A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our business faces significant risks. You should carefully consider
all of the information set forth in this Annual Report on Form 20-F and in our other filings with the SEC, including the following risk
factors that we face and that are faced by our industry. Our business, financial condition or results of operations could be materially
and adversely affected by any of these risks. Additional risks and uncertainties not presently known to us or that we currently deem immaterial
also may have similar adverse effects on us. This report also contains forward-looking statements that involve risks and uncertainties.
Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors, including
the risks described below and elsewhere in this Annual Report on Form 20-F and our other SEC filings. See “Forward-Looking Statements”
above.
Summary Risk Factors
Our business is subject to a number of risks of which you should be aware of before
making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this annual report. These
risks include, but are not limited to, the following:
• our success depends upon market acceptance of our products;
• if there is not sufficient demand for the procedures performed with our products, practitioner demand for our products could decline, resulting in unfavorable operating results;
• the success and continued development of our products depends, in part, upon maintaining strong relationships with physicians and other healthcare professionals;
• we rely heavily on our sales professionals to market and sell our products worldwide. If we are unable to hire, effectively train, manage, improve the productivity of and retain our sales professionals, our business will be harmed, which would impair our future revenue and profitability;
• the failure to attract and retain key personnel could adversely affect our business;
• the impact of the political, economic and military instability in Israel and the ongoing Israel-Hamas war and other conflicts in the region could impede our ability to operate and develop, manufacture and deliver products and components and harm our financial results;
• the impact of actual or threatened tariffs imposed on our products or their respective components;
• if we do not continue to develop and commercialize new products and identify new markets for our products and technologies, we may not remain competitive or expand beyond our historic customer base, and our revenues and operating results could suffer;
1
• product liability suits could be brought against us due to defective material or design or misuse of our products and could result in expensive and time-consuming litigation, payment of substantial damages and an increase in our insurance rates;
• our products and operations are subject to extensive and continuing regulatory compliance obligations in the United States and other countries, and failure to meet those obligations could adversely harm our business;
• we outsource almost all of the manufacturing of our products to a small number of manufacturing subcontractors. If our subcontractors’ operations are interrupted or if our orders exceed our subcontractors’ manufacturing capacity, we may not be able to deliver our products on time;
• our operating costs and business operations could be adversely affected by climate-related events and increasing regulatory requirements and security;
• if we are unable to protect our intellectual property rights, our competitive position could be harmed. Our success and ability to compete depends in large part upon our ability to protect our proprietary technology;
• third parties have commenced and may in the future commence litigation against us claiming that our products infringe upon their patents or other intellectual property rights;
• if we fail to obtain and maintain necessary FDA clearances for our products, if clearances for future products and proposed indications are delayed or not issued, if we or any of our third-party suppliers or manufacturers fail to comply with applicable regulatory requirements, or if there are regulatory changes, our commercial operations could be harmed; and
• as a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and Nasdaq corporate governance rules and are permitted to file less information with the SEC than U.S. domestic public companies, which may limit the information available to holders of our ordinary shares.
Risks Related to Our Business and Industry
Our success depends upon market acceptance of our products.
We design, develop, manufacture and commercialize innovative, minimally invasive and
non-invasive surgical/medical products. We have developed products that apply our minimally invasive technology in plastic surgery, dermatology,
gynecology and ophthalmology. We were established in 2008 and have expanded our product offerings to include fourteen product platforms:
BodyTite, Optimas, Votiva, Contoura, Triton, EmbraceRF, EvolveX, Evoke, Morpheus8,
EmpowerRF, Define, Envision, IgniteRF and OptimasMAX. In 2025 we introduced
two new, Luxora and ApexRF. If we fail to significantly penetrate current or new markets with
our products or fail to properly manage the manufacturing and distribution of multiple products, our business, financial condition and
results of operations could be negatively impacted. The success of our products depends on adoption and acceptance of our technology by
user doctors. The rate of adoption and acceptance may be affected adversely by perceived issues relating to quality and safety, doctors’
reluctance to invest in new technologies, the cost of competitive treatments and widespread acceptance of other technologies. Our business
strategy is based, in part, on our expectation that we will continue to make novel product introductions and upgrades that we can sell
to new and existing users of our products and that we will be able to identify new markets for our existing technologies.
To increase our revenues, we must:
• continue to further penetrate our existing historic customer base, including plastic and facial surgeons, aesthetic surgeons, dermatologists and obstetricians/gynecologists, or OB/GYNs, and drive recurring revenues by demonstrating to our customers that our products or product upgrades would be an attractive revenue-generating addition to their practices;
• expand our customer base to include new customers, such as ear, nose and throat physicians, or ENTs, ophthalmologists, general practitioners and aesthetic clinicians;
• leverage our existing technology to expand into new minimally invasive and non-invasive applications that either add to or significantly improve our current products;
• increase our sales presence to target and expand our market globally;
• actively pursue business development opportunities, including potential acquisitions and strategic partnerships to augment our product and technology portfolio; and
• expand and maintain our intellectual property and patent portfolio.
2
In addition, the surgical aesthetic solutions market is highly competitive and dynamic
and marked by rapid and substantial technological development and product innovations. Demand for our products could be diminished by
equivalent or superior products and technologies offered by competitors.
If there is not sufficient demand for the procedures performed with
our products, practitioner demand for our products could decline, resulting in unfavorable operating results.
Continued expansion of the global market for energy-based aesthetic procedures is a
material assumption of our business strategy. Most procedures performed using our products are not reimbursable through government or
private health insurance and are therefore elective procedures, the cost of which must be borne by the patient. The decision to utilize
our products may therefore be influenced by a number of factors, including:
• consumer disposable income and access to consumer credit;
• the cost of procedures performed using our products;
• the cost, safety and effectiveness of alternative treatments, including treatments which are not based upon laser or other energy-based technologies and treatments which use pharmaceutical products;
• the success of our sales and marketing efforts;
• the education of our customers and patients on the benefits and uses of our products compared to competitors’ products and technologies; and
• consumer confidence, which may be impacted by economic and political conditions.
If, as a result of these factors, there is not sufficient demand for the procedures
performed with our products, practitioner demand for our products could decline, which could have a material adverse effect on our results
of operations.
The success and continued development of our products depends, in
part, upon maintaining strong relationships with physicians and other healthcare professionals.
If we fail to maintain our working relationships with physicians and other ancillary
healthcare professionals, our products may not be developed and marketed in line with the needs and expectations of the professionals
who use and support our products. If we are unable to maintain these strong relationships or form new relationships with physicians and
other healthcare professionals beyond our historic customer base, the development and marketing of our products could suffer, which could
have a material adverse effect on our business, financial condition and results of operations.
We rely heavily on our sales professionals to market and sell our
products worldwide. If we are unable to hire, effectively train, manage, improve the productivity of and retain our sales professionals,
our business will be harmed, which would impair our future revenue and profitability.
Our success largely depends on our ability to hire, train, manage and improve the productivity
levels of our sales professionals worldwide. We train our existing and recently recruited sales professionals to better understand our
existing and new product technologies and how they can be positioned against our competitors’ products and increase the revenue
of our customers. It may take time for the sales professionals to become productive, and there can be no assurance that recently recruited
sales professionals will be adequately trained in a timely manner, that our direct sales productivity will improve or that we will not
experience significant levels of attrition in the future.
Product liability suits could be brought against us due to defective
material or design or misuse of our products and could result in expensive and time-consuming litigation, payment of substantial damages
and an increase in our insurance rates.
Our systems are inherently complex in design and require ongoing scheduled maintenance.
Our products may malfunction when used by our customers. Additionally, if our products are alleged to be defectively designed, manufactured
or labeled, contain defective components or are misused, we may become subject to substantial and costly litigation by our customers or
their patients. Misusing our products or failing to adhere to operating guidelines could cause burns, scarring and tissue irregularities.
In addition, if our operating guidelines are found to be inadequate, we may be subject to liability. Furthermore, our products are sold
in jurisdictions that vary as to the specific qualifications or training required for purchasers or operators of the products. There is
a risk that our products may be purchased or operated by physicians with varying levels of training and, in some cases, by practitioners,
such as nurses, chiropractors and technicians, who may not be adequately trained. The purchase and use of our products by non-physicians
or persons who lack adequate training may result in the misuse of our products, which could give rise to adverse treatment outcomes. If
we are unable to prevent product malfunctions or misuse, or if we fail to do so in a timely manner, we could also experience, among other
things, delays in the recognition of revenues or loss of revenues, particularly in the case of new products; legal actions by customers,
patients and other third parties, which could result in substantial judgments against us or settlement costs; action by regulatory bodies;
and diversion of development, engineering and management resources.
3
Product liability claims could divert management’s attention from our core business,
be expensive to defend and result in sizable damage awards against us. In addition, such potential adverse effects may cause a significant
increase in the premiums under our insurance policies. Further, the coverage limits of our product liability insurance policies may not
be adequate to cover future claims. A successful claim brought against us in excess of, or outside of, our insurance coverage could have
a material adverse effect on our business, financial condition and results of operations. Even if unsuccessful, such a claim could nevertheless
have an adverse impact on us, due to damage to our reputation and diversion of management resources.
We may have difficulty managing our growth, which could limit our
ability to increase sales and cash flow.
Since inception, we have experienced significant growth in our operations, and the number
of our employees has significantly increased since inception. This growth has placed significant demands on our management, as well as
our financial and operational resources. In order to achieve our business objectives, we will need to continue to grow our business. Continued
growth would increase the challenges involved in:
• implementing appropriate operational and financial systems;
• expanding our sales and marketing infrastructure and capabilities;
• ensuring compliance with applicable Food and Drug Administration, or FDA, and other regulatory requirements;
• providing adequate training and supervision to maintain high quality standards; and
• preserving our culture and values.
If our growth continues, it will require that we continue to develop and improve our
operational, financial and other internal controls. If we cannot scale and manage our business appropriately, we will not realize our
projected growth and our financial results will suffer.
The failure to attract and retain key personnel could adversely
affect our business.
Our success also will depend in large part on our ability to continue to attract, retain
and motivate qualified and highly skilled personnel. Competition for highly skilled employees is intense. We may be unable to continue
to attract and retain sufficient numbers of highly skilled employees. Our inability to attract and retain additional key employees or
the loss of one or more of our current key employees could adversely affect our business, financial condition and results of operations.
Our financial results may fluctuate from quarter to quarter.
We base our production, inventory and operating expenditure levels on anticipated orders.
