{"url_path":"/sec/bosc/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 Key Information Regarding","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-03-31","source_url":"https://www.sec.gov/Archives/edgar/data/1005516/0001213900-26-037333-index.html","accession_number":"0001213900-26-037333","cik":"0001005516","ticker":"BOSC","issuer_name":"BOS BETTER ONLINE SOLUTIONS LTD","edgar_url":"https://www.sec.gov/Archives/edgar/data/1005516/0001213900-26-037333-index.html","primary_entity_key":"0001005516","primary_entity_name":"BOS BETTER ONLINE SOLUTIONS LTD"},"word_count":8798,"has_tables":true,"body_markdown":"**Item 3:  Key Information Regarding\nBOS**\n\n** **\n\nUnless the context in which\nsuch terms are used would require a different meaning, all references to “BOS”, “we”, “our” or the\n“Company” refer to B.O.S. Better Online Solutions Ltd. and its subsidiaries.\n\n \n\n**3A.\n[Reserved]**\n\n** **\n\n**3B.\nCapitalization and Indebtedness**\n\n** **\n\nNot applicable.\n\n \n\n**3C.\nReasons for the Offer and Use of proceeds**\n\n** **\n\nNot applicable.\n\n \n\n**3D.\nRisk Factors**\n\n** **\n\nThe following risk factors,\nin addition to other information contained or incorporated by reference in this Form 20-F, should be considered carefully. Our business,\nfinancial condition or results of operations could be materially adversely affected by any of these risks. The risks described below are\nnot the only risks facing our Company. Additional risks and uncertainties that we are not aware of or that we currently believe are immaterial\nmay also adversely affect our business, financial condition, results of operation and liquidity. The trading price of our Ordinary Shares\ncould decline due to any of these risks, and you may lose all or part of your investment.\n\n \n\n**Risks relating to our financial\nresults and capital structure:**\n\n** **\n\n**We have had a history\nof losses and our future levels of sales and ability to achieve profitability are unpredictable.**\n\n \n\nAs of December 31, 2025, we\nhad an accumulated deficit of $61 million as a result of losses generated in certain fiscal years prior to fiscal 2022. Although we have\nreported net income for our most recent three fiscal years (net income of $3.6 million in 2025, $2.3 million in 2024 and $2.06 million\nin 2023), our ability to maintain and improve future levels of sales and profitability depends on many factors, which include\n\n \n\n \n●\ndelivering products in a timely manner;\n\n \n \n \n\n \n●\nsuccessfully implementing our business strategy;\n\n \n \n \n\n \n●\nour ability to access additional debt or equity financing to finance our growth, which may be difficult, depending on the conditions in the capital markets;\n\n \n \n \n\n \n●\nincreased demand for existing products and demand for new products; and\n\n \n \n \n\n \n●\ncontrolling costs.\n\n \n\nThere can be no assurance\nthat we will be able to meet our challenges and resume profitable operations in the future or that the level of historic sales will continue\nin the future.\n\n \n\n1\n\n \n\n \n\n**We may be unable to\nmaintain our gross profit margins.**\n\n \n\nOur sales and profitability\nmay vary in any given year, and from quarter to quarter. In order to increase sales, to enter into new markets with new products or due\nto competition, we may find it necessary to decrease prices in order to be competitive. Additionally, our gross profit margin tends to\nfluctuate mainly due to variety and mix of products and changing suppliers prices. We may not be able to maintain current gross profit\nmargins in the future, which would have a material adverse effect on our business.\n\n \n\n**We depend on two banks\nfor our credit facilities.**\n\n \n\nWe rely on the First International\nBank of Israel (“Bank Beinleumi”) and Bank Leumi to provide all of the bank credit facilities to our subsidiaries. As of December\n31, 2025, we had $972,000 in long term debt and $627,000 in short term debt to Bank Leumi and Bank Beinleumi, net of current maturities\nof $148,000.\n\n \n\n**Our assets are subject\nto a security interest in favor of Bank Beinleumi. Our failure to repay the bank loan, if required, could result in legal action against\nus, which could require the sale of all of our assets.**\n\n \n\nThe repayment of our debt\nto Bank Beinleumi is secured by a first priority floating charge on all of the present and future assets of the Company and its Israeli\nsubsidiaries, and by a first priority fixed charge on their goodwill, unpaid share capital and any insurance entitlements pertaining to\nassets underlying these charges. In addition, the Company and its Israeli subsidiaries entered into a series of intercompany guarantees\nin favor of Bank Beinleumi.\n\n \n\nIf we are unable to repay\nthe bank loan when due, the bank could foreclose on our assets in order to recover the amounts due. Any such action might require us to\ncurtail or cease operations (See “Item 5B. Liquidity and Capital Resources” below).\n\n \n\n**Our debt obligations\nmay hinder our growth and put us at a competitive disadvantage.**\n\n \n\nOur debt obligations require\nus to use a substantial portion of our operating cash flow to repay the principal and interest on our loans. This reduces funds available\nto grow and expand our business, limits our ability to pursue business opportunities and makes us more vulnerable to economic and industry\ndownturns. The existence of debt obligations and covenants also limits our ability to obtain additional financing on favorable terms.\n\n** **\n\n**Due to restrictions\nin our loan agreements, we may not be able to operate our business as we desire.**\n\n \n\nOur loan agreements contain\na number of conditions and limitations on the way in which we can operate our business, including limitations on our ability to raise\ndebt, sell or acquire assets and pay dividends. These limitations may force us to pursue less than optimal business strategies or forgo\nbusiness arrangements, which could have been financially advantageous to our shareholders and us. Our debt obligations also contain various\ncovenants, which require that we maintain certain financial ratios related to shareholders’ equity and EBITDA and capital to balance\nsheet ratio. Our failure to comply with the restrictions and covenants contained in our loan agreements could lead to a default under\nthe terms of these agreements (See “Item 5B. Liquidity and Capital Resources” below).\n\n \n\n**Risks related to our business:**\n\n ** **\n\n**We\nrely on certain key suppliers***.*\n\n \n\nMost\nof our sales rely on products of certain key suppliers, which we represent on a non-exclusive basis. In 2025, 52% of our Supply Chain\nSolutions division’s purchases were sourced from five key suppliers, 56% of our RFID division purchases were sourced from five other\nkey suppliers (including a software supplier) and 38% of our Intelligent Robotics division’s purchases were sourced from five other\nkey suppliers.