological demonstrations in Germany. The global self-driving commercial market is expected to be valued at $1 billion in 2020. Two more QuadSight ~~system~~solution prototypes were ordered in July 2020 by the automotive solutions business unit of a multi-billion-dollar global Chinese technology company. The technology company may use our technology to improve its autonomous vehicle and safety solutions, and the prototype sales could result in future collaboration.

In July 2020, we received two orders for product development and customization from Elbit Systems Land Ltd., a subsidiary of the leading Israeli defense company Elbit Systems. According to the orders, we have supplied a QuadSight prototype ~~system~~solution with wide-angle field-of-view detection capabilities to meet Elbit Systems’ specific requirements. The modified prototype enhances the QuadSight ~~system’s~~solution’s ability to detect objects in a wider area of the road ahead.

In November 2020, we completed integration of our ~~QuadSight®~~QuadSight software on the NVIDIA® Jetson AGX Xavier™ platform, enabling shuttles, agriculture equipment and heavy equipment machines to operate Foresight’s stereoscopic obstacle detection software. We also joined the NVIDIA Inception program, providing go-to-market support, technological assistance and expertise to AI startups using NVIDIA processing units.

In December 2020, we announced that we will join the 2021 startup cohort at the University of Michigan’s TechLab at MCity. During the one-year program, we ~~will work~~have worked with students from the University of Michigan to further develop our automotive vision ~~system~~solution designed for Advanced Driver Assistance Systems and autonomous vehicles. The team ~~will be~~was mentored by our Head of Algorithm and other leading employees.

While we are completing the development of the QuadSight ~~system,~~solution, our focus remains on increasing public awareness of our company by showcasing our unique technology. We participated in several leading exhibitions and conferences worldwide and have dedicated substantial efforts and resources to public relations.

The QuadSight ~~system~~solution also gained industry recognition by winning several prestigious technology and innovation awards:

In March 2021, we announced the sale of a QuadSight prototype to the U.S. division of Hitachi, a leading Japanese Tier One supplier and manufacturer of stereo vision systems for the automotive industry. Hitachi was interested in assessing our thermal stereo capabilities for possible enhancement of its current visible light stereo capabilities. The successful evaluation of our technology led to the signing of two POC projects with Hitachi, one in January 2022 and another one in June 2022. The POC projects consisted of technological evaluation and testing of predefined simulated and real-life scenarios. We paired our QuadSight® and Mono2Stereo™ technologies with Hitachi’s existing camera systems in an effort to improve distance measurement and object detection. Both POC projects were completed successfully, and, during the fourth quarter of 2022, Hitachi demonstrated our solution to their customers, primarily automotive OEMs, and received positive feedback. Currently, negotiations are ongoing for potential future steps, which may involve a joint development project.

In May 2021, we signed a joint POC project with an American subsidiary of a leading European passenger car manufacturer. The project is meant to test our stereoscopic technology abilities to enhance the vehicle manufacturer’s existing active safety features without requiring additional sensors and infrastructure. Following successful completion of the project and satisfactory outcome, the vehicle manufacturer may consider integrating our solutions into its vehicle safety applications. The project, which was based on a predefined technological statement of work, consisted of two phases: a feasibility testing phase followed by a simulation and real-life testing phase. Total consideration for the POC is $120,000. In December 2021, we successfully completed the POC project and are currently discussing with the European car manufacturer future possible steps, which may include a joint development project.

In June 2021, we expanded our presence in the autonomous agricultural equipment market with our QuadSight prototype sale to a leading global manufacturer of agricultural and construction equipment. The manufacturer is evaluating our stereo capabilities for use in agricultural machinery. This was a first prototype sale to the agricultural equipment market.

In July 2021, we received a notice of allowance from the U.S. Patent and Trademark Office for our patent application with respect to our multi-spectral vehicular solution for providing pre-collision alerts. The patented technology involves a multi-spectral automotive vision solution comprised of a pair of stereoscopic infrared sensors and a pair of stereoscopic visible-light sensors. The solution includes a data fusion module that fuses received data from both infrared and visible-light channels to enable accurate obstacle detection and distance estimation. The fusion between the two stereoscopic channels also addresses corner-case scenarios, especially in harsh weather and lighting conditions, while reducing false alerts. The solution’s automatic calibration module is designed to ensure that stereo cameras remain calibrated regardless of their configuration or position, in order to create accurate and continuous depth perception. This patent serves as the underlying technology of the QuadSight automotive vision solution, one of our flagship products.

In August 2021, we signed a memorandum of understanding (MOU) for a multiphase business cooperation with Wuhu Chery Technology Co., LTD, or Chery, a global Chinese vehicle manufacturer, and Xuanyuan Idrive Technology Co. Ltd., or XY, a subsidiary of Wuhan Guide Infrared Co., a leading Chinese developer and manufacturer of infrared thermal imaging systems. During the first phase, Chery will test the QuadSight vision prototype solution to evaluate out technology and its potential further integration into advanced solutions for vehicles manufactured by Chery. Upon successful evaluation, the parties will negotiate a commercial agreement for the co-development of advanced solutions based on Foresight’s technology integrated with XY’s automotive sensors. The advanced solutions are designed for potential integration into semi- and fully autonomous vehicles manufactured by Chery.

Additionally, in August 2021, we began a POC project with a leading Chinese vehicle manufacturer. The aim of the POC project was to evaluate the stereoscopic capabilities of Foresight’s QuadSight vision system, using both visible-light and thermal infrared channels, to detect and classify obstacles on any road in harsh weather and lighting conditions.

In October 2021, we received an order for a prototype of our QuadSight four-camera vision solution from a leading North American robotic systems developer. Our technology will be evaluated for possible integration into various autonomous vehicles solutions offered by the robotic systems developer to its wide range of end-customers, mostly in agricultural, industrial, aerospace, mining and security industries.

Additionally, in October 2021, we announced the sale of a prototype of our QuadSight four-camera vision solution to a leading Japanese manufacturer of agricultural and heavy equipment for testing. The equipment manufacturer will examine our stereoscopic capabilities for use in fully autonomous tractors as an alternative to the leading sensors that are currently being evaluated.

In January 2022, we deepened our Chinese footprint with the establishment of Foresight Changzhou in Jiangsu Province, China. The Chinese subsidiary was established in cooperation with the China-Israel Changzhou Innovation Park (CIP), a bi-national governmental initiative that provides a unique platform for Israeli industrial companies seeking to enter the Chinese market. With the support of CIP’s facilities and its dedicated staff, Foresight Changzhou will receive a package of incentives and grants from the Jiangsu Province’s government to aid in overcoming barriers and achieving success in China. The subsidiary has hired local engineers and high-quality staff, who are based in CIP.

Additionally, in January 2022, we announced the signing of a multiphase business cooperation agreement with SUNWAY-AI. The first phase consisted of a POC project in which SUNWAY will test the QuadSight vision prototype solution and evaluate our technology and its further potential integration into SUNWAY’s products and services. The POC project was completed successfully and in May 2022 we announced the signing of a memorandum of understanding with SUNWAY. The memorandum of understanding established a joint development program for an obstacle detection system for unmanned vehicles based on our stereoscopic technology, using both visible light and thermal cameras. SUNWAY intends to incorporate our stereo vision technology into its unmanned agricultural vehicles and heavy machinery. Furthermore, SUNWAY has applied for the endorsement and financial support of the Chinese province of Jiangsu to underwrite and otherwise advance the joint development.

In November 2022, we signed a joint development and supply agreement with SUNWAY to strengthen our relationship. Over the contractual period of four years, the deal may yield up to $51 million in revenue based on demand from SUNWAY. The agreement establishes a joint program for the development and supply of obstacle detection systems and cloud gateway for driverless vehicles, as well as for ADAS for airport ground support vehicles, using both visible light and thermal cameras. Starting in the second half of 2023, SUNWAY will commercialize the ADAS systems to its customers and to third parties in Mainland China, as well as to Hong Kong, Taiwan and Macao. SUNWAY will assume responsibility for all regulatory clearances in connection with commercialization, as well as all installation, deployment, maintenance and support activities. Additionally, and subject to predefined commercial terms, SUNWAY was granted exclusive commercialization rights in China regarding the ADAS systems for ground support vehicles used in airports. Our QuadSight stereoscopic technology, including both proprietary software and cameras, will be licensed to SUNWAY and will serve as the underlying technology for SUNWAY’s ADAS systems, intended for integration into several types of vehicles working closely with aircraft, including fueling vehicles, garbage trucks, boarding vehicles, etc. The QuadSight system allows all obstacle detection in challenging weather and lighting conditions.

In February 2022, we announced that we will customize products and solutions for a leading Israeli defense integrator, Elbit Systems. We developed a customized 3D perception solution to meet the requirements of Elbit Systems’ end-customer, the IDF. Total revenue from the project amounted to approximately $220,000 during 2022. The customization project followed extensive testing of QuadSight prototype solutions by Elbit Systems, over a period of two years, as well as numerous successful demonstrations performed by Elbit to the IDF. Following the successful process, Elbit Systems plans to replace the use of LiDAR in its solutions with our vision technology. in June 2022, Elbit showcased our customized 3D solution on an unmanned ground robotic combat vehicle at Eurosatory, the world’s leading land and airland defense and security exhibition in Paris.

In June 2022, we announced the signing of an agreement for a POC project with ZF North America, a subsidiary of ZF Friedrichshafen AG, one of the top three leading Tier One technology companies supplying systems for passenger cars, commercial vehicles and industrial technology, enabling the next generation of mobility. The POC project followed our winning of the ZF Pitch Event that took place at the 2022 Consumer Electronics Show exhibition in January 2022. The POC project was completed successfully and discussions are underway with ZF North America regarding potential next steps, which could involve collaborating on a joint development initiative.

In July 2022, we signed a memorandum of understanding with Shandong Industry Research Information and Artificial Intelligence Integration Research Institute Co., Ltd., a professional research institute wholly owned by Shandong Industrial Technology Research Institute, and Beidou Jingzong Technology (Shandong) Co., Ltd., or Beidou Tech. The memorandum of understanding established the joint development of an obstacle detection system and all-weather, high-precision positioning for unmanned vehicles based on multi-sensor fusion. The new system will combine our stereoscopic technology (using both visible light and thermal cameras), radar, and the laser scanning technology LiDAR, as well as Beidou Tech’s vehicle navigation and positioning system. The collaboratively produced system will aim to provide vehicle manufacturers with multi-sensor intelligent navigation to deploy in smart transportation, active safety automotive systems, and unmanned driving. The resulting system is intended for use in autonomous vehicles, trucks, passenger cars, and other vehicles in Shandong Province, China. Furthermore, the Chinese parties applied for the endorsement and financial support of the province to underwrite and otherwise advance the project. Meanwhile, the parties intend to negotiate a definitive agreement to develop the above-mentioned system and to establish a joint venture in Shandong.

In September 2022, we signed a paid joint POC project with a leading American manufacturer of electric vehicles. The project consists of the technological evaluation and testing of predefined scenarios. We intend to demonstrate our ability to create 3D stereo perception with software only, using the manufacturer’s existing pair of mono cameras mounted on a large baseline (distance between the cameras). Our proprietary ScaleCam separated stereo camera solution allows manufacturers to place cameras on a large baseline. This solution increases distance accuracy at long ranges, allows detection of any type of obstacle, and improves the safety and robustness of the manufacturer’s driver assistance system.

In February 2023, our QuadSight stereovision solution was recognized as a significant technological breakthrough by Israel’s Ministry of Defense. After extensive testing by the Administration for Research and Development of Weapons and Technological Infrastructure of Israel’s Ministry of Defense in search for an alternative sensor to replace active LiDAR sensors, the QuadSight non-active stereo technology exceeded all requirements and was declared a significant technological breakthrough for defense applications.

Additionally, in February 2023, we announced that our wholly owned subsidiary, Foresight Changzhou Automotive Ltd. won the Outstanding Enterprise in International Cooperation award from China Israel Changzhou Innovation Park (CICP), Jiangsu Province. Foresight Changzhou was one of five companies to win this award, out of nearly 200 companies in the CICP. Foresight registered in the CICP at the end of 2021 and signed a commercial contract of up to $51 million with SUNWAY in November 2022, enhancing its support in the open innovation and high-quality development of the CICP and Changzhou City.

In March 2023, we signed a paid joint POC project with a leading global Japanese automaker. The project consists of evaluating our unique automatic calibration capabilities to ensure that the location and orientation of mono cameras on a vehicle are known at all times. The parties will work together to develop a breakthrough solution capable of detecting when a single camera’s position has changed as well as providing real-time correction of the camera’s position while the vehicle is in motion, through the use of our proprietary software.

To the best of our knowledge, no existing solution is able to resolve these miscalibration issues. If successful, the POC project may provide a solution that eliminates the need for external calibration in a garage for all vehicles using mono cameras.

Over the course of ~~2021,~~2023, we ~~will~~intend to continue to seek opportunities that will allow us to enter into commercial agreements with vehicle manufacturers and Tier One automotive suppliers and system integrators in the automotive, defense and heavy machinery markets for our ~~QuadSight system.~~various 3D vision-based software solutions.

In 2020, we identified new markets suitable for our unique technology that enables obstacle detection in harsh weather and terrain conditions, including the defense market, the heavy industrial equipment market and the agriculture market. Compared to the traditional automotive market, these markets have an immediate potential in terms of commercialization, and we believe they can be a source of relatively short-term revenues. Although the defense, heavy equipment and agriculture markets differ from the main market that we are targeting, the QuadSight system is also suitable for these markets and does not require dedicated development. We believe that entering these new markets will allow us to expand and improve our current product capabilities and open new opportunities.

ADAS and autonomous technology offer many advantages on the battlefield. Defense vehicles must be able to adapt to complex conflict zones and operate in the harshest environmental conditions, including off-road driving and zero-visibility sandstorms. One major advantage of our QuadSight technology over other sensors is the ability to provide high detection capabilities while remaining passive (without emitting energy), allowing vehicles to be undetected by enemies in the battlefield, in contrast to other systems that use radar and LIDAR that can be easily detected. According to a recent report from Global Fire Power, as of 2020, the defense vehicle market size includes over 300,000 armored fighting vehicles and 100,000 Main Battle Tanks (MBTs) in service worldwide.

Adding ADAS and autonomous capabilities to heavy industrial equipment vehicles brings a host of benefits. These vehicles require significant investments, enabling them to operate during inclement weather and poor lighting conditions. These vehicles must be able to sense and avoid specific objects, including people, animals and other machinery, at all times.

According to a report from Zion Market Research in March 2019, the global heavy construction equipment market was valued at $145 billion in 2018 and is expected to reach $231.3 billion by 2025. According to Preco, a leading vendor for collision mitigation technology optimized for heavy-duty equipment, 18% of the users of heavy industrial equipment vehicles already have a system for collision mitigation and 48% of the users would consider installing such a system.

Stereoscopic vision technology can add advanced capabilities to existing agricultural stereo systems. The strong interest in precision agriculture has led to a growing interest in stereo technology for generating 3D maps of agriculture equipment surroundings. Our stereo vision solution provides 3D raw data for obstacle detection, creating 3D terrain maps for precision agriculture, enabling autonomous navigation and automated grain loading. In addition, Foresight’s automatic calibration solution optimizes existing stereo systems used in agriculture vehicles by overcoming miscalibration challenges caused by changes in temperature and equipment vibrations.

According to a March 2020 report by MarketsandMarkets, the precision farming market is estimated to be USD 7.0 billion in 2020 and is projected to reach USD 12.8 billion by 2025, at a CAGR of 12.7% between 2020 and 2025.

The COVID-19 pandemic caused us to consider ways in which our technology can help society overcome the crisis. Because our products make use of sophisticated thermal cameras, artificial intelligence and advanced algorithms, we believe that we were well positioned to create a mass screening solution for COVID-19 symptoms. In June 2020, we submitted a U.S. patent application for fast and accurate detection of six COVID-19 symptoms.

We believe that a mass screening solution is essential to allow the world to safely return to events and services with large population flows, including concerts, sporting events, and public transportation.

Over the past six months, we conducted several successful pilot projects in Israel and presented our solution at the SEECAT 2020 exhibition in Japan and at the GITEX Future Stars 2020 conference in the United Arab Emirates.

Currently we are continuing the commercialization efforts for our COVID-19 symptom detection solution, despite the fact that the world is slowly returning to pre-pandemic activities thanks to active vaccination campaigns.

~~Vehicle-to-everything,~~Vehicle-to-Everything, or V2X, communication, is a wireless technology that ~~enables communication between~~allows vehicles, infrastructure, grid, home, and ~~network.~~network to communicate with each other. This ~~revolutionary~~cutting-edge technology ~~promises~~has the potential to ~~transform~~revolutionize the automotive industry in the ~~future.~~coming years. By enabling more effective traffic management, V2X technology ~~enables better~~can enhance vehicle performance and alleviate traffic ~~management and is expected to improve traffic congestion, thereby enhancing the active performance of vehicles.~~congestion. Additionally, V2X technology ~~may~~could also ~~lead~~contribute to ~~more efficient~~improved gas consumption, as well as increased accuracy and ~~improvements~~precision in location ~~accuracy and positioning.~~tracking.

V2X technology can be segmented based on the communication medium: vehicle-to-vehicle, ~~(V2V),~~or V2V, vehicle-to-infrastructure, ~~(V2I),~~or V2I, vehicle-to-pedestrian, ~~(V2P),~~or V2P, vehicle-to-grid, ~~(V2G),~~or V2G, vehicle-to-cloud, ~~(V2C),~~or V2C, and vehicle-to-device, ~~(V2D).~~or V2D. The rapid technological advancements that have recently transpired have paved the way for semi-autonomous and autonomous vehicles, which have a wide range of applications in V2X communication technology domain.

V2X technology optimizes traffic flow, increases traffic safety, saves time, reduces emissions, maximizes the benefits of transportation for both commercial users and the ~~general~~ public, and increases the convenience factor of the driver and passengers. ~~Automated driver assistance systems and intelligent traffic systems are the major application areas of V2X technology.~~

According to a February 2020 report released by the World Health Organization, approximately 1.35 million people die each year as a result of road traffic crashes.

V2X communication provides features such as intersection collision warning, obstacle detection, ~~lane change assistance, lane departure warning,~~ rollover warning, road departure warning, forward collision warning and rear impact warning. The increasing demand for real-time traffic and incident alerts that help to increase public safety of both drivers and vulnerable road users is driving the growth of the automotive V2X market in automated driver ~~assistance. On~~assistance systems and in location-based applications and services.

Furthermore, growing smartphone adoption rates and worldwide infrastructure developments support market growth as 80.69 percent of the ~~other hand, restraints~~world’s population owns a smartphone and enjoys a wide deployment of 5G networks and cloud servers.

The COVID-19 pandemic severely impacted public transportation, with cities grounding to a halt, resulting in financial losses to major cities and high unemployment rates. In a March 2021 research report “The Future Of Public Transport”, mayors in around 100 cities around the world have said that investing in public transport could create 4.6 million jobs by 2030 and cut transport emissions, as part of COVID-19 recovery plan.

Automotive OEMs and many advanced mobility players have been some of the hardest hit in the automotive world due to COVID-19. This could lead to a direct long-term impact on the automotive industry due to the macroeconomic trends, changing consumer behavior and regulatory developments. Although, with countless changes forced upon our day-to-day lives by the COVID-19 pandemic, the automotive industries are on the lookout for how changes in consumer behavior may affect the adoption of technologies such V2X.

As governments make substantial investments in public transportation, a need arises to provide mobility solutions intended for the last mile - the last leg of a journey from a transportation hub to a final destination - giving rise to increased use of micro-mobility vehicles, such as ~~lack~~electric bikes (e-bikes), electric scooters (e-scooters), etc. Enhancing the safety of ~~cellular connectivity coverage~~vulnerable road users, such as e-bike and e-scooter riders, is of great concern. A September 2021 MarketsandMarkets research report forecasts that the electric bike market is projected to reach $79.7 billion by 2026 from $47.0 billion in ~~developing countries and the growing costs imposed on consumers can hinder market growth.~~2021, at a CAGR of 11.1%.

According to a January 2021 Industry Forecast by Allied Market Research, covering the period of 2020 to 2027, the global automotive V2X market was valued at $2.57 billion in 2019, and is projected to reach $11.72 billion by 2027, registering a CAGR of 28.4%. Europe was the highest revenue contributor, accounting for $851.8 million in 2019, and is estimated to reach $3.03 billion by 2027, with a CAGR of 24.4%.

Factors such as increased adoption of connected cars and a rise in urbanization & industrialization are expected to drive the market growth. In addition, future potential of 5G & artificial intelligence (AI) technology coupled with the advancements in cellular-V2X technology and developments in semi-autonomous & autonomous vehicles are expected to offer profitable opportunities for the automotive V2X market growth during the forecast period.

Micro-mobility refers to a rapidly growing market segment that encompasses various modes of transportation, including electric scooters, bicycles, and hoverboards, among others. These vehicles offer a convenient and eco-friendly solution to short-distance travel in urban areas and have quickly gained popularity in recent years. According to Acumen Research and Consulting, the Global Micro-mobility Market Size gathered $49.3 Billion in 2021 and is set to garner a market size of $186.2 Billion by 2030 growing at a CAGR of 16.2% from 2022 to 2030.

The global ADAS market will witness a robust CAGR of 13.83%, valued at $23.44 billion in 2021, expected to appreciate and reach $75.23 billion by 2030, confirms Strategic Market Research. ADAS are technologies and electronic systems in a vehicle to assist the driver. ADAS utilizes the sensors that are present inside the vehicle, such as a camera and a radar, to have a vigil on the outside world. ADAS provides pivotal information like the level of congestion present on the roads, updates on traffic, blockage, and closure of roads ahead so that the driver gets alerted beforehand. This system also measures the driver’s distraction and level of fatigue of the driver, thereby suggesting the precautions that need to be taken.

Hardware-based solutions require costly and complex designated hardware. As the technology is not fully ~~certified,~~regulated, there are standardization concerns. Hardware-based solutions are intended primarily to be installed in vehicles, providing only partial coverage, leaving vulnerable users (pedestrians, cyclists, etc.) unprotected. The use of DSRC technology increases the number of emitting units on the road (in addition to vehicle sensors and mobile phones), as it requires a separate communication band which emits additional energy. In addition, the market penetration cycle time is long due to regulatory ~~concerns.~~concerns and a global crisis of chip shortage.

Software-based cellular V2X solutions rely on existing infrastructure and do not require special certification. Using intuitive applications for smart devices (such as smartphones, ~~and SIM-based car~~ infotainment systems, head up displays, dash cams and ADAS), software-based solutions have a short market penetration cycle.

The above-mentioned industry forecast also claims that cellular V2X technology is designed to be compatible with upcoming 5G network technologies which will be used as the ultimate platforms to enable cooperative intelligent transport systems services and technology. Cellular V2X can be applied in use cases such as location-based applications (for example, navigation, shared transportation, and fitness applications), micro-mobility services to e-bikes and e-scooter riders, autonomous driving, platooning, vehicle safety and traffic efficiency which require efficient communication technology and is expected to offer profitable growth opportunities for automotive V2X market.

In December 2019, we completed the SDK configuration of the Eye-Net Protect solution. The Eye-Net Protect is a comprehensive solution that includes an intuitive mobile interface designed to provide real-time pre-collision alerts to all road users, including the most vulnerable ones (pedestrians, cyclists, and micro-mobility riders)

An SDK configuration indicates commercial engagement readiness and will allow Eye-Net Mobile to integrate its solution with leading location-based applications, such as navigation, ridesharing, parking, and fitness applications. This configuration will enable rapid market penetration, providing a life-saving accident prevention solution that is readily available for deployment.

Eye-Net Protect family of products (Eye-Net Protect, Eye-Net Protect Plus, Eye-Net Protect Pro) provides real-time pre-collision alerts to all road users by using smartphones with SDK configuration installed, relying on existing cellular networks.

Real-time alerts utilizing adaptive network latency compensation of each users’ cellular devices.

Eye-Net Protect is an intuitive and easy-to-use cellular-based V2X solution that provides real-time pre-collision alerts to drivers and vulnerable road users, including pedestrians, cyclists, scooter drivers, etc., by using smartphones and relying on existing cellular networks.

The solution calculates user location and collision probability multiple times per second and utilizes a sophisticated probability analysis for spatial cross-correlation of bearing, velocity, and acceleration to determine an imminent collision, with near zero false alarm rate.

Eye-Net’s unique V2X collision prediction and prevention software-based platform incorporates AI-powered algorithms that enhance accuracy, predict collisions, reduce latency, and optimize device resource consumption.

Designed to provide a complementary layer of protection beyond traditional ADAS, Eye-Net Protect extends protection to road users who are not in direct line of sight, and not covered by other alerting systems and sensors.

The Eye-Net Protect solution aims to solve three main limitations of conventional ADAS systems:

~~Eye-Net Protect~~ ~~(Market penetration – ready for commercial deployment)~~

~~A mobile client or mobile software development kit, or SDK, providing real-time pre-collision~~Eye-Zone is a V2X collision detection and accident prevention solution that sends alerts and indications to ~~vulnerable~~the driver. Eye-Zone uses a unique virtual sensor RUDAR™ (Road Users Detection and Ranging) designed to provides a point cloud of the real time location, movement characteristics and probability of collision with each of the road users ~~and vehicles by using smartphones, relying on existing cellular networks. This~~around the vehicle.

Eye-Zone is ~~the core development of Eye-Net Mobile. Eye-Net Protect’s~~designed to provide unique features and capabilities ~~include:~~enhancing automotive safety, without any hardware changes, allowing vehicles to communicate with all road users.

A revolutionary OS-agnostic software add-on that can be seamlessly integrated into automotive systems (such as ADAS, navigation, infotainment).

Eye-Net utilizes existing cellular networks, without requiring any hardware installation other than using smartphones and other smart devices within vehicles. It incorporates cutting-edge algorithms, protocols, and system architecture to enhance accuracy, predict collisions, reduce latency, and optimize device resource consumption.

~~A standalone application tailored for infotainment systems providing real-time alerts and notifications about road safety events and enhanced map information.~~Seamlessly connecting to external location sources

~~A state-of-the-art artificial intelligence system predicting safety trends and providing actionable insights based on big data collected from Eye-Net users.~~

In December 2019, we completed the SDK configuration of the Eye-Net Protect solution. An SDK configuration indicates commercial engagement readiness and will allow Eye-Net Mobile to integrate its solution with leading location-based applications, such as navigation, ridesharing, parking and fitness applications. This configuration will enable rapid market penetration, providing a life-saving accident prevention solution that is readily available for deployment.

There are many companies competing in the V2X communication market, including vehicle manufacturers, ~~and~~ automotive Tier One suppliers the majority of which are pushing for CV2X (hardware-based) protocols. ToOver the ~~best of our knowledge, there are only a few other companies~~past year, we see that small startups that have attempted to develop asimilar V2X cellular-based ~~solution similar~~solutions have ceased activities mainly due to ~~Eye-Net Mobile that relies on application~~technological and financial barriers. On the other hand, we can see a growing number of vehicle manufacturers, Tier One automotive suppliers, smartphone manufacturers and cellular ~~infrastructure.~~service providers that have taken the first steps to develop a similar solution to Eye-Net. As far as we know to date, none of our competitors has reached product completion and deployment readiness stage for a V2X product.

Eye-Net Mobile focuses on increasing public awareness of its products and technology by conducting controlled public trials and participating in conferences worldwide. The Eye-Net Protect solution was first launched in February 2019 at the Mobile World Congress in Barcelona, the world’s largest mobile conference.

~~In 2020,~~Over the course of 2021, Eye-Net Mobile ~~identified several~~modified its penetration strategy to concentrate on Israel, Japan, Europe and the United States and to address the following markets that may benefit from its unique accident prevention solution suite:

~~Micro mobility~~3rd-party applications - Location-based application providers, such as developers of navigation, shared transportation, and fitness applications, may offer the Eye-Net solution to existing user install base as a global added value on top of their existing platforms, enhancing road safety to all users.

Micro-mobility - The shared urban mobility landscape creates numerous safety concerns for riders and pedestrians. Micro mobility riders, unlike cars, lack any kind of safety warning system to avoid accidents. Eye-Net’s collision prediction and prevention solution answers a real need for a simple, hands-free, camera-free situational awareness and road safety solution that can be incorporated on any micro mobility vehicle, shared or owned. Relying on communication between smartphones through a dedicated app, the all-around solution is accessible to anyone and with any vehicle, for real-time pre-collision alerts anywhere, at any time.

~~Motorcycles -~~ Among the most vulnerable road users, motorcyclists lack warning systems and are especially vulnerable to side impact collisions. Particularly common at intersections, T-bone accidents are often caused by distracted driving and the motorcycle’s low visibility on the road.

The increasing demand for integration of safety systems in motorcycles aligns with the critical need to protect these vulnerable road users from serious motor vehicle crashes. Eye-Net’s collision prediction and prevention solution provides real-time alerts that meet the unique safety needs of motorcyclists. Featuring beyond line-of-sight capabilities, Eye-Net gives a highly accurate road picture, capable of foreseeing potential side-impact collisions, and ultimately – saving lives.

Automotive - Sophisticated ADAS systems improve driver safety– but none of them can see what’s coming from around the corner. Eye-Net’s solution brings a new paradigm in road safety, with an anytime, anywhere collision detection system that extends the field of view beyond line-of-sight, accurately identifying potential collisions and sending an alert in real time, to complement commonly used ADAS solutions. Cars equipped with in-vehicle infotainment systems, head-up display units (HUD) advanced dashcams, can be integrated with beyond line-of-sight warning capability enhance all-around protection for drivers, passengers, and pedestrians.

~~Smart City~~ - The ability to interconnect between smart mobility and smart cities is key to improving road safety for all road users in the urban ecosystem, and in planning for a sustainable Vision Zero future. Infrastructure optimization has the added benefit of enabling effective smart city planning for smarter mobility, to shorten “last mile” distances and achieve a safer, more efficient and environmentally friendly urban landscape.

Eye-Net’s cellular-based collision prediction and prevention solution interconnects smart mobility and smart cities, to achieve city-wide road safety. The scalable and flexible solution seamlessly connects to the city infrastructure and relies on communication between smartphones through a dedicated app.

The interconnection of vehicles, micro mobility devices, infrastructure and vulnerable road users represents a unique opportunity for mobile network operators to enhance road safety. Eye-Net’s anytime, anywhere, and all-around collision detection system utilizes interconnected cellular-based V2X communication to provide comprehensive protection for vulnerable road users and pedestrians. The solution uses existing cellular infrastructures and is compatible with 3G, 4G and 5G networks.

Mobile network operators can enhance the service offered to subscribers without the need for a dedicated device – built-in as part of a cellular offering to incorporate as part of the infrastructure for safe cities to residents, in cooperation with road authorities, and for all transportation markets – micro mobility, motorcycle, and automotive.

In March 2020, Eye-Net Mobile signed a collaboration agreement with NoTraffic Ltd. NoTraffic developed a proprietary Autonomous Traffic Management Platform solution that enables cities to intelligently implement their traffic policy in order to maximize traffic flow, reduce congestion, prioritize different types of vehicles, and prevent accidents. According to the agreement, the companies will collaborate to develop and optimize the technological abilities of Eye-Net Mobile’s cellular-based V2X accident prevention solution and NoTraffic’s intelligent traffic management solution. ~~Following the completion~~As of ~~joint development, the companies will promote the integration and commercialization of the combined solution with various municipalities in North America and throughout the world.~~March 20, 2023, we do not allocate efforts or resources to this collaboration.

In August 2020, Eye-Net Mobile announced the launch of two pilot projects with leading Japanese multinational companies: the first pilot project is with a global Japanese technology company, and the second pilot project is with a multinational Japanese electronics company. These pilot project pursue the company’s strategy of achieving a critical mass of users in a single geographic area to demonstrate the technology’s potential for preventing accidents and saving lives.

In October 2020, Eye-Net Mobile announced a distribution agreement with Cornes Technologies, a leading Japanese trading house. According to the agreement, Cornes Technologies will promote the Eye-Net™ cellular-based accident prevention suite in products and applications of third parties in Japan. The distribution agreement follows multiple successful pilot projects with Japanese multinational companies, as well as ongoing interest from additional Japanese companies.

In January 2021 another pilot project was announced with the intelligent transport system division of a multi-billion-dollar global Japanese vehicle manufacturer. The pilot project will be used to validate and evaluate the ~~software development kit (SDK)~~SDK configuration of the Eye-Net solution for possible integration into the vehicle manufacturer’s smart city project. In March 2021, Eye-Net successfully completed a controlled trial of its Eye-Net Protect solution which is part of the pilot project with the Japanese vehicle manufacturer. The vehicle manufacturer reviewed the performance of the Eye-Net Protect solution and subsequently concluded it is a valid option for the safety traffic system of its smart city project. ~~Following the results of~~Additionally, in March 2021, Eye-net Mobile successfully completed the first phase of a pilot project with the intelligent transport system division of a multi-billion-dollar global Japanese vehicle ~~manufacturer will initiate technical discussions between Eye-Net and the smart city constructor, progressing towards possible integration into its smart city project.~~manufacturer.

In February 2021, Eye-Net Mobile signed an agreement with ~~WunderCar~~Wunder Mobility Solutions, a German-based software, vehicles and service provider that enables companies and cities worldwide to launch and scale new mobility services. According to the agreement, Eye-Net will be included in Wunder Mobility’s Marketplace online platform and will introduce its Eye-Net Protect accident prevention solution to potential global corporate customers seeking mobility tech-focused applications.

Eye-Net Mobile also announced in February 2021 that it will conduct technological demonstrations over the 5G cellular network in collaboration with the innovation labs of a top multinational European cellular provider to test its Eye-Net™ Protect cellular-based vehicle-to-everything (V2X) accident prevention solution. The demonstrations will be used to test the ~~software development kit (SDK)~~SDK configuration and performance of the Eye-Net solution in controlled environment scenarios. Successful demonstrations of Eye-Net Protect’s V2X capabilities may lead to a pilot project with the cellular provider.

In March ~~20201, Eye-Mobile~~2021, Eye-Net Mobile signed a commercial cooperation agreement with SaverOne 2014 Ltd., a leader in providing an effective solution for cell phone distracted driving. According to the agreement, Eye-Net will integrate its Eye-Net™ Protect solution in SaverOne’s product designed to prevent the use of texting applications by the driver while the vehicle is in motion. The agreement also contemplates that SaverOne will introduce Eye-Net to certain companies with which it has business relationships, in consideration for 10% of the revenues received by Eye-Net under a commercial transaction with a third party introduced by SaverOne. In turn, Eye-Net will introduce SaverOne to Japanese vehicle manufacturers and business entities with which Eye-Net has business relationships.