If orders are not received when expected in any given quarter, expenditure levels could be disproportionately high in relation to sales
for that quarter. A number of additional factors, over which we have limited control, may contribute to fluctuations in our financial
results, including:
• customer adoption of our products;
• the willingness of individuals to pay directly for aesthetic medical procedures in light of the lack of reimbursement by third-party payors;
4
• continued availability of attractive equipment leasing terms for our customers, which may be negatively influenced by interest rate increases;
• the impact of the political, economic and military instability in Israel and the ongoing Israel-Hamas war;
• changes in our ability to obtain and maintain regulatory approvals and maintain compliance with applicable regulatory requirements;
• actual or perceived breaches of, or failures relating to, privacy, data protection or data security;
• positive or negative coverage in the media or clinical publications of our products or products of our competitors or industry;
• increases in the length of our sales cycle;
• performance of our independent distributors;
• delays in, or failure of, product and component deliveries by our subcontractors and suppliers;
• the impact on our operating costs and business operations by climate-related events and increasing regulatory requirements and security; and
• the impact of global health crises on our business and general economic conditions.
We rely on a limited number of suppliers, contract manufacturers
and logistics partners for our products. A loss of any of these partners or delays at transition points such as harbors, straights and
ports could negatively affect our business.
We rely on a limited number of contract manufacturers, suppliers and logistics providers
to manufacture and transport our products. Our reliance on a limited number of contract manufacturers for our products increases our risks,
since we do not currently have alternative or replacement contract manufacturers beyond these key parties. In the event of interruption
from any of our contract manufacturers or suppliers, we may not be able to increase capacity from other sources or develop alternate or
secondary sources without incurring material additional costs and substantial delays. Furthermore, our primary facilities are located
in Israel. Thus, our business could be affected if one or more of our suppliers, manufacturers or logistics partners are impacted by a
natural disaster, an epidemic, the ongoing Israel-Hamas war and other conflicts in the region, or other interruption at a particular location.
Interruptions in the development, manufacturing, and shipment of our products, could adversely impact our revenue, gross margins and operating
results. Such interruptions may be due to, among other things, temporary closures of the facilities our contract manufacturers, and other
vendors in our supply chain; restrictions or delays on transport or the import/export of goods and services from certain ports
and harbors that we and our logistics partners use; and local quarantines or work stoppages.
Competition among providers of energy-based devices for the medical
aesthetics market is characterized by rapid innovation. If we do not continue to develop and commercialize new products and identify new
markets for our products and technologies and expand beyond our historic customer base, we may not remain competitive, and our revenues
and operating results could suffer.
The industry in which we operate is subject to continuous technological development
and product innovation. If we do not continue to be innovative in the development of new products and applications, our competitive position
will likely deteriorate as other companies successfully design and commercialize new products and applications. While we attempt to protect
our products through patents and other intellectual property, there are few barriers to entry that would prevent new entrants or existing
competitors from developing products that compete directly with ours. We expect that any competitive advantage we may enjoy from our current
and future innovations may diminish over time, as companies successfully respond to our, or create their own, innovations. Accordingly,
our success depends in part on developing new and innovative applications of laser and other energy-based technology and identifying new
markets for and applications of existing products to new customers and technology. Our future growth also depends, in part, on our ability
to expand beyond our historic customer base to ENTs, ophthalmologists, general practitioners and aesthetic clinicians. If we are unable
to develop and commercialize new products and identify and penetrate new markets for our products and technology, our products and technology
could become obsolete and our revenues and operating results could be adversely affected.
5
Our long-term growth depends on our ability to enhance our products,
expand our indications, and develop and commercialize additional products.
It is important to our business that we continue to enhance our products and develop
and introduce new products. Developing products is expensive and time-consuming. The success of any new product offering or product enhancement
to our current products will depend on several factors, including our ability to:
• properly identify and anticipate physician and patient needs;
• develop and introduce new products and product enhancements in a timely manner;
• avoid infringing upon the intellectual property rights of third parties;
• demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;
• obtain the necessary regulatory clearances or approvals for expanded indications, new products or product modifications; and
• be fully FDA-compliant with marketing of new devices or modified products.
If we are not successful in expanding our indications and developing and commercializing
new products and product enhancements, our ability to increase our revenue may be impaired, which could have a material adverse effect
on our business, financial condition and results of operations.
Our inability to compete effectively with our competitors may prevent
us from achieving significant market penetration or improving our operating results.
Our products compete against products offered by public companies, including AbbVie
Inc., Apyx Medical Corporation, Venus Concept Inc., BTL Aesthetics, Inc. and Sisram Medical Ltd, as well as by private companies, such
as Cutera, Inc., Cynosure LLC, Lumenis Ltd., and Candela Medical Inc. Competition with these companies could result in reduced prices
and profit margins and loss of market share, any of which could harm our business, financial condition and results of operations. We also
face competition from medical aesthetic products, including Botox®, hyaluronic acid injections and collagen injections, and aesthetic
procedures, such as face lifts, liposuction, sclerotherapy, electrolysis, chemical peels and laser procedures, which may offer a broader
range of medical and non-medical products and technologies that are more readily available to customers at a lower cost. Our ability to
compete effectively depends upon our ability to distinguish the Company and our products from our competitors and their products and includes
the following factors:
• product performance;
• product pricing;
• product safety;
• intellectual property protection;
• quality of customer support;
• success and timing of new product development and introductions; and
• development of successful distribution channels.
Furthermore, potential customers also may need to recoup the cost of expensive products
that they already have purchased from our competitors and may decide not to purchase our products or to delay such purchases. If we are
unable to achieve continued market penetration, we will be unable to compete effectively, and our business will be harmed.
6
The introduction of disruptive technological breakthroughs, whether
pharmaceutical or other newer therapeutic solutions, may present an additional threat to our success in our target markets.
The medical technology industry is intensely competitive. Pharmaceutical alternative
treatments compete vigorously with traditional laser and other energy-based procedures, such as those carried out with our products. Some
pharmaceutical companies, academic and research institutions or others have or may in the future develop new, non-invasive or minimally
invasive therapies that could be considered more effective or more convenient, or less expensive than our current or future products.
The introduction of new technologies, along with these potential new therapies, could result in increased competition or make our products
obsolete. Moreover, we could expand our business to include new, non-invasive or minimally invasive therapies which may compete with our
current product offerings. We may not be able to respond effectively to technological changes and emerging industry standards or to successfully
identify, develop or support new technologies or enhancements to existing products in a timely and cost-effective manner. Any such developments
could have a material adverse effect on our business, financial condition and results of operations.
Our markets are characterized by evolving technological standards
and changes in customer requirements, and we may not be able to react to such changes and introduce new products in a timely manner.
The aesthetics market is characterized by extensive research and development, technological
change, frequent modifications and enhancements, innovations, new applications, evolving industry standards, and changes in customer requirements.
Our future growth depends, in part, on our ability to introduce new products on a timely basis, as well as to introduce other product
enhancements that address the evolving customer needs. This requires us to design, develop, manufacture, assemble, test, market and support
these new products or product enhancements on a timely and cost-effective basis. It also requires continued substantial investment in
research and development.
During each stage of the research and development process, we have in the past and may
again in the future encounter obstacles that could delay development and consequently increase our expenses. This may ultimately
force us to abandon a potential product in which we have already invested substantial time and resources. Technologies in development
could prove to be more complex than initially understood or not scientifically or commercially viable. Even if we develop new products
and technologies ahead of our competitors, we will still need to obtain the requisite regulatory approvals for such products, including
from public agencies, such as the FDA, before we can commercially distribute them. We cannot assure you that we will successfully identify
new technological opportunities, develop and bring new or enhanced products to market, obtain sufficient patent or other intellectual
property protection for such new or enhanced products, or obtain the necessary regulatory approvals in a timely and cost-effective manner,
or, if such products are introduced, that those products will achieve market acceptance. Our failure to do so, or to address the technological
changes and challenges in our markets, could have a material adverse effect on our business, financial condition and results of operations.
We rely on our own direct sales force to sell our products in certain
territories, which may result in higher fixed costs than our competitors and may slow our ability to reduce costs in the face of a sudden
decline in demand for our products.
We rely on our own direct sales force to market and sell our products in certain territories.
Some of our competitors rely predominantly on independent sales agents and third-party distributors. A direct sales force may subject
us to higher fixed costs than those of companies that market competing products through independent third parties, due to the costs that
we will bear associated with employee benefits, and training and managing sales personnel. As a result, we could be at a competitive disadvantage.
Additionally, these fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our products, which
could have a material adverse effect on our business, financial condition and results of operations.
To successfully market and sell our products internationally, we
must address many issues with which we have little or no experience.
International (non-U.S.) sales accounted for approximately 46% of our total revenue
for the year ended December 31, 2025. We believe that an increasing percentage of our future revenue will come from international sales
as we continue to expand our operations and develop opportunities in additional international territories. We currently depend on third-party
distributors and a direct sales team in certain regions to sell our products internationally. If these distributors or direct sales personnel
underperform, we may be unable to increase or maintain our level of international revenue. We will need to attract additional distributors
to grow our business and expand the territories in which we sell our products. Distributors may not commit the necessary resources to
market and sell our products to the level of our expectations. If current or future distributors do not perform adequately, or we are
unable to locate distributors in particular geographic areas, we may not realize expected international revenue growth. Additionally,
we expect to expand our direct sales force in the United States, Canada, Europe and Asia. If we are unable to do so successfully, our
revenue and revenue growth from international operations will be adversely affected.
International sales are subject to a number of risks, including:
• difficulties in staffing and managing our foreign operations;
7
• difficulties in penetrating markets in which our competitors’ products are more established;
• reduced protection for intellectual property rights in some countries;
• export restrictions, trade regulations and foreign tax laws;
• fluctuating foreign currency exchange rates;
• obtaining and maintaining foreign certification and compliance with other regulatory requirements;
• customs clearance and shipping delays; and
• political and economic instability.
If one or more of these risks were realized, it could require us to dedicate significant
resources to remedy the situation, and if we are unsuccessful at finding a solution, our revenue may decline.
Political, economic and military conditions in Israel could impede
our ability to operate and develop, manufacture and deliver products and components and harm our business and financial results.
Our principal executive offices and research and development facilities as well as our
third-party manufacturers are located in Israel. In addition, all of our subcontractors are located in Israel. Accordingly, political,
economic and military conditions in Israel and the surrounding region could directly affect our business.
In October of 2023, Hamas terrorists infiltrated Israel’s southern border from
the Gaza Strip and conducted a series of attacks on civilian and military targets. Following the attacks, Israel’s security cabinet
declared war against Hamas and commenced a military campaign. Since the commencement of these events, there have been additional active
hostilities, including with Hezbollah in Lebanon, the Houthi movement which controls parts of Yemen, and with Iran. During November 2024,
a ceasefire in Lebanon was declared. During January 2025, Israel and Hamas entered into a ceasefire agreement, which remained in effect
until March 18, 2025, when hostilities resumed. As of October 9, 2025, Israel and Hamas entered into a renewed ceasefire agreement calling
for a permanent end of the war. However, there are no assurances that such agreement will hold. In addition, in June 2025, a significant
escalation occurred in the direct confrontation with Iran and the Houthis Movement. Following an extensive Israeli preemptive strike
against nuclear sites and high-ranking officials in Tehran, Iran and the Houthis launched massive swarms of hundreds of ballistic missiles
and UAVs. These attacks resulted in casualties and widespread damage to residential buildings and civilian infrastructure across several
areas in Israel. The physical impact on Israel's infrastructure was substantial, with authorities recording damage to strategic assets,
including energy-related facilities, medical infrastructure and Israel’s national airport.