\n\n \n\n2\n\n \n\n \n\nIn\nparticular, 22% of our Supply Chain Solutions division purchases in the year 2025 were sourced from Positronics Manufacturing Company,\nwhich we represent in Israel. These purchases amounted to $6 million. A disruption in our business relationship with Positronic could\nhave a material adverse effect on the business, financial condition and results of operations of our Supply Chain Solutions division.\n\n \n\nIn\nthe event that any of our key suppliers becomes unable to fulfill our requirements in a timely manner or if we cease our business relationship\nwith any of these suppliers, we may experience an interruption in delivery and a decrease in our business until an alternative supplier\ncan be procured.\n\n \n\n**We depend on key personnel\nfor the success of our business.**\n\n \n\nOur success depends, to a\nsignificant extent, on the continued active participation of our executive officers and other key personnel, mainly our CEO, Eyal Cohen\nand our President Avidan Zelicovsky. In addition, there is significant competition for employees with technical, operational and sales\nexpertise in our industry.\n\n \n\nIn order to succeed we would\nneed to be able to:\n\n \n\n \n●\nretain the executive officers and key personnel who have been involved in the development of our two operating divisions; and\n\n \n \n \n\n \n●\nattract and retain highly skilled personnel in various functions of our business.\n\n \n\nWe cannot make assurances\nthat we will be successful in attracting, integrating, motivating and retaining key personnel. If we are unable to retain our key personnel\nand attract additional qualified personnel as and when needed, our business may be adversely affected.\n\n \n\n**We may be unable to\neffectively manage our growth and expansion, and as a result, our business results may be adversely affected.**\n\n \n\nOur goal is to grow over the\nnext few years. The management of our growth, if any, will require the continued expansion of our operational and financial control systems,\nas well as a significant increase in our financial resources and in our delivery and service capabilities. These factors could place a\nsignificant strain on our resources.\n\n \n\nOur growth increases the complexity\nof our operations, places significant demands on our management and our operational, financial and marketing resources and involves a\nnumber of challenges, including:\n\n \n\n \n●\nretaining and motivating key personnel of the acquired businesses;\n\n \n \n \n\n \n●\nassimilating different corporate cultures;\n\n \n \n \n\n \n●\npreserving the business relationships with existing key customers and suppliers;\n\n \n\n \n●\nmaintaining uniform standards, controls, procedures and policies;\n\n \n \n \n\n \n●\nintroducing joint products, solutions and service offerings; and\n\n \n \n \n\n \n●\nhaving sufficient working capital to finance growth.\n\n \n\nIn addition, our inability\nto meet our delivery commitments in a timely manner (as a result of unexpected increases in orders, for example) could result in losses\nof sales, exposure to contractual penalties, costs or expenses, as well as damage to our reputation in the marketplace.\n\n \n\nOur inability to manage growth\neffectively could have a material adverse effect on our business, financial condition and results of operations.\n\n \n\n3\n\n \n\n \n\n**We\ndo not have collateral or credit insurance for all of our customers’ debt, and our allowance for credit losses may increase.**\n\n \n\nOur\ncustomers’ debt is derived from sales to customers located primarily in Israel, India, the Far East and Europe. We do not generally\nrequire collateral; however, a certain portion of our debt of customers outside of Israel is insured against customer nonpayment through\nthe Israeli Credit Insurance Company Ltd.\n\n \n\nThe\nbalance of allowance for credit losses recorded on our financial statements as of December 31, 2025, amounted to $139,000, which was determined\nby our management to be sufficient. However, in the event of a global economic slowdown or if a local or global recession reoccurs, we\nmay be required to record additional and significant allowances for credit losses.\n\n \n\n**Certain\ncustomers of our Supply Chain Solutions division may cancel purchase orders they placed before the delivery.**\n\n \n\nSupply\nchain programs for the sale of electronic components, including the programs offered by our Supply Chain Solutions division, are designed\nto accommodate the preference of customers to work with a limited number of suppliers that are able to provide a wide range of electronic\ncomponents under one order. In the event we are not able to provide all of the components required by a customer, such customer could\nelect to terminate the entire order before its delivery. In addition, certain of our individual product orders provide a right of termination\nprior to delivery.\n\n \n\nIn\nthe event substantial orders are so cancelled, there is no assurance that we will be able to sell the pre-purchased inventory at a profit,\nor at all. This could result in excess and obsolete inventory and could have a material adverse effect on our results of operations.\n\n \n\n**The\nelectronic components provided by our Supply Chain Solutions division need to meet certain industry standards and for some customers we\nneed to be the manufacturers’ authorized distributors.**\n\n \n\nThe\nmain business of our Supply Chain Solutions division is the provision of electronic components to the aerospace and defense industry.\nThese components need to be in compliance with Aviation Standard number 9120 which was adopted by the International Aerospace Quality\nGroup. Noncompliance with these standards could limit our sales.\n\n \n\nIn\naddition, in the face of an increased number of refurbished or non-original components offered in the marketplace, certain customers have\nbegun to insist on only purchasing components directly from authorized distributors of the manufacturers. This could impair our ability\nto sell components of manufacturers for which we do not serve as authorized dealers and may have a substantial adverse effect on our business.\n\n \n\n**Our\nproducts may contain defects that may be costly to correct, delay market acceptance of our products, harm our reputation and expose us\nto litigation.**\n\n \n\nDespite\ntesting by us, errors may be found in our software products and services. If defects are discovered, we may not be able to successfully\ncorrect them in a timely manner, or at all. Defects and failures in our products could result in a loss of, or delay in, market acceptance\nof our products and could damage our reputation. Although our standard license agreement with our customers contains provisions designed\nto limit our exposure to potential product liability claims, it is possible that these provisions may not be effective or enforceable\nunder the laws of certain jurisdictions and we could fail to realize revenues and suffer damage to our reputation as a result of, or in\ndefense of, a substantial claim.