REVIEW AND PROSPECTS A. Operating Results The information contained in this section should be read in conjunction with our consolidated financial statements for the year ended December 31, 2025 and related notes, and the information contained elsewhere in this annual report. Our financial statements have been prepared in accordance with IFRS, as issued by the IASB. Company Overview We are a biopharmaceutical company that develops, manufactures, and commercializes novel, cost effective, biotherapeutic, non-surgical solutions for tissue repair and regeneration. Our strategy leverages our breakthrough enzymatic technology platform into diversified portfolio of biotherapeutics across multiple indications to pioneer solutions for unmet medical needs. Our current portfolio is focused on next-generation protein-based therapies for burn care, wound care and tissue repair. Our first innovative biopharmaceutical product, NexoBrid is a topically administered, biological orphan drug for the enzymatic removal of eschar in patients with deep partial- and full-thickness thermal burns. It selectively removes non-viable tissue while preserving viable tissue and is approved for use in adults and pediatric patients in 45 countries, including the United States, European Union, and Japan. We commercialize NexoBrid globally through multiple sales channels. We sell NexoBrid to burn centers in the EU, UK and Israel, primarily through our direct sales force, focusing on key burn centers and KOLs. In the United States, we entered into exclusive license and supply agreements with Vericel Corporation (Nasdaq: VCEL) to commercialize NexoBrid in North America. We have established local distribution channels in multiple international markets, focusing on Asia Pacific, EMEA, CEE and LATAM, which local distributors are also responsible for obtaining local marketing authorization within the relevant territories. EscharEx, our next-generation enzymatic therapy under development, is a bromelain-based, bioactive enzymatic therapy in advanced clinical development for the debridement of chronic and hard-to-heal wounds. Designed for topical, once-daily application, EscharEx has demonstrated a favorable safety profile and effective wound bed preparation in multiple Phase II trials. The therapy has shown the ability to remove non-viable tissue, promote granulation tissue, and reduce bioburden and biofilm. In February 2025 we initiated the VALUE, a global, pivotal Phase III trial evaluating EscharEx for the treatment of venous leg ulcers (VLUs). The VALUE study is a global, multicenter, prospective, randomized, double-blind, placebo-controlled trial with an adaptive design, that will be conducted across 40 sites in the U.S. and Europe, with the majority of sites already active. Its primary objective is to evaluate the efficacy and safety of EscharEx in achieving effective debridement and preparing the wound bed for healing in VLUs. The study will enroll 216 patients, randomized 1:1 to receive either EscharEx or placebo. The study co-primary endpoints are the incidence of complete debridement and the facilitation of wound closure. Secondary endpoints include the incidence of complete healthy granulation tissue, time to complete debridement, time to wound bed prepared and incidence of complete wound closure. Safety and tolerability of EscharEx will be assessed throughout the trial. An interim sample size assessment will occur after 65% of patients complete treatments, enabling adaptive adjustments as needed. The interim assessment and enrollment completion are expected by year-end 2026. To support the trial, we have established strategic research collaborations with Essity, Solventum, Mölnlycke, and MIMEDX. These industry leaders will provide advanced products to ensure consistent wound management across all study sites and optimize patient outcomes. We manufacture NexoBrid and our product candidates in our cGMP certified sterile manufacturing facility at our headquarters in Yavne, Israel. As of December 31, 2025, we had cash and cash equivalents and short term and restricted bank deposits of $53.6 million. Our revenues were $17.0 million and $20.2 million in 2025 and 2024, respectively. Our net operating loss was $25.3 million and $19.4 million in 2025 and 2024, respectively. We had an accumulated deficit of $228.9 million as of December 31, 2025. We expect to incur significant expenses and operating losses in the coming years, as research and development activities are central to our operations, which will offset by cash inflows from NexoBrid. 