The ongoing and revived hostilities in the region, could prevent or delay shipments
of our products, harm our operations and product development and cause our sales to decrease. In the event that the hostilities disrupt
the ongoing operation of our facilities or the airports and seaports on which we depend to import and export our supplies and products,
our operations may be materially adversely affected. Armed conflict in the region has caused some Israeli companies to experience delays
to clinical trials and other operational milestones. Similar disruptions could impact us and delay our timelines.
The conflict could cause situations where applicable foreign regulatory bodies, such
as the FDA, could not be able to visit our third-party manufacturing facilities in Israel in order to review, causing delays. The hostilities
could also 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.
Several of our employees are subject to military reserve service in the IDF and have
been and may be called to serve. Since October 7, 2023 and as of the date of this Annual Report, 6 of our employees served in active duty.
Military reserve service call ups that result in absences of personnel for an extended period of time may materially and adversely affect
our business, prospects, financial condition and results of operations.
8
Moreover, political uprisings and conflicts in various countries in the Middle East
are affecting the political stability of those countries. This instability has raised concerns regarding security in the region and the
potential for armed conflict. Such instability may lead to deterioration in the political and trade relationships that exist between the
State of Israel and certain other countries. Any armed conflicts, terrorist activities or political instability in the region could adversely
affect business conditions, could harm our results of operations and could make it more difficult for us to raise capital. Parties with
whom we do business may be disinclined 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. 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. Actions by international judicial bodies
or other international forums could also influence the global perception of Israel and Israeli companies and may lead to sanctions or
other restrictive measures against Israeli companies and academic institutions, which could negatively affect our operations and collaborations.
Further, there have been travel advisories imposed as related to travel to Israel, and
restriction on travel, or delays and disruptions as related to imports and exports may be imposed in the future. An inability to receive
supplies and materials, shortages of materials or difficulties in procuring our materials, among others, may adversely impact our ability
to commercialize and manufacture our product candidates and products in a timely manner. This could cause a number of delays and/or issues
for our operations, including delay of the review of our product candidates by regulatory agencies, which in turn would have a material
adverse impact on our ability to commercialize our product candidates. Although the resulting sanctions and any related market disruptions
are impossible to predict, they could be substantial, particularly if current or new sanctions continue for an extended period of time
or if geopolitical tensions result in expanded military operations on a global scale. See “Item 3. Key Information – D. Risk
Factors – Risks Related to our Operations in Israel.”
We have limited business in Russia which pose some degree of sanctions
risk that cannot be entirely eliminated.
We have a long-standing distribution contract with a Russian distributer which distributes
our products in the country and other neighboring countries. Sanctions against Russia across various key jurisdictions, including
the United States, are extremely dynamic and complex and usually apply on a strict liability basis, and sometimes may expose non-U.S.
parties to liability or imposition of market restrictions even in the absence of jurisdictional grounds or touchpoints with the country
of the governmental authority imposing the sanctions. Accordingly, in the current environment, Russia-related dealings may entail some
degree of exposure to sanctions risks that cannot be entirely eliminated.
We outsource almost all of the manufacturing of our
products to a small number of manufacturing subcontractors. If our subcontractors’
operations are interrupted or if our orders exceed our subcontractors’
manufacturing capacity, we may not be able to deliver our products on time.
We outsource almost all of the manufacturing of our products to three subcontractors
located in Israel, two of which we are substantially dependent on, while we manufacture our laser and intense pulsed light, or IPL, handpieces
in-house in Israel. These subcontractors have limited manufacturing capacity that may be inadequate if our customers place orders for
unexpectedly large quantities of our products. In addition, because our subcontractors are located in Israel, they on occasion may feel
the impact of potential economic or political instability in the region, including the ongoing Israeli-Hamas war. If the operations of
one or more of our subcontractors were halted or limited, even temporarily, or if they were unable or unwilling to fulfill large orders,
we could experience business interruption, increased costs, damage to our reputation and loss of our customers. In addition, finding new
subcontractors that meet our manufacturing requirements, comply with regulatory requirements, and are ISO certified could take several
months.
Future changes to U.S. income tax or trade policies impacting multi-national
companies could materially affect our financial condition and results of operations.
In recent years, the U.S. government has instituted or proposed changes to international
trade policy through the renegotiation, and potential termination, of certain existing bilateral or multilateral trade agreements and
treaties with, and the imposition of tariffs on, a wide range of products and other goods from China and other countries. Given our contract
manufacturing and logistic providers in those countries, policy or regulations changes in the United States or other countries present
particular risks for us.
9
New or increased tariffs could adversely affect many of our products. There also are
risks associated with retaliatory tariffs and resulting trade wars. We cannot predict future trade policy and regulations in the United
States and other countries, the terms of any new or renegotiated trade agreements or treaties, or tariffs and their impact on our business.
An escalated trade war could have a significant adverse effect on world trade and the world economy. To the extent that trade tariffs
and other restrictions imposed by the United States or other countries increase the price of, or limit the amount of, our products or
components or materials used in our products imported into the United States or other countries, or create adverse tax consequences, the
sales, cost, or gross margin of our products may be adversely affected and the demand from our customers for products and services may
be diminished. Uncertainty surrounding international trade policy and regulations as well as disputes and protectionist measures could
also have an adverse effect on consumer confidence and spending. If we deem it necessary to alter all or a portion of our activities or
operations in response to such policies, agreements, or tariffs, our capital and operating costs may increase.
Components used in our products are complex in design, and defects
may not be discovered prior to shipment to customers, which could result in warranty obligations, reducing our revenue and increasing
our costs.
In manufacturing our products, we and our subcontractors depend upon third-party suppliers
for various components. Many of these components require a significant degree of technical expertise to produce. If our suppliers fail
to produce components to specification, or if the suppliers, our subcontractors, or we, use defective materials or workmanship in the
manufacturing process, the reliability and performance of our products will be compromised.
If our products contain defects that cannot be repaired easily and inexpensively, we
may experience:
• loss of customer orders and delay in order fulfillment;
• damage to our brand reputation;
• increased cost of our warranty program due to product repair or replacement;
• inability to attract new customers;
• diversion of resources from our manufacturing and research and development departments into our service department;
• product recalls; and
• legal action.
The occurrence of any one or more of the foregoing could materially harm our business,
financial condition and results of operations.
We and our manufacturing subcontractors depend upon third-party
suppliers, making us vulnerable to supply shortages, price fluctuations or other degradations in performance of these suppliers, which
could harm our business and financial condition.
Many of the components that comprise our products are currently manufactured by a limited
number of suppliers. Although each of our components can be obtained from more than one supplier, we do not have the ability to manufacture
the components we outsource. Additionally, our subcontractors rely on a limited number of suppliers, or in some cases, one supplier, for
some of the materials and components used in our products. If our subcontractors were to lose such suppliers, there can be no assurance
that they will be able to identify or enter into agreements with alternative suppliers on a timely basis on acceptable terms, if at all,
which could cause interruptions in their operations. If any of these third-party suppliers fails to adequately perform, our revenue and
profitability could be adversely affected. A supply interruption or an increase in demand beyond current suppliers’ capabilities
could harm our ability to manufacture our products until we identify and qualify a new source of supply, which may be a lengthy process.
There is a risk that our suppliers will not always act consistently with our best interests,
and may not always supply goods that meet our requirements. Any interruption in the supply of components or materials, or our inability
to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability
to meet the demand of our customers, which would have an adverse effect on our business, financial condition and results of operations.
Transitioning to a new supplier could be time-consuming and expensive, may result in
interruptions in our operations and product delivery, could affect the performance specifications of our products or could require that
we modify the design of certain product systems. If a change in manufacturer results in a significant change to any product, a new 510(k)
clearance from the FDA or similar international regulatory authorization may be necessary before we implement the change, which could
cause substantial delays.
10
Disruptions or interruptions to our suppliers could occur for many reasons, including
fire, floods, hurricanes, typhoons, droughts, tsunamis, volcanoes, earthquakes, disease or other similar natural disasters, unplanned
maintenance or other manufacturing problems, labor shortages, power outages or shortages, telecommunications failures, strikes, transportation
interruption, government regulation, economic or political instability, terrorism or other extraordinary events, including epidemics and
related travel restrictions. Such disruptions may continue over a sustained period and could cause direct injury or damage to our supplier’s
employees and property with significant indirect consequences to us. Alternative facilities with sufficient capacity or capabilities may
not be available, may cost substantially more or may take a significant time to start manufacturing, each of which could negatively affect
our ability to fill customer orders and our business and financial performance.
There exists potential for misuse of our products, over which we
have very little to no control, which could harm our reputation and our business.
In the United States, federal regulations allow us to sell our products to or on the
order of “licensed practitioners.” The definition of “licensed practitioners” varies from state to state. As a
result, depending on state law, our products may be purchased or operated by physicians or other licensed practitioners, including nurse
practitioners, chiropractors and technicians. Outside the United States, many jurisdictions do not require specific qualifications or
training for purchasers or operators of our products. Although we offer training on the use of our products, we do not supervise the treatments
performed. Purchase and use of our products by non-physicians may result in product misuse. The potential misuse of our products may result
in adverse treatment outcomes, which could harm our reputation and expose us to costly product liability litigation.
Our products include a limited time warranty which could result
in substantial additional costs to us should we fail to monitor product quality effectively.
We generally provide a 12-month warranty on our products. After the warranty period,
maintenance and support is provided on a service contract basis. If our products malfunction, warranty claims may become significant,
which could cause a significant drain on our resources and materially adversely affect our results of operations.
We forecast sales to determine requirements for our products and
if our forecasts are incorrect, we may experience either shipment delays or increased costs.
Our subcontractors keep limited materials and components on hand. To help them manage
their manufacturing operations and minimize inventory costs, we forecast anticipated product orders to predict our inventory needs up
to six months in advance and enter into purchase orders on the basis of these forecasts. If our business expands, our demand will increase
and our suppliers may be unable to meet our demand. If we overestimate our requirements, our subcontractors will have excess inventory,
and may transfer to us any increase in costs. If we underestimate our requirements, our subcontractors may have inadequate components
and materials inventory, which could interrupt, delay or prevent delivery of our products to our customers. Any of these occurrences would
negatively affect our financial performance and the level of satisfaction our customers have with our business.