In April 2021, Eye-Net Mobile signed a distribution agreement with WebSIA Soluções Disruptivas, Inteligências Associadas, Tecnologia e Serviços Ltda., or WebSIA, a Brazilian distributor, developer and integrator focused on cutting-edge technologies. According to the agreement, WebSIA will exclusively promote and sell the Eye-Net™ Protect cellular-based accident prevention solution and serve as Eye-Net’s distributor in the city of Sao Paulo to support customers and generate new business. Following successful integration of Eye-Net’s solutions in Sao Paulo, the parties may expand the agreement to additional territories.

In July 2021, Eye-Net Mobile, announced it will collaborate on a pilot project with V-tron B.V., or B-tron, an innovative Dutch company developing telematics products and road safety applications for aftermarket use in European fleets and lease cars. V-tron will evaluate the Eye-Net™ Protect solution for possible integration into its onboard units and application services in order to enhance the value of its innovations offering and prevent accidents by connecting road users and alerting about potential collisions in real time.

Additionally, in July 2021, Eye-Net Mobile initiated a pilot project with the IT subsidiary of a multi-billion dollar multinational Japanese company to test its Eye-Net™ Protect cellular-based V2X accident prevention solution. The pilot project will evaluate Eye-Net Mobile’s solution for possible integration as an application layer into the C2X platform of the Japanese company to create potentially safer driving environments.

In November 2021, Eye-Net Mobile began a pilot project with a leading European cellular service provider. The cellular provider will test the SDK configuration and the performance of the Eye-Net™ Protect cellular-based V2X accident prevention solution and intends to demonstrate it to its business partners. Upon successful evaluation, the leading cellular service provider may offer the Eye-Net Mobile solution to its customers, including municipalities, as part of its 5G cellular network solutions suite.

In January 2022, Eye-Net Mobile began its first pilot project in India with a local telematics company, a venture facilitated by Eye-Net Mobile’s Indian distributor. Telematics, also known as fleet tracking, refers to the methodology of monitoring fleets, vehicles and drivers’ behavior by using GPS technology and onboard diagnostics. The Indian telematics company will evaluate the performance of the Eye-Net™ Protect collision prediction solution in various scenarios, including those involving vehicles, pedestrians and bicycle riders. Successful evaluation may lead to possible commercialization and integration of Eye-Net™ Protect into the service suite offered by the telematics company to its commercial fleets and governmental operators of vehicles.

In February 2022, Eye-Net Mobile was one of five winners selected by the Paris2Connect consortium to participate in an urban mobility experiment to take place in Paris’ Urban Innovation District. The Paris2Connect consortium includes Nokia (HEL: NOKIA), ATC France (a subsidiary of American Tower Corporation), Aximum, RATP Group, and Signify N.V. (AMS: LIGHT).

In September 2022, Eye-Net Mobile signed a five-year commercial cooperation agreement with Pango Pay & Go Ltd., or Pango. Pango is the developer of the leading mobility-as-a-service parking, vehicle, road services and payment application in Israel. Pursuant to the agreement, the parties will cooperate to integrate Eye-Net™ Protect products into Pango’s app as an SDK. The integration will enable Pango app users who completed the onboarding process, to use the service operated by Eye-Net Mobile through the app, which is intended to provide a layer of protection to Pango’s users, potentially preventing accidents by alerting drivers and road users about oncoming collisions. The potential large-scale deployment of Eye-Net™ Protect into Pango’s app may allow the integrated solution to protect the lives of millions of users in Israel. As part of the agreement, Pango will serve as Eye-Net Mobile’s distributor in Israel and as the Israel Community Manager of Eye-Net Mobile Products. In its role as Israel Community Manager, Pango will lead Eye-Net Mobile’s business development efforts in the Israeli market and will introduce the company to its commercial partners in Israel and will be entitled to a portion of the proceeds derived from the sale of Eye-Net Mobile products in Israel. In addition, Pango will be entitled to 50% of third-party revenues received by Eye-Net Mobile for services provided in Israel. Moreover, Pango will be granted options to purchase 2,500 ordinary shares, 0.01 par value per share of Eye-Net Mobile, constituting, if exercised in full, 2.22% of Eye-Net Mobile’s issued and outstanding share capital on a fully diluted basis at an exercise price which reflects a $40 million company valuation. Upon the successful integration of Eye-Net™ Protect into Pango’s app, Pango will release an updated version of its app, which will include the integrated SDK configuration of the Eye-Net Protect, to its millions of users in Israel. The updated app will also be available for download on all relevant application stores. The new integrated solution will include the free-of-charge Eye-Net Protect feature and a potential shared revenue stream derived from offering the premium Eye-Net Protect Plus feature for a monthly subscription fee. Pango will collect the monthly fee from the end user on behalf of Eye-Net Mobile and will receive 50% of the aggregate price per user. As of the date of this annual report, the parties continue cooperating on integration of Eye-Net Protect into Pango’s application.

In November 2022, Eye-Net Mobile successfully completed a technological roadshow of the Eye-Net Protect™ solution in Japan. Eye-Net Mobile demonstrated the technology for 20 automotive-related companies, including five leading Japanese OEMs, Tier One and Tier Two suppliers, as well as 11 dashboard cameras (dashcam) companies. Eye-Net Mobile’s successful demonstrations generated significant interest among several world-leading OEMs and manufacturers of complementary equipment to the automotive industry (including infotainment systems and dashcams) who expressed interest in pursuing further technological evaluation.

In February 2023, Eye-Net Mobile was engaged in a paid POC project to integrate Eye-Zone™ automotive system with vehicle manufacturer’s existing ADAS systems. The parties will begin a paid POC project to evaluate the added value and capabilities of Eye-Zone as a software V2X communication layer, allowing for unprecedented, seamless communication between vehicles and all road users (including vulnerable road users). The POC will include the integration of Eye-Zone within the automaker’s ADAS as an enhancement layer for the vehicle’s safety capabilities. The POC will be conducted in collaboration with a leading Japanese technology and communication company that will provide the communication infrastructure and advanced communication modules.

We are leveraging our unique expertise in advanced image processing algorithms and Computer vision technology into the rail industry. As of ~~the date of this annual report on Form 20-F,~~March 20, 2023, we hold a ~~19.34%~~15.2% stake ~~(15.83%~~(11.86% fully diluted) in Rail Vision Ltd., or Rail Vision, a development stage company ~~focused on train~~that is seeking to revolutionize railway safety ~~accident prevention~~ and ~~enhanced~~the data-related market. Rail Vision believes it has developed cutting edge, AI based, industry-leading detection technology specifically designed for railways, with investments from Knorr-Bremse, a world-class rail system manufacturer. Rail Vision has developed its railway detection and systems to save lives, increase efficiency, and dramatically reduce expenses for the railway operator. Rail Vision’s railway detection system is currently in the ~~rail industry.~~pilot phase with several industry leading railway operators as it seeks to move to the next stage of receiving commercial orders.

Rail Vision ~~develops a~~has developed unique ~~system~~railway detection systems for railway safety, based on image processing ~~technology, to~~technologies that provide early ~~warning~~warnings to ~~drivers~~train driver of hazards on and around the railway track, inincluding during severe weather ~~conditions~~ and in all lighting ~~conditions~~.conditions. Rail Vision’s unique system uses special high resolution cameras to identify objects up to 2,000 meters away, along with a computer unit that uses AI machine learning algorithms to analyze the images, identify objects on or near the tracks, and warn the train driver of the obstacle and potential danger.

Rail Vision develops solutions for a number of ~~segments~~verticals in the railway ~~market, such as:~~market:

Rail Vision’s Main Line System is ~~specially designed~~an application of its railway detection system that includes an external sensor unit installed on the train along with an on-board computer system. The on-board computer system receives data from the external sensor unit and uses artificial intelligence to ~~detect and classify obstacles – i.e. humans, animals, vehicles, signals, and infrastructure components – on and along rail tracks at a distance of up~~perform algorithmic calculations in real time to ~~2,000 meters and helps preventing~~identify potential hazards for the train ~~accidents and increases safety.~~operator.

For the shunting yard application, Rail Vision solution ~~enables railway operators~~is meant to ~~safeguard~~streamline work in the operational areas of railways (shunting yards) which are used for the assembly, loading and ~~automate the~~unloading of freight trains. The shunting yard ~~operation, and can also have the ability to predict when maintenance on~~application of the railway ~~is required.~~detection system consists of two external sensor units installed on either side of the locomotive that are linked to the central processing unit inside the train, and uses algorithms, artificial intelligence/deep learning neural nets, to classify these obstacles in real time, at a range of up to 200 meters on and beside the track, under severe weather and poor visibility conditions. These warnings are shown to the driver with some recommendations to stop or slow down.

For LRV application, Rail Vision’s Urban Rail Vehicle System ~~is specifically designed~~helps to ~~identify potentially dangerous situations in urban traffic,~~increase travel safety with the use of advanced technologies that provide real-time warnings of obstacles on the track ~~or on station platforms. The system detects~~by utilizing sensors and ~~classifies obstacles within the predefined area~~cameras with a broad field of ~~interest at a range of typically up to 200 meters. In case~~vision. As part of a ~~potentially dangerous situation, it generates visual~~cooperation with Knorr-Bremse AG, Rail Vision developed a preliminary prototype of LRV system. As of March 20, 2023 Rail Vision does not allocate its efforts or resources within this segment. Rail Vision will explore business opportunities and ~~acoustic alerts and is also appliable~~will base its decision of whether or not to allocate resources within this segment on ~~remotely controlled and autonomous vehicles.~~a case-by-case basis.

~~In addition, Rail Vision’s systems can be integrated into the train’s other sub systems, and can be scale up~~

For Maintenance, Predictive maintenance applications based on ~~its existing components which allow to facilitate emergency autonomous actions,~~measurements and data collection - customers who have installed Rail Vision Main line and Shunting yard systems for real time identification of objects, will have the option of receiving predictive track maintenance services, such as ~~halting acceleration, braking once an obstacle~~identification of vegetation invading the tracks, damage to infrastructures, sunk pylons, etc. This railway detection system application will be able to collect the data from the sensors and check for any changes in and around the track to indicate possible defects in the infrastructures. Currently, this application is ~~detected, sounding a horn~~in the initial research and ~~flashing lights.~~

~~In April 2020,~~development stage. Rail Vision ~~Ltd received its first commercial order from affiliate~~has developed a preliminary paid prototype for one customer thus far. As of Knorr-Bremse AG in Switzerland to supply an Assisted Remote Shunting (ARS) prototype system and an Operational Functional Test (OFT) for a total value of approximately 500,000 Euro to a leading European train operator. A successful testing of Rail Vision’s ARS prototype could entail the purchase of approximately 30 ARS systems for an additional 2.5 million Euro. In September 2020,March 20, 2023, Rail Vision ~~signed~~does not allocate its efforts or resources towards this product. Rail Vision will explore business opportunities and will base its decision of whether or not to allocate resources towards this product on a commercial agreement with an affiliate of Knorr-Bremse AG (KB) to supply Rail Vision’s ARS systems to the leading European train operator. According to the terms of the agreement, the train operator may choose to purchase 30 ARS systems, and may then exercise the option to purchase an additional 45 ARS systems.case-by-case basis.

In ~~December~~August 2020, Rail Vision entered into a framework agreement with KBCH (a subsidiary of Knorr-Bremse operating in Switzerland) regarding the ~~multi-billion-dollar electrically powered light rail market~~supply of a prototype of its system to the shunting yard of a company operating cargo trains in Switzerland, or SBBC. Under the Framework Agreement, Rail Vision provided KBCH one prototype of the system which was installed on an operating locomotive in an SBBC shunting yard, for the purpose of examining the operational performance of the system, or the Operational Function Test. In consideration for the prototype provided in October 2020 for the Operational Function Test, KBCH paid Rail Vision approximately EUR 244,000 (approx. $293,000). Rail Vision continues the cooperation with KBCH under the Framework Agreement for an upcoming tender. As of March 20, 2023, SBB (the parent company of SBB cargo) is planning to issue a tender for purchasing nine systems for evaluation. Upon successful tender, Rail Vision estimates that the total potential is more than 100 systems.

On September 17, 2020, Rail Vision entered into a non-binding memorandum of understanding with Knorr-Bremse regarding cooperation between the parties with respect to LRV systems. Following the signing of the Knorr-Bremse memorandum of understanding, in December 2020, Knorr-Bremse placed a purchase order for developing two ~~system samples from KB. Additionally, KB ordered~~prototypes of the ~~customization of~~LRV system ~~features~~ according to ~~its requirements. Revenue from~~specifications required by Knorr-Bremse. In return for the ~~sale is expected to~~development of the two prototypes, Knorr-Bremse paid a total of approximately ~~400,000 Euro.~~EUR 397,000 (approximately $471,000).

In October 2020, KBKnorr-Bremse made a follow-on investment of $10 million in Rail ~~Vision.~~Vision and $4.5 million in 2022. Following the additional ~~investment, KB~~investments, and as of March 20, 2023 Knorr-Bremse owns ~~36.79%~~32.6% of Rail Vision’s outstanding capital.

In April 2021, Rail Vision entered into an equipment, personnel and services supply agreement with Hitachi Rail STS Australia Pty Ltd., or STS, which enables STS, as the principal supplier, to supply Rio Tinto Railway Network with its Main Line system for long term demonstrations and to examine the Main Line system operational performance. The ~~investment reflected~~long-term pilot was concluded at the end of August 2022. Following the completion of the long-term pilot, Rail ~~Vision’s post-money valuation~~Vision submitted a summary report of the pilot and following a technical workshop with Rio Tinto that was performed in November 2022. Rail Vision expects that Rio Tinto will send Rail Vision more detailed requirements for the next phase.

In April 2022, Rail Vision completed an initial public offering of its ordinary shares and warrants on the Nasdaq Capital Market.

In January 2023, Rail Vision signed a contract with Israel Railways to purchase ten Rail Vision Main Line Systems and related services for a total amount of approximately ~~$50~~$1.4 million. The delivery is expected to start during the fourth quarter of 2023. Rail Vision believes that the first order for such system by a commercial operator will have an impact on the market.

In February 2023, a leading U.S.-based rail and leasing services company purchased a Rail Vision Switch Yard System for $140,000 with support, to evaluate its performance during a six-month trial. The US-based customer offers a suite of rail-centric services including in-plant rail switching and material handling services.

We seek patent and trademark protection as well as other effective intellectual property rights for our products and technologies in the United States and internationally. Our policy is to pursue, maintain and defend intellectual property rights developed internally and to protect the technology, inventions and improvements that are commercially important to the development of our business. ~~We have~~

Foresight Automotive has a growing portfolio of ~~two~~three granted U.S. patents and four pending U.S. non-provisional applications, two ~~full U.S. applications, three full applications~~granted patents with the Israeli Patent Office, ~~three~~one granted patent and five full applications in China, ~~four~~one of which has been allowed, six applications in Europe, four applications in Japan, and one PCT application. Eye-Net Mobile has a growing portfolio of one granted U.S. patent, three U.S. provisional patent applications, one full application with the Israeli Patent Office and one application in ~~Japan.~~Europe. A provisional patent application is a preliminary application that establishes a priority date for the patenting process for the invention concerned and provides certain provisional patent rights. We cannot be certain that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents granted to us in the future will be commercially useful in protecting our technology. Despite our efforts to protect our intellectual property, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages. For more information, please see “Risks Related to our Intellectual Property.”

On January 5, 2016, we entered into an asset transfer agreement with Magna whereby Magna transferred to us certain intellectual property rights and assets in the field of vehicle safety. The asset transfer agreement became effective retroactively on October 11, 2015. In addition, and since the date of our Merger, Magna has provided us with certain services, primarily with respect to the design and development of algorithms and ADAS designated computer vision software.

In addition to patent protection, we have also filed trademark applications for the purpose of preserving rights to the identity of our products. ~~Three trademark~~Foresight Automotive has two trademarks that have been granted in Israel and two additional applications that were filed ~~in Israel two of them have already been granted and the third one is waiting for examination. Three additional applications were filed under~~via the Madrid ~~protocol,~~Protocol, one of them has been granted in ~~the United States,~~ Europe, ~~and Japan. The second~~UK, Japan and the ~~third applications have~~U.S. and the second has been granted in Europe ~~only.~~and the UK. Eye-Net Mobile has One trademark that has been granted in Israel, one additional application was filed via the Madrid Protocol and has been granted in Europe and the UK and is pending (awaiting examination) in Canada. Eye-Net Mobile’s trademark applications in the following countries are still pending - Brazil, Canada, China, India, Japan and the USA. While we pay great attention to its trademark rights and to the avoidance of disputes relating to its products, there is no assurance that third parties may not allege that a use of our trademarks constitutes infringement of third-party trademark rights or other rights. However, when registration of our trademarks is perfected, we expect that the danger of any such adverse occurrence will be minimized or avoided entirely.

For the years ended December 31, ~~2020, 2019~~2022, 2021 and ~~2018,~~2020, we incurred approximately ~~$8,563,000, $10,209,891~~$11,534,000, $10,170,000 and ~~$8,637,947,~~$8,563,000, respectively, of research and development ~~expense.~~expenses, net.

Through Foresight Automotive, we have a development services agreement with Magna, pursuant to which Magna provides Foresight Automotive with software development services in consideration of monthly payments at agreed upon rates for each of Magna’s employees, not to exceed the aggregate monthly consideration of NIS 235,000 ~~(NIS 200,000 until January 1, 2019)~~ plus VAT. We expect that the services provided by Magna will decrease as we hire additional employees and expand our in-house capabilities.

Our research and development efforts are financed in part through royalty-bearing grants from the IIA. As of December 31, ~~2020,~~2022, we have received the aggregate amount of approximately ~~$661,000~~$603,000 from the IIA for the development of our technology. With respect to such grants, we are committed to pay certain royalties up to the total grant amount. Regardless of any royalty payment, we are further required to comply with the requirements of the Research Law, with respect to those past grants. When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. We do not believe that these requirements will materially restrict us in any way.

Magna B.S.P. Ltd., a private company incorporated in Israel, holds approximately ~~11.14%~~7.35% of our issued and outstanding share capital as of the date of this annual report on Form 20-F. We currently have ~~one wholly owned subsidiary:~~two wholly-owned subsidiaries: Foresight ~~Automotive.~~Automotive and Eye-Net Mobile. In addition, Foresight Automotive has one wholly-owned subsidiary, Foresight Changzhou, incorporated in Jiangsu Province, China.

On March 21, 2022, the Israeli court approved a corporate restructuring, according to which Foresight Automotive will distribute all of its holdings in Eye-Net Mobile (constituting 100% of Eye-Net Mobile’s outstanding share capital) to the Company, by way of dividend in kind. On September 15, 2022 the Company completed the said structural change after obtaining a tax ruling from the Israeli Tax Authority, and Eye-Net Mobile became a wholly owned subsidiary ~~Eye-Net Mobile, which are private~~of the Company.

On January 5, 2022, we announced the establishment of Foresight Changzhou Automotive Ltd., a wholly owned subsidiary, in Jiangsu Province, China. The Chinese subsidiary was established in cooperation with the China-Israel Changzhou Innovation Park, or CIP, a bi-national governmental initiative that provides a unique platform for Israeli industrial companies ~~incorporated in~~seeking to enter the ~~State of Israel.~~Chinese market.

Our offices and research and development ~~facility~~facilities are located at the Science Industrial Park in Ness Ziona, Israel, where we currently occupy approximately ~~11,000~~15,000 square feet. We lease our facilities, and our ~~lease ends~~leases end on March 31, 2024 and December 15, 2024. Both of our leases have an extension option for additional 3 year periods. Our monthly rent payment is approximately NIS ~~72,260~~142,000 (approximately ~~$22,000)~~$38,618).

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 consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Cautionary Note Regarding Forward-Looking Statements” and under “Risk Factors” elsewhere in this annual report on Form 20-F. Our discussion and analysis for the year ended December 31, ~~2019~~2021 can be found in our Annual Report on Form 20-F for the fiscal year ended December 31, ~~2019,~~2021, filed with the SEC on March 31, ~~2020.~~2022.

We are a technology company engaged in the design, development and commercialization of sensor ~~systems~~solutions for the automotive industry. Through our wholly owned subsidiaries, Foresight Automotive, ~~and~~ Eye-Net Mobile and Foresight Changzhou, we develop both “in-line-of-sight” vision ~~systems~~solutions and “beyond-line-of-site” cellular-based applications. Our 3D vision ~~sensor is a four-camera system based on~~solutions include modules of automatic calibration and dense 3D ~~video analysis,~~point cloud that can be applied to diverse markets such as automotive, defense, autonomous vehicles, agriculture and heavy industrial equipment. Eye-Net Mobile’s cellular-based solution suite provides real-time pre-collision alerts to enhance road safety and situational awareness for all road users in the urban mobility environment by incorporating cutting-edge AI technology and advanced ~~algorithms for image processing and sensor fusion.~~analytics. Our ~~cellular-based application is a V2X (vehicle-to-everything) accident prevention solution based on real-time multi-agents positioning algorithms. Our systems~~solutions are designed to increase safety by enabling highly accurate and reliable threat detection while ensuring the lowest rates of false alerts. Each of our ~~systems~~solutions is designed, developed and commercialized by one of our subsidiaries. ~~Our subsidiaries,~~Foresight Automotive and Eye-Net Mobile, all of which are located in our corporate headquarters, benefit from our collective engineering, operating, regulatory and marketing infrastructure to support their respective activities.

Our current operating expenses consist of three components — research and development expenses, marketing and sales expenses and general and administrative expenses.

Our research and development expenses, net consist primarily of salaries and related personnel expenses, subcontracted work and consulting and other related research and development expenses.

The following table discloses the breakdown of research and development expenses:

We expect that our research and development expenses will increase as we will need to recruit more employees as we move closer to commercialization of our ~~products.~~solutions.

Our ~~marketing~~sales and ~~sales~~marketing expenses consist primarily of salaries and related personnel expenses, consultants, exhibitions and travel expenses and other marketing and sales expenses.

The following table discloses the breakdown of sales and marketing ~~and sales~~ expenses:

General and administrative expenses consist primarily of salaries and related personnel expenses, professional service fees (for accounting, legal, bookkeeping, intellectual property and facilities), directors fees and insurance and other general and administrative expenses.

The following table discloses the breakdown of general and administrative expenses:

Comparison of the year ended December 31, ~~2020~~2022 to the year ended December 31, ~~2019.~~2021.

Our research and development expenses for the year ended December 31, ~~2020~~2022 amounted to ~~$8,563,000,~~$11,534,000, representing ~~a decrease~~an increase of ~~$1,647,000~~$1,364,000, or ~~16.1%~~13.4%, compared to approximately ~~$10,210,000~~$10,170,000 for the year ended December 31, ~~2019.~~2021. The ~~decrease~~increase was primarily attributable to ~~decrease in subcontracted services of approximately $1,589,000 and a decrease of approximately $182,000 in travel expenses, offset by~~ an increase in payroll and related expenses of approximately ~~$243,000. The~~$1,222,000 and an increase of approximately $248,000 in rent and office expenses, offset by a decrease of approximately $228,000 in ~~research~~subcontracted work and ~~development expenses is a result of the reduction in the monthly operating expenses made by the Company during the second quarter of 2020 due to the COVID-19 outbreak.~~consulting.

Our marketing and sales expenses for the year ended December 31, ~~2020~~2022 amounted to approximately ~~$1,268,000,~~$2,230,000, representing ~~a decrease~~an increase of approximately ~~$82,000,~~$382,000, or 6%20.7%, compared to approximately ~~$1,350,000~~$1,848,000 for the year ended December 31, ~~2019.~~2021. The ~~decrease~~increase was primarily attributable to ~~a decrease~~an increase in ~~payroll~~exhibitions, conventions and ~~related~~travel expenses of approximately ~~$37,000~~$260,000 and an increase of approximately $164,000 in consultants, offset by a decrease of approximately ~~$34,000~~$87,000 in ~~consulting services.~~other expenses.

Our general and administrative expenses ~~totaled~~amounted to approximately ~~$3,005,000~~$3,989,000 for the year ended December 31, ~~2020, a decrease of approximately $464,000, or 13.4%,~~2022, compared to approximately ~~$3,469,000~~$3,980,000 for the year ended December 31, ~~2019. The decrease was primarily attributable to a decrease of approximately $192,000 in payroll and related expenses and a decrease in professional services of approximately $225,000.~~2021.

As a result of the foregoing, our operating loss for the year ended December 31, ~~2020~~2022 was approximately ~~$12,836,000,~~$17,455,000, as compared to an operating loss of approximately ~~$15,029,000~~$15,945,000 for the year ended December 31, ~~2019, a decrease~~2021, an increase of approximately ~~$2,193,000,~~$1,510,000, or ~~14.6%~~9.5%.

Financial expense and income, net mainly consist of reevaluation of securities, bank interest income, exchange rate differences ~~bank fees~~ and other transactional costs.

We recognized a financial ~~income~~expense, net of approximately ~~$179,000~~$4,221,000 for the year ended December 31, ~~2020,~~2022, compared to a financial income, net of ~~$429,000~~$909,000 for the year ended December 31, ~~2019. The decrease was~~2021. Finance expense, net for the year ended December 31, 2022, consist primarily ~~attributable~~of the revaluation of our investment in Rail Vision to ~~a decrease~~its fair value in the amount of $2,208,000, from exchange rate differences in the amount of ~~approximately $601,000~~$2,194,000, offset by ~~an increase~~interest income in ~~reevaluation~~the amount of ~~securities of approximately $85,000 and of other investments of approximately $324,000.~~$189,000.

As a result of the foregoing, our loss for the year ended December 31, ~~2020~~2022 was approximately ~~$15,375,000,~~$21,676,000, as compared to approximately ~~$15,439,000~~$15,036,000 for the year ended December 31, ~~2019, a decrease~~2021, an increase of approximately ~~$64,000.~~$6,640,000.

We describe our significant accounting policies more fully in Note 2 to our financial statements for the year ended December 31, 2020. We believe that the accounting policies below are critical in order to fully understand and evaluate our financial condition and results of operations.

We prepare our financial statements in accordance with U.S. GAAP. At the time of the preparation of the financial statements, our management is required to use estimates, evaluations, and assumptions which affect the application of the accounting policy and the amounts reported for assets, obligations, income, and expenses. Any estimates and assumptions are continually reviewed. The changes to the accounting estimates are credited during the period in which the change to the estimate is made.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgment and assumptions can affect reported amounts and disclosures made. Actual results could differ from those estimates.

Equity investments without readily determinable fair value are carried at cost minus impairment, if any. When an observable price change in orderly transactions for the identical or a similar investment of the same issuer has occurred, the Company elects to carry those equity investments at fair value as of the date that the observable transaction occurred.

Investment in common stock of an entity in which we can exercise significant influence but do not own a majority equity interest or otherwise control is accounted for using the equity method and is included as an investment in an affiliate company in the consolidated balance sheets. We record our share in undistributed earnings and losses since acquisition in the consolidated statements of operations.

~~We review our investment for other-than-temporary impairment whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable.~~

We apply ASC 718-10, “Share-Based Payment,” or ASC 718-10, which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors including employee share options under our share plan based on estimated fair values.

ASC 718-10 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in our statement of operations.

Prior to the adoption of ASU 2018-07, Compensation – share Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, on January 1, 2019, we accounted for share options issued to non-employees under ASC 505-50 Equity: Equity-Based Payments to Non-Employees, which required the fair value of such non-employee awards to be re-measured at each quarter-end over the vesting period. After the adoption of ASU 2018-07, the accounting guidance is consistent with accounting for employee share-based compensation.

We estimate the fair value of share options granted using a Black-Scholes Merton options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are Ordinary Shares price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). Expected volatility was calculated based upon actual historical Ordinary Shares price movements over the period, equal to the expected option term. We have historically not paid dividends and have no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from Israeli governmental debentures with an equivalent term. The expected option term is calculated for options granted to employees and directors using the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted and our results of operations. During 2020, our Board of Directors approved the grant of options to purchase 14,628,000 of our Ordinary Shares, subject to the terms and condition of each specific grant.

Since our inception through December 31, ~~2020,~~2022, we have funded our operations principally with approximately ~~$99.8~~$114 million, in the aggregate, from funding from Magna, the issuance of Ordinary Shares or ADSs and exercise of warrants and options. As of December 31, ~~2020,~~2022, we had approximately ~~$43.9~~$26.5 million in cash and cash equivalents, restricted cash and short-term bank deposits.

Net cash used in operating activities of approximately ~~$11,495,000~~$17,057,000 during the year ended December 31, ~~2020~~2022 was primarily used for payment of payroll and related expenses, payments for professional services, subcontracted work and travel, patent, directors’ fees, rent and other miscellaneous expenses.

Net cash used in operating activities of approximately ~~$11,861,000~~$12,125,000 during the year ended December 31, ~~2019~~2021 was primarily used for payment of ~~subcontracted work, salaries~~payroll and related ~~personnel~~ expenses, payments for professional services, subcontracted work and travel, patent, directors’ fees, rent and other miscellaneous expenses.

Net cash provided by investing activities of approximately ~~$85,000~~$8,983,000 during the year ended December 31, ~~2020~~2022 was ~~primarily~~ provided ~~from proceeds~~by changes of short-term deposits of approximately ~~$67,000 and from the proceed from sales of marketable~~$10,297,000, offset by our investment in Rail Vision equity securities of approximately ~~$68,000, offset by~~$715,000 and investment in a simple agreement for future equity (SAFE) with Rail Vision of approximately $286,000, and from purchases of fixed assets of approximately ~~$50,000.~~$313,000.

Net cash used in investing activities of approximately ~~$7,191,000~~$12,582,000 during the year ended December 31, ~~2019~~2021 was ~~primarily provided from proceeds~~used for changes of short-term deposits of approximately ~~$7,273,000~~$12,347,000 and ~~offset by~~for purchases of fixed assets of approximately ~~$103,000.~~$235,000.

There was no financial activity during the twelve month period ended December 31, 2022.

Net cash provided by financing activities in the year ended December 31, ~~2020~~2021 consisted of approximately ~~$45,017,000~~$13,508,000 provided from net proceeds from the issuance of Ordinary Shares and from exercise of options and warrants of approximately ~~$263,000.~~$652,000.

~~Net cash provided by financing activities in the year ended December 31, 2019 consisted of approximately $6,521,000 primarily provided from net proceeds from the issuance of Ordinary Shares.~~

On April 28, 2020, we entered into securities purchase agreements with U.S. institutional investors to purchase 5,300,000 of our ADSs, representing 26,500,000 Ordinary Shares, at a purchase price of $0.50 per ADS in a registered direct offering, with the total gross proceeds of approximately $2.65 million.

On April 30, 2020, pursuant to a private placement agreement with certain qualified investors in Israel, we sold an aggregate of 3,500,000 Ordinary Shares (equivalent to 700,000 ADSs) at a price per Ordinary Share equal to $0.50 per ADSs. The total gross proceeds to us from the sale of Ordinary Shares was approximately $0.35 million.

On May 19, 2020, we entered into securities purchase agreements with U.S. institutional investors and Israeli qualified investors to purchase 8,333,334 of our ADSs, representing 41,666,670 Ordinary Shares, at a purchase price of $0.60 per ADS in a registered direct offering. The total gross proceeds to us from the sale of our ADSs was approximately $5 million.

On June 9, 2020, we entered into securities purchase agreements with U.S. institutional investors and Israeli qualified investors to purchase 6,400,000 of our ADSs, representing 32,000,000 Ordinary Shares, at a purchase price of $1.00 per ADS in a registered direct offering. The total gross proceeds to us from the sale of our ADSs was approximately $6.4 million.

On October 2, 2020, we entered into a sales agreement with A.G.P./Alliance Global Partners pursuant to which we issued and sold, during the year ended December 31, 2020, an aggregate of 4,371,131 ADSs for aggregate gross proceeds of approximately $8.1 million.

On December 28, 2020, pursuant to securities purchase agreements with U.S. institutional investors and qualified Israeli investors, we sold an aggregate of 6,265,063 of our ADSs, representing 31,325,315 Ordinary Shares at a purchase price of $4.15 per ADS in a registered direct offering. The total gross proceeds to us from the registered direct offering was approximately $26 million.

On January 22, 2021, we entered into a subsequent sales agreement with AGP, or the January 2021 Sales Agreement, pursuant to which we may offer and sell, from time to time, our ADSs. In that regard, we registered up to $60,000,000 of our ADSs on a Registration Statement on Form F-3 (File No. 333-252334) for the sale under ~~such sales agreement.~~the January 2021 Sales Agreement. Through March ~~21, 2021,~~20, 2023, we have sold an aggregate of 1,378,344 ADSs for aggregate gross proceeds of approximately $14 ~~million~~million. We made no sales under ~~such subsequent~~the sales ~~agreement.~~agreement entered into in January 2021 during the fiscal year ended December 31, 2022.

We have financed our operations to date primarily through proceeds from sales of our Ordinary Shares and ADSs and warrants. We have incurred losses and generated negative cash flows from operations since January 2011. Since January 2011, we have not generated ~~any~~significant revenue from the sale of products, ~~and~~however, we ~~do not~~ expect to ~~generate revenues~~see an increase in our revenue from the sale of our products in the ~~next few years.~~coming years, though there is no guarantee we will be successful in doing so.

As of December 31, ~~2020,~~2022, our cash and cash equivalents including restricted cash and short-term bank deposits were approximately ~~$43,938,000.~~$26,491,000. We expect that our existing cash, cash equivalents and short-term bank deposits will be sufficient to fund our current operations ~~until December 2023.~~through the second quarter of 2024.

Until we can generate significant recurring revenues and achieve profitability, we may need to seek additional sources of funds through the sale of additional equity securities, debt or other securities. Any required additional capital, whether forecasted or not, may not be available on reasonable terms, or at all. If we are unable to obtain additional financing or are unsuccessful in commercializing our products and securing sufficient funding, we may be required to reduce activities, curtail or even cease operations.

In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including:

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financings. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our products.

Our operations and business have been disrupted and could be materially adversely affected by the recent outbreak of COVID-19. We are still assessing our business operations and system supports and the impact COVID-19 may have on our results and financial condition. To date, we have taken action to reduce our operating expenses in the short term, to enable our employees to work remotely from home and taken steps to ensure support continuity to our customers, but there can be no assurance that this analysis or remedial measures will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular. For additional information, see “Risks Related to Our Business and Industry—We face business disruption and related risks resulting from the recent outbreak of the novel Coronavirus 2019 (COVID-19), which could have a material adverse effect on our business and results of operations.”

For a description of our research and development programs and the amounts that we have incurred over the last two years pursuant to those programs, please see “Item 5. Operating and Financial Review and Prospects— A. Operating Results— Operating Expenses— Research and Development Expenses, net” and “Item 5. Operating and Financial Review and Prospects— A. Operating Results— Comparison of the year ended December 31, ~~2020~~2022 to the year ended December 31, ~~2019—~~2021— Research and Development Expenses, Net.”