68 We expect to continue to invest in our research and development efforts, including in respect of our EscharEx planned clinical trials, as well as the clinical development and trials of our other pipeline product candidates. In addition, we expect to continue to advance NexoBrid as a standard of care, and expand its commercial reach in international markets, including for potential use as a medical countermeasure during mass casualty events. Key Components of Statements of Operations Revenues Sources of revenues. We derive revenues from sales of NexoBrid to burn centers and hospitals burn units in USA, Europe, Japan and Israel as well as to local distributors in other countries in accordance with distribution agreements we have in place, which also include revenues from licenses. We generate revenues from development services provided to BARDA, and to DoW/MTEC. Our ability to generate additional, more significant revenues will depend on the successful commercialization of NexoBrid and our ability to scale up the production. Cost of Revenues Our total cost of revenues includes expenses for the manufacturing of NexoBrid, including: the cost of raw materials; employee-related expenses, including salaries, equity based-compensation and other benefits and related expenses, lease payments, utility payments, depreciation, changes in inventory of finished products, royalties and other manufacturing expenses including adjustment for inventory impairment. These expenses are partially reduced by (i) an allocation of manufacturing costs associated with research and development and Scale-Up activities to research and development expenses, and (ii) the capitalization of certain manufacturing costs as property and equipment in connection with the establishment and expansion of our Scale-Up facility. Cost of revenues includes costs associated with the research and development services provided to BARDA and MTEC, including salaries and related expenses, clinical trials, sub-contractors and external advisors. Operating Expenses Research and Development Expenses Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as EscharEx progresses in its clinical program in the U.S. and our other pipeline product candidates’ progress in clinical trials. However, we do not believe that it is possible at this time to accurately project total program-specific expenses to reach commercialization. There are numerous factors associated with the successful development of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will affect our clinical development programs and plans. Our actual spending could differ as our plans change and we invest in other drugs or potentially reduce our anticipated funding on research for existing products. Research and development expenses consist primarily of compensation for employees engaged in research and development activities, including salaries, equity-based compensation, benefits and related expenses, clinical trials, contract research organization sub-contractors, development materials, external advisors and the allotted cost of our manufacturing facility for research and development purposes. Selling and Marketing Expenses Selling and marketing expenses consist primarily of compensation expenses for personnel engaged in sales and marketing, including salaries, equity based-compensation and benefits and related expenses, as well as promotion, marketing, market access, medical, and sales and distribution activities. These expenses are primarily comprised of costs related to our subsidiary in Germany, which is focused on marketing NexoBrid in EU, and costs related to maintain marketing authorization. 69 General and Administrative Expenses General and administrative expenses consist principally of compensation for employees in executive and administrative functions, including salaries, equity-based compensation, benefits and other related expenses, professional consulting services, including legal and audit fees, as well as costs of office and overhead. Financial Income/Financial Expense Financial income includes interest income, revaluation of financial instruments and exchange rate differences. Financial expense consists primarily of revaluation of financial instruments, revaluation of lease liabilities and exchange rate differences. The market interest due on government grants received from the IIA is also considered a financial expense, and is recognized beginning on the date we receive the grant until the date on which the grant is expected to be repaid as part of the revaluation to fair value of liabilities in respect of government grants. Taxes on Income The standard corporate tax rate in Israel is 23%. We do not generate taxable income in Israel, as we have historically incurred operating losses resulting in carry forward tax losses and other temporarily differences from R&D expenses totalling approximately $213.0 million as of December 31, 2025. We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses. Under the Law for the Encouragement of Capital Investments, 5719-1959 (the “Investment Law”), we have been granted “Beneficiary Enterprise” status, which provides certain benefits, including tax exemptions and reduced corporate tax rates. Income not eligible for Beneficiary Enterprise benefits is taxed at the regular corporate tax rate. The benefit entitlement period starts from the first year that the Beneficiary Enterprise first earns taxable income, and is limited to 12 years from the year in which the company requested to have tax benefits apply. Comparison of Period to Period Results of Operations We are providing within this section a supplemental discussion that compares our historical statement of operations data in accordance with IFRS, as issued by the IASB. The below table and the below discussion provide data for each of the years ended December 31, 2025 and 2024. The below discussion of our results