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 professional employees,
in most cases within the framework of their employment agreements. These agreements prohibit our employees, if they cease working for
us, from competing directly with us or working for our competitors for a limited period. Under applicable employment laws, we may be unable
to enforce these agreements, in whole or in part, and it may be difficult for us to restrict our competitors from gaining the expertise
our former employees gained 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 which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information
or its intellectual property. If we cannot demonstrate that we would be harmed, we may be unable to prevent our competitors from benefiting
from the expertise of our former employees, which could materially adversely affect our business, results of operations and ability to
capitalize on our proprietary information.
The expense and potential unavailability of insurance coverage for
our customers and the Company could adversely affect our ability to sell our products and our financial condition.
Some of our customers and prospective customers are required to maintain liability insurance
to cover their operation and use of our products. Medical malpractice carriers are withdrawing coverage in certain states or substantially
increasing premiums. If this trend continues or worsens, our customers may discontinue using our products and, industry-wide, potential
customers may opt against purchasing light, laser or radio frequency-based products due to the cost or inability to procure insurance
coverage.
11
Outbreaks of contagious disease or similar public health threats
could materially and adversely affect our business, financial condition and results of operations.
Outbreaks of contagious disease or other adverse public health developments worldwide
could have a material adverse effect on our business, financial condition and results of operations. Outbreaks of contagious disease or
other adverse public health developments could affect our business in a number of ways, including but not limited to:
• Disruptions or restrictions on our employees’ ability to work effectively due to illness.
• Temporary closures or disruptions at our facilities or the facilities of our customers or suppliers could reduce demand for our products or affect our ability to timely meet our customer’s orders and negatively impact our supply chain.
• Outbreaks of contagious disease could cause delays or disruptions in our supply chain.
• The failure of third parties on which we rely to meet their respective obligations to us, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties, could have an adverse impact on our business, financial condition or results of operations.
• The impact of contagious disease or other adverse public health developments could also exacerbate other risks discussed elsewhere in this section of this report, any of which could have a material adverse effect on us.
Global economic and social conditions may adversely affect our business,
financial condition and results of operations.
Any negative conditions in the national and global economic environments may adversely
affect our business, financial condition and results of operations. During uncertain economic times and in tight credit markets, many
of our customers may experience financial difficulties or be unable or unwilling to borrow money to fund their operations, including obtaining
credit lines for purchasing our products, and may delay or reduce purchases or reduce the extent of their operations. The market for aesthetic
procedures and the market for our premium products can be particularly vulnerable to economic uncertainty, since the end-users of our
products may decrease the demand for our products when they have less discretionary income or determine not to spend their discretionary
income on aesthetic procedures. In addition, in many instances, the ability of our customers to purchase our products depends in part
upon the availability of obtaining financing at acceptable interest rates.
These factors could result in reductions in revenues from sales of our products, longer
sales cycles, difficulties in collection of accounts receivable, slower adoption of new technologies and increased price competition.
Payment by our customers of our receivables is dependent upon the financial stability of the economies of certain countries. In light
of the current economic state of many countries outside of the United States, we continue to monitor the creditworthiness of our customers
because weakness in the end-user market could negatively affect the cash flows of our customers who could, in turn, delay paying their
obligations to us. This would increase our credit risk exposure and cause delays in our recognition of revenues on current and future
sales to these customers.
Exchange rate fluctuations may decrease our earnings if we are not
able to hedge our currency exchange risks successfully.
A majority of our revenues and a substantial portion of our expenses are denominated
in U.S. dollars. However, a portion of our revenues and a portion of our costs, including personnel and some marketing and facilities
expenses, are incurred in NIS, Canadian dollars and Euros. Inflation in Israel or Europe may have the effect of increasing the U.S. dollar
cost of our operations in that country. If the U.S. dollar declines in value in relation to one or more of these currencies, it will become
more expensive for us to fund our operations in the countries that use those other currencies. To date, we have not found it necessary
to hedge the risks associated with fluctuations in currency exchange rates. In the future, if we do not successfully engage in hedging
transactions, our results of operations may be subject to losses from fluctuations in foreign currency exchange rates.
12
Cyber-attacks as well as improper disclosure or control of personal
information could result in liability and harm our reputation, which could adversely affect our business and results of operations. We
may face liability if we breach our obligations related to the protection, security, nondisclosure of confidential customer information
or disclosure of sensitive data or fail or are perceived to fail to comply with applicable data protection laws and regulations, or consumer
protection laws, regulations and standards.
Our business is heavily dependent on the security of our IT networks. Internal or external
attacks on any of those could disrupt the normal operations of our engagements, impede our ability to provide services to our customers,
and subject us to substantial liabilities or penalties in connection with any violation of applicable contracts, privacy laws or regulations.
Attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and
are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. Emerging technologies
such as generative artificial intelligence (AI) may be used by malicious actors to create more targeted cyber-attacks that may target
us or spread disinformation about us or our products. Furthermore, because the techniques used to obtain unauthorized access to, or to
sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these
techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended
period. While we take measures to protect the security of, and unauthorized access to, our systems, as well as the privacy of personal
and proprietary information, it is possible that our security controls of our systems, as well as other security practices we follow or
those systems of our customers which we rely upon, may not prevent the improper access to or disclosure of personally identifiable or
proprietary information.
The global data protection landscape is rapidly evolving, and we are or may become subject
to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security
of personal data, such as information that we may collect about individuals in the U.S. and abroad. . This evolution may create uncertainty
in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information,
necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost
of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure
by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our
processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third
parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
As our operations and business grow, we may become subject to or affected by new or
additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. We are subject to
U.S. federal and state laws regarding data privacy and security, including Section 5 of the Federal Trade Commission Act, or FTC Act,
the California Consumer Privacy Act, or the CCPA and the California Privacy Rights Act, or the CPRA. Further, the Health Insurance Portability
and Accountability Act of 1996, as amended, and regulations implemented thereunder, or HIPAA, imposes, among other things, certain standards
relating to the privacy, security, transmission and breach reporting of individually identifiable health information. Although we are
not currently subject to the rules and regulations promulgated under the Health Insurance Portability and Accountability Act of 1996,
as amended (“HIPAA”), even when HIPAA does not apply, according to the FTC, failing to take appropriate steps to keep consumers’
personal information secure may constitute unfair acts or practices in or affecting commerce in violation of the Federal Trade Commission
Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume
of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce
vulnerabilities. Federal and state consumer protection laws are increasingly being applied by the FTC, and states’ attorneys general
to regulate the collection, use, storage and disclosure of personal or personally identifiable information, through websites or otherwise,
and to regulate the presentation of website content.
Certain states have also adopted comparable privacy and security laws and regulations,
some of which may be more stringent than HIPAA. For example, the CCPA provides for civil penalties for violations, as well as a private
right of action for data breaches that is expected to increase data breach litigation. The CPRA imposes additional data protection obligations
on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk
data, and opt outs for certain uses of sensitive data. Both the CCPA and CRPA are generally more stringent than similar U.S. federal regulations.
Any liability from failure to comply with the CCPA and CPRA, as well as HIPPA, to the extent we may become subject to this act in the
future, if at all, could adversely affect our financial condition.
13
We are also subject to foreign data privacy and security laws, including the Israeli
Protection of Privacy Law of 1981 and the Privacy Protection Regulations (Data Security) 5777-2017, the European Union General Data Protection
Regulation, or GDPR, and the United Kingdom GDPR, or UK GDPR. The GDPR went into effect in May 2018 and imposes strict requirements for
processing the personal data of individuals within the European Economic Area, or the EEA. Companies that must comply with the GDPR face
increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and significant
penalties for non-compliance, including potential fines for noncompliance of up to €20 million or 4% of the annual global revenues
of the noncompliant company, whichever is greater. The UK GDPR mirrors the fines under the GDPR, e.g., fines up to the greater of €20
million (£17.5 million) or 4% of global turnover.
As supervisory authorities issue further guidance on personal data export mechanisms,
including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer
additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between
and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location
or segregation of our relevant systems and operations, and could adversely affect our financial results.
Although we work to comply with applicable laws, regulations and standards, our contractual
obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent
manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply. Any failure
or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other third parties to comply
with such requirements or adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability
to us, damage our reputation, and adversely affect our business and results of operations.
We may become subject to numerous foreign, federal, and state healthcare
statutes and regulations and our failure to comply could result in a material adverse effect to our business and operations.
Although none of our products or procedures using our products are currently covered
by any state or federal government healthcare programs, or any private commercial payor, we may become subject to foreign, federal, and
state laws intended to prevent healthcare fraud and abuse, including those that apply to all payors. These laws could include state anti-kickback
and false claims laws, which may extend to services reimbursable by any payor, as well as state consumer protection laws. Although we
currently are not subject to transparency laws, we may become subject to such laws in the future. Such laws could include requirements
to disclose payments to certain healthcare professionals and healthcare entities or disclosures related to sales and marketing, or that
could require healthcare professionals to provide notice to their patients of ownership or financial arrangements with manufacturers.
Efforts to ensure that our internal operations and business arrangements with third
parties comply with future applicable healthcare laws and regulations may involve substantial costs. These laws and regulations, among
other things, could constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements,
including financing programs, we may have with physicians or other potential purchasers of our products. It is possible that governmental
authorities may conclude that our business practices, including our arrangements with physicians, some of whom received stock options
as compensation for services provided, as well as fees for marketing to other physicians, are subject to and do not comply with current
or future statutes, regulations, agency guidance or case law involving applicable healthcare laws. If our current or future operations
are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant
civil, criminal and administrative penalties which could adversely affect our ability to operate our business and pursue our strategy.
We are subject to anti-bribery, and corruption and anti-money laundering
laws, including the U.S. Foreign Corrupt Practices Act, as well as export control laws, customs laws, sanctions laws and other laws governing
our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and
legal expenses, which could adversely affect our business, results of operations and financial condition.
As we continue to grow our international presence and global operations, we will be
increasingly exposed to trade and economic sanctions and other restrictions imposed by the United States, the European Union, the State
of Israel and other governments and organizations. The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies
and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations
of economic sanctions laws, export control laws, the U.S. Foreign Corrupt Practices Act, or the FCPA, and other federal statutes and regulations,
including those established by the Office of Foreign Assets Control, or OFAC. In addition, the U.K. Bribery Act of 2010, or the Bribery
Act, prohibits both domestic and international bribery, as well as bribery across both private and public sectors. An organization that
“fails to prevent bribery” by anyone associated with the organization can be charged under the Bribery Act unless the organization
can establish the defense of having implemented “adequate procedures” to prevent bribery. Under these laws and regulations,
as well as other anti-corruption laws, anti-money laundering laws, export control laws, customs laws, sanctions laws and other laws governing
our operations, various government agencies may require export licenses, may seek to impose modifications to business practices, including
cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs,
which may increase compliance costs, and may subject us to fines, penalties and other sanctions. A violation of these laws or regulations
would negatively affect our business, financial condition and results of operations.