The COVID-19 pandemic has impacted companies in Israel and around the world, and as its trajectory remains highly ~~uncertain,~~uncertain. As of the date of this annual report, our management continues to examine the impacts of COVID-19 and are unable to estimate the full extent of its possible effects. No significant adverse effect on our operations and on the results of our operation is apparent at this stage. However, we cannot predict the duration and severity of the outbreak and its containment measures. Further, we cannot predict impacts, trends and uncertainties involving the pandemic’s effects on economic activity, the size of our labor force, our third-party partners, our investments in marketable securities, and the extent to which our revenue, income, profitability, liquidity, or capital resources may be materially and adversely affected. See also “Item 3.D. – Risk Factors– Risks Related to Our Business and Industry – We face business disruption and related risks resulting from the recent outbreak of the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.”

We ~~currently do~~describe our significant accounting policies more fully in Note 2 to our financial statements for the year ended December 31, 2022. We believe that the accounting policies below are critical in order to fully understand and evaluate our financial condition and results of operations.

We apply ASC 718-10, “Share-Based Payment,” or ASC 718-10, which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees, consultants and directors including employee share options under our share plan based on estimated fair values.

We estimate the fair value of share options granted using a Black-Scholes Merton options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are Ordinary Shares price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). Expected volatility was calculated based upon actual historical Ordinary Shares price movements over the period, equal to the expected option term. We have historically not paid dividends and have ~~any off-balance sheet arrangements.~~no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from Israeli governmental debentures with an equivalent term. The expected option term is calculated for options granted to employees and directors using the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted and our results of operations. During 2022, our Board of Directors approved the grant of options to purchase 13,075,000 of our Ordinary Shares, subject to the terms and condition of each specific grant.

~~The following table summarizes our contractual obligations at December 31, 2020:~~

The following table sets forth information regarding our executive officers, key employees and directors as of the date of this annual report on Form 20-F:

~~Mr. Michael Gally~~ has served on our Board of Directors since January 2016, and as our Chairman since March 2016. Mr. Gally serves as the manager and owner of MG Business Development, a leading consulting practice. From 2011 Mr. Gally served as a lecturer at the Tel Aviv University Faculty of Management - The Graduate School of Business Administration and since 2018 as a lecturer at the Technion, Israel Institute of Technology. Mr. Gally teaches several advanced marketing elective courses in the M.B.A. and E.M.B.A. programs. Mr. Gally takes an active part as an expert in export activities initiated by the State of Israel. Mr. Gally holds an M.B.A. from Tel Aviv University Faculty of Management – The Graduate School of Business Administration.

Mr. Haim Siboni has served as our Chief Executive Officer and on our Board of Directors since December 2015. Mr. Siboni has also served as the chief executive officer and as a director of Magna, our significant shareholder, since January 2001. Mr. Siboni also serves as Chairman of our Board of Directors since July 2021. Mr. Siboni has many years of professional experience, as well as a broad skillset, in fields such as engineering, marketing and business management of electronics, video, TV, multimedia, computerized systems, line and wireless telecommunication, design and development of systems and devices – including electro-optic radar systems.

Mr. Eli Yoresh has served as our Chief Financial Officer since March 2010, and was on our Board of Directors from October 2010 until August 2019. Mr. Yoresh is a seasoned executive with over 20 years of executive and financial management experience, mainly with companies from the financial, technology and industrial sectors. Since September 2018, Mr. Yoresh has been serving as a director at Medigus Ltd. (Nasdaq: MDGS), ~~as a director of Matomy Media Group Ltd.~~ since ~~June~~November 2020 ~~and~~ as a director of Gix Internet ~~Ltd.~~Ltd (TASE: GIX), since ~~November 2020.~~August 2021 as a director of Elbit Imaging Ltd (TASE: EMITF), since April 2022 as a director of Rail Vision Ltd (Nasdaq: RVSN) and since August 2022 as a director in Jeff Brands Ltd (Nasdaq: JFBR). Mr. Yoresh also served as a director at Nano Dimension Ltd. (Nasdaq: NNDM). ~~Mr. Yoresh’s previous directorships include several companies listed on the TASE.~~ Mr. Yoresh served as the chief executive officer of Tomcar Global Holdings Ltd., a global manufacturer of off-road vehicles, from 2005 to 2008. Mr. Yoresh holds a B.A. in Business Administration from the College of Management and an M.A. in Law from Bar-Ilan University. Mr. Yoresh is a Certified Public Accountant in Israel.

Mr. Levy Zruya has served as our Chief Technology Officer since January 2019. Mr. Zruya is a co-founder of Magna, our significant shareholder. Mr. Zruya also continues to serve as Magna’s Chief Technology Officer, a position he has held since 2001. Mr. Zruya has extensive experience in the electro-optics, electronics, software and communication fields. He was involved in several projects mainly with the Israel Defense Force and Israel Aerospace Industries, among them, night vision systems, infra-red sensor simulations, targets detecting and tracking. Mr. Zruya holds a B.Sc. in Engineering from the Technion - Israel Institute of Technology.

Oren Bar-On, Vice President of Global Operations and ~~Business Strategy~~Foresight Changzhou Chief Executive Officer

Mr. Oren Bar-On has served as our Vice President of Global Operations since October ~~2017.~~2017 and as the Chief Executive Officer of Foresight Changzhou since January 1, 2023. Mr. Bar-on is a seasoned executive with over 1720 years of executive and managerial experience, mainly in the fields of global operations, supply chain, quality and regulations, product engineering, business excellence and information Technology. Mr. Bar-on served as Director of Global Supply chain for Lumenis Medical Systems Ltd., one of the world’s leading medical laser equipment manufacturers, from January 2016 to October 2017. Mr. Bar-on also served as Director of Global Operations for Philips Healthcare, one of the world’s leading developers and manufacturers of diagnostic and imaging systems in the medical field, from April 2011 to January 2016. Mr. Bar-on holds a B.Sc. in Industrial Engineering from the Israeli Institute of Technology and an M.B.A. with Honors, from Haifa University.

Mr. Doron Cohadier has served as our Vice President of Business Development since January 2017. Mr. Cohadier has more than 16 years of managerial experience, mainly in the field of business development. From 2011 to 2017, Mr. Cohadier served as a Director Business Development and Marketing of Elbit Systems Ltd. (Nasdaq, TASE: ESLT). Mr. Cohadier holds a B.Sc. in Industrial Engineering from Brunel University, London, and an Executive M.B.A. from the Recanati School of Business Administration of the Tel Aviv University.

~~Mr. Nisso Moyal~~ has served as our Vice President of Business Development Non-Automotive since December 2020. Mr. Moyal has more than 15 years of managerial experience, mainly in the field of business development and marketing. From 2012 to 2018, Mr. Moyal served as a Director Business Development and Marketing of Mobileye Vision Technologies Ltd. (NYSE: MBLY). From 2018 to 2019, Mr. Moyal served as Vice President of Business Development of Rail Vision Ltd. Mr. Moyal holds a B.A. in Business Administration from Ruppin Academic Center, Israel.

Mrs. Sivan Siboni Scherf has served as our Vice President of Human Resources since January 2019. Prior to that, Mrs. Scherf served as our head of human resources since 2015. Mrs. Scherf has served legal counsel of Magna since 2015. Mrs. Scherf is a certified attorney, and a member of the Israel Bar Association since 2014. Mrs. Scherf holds a ~~Bachelor’s~~bachelor’s degree in Law and Business Management.

Dror Elbaz, Eye-Net Mobile’s Chief Operating Officer and Deputy Chief Executive Officer

Mr. Dror Elbaz has served as Eye-Net Mobile’s Chief Operating Officer and Deputy Chief Executive Officer since January 2019 and prior to that as Vice President of Research and Development of Foresight Automotive since December 2016. Mr. Elbaz has more than 15 years of research and development experience with multidisciplinary and highly engineered electro-optical systems, image acquisition, image processing and 3D reconstruction. From 2009 to 2015, Mr. Elbaz served as an R&D Projects Manager and as an Application Product Team Leader at Orbotech Ltd. (Nasdaq: ORBK). From 2015 to 2016, Mr. Elbaz served as a Technical Projects Manager and as Vice President of Engineering at Replay Video Technologies Ltd. Mr. Elbaz holds a B.Sc. in Computer Engineering from Bar Ilan University, Israel, and an M.B.A. in Technological Companies Management from the College of Management.

Mr. David Lempert has served as our Vice President of Research and Development since June 2020, and prior to that as Director of Research and Development since August 2019, and prior to that as project manager of Foresight Automotive since April 2017. Mr. Lempert has over 12 years of research and development global project management. From 2014 to 2017, Mr. Lempert served as the chief executive officer and co-founder of Led-Swim Ltd. a start-up company developing technology for swimming workout monitoring. From 2012 to 2014 Mr. Lempert served as project manager ~~and QA team leader~~ in IronSource Ltd. an advertising technology company focuses on developing technologies for app monetization. Mr. Lempert holds a B.Sc in Computer Science and an M.B.A specializing in risk management from the MLA collage in Israel.

Mr. Izac Assia has served as our Vice President of Product Management since September 2022, and prior to that as Director of Product Management since January 2019.

Mr. Assia has held a variety of executive and technical roles at global multidisciplinary companies, including product management and marketing, customer service and research and development. From January 2012 to June 2018, Mr. Assia served as a Director of System Product Management, team leader and product manager at SolarEdge Technologies LTD (Nasdaq: SEDG). Mr. Assia holds a B.Sc. in Electrical Engineering from Ben-Gurion University, Israel.

Mr. Ehud Aharoni has served on our Board of Directors as an independent director since January 2016. Mr. Aharoni has also served on our Audit and Compensation Committee since January 2016. ~~Since 2001,~~ Mr. Aharoni ~~has lectured to MBA~~serves as the CEO and EMBA students at the Tel-Aviv University, Coller School of Management in a variety of strategic courses, and holds a number of senior administrative positions, including the chief executive officer & academic directorAcademic Director of Lahav Executive Education, Coller School of Management, ~~since 2006,~~Tel-Aviv University, and a former lecturer at the ~~former Executive Director of~~school’s MBA and EMBA courses in Strategy, Innovation Strategy and Global Strategy. In 2004 he established the Eli Hurvitz Institute of Strategic Management ~~from~~at the School and served as its Executive director between 2004-2018. ~~Before joining~~Prior his role at Lahav, ~~Executive Education,~~ Mr. Aharoni served as an independent strategic consultant to leading Israeli firms and organizations. Mr. Aharoni holds a bachelor’s degree in statistics and operations research, an M.B.A. with specialization in Finance and a Continuing Studies, and an M.B.A. specializing in International Management, all from the Tel Aviv University.

Mr. Daniel Avidan has served on our Board of Directors as an external director since July 2017. From 2019 Mr. Avidan is serving as chief financial officer in MRR Thirteen Ltd. Mr. Avidan served as the chief executive officer of Sapir Corp Ltd. from 2014 to 2018. From 2012 to 2014, Mr. Avidan served in several positions in the Meuhedet Health Fund. From 2010 to 2012, Mr. Avidan served as the chief executive officer of Adumim A.D. Holdings Ltd. Between the years 1989 to 2010, Mr. Avidan held senior finance positions in four public companies in Israel and abroad. Mr. Avidan holds a B.A. in Economics from the Hebrew University of Jerusalem.

Mr. Zeev Levenberg has served on our Board of Directors as an external director since July 2011. Mr. Levenberg served as the co-founder, director and chief executive officer of My Connecting Group Ltd from 2015 to 2020. Mr. Levenberg has served as a director at Panaxia Labs Israel Ltd. since 2009 till the end of 2018, and as an external director in Alon Blue Square from 2016 till November 2019. Mr. Levenberg Also served as Director on Kardan Israel Ltd. from 2016 till 2018, when the company delisted from the Tel Aviv Stock Exchange. Between 2012 and 2017 Mr. Levenberg served as a director at MySize Inc., a dual listed company that traded at the Nasdaq and TASE. Mr. Levenberg holds an M.B.A. in Financial Management from Bar-Ilan University Business School, M.A. in Law studies from Bar-Ilan University and a B.Sc. in Life Science from the Hebrew University.

Mrs. Vered Raz-Avayo has served on our Board of Directors as an independent director since July 2017. Ms. Raz-Avayo has over 20 years of managerial and consulting experience in finance encompassing a wide range of industries in Israel and overseas, including real estate investment, diamonds, jewelry and aviation. During the years 1999 to 2010, Mrs. Raz-Avayo served as chief financial officer at one of the companies under the Leviev group. In addition, during the last 13 years Ms. Raz-Avayo has been an external director of several publicly traded companies. Currently, Ms. Raz-Avayo is an external director at Apollo Power Ltd., ~~Africa Israel Residences~~a director at Nayax Ltd. (TASE:NYAX) and a director ~~at Save Foods Inc.~~in Shikun & Binui Energy Ltd. Ms. Raz-Avayo is a certified public accountant in Israel, and holds a B.A. in Business Administration – Accounting and Finance, from the College of Management, and an M.F.A. in Film, TV and Screenwriting, from the Faculty of Arts of the Tel Aviv University.

Mr. Moshe Scherf has served on our Board of Directors since July 2021. Mr. Scherf has been providing legal services to Magna since 2016. Mr. Scherf has had a private law practice specializing in commercial litigation, dispute resolution and family law since 2013. Mr. Scherf lectures in the fields of civil law in various law faculties in Israel and was also a teaching assistant in several law courses. Mr. Scherf holds a LLB from Ono Academic College and an LLM from Bar Ilan University and is a member of the Israeli Bar Association.

Ms. Siboni Scherf is the daughter of Mr. Haim ~~Siboni.~~Siboni and married to Mr. Moshe Scherf. Mr. Levy Zruya was married to Mr. Haim Siboni’s sister. Otherwise, there are no family relationships between any members of our executive management and our directors.

The following table presents in the aggregate all compensation we paid to all of our directors and senior management from January 1, ~~2020~~2022 through December 31, ~~2020.~~2022. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during this period.

All amounts reported in the tables below reflect our ~~cost, in thousands of U.S. dollars.~~cost. Amounts paid in NIS are translated into U.S. dollars at the rate of NIS ~~3.4424~~3.358 = U.S. $1.00, based on the average representative rate of exchange between the NIS and the U.S. dollar as reported by the Bank of Israel during such period of time.

In accordance with the Companies Law, we are required to disclose the compensation granted to our five most highly compensated officers. The table below reflects the compensation granted during or with respect to the year ended December 31, ~~2020.~~2022.

~~The following table sets forth information regarding options granted to our executive officers and directors during the year ended December 31, 2020:~~

On August 18, 2022, we granted options to five of our senior officers to purchase an aggregate of 4,200,000 Ordinary Shares at an exercise price of NIS 1 (approximately $0.31 per share at the grant date). The options vest in equal quarterly installments over 12 quarters, commencing on January 1, 2023.

On October 20, 2022, our shareholders approved grants of options, with an exercise price of NIS1 (approximately $0.28 per share at the grant date) to (i) three members of our Board of Directors for each to purchase up to 400,000 Ordinary Shares, (ii) our Vice President of Human Resources to purchase up to 600,000 Ordinary Shares and (iii) our Chief Executive Officer to purchase up to 4,000,000 Ordinary Shares. The options vest in equal quarterly installments over 12 quarters until fully vested. We recorded, in our 2022 statement of comprehensive loss, an expense of $6, with respect to such grants, which is included in general and administrative expenses.

We have entered into written employment or services agreements with each of our executive officers. All of these agreements contain customary provisions regarding noncompetition, confidentiality of information and most of them contain also customary provisions regarding assignment of inventions. However, the enforceability of the noncompetition 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 up to a certain amount and to the extent that these liabilities are not covered by directors and officers insurance, subject to certain ~~exclusions.~~exclusions and to exculpate them in certain circumstances. Members of our senior management may be eligible for bonuses in accordance with our compensation policy and as set forth by our Board of Directors.

For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.

Other than with respect to our directors that are also executive officers, we do not have written agreements with any director providing for benefits upon the termination of his or her engagement with our company.

On September 23, 2019, following the approval of our audit and compensation committee and the Board of Directors, our shareholders approved an increase from NIS 10,000 to NIS 15,000 (approximately $4,665) in the monthly retainer to Mr. Michael Gally for his services as an active chairman of our Board of Directors.

Our Board of Directors presently consists of six ~~members, including~~members. Under the Companies Law, an Israeli public company is required to appoint at least two external directors ~~required~~ to ~~be appointed under~~serve on its board of directors, with certain exceptions. Presently two of the ~~Companies Law.~~six members of our Board of Directors are external directors. We believe that Ehud Aharoni, Daniel Avidan, Zeev Levenberg and Vered Raz-Avayo ~~and Michael Gally~~ are “independent” for purposes of the Nasdaq Stock Market rules. Our amended and restated articles of association provide that the number of Board of Directors’ members (including external directors) shall be set by the general meeting of the shareholders, provided that it will consist of not less than three and not more than ten members. Pursuant to the Companies Law, the management of our business is vested in our Board of Directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our Board of Directors. Our Chief Executive Officer is appointed by, and serves at the discretion of, our Board of Directors, subject to the services agreement that we have entered into with him. All other executive officers are appointed by our Chief Executive Officer. Their terms of employment are subject to the approval of the Board of Directors’ compensation committee and of the Board of Directors and are subject to the terms of any applicable employment or services agreements that we may enter into with ~~them.~~them and to our compensation policy.

Each director, except external directors, will hold office until the next annual general meeting of our shareholders following his or her appointment, or until he or she resigns or unless he or she is removed by a majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and our amended and restated articles of association.

In addition, under certain circumstances, our amended and restated articles of association allow our Board of Directors to appoint directors to fill vacancies on our Board of Directors or in addition to the acting directors (subject to the limitation on the number of directors), until the next annual general meeting or special general meeting in which directors may be appointed or terminated. External directors may be elected for up to two additional three-year terms after their initial three-year term under the circumstances described below, with certain exceptions as described in “External Directors” below. External directors may be removed from office only under the limited circumstances set forth in the Companies Law. See “Item 6. C. Board Practices—External Directors” below.

Under the Companies Law, any shareholder holding at least one percent of our outstanding voting power may nominate a director. However, any such shareholder may make such a nomination only if a written notice of such shareholder’s intent to make such nomination has been given to our Board of Directors. Any such notice must include certain information, including the consent of the proposed director nominee to serve as our director if elected, and a declaration that the nominee signed declaring that he or she possess the requisite skills and has the availability to carry out his or her duties. Additionally, the nominee must provide details of such skills, and demonstrate an absence of any limitation under the Companies Law that may prevent his or her election, and affirm that all of the required election-information is provided to us, pursuant to the Companies Law.

Under the Companies Law, our Board of Directors must determine the minimum number of directors who are required to have accounting and financial expertise. In determining the number of directors required to have such expertise, our Board of Directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our Board of Directors has determined that the minimum number of directors of our company who are required to have accounting and financial expertise is two. Messrs. Ehud Aharoni, Dan Avidan, Zeev Levenberg and Ms. Vered Raz Avayo qualify and declared their respective accounting and financial expertise to that effect.

The board of directors ~~may~~must elect one director to serve as the chairman of the board of directors to preside at the meetings of the board of directors and may also remove that director as chairman, unless otherwise provided in the articles of association with respect to the appointment of the chairman. Pursuant to the Companies Law, neither the chief executive officer nor any of his or her relatives is permitted to serve as the chairman of the board of directors, and a company may not vest the chairman or any of his or her relatives with the chief executive officer’s authorities. In addition, a person who reports, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors; the chairman may not be vested with authorities of a person who reports, directly or indirectly, to the chief executive officer; and the chairman may not serve in any other position in the company or a controlled company, but he or she may serve as a director or chairman of a controlled company. However, the Companies Law permits a company’s shareholders to determine, for a period not exceeding three years from each such determination, that the chairman or his or her relative may serve as chief executive officer or be vested with the chief executive officer’s authorities, and that the chief executive officer or his or her relative may serve as chairman or be vested with the chairman’s authorities. Such determination of a company’s shareholders requires either: (1) the approval of at least a majority of the shares of those shareholders present and voting on the matter (other than controlling shareholders and those having a personal interest in the determination) (shares held by abstaining shareholders shall not be considered); or (2) that the total number of shares opposing such determination does not exceed 2% of the total voting power in the company. ~~Currently, we have a separate chairman~~Mr. Haim Siboni has been serving in the combined role of Chairman of the Board of Directors and ~~chief executive officer.~~Chief Executive Officer of the Company from July 8, 2021, according to the approval of the shareholders of the Company from the same date.

The board of directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees of the board, and it may, from time to time, revoke such delegation or alter the composition of any such committees, subject to certain limitations. Unless otherwise expressly provided by the board of directors, the committees shall not be empowered to further delegate such powers. The composition and duties of our audit committee, financial statements examination committee and compensation committee are described below.

The board of directors oversees how management monitors compliance with our risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by us. The board of directors is assisted in its oversight role by an internal auditor. The internal auditor undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to our audit committee and our Board of Directors.

Under the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange in or outside of Israel is required to appoint at least two external directors to serve on its board of ~~directors.~~directors, with certain exceptions. External directors must meet stringent standards of independence. As of the date hereof, our external directors are Messrs. Zeev Levenberg and Daniel Avidan.

According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accounting expertise,” unless another member of the audit committee, who is an independent director under the Nasdaq Stock Market rules, has “financial and accounting expertise,” and the other external director or directors are required to have “professional expertise.” An external director may not be appointed unless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another term there is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is at least equal to the minimum number determined appropriate by the board of directors. We have determined that both our external directors, Messrs. Zeev Levenberg and Daniel Avidan have accounting and financial expertise.

A director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses a high degree of proficiency in, and an understanding of, business - accounting matters and financial statements, such that he or she is able to understand the financial statements of the company in depth and initiate a discussion about the manner in which financial data is presented. A director is deemed to have “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain senior positions.

External directors are elected by a special majority vote at a shareholders’ meeting. The term “Special Majority” is defined in the Companies Law as:

The Companies Law provides for an initial three-year term for an external director. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to two additional three-year terms, provided that:

The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including the Nasdaq Stock Market, may be extended indefinitely in increments of additional three-year terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of the external director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficial to the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as described above). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the term previously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term. On July 16, 2020, following the approval of our audit committee and the Board of Directors, our shareholders approved, among others, appointing Mr. Zeev Levenberg for an additional (fourth) three-year term.

External directors may be removed only by a special general meeting of shareholders called by the board of directors after the board has determined that circumstances allow such dismissal, at the same Special Majority of shareholders required for their election or by a court, and in both cases only if the external directors cease to meet the statutory qualifications for their appointment or if they violate their duty of loyalty to our company. In the event of a vacancy created by an external director which causes the company to have fewer than two external directors, the board of directors is required under the Companies Law to call a ~~shareholders~~shareholder meeting as soon as possible to appoint such number of new external directors in order that the company thereafter has two external directors.

Each committee of the board of directors that exercises the powers of the board of directors must include at least one external director, except that the audit committee and the compensation committee must include all external directors then serving on the board of directors and an external director must serve as the chair thereof. Under the Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation from the company other than for their services as external directors pursuant to the Companies Law and the regulations promulgated thereunder. Compensation of an external director is determined prior to his or her appointment and may not be changed during his or her term subject to certain exceptions.

The Companies Law provides that a person is not qualified to be appointed as an external director if (i) the person is a relative of a controlling shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she was directly or indirectly subordinate, or any entity under the person’s control, has or had, during the two years preceding the date of appointment as an external director: (a) any affiliation or other disqualifying relationship with the company, with any person or entity controlling the company or a relative of such person, or with any entity controlled by or under common control with the company; or (b) in the case of a company with no shareholder holding 25% or more of its voting rights, had at the date of appointment as an external director, any affiliation or other disqualifying relationship with a person then serving as chairman of the board or chief executive officer, with a holder of 5% or more of the issued share capital or voting power in the company or with the most senior financial officer.

The term “relative” is defined in the Companies Law as a spouse, sibling, parent, grandparent or descendant; spouse’s sibling, parent or descendant; and the spouse of each of the foregoing persons.

Under the Companies Law, the term “affiliation” and the similar types of disqualifying relationships, as used above, include (subject to certain exceptions):

The term “office holder” is defined in the Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other manager directly subordinate to the general manager.

In addition, no person may serve as an external director if that person’s position or professional or other activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as an external director or if the person is an employee of the Israel Securities Authority, or the ISA, or of an Israeli stock exchange. A person may furthermore not continue to serve as an external director if he or she received direct or indirect compensation from the company including amounts paid pursuant to indemnification or exculpation contracts or commitments and insurance coverage, other than for his or her service as an external director as permitted by the Companies Law and the regulations promulgated thereunder.

Following the termination of an external director’s service on a board of directors, such former external director and his or her spouse and children may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholder’s control. This includes engagement as an office holder of the company or a company controlled by its controlling shareholder or employment by, or provision of services to, any such company for consideration, either directly or indirectly, including through a corporation controlled by the former external director. This restriction extends for a period of two years with regard to the former external director and his or her spouse or child and for one year with respect to other relatives of the former external director.

If at the time at which an external director is appointed all members of the board of directors who are not controlling shareholders or relatives of controlling shareholders of the company are of the same gender, the external director to be appointed must be of the other gender. A director of a company may not be appointed as an external director of another company if at the same time a director of such other company is acting as an external director of the first company.

In addition, under regulations promulgated pursuant to the Companies Law, a company with no controlling shareholder whose shares are listed for trading on specified exchanges outside of Israel, including the Nasdaq Capital Market, may adopt exemptions from various corporate governance requirements of the Companies Law so long as such company satisfies the requirements of applicable foreign country laws and regulations, including applicable stock exchange rules, that apply to companies organized in that country and relating to the appointment of independent directors and the composition of audit and compensation committees. Such exemptions include an exemption from the requirement to appoint external directors and the requirement that an external director be a member of certain committees, as well as the exemption from limitations on directors’ compensation. We may use these exemptions in the future if we do not have a controlling shareholder.

Our amended and restated articles of association provide, as allowed by the Companies Law, that any director may, subject to the conditions set thereto, appoint a person as an alternate to act in his place, to remove the alternate and appoint another in his place and to appoint an alternate in place of an alternate whose office is vacated for any reason whatsoever. Under the Companies Law, a person who is not qualified to be appointed as a director, a person who is already serving as a director or a person who is already serving as an alternate director for another director, may not be appointed as an alternate director. Nevertheless, a director who is already serving as a director may be appointed as an alternate director for a member of a committee of the board of directors so long as he or she is not already serving as a member of such committee, and if the alternate director is to replace an external director, he or she is required to be an external director and to have either “financial and accounting expertise” or “professional expertise,” depending on the qualifications of the external director he or she is replacing. A person who does not have the requisite “financial and accounting experience” or the “professional expertise,” depending on the qualifications of the external director he or she is replacing, may not be appointed as an alternate director for an external director. A person who is not qualified to be appointed as an independent director, pursuant to the Companies Law, may not be appointed as an alternate director of an independent director qualified as such under the Companies Law. Unless the appointing director limits the time or scope of the appointment, the appointment is effective for all purposes until the appointing director ceases to be a director or terminates the appointment according to our amended and restated articles of association.

Our Board of Directors has originally established three standing committees, the audit committee, the compensation committee and the financial statements examination committee. To date, our audit committee also serves a compensation and a financial statements examination committee, in accordance with the provisions of the Companies Law and the regulations promulgated thereunder allowing same in certain exceptions, as set forth herein.

Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all of the external directors (one of whom must serve as chair of the committee). The audit committee may not include the chairman of the board; a controlling shareholder of the company or a relative of a controlling shareholder; a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder; or a director who derives most of his or her income from a controlling shareholder.

In addition, under the Companies Law, a majority of the members of the audit committee of a publicly traded company must be unaffiliated directors. In general, an “unaffiliated director” under the Companies Law is defined as either (i) an external director, or (ii) an individual who has not served as a director of the company for a period exceeding nine consecutive years and who meets the qualifications for being appointed as an external director, except that he or she need not meet the requirement being an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed outside of Israel) and for accounting and financial expertise or professional qualifications.

Our audit committee, acting pursuant to a written charter, is comprised of Messrs. Zeev Levenberg, Daniel Avidan and Ehud Aharoni.

Our audit committee may not conduct any discussions or approve any actions requiring its approval (see “Item 6.C. Board Practices—Approval of Related Party Transactions under Israeli Law”), unless at the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.

Under the Nasdaq Stock Market rules, we are required to maintain an audit committee consisting of at least three members, all of whom are independent and are financially literate and one of whom has accounting or related financial management expertise.

As noted above, the members of our audit committee include Mr. Levenberg and Mr. Avidan who are external directors, and Mr. Aharoni who is an independent director, each of whom is “independent,” as such term is defined in under Nasdaq Stock Market rules. Mr. Levenberg serves as the chairman of our audit committee. All members of our audit committee meet the requirements for financial literacy under the Nasdaq Stock Market rules. Our Board of Directors has determined that that each member of our audit committee is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq Stock Market rules.

Under the Companies Law, the board of directors of a public company in Israel must appoint a financial statements examination committee, which consists of members with accounting and financial expertise or the ability to read and understand financial statements. Our financial statements examination committee is comprised of Messrs. Zeev Levenberg, Daniel Avidan and Ehud Aharoni. The function of a financial statements examination committee is to discuss and provide recommendations to its board of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with the preparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financial statements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; and (5) value evaluations, including the assumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent registered public accounting firm and our internal auditor are invited to attend all meetings of our financial statements examination committee.

Under the Companies Law, an audit committee that meets the requirements set forth for financial statements examination committee in certain regulation promulgated under the Companies Law, may serve also as a financial statements examination committee. In May 2020, our Board of Directors has determined that our audit committee shall serve also as a financial statements examination committee.

Under the Companies Law, the board of directors of any public company must establish a compensation committee. The compensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the compensation committee. However, subject to certain exceptions, Israeli companies whose securities are traded on stock exchanges such as the Nasdaq Stock Market, and who do not have a shareholder holding 25% or more of the company’s share capital, do not have to meet this majority requirement; provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction where the company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceed an amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to (a) who may not be a member of the committee and (b) who may not be present during committee deliberations as described above.

Our compensation committee is acting pursuant to a written charter, and consists of Messrs. Zeev Levenberg, Daniel Avidan and Ehud Aharoni, each of whom is “independent,” as such term is defined under the Nasdaq Stock Market rules. Our compensation committee complies with the provisions of the Companies Law, the regulations promulgated thereunder, and our articles of association, on all aspects referring to its independence, authorities and practice. Our compensation committee follows home country practice as opposed to complying with the compensation committee membership and charter requirements prescribed under the Nasdaq Stock Market rules.

Our compensation committee reviews and recommends to our Board of Directors: (1) the annual base compensation of our executive officers and directors; (2) annual incentive bonus, including the specific goals and amount; (3) equity compensation; (4) employment agreements, severance arrangements, and change in control agreements/provisions; (5) retirement grants and/or retirement bonuses; and (6) any other benefits, compensation, compensation policies or arrangements.

The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. Such policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee. The compensation policy is then brought for approval by our shareholders, which requires a Special Majority. Under the Companies Law, the board of directors may adopt the compensation policy if it is not approved by the shareholders, provided that after the shareholders oppose the approval of such policy, and that the compensation committee and the board of directors re-examine the proposed compensation policy and determine, based on detailed reasoning, that adopting the compensation policy would be beneficial to the company. Furthermore, according to the Companies Law, the compensation policy must generally be periodically reviewed by the compensation committee and the board of directors and needs to be re-approved once every three years by the board of directors, following recommendation by the compensation committee, and by a Special Majority of the Company’s shareholders. Our former compensation policy was approved by our shareholders in December 2015 June 2017, and January 2019 and then amended with regard to certain specific issues in July 2020 and July 2021. On December 19, 2021, in course of the aforesaid periodical review, our compensation committee and Board of Directors, in their respective meetings, approved, and recommended to the shareholders to approve, an amended and restated compensation policy. On January 31, 2022, our shareholders determined not to approve the amended and restated compensation policy. Following the opposition of our shareholders, our Board of Directors and our compensation committee, in their respective meetings on March 31, 2022 and March 29, 2022, re-examined the amended and restated compensation policy and determined to adopt it and that adopting the amended and restated compensation policy would be beneficial to the Company, taking under consideration the shareholders’ opposition and, inter alia, based on the following reasons: (i) given their deep familiarity with the Company’s business, the manner in which it is managed and the applicable market conditions, the compensation committee and the Board of Directors have better perspective than the Company’s shareholders to determine whether the compensation the Company’s officers are eligible to, is fair and reasonable; (ii) the amended and restated compensation policy advances the Company’s objectives, business plan and long-term strategy, and creates appropriate incentives for the Company’s officers, in the light of the Company’s risk management, size and the nature of its business; (iii) all public Israeli companies are required to adopt a written compensation policy for their executives; therefore an absence of an effective compensation policy violates the applicable law and disposes the Company to certain penalties.

The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of executive officers and directors, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s business and its long-term strategy, and creation of appropriate incentives for executives. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:

The compensation policy must also consider appropriate incentives from a long-term perspective.

The compensation committee is responsible for (1) recommending the compensation policy to a company’s board of directors for its approval (and subsequent approval by the shareholders) and (2) duties related to the compensation policy and to the compensation of a company’s office holders, including:

Our compensation policy is designed to promote our long-term goals, work plan and policy, retain, motivate and incentivize our directors and executive officers, while considering the risks that our activities involve, our size, the nature and scope of our activities and the contribution of an officer to the achievement of our goals and maximization of profits, and align the interests of our directors and executive officers with our long-term performance. To that end, a portion of an executive officer compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance. On the other hand, our compensation policy includes measures designed to reduce the executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation.

Our compensation policy also addresses our executive officers’ individual characteristics (such as his or her respective position, education, scope of responsibilities and contribution to the attainment of our goals) as the basis for compensation variation among our executive officers, and considers the internal ratios between compensation of our executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted to an executive officer may include: base salary, annual bonuses, equity-based compensation, benefits and retirement and termination of service arrangements. All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary. In addition, our compensation policy provides for maximum permitted ratios between the total variable (cash bonuses and equity-based compensation) and non-variable (base salary) compensation components, in accordance with an officer’s respective position with the company.

An annual cash bonus may be awarded to executive officers upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to executive officers other than our chairman or Chief Executive Officer may be based entirely on a discretionary evaluation. Our Chief Executive Officer is entitled to determine performance objectives to such executive officers.

The performance measurable objectives of our chairman and Chief Executive Officer will be determined annually by our compensation committee and Board of Directors. A less significant portion of the chairman’s and/or the Chief Executive Officer’s annual cash bonus may be based on a discretionary evaluation of the chairman’s or the Chief Executive Officer’s respective overall performance by the compensation committee and the Board of Directors based on qualitative criteria.