of operations omits a comparison of our results for the years ended December 31, 2024 and 2023. In order to view that discussion, please see “ITEM 5. Operating and Financial Review and Prospects-A. Operating Results- Comparison of Period to Period Results of Operations- Year Ended December 31, 2024 Compared to Year Ended December 31, 2023” in our Annual Report on Form 20-F for the year ended December 31, 2024, which we filed with the SEC on March 19, 2025. Years Ended December 31, 2025 2024 (in thousands) Condensed statements of operations data: Revenues $ 16,959 $ 20,222 Cost of revenues 13,705 17,588 Gross profit 3,254 2,634 Operating expenses: Research and development 14,320 8,878 Selling and marketing 5,765 4,936 General and administrative 8,448 8,202 Other (income) expenses (13 ) 18 Operating loss (25,266 ) (19,400 ) Financial income (expenses), net 1,556 (10,763 ) Loss before taxes on income (23,710 ) (30,163 ) Taxes on income (169 ) (61 ) Net loss $ (23,879 ) $ (30,224 ) 70 Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Revenues Years Ended December 31, 2025 2024 (in thousands) Revenues from sale of products $ 5,769 $ 6,832 Revenues from development services 10,800 13,135 Revenues from license agreements and royalties 390 255 16,959 20,222 We generated total revenues of approximately $17.0 million for the year ended December 31, 2025 compared to approximately $20.2 million for the year ended December 31, 2024. The change is primarily attributable to the U.S. government shutdown, which resulted in delays in budget approvals and the initiation of new contractual agreements as well as lower product sales by Vericel. Revenues from sale of products Revenues from sales of products in 2025 were $5.8 million, a 15% decrease compared to $6.8 million in 2024 mainly driven by decreased revenues from Vericel. Revenues from development services Revenues from development services in 2025 were $10.8 million, a 18% decrease compared to $13.1 million in 2024. The decrease mainly is driven by the U.S. government shutdown, which resulted in delays in budget approvals and the initiation of new contractual agreements. Revenues from license agreements and royalties In 2025, revenues from license agreements and royalties were $0.4 million compared to $0.3 million in 2024, the increase mainly driven by increased royalties from Vericel. Our revenues, as reported in our consolidated financial statements, are based on the location of the customers, as shown in the below table: Year ended December 31 2025 2024 USA (see also note 18a, 18b, 18c) 11,784 15,463 Germany 817 824 Italy 1,002 817 Spain 1,291 840 Rest of the world 2,065 2,278 16,959 20,222 71 DoW/MTEC contributed 33% and 34% of the Company’s total revenues in 2025 and 2024 respectively. BARDA contributed 30% and 31% of the Company’s total revenues in 2025 and 2024 respectively. Vericel contributed 6% and 12% of the Company’s total revenues in 2025 and 2024 respectively. Costs and Expenses Cost of revenues Years Ended December 31, 2025 2024 (in thousands) Cost of revenues from sales of products $ 4,727 $ 6,440 Cost of revenues from development services 8,946 11,128 Cost of revenues from license agreements and royalties 32 20 13,705 17,588 Cost of revenues as a percentage of total revenues decreased from 87% for 2024 to 81% for 2025. Cost of revenues from sales of products as a percentage of revenues from sales of products decreased to approximately 82% for the year ended December 31, 2025, from approximately 94% in the year ended December 31, 2024. The decrease is mainly due to a favourable change in revenue mix. Cost of revenues from development services as a percentage of revenues from development services was approximately 83% in the year ended December 31, 2025, compared to approximately 85% in the year ended December 31, 2024. The change is primarily driven by activity linked to operating expenses with higher margin. Cost of revenues from license agreements and royalties as a percentage of revenues from license agreements was 8% in the year ended December 31, 2025 compared to approximately 8% in the year ended December 31,2024. Research and development expenses, Research and development expenses increased by 61% from approximately $8.9 million in the year ended December 31, 2024 to approximately $14.3 million in the year ended December 31, 2025, mainly due to costs associated with the EscharEx VALUE Phase III trial. Selling and marketing expenses Selling and marketing expenses increased by 17% in 2025 compared to 2024, from approximately $4.9 million in the year ended December 31, 2024 to approximately $5.8 million in the year ended December 31, 2025. The increase is mainly due to higher Marketing Authorization Holder expenses. General and administrative expenses General and administrative expenses increased by 3% in 2025 compared to 2024 from approximately $8.2 million in the year ended December 31, 2024 to approximately $8.4 million in the year ended December 31, 2025. The increase primarily reflects foreign exchange rate fluctuations and additional headcount to support the Company’s growth. 