14
We have implemented policies and procedures designed to ensure compliance by us and
our directors, officers, employees, representatives, consultants and agents with the FCPA, OFAC restrictions, the Bribery Act and other
export control, anti-corruption, anti-money-laundering and anti-terrorism laws and regulations. We cannot assure you, however, that our
policies and procedures are or will be sufficient or that directors, officers, employees, representatives, consultants and agents have
not engaged and will not engage in conduct for which we may be held responsible, nor can we assure you that our business partners have
not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to us or
even result in our being held liable for such conduct. Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control,
anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we
may be subject to other liabilities, which could have a material adverse effect on our business, financial condition and results of operations.
Our operating costs and business operations could be adversely affected
by climate-related events and increasing regulatory requirements and security.
The effects of climate change (such as drought, flooding, heat waves, wildfires, increased
storm severity, and sea level rise, etc.) could affect our ability to continue our operations and cause delays in our product development,
manufacturing and shipment, all of which could cause reputational harm or otherwise have an adverse effect on our business and operating
results. In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. Changing market dynamics,
global policy developments and the increasing frequency and impact of extreme weather events on critical infrastructure across different
countries could have the potential to disrupt our business, the business of our third-party suppliers and the business of our customers,
and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. We also expect to face
increasing regulatory requirements and regulatory scrutiny related to climate matters, resulting in higher associated compliance costs.
Failure to uphold, meet or make timely forward progress against our public commitments and goals related to climate action could adversely
affect our reputation with suppliers and customers, financial performance or the ability to recruit and retain talent.
Risks Related to Our Intellectual Property
If we are unable to protect our intellectual property rights, our
competitive position could be harmed. Our success and ability to compete depends in large part upon our ability to protect our proprietary
technology.
Our success and ability to compete depends in large part upon our ability to protect
our proprietary technology. We rely primarily upon a combination of patents and trademarks, as well as nondisclosure, confidentiality
and other contractual agreements to protect the intellectual property related to our brands, products and other proprietary technologies.
We generally apply for patents only in those countries where we intend to make, have
made, use, offer for sale, or sell products. To date, we have issued patents in the United States, which we consider to be our main target
market, and one issued patent in South Korea. Most of our revenues for the years ended December 31, 2025, 2024 and 2023 were derived from
the United States, where we have patent protection. We do not seek protection in all countries where we sell products and we may not accurately
predict all the countries where patent protection would ultimately be desirable. At this time, the countries in which we have not sought
patent protection, but intend to offer our products for sale, are not our main target markets. We acknowledge that competitors may use
our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export
otherwise infringing products to territories in which we do not have patent protection. Such activity may prevent us from protecting our
proprietary technology, and thus, may harm our competitive position.
15
Our patent portfolio consists of fifteen issued U.S. patents, one issued Korean patent
and eleven pending patent applications in the United States relating to our technology and products. Our pending and future patent applications
may not issue as patents or, even if issued, may not issue in a form that will be advantageous to us. Any issued patents may be challenged,
invalidated or legally circumvented by third parties. We cannot be certain that our patents will be upheld as valid, proven enforceable
or prevent the development of competitive products. Other companies may also design around technologies we have patented. Third parties
may have blocking patents that could prevent us from marketing our products or practicing our own patented technology. In addition, competitors
could purchase one of our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts,
design around our protected technology, or develop their own competitive technologies that fall outside of our intellectual property rights.
If our intellectual property is not adequately protected, our competitive position could be adversely affected, as could our business
and financial results.
The U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have made,
and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, foreign courts have
made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. We cannot predict
future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and foreign legislative
bodies.
We rely on a combination of patent and other intellectual property laws and confidentiality,
non-disclosure and assignment of inventions agreements, as appropriate, with our employees and consultants, to protect and otherwise seek
to control access to, and distribution of, our proprietary information. These measures may not be adequate to protect our technology from
unauthorized disclosure, third-party infringement or misappropriation. Parties may breach these agreements, and we may not have adequate
remedies for any breach. Also, the laws of certain countries in which we develop, manufacture or sell our products may not protect our
intellectual property rights to the same extent as the laws of the United States or Israel.
The aesthetics industry is highly competitive and marked by frequent litigation. New
patent applications may be pending or may be filed in the future by third parties covering technology that we currently use or may ultimately
use. Third parties have claimed, and may in the future claim, that our current or future products infringe their patent or other intellectual
property rights and may seek to prevent, limit or interfere with our ability to make, use, sell or import our products. Moreover, if such
a claim were to be decided adversely to us or if we settled such a claim on adverse terms, we could be forced to pay substantial damages,
to license the technology in question at high rates or to redesign or modify our products so as to avoid any infringement. Any of those
results could adversely affect our sales, margins and results of operations.
If it appears necessary or desirable, we may try to obtain licenses for those patents
or intellectual property rights that we are allegedly infringing, may infringe, or desire to use. Although holders of these types of intellectual
property rights commonly offer these licenses, we cannot assure you that licenses will be offered or that the terms of any offered licenses
will be acceptable to us. Our failure to obtain a license for key intellectual property rights from a third party for technology used
by us could cause us to incur substantial liabilities and to suspend the manufacturing and selling of products utilizing the technology.
Alternatively, we could be required to expend significant resources to develop non-infringing
technology. We cannot assure you that we would be successful in developing non-infringing technology.
Third parties have and may in the future commence litigation against
us claiming that our products infringe upon their patents or other intellectual property rights
From time to time, we may be party to, or threatened with, litigation or other proceedings
with third parties, including non-practicing entities, who allege that our products, components of our products, services, and/or proprietary
technologies infringe, misappropriate or otherwise violate their intellectual property rights. The types of situations in which we may
become a party to such litigation or proceedings include:
• we or our collaborators may initiate litigation or other proceedings against third parties seeking to invalidate the patents held by those third parties or to obtain a judgment that our products or processes do not infringe those third parties’ patents;
• we or our collaborators may participate at substantial cost in International Trade Commission proceedings to abate importation of products that would compete unfairly with our products;
• if our competitors file patent applications that claim technology also claimed by us, we may be required to participate in interference, derivation or opposition proceedings to determine the priority of invention, which could jeopardize our patent rights and potentially provide a third party with a dominant patent position;
• if third parties initiate litigation claiming that our processes or products infringe their patent or other intellectual property rights, we and our collaborators will need to defend against such proceedings;
16
• if third parties initiate litigation or other proceedings seeking to invalidate patents owned by or licensed to us or to obtain a declaratory judgment that their product, service, or technology does not infringe our patents or patents licensed to us, we will need to defend against such proceedings;
• we may be subject to ownership disputes relating to intellectual property, including disputes arising from conflicting obligations of consultants or others who are involved in developing our products; and
• if a license to necessary technology is terminated, the licensor may initiate litigation claiming that our processes or products infringe or misappropriate its patent or other intellectual property rights and/or that we breached our obligations under the license agreement, and we and our collaborators would need to defend against such proceedings.
These lawsuits and proceedings, regardless of merit, are time-consuming and expensive
to initiate, maintain, defend or settle, and could divert the time and attention of managerial and technical personnel, which could materially
adversely affect our business. Any such claim could also force us to do one or more of the following:
• incur substantial monetary liability for infringement or other violations of intellectual property rights, which we may have to pay if a court decides that the product, service, or technology at issue infringes or violates the third party’s rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the third party’s attorneys’ fees;
• pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology;
• stop manufacturing, offering for sale, selling, using, importing, exporting or licensing the product or technology incorporating the allegedly infringing technology or stop incorporating the allegedly infringing technology into such product, service, or technology;
• obtain from the owner of the infringed intellectual property right a license, which may require us to pay substantial upfront fees or royalties to sell or use the relevant technology and which may not be available on commercially reasonable terms, or at all;
• redesign our products, services, and technology so they do not infringe or violate the third party’s intellectual property rights, which may not be possible or may require substantial monetary expenditures and time;
• enter into cross-licenses with our competitors, which could weaken our overall intellectual property position;
• lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others;
• find alternative suppliers for non-infringing products and technologies, which could be costly and create significant delay; or
• relinquish rights associated with one or more of our patent claims, if our claims are held invalid or otherwise unenforceable.
Some of our competitors may be able to sustain the costs of complex intellectual property
litigation more effectively than we can because they have substantially greater resources. In addition, intellectual property litigation,
regardless of its outcome, may cause negative publicity, adversely impact prospective customers, cause product shipment delays, or prohibit
us from manufacturing, marketing or otherwise commercializing our products, services and technology. Any uncertainties resulting from
the initiation and continuation of any litigation could have a material adverse effect on our ability to raise additional funds or otherwise
have a material adverse effect on our business, results of operation, financial condition or cash flows.
17
In addition, we may indemnify our customers and distributors against claims relating
to the infringement of intellectual property rights of third parties related to our products. Third parties may assert infringement claims
against our customers or distributors. These claims may require us to initiate or defend protracted and costly litigation on behalf of
our customers or distributors, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages
on behalf of our customers, suppliers or distributors, or may be required to obtain licenses for the products or services they use. If
we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products or services.
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, which could have a material adverse effect on the price of our ordinary shares. If securities analysts or investors perceive
these results to be negative, it could have a material adverse effect on the price of our ordinary shares.
If our trademarks and trade names are not adequately protected,
then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be challenged, infringed,
circumvented, declared generic or determined to be infringing on other marks. We may not be able to protect our rights in these trademarks
and trade names, which we need in order to build name recognition with potential partners or customers in our markets of interest. If
we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and
our business may be adversely affected.
We may be subject to claims that our employees, consultants or independent
contractors have wrongfully used or disclosed confidential information of their former employers or other third parties.
We do and may in the future employ individuals who were previously employed at universities
or other pharmaceutical or medical device companies, including our competitors or potential competitors. Although we try to ensure that
our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for
us, and we are not currently subject to any significant claims that our employees, consultants or independent contractors have wrongfully
used or disclosed confidential information of third parties, we may in the future be subject to such claims. Litigation may be necessary
to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable
intellectual property rights or personnel. 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.
Intellectual property rights do not necessarily address all potential
threats to our business.
The degree of future protection afforded by our intellectual property rights is uncertain
because even granted intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to
entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third party
has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from
our intellectual property rights. The following examples are illustrative:
• others may be able to develop and/or practice technology that is similar to our technology or aspects of our technology, but that are not covered by the claims of the patents that we own or control, assuming such patents have issued or do issue;
• we or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;
• we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;
• others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
• it is possible that our pending patent applications will not lead to issued patents;
• issued patents that we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
• our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
18
• third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license;
• parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;
• we may not develop or in-license additional proprietary technologies that are patentable;
• we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and
• the patents of others may have an adverse effect on our business.