The equity-based compensation under our compensation policy for our executive officers (including members of our Board of Directors) is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus, with its main objectives being to enhance the alignment between the executive officers’ interests with our long-term interests and those of our shareholders and to strengthen the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares and phantom, options, in accordance with our share incentive plan then in place. Share options granted to executive officers shall be subject to vesting periods in order to promote long-term retention of the awarded executive officers. The equity-based compensation shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of the executive officer.

In addition, our compensation policy contains compensation recovery provisions which allow us under certain conditions to recover bonuses paid in excess on basis of results which were discovered as incorrect or restated in the our financial statements enable our Chief Executive Officer to approve an immaterial change in the terms of employment of an executive officer (provided that the changes of the terms of employment are in accordance our compensation policy) and allow us to exculpate, indemnify and insure our executive officers and directors subject to certain limitations set forth thereto.

Our compensation policy also provides for compensation to the members of our Board of Directors either: (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time; or (ii) for those members who are also executive officers of the Company - in accordance with the amounts determined in our compensation policy.

Under the Companies Law, an audit committee that meets the requirements set forth for compensation committee in the Companies Law may serve also as a compensation committee. In February 2017, our Board of Directors has determined that our audit committee shall serve also as a compensation committee.

Under Nasdaq rules, we are required to maintain a compensation committee consisting of at least two members, all of whom are independent. In addition, in affirmatively determining the independence of any director who will serve on the compensation committee of a board of directors, the board of directors must consider all factors specifically relevant to determining whether a director has a relationship to the company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member.

As noted above, the members of our compensation committee include Messrs. Aharoni, Avidan and Levenberg, each of whom is “independent,” as such term is defined under Nasdaq rules. Mr. Avidan serves as the chairman of our compensation committee.

Under the Companies Law, the board of directors of an Israeli public company must also appoint an internal auditor nominated by the audit committee. Our internal auditor is Mr. Ido Cnaan. The role of the internal auditor is to examine, among other things, whether a company’s actions comply with the law and proper business procedure. The audit committee is required to oversee the activities, and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. An internal auditor may not be an interested party or office holder, or a relative of any interested party or office holder and may not be a member of the company’s independent accounting firm or its representative. The Companies Law defines an interested party as a holder of 5% or more of the outstanding shares or voting rights of a company, any person or entity that has the right to nominate or appoint at least one director or the general manager of the company or any person who serves as a director or as the general manager of a company. Our internal auditor is not our employee, but the managing partner of a firm which specializes in internal auditing.

Under the Companies Law, remuneration of directors is subject to the approval of the compensation committee, thereafter by the board of directors and thereafter, unless exempted under the regulations promulgated under the Companies Law, by the general meeting of the shareholders. In case the remuneration of the directors is in accordance with regulations applicable to remuneration of the external directors then such remuneration shall be exempt from the approval of the general meeting. Where the director is also a controlling shareholder, the requirements for approval of transactions with controlling shareholders apply.

Under the Companies Law, we may approve an action by an office holder from which the office holder would otherwise have to refrain, as described above, if:

● the office holder acts in good faith and the act or its approval does not cause harm to the company; and

● the office holder disclosed the nature of his or her interest in the transaction (including any significant fact or document) to the company at a reasonable time before the company’s approval of such matter.

The Companies Law requires that an office holder disclose to the company, promptly, and, in any event, not later than the board meeting at which the transaction is first discussed, any direct or indirect personal interest that he or she may have and all related material information known to him or her relating to any existing or proposed transaction by the company. If the transaction is an extraordinary transaction, the office holder must also disclose any personal interest held by:

● any corporation in which the office holder or his or her relatives holds 5% or more of the shares or voting rights, serves as a director or general manager or has the right to appoint at least one director or the general manager.

● that is likely to have a material effect on the company’s profitability, assets or liabilities.

The Companies Law does not specify to whom within us nor the manner in which required disclosures are to be made. We require our office holders to make such disclosures to our Board of Directors.

Under the Companies Law, once an office holder complies with the above disclosure requirement, the board of directors may approve a transaction between the company and an office holder, or a third party in which an office holder has a personal interest, unless the articles of association provide otherwise and provided that the transaction is in the company’s interest. If the transaction is an extraordinary transaction in which an office holder has a personal interest, first the audit committee and then the board of directors, in that order, must approve the transaction. Under specific circumstances, shareholder approval may also be required. A director who has a personal interest in an extraordinary transaction, which is considered at a meeting of the board of directors or the audit committee, may not be present at this meeting or vote on this matter, unless a majority of the board of directors or the audit committee, as the case may be, has a personal interest. If a majority of the board of directors has a personal interest, then shareholder approval is generally also required.

Under the Companies Law, all arrangements as to compensation and indemnification or insurance of office holders require approval of the compensation committee and board of directors, and compensation of office holders who are directors must be also approved, subject to certain exceptions, by the shareholders, in that order.

Under the Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company. Extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest, as well as transactions for the provision of services whether directly or indirectly by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, and transactions concerning the terms of engagement of a controlling shareholder or a controlling shareholder’s relative, whether as an office holder or an employee, require the approval of the audit committee or the compensation committee, as the case may be, the board of directors and a majority of the shares voted by the shareholders of the company participating and voting on the matter in a shareholders’ meeting, in that order. In addition, the shareholder approval must fulfill one of the following requirements:

● at least a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or

● the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than 2% of the voting rights in the company.

In addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three years requires the abovementioned approval every three years; however, such transactions not involving the receipt of services or compensation can be approved for a longer term, provided that the audit committee determines that such longer term is reasonable under the circumstances.

The Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction with a controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to so indicate will result in the invalidation of that shareholder’s vote.

The term “controlling shareholder” is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager. In the context of a transaction involving a related party, a controlling shareholder also includes a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, the holdings of all shareholders who have a personal interest in the same transaction will be aggregated.

Under the Companies Law, a company may obtain insurance for any of its office holders against the following liabilities incurred due to acts he or she performed as an office holder, if and to the extent provided for in the company’s articles of association:

We currently have directors’ and officers’ liability insurance, providing total coverage of $15,000,000 for the benefit of all of our directors and officers, in respect of which we paid a twelve-month premium of $155,000, which expires on June 28, 2023.

The Companies Law provides that a company may indemnify an office holder against the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification:

Our amended and restated articles of association allow us to indemnify our office holders up to a certain amount. The Companies Law also permits a company to undertake in advance to indemnify an office holder, provided that if such indemnification relates to financial liability imposed on him or her, as described above, then the undertaking should be limited and shall detail the following foreseen events and amount or criterion:

We have entered into indemnification agreements with all of our directors and with all members of our senior management. Each such indemnification agreement provides the office holder with indemnification permitted under applicable law and up to a certain amount, and to the extent that these liabilities are not covered by directors and officer’s insurance.

Under the Companies Law, an Israeli company may not exculpate an office holder from liability for a breach of his or her duty of loyalty, but may exculpate in advance an office holder from his or her liability to the company, in whole or in part, for damages caused to the company as a result of a breach of his or her duty of care (other than in relation to distributions), but only if a provision authorizing such exculpation is included in its articles of association. Our amended and restated articles of association provide that we may exculpate, in whole or in part, any office holder from liability to us for damages caused to the Company as a result of a breach of his or her duty of care, but prohibit an exculpation from liability arising from a Company’s transaction and/or decision in which our controlling shareholder or officer has a personal interest.

We have entered into exculpation agreements with all of our directors and with all members of our senior management. Under such exculpation agreements, we exculpate and release our office holders from any and all liability to us related to any breach by them of their duty of care to us to the fullest extent permitted by law, subject to the aforesaid limitations.

The Companies Law provides that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide coverage for any liability incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty unless (in the case of indemnity or insurance only, but not exculpation) the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice us; (2) a breach by the office holder of his or her duty of care if the breach was carried out intentionally or recklessly (as opposed to merely negligently); (3) any act or omission committed with the intent to derive an illegal personal benefit; or (4) any fine, monetary sanction, penalty or forfeit levied against the office holder.

Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.

Our amended and restated articles of association permit us to exculpate (subject to the aforesaid limitation), indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Companies Law.

The foregoing descriptions summarize the material aspects and practices of our Board of Directors. For additional details, we also refer you to the full text of the Companies Law, as well as of our amended and restated articles of association, which are attached as an exhibit to this annual report on Form 20-F, and are incorporated herein by reference.

There are no service contracts between us or our subsidiaries, on the one hand, and our directors in their capacity as directors, on the other hand, providing for benefits upon termination of service.

Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of ~~Office Holders~~at least three directors, including all of the external directors (one of whom must serve as chair of the committee). The audit committee may not include the chairman of the board; a controlling shareholder of the company or a relative of a controlling shareholder; a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder; or a director who derives most of his or her income from a controlling shareholder.

Our audit committee, acting pursuant to a written charter, is comprised of Messrs. Zeev Levenberg, Daniel Avidan and Ehud Aharoni.

The compensation policy must also consider appropriate incentives from a long-term perspective.

Under the Companies Law, the board of directors of an Israeli public company must also appoint an internal auditor nominated by the audit committee. Our internal auditor is Mr. Ido Cnaan. The role of the internal auditor is to examine, among other things, whether a company’s actions comply with the law and proper business procedure. The audit committee is required to oversee the activities, and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. An internal auditor may not be an interested party or office holder, or a relative of any interested party or office holder and may not be a member of the company’s independent accounting firm or its representative. The Companies Law ~~imposes~~defines an interested party as a ~~duty~~holder of ~~care and a duty~~5% or more of ~~loyalty on all office holders~~the outstanding shares or voting rights of a ~~company.~~

~~The duty of care requires an office holder~~company, any person or entity that has the right to ~~act with~~nominate or appoint at least one director or the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care of an office holder includes a duty to use reasonable means to obtain:

~~The duty of loyalty of an office holder requires an office holder to act in good faith and for the benefit~~general manager of the company or any person who serves as a director or as the general manager of a company. Our internal auditor is not our employee, but the managing partner of a firm which specializes in internal auditing.

Under the Companies Law, remuneration of directors is subject to the approval of the compensation committee, thereafter by the board of directors and ~~includes~~thereafter, unless exempted under the regulations promulgated under the Companies Law, by the general meeting of the shareholders. In case the remuneration of the directors is in accordance with regulations applicable to remuneration of the external directors then such remuneration shall be exempt from the approval of the general meeting. Where the director is also a ~~duty to:~~controlling shareholder, the requirements for approval of transactions with controlling shareholders apply.

Under the Companies Law, we may approve an action by an office holder from which the office holder would otherwise have to refrain, as described above, if:

● the office holder acts in good faith and the act or its approval does not cause harm to the company; and

● that is likely to have a material effect on the company’s profitability, assets or liabilities.

The Companies Law does not specify to whom within us nor the manner in which required disclosures are to be made. We require our office holders to make such disclosures to our Board of Directors.

● the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than 2% of the voting rights in the company.

We have entered into exculpation agreements with all of our directors and with all members of our senior management. Under such exculpation agreements, we exculpate and release our office holders from any and all liability to us related to any breach by them of their duty of care to ~~refrain from abusing its power in~~us to the ~~company and~~fullest extent permitted by law, subject to ~~act~~the aforesaid limitations.

The Companies Law provides that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide coverage for any liability incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty unless (in the case of indemnity or insurance only, but not exculpation) the office holder acted in good faith and ~~in an acceptable manner in exercising its rights and performing its obligations toward~~had a reasonable basis to believe that the ~~company and other shareholders, including, among other things, voting at general meetings of shareholders (and at shareholder class meetings) on the following matters:~~

~~A shareholder also has a general duty to refrain from oppressing other shareholders.~~

~~The remedies generally available upon~~act would not prejudice us; (2) a breach ~~of contract will also apply to a breach of~~by the ~~above-mentioned duties, and in the event of oppression of other shareholders, additional remedies are available to the injured shareholder.~~

In addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder of his or ~~has another power~~her duty of care if the breach was carried out intentionally or recklessly (as opposed to merely negligently); (3) any act or omission committed with ~~respect~~the intent to ~~a company, is under a duty to act with fairness towards~~derive an illegal personal benefit; or (4) any fine, monetary sanction, penalty or forfeit levied against the ~~company. The~~office holder.

Under the Companies Law, ~~does not describe the substance~~exculpation, indemnification and insurance of ~~this duty except to state that the remedies generally available upon~~office holders in a ~~breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the~~public company ~~into account.~~

~~Our Board of Directors has originally established three standing committees, the audit committee,~~must be approved by the compensation committee and the ~~financial statements examination committee. To date,~~board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.

Our amended and restated articles of association permit us to exculpate (subject to the aforesaid limitation), indemnify and insure our ~~audit committee~~office holders to the fullest extent permitted or to be permitted by the Companies Law.

The foregoing descriptions summarize the material aspects and practices of our Board of Directors. For additional details, we also ~~serves a compensation and a financial statements examination committee, in accordance with~~refer you to the ~~provisions~~full text of the Companies Law, as well as of our amended and restated articles of association, which are attached as an exhibit to this annual report on Form 20-F, and are incorporated herein by reference.

There are no service contracts between us or our subsidiaries, on the ~~regulations promulgated thereunder allowing same~~one hand, and our directors in ~~certain exceptions,~~their capacity as ~~set forth herein.~~directors, on the other hand, providing for benefits upon termination of service.

Our audit committee, acting pursuant to a written charter, is comprised of Messrs. Zeev Levenberg, Daniel Avidan and Ehud Aharoni.

The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. Such policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee. The compensation policy is then brought for approval by our shareholders, which requires a Special Majority. Under the Companies Law, the board of directors may adopt the compensation policy if it is not approved by the shareholders, provided that after the shareholders oppose the approval of such policy, and that the compensation committee and the board of directors ~~revisit~~re-examine the ~~matter~~proposed compensation policy and determine, based on detailed reasoning, that adopting the compensation policy would be beneficial to the company. Furthermore, according to the Companies Law, the compensation policy must generally be periodically reviewed by the compensation committee and the board of directors and needs to be re-approved once every three years by the board of directors, following recommendation by the compensation committee, and by a Special Majority of the Company’s shareholders. Our former compensation policy was approved by our shareholders in December 2015 ~~and~~ June 2017, and ~~an amendment thereto was approved by our shareholders in~~ January 2019 and then amended with regard to certain specific issues in July ~~2020.~~2020 and July 2021. On December 19, 2021, in course of the aforesaid periodical review, our compensation committee and Board of Directors, in their respective meetings, approved, and recommended to the shareholders to approve, an amended and restated compensation policy. On January 31, 2022, our shareholders determined not to approve the amended and restated compensation policy. Following the opposition of our shareholders, our Board of Directors and our compensation committee, in their respective meetings on March 31, 2022 and March 29, 2022, re-examined the amended and restated compensation policy and determined to adopt it and that adopting the amended and restated compensation policy would be beneficial to the Company, taking under consideration the shareholders’ opposition and, inter alia, based on the following reasons: (i) given their deep familiarity with the Company’s business, the manner in which it is managed and the applicable market conditions, the compensation committee and the Board of Directors have better perspective than the Company’s shareholders to determine whether the compensation the Company’s officers are eligible to, is fair and reasonable; (ii) the amended and restated compensation policy advances the Company’s objectives, business plan and long-term strategy, and creates appropriate incentives for the Company’s officers, in the light of the Company’s risk management, size and the nature of its business; (iii) all public Israeli companies are required to adopt a written compensation policy for their executives; therefore an absence of an effective compensation policy violates the applicable law and disposes the Company to certain penalties.

The compensation policy must also consider appropriate incentives from a long-term perspective.

Under the Companies Law, we may approve an action by an office holder from which the office holder would otherwise have to refrain, as described above, if:

● the office holder acts in good faith and the act or its approval does not cause harm to the company; and

● that is likely to have a material effect on the company’s profitability, assets or liabilities.

The Companies Law does not specify to whom within us nor the manner in which required disclosures are to be made. We require our office holders to make such disclosures to our Board of Directors.

● the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than 2% of the voting rights in the company.

We currently have directors’ and officers’ liability insurance, providing total coverage of ~~$20,000,000~~$15,000,000 for the benefit of all of our directors and officers, in respect of which we paid a twelve-month premium of ~~$127,450,~~$155,000, which expires on June ~~14, 2021.~~28, 2023.

~~We have entered into indemnification~~Our amended and ~~exculpation agreements with all~~restated articles of ~~our directors and members of our senior management. Each such agreement provides the office holder with indemnification permitted under applicable law and up~~association permit us to ~~a certain amount, and~~exculpate (subject to the ~~extent that these liabilities are not covered by directors~~aforesaid limitation), indemnify and officers insurance. In addition, under such indemnification and exculpation agreements we may not exculpate our directors or members of our senior management with regard to a decision and/or a transaction in which our controlling shareholder and/or anyinsure our office ~~holder has personal interest in.~~holders to the fullest extent permitted or to be permitted by the Companies Law.

The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company.

The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care of an office holder includes a duty to use reasonable means to obtain:

● information on the advisability of a given action brought for his approval or performed by him by virtue of his position; and

The duty of loyalty of an office holder requires an office holder to act in good faith and for the benefit of the company, and includes a duty to:

● refrain from any conflict of interest between the performance of his duties in the company and his performance of his other duties or personal affairs;

● refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and

● disclose to the company any information or documents relating to the company’s affairs which the office holder has received due to his position as an office holder.

Under the Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising its rights and performing its obligations toward the company and other shareholders, including, among other things, voting at general meetings of shareholders (and at shareholder class meetings) on the following matters:

● the approval of related party transactions and acts of office holders that require shareholder approval.

A shareholder also has a general duty to refrain from oppressing other shareholders.

The remedies generally available upon a breach of contract will also apply to a breach of the above-mentioned duties, and in the event of oppression of other shareholders, additional remedies are available to the injured shareholder.

In addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account.

~~On December 31, 2018, we had 47 full-time employees and three part-time employees. On December 31, 2019, we had 61 full-time employees and nine part-time employees.~~ On December 31, 2020, we had 59 full-time employees and 5 part-time ~~employees.~~employees, out of which 45 employees worked in our R&D department, 9 employees in management and administration, 5 employees in sales, and marketing and 5 employees in operations. On December 31, 2021, we had 68 full-time employees and 5 part-time employees, out of which 54 employees worked in our R&D department, 9 employees in management and administration, 5 employees in sales and marketing, and 5 employees in operations. On December 31, 2022, we had 81 full-time employees and 6 part-time employees, out of which 64 employees worked in our R&D department, 10 employees in management and administration, 8 employees in sales and marketing, and 5 employees in operations.

As of March ~~25, 2021,~~20, 2023, we had six full-time senior management employees, including our Chief Executive Officer, Vice President of Business Development, Foresight Changzhou CEO and Vice President of Global Operations, Vice President of Research and Development, Vice President ~~of Business Development non-automotive,~~Product and Deputy Chief Executive Officer of Eye-Net Ltd., and an additional two part-time senior managers – our Chief Financial Officer and Vice President of Human Resources. All of our employees are located in ~~Israel.~~Israel, except for two employees in China. None of our employees are represented by labor unions or covered by collective bargaining agreements. We believe that we maintain good relations with all of our employees. However, in Israel, we are subject to certain Israeli labor laws, regulations and national labor court precedent rulings, as well as certain provisions of collective bargaining agreements applicable to us by virtue of extension orders issued in accordance with relevant labor laws by the Israeli Ministry of Economy and which apply such agreement provisions to our employees even though they are not part of a union that has signed a collective bargaining agreement.

All of our employment and consulting agreements include employees’ and consultants’ undertakings with respect to non-competition, assignment to us of intellectual property rights developed in the course of employment, and confidentiality. The enforceability of such provisions is limited by Israeli law.

We maintain one equity incentive plan – our 2016 Equity Incentive Plan, or the 2016 Plan. As of March ~~21, 2021,~~20, 2023, the number of Ordinary Shares reserved for the exercise of options granted under the 2016 Plan was ~~36,903,634.~~56,656,781. In addition, as of March ~~21, 2021,~~20, 2023, 36,892,799 options to purchase ~~25,092,765~~ Ordinary Shares were issued and outstanding, out of which 5,567,174 options to purchase ~~5,971,219~~ Ordinary Shares were vested as of that date, with an exercise price of NIS 1.95 (approximately ~~$0.59)~~$0.53) per share, options to purchase 2,150,000 Ordinary Shares were vested as of that date, with an exercise price of NIS 2.31 (approximately ~~$0.70)~~$0.63) per share, options to purchase ~~100,000~~250,000 Ordinary Shares were vested as of that date, with an exercise price of NIS ~~3.78~~2.29 (approximately ~~$1.15)~~$0.63) per share, options to purchase ~~41,667 Ordinary Shares were vested as of that date, with an exercise price of NIS 6.96 (approximately $2.116) per share, options to purchase 3,143,713~~12,161,875 Ordinary Shares were vested as of that date, with an average exercise price of NIS 1.06 (approximately ~~$0.32)~~$0.29) per share, options to purchase ~~58,334~~400,000 Ordinary Shares were vested as of that date, with an average exercise price of NIS ~~1.13~~2.90 (approximately ~~$0.34)~~$0.79) per share, options to purchase ~~14,584~~768,750 Ordinary Shares were vested as of that date, with an exercise price of NIS 1.33 (approximately ~~$0.40)~~$0.36) per share, ~~and~~ options to purchase ~~700,000~~375,000 Ordinary Shares were vested as of that date, with an exercise price of NIS 6.13 (approximately ~~$1.86)~~$1.67) per share, options to purchase 100,000 Ordinary Shares were vested as of that date, with an average exercise price of NIS 4.75 (approximately $1.29) per share and options to purchase 15,095,000 Ordinary Shares were vested as of that date, with an exercise price of NIS 1 (approximately $0.27) per share. Exercise prices in NIS are translated into U.S. dollars at the rate of NIS ~~3.289~~3.677 = U.S. $1.00, based on the closing rate of exchange between the NIS and the U.S. dollar as reported by the Bank of Israel on March ~~21, 2021.~~20, 2023.

Our 2016 Plan was adopted by our Board of Directors in November 2015 and expires in November 2025. Our employees, directors, officers, and services providers, including those who are our controlling shareholders, if any, as well as those of our affiliated companies, are eligible to participate in this plan.

Our 2016 Plan is administered by our Board of Directors, regarding the granting of options and the terms of option grants, including exercise price, method of payment, vesting schedule, acceleration of vesting and the other matters necessary in the administration of this plan. Eligible Israeli employees, officers and directors, would qualify for provisions of Section 102(b)(2) of the Israeli Income Tax Ordinance, 1961, or the Tax Ordinance. Pursuant to such Section 102(b)(2), qualifying options and shares issued upon exercise of such options are held in trust and registered in the name of a trustee selected by the board of directors. The trustee may not release these options or shares to the holders thereof for two years from the date of the registration of the options in the name of the trustee. Under Section 102, any tax payable by an employee from the grant or exercise of the options is deferred until the transfer of the options or Ordinary Shares by the trustee to the employee or upon the sale of the options or Ordinary Shares, and gains may qualify to be taxed as capital gains at a rate equal to 25%, subject to compliance with specified conditions. Our Israeli non-employee service providers and controlling shareholders may only be granted options under Section 3(9) of the Tax Ordinance, which does not provide for similar tax benefits. The 2016 Plan also permits granting options to Israeli grantees who do not qualify under Section 102(b)(2).

As a default, our 2016 Plan provides that upon termination of employment for any reason, other than in the event of death or disability, all unvested options will expire and all vested options will generally be exercisable for 6 months following such termination, or such other period as determined by the plan administrator, subject to the terms of the 2016 Plan and the governing option agreement. Notwithstanding the foregoing, in the event the employment is terminated for cause (including, inter alia, a breach of confidentiality or non-compete obligations to us, and commission of an act involving moral turpitude or an act that causes harm to us) all options granted to such employee, whether vested or unvested, will not be exercisable and will terminate on the date of the termination of his employment.

Upon termination of employment due to death or disability, all the options vested at the time of termination will generally be exercisable for 12 months, or such other period as determined by the plan administrator, subject to the terms of the 2016 Plan and the governing option agreement.

The following table sets forth information regarding beneficial ownership of our Ordinary Shares as of March ~~21, 2021~~20, 2023 by:

Except as indicated in footnotes to this table, we believe that the shareholder named in this table has sole voting and investment power with respect to all shares shown to be beneficially owned by it, based on information provided to us by such shareholder. The shareholder listed below does not have any different voting rights from any of our other shareholders.

Over the course of 2022, there were no increases in the percentage ownership of our major shareholders. On the other hand, there were decreases in the percentage ownership of entities affiliated with Magna from 10.72% to 7.36%, which was due to a corporate restructuring of Magna in which certain shareholders of Magna exchanged their shares of Magna for our Ordinary Shares.

Over the course of 2021, there were no increases in the percentage ownership of our major shareholders. On the other hand, there were decreases in the percentage ownership of entities affiliated with Magna from 11.47% to 10.72%, which was due to the dilution of their ownership as a result of equity offerings.

Over the course of 2020, there were no increases in the percentage ownership of our major shareholders. On the other hand, there were decreases in the percentage ownership of entities affiliated with (i) Magna from 23.2% to 11.47%, which was due to the dilution of their ownership as a result of equity offerings (ii) Ionic Ventures LLC (from 9.98% to 0%), which was due to the sale of their holdings. and (iii) Harel Insurance Investments & Financial Services Ltd. (from 6.3% to 3.8%), which was due to the dilution of their ownership as a result of equity offerings.

Over the course of 2019, there were no increases in the percentage ownership of our major shareholders. On the other hand, there were decreases in the percentage ownership of entities affiliated with (i) Magna from 27.2% to 23.2%, which was due to the dilution of their ownership as a result of equity offerings (ii) Harel Insurance Investments & Financial Services Ltd (from 10.5% to 6.3%) and (iii) Meitav Dash Investments Ltd. (from 5.4% to 4.65%), which was due to the dilution of their ownership as a result of equity offerings.

Over the course of 2018, there were increases in the percentage ownership of our major shareholders with (i) Harel Insurance Investments & Financial Services Ltd (from 0% to 10.5%) and (ii) Meitav Dash Investments Ltd. (from 0% to 5.4%). On the other hand, there were decreases in the percentage ownership of entities affiliated with (i) Magna from 32.3% to 27.2%, which was due to the dilution of their ownership as a result of equity offerings

Based upon a review of the information provided to us by our registrar in Israel, as of March ~~21, 2021,~~20, 2023, there were a total of 13 holders of record of our Ordinary Shares, of which all record holders had registered addresses in Israel. Based upon a review of the information provided to us by The Bank of New York Mellon, the depositary of the ADSs, as of March ~~19, 2021,~~29, 2023, there were ~~97 holders~~89 holder of record of the ADSs on record with the Depository Trust Company. These numbers are not representative of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside, since many of these shares were held of record by brokers or other nominees.

We are not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there are no arrangements known to us which would result in a change in control of us at a subsequent date.

See “Item 6.B. Compensation” for compensation to our directors and officers.

Since our inception we have granted options to purchase our Ordinary Shares to our officers and our directors. Such option agreements may contain acceleration provisions upon certain merger, acquisition, or change of control transactions. We describe our option plan under “Item 6.E. Share Ownership—2016 Equity Incentive Plan.” If the relationship between us and an executive officer or a director is terminated, except for cause (as defined in the various option plan agreements), options that are vested will generally remain exercisable for six months after such termination.

Following the Merger, on January 5, 2016, Magna entered into a services agreement with Foresight Automotive, which provided that, for a period of 12 months following the Merger, Magna shall provide Foresight Automotive with certain services, primarily with respect to the design and development of algorithms and ADAS designated computer vision software in consideration of monthly payments at agreed upon rates for each of Magna’s workers, not to exceed the aggregate monthly consideration of NIS 200,000 plus VAT. Furthermore, Foresight Automotive may extend the agreement by two additional 12 month periods, which right has been exercised by Foresight Automotive on two occasions. On January 28, 2019, the Company’s shareholders approved the extension of the services agreement with Magna for 12 additional months with an option to extend the agreement for two additional 12 month periods, which right has been exercised by Foresight Automotive for the two additional 12 month periods. According to the updated agreement, the monthly payment to Magna for the research and development services will not exceed NIS 235,000 (approximately ~~$73,000)~~$73,000 at the time of the extension) plus VAT. On January 30, 2022, the Company’s shareholders approved the extension of the services agreement with Magna for twelve (12) additional months with an option to extend the agreement for two (2) additional twelve (12) month periods, which right has been exercised by Foresight Automotive for the first additional twelve (12) month period. According to the updated agreement, the monthly payment to Magna for the research and development services will not exceed NIS 235,000 (approximately $72,000 at the time of the extension) plus VAT. In addition, our Chief Executive Officer, Mr. Haim Siboni, and our Chief Technology Officer, Mr. Levi Zruya, serve as Magna’s Chief Executive Officer and Chief Technology Officer, respectively.

We have never declared or paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our Board of Directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board of Directors may deem relevant.

The Companies Law imposes further restrictions on our ability to declare and pay dividends.

Payment of dividends may be subject to Israeli withholding taxes. See “Item 10. E. Taxation” for additional information.

No significant change, other than as otherwise described in this annual report on Form 20-F, has occurred in our operations since the date of our consolidated financial statements included in this annual report on Form 20-F.

Our Ordinary Shares have been trading on the TASE since 1987. From July 2015 until October 2015, we did not have any business activity, excluding administrative management. On October 11, 2015, we entered into the Merger with Magna and Foresight Automotive. The ADSs have been trading under the symbol “FRSX” on the Nasdaq Capital Market since June 15, 2017.

Our Ordinary Shares have been trading on the TASE since 1987. The ADSs are listed on the Nasdaq Capital Market.

A copy of our amended and restated articles of association is attached as Exhibit 1.1 to this annual report on Form 20-F. The information called for by this Item is set forth in Exhibit 2(d) to this annual report on Form 20-F and is incorporated by reference into this annual report on Form 20-F.

The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we are or have been a party, for the two years immediately preceding the date of this annual report on Form 20-F:

There are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our Ordinary Shares or the proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.

The ownership or voting of our Ordinary Shares by non-residents of Israel, except with respect to citizens of countries that are in a state of war with Israel, is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.

The following is a description of the material Israeli income tax consequences of the ownership of our Ordinary Shares. The following also contains a description of material relevant provisions of the current Israeli income tax structure applicable to companies in Israel, with reference to its effect on us. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation, there can be no assurance that the tax authorities will accept the views expressed in the discussion in question. The discussion is not intended, and should not be taken, as legal or professional tax advice and is not exhaustive of all possible tax considerations.

The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our Ordinary Shares and ADSs. Shareholders should consult their own tax advisors concerning the tax consequences of their particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

Israeli companies are generally subject to corporate tax. As of January 2016, the corporate tax rate was 25%. As of January 1, 2017, the corporate tax rate was reduced to 24% and as of January 1, 2018, the corporate tax rate is 23%. However, the effective tax rate payable by a company that derives income from a Preferred Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to the prevailing corporate tax rate.

Capital gains derived by an Israeli resident company are subject to tax at the prevailing corporate tax rate. Under Israeli tax legislation, a corporation will be considered as an “Israeli resident company” if it meets one of the following: (i) it was incorporated in Israel; or (ii) the control and management of its business are exercised in Israel.

The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies.”

The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company, of which 90% or more of its income in any tax year, other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.

The following corporate tax benefits, among others, are available to Industrial Companies:

Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.

Under the Research Law, research and development programs which meet specified criteria and are approved by the IIA are eligible for grants of up to 50% of the project’s expenditure, as determined by the research committee, in exchange for the payment of royalties from the revenues generated from the sale of products and related services developed, in whole or in part pursuant to, or as a result of, a research and development program funded by the IIA. The royalties are generally at a range of 3.0% to 5.0% of revenues until the entire IIA grant is repaid, together with an annual interest generally equal to the 12 month LIBOR applicable to dollar deposits that is published on the first business day of each calendar year.

The terms of the Research Law also require that the manufacture of products developed with government grants be performed in Israel. The transfer of manufacturing activity outside Israel may be subject to the prior approval of the IIA. Under the regulations of the Research Law, assuming we receive approval from the IIA to manufacture our IIA-funded products outside Israel, we may be required to pay increased royalties. The increase in royalties depends upon the manufacturing volume that is performed outside of Israel as follows:

If the manufacturing is performed outside of Israel by us, the rate of royalties payable by us on revenues from the sale of products manufactured outside of Israel will increase by 1% over the regular rates. If the manufacturing is performed outside of Israel by a third party, the rate of royalties payable by us on those revenues will be equal to the ratio obtained by dividing the amount of the grants received from the IIA and our total investment in the project that was funded by these grants. The transfer of no more than 10% of the manufacturing capacity in the aggregate outside of Israel is exempt under the Research Law from obtaining the prior approval of the IIA. A company requesting funds from the IIA also has the option of declaring in its IIA grant application an intention to perform part of its manufacturing outside Israel, thus avoiding the need to obtain additional approval. On January 6, 2011, the Research Law was amended to clarify that the potential increased royalties specified in the table above will apply even in those cases where the IIA approval for transfer of manufacturing outside of Israel is not required, namely when the volume of the transferred manufacturing capacity is less than 10% of total capacity or when the company received an advance approval to manufacture abroad in the framework of its IIA grant application.

The know-how developed within the framework of the IIA plan may not be transferred to third parties outside Israel without the prior approval of a governmental committee charted under the Research Law. The approval, however, is not required for the export of any products developed using grants received from the IIA. The IIA approval to transfer know-how created, in whole or in part, in connection with an IIA-funded project to third party outside Israel where the transferring company remains an operating Israeli entity is subject to payment of a redemption fee to the IIA calculated according to a formula provided under the Research Law that is based, in general, on the ratio between the aggregate IIA grants to the company’s aggregate investments in the project that was funded by these IIA grants, multiplied by the transaction consideration. The transfer of such know-how to a party outside Israel where the transferring company ceases to exist as an Israeli entity is subject to a redemption fee formula that is based, in general, on the ratio between the aggregate IIA grants to the total financial investments in the company, multiplied by the transaction consideration. According to the January 2011 amendment, the redemption fee in case of transfer of know-how to a party outside Israel will be based on the ratio between the aggregate IIA grants received by the company and the company’s aggregate research and development expenses, multiplied by the transaction consideration. According to regulations promulgated following the 2011 amendment, the maximum amount payable to the IIA in case of transfer of know how outside Israel shall not exceed 6 times the value of the grants received plus interest, and in the event that the receiver of the grants ceases to be an Israeli corporation such payment shall not exceed six times the value of the grants received plus interest, with a possibility to reduce such payment to up to three times the value of the grants received plus interest if the research and development activity remains in Israel for a period of three years after payment to the IIA.

Transfer of know-how within Israel is subject to an undertaking of the recipient Israeli entity to comply with the provisions of the Research Law and related regulations, including the restrictions on the transfer of know-how and the obligation to pay royalties, as further described in the Research Law and related regulations.