72 Financial income, net Years Ended December 31, 2025 2024 (in thousands) Financial income $ 4,017 $ 2,048 Financial expenses (2,461 ) (12,811 ) 1,556 (10,763 ) Financial income Financial income increased from approximately $2.0 million in the year ended December 31, 2024 to approximately $4.0 million in the year ended December 31, 2025. The increase was primarily driven by $2.2 million financial income from the revaluation of warrants. Financial expense Financial expenses decreased from approximately $12.8 million for the year ended December 31, 2024 to approximately $2.5 million for the year ended December 31, 2025. The decrease was primarily attributable to the recognition of financial income from the revaluation of warrants in 2025, compared to financial expenses recorded from the revaluation of warrants in 2024. B. Liquidity and Capital Resources Our primary uses of cash are to fund working capital requirements, manufacturing costs, research and development activities related to EscharEx and other products candidates, capital expenditure requirements, as well as sales and marketing activities associated with the commercialization of NexoBrid in Europe. Primary Cash Sources In recent years, we have funded our operations from a combination of sources, including: (i) revenues from sales of NexoBrid to burn centers and hospitals burn units in USA, Europe, Japan and Israel as well as to local distributors in other countries in accordance with distribution agreements we have in place, which also include revenues from licenses. (ii) revenues from development services provided to BARDA, and to DoW/MTEC; (iii) government grants (iv) public and private offerings of our securities; and (v) exercise of series A Warrants Recent Public and Private Securities Offerings On February 3, 2023, we entered into a securities purchase agreement (the “2023 Securities Purchase Agreement”) with the purchasers listed on the signature pages thereto (the “2023 Purchasers”), in connection with the offer and sale of 1,964,286 ordinary shares (the “2023 Offering”). The purchase price per ordinary share was $14.00. The 2023 Offering closed on February 7, 2023. The gross proceeds from the 2023 Offering were approximately $27.5 million. On July 15, 2024, we entered into a share purchase agreement (the “2024 Share Purchase Agreement”) with the purchasers listed on the signature pages thereto (the “2024 Purchasers”), for the offer and sale of 1,453,488 ordinary shares at a purchase price per share of $17.20 (the “2024 Offering”). The gross proceeds from the 2024 Offering were $25 million. Along with our entry into the 2024 Share Purchase Agreement, we entered into a registration rights agreement with the 2024 Purchasers (the “2024 Registration Rights Agreement”), providing the 2024 Purchasers customary registration rights with respect to the ordinary shares to be issued to them pursuant to the 2024 Offering and any additional Registrable Securities, as defined therein. On September 9, 2024, the SEC declared effective our shelf registration statement on Form F-3, which registered the resale of 1,453,488 shares. 73 On March 27, 2025, the SEC declared effective our shelf registration statement on Form F-3, and registered offerings of up to $125,000,000 in various securities and the resale of up to 1,266,141 ordinary shares. On September 29, 2025, we entered into a securities purchase agreement (the “2025 Securities Purchase Agreement”) with certain purchasers (the “2025 Purchasers”), in connection with the offer and sale of 1,734,105 ordinary shares (the “2025 Offering”). The purchase price per ordinary share was $17.30. The 2025 Offering closed on September 30, 2025. The Gross proceeds from the 2025 Offering were approximately $30.0 million. H.C. Wainwright & Co., LLC (“Wainwright”) acted as the exclusive placement agent for the 2025 Offering. Upon closing of the 2025 Offering, we paid Wainwright a cash transaction fee equal to 7.0% of the aggregate gross proceeds from the 2025 Offering (or 1.75% to 5% in the case of certain designated investors). We also agreed to pay Wainwright for its role as exclusive placement agent in the 2025 Offering a non-accountable expense allowance of $85,000.00 and clearing fees of $15,950.00. Recent Government Grant In July 2024, we were awarded a €2.5 million grant from the European Innovation Council (EIC) Accelerator program to support the clinical and regulatory advancement of EscharEx for the treatment of diabetic foot ulcers (DFUs). Following a successful evaluation process, we entered into discussions with respect to a potential additional €13.75 million equity investment component under the EIC Accelerator program; however, these discussions did not result in an equity investment. In December 2024, we received the first payment of Euro 1.1 million from the grant component. In 2025, we received an additional $3.6 million in funding from the U.S. DoW to advance development of a room-temperature stable formulation of NexoBrid. The supplemental funding will support expanded CMC activities, enhancement of in-house manufacturing capabilities and initial preparations for a clinical trial. Overall Outlook We believe that our existing cash and cash equivalents, short-term and restricted bank deposits of $53.6 million as of December 31, 2025, will be sufficient to fund its operations and