\n\n** **\n\n**Our\nproducts may infringe on the intellectual property rights of others.**\n\n \n\nThird\nparties may assert claims that we have violated a patent, trademark, copyright or other proprietary intellectual property right belonging\nto them. As is characteristic of our industry, there can be no assurance that our products do not or will not infringe on the proprietary\nrights of third parties, that third parties will not claim infringement by us with respect to patents or other proprietary rights or that\nwe would prevail in any such proceedings. Any infringement claims, whether or not meritorious, could result in costly litigation or arbitration\nand divert the attention of technical and management personnel. Any adverse outcome in litigation alleging an infringement could require\nus to develop non-infringing technology or enter into royalty or licensing agreements. If, in such situations, we are unable to obtain\nlicenses on acceptable terms, we may be prevented from selling products that infringe on such intellectual property of a third party.\nIn addition, an unfavorable outcome or settlement regarding one or more of these matters could have a material adverse effect on our business\nand operating results.\n\n** **\n\n4\n\n \n\n** **\n\n**The\nSupply Chain Solutions division engages in a number of business activities governed by U.S. Government Laws and Regulations, which if\nviolated, could subject the Company to civil or criminal fines and penalties.**\n\n \n\nThe\nSupply Chain Solutions division engages in a number of business activities governed by U.S. Government procurement laws and regulations,\nwhich change frequently, including regulations relating to import-export control and technology transfer restrictions. In addition, the\nU.S. Foreign Corrupt Practices Act, or the FCPA, and similar anti-corruption laws in other jurisdictions, include anti-bribery provisions.\nIf we, or our sales representatives, fail to comply with these laws and regulations, we could be subject to administrative, civil or criminal\nliabilities that could have a material adverse effect on our business and results of operations. We may not always be protected in cases\nof violation of the FCPA or other anti-corruption laws by our employees or third-parties acting on our behalf and such violations may\nhave a material adverse effect on our reputation, operating results and financial condition.\n\n \n\n**Future\nchanges in industry standards may have an adverse effect on our business.**\n\n \n\nNew\nindustry standards in the aviation and defense industry could cause a portion of our Supply Chain Solutions division’s inventory\nto become obsolete and unmarketable, which would adversely affect our results of operations.\n\n \n\n**Existing\nand proposed Israeli legal requirements in respect of minimum wage and work and rest hours may increase our labor related expenses.**\n\n \n\nIn\nApril 2025, the mandatory minimum wage in Israel was increased by approximately 6%, to NIS 6,247.67 per month for 182 monthly hours (NIS\n34.32 per hour). The minimum wage is due to increase again on April 2026 to NIS 6,443.85 per month or NIS 35.4 per hour. As a result,\nwe may suffer an increase in our labor costs in Israel, which could adversely affect our profitability.\n\n** **\n\n**If\nrevenue levels for any quarter fall significantly below our expectations, our results of operations will be adversely affected.**\n\n \n\nOur\nrevenues in any quarter are substantially dependent on orders received and delivered in that quarter. We base our decisions regarding\nour operating expenses on anticipated revenue trends and our expenses levels are relatively fixed or require some time for adjustment.\nAs a result, revenue levels falling significantly below our expectations will adversely affect our quarterly results of operations.\n\n \n\n**The\nrate of inflation in Israel may negatively impact our costs if it exceeds the rate of devaluation of the NIS against the U.S. dollar.\nSimilarly, the U.S. dollar cost of our operations in Israel will increase to the extent increases in the rate of inflation in Israel are\nnot offset by a devaluation of the NIS in relation to the U.S. dollar.**\n\n \n\nA\nsubstantial amount of our revenues is denominated in U.S. dollars (“U.S. dollars” or “dollars”) or is U.S. dollar-linked.\nHowever, we incur a significant portion of our expenses, principally salaries and related personnel expenses in Israel and rent for our\nfacilities in Israel, in NIS. As a result, we are exposed to the risk that the rate of inflation in Israel will exceed the rate of devaluation\nof the NIS in relation to the U.S. dollar or that the timing of this devaluation lags behind inflation in Israel. In any such event, the\nU.S. dollar cost of our operations in Israel will increase and our U.S. dollar-measured results of operations will be adversely affected.\n\n \n\nSimilarly,\nwe are exposed to the risk that the NIS, after adjustment for inflation in Israel, will appreciate in relation to the U.S. dollar. In\nthat event, the dollar-measured costs of our operations in Israel will increase and our dollar-measured results of operations will be\nadversely affected.\n\n \n\nIn\n2025 and 2024, the NIS appreciated against the dollar by approximately 14% and 0.027%, respectively. In 2023 and 2022, the NIS depreciated\nagainst the dollar by approximately 3%, and 13%, respectively. In 2021 and 2020 the NIS appreciated against the dollar by approximately\n3.3% and 6.9%, respectively. In 2025 and 2024 the inflation rate in Israel was 2.6% and 3.4%, respectively; in 2023 the inflation rate\nin Israel was 3% and in 2022 the inflation rate in Israel was 5.3%. In 2021 there was annual inflation in Israel of 2.4%. In 2020, the\ndeflation rate in Israel was 0.7%. Therefore, the U.S. dollar cost of our Israeli operations decreased in 2025, 2024, 2021 and 2020, and\nincreased in 2023 and 2022. We cannot predict any future trends in the rate of inflation in Israel and whether the NIS will appreciate\nagainst the U.S. dollar or vice versa.\n\n \n\n5\n\n \n\n \n\nThe\nexistence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, increased\ncosts of labor, fluctuations in foreign currency exchange rates, and other similar effects. As a result of inflation, we have experienced,\nand may continue to experience, cost increases, which could materially and adversely affect our business, results of operations, and financial\ncondition. Any increase in the rate of inflation in Israel, unless the increase is offset on a timely basis by a devaluation of the NIS\nin relation to the U.S. dollar, will increase our labor and other costs, which will increase the U.S. dollar cost of our operations in\nIsrael and harm our results of operations (see “Item 5A. Results of Operation - Impact of Inflation and Currency Fluctuations”\nbelow).\n\n** **\n\n**If\nwe are unsuccessful in introducing new products, we may be unable to expand our business.