Should any of these events occur, they could significantly harm our business and results
of operations.
Risks Related to Government Regulation
Our business is subject to extensive and continuing regulatory compliance
obligations. If we fail to obtain and maintain necessary FDA clearances for our products, if clearances for future products and proposed
indications are delayed or not issued, if we or any of our third-party suppliers or manufacturers fail to comply with applicable regulatory
requirements, or if there are regulatory changes, our commercial operations could be harmed.
Our products are medical devices subject to extensive regulation by the applicable regulatory
authorities where our products are or will be sold prior to their marketing for commercial use. In the United States, our products are
subject to extensive regulation by the FDA for developing, testing, manufacturing, labeling, sale, marketing, advertising, promotion,
distribution, import, export, shipping, establishment registration and device listing, inspections and audits, record keeping, recalls
and field safety corrective actions and post-market surveillance, including reporting of certain events.
Before a new medical device, or a new use of, or claim for, an existing product can
be marketed in the United States, it must first receive marketing authorization from the FDA unless it is exempt. The FDA marketing authorizations
include a 510(k) clearance or premarket approval. A relatively small number of devices may be exempt from 510(k) clearance or may receive
marketing authorization through the de novo classification pathway. These processes can be expensive and lengthy. The FDA’s 510(k)
clearance process usually takes from 3 to 12 months, but it can last longer. The process of obtaining premarket approval is much more
costly and uncertain than the 510(k)-clearance process and it generally takes from one to three years, or even longer, from the time the
application is filed with the FDA. Our future products and enhancements or changes to products may require new 510(k) clearance or premarket
approval from the FDA. All products that we currently market in the United States that require an FDA marketing authorization have received
510(k) clearance for the uses for which they are marketed.
Medical devices may be marketed only for the indications for which they are approved
or cleared. We have obtained 510(k) clearance for the current treatments for which we offer our products. However, our clearances can
be revoked under certain circumstances. If the FDA disagrees with us concerning the scope or applicability of a clearance or exemption
with respect to a device, we may be required to change our promotional and/or labeling materials and/or stop marketing that device. Changes
or modifications to an FDA-cleared device that could significantly affect its safety or effectiveness or that constitute a major change
or modification in its intended use would require a new 510(k) clearance or possibly premarket approval. We may not be able to obtain
additional 510(k) clearances or premarket approvals for new products or for modifications to, or additional indications for, our existing
products in a timely fashion, or at all. Delays in obtaining future clearances or approvals would adversely affect our ability to introduce
new or enhanced products in a timely manner, which in turn would harm our revenue and future profitability.
We have made modifications to our devices in the past and may make additional modifications
in the future that we believe do not or will not require additional clearances or approvals. If the FDA disagrees, and requires new clearances
or approvals for the modifications, we may be required to recall and to stop marketing the modified devices. We also are subject to the
FDA’s Medical Device Reporting regulations, which require us to report to the FDA if our products cause or contribute to a death
or serious injury, or malfunction in a way that would likely cause or contribute to a death or serious injury.
19
The FDA or the applicable foreign regulatory bodies can delay, limit or deny clearance
or approval of a device for many reasons, including:
• our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory bodies that our products are safe or effective for their intended uses;
• the disagreement of the FDA or the applicable foreign regulatory bodies with the design or implementation of our clinical trials or the interpretation of data from pre-clinical studies or clinical trials;
• serious and unexpected adverse device effects experienced by participants in our clinical trials;
• the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required;
• our inability to demonstrate that the clinical and other benefits of the device outweigh the risks;
• the manufacturing process or facilities we use may not meet applicable requirements; and
• the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval.
In addition, the FDA or applicable foreign regulatory bodies may change their clearance
and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay
approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely
basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new clearances,
increase the costs of compliance or restrict our ability to maintain our current clearances. For example, in November 2018, FDA officials
announced forthcoming steps that the FDA intends to take to modernize the premarket notification pathway under Section 510(k) of the Food,
Drug and Cosmetic Act of 1938, as amended (the “FDCA”). Among other things, the FDA announced that it plans to develop proposals
to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates. These proposals include possible plans to sunset
certain older devices that were used as predicates under the 510(k)-clearance pathway, and to publish a list of devices that have been
cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old. The FDA also announced
that it intends to finalize guidance to establish a premarket review pathway for “manufacturers of certain well-understood device
types” as an alternative to the 510(k) clearance pathway and that such premarket review pathway would allow manufacturers to rely
on objective safety and performance criteria recognized by the FDA to demonstrate substantial equivalence, obviating the need for manufacturers
to compare the safety and performance of their medical devices to specific predicate devices in the clearance process. These proposals
have not yet been finalized or adopted, and the FDA announced that it would seek public feedback prior to publication of any such proposals,
and may work with Congress to implement such proposals through legislation. Accordingly, it is unclear the extent to which any proposals,
if adopted, could impose additional regulatory requirements on us that could delay our ability to obtain new 510(k) clearances, increase
the costs of compliance, or restrict our ability to maintain our current clearances, or otherwise create competition that may negatively
affect our business.
Additionally regulatory clearances or approvals to market a product can contain limitations
on the indicated uses for such product. Product clearances and approvals can be withdrawn due to failure to comply with regulatory standards
or the occurrence of unforeseen problems following initial clearance or approval. FDA regulations depend heavily on administrative interpretation,
and there can be no assurance that future interpretations made by the FDA or other regulatory bodies will not adversely affect our operations.
We and our manufacturers may be inspected by the FDA from time to time to determine whether we or our manufacturers are in compliance
with applicable laws, including the cGMP regulations set forth in the FDA’s Quality System Regulation/Medical Device Current Good
Manufacturing Practices, or QSR, including those relating to specifications, development, documentation, validation, testing, quality
control and product labeling. A determination that we are in violation of FDA or other applicable foreign regulations or any of our product
clearances or approvals could lead to imposition of civil penalties, including fines, product recalls or product seizures and, in certain
cases, criminal sanctions.
The use, misuse or off-label use of our products may harm our reputation
in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by
regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.
The use, misuse or off-label use of our products may harm our reputation or the image
of our products in the marketplace, result in injuries that lead to product liability suits, which could be costly to our business, or
result in legal sanctions if we are deemed or alleged to have engaged in off-label promotion.
20
A medical device may be authorized by the FDA for marketing through several regulatory
mechanisms. The FDA classifies medical devices as Class I, Class II, or Class III, in increasing order of risk. Most of our products are
Class I or Class II medical devices. As such, they are either exempt from premarketing authorization requirements or are subject to the
510(k)-clearance process, and all are listed with the FDA pursuant to FDA’s medical device listing requirements.
Under FDA regulations, for each of our products we must only use labeling, including
advertising and promotional materials, that is consistent with the specific indication(s) for use included in the FDA exemption regulation,
clearance, or approval that is applicable to the specific product. If the FDA or other authorities determine that our promotional or training
materials constitute the unlawful promotion of an off-label use, they could request that we modify our training or promotional materials
and/or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, civil money penalties,
seizure, injunction or criminal fines and penalties. Other federal, state or foreign governmental authorities might also take action if
they consider our promotion or training materials to constitute promotion of an uncleared or unapproved use, which could result in significant
fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement, or exclusion from participation
in federal health programs. In each event, our reputation could be damaged and the use of our products in the marketplace could be impaired,
or our business could face significant hardship.
In addition, there may be increased risk of injury if physicians or others attempt to
use our products off-label. The FDA does not restrict or regulate a physician’s use of a medical product within the practice of
medicine, and we cannot prevent a physician from using our products for an off-label use. The use of our products for indications other
than those for which our products have been approved or cleared by the FDA may not effectively treat the conditions not referenced in
product indications, which could harm our reputation in the marketplace among physicians and patients. Physicians may also misuse our
products or use improper techniques if they are not adequately trained in the particular use, potentially leading to injury and an increased
risk of product liability. Product liability claims are expensive to defend and could divert management’s attention from our primary
business and result in substantial damage awards against us. Any of these events could harm our business, results of operations and financial
condition.
We are subject to ongoing regulatory obligations and a failure to
comply with post-marketing regulatory requirements could subject us to enforcement actions, including substantial penalties, and might
require us to recall or withdraw a product from the market.
Even after we have obtained the proper regulatory clearance or approval to market a
product, we have ongoing responsibilities under FDA regulations and applicable foreign laws and regulations. The regulations to which
we are subject are complex and have become more stringent over time. Regulatory changes could result in restrictions on our ability to
continue or expand our operations, higher than anticipated costs, or lower than anticipated sales.
Our products and/or their use are also subject to state regulations and additional regulations
in other foreign jurisdictions outside of the United States, which may change at any time. We cannot predict the impact or effect of future
legislation or regulations and any changes in regulations may impede sales.
Furthermore, the FDA and state authorities have broad enforcement powers. Our failure
to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any
of the following sanctions:
• warning letters or untitled letters, fines, injunctions, consent decrees and civil penalties;
• repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizure of our products;
• operating restrictions or partial suspension or total shutdown of production;
• refusing our requests for 510(k) clearance or premarket approval of new products, new intended uses, or modifications to existing products;
• withdrawing 510(k) clearances or premarket approvals or foreign regulatory approvals that have already been granted, resulting in prohibitions on sales of our products; and
• criminal prosecution.
The occurrence of any of these events could harm our business, financial condition and
results of operations.
21
If we or our subcontractors fail to comply with federal
and state regulation, including the FDA’s Quality System Regulation/Medical
Device Good Manufacturing Practices and performance standards, our or our subcontractors’
manufacturing operations could be halted, and our business would suffer.
We and our subcontractors currently are required to demonstrate and maintain compliance
with the QSR. The QSR is a complex regulatory scheme that covers the methods and documentation of the design, testing, control, manufacturing,
labeling, quality assurance, packaging, storage and shipping of our products. Because our products use optical energy, including lasers,
our products also are covered by a performance standard for lasers set forth in FDA regulations. The laser performance standard imposes
specific record-keeping, reporting, product testing and product labeling requirements. These requirements include affixing warning labels
to laser products, as well as incorporating certain safety features in the design of laser products. The FDA enforces the QSR and laser
performance standards through periodic announced or unannounced inspections. We and our subcontractors are subject to such inspections.
Although we place our own quality control employee at each of our subcontractor’s facilities, we do not have complete control over
our subcontractor’s compliance with these standards.
Any failure by us or our subcontractors to take satisfactory corrective action in response
to an adverse QSR inspection or to comply with applicable laser performance standards could result in enforcement actions against us or
our subcontractors, including warning letters or untitled letters; fines, injunctions or civil penalties; suspension or withdrawal of
approvals or clearances; seizures or recalls of our products; total or partial suspension of production or distribution; administrative
or judicially imposed sanctions; the FDA’s refusal to grant pending or future clearances or approvals for our products; clinical
holds; refusal to permit the import or export of our products; and criminal prosecution of us or our employees. Any of these actions could
significantly and negatively impact the supply of our products, and could cause our sales and business to suffer. In addition, we are
subject to standards imposed on our activities outside of the United States, such as obtaining CE mark certification in Europe (by our
notified body DEKRA) and the Standards Institution of Israel (imposed on our activities in Israel), and failure to comply with such standards
could adversely impact our business.