These restrictions may impair our ability to outsource manufacturing, engage in change of control transactions or otherwise transfer our know-how outside Israel and may require us to obtain the approval of the IIA for certain actions and transactions and pay additional royalties to the IIA. In particular, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israeli citizen or resident an “interested party,” as defined in the Research Law, requires a prior written notice to the IIA in addition to any payment that may be required of us for transfer of manufacturing or know-how outside Israel. If we fail to comply with the Research Law, we may be subject to criminal charges.

Israeli tax law allows, under certain conditions, a tax deduction for expenditures, including capital expenditures, for the year in which they are incurred. Expenditures are deemed related to scientific research and development projects, if:

The amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable under the general depreciation rules of the Tax Ordinance. Expenditures not so approved are deductible in equal amounts over three years.

From time to time, we may apply to the IIA for approval to allow a tax deduction for all research and development expenses during the year incurred. There can be no assurance that such application will be accepted.

The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible assets).

The Investment Law grants tax benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. A Preferred Company is entitled to a reduced corporate tax rate of 16% with respect to its income derived by its Preferred Enterprise, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 9%.

Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% or such lower rate as may be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld.

Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders. A non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company will be exempt from Israeli tax so long as the shares were not held through a permanent establishment that the non-resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of 25% or more in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.

Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under Convention Between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended, or the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder who is a United States resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the U.S.-Israel Tax Treaty, or a Treaty U.S. Resident, is generally exempt from Israeli capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition is attributed to a permanent establishment in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12-month period preceding the disposition, subject to certain conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year.

In some instances where our shareholders may be liable for Israeli tax on the sale of their Ordinary Shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale.

Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-Israeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary Shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s country of residence. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. However, a distribution of dividends to non-Israeli residents is subject to withholding tax at source at a rate of 20% if the dividend is distributed from income attributed to a Preferred Enterprise, unless a reduced tax rate is provided under an applicable tax treaty. For example, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our Ordinary Shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by a Preferred Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed from income attributed to a Preferred Enterprise are not entitled to such reduction under the tax treaty but are subject to a withholding tax rate of 15% for a shareholder that is a U.S. corporation, provided that the condition related to our gross income for the previous year (as set forth in the previous sentence) is met. If the dividend is attributable partly to income derived from a Preferred Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of the two types of income. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.

THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.

Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S. Holder” arising from the purchase, ownership and sale of the Ordinary Shares and ADSs. For this purpose, a “U.S. Holder” is a holder of Ordinary Shares or ADSs that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) or a partnership (other than a partnership that is not treated as a U.S. person under any applicable U.S. Treasury regulations) created or organized under the laws of the United States or the District of Columbia or any political subdivision thereof; (3) an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; or (5) a trust that has a valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.

This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income tax considerations that may be relevant to a decision to purchase our Ordinary Shares or ADSs. This summary generally considers only U.S. Holders that will own our Ordinary Shares or ADSs as capital assets. Except to the limited extent discussed below, this summary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’s status as a U.S. Holder. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder, administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change, possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income tax treatment of an investment in our Ordinary Shares or ADSs by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with the conclusions set forth below.

This discussion does not address all of the aspects of U.S. federal income taxation that may be relevant to a particular U.S. holder based on such holder’s particular circumstances and in particular does not discuss any estate, gift, generation-skipping, transfer, state, local, excise or foreign tax considerations. In addition, this discussion does not address the U.S. federal income tax treatment of a U.S. Holder who is: (1) a bank, life insurance company, regulated investment company, or other financial institution or “financial services entity;” (2) a broker or dealer in securities or foreign currency; (3) a person who acquired our Ordinary Shares or ADSs in connection with employment or other performance of services; (4) a U.S. Holder that is subject to the U.S. alternative minimum tax; (5) a U.S. Holder that holds our Ordinary Shares or ADSs as a hedge or as part of a hedging, straddle, conversion or constructive sale transaction or other risk-reduction transaction for U.S. federal income tax purposes; (6) a tax-exempt entity; (7) real estate investment trusts or grantor trusts; (8) a U.S. Holder that expatriates out of the United States or a former long-term resident of the United States; or (9) a person having a functional currency other than the U.S. dollar. This discussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, Ordinary Shares or ADSs representing 10% or more of our voting power. Additionally, the U.S. federal income tax treatment of partnerships (or other pass-through entities) or persons who hold Ordinary Shares or ADSs through a partnership or other pass-through entity are not addressed.

Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding or disposing of our Ordinary Shares or ADSs, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.

We do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading “Passive Foreign Investment Companies” below and the discussion of “qualified dividend income” below, a U.S. Holder, other than certain U.S. Holder’s that are U.S. corporations, will be required to include in gross income as ordinary income the amount of any distribution paid on Ordinary Shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our earnings and profits will be treated first as a non-taxable return of capital, reducing the U.S. Holder’s tax basis for the Ordinary Shares to the extent thereof, and then capital gain. We do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles and, therefore, U.S. Holders should expect that the entire amount of any distribution generally will be reported as dividend income.

In general, preferential tax rates for “qualified dividend income” and long-term capital gains are applicable for U.S. Holders that are individuals, estates or trusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” is a corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS has stated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.

In addition, our dividends will be qualified dividend income if our Ordinary Shares or ADSs are readily tradable on the Nasdaq Capital Market or another established securities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as a PFIC, as described below under “Passive Foreign Investment Companies.” A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has not held our Ordinary Shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the ex-dividend date, or (2) to the extent the U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk of loss on our Ordinary Shares or ADSs are not counted towards meeting the 61-day holding period. Finally, U.S. Holders who elect to treat the dividend income as “investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.

The amount of a distribution with respect to our Ordinary Shares or ADSs will be measured by the amount of the fair market value of any property distributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in the income of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder, and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts the NIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. source ordinary exchange gain or loss.

Except as provided under the PFIC rules described below under “Passive Foreign Investment Companies,” upon the sale, exchange or other disposition of our Ordinary Shares or ADSs, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s tax basis for the Ordinary Shares or ADSs in U.S. dollars and the amount realized on the disposition in U.S. dollar (or its U.S. dollar equivalent determined by reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on the sale, exchange or other disposition of Ordinary Shares or ADSs will be long-term capital gain or loss if the U.S. Holder has a holding period of more than one year at the time of the disposition. Individuals who recognize long-term capital gains may be taxed on such gains at reduced rates of tax. The deduction of capital losses is subject to various limitations.

Special U.S. federal income tax laws apply to U.S. taxpayers who own shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federal income tax purposes for any taxable year that either:

For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions and from notional principal contracts. Cash is treated as generating passive income.

We believe that we will not be a PFIC for the current taxable year, ~~although~~and we ~~have~~do not ~~determined whether we will be~~expect to become a PFIC in the ~~foreseeable future.~~future, although there can be no assurance in this regard. The tests for determining PFIC status are applied annually, and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of our Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will not become a PFIC.

If we currently are or become a PFIC, each U.S. Holder who has not elected to mark the shares to market (as discussed below), would, upon receipt of certain distributions by us and upon disposition of our Ordinary Shares or ADSs at a gain: (1) have such distribution or gain allocated ratably over the U.S. Holder’s holding period for the Ordinary Shares or ADSs, as the case may be; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive a step-up to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by the decedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.

The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held the Ordinary Shares or ADSs while we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made such a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinary income and such U.S. Holder’s pro rata share of our net capital gains as long-term capital gain, regardless of whether we make any distributions of such earnings or gain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholder-by-shareholder basis and generally may be revoked only with the consent of the IRS. We do not intend to notify U.S. Holders if we believe we will be treated as a PFIC for any tax year. In addition, we do not intend to furnish U.S. Holders annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. Therefore, the QEF election will not be available with respect to our Ordinary Shares or ADSs.

In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a mark-to-market election. A U.S. Holder of our Ordinary Shares or ADSs which are regularly traded on a qualifying exchange, including the Nasdaq Capital Market, can elect to mark the Ordinary Shares or ADSs to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair market value of the Ordinary Shares or ADSs and the U.S. Holder’s adjusted tax basis in the Ordinary Shares or ADSs. Losses are allowed only to the extent of net mark-to-market gain previously included income by the U.S. Holder under the election for prior taxable years.

U.S. Holders who hold our Ordinary Shares or ADSs during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFIC rules.

U.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (including dividends on and gains from the sale or other disposition of our Ordinary Shares or ADSs), or in the case of estates and trusts on their net investment income that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.

Except as provided below, an individual, corporation, estate or trust that is not a U.S. Holder referred to below as a non-U.S. Holder, generally will not be subject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our Ordinary Shares or ADSs.

A non-U.S. Holder may be subject to U.S. federal income tax on a dividend paid on our Ordinary Shares or ADSs or gain from the disposition of our Ordinary Shares or ADSs if: (1) such item is effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States and, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the case of a disposition of our Ordinary Shares or ADSs, the individual non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the disposition and other specified conditions are met.

In general, non-U.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our Ordinary Shares or ADSs if payment is made through a paying agent, or office of a foreign broker outside the United States. However, if payment is made in the United States or by a U.S. related person, non-U.S. Holders may be subject to backup withholding, unless the non-U.S. Holder provides an applicable IRS Form W-8 (or a substantially similar form) certifying its foreign status, or otherwise establishes an exemption.

The amount of any backup withholding from a payment to a non-U.S. Holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

A U.S. Holder may be subject to backup withholding at a rate of 24% with respect to cash dividends and proceeds from a disposition of Ordinary Shares or ADSs. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will not apply with respect to payments made to designated exempt recipients, such as corporations and tax-exempt organizations. Backup withholding is not an additional tax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.

Pursuant to recently enacted legislation, a U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our Ordinary Shares or ADSs, unless such Ordinary Shares or ADSs are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS if the aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amount as may be prescribed by applicable IRS guidance); and may be required to file a Report of Foreign Bank and Financial Accounts, or FBAR, if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. You should consult your own tax advisor as to the possible obligation to file such information report.

We are subject to the information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements file reports with the SEC. The SEC maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.

As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not be required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act. However, we file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and may submit to the SEC, on a Form 6-K, unaudited quarterly financial information.

In addition, since our Ordinary Shares are traded on the TASE, we have filed Hebrew language periodic and immediate reports with, and furnish information to, the TASE and the ISA, as required under Chapter Six of the Israel Securities Law, 1968. Copies of our filings with the ISA, can be retrieved electronically through the MAGNA distribution site of the ISA (www.magna.isa.gov.il) and the TASE website (www.maya.tase.co.il).

We maintain a corporate website www.foresightauto.com. Information contained on, or that can be accessed through, our website and the other websites referenced above do not constitute a part of this annual report on Form 20-F. We have included these website addresses in this annual report on Form 20-F solely as inactive textual references.

In the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our current investment policy is to invest available cash in bank deposits with banks that have a credit rating of at least A-minus. Accordingly, a substantial majority of our cash and cash equivalents is held in deposits that bear interest. Given the current low rates of interest we receive, we will not be adversely affected if such rates are reduced. Our market risk exposure is primarily a result of NIS/U.S. dollar exchange rates, which is discussed in detail in the following paragraph.

Our results of operations and cash flow are subject to fluctuations due to changes in NIS/U.S. dollar currency exchange rates. The vast majority of our liquid assets is held in NIS, and a certain portion of our expenses is denominated in U.S. dollars. Changes of 5% and 10% in the U.S. dollar/NIS exchange rate would increase/decrease our operating expenses for ~~2019~~2022 by ~~4.8%~~0.65%% and ~~9.1%~~1.3%, respectively. However, these historical figures may not be indicative of future exposure, as we expect that the percentage of our NIS denominated expenses will materially decrease in the near future, therefore reducing our exposure to exchange rate fluctuations.

We do not hedge our foreign currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.

The following table shows the fees and expenses that a holder of the ADSs may have to pay, either directly or indirectly:

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.

The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, ~~2020,~~2022, or the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated and communicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based principally on the framework and criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission as of the end of the period covered by this report. Based on that evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, ~~2020~~2022 at providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption for emerging growth companies provided in the JOBS Act.

During the year ended December 31, ~~2020,~~2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our Board of Directors has determined that each member of our audit committee is an audit committee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaq rules.

We have adopted a written code of ethics that applies to our officers and employees, including our principal executive officer, principal financial officer, principal controller and persons performing similar functions as well as our directors. Our Ethical Code is posted on our website at www.foresightauto.com. Information contained on, or that can be accessed through, our website does not constitute a part of this annual report on Form 20-F and is not incorporated by reference herein. If we make any amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit waiver, from a provision of the code, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC including the instructions to Item 16B of Form 20-F. We have not granted any waivers under our Code of Business Conduct and Ethics.

Brightman Almagor Zohar & Co., a ~~member~~ firm ofin the Deloitte ~~Touche Tohmatsu Limited,~~Global Network, has served as our principal independent registered public accounting firm for each of the two years ended December 31, ~~2019~~2021 and ~~2020.~~2022.

The following table provides information regarding fees paid by us to Brightman Almagor Zohar & Co. and/or other member firms of Deloitte Touche Tohmatsu Limited for all services, including audit services, for the years ended December 31, ~~2019~~2022 and ~~2020:~~2021:

Our audit committee has a pre-approval policy for the engagement of our independent registered public accounting firm to perform certain audit and non-audit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee pre-approves annually a catalog of specific audit and non-audit services in the categories of audit services, audit-related services and tax services that may be performed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general pre-approval, it will require specific pre-approval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to perform the prohibited non-audit functions defined in applicable SEC rules.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Under Nasdaq Stock Market rules, we may elect to follow certain corporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the Nasdaq Stock Market rules for U.S. domestic issuers.

In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the Nasdaq Stock Market rules, we have elected to follow the provisions of the Companies Law, rather than the Nasdaq Stock Market rules, with respect to the following requirements:

Shareholder approval is generally required for officer compensation in the event (i) approval by our Board of Directors and our compensation committee is not consistent with our office holder compensation policy, or (ii) compensation required to be approved is that of our chief executive officer or an executive officer who is also the controlling shareholder of our company (including an affiliate thereof). Such shareholder approval shall require a majority vote of the shares present and voting at a shareholders meeting, provided either (i) such majority includes a majority of the shares held by non-controlling shareholders who do not otherwise have a personal interest in the compensation arrangement that are voted at the meeting, excluding for such purpose any abstentions disinterested majority, or (ii) the total shares held by non-controlling and disinterested shareholders voted against the arrangement does not exceed 2% of the voting rights in our company.

Additionally, approval of the compensation of an executive officer who is also a director requires a simple majority vote of the shares present and voting at a shareholders meeting, if consistent with our office holder compensation policy. Our compensation committee and board of directors may, in special circumstances, approve the compensation of an executive officer (other than a director, a chief executive officer or a controlling shareholder) or approve the compensation policy despite shareholders’ objection, based on specified arguments and taking shareholders’ objection into account. Our compensation committee may further exempt an engagement with a nominee for the position of chief executive officer, who meets the non-affiliation requirements set forth for an external director, from requiring shareholder approval, if such engagement is consistent with our office holder compensation policy and our compensation committee determines based on specified arguments that presentation of such engagement to shareholder approval is likely to prevent such engagement. To the extent that any such transaction with a controlling shareholder is for a period exceeding three years, approval is required once every three years.

A director or executive officer may not be present when the board of directors of a company discusses or votes upon a transaction in which he or she has a personal interest, except in case of ordinary transactions, unless the chairman of the board of directors determines that he or she should be present to present the transaction that is subject to approval.

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

We have elected to provide financial statements and related information pursuant to Item 18.

The consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20-F beginning on page F-1.

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on Form 20-F filed on its behalf.

We have audited the accompanying consolidated balance sheets of Foresight Autonomous Holdings Ltd. and its subsidiaries (the “Company”) as of December 31, ~~2020~~2022 and ~~2019~~2021 and the related consolidated statements of comprehensive loss, shareholders’ equity and cash flows for each of the three years in the period ended December 31, ~~2020,~~2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2020~~2022 and ~~2019,~~2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2020,~~2022, in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our ~~audit.~~audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our ~~audit provides~~audits provide a reasonable basis for our opinion.

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statements of Comprehensive Loss

(~~dollars~~Dollars in thousands, except per share data)

Year ended
December 31,

2020 2019 2018
Note USD in thousands

Research and development expenses, net 11 8,563 10,210 8,638

Marketing and sales expenses 12 1,268 1,350 987

General and administrative expenses 13 3,005 3,469 3,696

Operating loss 12,836 15,029 13,321

Equity in net loss of an affiliated company 4 2,718 839 2,905

Financial income, net 14 (179 ) (429 ) (1,569 )

Net Loss 15,375 15,439 14,657

Basic and diluted loss per share (in USD) 2L (0.07 ) (0.10 ) (0.12 )

Weighted average number of shares outstanding used in computing basic and diluted loss per share - in thousands 219,913 149,534 120,612

		2022			2021			2020
		Year ended December 31,
		2022			2021			2020
	Note	USD in thousands
Revenues			550			120			—
Cost of revenues			252			67			—
Gross profit			298			53			—
Research and development expenses, net	11		11,534			10,170			8,563
Sales and marketing expenses	12		2,230			1,848			1,268
General and administrative expenses	13		3,989			3,980			3,005
Operating loss			17,455			15,945			12,836
Equity in net loss of an affiliated company	4		—			—			2,718
Financial expenses (income), net	14		4,221			(909	)		(179	)
Net Loss			21,676			15,036			15,375
Basic and diluted loss per share (in USD)	2L		(0.07	)		(0.05	)		(0.07	)
Weighted average number of shares outstanding used in computing basic and diluted loss per share - in thousands			322,817			321,356			219,913

The accompanying notes are an integral part of the consolidated financial statements.

F-4

Foresight Autonomous Holdings Ltd.

Statements of Changes in Shareholders’ Equity

	Share Capital				Additional					Total Foresight Autonomous Holdings Ltd.			Non-					Number of shares		USD		paid in capital		Accumulated deficit			Shareholders’ equity			controlling interest		Total equity
	Number of shares		USD		paid in capital		Accumulated deficit			Shareholders’ equity			controlling interest		Total equity			Share Capital				Additional					Total Foresight Autonomous Holdings Ltd.			Non-
			USD in thousands															Number of shares		USD		paid in capital		Accumulated deficit			Shareholders’ equity			controlling interest		Total equity
																		USD in thousands
BALANCE AS OF JANUARY 1, 2018		109,502,289		--		44,114		(19,297	)		24,817			--		24,817

CHANGES DURING 2018:
Issuance of ordinary shares and warrants		21,963,411		--		11,208		--			11,208			--		11,208
Exercise of warrants		156,500		--		125		--			125			--		125
Exercise of options		288,204		--		34		--			34			--		34
Share-based payment		25,000		--		2,040		--			2,040			--		2,040
Loss for the year		--		--		--		(14,657	)		(14,657	)		--		(14,657	)

BALANCE AS OF DECEMBER 31, 2018		131,935,404		--		57,521		(33,954	)		23,567			--		23,567

CHANGES DURING 2019:
Issuance of ordinary shares and warrants		21,733,333		--		6,521		--			6,521			--		6,521
Derivative warrant liabilities classified in equity		--		--		1		--			1			--		1
Exercise of options		850,523		--		--		--			--			--		--
Share-based payment		130,342		--		1,638		--			1,638			--		1,638
Loss for the year		--		--		--		(15,439	)		(15,439	)		--		(15,439	)

BALANCE AS OF DECEMBER 31, 2019		154,649,602		--		65,681		(49,393	)		16,288			--		16,288

BALANCE AS OF JANUARY 1, 2020																			154,649,602		—		65,681		(49,393	)		16,288			—		16,288
CHANGES DURING 2020:
Issuance of ordinary shares		156,847,640		--		44,707		--			44,707			--		44,707			156,847,640		—		44,707		—			44,707			—		44,707
Exercise of options		688,063		--		263		--			263			--		263			688,063		—		263		—			263			—		263
Share-based payment		575,000		--		1,088		--			1,088			74		1,162			575,000		—		1,088		—			1,088			74		1,162
Loss for the year		--		--		--		(15,375	)		(15,375	)		--		(15,324	)		—		—		—		(15,375	)		(15,375	)		—		(15,375	)

BALANCE AS OF DECEMBER 31, 2020		312,760,305		--		111,739		(64,768	)		46,971			74		47,096			312,760,305		—		111,739		(64,768	)		46,971			74		47,045
CHANGES DURING 2021:
Issuance of ordinary shares																			6,891,720		—		13,508		—			13,508			—		13,508
Exercise of options																			1,605,402		—		57		—			57			—		57
Exercise of warrants																			1,174,589		—		595		—			595			—		595
Share-based payment																			220,000		—		2,310		—			2,310			154		2,464
Loss for the year																			—		—		—		(15,036	)		(15,036	)		—		(15,036	)
BALANCE AS OF DECEMBER 31, 2021																			322,652,016		—		128,209		(79,804	)		48,405			228		48,633
Balance																			322,652,016		—		128,209		(79,804	)		48,405			228		48,633
CHANGES DURING 2022:
Exercise of options																			7,540		—		4		—			4			—		4
Share-based payment																			320,000		—		1,597		—			1,597			225		1,822
Loss for the year																			—		—		—		(21,676	)		(21,676	)		—		(21,676	)
BALANCE AS OF DECEMBER 31, 2022																			322,979,556		—		129,810		(101,480	)		28,330			453		28,783
Balance																			322,979,556		—		129,810		(101,480	)		28,330			453		28,783

The accompanying notes are an integral part of the consolidated financial statements.

F-5

Foresight Autonomous Holdings Ltd.

Consolidated Statements of Cash Flows

	Year ended December 31,									2022			2021			2020
	2020			2019			2018			Year ended December 31,
	USD in thousands									2022			2021			2020
										USD in thousands
Cash flows from Operating Activities
Loss for the year		(15,375	)		(15,439	)		(14,657	)		(21,676	)		(15,036	)		(15,375	)

Adjustments to reconcile loss to net cash used in operating activities:		3,880			3,578			3,184			4,619			2,911			3,880

Net cash used in operating activities		(11,495	)		(11,861	)		(11,473	)		(17,057	)		(12,125	)		(11,495	)

Cash Flows from Investing Activities
Changes in short term deposits		67			7,273			(337	)		10,297			(12,347	)		67
Investment in affiliated company		--			--			(5,065	)
Proceeds from sales of other investments		--			21			--
Proceeds from sales of marketable securities		68			--			--			—			—			68
Investment in SAFE											(286	)		—			—
Investment in equity securities											(715	)		—			—
Purchase of fixed assets		(50	)		(103	)		(733	)		(313	)		(235	)		(50	)

Net cash provided by (used in) investing activities		85			7,191			(6,135	)		8,983			(12,582	)		85

Cash flows from Financing Activities
Issuance of ordinary shares and warrants, net of issuance expenses		45,017			6,521			11,208
Issuance of ordinary shares, net of issuance expenses											—			13,508			45,017
Proceeds from exercise of warrants		--			--			125			—			595			—
Proceeds from exercise of options		263			--			34			—			57			263

Net cash provided by financing activities		45,280			6,521			11,367			—			14,160			45,280

Effect of exchange rate changes on cash and cash equivalents		75			(182	)		(237	)		(839	)		(37	)		75

Increase (decrease) in cash and cash equivalents		33,945			1,669			(6,478	)
Cash and cash equivalents at the beginning of the period		4,827			3,158			9,636

Cash and cash equivalents at the end of the period		38,772			4,827			3,158
(Decrease) increase in cash and cash equivalents and restricted cash											(8,913	)		(10,584	)		33,945
Cash and cash equivalents and restricted cash at the beginning of the period											28,188			38,772			4,827
Cash and cash equivalents and restricted cash at the end of the period											19,275			28,188			38,772

The accompanying notes are an integral part of the consolidated financial statements.

F-6

Foresight Autonomous Holdings Ltd.

Consolidated Statements of Cash Flows

Adjustments to reconcile loss to net cash used in operating activities:	Year ended December 31,									Year ended December 31,
	2020			2019			2018			2022			2021			2020
	USD in thousands									USD in thousands

Adjustments to reconcile loss to net cash used in operating activities:
Share-based payment		1,162			1,638			2,040			1,826			2,464			1,162
Depreciation		254			259			235			218			159			254
Revaluation of derivative warrant liabilities		--			1			(2,071	)
Equity in net loss of an affiliated company		2,718			839			2,905			—			—			2,718
Revaluation of other investments		--			324			(316	)
Revaluation of marketable securities		(87	)		--			(1	)		2,217			30			(87	)
Exchange rate changes on cash and cash equivalents		(75	)		182			237			839			37			(75	)

Changes in assets and liabilities:
Decrease (Increase) in other current assets		212			(142	)		11
Decrease (increase) in other current assets											(182	)		(259	)		212
Increase (decrease) in trade payables		(296	)		154			14			62			(138	)		(296	)
Change in operating lease liability		60			110			--			(289	)		(33	)		60
Increase (decrease) in other payables		(68	)		213			130			(72	)		651			(68	)

Adjustments to reconcile loss to net cash used in operating activities		3,880			3,578			3,184			4,619			2,911			3,880

Supplemental information for Cash Flow:

Non-Cash Activities:
Year ended
December 31,

2020 2019 2018
USD in thousands

Accrued issuance expenses recorded in shareholders’ equity 310 -- --
Exercise of warrant of investment in affiliated company -- -- 4,004

Non-Cash Activities:	Year ended December 31,
	2022		2021		2020
	USD in thousands
Non-Cash Activities
Accrued issuance expenses recorded in shareholders’ equity		—		—		310
Conversion of SAFE to investment in equity securities		286		—		—

The accompanying notes are an integral part of the consolidated financial statements.

~~F-7~~

F-7

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(~~dollars~~Dollars in thousands, except per share data)

NOTE 1- GENERAL

Foresight Autonomous Holdings Ltd. (the “Company”) was originally incorporated in Israel in September 1977 under the name “Golan Malechet Macshevet Ltd.” as a private company, and in April 1987 became a public company. In 2010, the Company changed its name to “Asia Development (A.D.B.M.) Ltd.” The Company’s ordinary shares (the “Ordinary Shares”) are traded on the Tel Aviv Stock Exchange (“TASE”). In addition, since June 15, 2017 the Company has American Depository Shares (the “ADSs”) registered with the U.S. Securities and Exchange Commission. The ADSs are listed on The Nasdaq Capital Market, and the ratio of the Company’s Ordinary Shares to ADSs is 5:1. on January 5, 2016, the Company acquired (the “Acquisition Transaction”) 100% of the outstanding shares of Foresight Automotive Ltd. (“Foresight Ltd.”), a company incorporated in Israel, pursuant to a capital stock exchange agreement dated as of October 11, 2015, among the Company, Magna B.S.P. Ltd. (“Magna”), and Foresight Ltd. In exchange for the outstanding shares of Foresight Ltd., the Company issued to Magna a total of 35,884,116 of the Company’s Ordinary Shares representing approximately 64.50% of the Ordinary Shares then issued and outstanding after giving effect to the Acquisition Transaction. As a result of the Acquisition Transaction, Foresight Ltd. became a wholly owned subsidiary of the Company as of January 5, 2016 and, subsequent to the Acquisition Transaction, the Company changed its name to “Foresight Autonomous Holdings Ltd.” The Company and its subsidiaries Foresight Ltd. and Eye-Net Mobile Ltd (“Eye-Net”) are collectively referred to as the “Company” or the “Group”.

Foresight Autonomous Holdings Ltd. (the “Company”) was originally incorporated in Israel in September 1977 under the name “Golan Malechet Machshevet Ltd.” as a private company, and in April 1987 became a public company. In 2010, the Company changed its name to “Asia Development (A.D.B.M.) Ltd.” The Company’s ordinary shares, no par value, (the “Ordinary Shares”) are traded on the Tel Aviv Stock Exchange (“TASE”). In addition, since June 15, 2017, the Company has American Depository Shares (the “ADSs”) registered with the U.S. Securities and Exchange Commission. The ADSs are listed on The Nasdaq Capital Market, and the ratio of the Company’s Ordinary Shares to ADSs is 5:1. On January 5, 2016, the Company acquired (the “Acquisition Transaction”) 100% of the outstanding shares of Foresight Automotive Ltd. (“Foresight Ltd.”), a company incorporated in Israel, pursuant to a capital share exchange agreement dated as of October 11, 2015, among the Company, Magna B.S.P. Ltd. (“Magna”), and Foresight Ltd. In exchange for the outstanding shares of Foresight Ltd., the Company issued to Magna a total of 35,884,116 of the Company’s Ordinary Shares representing approximately 64.50% of the Ordinary Shares then issued and outstanding after giving effect to the Acquisition Transaction. As a result of the Acquisition Transaction, Foresight Ltd. became a wholly owned subsidiary of the Company as of January 5, 2016, and, subsequently to the Acquisition Transaction, the Company changed its name to “Foresight Autonomous Holdings Ltd.”

Foresight Ltd. was established in July 2015 by Magna ~~in order~~ to transfer all of Magna’s three-dimensional (3D) computer vision research and development technology and business in the area of Advanced Driver Assistance Systems (“ADAS”) to a separate entity. As part of the reorganization, Magna transferred to Foresight Ltd. all of the intellectual assets comprised mostly of know-how, software and algorithms developed by Magna.

Eye-Net Mobile Ltd (“Eye-Net”) was established in May 2018 by Foresight Ltd. in order to develop cellular based, beyond-line-of-sight, accident prevention solutions. On September 15, 2022, Foresight Ltd. transferred the shares of Eye-Net to the Company, free of charge and in accordance with the provisions of Section 104 C of the Israeli Income Tax Ordinance [New Version] 5721-1961, so that after the transfer of the shares, the Company directly holds all of the shares of Eye-Net.

On January 5, 2022, the Company announced the establishment of Foresight Changzhou Automotive Ltd., (“Foresight Changzhou”), a wholly owned subsidiary, in Jiangsu Province, China. Foresight Changzhou was established in cooperation with the China-Israel Changzhou Innovation Park (CIP), a bi-national governmental initiative that provides a unique platform for Israeli industrial companies seeking to enter the Chinese market.

The Company and its subsidiaries Foresight Ltd., Eye-Net and Foresight Changzhou are collectively referred to as the “Company” or the “Group.”

The Company is a technology company developing smart multi-spectral vision software solutions and cellular-based applications. Through its wholly owned subsidiaries, Foresight Ltd. and Eye-Net, the Company develops both “in-line-of-sight” vision systems and “beyond-line-of-sight” accident-prevention solutions.

The Company’s vision solutions include modules of automatic calibration ~~sensor fusion~~ and dense 3D point cloud that can be applied to ~~different~~diverse markets such as automotive, defense, autonomous vehicles and heavy industrial equipment. Eye-Net’s cellular-based solution suite provides real-time pre-collision alerts to enhance road safety and situational awareness for all road users in the urban mobility environment by incorporating cutting-edge artificial intelligence (“AI”) ~~technology.~~technology and advanced analytics.

The Group activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize its technology before competitors develop similar technology. In addition, the Group is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements and limited operating history.

To date, the Company has not generated significant revenues from its activities and has incurred substantial operating losses. Management expects the Company to continue to generate significant operational losses and to continue to fund operations primarily through the utilization of its current financial resources, sales of its products, and through additional raises of capital. The Company anticipates its existing cash will be sufficient to fund its expected operating cash requirements for at least twelve months following the date of this report.

F-8

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(Dollars in thousands, except per share data)

NOTE 2- SIGNIFICANT ACCOUNTING POLICIES

Basis of ~~Presentation:~~Presentation:

The financial statements have been prepared in conformity with accounting principles generally accepted in United Sates of America (“USU.S. GAAP”).

Use of estimates in the preparation of financial ~~statements:~~statements:

The preparation of financial statements in conformity with USU.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s management believes that the estimates, judgment, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect reported amounts and disclosures made. Actual results could differ from those estimates.

~~F-8~~

~~Foresight Autonomous Holdings Ltd.~~

~~Notes to the consolidated financial statements~~

~~(dollars in thousands, except per share data)~~

Financial statement in U.S. ~~dollars:~~dollars:

The functional currency of the Company is the U.S. dollar (“dollar” or “USD”) since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future.

Transactions and balances denominated in dollars are presented at their original amounts. Transactions and balances denominated in foreign currencies have been re-measured to dollars in accordance with the provisions of Accounting Standards Codification (“ASC”) 830-10, “Foreign Currency Translation.”

All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of comprehensive loss as financial income or expenses, as appropriate.

Cash and cash ~~equivalents:~~equivalents and restricted cash:

Cash equivalents are short-term highly liquid investments that are readily convertible to cash with maturities of three months or less as of the date acquired.

Restricted cash consists of deposits pledged to a bank that provided guarantee in connection with an operating lease.

Property and ~~equipment:~~equipment:

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

SCHEDULE OF ESTIMATED USEFUL LIVES

	%
Computers and software		~~15-33~~	15-33
Office furniture and equipment		7
Leasehold improvements		Over the shorter of the related lease period or the useful life of the asset

F-9

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(Dollars in thousands, except per share data)

Fair value of financial ~~instruments:~~instruments:

The carrying values of cash and cash equivalents, short term deposits, other current receivables, marketable equity securities, trade payables and other accounts payable approximate their fair value due to the short-term maturity of these instruments.

ASC 820, “Fair Value Measurements and Disclosures, (“ASC 820”), defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact. The Company also considers assumptions that market participants would use when pricing the asset or liability, such as, inherent risk, transfer restrictions and risk of nonperformance. Hierarchical levels are directly related to the amount of subjectivity with the inputs to the valuation of these assets or liabilities as follows:

Level 1 - Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 - Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable inputs for similar assets or liabilities. These include quoted prices for identical or similar assets or liabilities in active markets and quoted prices for identical or similar assets of liabilities in markets that are not active;

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s investment in equity securities is classified within Level 1 of the fair value hierarchy because its quoted price in active market.

Marketable equity ~~securities:~~securities:

~~Marketable~~In accordance with ASC 820, marketable equity securities classified as trading are recorded at fair value. The fair value is based on the current market value. Unrealized gains and losses before the securities are sold are reported in the statement of comprehensive ~~loss.~~loss as financial income or expenses, as appropriate.

~~Non-Marketable~~Non-marketable equity ~~securities:~~securities:

In accordance with ASC 321, “investments — Equity Securities”, (“ASC 321”), equity investments without readily determinable fair value are carried at cost minus impairment, if any. When an observable price change in orderly transactions for the identical or a similar investment of the same issuer has occurred, the Company elects to carry those equity investments at fair value as of the date that the observable ~~transaction~~price change occurred.

Investment in ~~Affiliate Company:~~affiliate Company:

Investment in ordinary shares of an entity in which the Company can exercise significant influence but does not own a majority equity interest or otherwise control is accounted for using the equity method and is included as an investment in an affiliate company in the consolidated balance sheet. The Company records its share in undistributed earnings and losses since acquisition in the consolidated statements of operations.

The Company reviews its investment for other-than-temporary impairment whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable.