**\n\n \n\nThe\nmarket for some of our products is characterized by rapidly changing technology and evolving industry standards. The introduction of products\nembodying new technology and the emergence of new industry standards can render existing products obsolete and unmarketable and can exert\nprice pressures on existing products.\n\n \n\nOur\nability to anticipate changes in technology and industry standards and successfully market new and enhanced products as well as additional\napplications for existing products, in each case on a timely basis, will be critical in our ability to grow and remain competitive. If\nwe are unable, for technological or other reasons, to market products that are competitive in technology and price and responsive to customer\nneeds, our business will be materially adversely affected.\n\n \n\n**Disruptions\nto our IT systems due to system failures or cyber security attacks may impact our operations, result in sensitive customer information\nbeing compromised, and expose us to liability which would have a material adverse effect on our reputation and materially harm our business.**\n\n \n\nWe\nare subject to a number of legal requirements, contractual obligations and industry standards regarding security, data protection and\nprivacy and any failure to comply with these requirements, obligations or standards could have an adverse effect on our reputation, business,\nfinancial condition and operating results. In conducting our business, we routinely collect and store sensitive data, including personal\ninformation and proprietary technology and information about our business and our customers, suppliers and business partners, including\nproprietary technology and information owned by our customers. The secure processing, maintenance and transmission of this information\nis critical to our operations and business strategy. Our servers and equipment may be subject to computer viruses, break-ins, and similar\ndisruptions from unauthorized tampering with computer systems. Our systems have been, and are expected to continue to be, the target of\nmalware and other cyber-attacks. In this regard, in 2022, the Company learned that it suffered a limited cybersecurity breach in 2020\npursuant to which an unauthorized party accessed and extracted data by exploiting a vulnerability affecting certain of the Company’s\nsoftware. The deficient software was subsequently replaced in 2020 in an unrelated upgrade and, to the Company’s knowledge, after\nconducting an investigation, the breach has not reoccurred and did not result in the release of any material company or customer information.\n\n \n\nAlthough\nwe have invested in measures to reduce these risks and conducted related tests there can be no assurance that our current information\ntechnology (IT) systems are fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other\nsimilar threats. See “Item 16K-Cybersecurity” for more information on our policies and procedures for identification and management\nof risks from cyber threats. A cyber-attack that bypasses our IT security systems causing an IT security breach may lead to a material\ndisruption of our IT business systems and/or the loss of business information. A cyber-attack on our systems or networks that impairs\nour IT systems could disrupt our business operations and our ability to sell our products. Any such event could have a material adverse\neffect on our business. To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders or shipment\nof our products, or in theft, destruction, loss, misappropriation or release of our confidential information or our intellectual property,\nour business, financial condition, results of operations and prospects could be materially adversely affected. Furthermore, we cannot\nbe sure that our insurance policies with respect to cyber risk will adequately cover or include the damages or losses (whether direct\nor consequential) resulting from successful cyber attacks or if we will be able to renew such insurance.\n\n \n\n6\n\n \n\n \n\n**We\nhave significant sales worldwide and could encounter problems if conditions change in the places where we market products.**\n\n \n\nWe\nhave sold and intend to continue to sell products in overseas markets, including in India, the Far East, America and Europe. A number\nof risks are inherent in engaging in international transactions, including:\n\n \n\n \n●\npossible problems in collecting receivables;\n\n \n \n \n\n \n●\nthe imposition of governmental controls, or export license requirements;\n\n \n \n \n\n \n●\npolitical and economic instability in foreign companies;\n\n \n \n \n\n \n●\nforeign currency exchange rate risk;\n\n \n \n \n\n \n●\ntrade restrictions, sanctions or changes in tariffs being imposed; and\n\n \n \n \n\n \n●\nlaws and legal issues concerning foreign countries.\n\n \n\nShould\nwe encounter such difficulties in conducting our international operations, they may adversely affect our business condition and results\nof operations.\n\n \n\n**Unfavorable\nglobal economic conditions could have a material adverse effect on our business, operating results and financial condition.**\n\n \n\nWe\nare currently operating in a period of economic uncertainty and cannot predict the timing, strength, or duration of any economic downturn.\nTo the extent unfavorable conditions in the national and global economy persist, we may experience reductions in sales of products and\nservices in some markets, longer sales cycles, slower adoption of new technologies and increased price competition. In addition, weakness\nin the end-user market could negatively affect the cash flow of our customers who could, in turn, delay paying their obligations to us.\nThis could increase our credit risk exposure and cause delays in our recognition of revenues on future sales to these customers.\n\n \n\nThe global COVID-19 pandemic\naffected economic activity worldwide and led, among other things, to a disruption in the global supply chain, a decrease in global transportation,\nand restrictions on travel and work that were announced by the State of Israel and other countries worldwide. As a result of the COVID-19\npandemic, we had experienced a reduction in inbound and outbound international delivery routes, which have caused, delays in receipt and\nshipment of goods.\n\n \n\nIn\nparticular, the Company relies, with respect to some of its products, on manufacturers in China. The adverse effects of the COVID-19 on\nour business with China have subsided in 2024, however the return of the pandemic and any related measures taken by the authorities may\nadversely affect our future results of operations, cash flows and financial condition\n\n** **\n\n**Environmental,\nsocial and governance matters may impact our business and reputation.**\n\n** **\n\nIncreasingly,\nin addition to the importance of their financial performance, companies are being judged by their performance on a variety of environmental,\nsocial and governance, or ESG, matters, which are considered to contribute to the long-term sustainability of companies’ performance.