capital expenditure for at least twelve months from the date of issuance of our consolidated financial statements included in this annual report. Our future capital requirements will depend on many factors, including our revenue growth, timing of milestone payments, the timing and extent of our spending on research and development efforts, and international expansion. We may also seek to invest in or acquire complementary businesses or technologies. To the extent that existing cash and cash from operations are insufficient to fund our future activities, we may need to raise additional funding through debt and equity financing. Additional funds may not be available on favourable terms or at all. The accompanying consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern. From inception to December 31, 2025, the Company has incurred cash outflows from operations, losses from operations, and has an accumulated deficit of $228.9 million. Cash Flows The following table summarizes our consolidated statement of cash flows for the periods presented. The below discussion beneath the table omits a description of our cash flows for the year ended December 31, 2024. In order to view that discussion, please see “ITEM 5. Operating and Financial Review and Prospects Liquidity and Capital Resources” in our Annual Report on Form 20-F for the year ended December 31, 2024, which we filed with the SEC on March 19, 2025: Year Ended December 31, 2025 2024 Net cash provided by (used in): Operating activities $ (16,121 ) $ (13,624 ) Investing activities (17,950 ) (8,397 ) Financing activities 29,620 19,394 74 Net cash used in operating activities Net cash used in all periods resulted primarily from our net loss adjusted for non-cash items and changes in components of working capital. Adjustments of non-cash items include depreciation and amortization, share-based compensation, revaluation of warrants and changes in assets and liabilities items. Net cash used in operating activities increased to approximately $16.1 million in the year ended December 31, 2025 compared to net cash used in operating activities of approximately $13.6 million in the year ended December 31, 2024, primarily as a result of adjustment of non-cash items from revaluation of warrants, offset by lower operational net loss. Net cash used in investing activities Net cash used in investing activities primarily derives from investment in short term banks deposits and from purchases of property and equipment mainly related to scaling up our production facility, offset by interest received from short term bank deposit. Net cash used in investing activities was $18.0 million in the year ended December 31, 2025, compared to $8.4 million provided during the year ended December 31, 2024, primarily result from investment in short- term bank deposits. Net cash provided by financing activities Net cash provided by financing activities consists of proceeds from the issuance of shares and from exercise of warrants and share options, offset primarily by the repayment of lease liability and liabilities in respect of Teva. For the year ended December 31, 2025, net cash provided by financing activities was $29.6 million, compared to $19.4 million for the year ended December 31, 2024. The increase was primarily attributable to higher proceeds from the issuance of shares and the exercise of warrants and share options, as well as lower repayments of liability in respect of Teva in 2024. Israeli Corporate-Level Tax Considerations and Government Programs The following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that benefit us and therefore impact our results of operations and financial condition. To the extent that the discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below. General Corporate Tax Structure in Israel Generally, Israeli companies are subject to a corporate tax on their taxable income. Effective January 1, 2018 and thereafter, the corporate tax rate is 23%. However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a Beneficiary Enterprise, a Preferred Enterprise or Technology Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to the prevailing regular corporate tax rate. Law for the Encouragement of Industry (Taxes), 5729-1969 The Law for the Encouragement of Industry (Taxes), 5729-1969 (the “Industry Encouragement Law”), provides several tax benefits for “Industrial Companies.” The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company which was incorporated in Israel, of which 90% or more of its income in any tax year, other than income from certain government loans, is derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area”, in accordance with the definition under section 3A of the Israeli Income Tax Ordinance (New Version) 1961 (the “Ordinance”). An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production. The following tax benefits, among others, are available to Industrial Companies: • amortization of the cost of purchased a patent, rights to use a patent, and know-how, which are used for the development or advancement of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised; • under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies controlled by it; and 75 • expenses related to a public offering are deductible in equal amounts over a three year period commencing on the year of the offering. Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority. We believe that we currently qualify as an Industrial Company within the meaning of the Industry Encouragement Law. However, there can be no assurance that we will continue to qualify as an Industrial Company or that the benefits described above will be available in the future. Law for the Encouragement of Capital Investments, 5719-1959 The Investment Law provides certain incentives for capital investments in production facilities (or other eligible assets). The Investment Law was significantly amended several times during recent years, with the three most significant changes effective as of April 1, 2005 (the “2005 Amendment”), as of January 1, 2011 (the “2011 Amendment”), and as of January 1, 2017 (the “2017 Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the amended Investment Law. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. The 2017 Amendment introduces new benefits for Technological Enterprises, alongside the existing tax benefits. Prior to 2011, we did not utilize any of the benefits for which we were eligible under the Investment Law. The following is a summary of the Investment Law subsequent to its amendments as well as the relevant changes contained in the new legislation. Tax Benefits Subsequent to the 2005 Amendment The 2005 Amendment applies to new investment programs and investment programs commencing after 2004, but does not apply to investment programs approved prior to April 1, 2005 (“Approved Enterprise”). The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions of the Investment Law as in effect on the date of such approval. Pursuant to the 2005 Amendment, the Israeli Authority for Investments and Development of the Israeli Ministry of Economy (the “Investment Center”) will continue to grant Approved Enterprise status to qualifying investments. The 2005 Amendment, however, limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise. The 2005 Amendment provides that Approved Enterprise status will only be necessary for receiving cash grants. As a result, it is no longer necessary for a company to obtain the advance approval of the Investment Center in order to receive the tax benefits previously available under the alternative benefits track. Rather, a company may claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax benefits set forth in the 2005 Amendment. Companies or programs under the new provisions receiving these tax benefits are referred to as Beneficiary Enterprises. Companies that have a Beneficiary Enterprise, are entitled to approach the Israel Tax Authority for a pre-ruling regarding their eligibility for tax benefits under the Investment Law, as amended. Tax benefits are available under the 2005 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than 25% of their business income from export to specific markets with a population of at least 14 million in 2012 (such export criteria will further increase in the future by 1.4% per annum). In order to receive the tax benefits, the 2005 Amendment states that a company must make an investment which meets certain conditions, including exceeding a minimum investment amount specified in the Investment Law. Such investment allows a company to receive “Beneficiary Enterprise” status, and may be made over a period of no more than three years ending in the year in which the company chose to have the tax benefits apply to its Beneficiary Enterprise. Where the company requests to apply the tax benefits to an expansion of existing facilities, only the expansion will be considered to be a Beneficiary Enterprise and the company’s effective tax rate will be the weighted average of the applicable rates. In this case, the minimum investment required in order to qualify as a Beneficiary Enterprise is required to exceed a certain percentage of the value of the company’s production assets before the expansion. The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Beneficiary Enterprise depends on, among other things, the geographic location in Israel of the Beneficiary Enterprise. The location will also determine the period for which tax benefits are available. Such tax benefits include an exemption from corporate tax on undistributed income for a period of between two to ten years, depending on the geographic location of the Beneficiary Enterprise in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year. A company qualifying for tax benefits under the 2005 Amendment which pays a dividend out of income attributed to its Beneficiary Enterprise during the tax exemption period will be subject to corporate tax in respect of the amount of the dividend distributed (grossed-up to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate that would have otherwise been applicable. Dividends paid to Israeli shareholders out of income attributed to a Beneficiary Enterprise (or out of dividends received from a company whose income is attributed to a Beneficiary Enterprise) are generally subject to withholding tax at source at the rate of 15% (in the case of non-Israeli shareholders - subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 15% or such lower rate as may be provided in an applicable tax treaty, applicable to dividends and distributions out of income attributed to a Beneficiary Enterprise). The reduced rate of 15% is limited to dividends and distributions out of income attributed to a Beneficiary Enterprise during the benefits period and actually paid at any time up to 12 years thereafter, except with respect to a qualified Foreign Investment Company (as such term is defined in the Investment Law), in which case the 12-year limit does not apply. 