F-10

~~F-9~~

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(~~dollars~~Dollars in thousands, except per share data)

~~Leases:~~Leases:

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities were recognized based on the present value of the remaining lease payments over the lease term. When the Company’s lease did not provide an implicit rate, the Company used its incremental borrowing rate in determining the present value of lease payments. The Company used the implicit rate when readily determinable. The operating lease ROU asset excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments ~~are~~is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, such as cars, the Company accounts for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases, the Company applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

The Company has made an accounting policy election not to recognize ROU assets and lease liabilities that arise from short-term leases for facilities and equipment. Instead, the Company recognizes the lease payments in the consolidated statement of operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

Share-based ~~compensation:~~compensation:

The Company applies ASC 718-10, “Share-Based Payment,” (“ASC 718-10”), which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors including share options granted under the Company’s incentive share option plan based on estimated fair values.

ASC 718-10 requires companies to estimate the fair value of share-based payment awards on the date of grant. The value of the portion of the share-based payment award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s statements of comprehensive loss.

The Company accounts for ~~stock-based~~share-based compensation expense based on estimated grant date fair value, using the Black-Scholes option-pricing model. The fair value is recognized as an expense in the consolidated financial statements over the requisite service periods. For performance-based grants, the Company recognizes compensation costs for grants that are expected to vest based on whether performance criteria are expected to be met. The determination of fair value and the timing of expense using option pricing models such as the Black-Scholes model require the input of subjective assumptions, including the expected term and the expected price volatility of the underlying ~~stock.~~share. The Company estimates the expected term assumption using the “simplified” method. In determining the Company’s expected ~~stock~~share price volatility assumption, the Company reviews the historical and implied volatility of the Company’s Ordinary Shares.

The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term.

Basic and diluted net loss per ~~share:~~share:

Basic loss per share is calculated by dividing the net loss by the weighted average number of Ordinary Shares outstanding during the year. Diluted loss per share is calculated by dividing the net loss by the weighted average number of Ordinary Shares outstanding plus the number of additional Ordinary Shares that would have been outstanding if all potentially dilutive Ordinary Shares had been issued, using the treasury stock method, in accordance with ASC 260-10, “Earnings per Share.” Potentially dilutive Ordinary Shares were excluded from the diluted loss per share calculation because they were anti-dilutive.

F-11

The weighted average number of Ordinary Shares outstanding has been retroactively restated for the equivalent number of shares received by the accounting acquirer as a result of the reverse recapitalization as if these shares had been outstanding as of the beginning of the earliest period presented.

~~F-10~~

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(~~dollars~~Dollars in thousands, except per share data)

The following table present summarized basic and diluted per Ordinary Share and per ADS:

SCHEDULE OF BASIC AND DILUTED PER ORDINARY SHARE AND PER ADS

	Year ended December 31,									2022			2021			2020
	2020			2019			2018			Year ended December 31,
										2022			2021			2020
Net loss		15,375			15,439			14,657			21,676			15,036			15,375

Basic and diluted loss per Ordinary Share (in USD)		(0.07	)		(0.10	)		(0.12	)		(0.07	)		(0.05	)		(0.07	)

Basic and diluted loss per ADS (in USD)		(0.35	)		(0.52	)		(0.61	)		(0.35	)		(0.25	)		(0.35	)

Weighted average number of Ordinary Shares outstanding used in computing basic and diluted loss per share - in thousands		219,913			149,534			120,612			322,817			321,356			219,913

Weighted average number of ADSs outstanding used in computing basic and diluted loss per ADS - in thousands		43,983			29,907			24,122			64,563			64,271			43,983

Revenue recognition:

The Company applies ASC 606 “Revenue from contracts with customers” (“ASC 606”). Under ASC 606, revenue is measured as the amount of consideration the Company expects to be entitled to, in exchange for transferring products or providing services to its customers and is recognized when or as performance obligations under the terms of contracts with the Company’s customers are satisfied. ASC 606 prescribes a five-step model for recognizing revenue from contracts with customers: (i) identify contract(s) with the customer; (ii) identify the separate performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the separate performance obligations in the contract; and (v) recognize revenue when (or as) each performance obligation is satisfied.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation. Goods and services that are determined not to be distinct are combined with other promised goods and services. The Company then allocates the transaction price (the amount of consideration the Company expects to be entitled to from a customer in exchange for the promised goods or services) to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied.

Research and development expenses, ~~net:~~net:

Research and development expenses are charged to the statement of comprehensive loss as incurred.Non-royalty-bearing grants for funding approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from research and development expenses.

~~Reclassification:~~

~~Certain amounts~~NOTE 3 - OTHER CURRENT RECEIVABLES

SCHEDULE OF OTHER CURRENT RECEIVABLES

	2022		2021
	December 31,
	2022		2021
	USD in thousands
Governmental institutes		225		240
Prepaid expenses		380		284
Other receivables		237		136
Other current receivables		842		660

In 2021, the Company received an award in ~~prior years consolidated financial statements have been reclassified~~an aggregate amount of approximately $721 from the European Horizon 2020 Program to ~~conform to~~aid in funding the ~~current year’s presentation.~~

~~Recently Adopted Accounting Pronouncements~~

~~In June 2016,~~Company’s research and development. The award does not bear a royalty payment commitment nor is the Financial Accounting Standards Board (the “FASB”) issued a new standard, Accounting Standards Update (“ASU”) 2016 -13, “Financial Instruments—Credit Losses,” requiring measurement and recognition of expected credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.award otherwise refundable. The Company ~~adopted this ASU, effective January 1,~~recorded an amount of $116 as grant receivables in other receivables as of December 31, 2022. $395 was recorded as participation by the European Horizon 2020 ~~using~~grant in research and development expenses during the ~~modified retrospective approach, and the effect~~year ended on ~~the Company’s consolidated condensed financial statements and related disclosures was not material.~~December 31, 2022.

~~Recent Accounting Standards~~F-12

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of this ASU did not have a significant impact on its financial position or results of operations.

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. The ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The adoption of this ASU did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

~~F-11~~

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(~~dollars~~Dollars in thousands, except per share data)

NOTE ~~3 - OTHER CURRENT RECEIVABLES~~4 – INVESTMENT IN EQUITY SECURITIES

December 31,
2020 2019
USD in thousands
Governmental institutes 150 211
Prepaid expenses 197 339
Other receivables 54 63
401 613

~~NOTE 4 - EQUITY INVESTMENT~~

Rail Vision Ltd. (“Rail Vision”) was incorporated in Israel on April 18, 2016 and is a development stage company that is focused on train safety, accident prevention and enhanced efficiency in the rail industry. During 2016, the Company entered into a share purchase agreement to acquire 32% of the share capital of Rail Vision ~~at an average price per share of $60~~Ltd (“Rail Vision”) and three types of warrants to purchase ordinary shares of Rail ~~Vision: Warrant 1, Warrant 2 and Warrant 3 exercisable within 18 months, 30 months and 24 months following their issuance, at an exercise price of $189, $270 and $216, respectively.~~Vision.

~~On November 7,~~From 2016 ~~the Company and other investors completed the investment in Rail Vision. As a result, the Company purchased a total of 23,692 ordinary shares of Rail Vision at an average price per share equal~~ to $60 and 23,692 of Warrants 1, 23,692 of Warrants 2 and 2,704 of Warrants 3. The Company’s total investment in Rail Vision amounted to $1,422 and was allocated to warrants investment and investment in the ordinary shares based on the relative fair value, as of the date of investment completion. Since2020, the Company had a significant influence in Rail Vision but did not own a majority equity interest or otherwise a control in ~~it,~~it. Consequently, the Company accounted the investment in Rail Vision using the equity method and was included as an investment in an affiliate company in the consolidated balance sheet. From 2017 through 2018 the Company exercised 26,396 Warrants 1 and 2,704 Warrants 3, following those exercises along with other capital raises in Rail Vision, as of December 31, 2018 the Company increased its holdings in Rail Vision to 35.91% (and 33.81% on a fully diluted basis).

~~Activity in investment in the affiliated company is as follows:~~

Investment in affiliated company % Equity Interests
As of January 1, 2019 7,568 35.91 %
Gain from issuance of shares to third parties (see note 4A1) 1,941
Equity in net loss of affiliated company (2,780 )
As of December 31, 2019 6,729 24.12 %
Equity in net loss of affiliated company (2,718 )
As of December 30, 2020 4,011 19.34 %

In 2019, Knorr-Bremse Systeme für Schienenfahrzeuge GmbH (“KB”), an affiliate of Knorr-Bremse AG (Frankfurt: KBX), a global market leader for braking systems and a leading supplier of other rail and commercial vehicle subsystems, invested $10,000 in Rail Vision, in consideration of an issuance of an aggregate of 40,984 ordinary shares of Rail Vision, at a price per share equal to $244 (the “PPS”) representing a post investment valuation of approximately $47,000, reflecting 21.34% of Rail Vision’s issued and outstanding capital. KB has also been issued an aggregate of 14,903 warrants to purchase up to 14,903 of Rail Vision’s ordinary shares at an exercise price per share equal to the PPS. During 2019, a total of 3,007 warrants were exercised by KB and the remaining warrants expired. As of December 31, 2019, KB held 21.19% of Rail Vision’s issued and outstanding ordinary shares.

~~F-12~~

~~Foresight Autonomous Holdings Ltd.~~

~~Notes to the consolidated financial statements~~

~~(dollars in thousands, except per share data)~~

Following KB’s investment in Rail Vision, and exercise of warrants by KB and third parties during the year ended December 31, 2019, the Company’s holdings in Rail Vision, as of December 31, 2019, decreased from 35.91% as of December 31, 2018, to 24.12%. As a result, during 2019 the Company recorded a gain of $1,941 from issuance to third parties in “Equity in net loss (gain) of affiliated company.”

In October 2020, KB invested additional $10,000 in Rail Vision, in consideration of an issuance of an aggregate of 51,282 preferred A shares of Rail Vision, at a price per share equal to $195 representing a post investment valuation of approximately $50,000, reflecting 19.81% of Rail Vision’s issued and outstanding capital. As of December 31, 2020, KB held 36.79% of Rail Vision’s issued and outstanding share capital (ordinary shares and preferred A shares).

As of December 30, 2020, ~~following~~the Company signed an agreement with other investors in Rail Vision, which ultimately reduced the Company’s rights to nominate directors on Rail Vision’s Board of Directors to a right to nominate only one ~~director (instead of two directors) out of eight directors on Rail Vision Board of Directors.~~director. Consequently, the Company has lost its ~~significate~~significant influence over Rail Vision and as of ~~this date. The loss of significate influence over Rail Vision does not have a material impact on the Company’s consolidated statements of comprehensive loss.~~December 31, 2020. The Company presented the remaining equity interest in Rail Vision as an investment in equity securities without readily determined fair value since that date.

In January 2022, the Company invested $286 through a Simple Agreement for Future Equity (“SAFE”) agreement with Rail Vision. According to the SAFE, in the event of an Initial Public Offering (“IPO”) before the maturity date, the SAFE will be automatically converted into Rail Vision’s ordinary shares equal to the purchase amount divided by the IPO price per share.

On April 4, 2022, Rail Vision completed its IPO and became listed on the Nasdaq Capital Market. As part of the IPO, the Company invested an additional $715 in Rail Vision’s ordinary shares and the SAFE converted to Rail Vision’s ordinary shares.

Since April 4, 2022, the Company measures the investment in Rail Vision in fair value through profit or loss.

As of December 31, ~~2020,~~2022, the Company held ~~19.34%~~15.39% (2021: 19.31%) of the issued and outstanding share capital ~~(and 15.83%~~and 12.25% (2021: 16.86%) of the share capital on a fully diluted ~~basis)~~basis of Rail Vision.

The reconciliation of the opening and closing fair value balance of the investment in equity securities instruments is provided below:

SCHEDULE OF RECONCILIATION OF OPENING AND CLOSING BALANCE OF INVESTMENT IN EQUITY SECURITIES


Opening Balance December 31, 2021	$	4,011
Changes during 2022:
Revaluation to fair value through profit or loss		(2,208	)
Investment in equity securities		715
Conversion of SAFE to equity securities		286
Closing Balance December 31, 2022	$	2,804

NOTE 5 - FIXED ASSETS, NET

SCHEDULE OF FIXED ASSETS, NET

	2022		2021
	December 31,
	2022		2021
	USD in thousands
Cost:
Computers and software		839		739
Office furniture and equipment		356		255
Leasehold improvements		479		392
Fixed assets, gross		1,674		1,386
Less – accumulated depreciation		1,076		883
Fixed assets, net		598		503

~~The following tables present summarized financial information derived from Rail Vision’s consolidated financial statements, which are prepared on the basis of US GAAP:~~F-13

~~Balance sheet data:~~	~~As of~~
	~~December 31,~~
	~~2019~~
	~~USD in thousands~~

~~Current assets~~		~~9,820~~
~~Long-term assets~~		~~2,228~~
~~Current liabilities~~		~~(1,113~~	)
~~Long-term liabilities~~		~~(1,270~~	)
~~Equity~~		~~(9,665~~	)

Operating data: Year ended
December 31,
2020 2019
USD in thousands
Revenue -- --
Operating loss (10,271 ) (10,046 )
Net loss (10,273 ) (10,032 )

~~F-13~~

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(~~dollars~~Dollars in thousands, except per share data)

~~NOTE 5 - FIXED ASSETS, NET~~

December 31,
2020 2019
USD in thousands
Cost:
Computers and software 595 597
Office furniture and equipment 216 173
Leasehold improvements 349 346
1,160 1,116
Less – accumulated depreciation 733 485

Fixed assets, net 427 631

Depreciation expenses for the years ended December 31, ~~2020~~2022 and December 31, ~~2019~~2021 were ~~$254~~$218 and ~~$259,~~$159, respectively.

NOTE 6 - EMPLOYEE RIGHTS UPON RETIREMENT

Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances.

Pursuant to section 14 of the Israeli Severance Pay Law, 5723-1963, the Company’s employees covered under this section are entitled to monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with pension companies. Payments in accordance with section 14 of the Israeli Severance Pay Law, 5723-1963 relieve the Company from any future severance payments in respect of those employees.

NOTE 7 - OTHER CURRENT PAYABLES

SCHEDULE OF OTHER CURRENT PAYABLES

	December 31,				2022		2021
	2020		2019		December 31,
	USD in thousands				2022		2021
					USD in thousands
Employees and related expenses		719		882		1,493		1,179
Accrued expenses		428		208		299		241
Other payables		60		40		-		445
		1,207		1,130
Other current payables						1,792		1,865

NOTE 8 - COMMITMENTS AND CONTINGENCIES LIABILITIES

Agreement with Magna

On January 28, 2019, the Company’s shareholders approved the extension of the research and development services agreement with Magna for software development in the area of ADAS. Subject to the conditions prescribed in the agreement, Magna will provide Foresight Ltd. with research and development services for a 12-month period, with an option to extend the agreement for two additional periods of 12 months each, which the Company extended in full. On January 30, 2022, the Company’s shareholders approved an additional extension of the research and development services agreement with Magna. Subject to the conditions prescribed in the agreement, Magna will continue to provide Foresight Ltd. with research and development services for a 12-month period with an option to extend the agreement for two additional 12-month periods. According to the agreement, the monthly payment to Magna for the research and development services will not exceed NIS ~~235~~235,000 (approximately ~~$73). The Company has decided to extend the two additional periods.~~$67) plus VAT.

~~Israel~~Israeli Innovation Authority

Magna obtained grants from the Israel Innovation Authority (the “IIA”) for participation in research and development programs for the years 2011 through 2013, and, in return, further to the acquisition transaction, the Company is obligated to pay royalties amounting to 3% to 5% of its future sales up to the amount of the grant. The grant is linked to the exchange rate of the dollar and bears interest of LIBOR per annum.

Magna obtained grants from the Israeli Innovation Authority (the “IIA”) for participation in research and development programs for the years 2011 through 2013, and, in return, further to an acquisition transaction between the Company and Magna, the Company is obligated to pay royalties amounting to 3% to 5% of its future sales up to the amount of the grant. The grant is linked to the exchange rate of the dollar and bears interest of LIBOR per annum.

Through the years ended December 31, ~~2020, 2019~~2022, 2021 and ~~2018~~2020, total grants obtained amounted to ~~$661, $615~~$603, $683 and ~~$567,~~$661, respectively.

The refund of the grants is contingent upon the successful outcome of the Company’s research and development programs and the ~~attainment~~generation of sales. The Company has no obligation to refund these grants if sales are not generated. The financial risk is assumed completely by the Government of Israel. The grants are received from the government on a project-by-project basis. If ~~the~~a project fails, the Company has no obligation to repay any grant received for the specific unsuccessful or aborted project.

F-14

~~F-14~~

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(~~dollars~~Dollars in thousands, except per share data)

NOTE 9 - LEASES

The Company and its subsidiaries, Foresight Ltd. and Eye Net, currently has 3-year leases ~~certain property and equipment under operating and finance leases. The Company’s leases have remaining lease terms ranging from less than 1 year to 30 years, some of which include~~ for their offices with options to extend the leases for another 3 years. The lease for ~~up to 5 years,~~Foresight Ltd. and ~~some~~Eye Net ends on March 31, 2027 and December 15, 2027, respectively. The Company also currently leases several vehicles, each for a term of ~~which include options to terminate the lease within 1 year.~~3 years. The Company has no finance leases.

Supplemental cash flow information related to operating leases was as follows:

SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO OPERATING LEASES


	Year Ended December 31, 2020		Year Ended December 31, 2022
Cash payments for operating leases	$	471	$	550
New operating lease assets obtained in exchange for operating lease liabilities	$	171	$	—

As of December 31, ~~2020,~~2022, the Company’s operating leases had a weighted average remaining lease term of ~~3.2~~2.7 years and a weighted average discount rate of 5%5%. Future lease payments under operating leases as of December 31, ~~2020~~2022, were as follows:

SCHEDULE OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

	Operating Leases
2021	$	432
2022		423
				Operating Leases
2023		396		$	527
2024		93			491
2025					483
2026					483
2027					218
Total future lease payments		1,344			2,202
Less imputed interest		(64	)		(199	)
Total lease liability balance	$	1,280		$	2,003

NOTE 10 - SHAREHOLDERS’ EQUITY

The rights of Ordinary Shares are as follows:

The Ordinary Shares confer upon the ~~holders~~shareholders the right to receive notice to participate and vote in general meetings of shareholders of the Company, the right to receive dividends, if declared, and the right to participate in a distribution of the surplus of assets upon liquidation of the Company.

Issuance of shares, warrants, and ~~options~~options.

Private placements

(a)

~~(a)~~

During 2016, the Company raised ~~$6,835 (gross)~~$6,835 in gross proceeds through private placements of its Ordinary Shares. The Company issued a total of 15,050,032 Ordinary Shares (NIS 1.75 per share, approximately ~~$0.45~~$0.45 per share), and a total of 12,022,835 Series A warrants, 13,565,691 Series B warrants and 3,178,557 Series E warrants at an exercise price of NIS 3 per share (approximately ~~$0.93~~$0.93 per share), NIS 4 (approximately ~~$1.24~~$1.24 per share), NIS 3 (approximately ~~$0.93~~$0.93 per share), respectively, to purchase 1 Ordinary Share, respectively. After deducting closing costs and fees, the Company received net proceeds of approximately ~~$6,245.~~$6,245.

During 2019, the Series A warrants were exercised in full. On June 30, 2020, the outstanding balance of Series B warrants and Series E warrants, consisting of an aggregate of 11,781,552 and 2,687,197, respectively, fully expired.

F-15

~~F-15~~

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(~~dollars~~Dollars in thousands, except per share data)

(b)

~~(b)~~

During 2017, the Company raised ~~$11,645 (gross)~~$11,645 in gross proceeds through private placements of its Ordinary Shares. The Company issued a total of 21,027,690 Ordinary Shares (average of NIS 2.01 per share, approximately average of ~~$0.55~~$0.55 per share), and a total of 19,520,514 Series F warrants and 1,051,665 Series G warrants at an exercise price of ~~$0.80~~$0.80 and ~~$0.95,~~$0.95, respectively, to purchase 1 Ordinary Share for every share purchased in the private placement agreements. After deducting closing costs and fees, the Company received net proceeds of approximately ~~$10,745.~~$10,745.

During 2018, the outstanding balance of Series G warrants, consisting of an aggregate of 1,001,665, fully expired. On June 30, 2020, the outstanding balance of Series F warrants, consisting of an aggregate of 18,917,985, fully expired.

(c)

~~(c)~~

On June 21, 2018 and June 25, 2018, the Company raised ~~$12,351~~$12,351 in gross proceeds through a private placement of its Ordinary Shares with several leading Israeli institutional investors and several private investors. The Company issued a total of 21,963,411 Ordinary Shares, (NIS 2.05 per share, approximately ~~$0.56~~$0.56 per share). In addition, the Company issued Series F-1 warrants to purchase 22,067,679 Ordinary Shares at an exercise price of ~~$0.80~~$0.80 per share, exercisable until the 24-month anniversary of the date of issuance.

After deducting closing costs and fees, the Company received net proceeds of approximately ~~$11,208.~~ $11,208. 22,067,679 Series F-1 warrants expired on June 30, ~~2020.~~2020.

(d)

~~(d)~~

On January 27, 2019, the Company entered into a development agreement for manufacturing and engineering consulting services, and an investment agreement with RH Electronics Ltd. (“RH”). Pursuant to the agreement, RH purchased 1,233,333 Ordinary Shares for a total consideration of ~~$1,000~~$1,000 at a price per share of NIS 3 (approximately ~~$1.23~~$1.23 per share).

(e)

~~(e)~~

On May 10, 2020, the Company raised ~~$350 (gross)~~$350 in gross proceeds through a private placement of its ~~Ordinary Shares.~~ADSs. The Company issued a total of 700,000 ADSs ~~(3,500,000~~(3,500,000 Ordinary Shares) at ~~$0.50~~$0.50 per ADS. After deducting closing costs and fees, the Company received net proceeds of approximately ~~$321,~~$321, net of issuance expenses.

Public Offering and Registered direct ~~offering~~offering.

On ~~March 19, 2019,~~April 30, 2020, the Company raised ~~$6,150 (gross)~~$2,650 in gross proceeds through a ~~public~~registered direct offering of its ADSs. The Company issued a total of ~~4,100,000~~5,300,000 ADSs ~~(20,500,000~~(26,500,000 Ordinary Shares) at ~~$1.50~~$0.50 per ADS. After deducting closing costs and fees, the Company received net proceeds of approximately ~~$5,521,~~$2,294, net of issuance expenses.

On ~~April 30,~~May 19, 2020, the Company raised ~~$2,650 (gross)~~$5,000 in gross proceeds through a registered direct offering of its ADSs. The Company issued a total of ~~5,300,000~~8,333,334 ADSs ~~(26,500,000~~(41,666,670 Ordinary Shares) at ~~$0.50~~$0.60 per ADS. After deducting closing costs and fees, the Company received net proceeds of approximately ~~$2,294,~~$4,498, net of issuance expenses.

On ~~May 19,~~June 9, 2020, the Company raised ~~$5,000 (gross)~~$6,400 in gross proceeds through a registered direct offering of its ADSs. The Company issued a total of ~~8,333,334~~6,400,000 ADSs ~~(41,666,670~~(32,000,000 Ordinary Shares) at ~~$0.60~~$1.00 per ADS. After deducting closing costs and fees, the Company received net proceeds of approximately ~~$4,498,~~$5,816, net of issuance expenses.

On June 9, 2020, the Company raised $6,400 (gross) through a registered direct offering of its ADSs. The Company issued a total of 6,400,000 ADSs (32,000,000 Ordinary Shares) at $1.00 per ADS. After deducting closing costs and fees, the Company received net proceeds of approximately $5,816, net of issuance expenses.

On October 2, 2020, the Company entered into a sales agreement, pursuant to which the Company was able to sell from time to time, ADSs, in the aggregate amount of up to $8,100 (the “October 2020 Sales Agreement”). Sales under the October 2020 Sales Agreement were made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act. Under the October 2020 Sales Agreement, the Company sold, through the sales agent, an aggregate of 4,371,131 ADSs (21,855,655 Ordinary Shares) at an average price of $1.85 per ADS, raising gross proceeds of approximately $8,085. After deducting closing costs and fees, the Company received net proceeds of approximately $7,752 net of issuance expenses.

On December 30, 2020, the Company raised ~~$8,085 (gross). From October~~$26,000 in gross proceeds through ~~December 2020,~~a registered direct offering of its ADSs. The Company issued a total of ~~4,371,131~~6,265,063 ADSs ~~(21,855,655~~(31,325,315 Ordinary Shares) at ~~a weighted average price of $1.85~~$4.15 per ADS. After deducting closing costs and fees, the Company received net proceeds of approximately ~~$7,752,~~$24,026, net of issuance expenses.

F-16

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(Dollars in thousands, except per share data)

On ~~December 30, 2020,~~January 22, 2021, the Company ~~raised $26,000 (gross)~~entered into a sales agreement, pursuant to which the Company can sell from time to time, ADSs, in the aggregated amount of up to $60,000 (the “January 2021 Sales Agreement”). Sales under the January 2021 Sales Agreement were made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act. Under the January 2021 Sales Agreement, the Company sold in 2021, through ~~a registered direct offering~~the sales agent, an aggregate of ~~its ADSs. The Company issued a total of 6,265,063~~1,378,344 ADSs ~~(31,325,315~~(6,891,720 Ordinary Shares) at ~~$4.15~~an average price of $10.137 per ~~ADS.~~ADS, raising gross proceeds of approximately $13,972. After deducting closing costs and fees, the Company received net proceeds of approximately ~~$24,026,~~$13,508, net of issuance expenses. No sale under the January 2021 Sales Agreement were made during 2022.

~~F-16~~

~~Foresight Autonomous Holdings Ltd.~~

~~Notes to the consolidated financial statements~~

~~(dollars in thousands, except per share data)~~

Shares and warrants to service providers:

(a)

~~(a)~~

Shares granted to service providers:

On February 14, 2018, the Company granted 25,000 Ordinary Shares to a service provider. The Company recorded in its 2018 statement of comprehensive loss an expense of $19 in respect of such grant, included in general and administrative expenses.

On July 2, 2019, the Company granted 130,342 Ordinary Shares to a service provider. The Company recorded in its 2019 statement of comprehensive loss an expense of $50 in respect of such grant, included in general and administrative expenses.

During 2020, the Company granted 575,000 Ordinary Shares to several service providers. The Company recorded in its 2020 statement of comprehensive loss an expense of ~~$124~~$124 in respect of such grant included in general and administrative expenses.

During 2021, the Company granted 220,000 Ordinary Shares to several service providers. The Company recorded in its 2021 statement of comprehensive loss an expense of $153 in respect of such grant included in general and administrative expenses.

During 2022, the Company granted 320,000 Ordinary Shares to several service providers. The Company recorded in its 2022 statement of comprehensive loss an expense of $68 in respect of such grant included in general and administrative expenses.

(b)

~~(b)~~

Warrants and ~~Options~~options granted to service providers:

The fair value for the warrants granted to service providers was estimated on the measurement date determined using a Black-Scholes option pricing model, with the following weighted-average assumptions: weighted average volatility of 95.7%, risk free interest rates of 0.51%, dividend yields of 0% and a weighted average life of the options of one – 2.6 years.

~~(1)~~

On March 25, 2018, the Company granted options to service provider to purchase a total of 500,000 Ordinary Shares at an exercise price of NIS 3 (approximately $0.86 per share at the grant date). The options vested equally over a period of 4 quarters ending January 1, 2019. The Company recorded in its 2018 statement of comprehensive loss an expense of $78 in respect of such grant, included in general and administrative expenses.

The fair value for the warrants granted to service providers was estimated on the measurement date using a Black-Scholes option pricing model, with the following weighted-average assumptions: weighted average volatility of 92.87% - 93.41%, risk free interest rates of 0.687%, dividend yields of 0% and a weighted average life of the options of 4.25-4.37 years.

(1)

~~(2)~~

On April 23, 2018, the Company granted options to service provider to purchase a total of 100,000 Ordinary Shares at an exercise price of NIS 3.78 (approximately $1.06 per share at the grant date). The options vested as to one third of the options after one year and balance of the remaining options vest equally over eight quarters until fully vested on March 31, 2021. On March 20, 2019, the Company approved a modification of the outstanding options from an exercise price of NIS 3.78 to an exercise price of NIS 1.95 per share (approximately $0.56 per share).

~~(3)~~

On June 21 and June 25, 2018, the Company granted to an intermediator in its private placement 104,268 Series F-1 warrants to purchase 104,268 Ordinary Shares at an exercise price of USD $0.80. These options expire 24 months after their grant date and were fully vested as of their grant date. In respect of the portion of such grant allocated to the instruments issued in the private placement, the related compensation costs were recorded in equity with no impact on the statement of comprehensive loss. On June 30, 2020 the outstanding balance of Series F-1 warrants in a total of 104,268 fully expired

~~(4)~~

On July 17, 2019, the Company granted options to service provider to purchase a total of 25,000 Ordinary Shares at an exercise price of NIS 1.95 per share (approximately $0.56 per share at the grant date). The options vest equally over eight quarters until fully vested on March 31, 2021.

~~(5)~~

On September 23, 2019, the Company approved a modification of the exercise price of options held by Magna’s employees, previously granted on August 27, 2017, from NIS 3.57 per share to an exercise price of NIS 1.95 (approximately $0.56) per share.

On July 16, 2020, the Company extended the exercise period of the outstanding options granted to Magna’s employees for one additional year. As a result, the Company recorded in its 2020 and 2019 statement of comprehensive loss an expense of $16 and $37, respectively.

~~(6)~~

On July 16, 2020, the Company granted to Magna’s employees ~~additional~~ options to purchase a total of 950,000 Ordinary Shares at an exercise price of NIS 0.787 (approximately ~~$0.23~~$0.23 per share at the grant date) for one third of the options, an exercise price of NIS 1.06 (approximately ~~$0.31~~$0.31 per share at the grant date) for the second third of the options and an exercise price of NIS 1.33 (approximately ~~$0.38~~$0.38 per share at the grant date) for the last third of the options. The options vest over 12 quarters until fully vested on December 31, 2022. The Company recorded in its 2022, 2021 and 2020 statement of comprehensive loss an expense of ~~$51~~$48, $51 and $51 respectively, in respect of such grant, included in research and development expenses.

~~F-17~~

~~Foresight Autonomous Holdings Ltd.~~

~~Notes~~On January 18, 2021, the Company approved an extension to the ~~consolidated financial statements~~expiration dates of all the options already granted to Magna’s employees, from three years after each vesting date to seven years starting from the grant date. As a result, the Company recorded in its 2022 and 2021 statement of comprehensive loss an expense of $8 and $17, respectively.

~~(dollars in thousands, except per share data)~~

(2)

~~(7)~~

On November 12, 2020, the Company granted options to service provider to purchase a total of 100,000 Ordinary Shares at an exercise price of NIS 1.33 (approximately ~~$0.39~~$0.39 per share at the grant date). The options vest equally over eight quarters until fully vested on October 1, ~~2022.~~2022.

(3)

4.On January 18, 2021, the Company granted options to service providers to purchase a total of 400,000 Ordinary Shares at an exercise price of NIS 2.9 (approximately $0.93 per share at the grant date). 300,000 of the options vest equally over twelve quarters until fully vested on January 1, 2024, and for 100,000 options one third of the options vest on January 1, 2022, and the balance vest equally over eight quarters until fully vested on January 1, 2024. The Company recorded in its 2022 and 2021 statement of comprehensive loss an expense of $91 and $91, respectively.

F-17

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(Dollars in thousands, except per share data)

(4)

On March 25, 2021, the Company granted options to service provider to purchase a total of 100,000 Ordinary Shares at an exercise price of NIS 4.75 (approximately $1.53 per share at the grant date). The options vest equally over twelve quarters until fully vested on January 1, 2024. The Company recorded in its 2022 and 2021 statement of comprehensive loss an expense of $22 and $22, respectively.

(5)

On December 30, 2021, the Company granted options to service providers to purchase a total of 400,000 Ordinary Shares at an exercise price of NIS 2.29 (approximately $0.74 per share at the grant date). 200,000 of the options vest equally over twelve quarters until fully vested on January 1, 2025. For 100,000 options one third of the options vest on January 1, 2023, and the balance vest equally over eight quarters until fully vested on January 1, 2025. For the remaining 100,000 options, upon meeting predefined business targets, 50% vest on December 31, 2022, and 50% on December 2023, the Company recorded in its 2022 statement of comprehensive loss an expense of $26.

Shares and options to employees

(a)

~~(a)~~

Incentive Plan

In November 2015, the Board of Directors of the Company authorized a share option plan (“2016 Equity Incentive Plan”). The 2016 Equity Incentive Plan provides for the grant of share options to service ~~provider,~~providers, employees and office holders of the Company. Awards may be granted under the 2016 Equity Incentive Plan until November 2025, when the 2016 Equity Incentive Plan expires.

According to the 2016 Equity Incentive Plan, the aggregate number of Ordinary Shares that may be granted pursuant to awards will not exceed ~~15%~~15% of the Company’s capital on a fully diluted basis.

(b)

~~(b)~~

The fair value of options granted was estimated using the Black-Scholes option pricing model, and based on the following assumptions:

SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED USING THE BLACK-SCHOLES OPTION PRICING MODEL

	As of December 31,
	2020	2019	As of December 31,
			2022		2021
Exercise price	$0.31-$0.54	$0.55		$0.28-$0.65		$0.41-$1.81
Expected volatility	76%-97%	66%-78%		93%-95%		93%-99%
Risk-free interest	0.08%-0.31%	0.29%-0.79%		1.5%-4.5%		0.26%-0.7%
Expected life of up to (years)	1.66-4.24	2.25-3.28		3.5-4.5		3.88-4.43

The following table summarizes the option activity for the ~~year~~years ended December 31, ~~2020~~2022, and 2021 for options granted to employees, officers, and directors:

SCHEDULE OF OPTION ACTIVITY

	As of December 31,														As of December 31,
	2020							2019							2022						2021
	Number of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Number of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Number of options			Weighted average exercise price		Weighted average remaining contractual term. (In years)	Number of options			Weighted average exercise price		Weighted average remaining contractual term. (In years)
Outstanding at beginning of period ~~(a)~~(c)		12,848,788		$	0.63				11,544,622		$	0.76				22,860,713		$	0.5	4.84		24,076,750		$	0.47	1.61
Granted ~~(b)~~(d)		13,578,000		$	0.32				3,775,000		$	0.55				13,075,000		$	0.28			3,355,000		$	0.91
Exercised		(769,205	)	$	0.30				(1,200,000	)	$	0.08				(33,333	)	$	0.22			(2,707,286	)	$	0.49
Forfeited		(1,580,833	)	$	1.32				(1,270,834	)	$	0.78				(1,649,164	)		0.72			(1,863,751	)	$	1.63

Outstanding at the end of period		24,076,750		$	0.47		1.61		12,848,788		$	0.63		1.16		34,253,216		$	0.43	5.92		22,860,713		$	0.5	4.84
Exercisable at the end of period		12,642,667					0.87		8,200,872					0.59		19,427,796				4.73		14,749,296				4.29

(*)

The weighted average fair value of options granted during the year ended December 31, 2022, was $ 0.08 per share.