\n\n \n\n7\n\n \n\n \n\nA\nvariety of organizations measure the performance of companies on such ESG topics, and the results of these assessments are widely publicized.\nIn addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major\ninstitutional investors have publicly emphasized the importance of such ESG measures to their investment decisions. Topics taken into\naccount in such assessments include, among others, the company’s efforts and impacts on climate change and human rights, ethics\nand compliance with law, and the role of the company’s board of directors in supervising various sustainability issues. In addition\nto the topics typically considered in such assessments, in the healthcare industry, issues of the public’s ability to access a company’s\nmedicines are of particular importance.\n\n \n\nIn\nlight of this increased focus on ESG matters, there can be no certainty that we will manage such issues successfully, or that we will\nsuccessfully meet society’s expectations as to our proper role. Any failure or perceived failure by us in this regard could have\na material adverse effect on our reputation and on our business, share price, financial condition, or results of operations, including\nthe sustainability of our business over time.\n\n \n\n**We may be obligated\nto indemnify our directors and officers***.*\n\n \n\nThe\nCompany has agreements with its directors and senior officers which provide, subject to Israeli law, indemnification by the Company for\nits directors and senior officers for: (a) monetary liability imposed upon a director or officer in favor of a third party by a judgment,\nincluding a settlement or an arbitral award confirmed by the court, as a result of an act or omission of such person in his or her capacity\nas a director or officer of the Company, (b) reasonable litigation expenses, including attorney’s fees, incurred by a director or\nofficer (A) pursuant to an investigation or a proceeding commenced against him or her by a competent authority, provided that (i) it was\nterminated without the filing of an indictment and without having a monetary charge imposed in lieu of criminal proceedings (as such terms\nare defined in the Israeli Companies Law; or (ii) it was terminated without the filing of an indictment but with a monetary charge imposed\nher in lieu of criminal proceedings for a crime that does not require proof of criminal intent; (B) or in connection with a financial\nsanction, as a result of an act or omission of such person in its capacity as a director or officer of the Company, (c) reasonable litigation\nexpenses, including attorney’s fees, incurred by a director or officer or imposed on him or her by a court, in a proceeding brought\nagainst him or her by or on behalf of the Company or by a third party, or in a criminal action in which he or she was acquitted, or in\na criminal action which does not require criminal intent in which he was convicted, in each case relating to acts or omissions of such\nperson in its capacity as a director or officer of the Company, (d) expenses, including reasonable litigation expenses and legal fees,\nincurred by such a director or officer as a result of a proceeding instituted against him in relation to (A) infringements that may result\nin imposition of financial sanction pursuant to the provisions of Chapter H’3 under the Israeli Securities Law 5728 – 1968\n(the “Israeli Securities Law”) or (B) administrative infringements pursuant to the provisions of Chapter H’4 under the\nIsraeli Securities Law or (C) infringements pursuant to the provisions of Chapter I’1 under the Israeli Securities Law; and (e)\npayments to an injured party of infringement under Section 52ND(a)(1)(a) of the Israeli Securities Law. Payments pursuant to such indemnification\nobligation may materially adversely affect our financial condition.\n\n \n\n**There\ncan be no assurance that we will not be classified as a passive foreign investment company (a “PFIC”).**\n\n \n\nBased on our current and projected\nincome, assets and activities, we do not believe that, at this time, BOS is a passive foreign investment company for U.S. federal income\ntax purposes, but there can be no assurance that we will not be classified as such in the future. Such classification may have materially\nadverse tax consequences for our U.S. shareholders. One method of avoiding such tax consequences is by making a “qualified electing\nfund” election for the first taxable year in which the Company is a PFIC. However, such an election is conditioned upon our furnishing\nour U.S. shareholders annually with certain tax information. We do not presently prepare or provide such information, and such information\nmay not be available to our U.S. shareholders if we are subsequently determined to be a PFIC. You are advised to consult with your own\ntax advisor regarding the particular tax consequences related to the ownership and disposition of our Ordinary Shares under your own particular\nfactual circumstances.\n\n \n\n8\n\n \n\n \n\n**A\ndecline in our market capitalization or other factors could require us to write-down the value of our goodwill, which could have a material\nadverse effect on our results of operations.**\n\n \n\nOur\nbalance sheet contains a significant amount of goodwill and other amortizable intangible assets in long-term assets, totaling about $3.3\nmillion on December 31, 2025. We review goodwill annually for impairment, or more frequently when indications for potential impairment\nexist. We review other amortizable intangible assets for impairment when indicators for impairment exist. The volatility of our share\nprice can cause significant changes to our market capitalization.\n\n \n\nIf\nour market capitalization experiences a significant decline and is below the value of our Shareholders’ equity, if the carrying\namount of a reporting unit exceeds its fair value or if any other quantitative or qualitative indication of impairment of goodwill arises\nin the future, we may be required to record impairment charges for our goodwill. Any such write-downs, if required, could result in a\nsignificant non-cash expense on our income statement, which could have a material adverse effect on our results of operations.\n\n** **\n\n**Our business could be\nimpacted as a result of actions by activist shareholders or others.**\n\n \n\nWe may be subject, from time\nto time, to legal and business challenges in the operation of our company due to actions instituted by activist shareholders or others.\nResponding to such actions could be costly and time-consuming, may not align with our business strategies and could divert the attention\nof our Board of Directors and senior management from the pursuit of our business strategies. Perceived uncertainties as to our future\ndirection as a result of shareholder activism may lead to the perception of a change in the direction of the business or other instability\nand may affect our relationships with investors, vendors, customers, prospective and current employees and others.