76 The benefits available to a Beneficiary Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations. If a company does not meet these conditions, it would be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest, or other monetary penalties. We currently have Beneficiary Enterprise programs under the Investment Law, which we believe will entitle us to certain tax benefits. The majority of any taxable income from our Beneficiary Enterprise programs (once generated) would be tax exempt for a period of ten years commencing in the year in which we will first earn taxable income relating to such enterprises, subject to the 12-year limitation from the year the company chose to have its tax benefits apply. Tax Benefits Under the 2011 Amendment The 2011 Amendment canceled the availability of the tax benefits granted under the Investment Law prior to 2011 and, instead, introduced new tax benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. The tax benefits under the 2011 Amendment for a Preferred Company meeting the criteria of the law include, among others, a reduced corporate tax rate of 15% for preferred income attributed to a Preferred Enterprise in 2011 and 2012, unless the Preferred Enterprise was located in a specified development zone, in which case the rate was 10%. Under the 2011 Amendment, such corporate tax rate was reduced in 2013 from 15% and 10%, respectively, to 12.5% and 7%, respectively, and then increased to 16% and 9%, respectively, in 2014 and thereafter until 2016. Pursuant to the 2017 Amendment, in 2017 and thereafter, the corporate tax rate for Preferred Enterprise which is located in a specified development zone was decreased to 7.5%, while the reduced corporate tax rate for other development zones remains 16%. Income attributed to a Preferred Company from a “Special Preferred Enterprise” (as such term is defined in the Investment Law) would be entitled, during a benefits period of 10 years, to reduced tax rates of 8%, or 5% if the Special Preferred Enterprise is located in a certain development zone. As of January 1, 2017, the definition of “Special Preferred Enterprise” includes less stringent conditions. Dividends paid to Israeli shareholders out of preferred income attributed to a Preferred Enterprise or to a Special Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders - subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such lower rate as may be provided in an applicable tax treaty(. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, the aforesaid will apply). The 2011 Amendment also provided transitional provisions to address companies already enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things, that: unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January 1, 2011, a Beneficiary Enterprise can elect to continue to benefit from the benefits provided to it before the 2011 Amendment came into effect, provided that certain conditions are met. We have examined the possible effect, if any, of these provisions of the 2011 Amendment on our financial statements and have decided, at this time, not to opt to apply the new benefits under the 2011 Amendment. There can be no assurance that we will comply with the conditions required to remain eligible for benefits under the Investment Law in the future or that we will be entitled to any additional benefits thereunder. 77 New Tax benefits under the 2017 Amendment that became effective on January 1, 2017. The 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on December 29, 2016, and is effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for two types of “Technology Enterprises,” as described below, and is in addition to the other existing tax beneficial programs under the Investment Law. The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a “Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technology Income,” as defined in the Investment Law. The tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in development zone A. In addition, a Preferred Technology Company will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the Israeli Innovation Authority (the “IIA”). The 2017 Amendment further provides that a technology company satisfying certain conditions will qualify as a “Special Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technology Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by Special Preferred Technology Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from IIA. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law. Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, to Israeli shareholders paid out of Preferred Technology Income, are generally subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders - subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such lower rate as may be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, the aforesaid will apply). If such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4% (or a lower under the tax treaty, if applicable, subject to the receipt in advance of a valid certificate from the Israeli Tax Authority allowing for a reduced tax rate). C. Research and Development, Patents and Licenses, etc. Our research and development strategy is centered on developing our patented proteolytic enzyme technology, which underlies NexoBrid and EscharEx, into additional products for high value indications. Our research and development team is located at our facilities in Yavne and Gan-Rave, Israel, and consists of 35 employees as of December 31, 2025 and is supported by highly experienced consultants in various research and development disciplines. We have received government grants (which are subject to repayment in manner of royalties from future sales) as part of the NexoBrid and EscharEx research and development programs approved by the IIA. The total gross amount of grants actually received by us from the IIA, including accrued interest and net of royalties actually paid, totaled approximately $14.1 million as of December 31, 2025 and the amortized cost (using the interest method) of the liability totaled approximately $8.5 million and $8.3 million as of December 31, 2025 and 2024, respectively. Because the repayment of IIA grants is in the form of future royalties, the balance of the commitments to the IIA is presented as an amortized liability on our balance sheet. As of December 31, 2025, we had accrued and paid royalties to the IIA totaling $2.5 million. We received funds from BARDA in accordance with the terms of our BARDA contracts. As of December 31, 2025 the Company has recognized a cumulative total of $99.8 million in revenues from development services from BARDA for its participation in NexoBrid’s research and development programs. We received funds from DoW and MTEC in accordance with the terms of our DoW and MTEC contracts. As of December 31, 2025 the Company has recognized a cumulative total of $15.0 million in revenues from development services from DoW and MTEC for its participation in the program to develop NexoBrid as a non-surgical solution for field-care burn treatment for the U.S. Army. For a description of our research and development policies for the last three years, see “ITEM 4.B. Business Overview-Research and Development.” 78 D. Trend Information We continue to closely monitor macro-economic conditions, including the headwinds caused by supply chain problems, inflation, increased interest rates and other trends that have been adversely impacting economic activity on a global scale. We have been assessing, on an ongoing basis, the implications of those global conditions for our operations, supply chain, liquidity, cash flow and product orders, and will act in an effort to mitigate adverse consequences as needed. To the extent inflation increases our costs and expenses, we could consider price increases to offset those cost pressures. Specific developments that may potentially impact our operating performance in an adverse manner include: • potential reluctancy of central banks in Europe and the U.S. to reduce interest rates for fear of an uptick in inflation, which lack of action would leave interest rates at their current relatively high levels and thereby maintain current unfavorable credit/financing conditions for our customers who purchase our products; • potential contraction of economic activities and recessionary conditions that could arise as a result of the maintenance of relatively high interest rates and a decrease in consumer demand; • the continued depreciated value of the Euro relative to the U.S. dollar, which may have an adverse impact on the U.S.- denominated value of our European-derived revenues for purposes of our financial statements; and • the increase and potential future increase in tariffs imposed by the U.S. government on foreign countries, or by foreign countries on the U.S., which could broadly adversely impact the country-specific or regional economies into which our products are sold, thereby decreasing our customers’ demand for our products and resulting in a decrease in our revenues. We cannot provide any assurances as to the extent of our resilience to the adverse impact of these specific developments in future periods. Other than the foregoing and as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2025 to the present time that are reasonably likely to have a material adverse effect on our net revenue, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition. E. Critical Accounting Estimates Our consolidated financial statements are prepared in conformity with IFRS, as issued by the IASB. The preparation of these historical financial statements in conformity with IFRS requires management to make estimates, assumptions and judgments in certain circumstances that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting estimates are described in Note 2 to our consolidated financial statements included elsewhere in this annual report. 79