F-18

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(Dollars in thousands, except per share data)

As of December 31, ~~2020,~~2022, the total unrecognized share-based payment expenses related to nonvested awards was $1,662, which is expected to be recognized over the next 3 years.

As of December 31, 2022, there was ~~$1,723~~$1,662 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. This cost is expected to be recognized over a weighted-average period of ~~2.21~~1.62 years.

(c)

~~(c)~~

Options ~~Granted~~granted during ~~2018~~2020 and ~~2019~~2021.

On June 18, 2018, the Company granted options to purchase 100,000 Ordinary Shares to its chairman of the Board of Directors at an exercise price of NIS 3.78 (approximately $1.06 per share at the grant date). One third of the options vested after one year and the balance of the remaining options vest over eight quarters until fully vested on March 31, 2021.

~~F-18~~

~~Foresight Autonomous Holdings Ltd.~~

~~Notes to the consolidated financial statements~~

~~(dollars in thousands, except per share data)~~

During 2018, the Company granted options to purchase 2,640,000 Ordinary Shares to its employees at an average exercise price of NIS 3.78 (approximately $1.06 per share at the grant date). One third of the options vested after one year and the balance of the remaining options vest over eight quarters until fully vested.

On March 20, 2019, in accordance with the terms of the Company’s 2016 Equity Incentive Plan, the Company’s Board of Directors approved a modification of outstanding options held by officers and employees that had an exercise price of NIS 3.78 per share (approximately $1.05 per share at the grant date) and reduced the exercise price to NIS 1.95 per share (approximately $0.54 per share at the grant date). This resolution was effective from May 6, 2019, after receiving approval from the Israeli Tax Authorities. The Company calculated the fair value of such options immediately before and after the modification. The Company immediately recognized the additional fair value attributable to vested options, approximately $27, as stock compensation expenses. The additional fair value resulting from the modification, approximately $54, is being expensed over the remaining vesting period of the modified options.

During 2019, the Company granted options to purchase 2,575,000 Ordinary Shares to its employees at an exercise price of NIS 1.95 (approximately $0.54 per share at the grant date). One third of the options vest after one year and the balance of the remaining options vest over eight quarters until fully vested.

On September 23, 2019, the Company granted to four members of its Board of Directors options to purchase an aggregate of 300,000 Ordinary Shares, each, at an exercise price of NIS 1.95 (approximately $0.56 per share at the grant date). The options vest over 12 quarters until fully vested on July 31, 2022.

~~(d)~~

~~Options Granted during 2020~~

On March 12, 2020, and on July 16, 2020, the Company extended the exercise period of 3,194,205 and of 2,150,000 outstanding options granted during 2017 to employees and to the Chief Executive Officer and to the Vice President of Human Resources, respectively, for one additional year. As a result, the Company recorded in its 2020 statement of comprehensive loss a total expense of ~~$33.~~$33.

On June 9, 2020, the Company granted to three of its senior officers options to purchase an aggregate of 3,650,000 Ordinary Shares, at an exercise price of NIS 0.787 (approximately ~~$0.23~~$0.23 per share at the grant date) for one third of the options, an exercise price of NIS 1.06 (approximately ~~$0.31~~$0.31 per share at the grant date) for the second third of the options and an exercise price of NIS 1.33 (approximately ~~$0.38~~$0.38 per share at the grant date) for the last third of the options. The options vest over 12 quarters until fully vested ~~on March 31, 2023.~~. The Company recorded in its 2020 statement of comprehensive loss an expense of ~~$108,~~$108, in respect of such grant.

On July 16, 2020, the Company’s shareholders approved, among others, a grant of options to two members of the Company’s Board of Directors, to the Company’s Chief Executive Officer and to the Company’s Vice President of Human Resources to purchase 300,000 each, 4,113,000, and 700,000, respectively, of the Company’s Ordinary Shares at an exercise price of NIS 0.787 (approximately ~~$0.23~~$0.23 per share at the grant date) for one third of the options, an exercise price of NIS 1.06 (approximately ~~$0.31~~$0.31 per share at the grant date) for the second third of the options and an exercise price of NIS 1.33 (approximately ~~$0.38~~$0.38 per share at the grant date) for the last third of the options. The options vest over 12 quarters until fully vested on December 31, ~~2022.~~2022. The Company recorded in its 2020 statement of comprehensive loss an expense of ~~$292,~~$292, in respect of such grants, included in general and administrative expenses.

On August 19, 2020, the Company granted to its Vice President of Operations options to purchase an aggregate of 700,000 Ordinary Shares, at an exercise price of NIS 0.986 (approximately ~~$0.29~~$0.29 per share at the grant date) for one third of the options, an exercise price of NIS 1.06 (approximately ~~$0.31~~$0.31 per share at the grant date) for the second third of the options and an exercise price of NIS 1.33 (approximately ~~$0.38~~$0.38 per share at the grant date) for the last third of the options. The options vest over 12 quarters until fully vested on June 30, ~~2023.~~2023. The Company recorded in its 2020 statement of comprehensive loss an expense of ~~$11,~~$11, in respect of such grant, included in research and development expenses.

~~F-19~~

~~Foresight Autonomous Holdings Ltd.~~

~~Notes to the consolidated financial statements~~

~~(dollars in thousands, except per share data)~~

During 2020, the Company granted options to purchase 1,000,000 Ordinary Shares to its employees at an exercise price ranging between NIS 0.787 to NIS 1.95 (an average of approximately ~~$0.46~~$0.46 per share at the grant date). One third of the options vest after one year and the balance of the remaining options vest over eight quarters until fully ~~vested.~~

vested. In addition, the Company granted options to purchase 2,815,000 Ordinary Shares to its employees at an exercise price ranging between NIS 0.787 to NIS 1.95 (an average of approximately ~~$0.36~~$0.36 per share at the grant date). The options vest over 12 quarters until fully ~~vested.~~vested.

~~(e)~~

~~Options Granted to Eye-net’s employees~~

On ~~August 19, 2020,~~January 18, 2021, the Company approved an extension to the expiration dates, of all the options already granted under the Company’s ~~subsidiary, Eye-net,~~2016 Equity Incentive Plan, from three years after each vesting date to seven years starting from the grant date. As a result, the Company recorded in its 2021 statement of comprehensive loss an expense of $815.

F-19

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(Dollars in thousands, except per share data)

During 2021, the Company granted options to purchase ~~8,700~~1,480,000 Ordinary Shares to its employees at an exercise price ranging between NIS 1.33 to NIS 2.29 (an average of ~~Eye-net~~approximately $0.74 per share at the grant date). The options vest equally over twelve quarters. In addition, the Company granted options to purchase 1,875,000 Ordinary Shares to its employees at an exercise price ranging between NIS 2.29 to NIS 5.93 (an average of approximately $0.91 per share at the grant date). One third of the options vest after one year and the balance of the remaining options vest equally over eight quarters until fully vested. As a result, the Company recorded in its 2021 statement of comprehensive loss an expense of $313.

(d)

Options granted during 2022.

On May 23, 2022, the Company’s Board of Directors approved a reduction to the exercise price of previously granted options for 27 employees, under the Company’s 2016 Equity Incentive Plan, with an exercise price of NIS 2.29 to an exercise price of NIS 1. As a result, the Company recorded, in its 2022 statement of comprehensive loss, an expense of $39.

On August 18, 2022, the Company granted options to five of its senior officers to purchase an aggregate of 4,200,000 Ordinary Shares, at an exercise price of NIS 1 (approximately $0.31 per share at the grant date). The options vest over 12 quarters until fully vested, starting from January 1, 2023.

On October 20, 2022, the Company’s shareholders approved grants of options to three members of the Company’s Board of Directors, to the Company’s Vice President of Human Resources and to the Company’s Chief Executive Officer to purchase 400,000 each, 600,000 and 4,000,000, respectively, of the Company’s Ordinary Shares at an exercise price of NIS 1 (approximately $0.28 per share at the grant date). The options vest over 12 quarters until fully vested. The Company recorded, in its 2022 statement of comprehensive loss, an expense of $6, with respect to such grants, included in general and administrative expenses.

During 2022, the Company granted options to purchase 1,225,000 Ordinary Shares to its employees at an exercise price of ~~$100~~NIS 2.29 (approximately $0.72 per share at the grant date), which exercise price was thereafter reduced to NIS 1 as described above, with some of the options vesting equally over twelve quarters, and some of the options having a one-year cliff and the remainder vesting equally over eight quarters. In addition, the Company granted options to purchase 75,000 Ordinary Shares to its employees at an exercise price of NIS 1.95 (approximately $0.61 per share at the grant date), all the options vest on the grant date. Furthermore, the Company granted options to purchase 1,775,000 Ordinary Shares to its employees at an exercise price of NIS 1 (approximately $0.28 per share at the grant date), with some of the options vesting equally over twelve quarters, and some of the options having a one-year cliff and the remainder vesting equally over eight quarters.

As a result, the Company recorded in its 2022 statement of comprehensive loss an expense of $64.

(e)

Options granted to Eye-Net’s employees.

On August 19, 2020, the Company’s subsidiary, Eye-Net, granted options to purchase 8,700 ordinary shares of Eye-Net to its employees at an exercise price of $100 per share. The options vest over 12 quarters until fully vested on June 30, ~~2023.~~2023. The Company recorded in its 2022, 2021 and 2020 statement of comprehensive loss an expense of ~~$74,~~$115, $135 and $74, in respect of such grant.

During 2021, the Company’s subsidiary, Eye-Net, granted options to purchase 4,850 ordinary shares of Eye-Net to its employees at an exercise price of $100 per share. 4,500 options vest over 36 months, one third of the options vest after one year and the balance of the remaining options vest over eight quarters until fully vested. 350 options vests over 11 quarters until fully vested. The Company recorded in its 2022 and 2021 statement of comprehensive loss an expense of $96 and 19, in respect of such grant.

During 2022, the Company’s subsidiary, Eye-Net, granted options to purchase 1,350 ordinary shares of Eye-Net to its employees. The options vest over 36 months, one third of the options vest after one year and the balance of the remaining options vest over eight quarters until fully vested. 450 options were granted at an exercise price of $100 and 900 options were granted at an exercise price of $200 per share. The Company recorded in its 2022 statement of comprehensive loss an expense of $14, in respect of such grant.

F-20

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(Dollars in thousands, except per share data)

Share Based Compensation Expense:

The total share-based compensation expense, related to Ordinary Shares, options granted to employees, directors and service providers was comprised, at each period, as follows:
SCHEDULE OF SHARE-BASED COMPENSATION EXPENSE

	Year ended						2022		2021		2020
	December 31,						Year ended December 31,
	2020		2019		2018		2022		2021		2020
	USD in thousands						USD in thousands

Cost of revenues								25		5		—
Research and development		469		568		621		929		1,161		469
Marketing and sales		62		214		196		196		169		62
General and administrative		631		856		1,223		676		1,129		631
		1,162		1,638		2,040
Share-based compensation expense								1,826		2,464		1,162
Less: Share-based compensation expense attributable to non-controlling interests		74		--		--		225		154		74
Share-based compensation expense attributable to Foresight Autonomous Holdings Ltd.		1,088		1,638		2,040		1,601		2,310		1,088

NOTE 11 -RESEARCH AND DEVELOMENT, NET

SCHEDULE OF RESEARCH AND DEVELOPMENT, NET

	Year ended									2022			2021			2020
	December 31,									Year ended December 31,
	2020			2019			2018			2022			2021			2020
	USD in thousands									USD in thousands

Payroll and related expenses (*)		5,922			5,679			5,793
Payroll and related expenses											8,778			7,556			5,922
Subcontracted work and consulting		1,534			3,123			1,744			1,523			1,751			1,534
Share-based payments to service provider		67			37			43			57			118			67
Rent and office maintenance		671			720			629			1,068			810			671
Travel expenses		54			236			76			141			44			54
Other		415			492			393			362			309			415
Less participation in grants											(395	)		(351	)		—
Sales of prototypes		(100	)		(77	)		(40	)		—			(67	)		(100	)
		8,563			10,210			8,638
Research and development total											11,534			10,170			8,563

NOTE 12 -MARKETING AND SALES

SCHEDULE OF MARKETING AND SALES

	2022		2021		2020
	Year ended December 31,
	2022		2021		2020
	USD in thousands
Payroll and related expenses		1,318		1,273		833
Exhibitions, conventions and travel expenses		302		42		175
Consultants		558		394		178
Other		52		139		82
Total marketing and sales		2,230		1,848		1,268

~~(*)~~

~~Includes share-based payment of $402, $531 and $578 in 2020, 2019 and 2018, respectively.~~F-21

~~F-20~~

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(~~dollars~~Dollars in thousands, except per share data)

~~NOTE 12 - MARKETING AND SALES~~

Year ended
December 31,
2020 2019 2018
USD in thousands

Payroll and related expenses (*) 833 870 489
Exhibitions, conventions and travel expenses 175 172 189
Consultants 178 212 249
Other 82 96 60
1,268 1,350 987

~~(*)~~

~~Includes share-based payment of $62, $206 and $182 in 2020, 2019 and 2018, respectively.~~

NOTE 13 -GENERAL AND ADMINISTRATIVE

SCHEDULE OF GENERAL AND ADMINISTRATIVE

	Year ended						2022		2021		2020
	December 31,						Year ended December 31,
	2020		2019		2018		2022		2021		2020
	USD in thousands						USD in thousands

Payroll and related expenses (*)		1,342		1,534		1,776
Payroll and related expenses								1,756		1,748		1,342
Share-based payments to service providers		128		75		179		215		268		128
Professional services		926		1,151		1,071		1,340		1,207		926
Directors fees and insurance (**)		348		404		361
Directors’ fees and insurance								405		494		348
Travel expenses		14		41		54		8		—		14
Rent and office maintenance		146		195		131		175		212		146
Other		101		69		124		90		51		101
		3,005		3,469		3,696
Total general and administrative								3,989		3,980		3,005

~~(*)~~	~~Includes share-based payment of $389, $625, and $893 in 2020, 2019 and 2018, respectively.~~
~~(**)~~	~~Includes share-based payment of $113 $156 and $151 in 2020, 2019 and 2018, respectively.~~

NOTE 14 - FINANCIAL EXPENSE (INCOME), NET

SCHEDULE OF FINANCIAL EXPENSE (INCOME), NET

	Year ended
	December 31,									2022			2021			2020
	2020			2019			2018			Year ended December 31,
	USD in thousands									2022			2021			2020
										USD in thousands
Reevaluation of securities, net		(85	)		--			(1	)		2,208			10			(85	)
Reevaluation of other investments		--			324			(316	)
Reevaluation of derivative warrant liabilities		--			1			(2,071	)
Bank interest income											(189	)		(887	)		—
Exchange rate differences		--			(601	)		1,000			2,194			(14	)		—
Other		(94	)		(153	)		(181	)		8			(18	)		(94	)
		(179	)		(429	)		(1,569	)
Financial expense income net, total											4,221			(909	)		(179	)

~~F-21~~

~~Foresight Autonomous Holdings Ltd.~~

~~Notes to the consolidated financial statements~~

~~(dollars in thousands, except per share data)~~

NOTE 15 - TAXES ON INCOME

The Company is subject to income taxes under Israeli tax laws:

Corporate tax rates in Israel

The Israeli corporate tax rate was ~~23%~~23% in ~~2020, 2019~~2022, 2021 and ~~2018.~~2020. Such tax rate changes had no significant impact on the Company’s financial statements.

As of December 31, ~~2020,~~2022, the Company generated net operation losses of approximately ~~$37,951,~~$68,870, which may be carried forward and offset against taxable income in the future for an indefinite period.

The Company is still in its development stage and has not yet generated revenues; therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts.

SCHEDULE OF DEFERRED TAX ASSETS

										2022			2021			2020
	December 31,									December 31,
	2020			2019			2018			2022			2021			2020
Deferred tax assets:	USD in thousands									USD in thousands

Operating loss carryforward		37,951			25,077			18,711			68,870			51,683			37,951

Deferred taxes due to carryforward losses		8,729			5,768			4,303			15,840			11,887			8,729

Valuation allowance		(8,729	)		(5,768	)		(4,303	)		(15,840	)		(11,887	)		(8,729	)
Net deferred tax asset		--			--			--			—			—			—

The Company has no uncertain tax positions and foreign sources of income.

	5.	~~The Company~~
	5.	Foresight Autonomous Holdings Ltd. has final tax assessments until and including ~~2016.~~2019. Foresight Automotive Ltd. has final tax assessments until and including 2017 and Eye-Net Mobile Ltd. does not have final tax assessments since its inception.

F-22

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(Dollars in thousands, except per share data)

NOTE 16 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES

~~Transactions:~~

Year ended
December 31,
2020 2019 2018
USD in thousands

Subcontracted work and consulting 672 722 660
Share-based payments to service provider 67 37 43
739 759 703

~~Balances:~~

As of
December 31,
2020 2019
USD in thousands

Other accounts payable 70 67
70 67

~~F-22~~

~~Foresight Autonomous Holdings Ltd.~~

~~Notes to the consolidated financial statements~~

~~(dollars in thousands, except per share data)~~

~~NOTE 17 - SUBSEQUENT EVENTS~~

On January 18, 2021, the Company’s Board of Directors approved an extension of all the options already granted under the Company’s 2016 Equity Incentive Plan to seven years from the grant date instead of three years from vesting date.

~~On March 8, 2021, the extraordinary shareholders meeting approved a special bonus to the Chief Executive Officer of approximately $100 for the year 2020.~~

On January 22, 2021, the Company entered into an At the Market Sales agreement, or the Sales Agreement, pursuant to which the Company may sell up to $60,000 from time to time. As of March 25, 2021, the Company issued a total of 1,378,344 ADSs (6,891,720 Ordinary Shares) at a weighted average price of $10.137 per ADS. After deducting closing costs and fees, as of March 25, 2021, the Company received net proceeds of approximately $13,500, net of issuance expenses.

On February 25, 2021, the Company issued options to purchase 1,105,000 Ordinary Shares to its employees at an exercise price ranging between NIS 1.33 to NIS 5.93 (an average of approximately $1.41 per share at the grant date).

~~Rail Vision Ltd.~~

~~Financial Statements~~

~~As of December 31, 2020~~

~~Rail Vision Ltd.~~

~~Financial Statements~~

~~As of December 31, 2020~~

~~TABLE OF CONTENTS~~

	~~Page~~

~~Report of Independent Registered Public Accounting Firm~~	~~F-26~~

~~Financial Statements:~~

~~Balance Sheets~~	~~F-27~~

~~Statements of Comprehensive Loss~~	~~F-28~~

~~Statements of Changes in Shareholders’ Equity~~	~~F-29~~

~~Statements of Cash Flows~~	~~F-30~~

~~Notes to the Financial Statements~~	~~F-31 - F-48~~

~~F-25~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and Shareholders of~~

~~RAIL VISION LTD.~~

~~Opinion on the Financial Statements~~

We have audited the accompanying balance sheet of Rail Vision Ltd. (the “Company”) as of December 31, 2019 and the related statements of comprehensive loss, shareholders’ equity and cash flows for the year ended December 31, 2019 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flow for each the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

~~Going Concern~~

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s lack of revenues and substantial operating losses raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of’ these uncertainties.

~~Change in Accounting Principle~~

As discussed in Note 2 to the financial statements, effective January 1, 2019, the Company adopted the Financial Accounting Standards Board’s new standard related to leases using the modified retrospective approach.

~~Basis for Opinion~~

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

~~/s/ Brightman Almagor Zohar & Co.~~
~~Certified Public Accountants~~
~~A Firm in the Deloitte Global Network~~

~~Tel Aviv, Israel~~

~~March 31, 2020~~

~~We have served as the Company’s auditor since 2016.~~

~~Rail Vision Ltd.~~

~~Balance Sheets~~
~~(U.S. dollars in thousands, except share and per share data)~~

As of
December 31,
Note
2020
2019
(Unaudited)
ASSETS

Current assets
Cash and cash equivalents $ 6,749 $ 9,120
Restricted cash 194 180
Deferred expenses 7D (1) 196 331
Other current assets 3 167 189
Total current assets 7,306 9,820

Right of use of asset 12 1,166 1,521
Deferred expenses 7D (1) - 196
Fixed assets, net 4 443 511
1,609 2,228

TOTAL ASSETS 8,915 12,048

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities
Trade accounts payable 41 137
Lease liability – current 12 475 295
Other accounts payable 5 1,599 681
Total current liabilities 2,115 1,113

Lease liability non-current 12 884 1,270

TOTAL LIABILITIES 2,999 2,383

Preferred A shares – NIS 0.01 par value; Authorized 900,000 shares; Issued and outstanding: 51,282 shares as of December 31, 2020 7 4,965 -

Shareholders’ equity
Ordinary shares, NIS 0.01 par value; Authorized 900,000 shares; Issued and outstanding: 207,650 shares as of December 31, 2020 and December 31, 2019 8 (* ) (* )
Additional paid in capital 8 34,636 33,077
Accumulated deficit (33,685 ) (23,412 )
Total shareholders’ equity 951 9,665

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 8,915 12,048

~~(*)~~

~~Represents an amount less than $1.~~

~~The accompanying notes are an integral part of the financial statements.~~

~~Rail Vision Ltd.~~

~~Statements of Comprehensive Loss~~

~~(U.S. dollars in thousands, except share and per share data)~~

Year ended
December 31,
Note
2020

2019

(Unaudited)

Research and development expenses 9 $ 7,244 $ 7,156

General and administrative expenses 10 3,027 2,890

Operating loss 10,271 10,046

Financial expenses (income), net 2 (14 )

Net loss 10,273 10,032

Basic and diluted loss per share
$ (49.47 ) $ (54.91 )

Weighted average number of shares outstanding used in computing basic and diluted loss per share 207,650 182,685

~~The accompanying notes are an integral part of the financial statements.~~

~~F-28~~

~~Rail Vision Ltd.~~

~~Statements of Convertible Preferred Shares and Changes in Shareholders’ Equity~~

~~(U.S. dollars in thousands, except share and per share data)~~

Convertible Preferred A Shares Ordinary Shares Additional Total
Number
of shares USD Number
of shares USD paid in
capital Accumulated
Deficit shareholders’
equity

BALANCE AS OF DECEMBER 31, 2018 -- -- 139,485
(*
) 18,307 (13,380 ) 4,927

CHANGES DURING 2019:
Issuance of Ordinary Shares and warrants -- -- 40,984 (* ) 9,941 -- 9,941
Issuance of shares as a result of exercise of warrants -- -- 27,181 (* ) 3,472 -- 3,472
Share-based payment -- -- -- -- 1,357 -- 1,357
Loss for the year -- -- -- -- -- (10,032 ) (10,032 )

BALANCE AS OF DECEMBER 31, 2019 -- -- 207,650
(*
) 33,077 (23,412 ) 9,665

CHANGES DURING 2020: (Unaudited)
Issuance of convertible preferred shares 51,282 4,965
Share-based payment -- -- -- -- 1,559 -- 1,559
Loss for the year -- -- -- -- -- (10,273 ) (10,273 )
BALANCE AS OF DECEMBER 31, 2020 51,282 4,965 207,650
(*
) 34,636 (33,685 ) 951

~~(*)~~

~~Represents an amount less than $1.~~

~~The accompanying notes are an integral part of the financial statements.~~

~~F-29~~

~~Rail Vision Ltd.~~

~~Statements of Cash Flows~~

~~(U.S. dollars in thousands)~~

Year ended
December 31,
2020 2019
(Unaudited)
Cash flows from operating activities
Loss for the year $ (10,273 ) $ (10,032 )
Adjustments to reconcile loss to net cash used in operating activities:
Depreciation 190 183
Share-based compensation 1,559 1,357
Change in lease liability 172 122

Changes in operating assets and liabilities:

Decrease (increase) in other current assets 330 (6 )
Increase (decrease) in trade accounts payable (96 ) 36
Increase in other accounts payable 918 136

Net cash used in operating activities (7,200 ) (8,204 )

Cash flows from investing activities
Purchase of fixed assets (122 ) (152 )
Net cash used in investing activities (122 ) (152 )

Cash flows from financing activities:
Issuance of Preferred Shares 4,965 --
Issuance of Ordinary Shares and warrants, net of issuance expenses -- 9,941
Proceeds from exercise of Warrants, net of issuance expenses -- 3,472

Net cash provided by financing activities 4,965 13,413

Increase in cash, cash equivalents and restricted cash (2,357 ) 5,057
Cash, cash equivalents and restricted cash at the beginning of the period 9,300 4,243

Cash, cash equivalents and restricted cash at the end of the period 6,943 9,300

Year ended
December 31,

2020 2019
(Unaudited)
Non Cash Activities:

Increase in Deferred expenses against additional paid in capital -- 303
Right-of-use assets obtained in exchange for new operating lease obligations -- 1,768

~~The accompanying notes are an integral part of the financial statements.~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 1 - GENERAL~~

Rail Vision Ltd. (the “Company”) was incorporated on April 18, 2016 in Israel. The Company is engaged in the design, development and manufacture of a safety, security and track scanning system for the railway industry. The Company’s proprietary Automated Early Warning System (“AEWS”) has been designed to solve challenges in railway operational safety, efficiency and predictive maintenance. The AEWS provides visual data of a train’s surrounding environment by utilizing real-time algorithmic analysis of the input received from various advanced onboard sensors, including thermal infrared sensors and high definition video sensors.

The Company’s activities are subject to significant risks and uncertainties. The Company is a development-stage company and has a limited operating history on which to assess the prospects for its business, has incurred significant losses since the date of its inception, and anticipates that it will continue to incur significant losses until it will be able to successfully commercialize its products. Failure to obtain this necessary capital when needed may force the Company to delay, limit or terminate its product development efforts or other operations. In addition, the Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, the loss of key personnel and the effect of planned expansion of operations on the future results of the Company.

~~GOING CONCERN:~~

To date, the Company has not generated revenues from its activities and has incurred substantial operating losses. Management expects the Company to continue to generate substantial operating losses and to continue to fund its operations primarily through utilization of its current financial resources and through additional raises of capital.

Such conditions raise substantial doubts about the Company’s ability to continue as a going concern. Management’s plan includes raising funds from outside potential investors. However, there is no assurance such funding will be available to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives. These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.

~~The Corona virus (COVID-19):~~

Since the beginning of 2020, an event with macroeconomic consequences originating from the spread of the Corona virus (COVID-19) has been affecting the world. The outbreak of the Corona virus has caused shocks in global financial markets and the economic world has entered a period of uncertainty. The Israeli government, like other governments around the world, has taken various measures to prevent the outbreak of the virus, including preventing movement during certain periods, restrictions on opening businesses and other restrictions.

~~The Corona crisis has affected the Company’s operations in several ways, as follows:~~

●

~~Raising capital – The shocks in the global financial markets and the uncertainty in the economic world have made it difficult for the Company to raise capital during this period.~~

●

Employment of workers – At the beginning of the Corona crisis, some of the Company’s employees were given unpaid leave and the rest of the Company’s employees worked full time (at a reduced salary for a period of 6 months). As of the date of this report, the Company is operating according to the Corona routing format (“Purple Badge”), according to which about half of the employees work from home on any given day, the number of in-person meetings has been reduced and a routine of video meetings has been introduced instead of in-person meetings, guests are restricted from entering offices, etc., while requiring its employees to adhere to the Ministry of Health guidelines.

~~F-31~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 1 - GENERAL (Cont.)~~

~~The Corona virus (COVID-19) (Cont.)~~

●

Restrictions on movement – Restrictions on movement imposed in Israel and around the world led to delays and postponements in the conducting of demonstrations for potential customers, limiting the Company’s employees’ ability to provide support services at a potential customer’s site where the Company has a prototype system in a long-term trial, as well as the cancellation of business and marketing trips.

At this stage, it is not possible to assess whether this is a short-term event or an ongoing crisis that could lead to a global recession. Since this is an event that is not under the Company’s control, such as the continued spread of the virus, the Company is continuously monitoring changes in the markets in Israel and around the world and examining the implications for its medium- and long-term business activities in order to address issues and events related to the crisis and its possible consequences.

As of the date of this report, the Company estimates that its long-term operations are not expected to be significantly impaired, given the potential for future engagements with potential customers in the markets in which it operates as well as in other markets. Nevertheless, there is a concern that the continuation of the crisis may make it difficult for the Company to continue developing its products and carry out projects and demonstrations for potential customers.

~~NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES~~

~~Basis of Presentation:~~

~~The financial statements have been prepared in conformity with accounting principles generally accepted in United Sates of America (“US GAAP”).~~

~~Use of estimates in the preparation of financial statements:~~

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect reported amounts and disclosures made. Actual results could differ from those estimates.

~~Financial statement in U.S. dollars:~~

The functional currency of the Company is the U.S. dollar (“dollar” or “$”) since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future.

~~Cash and cash equivalents:~~

~~Cash equivalents are short-term highly liquid investments that are readily convertible to cash with maturities of three months or less as of the date acquired.~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

~~Reclassification:~~

~~Certain amounts in prior years financial statements have been reclassified to conform to the current year’s presentation.~~

~~Fair value of financial instruments:~~

~~The carrying values of cash and cash equivalents, other receivables, trade accounts payable and other accounts payable approximate their fair value due to the short-term maturity of these instruments.~~

ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.

~~Property and equipment:~~

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets. The annual depreciation rates are as follows:

	%
~~Office furniture and equipment~~	~~7-15~~
~~Computer software and electronic equipment~~	33
~~Laboratory equipment~~	~~7-15~~
~~Leasehold improvements~~	~~Over the shorter of the lease term (including the option) or useful life~~

~~Impairment of long-lived assets:~~

~~The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets,” whenever events or changes~~

in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. During 2017 and 2016, no impairment losses were identified.

~~Accrued post-employment benefit:~~

Under Israeli employment laws, employees of the Company are included under Section 14 of the Severance Compensation Act, 1963 (“Section 14”) for a portion of their salaries. According to Section 14, these employees are entitled to monthly deposits (payments) made by the Company on their behalf with insurance companies.

Payments in accordance with Section 14 release the Company from any future severance payments (under the Israeli Severance Compensation Act, 1963) with respect of those employees. The obligation to make the monthly deposits is expensed as incurred. In addition, the aforementioned deposits are not recorded as an asset in the Company’s balance sheet, and there is no liability recorded as the Company does not have a future obligation to make any additional payments.

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

~~Share-based compensation:~~

The Company applies ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors including share options granted under the Company’s incentive share option plan based on estimated fair values.

ASC 718-10 requires companies to estimate the fair value of share-based payment awards on the date of grant using a Black-Scholes option pricing model. The value of the portion of the share-based payment award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s statements of comprehensive loss.

The Company estimates the fair value of share options granted as share-based payment awards using a Black-Scholes option pricing model. The Black-Scholes option pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). Expected volatility is estimated based on volatility of similar companies in the technology sector. The Company has historically not paid dividends and has no foreseeable plans to pay dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected option term is calculated for options granted to employees and directors using the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the share options granted and the results of operations of the Company.

~~Leases:~~

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities were recognized based on the present value of the remaining lease payments over the lease term. When the Company’s lease did not provide an implicit rate, the Company used its incremental borrowing rate in determining the present value of lease payments. The Company used the implicit rate when readily determinable. The operating lease ROU asset excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments are recognized on a straight-line basis over the lease term.

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

~~Basic and diluted net loss per share:~~

Basic loss per share is computed by dividing the net loss by the weighted average number of Ordinary Shares outstanding during the year. Diluted loss per share is computed by dividing the net loss by the weighted average number of Ordinary Shares outstanding plus the number of additional Ordinary Shares that would have been outstanding if all potentially dilutive Ordinary Shares had been issued, using the treasury stock method, in accordance with ASC 260-10, “Earnings per Share.” Potentially dilutive Ordinary Shares were excluded from the diluted loss per share calculation because they were anti-dilutive.

~~Research and development expenses, net:~~

~~Research and development expenses, net, are charged to the statement of comprehensive loss as incurred.~~

~~Recently Adopted Accounting Pronouncements~~

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued a new standard, Accounting Standards Update (“ASU”) 2016 -13, “Financial Instruments—Credit Losses,” requiring measurement and recognition of expected credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The Company adopted this ASU, effective January 1, 2020, using the modified retrospective approach, and the effect on the Company’s consolidated condensed financial statements and related disclosures was not material.

~~Recent Accounting Standards~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 3 - OTHER CURRENT ASSETS~~

~~Composition:~~

December 31,
2020 2019

(Unaudited)

Governmental institutes $ 128 $ 180
Prepaid expenses 12 --
Other 27 9
167 189

~~NOTE 4 - FIXED ASSETS, NET~~

December 31,
2020 2019
(Unaudited)
Cost:

Computers and software $ 565 $ 475
Laboratory equipment 181 174
Furniture and office equipment 114 111
Leasehold improvement 134 132
994 892
Accumulated depreciation:

Computers and software $ 456 $ 325
Laboratory equipment 34 15
Furniture and office equipment 28 21
Leasehold improvement 33 20
551 381

Depreciated cost 443 511

~~Depreciation expenses for the year ended December 31, 2020 and 2019 were $190 and $183, respectively.~~

~~NOTE 5 - OTHER ACCOUNTS PAYABLE~~

December 31,
2020 2019
(Unaudited)

Employees and related expenses $ 658 $ 569
Accrued expenses 307 112
Deferred revenues (*) 634 --
1,599 681

~~(*)~~

~~See also Notes 6C and 6D below.~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 6 - COMMITMENTS AND CONTINGENCIES LIABILITIES~~

~~Collaboration agreement with Israel Railways Ltd. (hereinafter: “Israel Railways”):~~

In August 2016, the Company and Israel Railways entered into an agreement for cooperation between the parties, which was replaced by a new amended agreement in January 2020 (hereinafter: “the Railway Agreement”). Under the Railway Agreement, the Company undertook to fulfill its functions for the development, marketing, distribution and sale of the system, and Israel Railways undertook to provide the Company with services and the means to perform tests and experiments, mainly in logistics and manpower, and to provide the Company with information on certain data that will be given at the discretion of Israel Railways.

~~According to the Railway Agreement, the Company committed as follows to Israel Railways:~~

During the period from 3.8.2016 until the earliest of (a) a period of 5 years from the date of the first commercial sale or (b) the date of an initial public offering (IPO) or (c) a change of control (as defined in the Railway Agreement), Israel Railways will be entitled to a payment of royalties in the amount of 2.75% of the Company’s net sales.