\n\n** **\n\n**We may fail to maintain\neffective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which could have\na material adverse effect on our operating results, investor confidence in our reported financial information and the market price of\nour Ordinary Shares.**\n\n \n\nOur efforts to comply with\nthe requirements of Section 404 of the Sarbanes-Oxley Act of 2002, governing internal control and procedures for financial reporting have\nresulted in increased general and administrative expenses and a diversion of management time and attention. We expect these efforts to\nrequire the continued commitment of significant resources. We may identify material weaknesses or significant deficiencies in our assessments\nof our internal control over financial reporting. Failure to maintain effective internal control over financial reporting could result\nin investigations or sanctions by regulatory authorities and could have a material adverse effect on our operating results, investor confidence\nin our reported financial information and the market price of our Ordinary Shares.\n\n \n\n**If\nour employees commit fraud or engage in other misconduct, including noncompliance with regulatory standards and requirements or insider\ntrading, our business may experience material adverse consequences.**\n\n \n\nDuring the course of our operations,\nour directors, executives and employees may have access to material, nonpublic information regarding our business, our results of operations\nor potential transactions we are considering. Despite the adoption of an Insider Trading Policy, we may not be able to prevent a director,\nexecutive or employee from trading in our ordinary shares on the basis of, or while having access to, such information.\n\n \n\nIn addition, while we have\ndesigned and operate an internal control system, we cannot provide absolute assurance that instances of fraud, if any, shall be prevented\nor detected. \n\n \n\nIf a director, an executive\nor an employee was to be investigated, or an action was to be brought against him or her for insider trading or fraud, it could have a\nnegative impact on our reputation and our share price. Such a claim, with or without merit, could also result in substantial expenditures\nof time and money and divert attention of our management team from other tasks important to the success of our operations.\n\n** **\n\n9\n\n \n\n** **\n\n**Risks\nrelated to our Ordinary Shares:**\n\n \n\n**Our\nshare price has been and may continue to be volatile, which could result in substantial losses for individual shareholders.**\n\n \n\nThe market price of our Ordinary\nShares has been and may continue to be highly volatile and subject to wide fluctuations. From January 1, 2025, through March 19, 2026,\nthe daily closing price of our Ordinary Shares in Nasdaq has ranged from $3.31 to $5.06 per share. We believe that these fluctuations\nhave been in response to a number of factors including the following, some of which are beyond our control:\n\n \n\n \n●\nvariations between actual results and projections;\n\n \n \n \n\n \n●\nthe limited trading volume in our stock;\n\n \n \n \n\n \n●\nchanges in our bank debts; and\n\n \n \n \n\n \n●\nNasdaq Capital Market Listing Standards non-compliance notices.\n\n \n\nIn\naddition, stock markets in general have, from time to time, experienced extreme price and volume fluctuations. This volatility is often\nunrelated or disproportionate to the operating performance of the affected companies. These broad market fluctuations may adversely affect\nthe market price of our Ordinary Shares, regardless of our actual operating performance.\n\n \n\n**Future sales of our\nOrdinary Shares, whether by us or our shareholders, could cause our stock price to decline.**\n\n \n\nIf our existing shareholders\nsell, or indicate an intent to sell, substantial amounts of our Ordinary Shares in the public market, the trading price of our Ordinary\nShares could decline significantly. Similarly, the perception in the public market that our shareholders might sell Ordinary Shares could\nalso depress the market price of our Ordinary Shares. A decline in the price of our Ordinary Shares might impede our ability to raise\ncapital through the issuance of additional Ordinary Shares or other equity securities. In addition, the issuance and sale by us of additional\nOrdinary Shares or securities convertible into or exercisable for our Ordinary Shares, or the perception that we will issue such securities,\ncould reduce the trading price for our Ordinary Shares as well as make future sales of equity securities by us less attractive or not\nfeasible. The sale of Ordinary Shares issued upon the exercise of our outstanding options and warrants could further dilute the holdings\nof our then existing shareholders.\n\n** **\n\n**Our\nOrdinary Shares may be delisted from the Nasdaq Stock Market as a result of our failure to meet the Nasdaq Capital Market continued listing\nrequirements.**\n\n \n\nOver\nthe years, the Company has received several notices from the Nasdaq Stock Market advising it of the non-compliance of its shares with\ncontinued listing requirements on the Nasdaq Capital Market.\n\n \n\nThere\ncan be no assurance that the Company will continue to qualify for listing on the Nasdaq Capital Market. If the Company’s Ordinary\nShares are delisted from the Nasdaq Capital Market, trading in its Ordinary Shares could be conducted on the over-the-counter market.\nIn addition, if the Company’s Ordinary Shares were delisted from the Nasdaq Capital Market, it would be subject to the so-called\npenny stock rules that impose restrictive sales practice requirements on broker-dealers who sell those securities. Consequently, de-listing,\nif it occurred, could affect the ability of our shareholders to sell their Ordinary Shares in the secondary market. The restrictions applicable\nto shares that are de-listed, as well as the lack of liquidity for shares that are traded on an electronic bulletin board, may adversely\naffect the market price of such shares.\n\n \n\n10\n\n \n\n \n\n**Risks related to our\nlocation in Israel:**\n\n \n\n**Political,\neconomic, and security conditions in Israel affect our operations and may limit our ability to produce and sell products or provide our\nservices.**\n\n \n\nWe\nare incorporated under the laws of the State of Israel, where we also maintain our headquarters and our principal research and development\nand sales and marketing facilities. As a result, political, economic and military conditions affecting Israel directly influence us.\n\n \n\nSince\nits establishment in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. In recent years,\nthese have included hostilities between Israel and Hezbollah in Lebanon, and Israel and Hamas in the Gaza Strip, both of which resulted\nin rockets being fired into Israel causing casualties and disruption of economic activities. Recent political uprisings and conflicts\nin various countries in the Middle East, including Egypt and Syria, are affecting the political stability of those countries.