Our products may cause or contribute to adverse medical events or
other undesirable side effects that we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that
could harm our reputation, business, financial condition and results of operations. The discovery of serious safety issues with our products,
or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative
impact on us.
We are subject to the FDA’s medical device reporting regulations and similar foreign
regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or
more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were
to recur, it could cause or contribute to a death or serious injury. The timing of our obligation to report is triggered by the date we
become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within
the prescribed timeframe. We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not
reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of the product. If
we fail to comply with our reporting obligations, the FDA could take action, including warning letters, untitled letters, administrative
actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products or
delay in clearance of future products.
The FDA and foreign regulatory bodies have the authority to require the recall of commercialized
products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an
unacceptable risk to health. We may also choose to voluntarily recall a product if any material deficiency is found. A government-mandated
or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing defects,
labeling or design deficiencies, packaging defects or other deficiencies or failures to comply with applicable regulations. Product defects
or other errors may occur in the future. Depending on the corrective action we take to redress a product’s deficiencies or defects,
the FDA may require, or we may decide, that we will need to obtain new approvals or clearances for the product before we may market or
distribute the corrected product. Seeking such approvals or clearances may delay our ability to replace the recalled products in a timely
manner. Moreover, if we do not adequately address problems associated with our products, we may face additional regulatory enforcement
action, including FDA warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.
22
Companies are required to maintain certain records of recalls and corrections, even
if they are not reportable to the FDA. We may initiate voluntary withdrawals or corrections for our products in the future that we determine
do not require notification of the FDA. If the FDA disagrees with our determinations, it could require us to report those actions as recalls
and we may be subject to enforcement action. A future recall announcement could harm our reputation with customers, potentially lead to
product liability claims against us and negatively affect our sales.
We may be unable to obtain or maintain international regulatory
qualifications or approvals for our current or future products and indications, which could harm our business. Additionally, obtaining
and maintaining regulatory approval in one jurisdiction does not mean we will be successful in obtaining regulatory approvals for our
products in other jurisdictions.
Sales of our products outside the United States are subject to foreign regulatory requirements
that vary widely from country to country, including some regulatory requirements that we may not be fully aware of, or that may change
in ways that affect our ability to sell our products in those jurisdictions. Complying with international regulatory requirements can
be an expensive and time-consuming process and approval is not certain. The regulatory process in foreign jurisdictions includes all the
risks associated with obtaining FDA clearance, as well as additional risks not present in the FDA process. For example, the time required
to obtain foreign clearance or approvals may be longer than that required for FDA clearance or approvals, and requirements for such clearances
or approvals may significantly differ from FDA requirements, adding costs and variability. Foreign regulatory authorities may not approve
our product for the same uses cleared by the FDA. Although we have obtained regulatory clearances to sell our products in the European
Union and other countries outside the United States, we may be unable to maintain regulatory qualifications, clearances or approvals in
these countries or to obtain approvals in other countries. We also may incur significant costs in attempting to obtain and in maintaining
foreign regulatory approvals, clearances or qualifications.
If we experience delays in receiving necessary qualifications, clearances or approvals
to market our products outside the United States, or if we fail to receive those qualifications, clearances or approvals, we may be unable
to market some of our products or enhancements in certain international markets effectively, or at all. Since the enactment of the Israeli
Medical Equipment Law, 2012, or the Medical Equipment Law, the manufacturing and marketing of medical and certain aesthetic devices, including
our products, in Israel requires registration with the Israeli Ministry of Health. The Medical Equipment Law offers a fast-track registration
process for devices that received approval from certain non-Israeli regulatory agencies, including FDA clearance or CE marks. We have
taken advantage of such fast-track registration process in the past. If we are unable to obtain and maintain the necessary registration
for any of our products in Israel, we may have to move the manufacturing of such unregistered products to a location outside of Israel
and stop selling these products in Israel until the products are registered. We may also suffer harm to our reputation as a result.
Disruptions at the FDA and other government agencies caused by funding
shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent
new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety
of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees,
and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition,
government funding of other government agencies that fund research and development activities is subject to the political process, which
is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new devices
to be reviewed and/or cleared by necessary government agencies, which would adversely affect our business. For example, over the last
several years, including for 43 days beginning on October 1, 2025, the U.S. government has shut down several times and certain regulatory
agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
New regulations may limit our ability to sell to non-physicians
in the future.
Currently, we sell our products solely to physicians. However, where permitted under
applicable laws, we intend to introduce certain of our products in the developing medical spa market, where aesthetic procedures are being
performed at dedicated facilities by non-physicians under physician supervision. U.S., state and international regulations could change
at any time, disallowing sales of our products to aestheticians, and/or limiting the ability of aestheticians and non-physicians to operate
our products.
23
Risks Related to Our Ordinary Shares
The price of our ordinary shares may be volatile, and you may lose
all or part of your investment.
The price of our ordinary shares has historically fluctuated and has experienced volatility
in the past. The market price for our ordinary shares may fluctuate as a result of a number of factors, many of which are beyond our control,
including:
• fluctuations in our operating results or the operating results of our competitors;
• changes in the estimates of the future size and growth rate of our market opportunities;
• changes in the general economic, industry and market conditions;
• success of competitive technologies and procedures;
• recruitment or departure of key personnel;
• the announcement of new products or enhancements by us or our competitors;
• the commencement or outcome of litigation against us, or involving our general industry or both;
• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
• changes in earnings estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ earnings estimates;
• developments in our industry, including the announcement of significant new technologies, procedures or acquisitions by us or our competitors;
• actual or expected sales of our ordinary shares by the holders of our ordinary shares; and
• the trading volume of our ordinary shares.
In addition, the stock prices of companies in the medical device industry have experienced
wide fluctuations that often have been unrelated to the operating performance of those companies. These fluctuations may be attributed,
among other reasons, to the general global economic environment and the instability in markets. These factors and price fluctuations may
materially and adversely affect the market price of our ordinary shares.
Future sales of our ordinary shares could reduce the price of our
ordinary shares.
Sales by shareholders of substantial amounts of our ordinary shares, or the perception
that these sales may occur in the future, could materially and adversely affect the market price of our ordinary shares and could impair
our ability to raise capital through the sale of additional equity securities and our ability to acquire other companies by using our
ordinary shares as consideration.
As of December 31, 2025, there were 63,358,750 ordinary shares outstanding (not including
a total of 24,975,003 ordinary shares held at that date as treasury shares). Sales of these shares, or the perception that these sales
may occur in the future, into the market could cause the market price of our ordinary shares to drop significantly. In addition, we have
registered all ordinary shares that we have issued and may issue in the future under our equity compensation plans, and, as such, these
shares can be freely sold in the public market upon issuance.
We have not paid dividends in the past and may not pay dividends
in the future, and any return on investment may be limited to the value of our ordinary shares.
We have never declared or paid cash dividends on our ordinary shares and may not distribute
cash or other dividends on our ordinary shares in the foreseeable future. The distribution of dividends on our ordinary shares will depend
on our earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider
relevant. We may only distribute dividends out of “profits,” as defined by the Companies Law, and provided that the
distribution is not reasonably expected to impair our ability to fulfill our outstanding and anticipated obligations as they become due.
If we do not distribute dividends, our ordinary shares may be less valuable because a return on your investment will only occur if the
price of our ordinary shares appreciates.
24
We incur significant costs operating as a public company in the
United States, and our management is required to devote substantial time to compliance matters.
As a public company whose ordinary shares are listed in the United States, we are subject
to an extensive regulatory regime, requiring us, among other things, to maintain various internal controls and facilities and to prepare
and file periodic and current reports and statements. Complying with these requirements is costly and time consuming. In the event that
we are unable to demonstrate ongoing compliance with our obligations as a public company, or are unable to produce timely or accurate
financial statements, we may be subject to sanctions or investigations by regulatory authorities and investors may lose confidence in
our operating results, and the price of our ordinary shares could decline. We became a “large accelerated filer” beginning
from December 31, 2020. We have incurred significant management time and cost complying with the more stringent reporting requirements
applicable to “accelerated filers,” including complying with auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley
Act of 2002.
We may be subject to shareholder activism, including proposals or
demands by our shareholders to effect changes in our governance, corporate structure or business strategy.
Activist shareholders may seek to influence or control decisions regarding matters such
as our operations, distributions, management, compensation or other key aspects of our business or operations. Such activism could result
in significant costs and management distraction, diverting resources away from our strategic priorities. Shareholder activism could give
rise to perceived uncertainties as to our future prospects and adversely affect our business, operations, financial condition and stock
price. Additionally, increased activist activity may lead to volatility in our stock price and potentially adversely impact our relationship
with investors, customers, employees, and other stakeholders.
U.S. investors in the Company could suffer adverse tax consequences
if we are characterized as a passive foreign investment company.
We believe that we were not a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes for our taxable year ended December 31, 2025, and we do not expect to be classified as a PFIC for the current
year ending December 31, 2026 or the foreseeable future. However, the determination of whether we are a PFIC is a factual determination
made annually based on all the facts and circumstances and thus is subject to change. The relevant rules for determining whether or not
we are a PFIC as applied to our business are not entirely clear and certain aspects of the relevant tests will be outside our control.
Therefore, no assurance can be given that we will not be a PFIC for any taxable year.
If we are determined to be a PFIC at any time during which a U.S. Holder (as defined
in “Item 10E. Additional Information–Taxation–Material U.S. Federal Income Tax Considerations to U.S. Holders”)
holds our shares, such U.S. Holder may be subject to materially adverse tax consequences, including additional U.S. federal income tax
liability and tax filing obligations. See “Item 10E. Additional Information–Taxation–Material U.S. Federal Income Tax
Considerations to U.S. Holders–Passive Foreign Investment Company Considerations.” U.S. Holders are strongly urged to consult
their tax advisors as to whether or not we will be a PFIC.
If we fail to maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose
confidence in our financial and other public reporting, which would harm our business and the trading price of our ordinary shares.
Effective internal control over financial reporting is necessary for us to provide reliable
financial reports. As a “large accelerated filer” we are responsible for establishing and maintaining internal controls and
procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal
controls over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404. Although our independent registered
public accounting firm is required to attest to the effectiveness of our internal control over financial reporting pursuant to Section
404(b) of the Sarbanes-Oxley Act of 2002 and our management is required to report on our internal controls over financial reporting under
Section 404, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause
us to fail to meet our reporting obligations. In addition, any testing by us, as and when required, conducted in connection with Section
404 or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our
internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes
to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause
investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ordinary
shares.