During the period from 3.8.2016 until the earliest of: (a) the date of an initial public offering (IPO) or (b) a change of control (as defined in the Railways Agreement) Israel Railways will be entitled to a payment of a total of 1.5% of the total proceeds from an IPO or consideration, received by the Company or its shareholders, for a change of control (as defined in the Railway Agreement).

Israel Railways will be entitled to purchase the Company’s products and services at a price equal to half the lowest price charged by the Company for those products and services from a third party that is not related to the Company.

~~As of December 31, 2019, and 2020, the Company has no liability in respect of such royalties.~~

In addition, as part of the agreement with the railway, the Company granted Israel Railways (in exchange for services provided by Israel Railways to the Company) an option to purchase 4,442 of the Company’s common shares in exchange for their par value (hereinafter: “the option”), which can be exercised by Israel Railways until the IPO or a change of control (as defined in the Railway Agreement), whichever is earlier.

The Railway Agreement may be terminated by either party to the agreement, with 60 days’ prior written notice. Also, in the event of a change of control in the Company, Israel Railways may terminate the agreement with 30 days’ prior written notice.

~~Consultation agreement:~~

In December 2020, the Company entered into a service agreement with Z. Einhorn Holdings Ltd., a private company controlled by Mr. Zvi Oren (hereinafter: “the Consultant”) according to which the Consultant will lead, supervise and advise the Company’s management in its contacts with Israel Railways in the homologation process and sale the Company’s systems to Israel Railways.

According to the service agreement, the homologation process will include presenting the Company’s systems to Israel Railways, defining the required level of safety (SIL) and defining a work plan to achieve homologation of the Company’s systems with Israel Railways locomotives, including their installation for commercial use and obtaining all required approvals in Israel and abroad for the systems’ installation on the Israel Railways locomotives.

The Consultant’s services in connection with the sale process of the Company’s systems to Israel Railways (the “sale process”) will include involvement in conducting negotiations with Israel Railways, engagement in sales agreements or orders for the purchase of a minimum quantity of systems as stipulated in the service agreement, supply and installation of the systems on the Israel Railways locomotives and receipt of the total consideration for them by the Company.

~~In return for his services, the Company will pay the Consultant a monthly remuneration in the amount of approx. $ 3 thousand (plus VAT).~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 6 - COMMITMENTS AND CONTINGENCIES LIABILITIES (Cont.)~~

~~Consultation agreement (Cont.)~~

If approval is received from the Israel Railways representatives regarding their agreement to promote the homologation process and, subject to its success, to purchase the Company’s systems (hereinafter: “the operating event”), the Company will pay the Consultant a bonus of NIS 150,000 (approx. $ 46,650) (plus VAT) if, within 12 months of the operating event, the homologation process will be successfully concluded. In addition, the Company will pay the Consultant an amount of NIS 350,000 (approx. $ 108,865) (plus VAT) if, within 18 months of the operating event, the sale process is completed. Moreover, after the operating event, the Company will allot options to the Consultant for the purchase of 570 of the Company’s common shares at a price of USD 270.13 per share. The consultant will be eligible to exercise the options upon completion of both the homologation process and the sale process. The exercise period of the options is until the end of 24 months from the date of their allotment. As of the date of this report, the operating event has not yet taken place and accordingly, the above options have not yet been allotted to the Consultant.

The service agreement is in effect from November 1, 2020 until the completion of the services determined in the agreement, as detailed above. Either party may terminate the engagement between the parties with 30 days’ notice.

~~Memorandum of Understanding between the company and Knorr Bremse:~~

On September 17, 2020, a non-binding Memorandum of Understanding was signed between the Company and Knorr Bremse (hereinafter: the “Memorandum of Understanding”) regarding cooperation between the parties with respect to light rail systems (LRV), carrying out adjustments and completing development at Knorr Bremse’s request, appointment of Knorr Bremse as a non-exclusive representative of the Company in Germany and its authorization to act for the business development and promotion of the marketing of the LRV systems in Germany, according to a detailed cooperation agreement, which will be discussed in good faith and signed between the parties at a later stage.

In the Memorandum of Understanding, it was agreed that the parties will negotiate a detailed cooperation agreement in good faith, in which they will determine, among other things, the terms of sale of the LRV systems by the Company to Knorr Bremse, while the general terms of the sale of the systems will be as is usual in transactions of this type and the specific terms of sale will be agreed between the parties in relation to each order separately.

The Memorandum of Understanding will be in effect from the date of its signing until the earliest of: (a) the signing of a binding cooperation agreement between the parties which will replace the Memorandum of Understanding; (b) a notice by one of the parties that he is interested in terminating the Memorandum of Understanding and the negotiations between the parties on the cooperation agreement; or (c) 12 months from the date of signing the Memorandum of Understanding.

In accordance with a work order that Knorr Bremse sent to the Company in December 2020, the Company is developing two prototypes of the LRV system according to characteristics required by Knorr Bremse, whose delivery is planned by June 2021. In return for the prototypes, Knorr Bremse is expected to pay the Company a total of EUR 397 thousand (approx. $ 476). During December 2020, Knorr Bremse paid the Company an advance in the amount of approx. EUR 320 thousand (approx. $ 382) on account of the above payment and which was recorded as of December 31, 2020 as income in advance (see Note 5 above).

~~F-38~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 6 - COMMITMENTS AND CONTINGENCIES LIABILITIES (Cont.)~~

~~Framework agreement with Knorr-Bremse Rail Systems Schweiz AG (hereinafter: “KBCH”):~~

In August 2020, the Company entered into a framework agreement (hereinafter: the “Framework Agreement”) with KBCH (a subsidiary of Knorr Bremse operating in Switzerland) regarding the supply of a prototype of the Company’s system for the Shunting Yard of a company operating cargo trains in Switzerland (hereinafter: “SBBC”). The engagement of the Company and KBCH in the framework agreement was made with respect to KBCH’s engagement with SBBC in a July 2020 agreement, following a successful pilot of the system by SBBC, according to which KBCH undertook to serve as the system’s main supplier to SBBC, according to the terms agreed in advance with the Company.

Under the framework agreement, the Company provided KBCH with one prototype of the system (the “Prototype”), which will be installed on an operating locomotive in the SBBC shunting yard, for the purpose of examining the operational performance of the system (the “Operational Performance Test”). The company undertook to include in the prototype certain features as required by SBBC and to be responsible for the integrity of the prototype, for a period of one year following its installation.

The prototype was supplied by the Company in October 2020 and installed in an SBBC operating locomotive. According to the framework agreement, at the end of three months from the beginning of the operational performance test, which is expected to begin in Q2 of 2021, and after receiving appropriate regulatory approvals from the regulator, representatives of the three parties will meet to evaluate test results and system performance.

In consideration for the prototype provided for the operational performance test, KBCH paid the Company the amount of approx. EUR 244 thousand (approx. $ 292). In addition, in order to support the operational performance test procedure, the Company undertook to provide various professionals, as needed, in exchange for payment at the maximum rates and amounts determined in the framework agreement. In addition, the framework agreement determines a division between the Company and KBCH regarding additional support actions for SBBC, as needed, in the operational performance testing process. In accordance with generally accepted accounting principles, the above revenues have not yet been recognized in the Company’s financial statements and were recorded as of December 31, 2020 as net income in advance (less specific costs attributed to the above project) in the amount of approx. $ 218 thousand.

Under the framework agreement, SBBC may order from the Company, through KBCH, 30 systems, subject to the fulfillment of the conditions determined in the framework agreement. As of the date of this report, the operational performance test has not yet been completed and there is no certainty that an order will indeed be received for the Company’s systems as stated.

The period of the framework agreement is from the date of its signing until the end of ten (10) years from the successful installation of 30 units of the system in SBBC facilities. Either party will be entitled to terminate the framework agreement immediately in the event of cancellation of the agreement between KBCH and SBBC for any reason or in the event that the order of the 30 systems is not executed.

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 7 - CONVERTIBLE PREFERED SHARES~~

~~Issuance of Preferred A Shares~~

On October 13, 2020, the Company and Knorr Bremse entered into an investment agreement under which the Company allotted 51,282 Preferred A shares to Knorr Bremse, in exchange for a total investment of approx. USD 10 million, half of which was paid on October 13, 2020 and the second half will be paid by April 12, 2021.

~~Following the above investment, Knorr Bremse holds approx. 36.8% of the Company’s issued and paid-up share capital.~~

In addition, the Company was given, under the agreement, an option to demand that Knorr Bremse implicitly invest an additional USD 5 million (for a total of USD 15) at the same price per share and in exchange for the same class of shares, provided the existence of circumstances as detailed in the investment agreement.

~~Preferred A shares are entitled to all the rights of the Company’s common shares and additional rights as follows:~~

~~(1)~~

~~Liquidation preference:~~ Holders of preferred shares are entitled to priority, in respect of their preferred shares, in the distribution of the proceeds of a liquidation or deemed liquidation event over the Company’s common shareholders. The priority of Preferred A shareholders is in the amount of the return on their investment (the “Priority Amount”). The priority in the distribution to holders of Preferred A shares is on a non-participating liquidation preference basis, such that holders of Preferred A shares receive the priority amount in distribution or the amount of in the distribution on a pro rata basis (an ordinary distribution without priority in the distribution), whichever is higher.

~~(2)~~

~~Listing rights:~~ Holders of Preferred A shares are entitled under a shareholders’ rights agreement to certain listing rights in the event of an issue in which not all the Company’s shares are listed for trading and/or in the case of a combination of a sale offer on the listing date.

It should be clarified that holders of Preferred A shares are entitled, at their choice, to convert the preferred shares at any time into the Company’s common shares in a 1:1 ratio. In addition, prior to the listing of the Company’s securities as part of an initial public offering of the Company’s shares (IPO), all Preferred A shares will be immediately converted into the Company’s common shares in a 1:1 ratio, and accordingly, all rights stated are revoked upon their conversion into the Company’s common shares.

~~NOTE 8 - SHAREHOLDERS’ EQUITY~~

~~The rights of Ordinary Shares are as follows:~~

The Ordinary Shares confer upon the holders the right to receive notice to participate and vote in general meetings of shareholders of the Company, the right to receive dividends, if declared, and the right to participate in a distribution of the surplus of assets upon liquidation of the Company.

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 8 - SHAREHOLDERS’ EQUITY (Cont.)~~

~~Issuance of Ordinary shares and warrants:~~

~~(1)~~

~~At inception, the Company issued 40,000 Ordinary Shares, NIS 0.01 par value per share, to the Company’s founders for no consideration.~~

~~(2)~~

In August and November 2016, the Company raised $2,000 (gross) through private placements of its Ordinary Shares. The Company issued 33,318 Ordinary Shares ($60.03 per share) and 71,263 warrants to purchase Ordinary Shares. The warrants consist of: (i) 33,318 Series A Warrants exercisable within 18 months, at an exercise price per share of $189.09, (ii) 33,318 Series B Warrants exercisable within 30 months, at an exercise price per share of $270.13, and (iii) 4,627 Series C Warrants exercisable within 24 months, at an exercise price per share of $216.10. The net proceeds, after deducting closing costs and fees, amounted to $1,960.In addition a convertible note was converted into 721 Ordinary Shares.

During January 10 through May 2, 2018, 22,502 Series A Warrants were exercised into 22,502 of the Company’s Ordinary Shares at an exercise price per share of $189.09 and for an aggregate of $4,255 (gross), 292 Series A Warrants expired on May 2, 2018 and for the remaining 10,524 Series A Warrants that were not exercised, the Company reached with the holder of those options an agreement to postpone their expiration date until August 3, 2018.

~~On July 11, 2018. The remaining 10,524 Series A Warrants for an aggregate of $1,990 (gross).~~

During November 2018, 4,224 Series C Warrants were exercised into 4,224 of the Company’s Ordinary Shares at an exercise price per share of $216.1 and for an aggregate of $913 (gross) and 403 Series C Warrants expired on November 2, 2018.

~~(3)~~

In September and October 2017, the Company raised $5,843 (gross) through private placements of its Ordinary Shares. The Company issued 21,629 Ordinary Shares ($270.13 per share) and 21,629 warrants (consisting of 6,339 Series D Warrants at an exercise price per share of $284.36 and 15,290 Series E Warrants at an exercise price per share of $255.7) to purchase Ordinary Shares. Both of the warrants are exercisable within 18 months. The net proceeds, after deducting closing costs and fees, amounted to $5,280. In addition, after deducting share based compensation granted to a finder, which related compensation costs were recorded in equity, the increase of the Company’s equity amounted to approximately $5,192 (see Note 7D(3)).

The Ordinary Share issuances from September and October 2017 and the related warrants are subject to adjustments in the event of the exercise of Series A, B and C Warrants (see Note 7B(3)), in which case an applicable number of Ordinary Shares will be issued to purchasers of the Ordinary Shares to retroactively adjust their effective purchase price to align with the purchase price at which such new securities are issued and the exercise price of Series D Warrants and Series E Warrants will be reduced accordingly.

Corresponding to the Series A and C Warrants exercise (see Note 7B(2)), 2,217 Ordinary Shares were issued and the exercise price of Series D Warrants and Series E Warrants was adjusted to $273.38 and $249.18, respectively.

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 8 - SHAREHOLDERS’ EQUITY (Cont.)~~

~~Issuance of Ordinary shares and warrants (Cont~~.)

~~(4)~~

During February through May 2018, the Company raised $2,700 (gross) through private placements of its Ordinary Shares (“SPA 2018”). The Company issued 4,201 Ordinary Shares ($642.48 per share). The net proceeds, after deducting closing costs and fees, amounted to $2,511.

The agreements for SPA 2018 include an anti-dilution protection, such that in the event that within a period of 15 months as of the closing date of the share purchase agreement, the Company will issue new securities, or upon an exit event as defined in the share purchase agreement, an applicable number of Ordinary Shares will be issued to the purchasers of the Ordinary Shares to retroactively adjust their effective purchase price to equal a 30% discount of the purchase price of such new securities, or the price per share underlying such exit event, as applicable, provided that in no event shall the adjusted price per share exceed the original price per share. In the event an exit event or an issuance of new securities is not consummated during a period of 15 months as of the closing date, an applicable number of Ordinary Shares will be issued to the purchasers of the Ordinary Shares to retroactively adjust their effective price per share to $458.92.

The investment transaction detailed in (5) below, has triggered anti-dilution rights of the SPA 2018 shareholders (as detailed above) and accordingly additional of 11,608 Ordinary Shares of the Company have been issued to these shareholders.

~~(5)~~

On March 19, 2019 the Company and Knorr-Bremse Systeme für Schienenfahrzeuge GmbH, an affiliate of Knorr-Bremse AG (Frankfurt: KBX) (a global market leader for braking systems and a leading supplier of other rail and commercial vehicle subsystems, “KB”) signed an agreement whereby KB invested $9,930 (after deducting closing costs and fees ( in the Company in consideration of an issuance of an aggregate number of 40,984 Ordinary Shares of the Company (the “Purchased Shares”), at a price per share equal to US $244.00 (the “PPS”) reflecting 21.34% of the Company’s issued and outstanding capital.

According to the agreement, the consideration for the investment was transferred to the company in two installments, $ 5 million was transferred at the closing and an additional $ 5 million was transferred six months later.

KB have also been issued an aggregate of 14,903 warrants to purchase up to 14,903 of the Company’s Ordinary Shares at an exercise price per share equal to the PPS (the “KB Warrants”). These Warrants shall become exercisable (i) only upon an exercise of warrants of the respective class (i.e. warrants series B, D and E, as the case may be), and (ii) only for the number of additional Ordinary Shares in accordance with the formula of approximately 20% of the number of issued Ordinary Shares originating from the exercised Warrants of the respective class, all as specified in the agreement. As of December 31, 2019, all of the KB Warrants have been exercised (see also (8) - (10) below) or expired.

~~(6)~~

~~During March 2019, 1,861 Series D Warrants were exercised into 1,861 of the Company’s Ordinary Shares for an aggregate of $470 (gross) and 4,875 Series D Warrants expired on March 19, 2019.~~

~~(7)~~

~~During April 2019, 6,898 Series E Warrants were exercised into 6,898 of the Company’s Ordinary Shares for an aggregate of $1,711 (gross) and 9,864 Series E Warrants expired on April 6, 2019.~~

~~(8)~~

~~During May 2019, 5,332 Series B Warrants were exercised into 5,332 of the Company’s Ordinary Shares for an aggregate of $1,411 (gross) and 29,124 Series B Warrants expired on May 1, 2019.~~

~~F-42~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 8 - SHAREHOLDERS’ EQUITY (Cont.)~~

~~Equity Incentive Plan:~~

In January 2017, the Board of Directors (the “Board”) of the Company authorized an incentive share option plan (“2017 Plan”). The 2017 Plan provides for the grant of incentive share options to employees and service providers of the Company. Awards may be granted under the 2017 Plan until January 31, 2027.

~~According to the 2017 Plan, the aggregate number of Ordinary Shares that may be issued pursuant to awards will not exceed 53,008 Ordinary Shares.~~

~~Shares and options to service providers:~~

The fair value for the warrants to service providers was estimated on the measurement date determined using a Black-Scholes option pricing model, with the following weighted-average assumptions: weighted average volatility of 70%, risk free interest rates of 1.4%, dividend yields of 0% and a weighted average life of the options of up to 5 years.

~~(1)~~

On August 3, 2016, and as amended on January 19, 2020, as part of the cooperation agreement signed with IR for development, marketing, distribution and sale of the Company’s system services (as described in Note 6A), the Company issued warrants to purchase up to 4,442 ordinary shares of the Company, with an exercise price of NIS 0.01 (approximately $0.003) per share. The Company recorded as deferred expenses a total of $303 in 2019 which are amortized over 5 years beginning August 2016. In respect of such grants, amounts of $331 and $305 were recorded in the Company’s statement of comprehensive loss for the year ended December 31, 2020 and 2019, respectively, included in research and development expenses. See also Note 6 above.

~~(2)~~

On November 5, 2017, the Company issued 150 Ordinary Shares to a service provider as part of the total consideration for tax advisory services. The Company recorded in its statement of comprehensive loss an expense of $43 in respect of such grant, included in general and administrative expenses.

~~(3)~~

On November 9, 2017, the Company granted to a consulting service provider options to purchase 1,481 Ordinary Shares at an exercise price of NIS 0.30 per share (approximately $0.09 at the grant date) as part of the total consideration in respect of capital raising fees. These options are fully vested and expire 30 months from the grant date. As such options were granted in connection with an equity transaction, the relating compensation costs were recorded in equity with no impact on the statements of comprehensive loss. On May 12, 2019 these options were exercised by the service provider into 1,481 of the Company’s Ordinary Shares.

~~(4)~~

On January 4, 2018, the Company granted to three consulting service providers options to purchase 2,230 Ordinary Shares at an exercise price of 270.13 $ per share. Third of the options will vest upon the first year anniversary, the remainder of the options will vest in 8 quarterly tranches over a period of 2 years. For the years ended December 31, 2019 and 2018, the company recorded an expense of 99 USD, for each year, in respect of such grant included in general and administrative expenses.

~~(5)~~

~~Regarding the Company’s obligation to allocate options to a consultant in connection with the Company’s arrangement with Israel Railways, see Note 6B above.~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 8 - SHAREHOLDERS’ EQUITY (Cont.)~~

~~Options to employees~~

~~(1)~~

The fair value of options was estimated using the Black-Scholes option pricing model, which based on the following assumptions: weighted average volatility of 70%, risk free interest rates of 0.8%-1.03%, dividend yields of 0% and expected life of the options of up to 6 years.

~~(2)~~

~~The following table summarizes the option activity for options to employees, officers and directors:~~

For the year ended
December 31,

2020 (Unaudited) 2019
Amount of options Weighted average exercise price Weighted average remaining contractual life Amount of options Weighted average exercise price Weighted average remaining contractual life
$ $
Outstanding at beginning of period 16,062 270.13 4.75-5 15,498 270.13 5.75-6.0
Granted 34,142 270.13 5.33-7.87 3,001 270.13 5.0
Exercised -- -- --
Forfeited (12,936 ) 270.13 (2,437 ) 270.13

Outstanding at end of period 37,268 270.13
4.75-7.87
16,062 270.13
4.75-5.0

Exercisable at end of period 13,545 270.13
4.75-7.87
4,136 270.13
4.75-5.0

~~(3)~~

~~Options granted~~:

On January 4, 2018, the Company granted 10,284 options to purchase 10,284 Ordinary Shares to its employees and directors at an exercise price of $270.13 per share. These options expire 10 years after their grant date and vest over 3 years in 9 tranches. Third of the options will vest upon the first-year anniversary, the remainder of the options will vest in 8 quarterly tranches over a period of 2 years. For the years ended December 31, 2020 and 2019, the company recorded an expense of USD 358 and USD 469, respectively, in respect for such grant.

On June 24, 2018, the Company granted 4,466 options to purchase 4,466 Ordinary Shares to its employees and directors at an exercise price of USD 270.13. Third of the options will vest upon the first-year anniversary. The reminder will vest over 8 quarters until fully vested over a period of 2 years. For the years ended December 31, 2020 and 2019, the Company recorded an expense of USD 191 and USD 368, respectively, in respect for such grant.

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 8 - SHAREHOLDERS’ EQUITY (Cont.)~~

~~Options to employees (Cont.)~~

On March 24, 2019, the Company granted 3,001 options to purchase 3,001 Ordinary Shares to its former CEO at an exercise price of USD 270.13. Third of the options will vest upon the first -year anniversary. The reminder will vest over 8 quarters until fully vested over a period of 2 years. During December 2020, the employment of the Company’s former CEO ended, and the above options were not exercised and expired.

On January 22, 2020, the Company granted 15,257 options (of which 1,695 options to the former CEO that were not exercised and expired at the end of his employment in December 2020) that can be exercised to 15,257 common shares to its employees (56 offerees) at an exercise price of USD 270.13. One-third of the options will vest on September 18, 2020 and the balance during the following two years thereafter over 8 quarters.

In October 2020, the Company granted 12,655 options to the Chairman of the Board and 1,400 options to the Company CEO, as detailed below. In addition, the Company granted 2,380 options to the former CEO of the company that did not vested and expired at the end of his employment in December 2020.

In accordance with an options agreement dated October 13, 2020, the Company granted the Chairman 12,655 options exercisable for 12,655 of the Company’s shares, against payment of an exercise price of USD 270.13 per option. The Chairman’s eligibility to exercise the options will be established as follows: (1) The eligibility to exercise 3,164 options will vest in one tranche at the end of 12 months from October 13, 2020; (2) Eligibility to exercise 6,327 additional options will vest in the event that the Company arrives at a cumulative order backlog (as defined in the agreement) in the amount of not less than USD 7 million by the end of 18 months from October 13, 2020; the eligibility to exercise the balance of 3,164 options will be established in the event that the Company reaches a cumulative order backlog of USD 15 million by the end of 24 months from October 13, 2020 (including the cumulative order backlog included in Subsection (2) above); and all subject to him serving as the Active Chairman of the Company’s Board of Directors at the time the eligibility has been established for the exercise of the options.

In accordance with an agreement dated October 13, 2020 the Company CEO was granted 1,400 options exercisable for 1,400 of the Company’s common shares, against payment of an exercise price of USD 270.13 per option. The CEO eligibility to exercise the options will vest as follows: (1) Eligibility to exercise 700 options will be established on the condition that the Company reaches, no later than October 12, 2022 a cumulative order backlog (as defined above) in an amount not less than USD 10 million; (2) Eligibility to exercise the remaining 700 options will be established on the condition that the Company reaches, no later than October 12, 2024 a cumulative order backlog (as defined above) in an amount not less than USD 20 million (including the order backlog counted for Subsection (1) above); and all subject to him serving in his position at the time the eligibility has been established for the exercise of the options.

On November 3, 2020, the Company granted 2,450 options exercisable for 2,450 common shares to its employees at an exercise price of USD 270.13. One-third of the options will vest at the end of one year from the grant date and the balance during the following two years thereafter over 8 quarters.

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 8 - SHAREHOLDERS’ EQUITY (Cont.)~~

~~Share Based Compensation Expense:~~

~~The total share-based compensation expense, related to Ordinary Shares, options and warrants granted to employees and service providers comprised, at each period, as follows:~~

Year ended
December 31,
2020 2019
(Unaudited)

Research and development $ 863 $ 690
General and administrative 696 667
Total share-based compensation expense 1,559 1,357

~~NOTE 9 - RESEARCH AND DEVELOPMENT~~

Year ended
December 31,
2020 2019
(Unaudited)

Depreciation $ 123 $ 166
Share-based payment 1,195 690
Payroll and related expenses 5,029 4,953
Subcontracted work and consulting 82 194
Equipment 390 635
Rent and office maintenance 359 377
Travel and other expenses 66 141
7,244 7,156

~~NOTE 10 - GENERAL AND ADMINISTRATIVE~~

Year ended
December 31,
2020 2019
(Unaudited)

Payroll and related expenses $ 1,556 $ 1,219
Share-based payment 696 667
Professional services 555 736
Travel expenses 26 112
Rent and office maintenance 120 126
Depreciation 67 17
Marketing 7 13
3,027 2,890

~~F-46~~

~~Rail Vision Ltd.~~

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 11 - TAXES ON INCOME~~

~~The Company is subject to income taxes under Israeli tax laws:~~

~~The Israeli corporate tax rate was 23% in 2020, 2019 and 2018.~~

~~As of December 31, 2020, the Company generated net operating losses of approximately $25,902, which may be carried forward and offset against taxable income in the future for an indefinite period.~~

The Company is still in its development stage and has not yet generated revenues. Therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts.

December 31,
2020 2019
(Unaudited)
Deferred tax assets:

Deferred taxes due to carryforward losses $ 5,957 $ 5,380

Valuation allowance (5,957 ) (5,380 )
Net deferred tax asset -- --

~~The Company has no uncertain tax positions and foreign sources of income.~~

~~NOTE 12 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES~~

Parties considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

	A.	A.	Transactions:

Year ended
December 31,
2020 2019
(Unaudited)

Professional services $ 69 $ 90

Severance payment to former Company CEO (2) $ 234 --

~~F-47~~

SCHEDULE OF RELATED PARTY TRANSACTIONS

~~Rail Vision Ltd.~~

	2022		2021		2020
	Year ended December 31,
	2022		2021		2020
	USD in thousands
Subcontracted work and consulting		748		823		672
Share-based payments to service provider		56		118		67
Total transactions		804		941		739

~~Notes to Financial Statements~~
~~(U.S. dollars in thousands, except share and per share data)~~

~~NOTE 12 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES (Cont.)~~

Balances:

December 31,
2020 2019
(Unaudited)

Other accounts payable $ 6 $ 8

Deferred revenues (1) $ 632 --

Severance payment to former Company CEO (2) $ 234 --

	2022		2021
	As of December 31,
	2022		2021
	USD in thousands
Other accounts payable		63		75
Total balances		63		75

~~(1)~~

~~See Notes 10C and D above.~~F-23

~~(2)~~

~~This amount is in respect of a severance payment for the termination of a service agreement with the former Company CEO, which was paid in January 2021.~~

~~NOTE 13 - LEASES~~

As of December 31, 2020, the Company leases office space, which has remaining terms of approximately 3.67 years (which include options to extend the lease for additional 3 years) and a discount rate of 5%. The period which is subject to an option to extend the lease is included in the lease term as it is reasonably certain that the option will be exercised. The Company has no finance leases.

~~For the year ended December 31, 2020 and 2019, operating lease expenses recorded in the Statements of Comprehensive Loss were $373 and $388, respectively.~~

~~Future minimum lease payment for all existing operating lease as of December 31, 2020 are as follows:~~

2021 345
2022 433
2023 433
2024 281
Total future lease payments 1,492
Less imputed interest (132 )
Total lease liability balance 1,360

~~F-48~~

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American Depositary Shares each representing 5	FRSX	Nasdaq Capital Market
Ordinary Shares, no par value (1)
~~Ordinary Shares, no par value (2)~~

PART I			1
	~~ITEM 1.~~	~~IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS~~		1

ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		1

ITEM 2.	~~ITEM 2.~~	OFFER STATISTICS AND EXPECTED TIMETABLE		1

ITEM 3.	~~ITEM 3.~~KEY INFORMATION	~~KEY INFORMATION~~		1
		A. [Removed and reserved].		1
		B. Capitalization and Indebtedness		1
		C. Reasons for the Offer and Use of Proceeds		1
		D. Risk Factors		1

ITEM 4.	~~ITEM 4.~~	INFORMATION ON THE COMPANY		19
		A. History and Development of the Company		19
		B. Business Overview		20
		C. Organizational Structure		3447
		D. Property, Plants and Equipment		3447

ITEM 4.A	~~ITEM 4.A~~	UNRESOLVED STAFF COMMENTS		3447

ITEM 5.	~~ITEM 5.~~	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		3548
		A. Operating Results		3548
		B. Liquidity and Capital Resources		3951
		C. Research and Development, Patent and Licenses, etc.		4153
		D. Trend Information.		4153
		E. ~~Off-Balance Sheet Arrangements~~Critical Accounting Estimates		4153
		~~F. Tabular Disclosure of Contractual Obligations~~		41

ITEM 6.	~~ITEM 6.~~	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		4254
		A. Directors and Senior Management		4254
		B. Compensation		4557
		C. Board Practices		4658
		D. Employees		5971
		E. Share Ownership		6072

	ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		6173
		A. Major Shareholders		6173
		B. Related Party Transactions		6376
		C. Interests of Experts and Counsel		6476

	ITEM 8.	FINANCIAL INFORMATION		6476
		A. Consolidated Statements and Other Financial Information		6476
		B. Significant Changes		6477

	ITEM 9.	THE OFFER AND LISTING		6477
		A. Offer and Listing Details		6477
		B. Plan of Distribution		6577
		C. Markets		6577
		D. Selling Shareholders		6577
		E. Dilution		6577
		F. Expenses of the Issue		6577

ITEM 10.	ADDITIONAL INFORMATION		6577
		A. Share Capital		6577
		B. Memorandum and Articles of Association		6578
		C. Material Contracts		6578
		D. Exchange Controls		6678
		E. Taxation		6679
		F. Dividends and Paying Agents		7387
		G. Statement by Experts		7387
		H. Documents on Display		7487
		I. Subsidiary Information		7487
	J. Annual Report to Security Holders.			87

ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		7488

	ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		7588
		A. Debt Securities		7588
		B. Warrants and rights		7588
		C. Other Securities		7588
		D. American Depositary Shares		7588

PART II			89

~~PART II~~		77
	ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		7789

	ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		7789

	ITEM 15.	CONTROLS AND PROCEDURES		7790

ITEM 16.	[Reserved].

ITEM 16. A	AUDIT COMMITTEE FINANCIAL EXPERT		7790

	ITEM 16. B	CODE OF ETHICS		7890

	ITEM 16. C	PRINCIPAL ACCOUNTANT FEES AND SERVICES		7891

	ITEM 16. D	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		7891

	ITEM 16. E	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		7891

ITEM 16. F	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		91

ITEM 16. G	CORPORATE GOVERNANCE		92

ITEM 16. H	MINE SAFETY DISCLOSURE		94

ITEM 16.I	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.		94

PART III			94

	~~ITEM 16. F~~	~~CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT~~		78

	~~ITEM 16. G~~	~~CORPORATE GOVERNANCE~~		79

	~~ITEM 16. H~~	~~MINE SAFETY DISCLOSURE~~		80

~~PART III~~				81
	ITEM 17.	FINANCIAL STATEMENTS		8194

	ITEM 18.	FINANCIAL STATEMENTS		8194

ITEM 19.	EXHIBITS		94

	✓	Improves existing systems, functionality level up to level 2+

	✓	Software library and API for quick and simple integration

	✓	Can be customized per customer requirements

U.S. dollars	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Facility (1)		1,207,600		371,600		743,200		92,800		--
Cars Rental (2)		136,900		60,800		76,100		--		--
Development Agreement with Magna (3)		877,000		877,000		--		--		--
Total		2,221,500		1,309,400		819,300		92,800		--

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Emerging Growth Company	☒

	●
	●	general market, political and economic conditions in the countries in which we operate;

	●
	●	our ability to regain and effectively comply with the minimum bid requirements of Nasdaq;

	●	changes in our strategy;

	●
	●	the impact of the coronavirus, or COVID-19, pandemic, and resulting government actions on us; and

	●
	●	We have not generated any significant revenue from the sale of our current products and may never be profitable.

	●
	●	Our future success depends in part on our ability to retain our executive officers and to attract, retain and motivate other qualified personnel.

	●
	●	We depend entirely on the success of our current products in development, and we may not be able to successfully introduce these products and commercialize them.

	●
	●	We face business disruption and related risks resulting from the recent outbreak of the novel Coronavirus 2019, or the COVID-19 pandemic, which could have a material adverse effect on our business and results of our operations.

	●
	●	If we are unable to obtain and maintain effective intellectual property rights and proprietary rights for our products, we may not be able to effectively compete in our markets.

	●
	●	Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.


	*Risks Related to the Ownership of the ADSs or our Ordinary Shares*

	●
	●	If we are unable to comply with Nasdaq listing requirements, our ADSs could be delisted from Nasdaq, and as a result, we and our shareholders could incur material adverse consequences, including negative impact on our liquidity, our shareholders’ ability to sell shares and our ability to raise capital.

	●
	●	Holders of ADSs must act through the depositary to exercise their rights as our shareholders.

	●
	●	The Jumpstart Our Business Startups Act allows us to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and reduce the amount of information we provide in our reports filed with the Securities and Exchange Commission, which could undermine investor confidence in our company and adversely affect the market price of the ADSs or our Ordinary Shares.


	●	If we are unable to comply with Nasdaq minimum bid requirement, our ADSs could be delisted from Nasdaq, and as a result we and our shareholders could incur material adverse consequences, including a negative impact on our liquidity, our shareholders’ ability to sell securities and our ability to raise capital.

	*Risks Related Israeli Law and Our Incorporation, Location and Operations in Israel*

	●
	●	We are exposed to fluctuations in currency exchange rates.

	●
	●	Provisions of Israeli law and our articles of association may delay, prevent or otherwise impede a merger with, or acquisition of, our company, which could prevent a change of control, even when the terms of such transaction are favorable to us and our shareholders.

	●
	●	establish a sales, marketing, distribution and technical support infrastructure to commercialize our products;

	●
	●	seek to maintain, protect, and expand our intellectual property portfolio;

	●
	●	create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts.

	●
	●	establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products to support market demand for our products;

	●
	●	launching and commercializing products, either directly or with a collaborator or distributor;

	●
	●	addressing any competing technological and market developments;

	●
	●	identifying, assessing, acquiring and/or developing new products;

	●
	●	negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;

	●
	●	maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and

	●
	●	the cost of establishing commercial supplies of our products;

	●
	●	the cost and timing of establishing sales, marketing, and distribution capabilities; and

	●
	●	the terms and timing of any collaborative, licensing, and other arrangements that we may establish.

	●
	●	the mix of products and services that we sell during any period;