\n\n \n\nOn\nOctober 7, 2023, Hamas launched a series of coordinated attacks from the Gaza Strip onto Israel. In response on October 8, 2023, Israel\ndeclared war on Hamas. Although on October 13, 2025, Israel reached a ceasefire agreement with Hamas, the situation in Gaza remains highly\nunstable and hostilities may resume at any time. Following the attack by Hamas on Israel’s southern border, Hezbollah in Lebanon\nalso launched missile, rocket and shooting attacks against Israeli military sites, troops and Israeli towns in northern Israel. In November\n2024, Israel entered into a ceasefire arrangement with Hezbollah, which reduced hostilities along the northern border until early March\n2026 when hostilities resumed. In response, Israel has conducted a number of targeted strikes against sites in Lebanon associated\nwith Hezbollah.\n\n \n\nSince\nOctober 2023, Israel has been subject to armed conflict with Iran, the outcome and implications of which remain uncertain. In late February\n2026, the United States and Israel undertook significant military operations targeting Iran, and Iran has since carried out retaliatory\nactions in the region. Any continued or expanded hostilities involving Iran - including a wider regional conflict, additional sanctions,\ndisruption to energy markets or shipping routes, or increased volatility in global financial markets - could adversely affect global economic\nconditions and the markets in which we operate. To date, this situation has had no material impact on the Company’s activities in\nIsrael. However, those may be subject to temporary disruptions if this situation was to further escalate.\n\n \n\nThe\nsecurity situation remains fluid, and any renewed military actions, restrictions, or government-imposed measures could adversely affect\nour operations, supply chains, and financial conditions and Israel’s economy in general. These events may be intertwined with wider\nmacroeconomic indications of a deterioration of Israel’s economic standing that may involve a downgrade in Israel’s credit\nrating by rating agencies (such as the recent downgrade by Moody’s of its credit rating of Israel from A2 to Baa1), which may have\na material adverse effect on the Company and its ability to effectively conduct its operations.\n\n \n\nAny\narmed conflicts, terrorist activities, political instability or hostilities in the region or that involve Israel or the interruption or\ncurtailment of trade within Israel or between Israel and its trading partners could adversely affect our business, financial condition\nand results of operations and could make it more difficult for us to raise capital. \n\n \n\n11\n\n \n\n \n\nA\nnumber of our key personnel in Israel have standing obligations to perform periodic reserve duty in the Israel Defense Forces and are\nsubject to be called up for active military duty at any time. In connection with the Israeli security cabinet’s declaration of war\nagainst Hamas and possible hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to\nperform immediate military service. Certain of our employees in Israel have been called, and additional employees may be called, for service\nin the current or future wars or other armed conflicts with Hamas and others, and such persons may be absent for an extended period of\ntime. Although many of such military reservists have since been released, they may be called up for additional reserve duty, depending\non developments in the war in Gaza, Lebanon and along Israel’s other borders. If our key personnel are absent from our business\nfor a significant period of time, we may experience disruptions in our business that could affect the development, sales or technical\nsupport of our products. As a result, we might not be able to compete in the market and our results of operations could be harmed. \n\n \n\nOur commercial insurance\ndoes not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli\ngovernment has in the past covered the reinstatement value of certain damages that were caused by terrorist attacks or acts of war, we\ncannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages\nincurred. Any losses or damages incurred by us could have a material adverse effect on our operations.\n\n \n\nFurthermore,\nseveral countries and companies restrict business with Israel and Israeli companies. Restrictive laws or policies directed towards Israel\nor Israeli businesses may have an adverse impact on our operations, our financial results or the expansion of our business. In January\n2024 the International Court of Justice, or ICJ, issued an interim ruling in a case filed by South Africa against Israel\nin December 2023, making allegations of genocide amid and in connection with the war in Gaza, and ordered Israel, among other things,\nto take measures to prevent genocidal acts, prevent and punish incitement to genocide, and take steps to provide basic services and humanitarian\naid to civilians in Gaza. On November 21, 2024, the International Criminal Court (“ICC”) issued arrest warrants for Israeli\nPrime Minister Benjamin Netanyahu and former Israeli Minister of Defense Yoav Gallant based on allegations of war crimes including using\nstarvation as a method of warfare, murder and other inhumane acts. There are concerns that companies and businesses will terminate, and\nmay have already terminated, certain commercial relationships with Israeli companies following the ICJ and ICC decisions. This may materially\nand adversely impact our ability to sell and provide our products and services.\n\n \n\nIn\naddition, prior to the Hamas attack in October 2023, the Israeli government pursued extensive reforms to Israel’s judicial system.\nIn response to such initiatives, many individuals, organizations and institutions, both within and outside of Israel, have voiced concerns\nthat the proposed reforms may negatively impact the business environment in Israel including due to increased currency fluctuations, downgrades\nin credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic conditions.\nIn September 2024, Moody’s rating agency has lowered Israel’s credit rating from A2 to Baa1. Such rating continued for 2025.\nIn October 2024, S&P Global and Fitch downgraded Israel credit rating from “A+” to “A. On November 7, 2025, S&P\nGlobal Ratings revised its outlook on Israel to stable from negative. At the same time, they affirmed their 'A/A-1' long- and short-term\nforeign and local currency sovereign credit ratings. Any negative developments should they occur may have an adverse effect on our business,\nour results of operations and our ability to raise additional funds, if deemed necessary by our management and board of directors.\n\n \n\n12\n\n \n\n \n\n**The\nanti-takeover effects of Israeli laws may delay or deter a change of control of the Company.**\n\n \n\nProvisions\nof Israeli law may delay, prevent or make undesirable a merger or an acquisition of all or a significant portion of our shares or assets.