25
We are a “foreign
private issuer” and have disclosure obligations that are different from
those of U.S. domestic reporting companies.
We are a foreign private issuer and are not subject to the same requirements that are
imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we are subject to reporting obligations that, in certain respects,
are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we are not required to issue quarterly
reports or proxy statements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under
regulations promulgated under the Companies Law, as an Israeli public company listed on the Nasdaq, we are required to disclose the compensation
of our five most highly compensated officers on an individual basis, this disclosure will not be as extensive as that required of U.S.
domestic reporting companies. We also have four months after the end of each fiscal year to file our annual report with the SEC and are
not required to file current reports as frequently or promptly as U.S. domestic reporting companies. Our officers, directors and principal
shareholders have historically been exempt from the requirements to report transactions and short-swing profit recovery required by Section
16 of the Exchange Act, but effective March 18, 2026, our officers and directors will be subject to such reporting requirements.
Furthermore, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD (Fair Disclosure) promulgated
under the Exchange Act. Even though we may voluntarily elect to comply with Regulation FD and have done so in the past, these exemptions
and leniencies reduce the frequency and scope of information and protections available to you in comparison to those applicable to a U.S.
domestic reporting company.
We would lose our foreign private issuer status if, as of June 30 in any calendar year,
a majority of our outstanding shares are held of record by U.S. residents and a majority of our directors or executive officers are U.S.
citizens or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. The regulatory
and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we lose our foreign private
issuer status, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which
are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our
policies to comply with accepted governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve
additional costs. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements on U.S.
stock exchanges that are available to foreign private issuers.
As a “foreign
private issuer,” we are permitted to 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.
As a “foreign private issuer,” we are permitted to follow certain home country
corporate governance practices instead of those otherwise required under the listing rules of Nasdaq for domestic U.S. issuers. For instance,
we follow our home country law instead of the listing rules of Nasdaq that require that we obtain shareholder approval for certain dilutive
events, such as the establishment or amendment of certain equity-based compensation plans, an issuance that will result in a change of
control of us, certain transactions other than a public offering involving issuances of a 20% or greater interest in the Company, and
certain acquisitions of the stock or assets of another company. Under the Companies Law as currently applicable to us, there is no requirement
to receive shareholder approval for the issuance of securities for such dilutive events, and under our amended and restated articles of
association our board of directors is authorized to issue securities, including ordinary shares, warrants and convertible notes. Additionally,
under the Companies Law, unless the articles of association otherwise provide, the quorum required for an ordinary meeting of shareholders
must consist of at least two shareholders who hold at least 25% of the voting rights (instead of the 33 and 1/3% required under Nasdaq
rules), and we are not required to have a nominating committee consisting solely of independent directors for the nomination of directors.
See “Item 16G. Corporate Governance” for details on the differences between Israeli corporate governance practices and comparable
U.S. requirements and other home country practices we follow instead of the listing rules of Nasdaq. We may in the future elect to follow
home country corporate governance practices in Israel with regard to other matters. Following our home country corporate governance practices
as opposed to the requirements that would otherwise apply to a U.S. company listed on Nasdaq may provide less protection to you than what
is accorded to investors under the listing rules of Nasdaq applicable to domestic U.S. issuers.
Risks Related to Our Operations in Israel
Our commercial insurance may leave us subject to a risk of a loss
if a terrorist attack or act of war occurs.
Our insurance does not cover losses that may occur as a result of an event associated
with the security situation in the Middle East or for any resulting disruption in our operations. Although the Israeli government has
in the past covered the reinstatement value of direct damages that were caused by terrorist attacks or acts of war, we cannot be assured
that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred, and
the government may cease providing such coverage or the coverage might not suffice to cover potential damages. Any losses or damages incurred
by us could have a material adverse effect on our business.
26
Boycotts and various Middle Eastern business restrictions in the
region may adversely impact our ability to operate and sell our products.
Several countries, principally in the Middle East, restrict doing business with Israel
and Israeli companies, and additional countries may in the future impose restrictions on doing business with Israel and Israeli companies,
whether as a result of the ongoing and revived hostilities in the region, the ongoing Israel-Hamas war or otherwise. In addition, there
have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies.
Although Israel had signed bilateral peace agreements with several Middle Eastern countries for forging new economic ties with them, the
goals of such bilateral peace agreements may not be achieved in full or at all. The restrictive laws and policies and the actions by boycott
activists, if they become more widespread and successful, and fast-moving changes to Israel’s geopolitical relations, may limit
our ability to sell our products and may have an adverse impact on our operating results, financial conditions or the expansion of our
business.
We may become subject to claims for remuneration or royalties for
assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
We have entered into assignment of invention agreements with our employees pursuant
to which such individuals agree to assign to us all rights to any inventions created during their employment or engagement with us. A
significant portion of our intellectual property has been developed by our employees in the course of their employment with us. Under
the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee during the scope of his or her employment with
a company and as a result thereof are regarded as “service inventions,” which belong to the employer, absent a specific agreement
between the employee and employer giving the employee service invention rights. The Patent Law also provides that if there is no agreement
between an employer and an employee with respect to the employee’s right to receive compensation for such “service inventions,”
and to what extent and under which conditions, the Israeli Compensation and Royalties Committee, or the Committee, a body constituted
under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her service inventions and the scope
and conditions for such remuneration. The Patent Law further provides criteria for assisting the Committee in making its decisions. Case
law clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that in certain
circumstances, such waiver does not necessarily have to be explicit. The Committee will examine, on a case-by-case basis, the general
contractual framework between the parties, applying interpretation rules of the general Israeli contract laws. Further, the Committee
has not yet determined one specific formula for calculating this remuneration, nor the criteria or circumstances under which an employee’s
waiver of his right to remuneration will be disregarded. Similarly, it remains unclear whether waivers by employees in their employment
agreements of the alleged right to receive consideration for service inventions should be declared as void being a depriving provision
in a standard contract. Although our employees have agreed to assign to us service invention rights and have specifically waived their
right to receive any special remuneration for such service inventions beyond their regular salary and benefits, as a result of uncertainty
under Israeli law with respect to the efficacy of waivers of service invention rights, we may face claims demanding remuneration in consideration
for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current
and/or former employees, or be forced to litigate such claims, which could negatively affect our business.
Our operations may be affected by negative economic conditions or
labor unrest in Israel.
General strikes or work stoppages, including at Israeli ports, have occurred periodically
or have been threatened in the past by Israeli trade unions due to labor disputes. These general strikes or work stoppages may have an
adverse effect on the Israeli economy and on our business, including our ability to deliver products to our customers and to receive raw
materials from our suppliers in a timely manner and could have a material adverse effect on our results of operations.
You may have difficulties enforcing a U.S. judgment against us,
our executive officers and directors and Israeli experts named in this Annual Report on Form 20-F in Israel or the United States, asserting
U.S. securities laws claims in Israel or serving process on our officers and directors and these experts in Israel.
We are incorporated in Israel and our corporate headquarters is located in Israel. Many
of our executive officers and directors reside outside of the United States, and a significant portion of our assets and the assets of
certain of our directors and executive officers are located outside the United States. Therefore, a judgment obtained against us or any
of them in the United States, including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible
in the United States and may not be enforced by an Israeli court. Further, if a foreign judgment is enforced by an Israeli court, it will
be payable in Israeli currency. It also may be difficult for you to effect 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 U.S. securities laws in Israel. Israeli courts may refuse to hear a claim
based on an alleged violation of U.S. 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 U.S. law is applicable
to the claim. If U.S. law is found to be applicable, the content of applicable U.S. 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 in Israel,
you may not be able to collect any damages awarded by either a U.S. or foreign court.
27
Moreover, among other reasons, including but not limited to, fraud or absence of due
process, or the existence of a judgment which is at variance with another judgment that was given in the same matter if a suit in the
same matter between the same parties was pending before a court or tribunal in Israel, an Israeli court will not enforce a foreign judgment
if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases),
or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.
Provisions of our amended and restated articles of association and
Israeli law may delay, prevent or make difficult a merger with, or an acquisition of, the Company, which could prevent a change of control
even when the terms of such transaction are favorable to us and our shareholders and, therefore, could depress the price of our ordinary
shares.
As a company incorporated under the laws of the State of Israel, we are subject to Israeli
corporate law. Israeli corporate law regulates mergers, requires tender offers for acquisitions of ordinary shares above specified thresholds,
requires special approvals for transactions involving directors, officers or certain significant shareholders and regulates other matters
that may be relevant to these types of transactions. In addition, our amended and restated articles of association contain provisions
that may make it more difficult to acquire us, such as classified board provisions. In addition, Israeli corporate law generally does
not provide for shareholder action by written consent in public companies, thereby requiring all shareholder actions to be taken at a
general meeting, which could delay the ability of shareholders to effect certain corporate actions. Furthermore, Israeli tax considerations
may make potential transactions unappealing to us or to some of our shareholders whose country of residence does not have a tax treaty
with Israel granting tax relief to such shareholders from Israeli tax obligations. With respect to mergers, Israeli tax law allows for
tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including, in some
cases, a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating
companies are subject to certain restrictions. See “Item 10E. Additional Information–Taxation–Israeli Material Tax Considerations”
for additional information. These provisions of our amended and restated articles of association and Israeli law may delay, prevent or
make difficult an acquisition of us, which could prevent a change of control and therefore depress the price of our ordinary shares.
In addition, as a corporation incorporated under the laws of the State of Israel, we
are subject to the Israeli Economic Competition Law, 1988, and the regulations promulgated thereunder (formerly known as the Israeli Antitrust
Law, 1988), under which we may be required in certain circumstances to obtain the approval of the Israel Competition Authority (formerly
known as the Israel Antitrust Authority) in order to consummate a merger or a sale of all or substantially all of our assets.
Your rights and responsibilities as a holder of our ordinary shares
will be governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders of U.S.
companies.
Since we are incorporated under Israeli law, the rights and responsibilities of the
holders of our ordinary shares are governed by our articles of association and by Israeli law, including the Companies Law. These rights
and responsibilities differ in some material respects from the rights and responsibilities of shareholders in typical U.S. corporations.
In particular, pursuant to the Companies Law, a shareholder of an Israeli company has certain duties, including to act in good faith and
fairness and in a customary manner in exercising its rights and performing its obligations towards 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 certain related party transactions that require shareholder approval under Israeli law.
A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder
or a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent
the appointment of an officer of the company has a duty to act in fairness towards the company with regard to such vote or appointment.
See “Item 6C. Directors, Senior Management and Employees–Board Practices–Approval of Related Party Transactions under
Israeli Law” for additional information. There is limited case law available to assist in understanding the nature of these duties
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.
28