\nThe Israeli Companies Law regulates acquisitions of shares through tender offers and mergers, requires special approvals for transactions\ninvolving significant shareholders and regulates other matters that may be relevant to these types of transactions. These provisions of\nIsraeli law could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire\nus, even if doing so would be beneficial to our shareholders. These provisions may limit the price that investors may be willing to pay\nin the future for our Ordinary Shares. Furthermore, Israeli tax considerations may make potential transactions undesirable to us or to\nsome of our shareholders.\n\n \n\nThese\nlaws may have the effect of delaying or deterring a change in control of the Company, thereby limiting the opportunity for shareholders\nto receive a premium for their shares and possibly affecting the price that some investors are willing to pay for the Company’s\nsecurities.\n\n \n\n**All\nof our directors and officers are non-U.S. residents and enforceability of civil liabilities against them is uncertain.**\n\n \n\nAll\nof our directors and officers reside outside of the United States. Therefore, a judgment obtained against us, or any of these persons,\nincluding a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United\nStates and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in\nthe United States or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear\na claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring\nsuch 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\nto 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,\nwhich can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding\ncase law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against\nus in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.\n\n \n\n**Your\nrights and responsibilities as our shareholder will be governed by Israeli law, which differ in some respects from the rights and responsibilities\nof shareholders of United States corporations.**\n\n \n\nSince\nwe are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association\nand Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in United\nStates-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith towards the company and\nother shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting\nof shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s\nauthorized share capital, a merger and approval of related party transactions that require shareholder approval. In addition, a shareholder\nwho knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment\nof a director or executive officer in the company has a duty of fairness towards the company. These provisions may be interpreted to impose\nadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.\n\n \n\n13\n\n \n\n \n\n**We rely on the foreign\nprivate issuer exemption for certain corporate governance requirements under the Nasdaq Stock Market Rules. This may afford less protection\nto holders of our Ordinary Shares.**\n\n* *\n\nWe\nare a foreign private issuer as such term is defined under U.S. federal securities laws. As a foreign private issuer, we have elected\nto follow certain home country corporate governance practices, instead of certain requirements of the Marketplace Rules of the Nasdaq\nCapital Market, or the Nasdaq Marketplace Rules. We may in the future elect to follow Israeli corporate governance practices with regard\nto, among other things, the composition of our board of directors (“**Board of Directors**”), compensation of officers,\ndirector nomination procedures and quorum requirements at shareholders’ meetings. In addition, we may elect to follow Israeli corporate\ngovernance practices instead of the Nasdaq requirements to obtain shareholder approval for certain dilutive events (such as for the establishment\nor amendment of certain equity-based compensation plans, issuances that will result in a change of control of the company, certain transactions\nother than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets\nof another company). Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq’s corporate\ngovernance rules. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S.\ncompany listed on the Nasdaq Capital Market may provide less protection than is accorded to investors of domestic issuers. See “Item\n16G – Corporate Governance” below.\n\n \n\n**If\nwe were to lose our foreign private issuer status under U.S. federal securities laws, we would incur additional expenses associated with\ncompliance with the U.S. securities laws applicable to U.S. domestic issuers.**\n\n \n\nAs\na foreign private issuer, we are exempt from the rules and regulations under the Securities and Exchange Act of 1934, as amended (the\n“**Exchange Act**”), related to the furnishing and content of proxy statements, and our officers, directors and principal\nshareholders are exempt from the short-swing profit recovery provisions contained in Section 16 of the Exchange Act and our principal\nshareholders are also exempt from the reporting provisions of this Act. In addition, we are not required under the Exchange Act to file\nannual, quarterly and current reports and financial statements with the Securities and Exchange Commission as frequently or as promptly\nas domestic companies whose securities are registered under the Exchange Act.\n\n \n\nThe\nregulatory and compliance costs to us under U.S. securities laws, if we are required to comply with the reporting requirements applicable\nto a U.S. domestic issuer, may be significantly higher than the cost we currently incur as a foreign private issuer.\n\n \n\n**As a public company\nin the United States, we incur significant accounting, legal and other expenses as a result of listing our Ordinary Shares on the Nasdaq\nCapital Market, and we may need to devote substantial resources to address new compliance initiatives and reporting requirements.**\n\n \n\nAs\na public company in the United States, the Exchange Act requires that we file periodic reports with respect to our business and financial\ncondition and maintain effective disclosure controls and procedures and internal control over financial reporting. In addition, subsequent\nrules implemented by the SEC and the Nasdaq Stock Market may also impose various additional requirements on public companies. As a result,\nwe incur significant accounting, legal and other expenses as a result of listing our Ordinary Shares on the Nasdaq Capital Market. These\ninclude costs associated with corporate governance requirements of the SEC and the Marketplace Rules of Nasdaq, as well as requirements\nunder Section 404 and other provisions of the Sarbanes-Oxley Act of 2002. Any future changes in the laws and regulations affecting public\ncompanies in the United States and Israel, will result in increased costs to us as we respond to such changes. These laws, rules\nand regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer\nliability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the\nsame or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified\npersons to serve on our Board of Directors, our board committees or as executive officers.\n\n \n\n14"}