{"url_path":"/sec/mbai/10-k/2026/item-10","section_key":"item-10","section_title":"Item 10 Additional Information**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-04-27","source_url":"https://www.sec.gov/Archives/edgar/data/1610590/0001213900-26-048090-index.html","accession_number":"0001213900-26-048090","cik":"0001610590","ticker":"MBAI","issuer_name":"Check-Cap Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1610590/0001213900-26-048090-index.html","primary_entity_key":"0001610590","primary_entity_name":"Check-Cap Ltd"},"word_count":13514,"has_tables":true,"body_markdown":"** **\n\n**Item 10. Additional Information**\n\n** **\n\n**A. Share Capital**\n\n \n\nNot applicable.\n\n** **\n\n**B. Memorandum and Articles of Association**\n\n \n\nA copy of our amended and\nrestated articles of association is incorporated by reference attached as Exhibit 1.1 to this Annual Report. Other than as disclosed below,\nthe information called for by this Item is set forth in Exhibit 2.1 to this Annual Report and is incorporated by reference into this Annual\nReport.\n\n** **\n\n**Registration Number and Purposes of the Company**\n\n \n\nOur registration number with\nthe Israeli Registrar of Companies is 51-425981-1. Our purpose as set forth in our amended articles of association is to engage in any\nlawful activity.\n\n** **\n\n**Shareholder Meetings**\n\n \n\nUnder Israeli law, we are\nrequired to hold an annual general meeting of our shareholders once every calendar year that must be held no later than 15 months after\nthe date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to in\nour amended articles of association as special general meetings. Our Board of Directors may call special general meetings whenever it\nsees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Israeli Companies Law provides that\nour Board of Directors is required to convene a special general meeting upon the written request of (i) any two of our directors or one-quarter\nof the serving members of our Board of Directors; or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of\nour outstanding shares and 1% of our outstanding voting power or (b) 5% or more of our outstanding voting power.\n\n \n\nFurthermore, the Israeli\nCompanies Law requires that resolutions regarding the following matters be approved by our shareholders at a general meeting:\n\n \n\n \n●\napproval of certain related party transactions;\n\n \n\n \n●\nincreases or reductions of our authorized share capital;\n\n \n\n \n●\nmergers; and\n\n \n\n \n●\nthe exercise of our Board of Director’s powers by a general meeting, if our Board of Directors is unable to exercise its powers and the exercise of any of its powers is essential for our proper management.\n\n \n\nSubject to the provisions\nof the Israeli Companies Law and regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings\nare the shareholders of record on a date to be decided by the Board of Directors, which, as a company listed on an exchange outside Israel,\nmay be between four and 40 days prior to the date of the meeting.\n\n \n\n107\n\n \n\n \n\nThe Israeli Companies Law\nrequires that a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to\nthe meeting and if the agenda of the meeting includes, among other things, the appointment or removal of directors, the approval of transactions\nwith office holders or interested or related parties, an approval of a merger or the approval of the compensation policy, notice must\nbe provided at least 35 days prior to the meeting.\n\n  \n\nUnder the Israeli Companies\nLaw, our shareholders are not permitted to take action via written consent in lieu of a meeting.\n\n** **\n\n**Borrowing powers**\n\n \n\nPursuant to the Israeli Companies\nLaw and our amended articles of association, our Board of Directors may exercise all powers and take all actions that are not required\nunder law or under our amended articles of association to be exercised or taken by our shareholders, including the power to borrow money\nfor company purposes.\n\n \n\nFor details regarding the\napprovals required under the Israeli Companies Law for the approval of director compensation, see Item 6C “Directors, Senior Management\nand Employees - Board Practices -Approval of Related Party Transactions under Israeli Law - Disclosure of Personal Interests of an Office\nHolder and Approval of Certain Transactions-Compensation of Directors.”\n\n** **\n\n**C. Material Contracts**\n\n \n\nOther than as described below,\nin Item 4. “Information on Our Company,” Item 7B “Major Shareholders and Related Party Transactions - Related Party\nTransactions” or elsewhere in this Annual Report, we have not entered into any material contracts other than in the ordinary course\nof business.\n\n \n\n**Merger Agreement with MBody AI**\n\n** **\n\nOn September 12, 2025, the Company, Merger Sub, and MBody AI entered\ninto the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will merge with and into MBody AI, with MBody AI surviving the\nMerger as a direct, wholly-owned subsidiary of the Company.\n\n \n\nAt the effective time of the Merger, each share of MBody AI capital\nstock outstanding immediately prior to the effective time (excluding treasury shares and certain excluded shares) will be converted solely\ninto the right to receive a number of Check-Cap ordinary shares such that, following the effective time, holders of MBody AI capital stock\nwill own ninety percent (90%) of the issued and outstanding Check-Cap ordinary shares on a fully diluted basis. No fractional Check-Cap\nordinary shares will be issued in connection with the Merger.\n\n \n\nThe Merger Agreement contains customary representations, warranties,\nand covenants made by the parties, including covenants relating to obtaining requisite shareholder approvals, indemnification of directors\nand officers, and the conduct of each party’s business between the date of the Merger Agreement and the closing. The closing of\nthe Merger is subject to the satisfaction or waiver of certain conditions, including, among other things: (i) the absence of any order\nor law preventing the consummation of the transactions; (ii) approval by both Check-Cap and MBody AI shareholders; (iii) the expiration\nor termination of any applicable antitrust waiting periods; and (iv) the parties’ commercially reasonable efforts to secure a private\nfinancing on terms reasonably acceptable to each of the parties.\n\n \n\nThe Merger Agreement may be terminated by either party if the Merger\nhas not been consummated by June 30, 2026, subject to certain exceptions. The Merger Agreement also provides for certain termination fees.\nUnder specified circumstances, the Company may be required to pay MBody AI an expense reimbursement fee of up to $1,500,000, and in certain\nother circumstances, the Company may be required to pay MBody AI a termination fee of $2,500,000.\n\n \n\nFor U.S. federal income tax purposes, the Merger is intended to constitute\na reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.\n\n \n\nThe Merger was approved by the Company’s shareholders on November\n14, 2025, and closing is anticipated in the first half of 2026. The Apollo BCA is expected to be terminated in connection with the closing\nof the Merger.\n\n** **\n\n108\n\n \n\n** **\n\n**Business Combination Agreement with Apollo**\n\n \n\nOn March 25, 2024, the Company entered into the Apollo BCA, pursuant\nto which a wholly-owned subsidiary of Apollo was to merge with and into the Company, with the Company surviving as a direct, wholly-owned\nsubsidiary of Apollo. Under the exchange ratio formula in the Apollo BCA, Check-Cap security holders were expected to own approximately\n15% and Apollo security holders were expected to own approximately 85% of the combined entity on a fully diluted basis, subject to certain\nnet cash adjustments. In May 2024, the Company reimbursed Apollo $3,808,815 pursuant to the provisions of the Apollo BCA.\n\n \n\nThe Apollo BCA remains in effect as of the date of this Annual Report\nand is expected to be terminated in connection with the closing of the Merger with MBody AI.\n\n \n\n**Apollo Loan Agreements and Segregated Account**\n\n** **\n\nDuring 2024 and 2025, the Company entered into a series of loan agreements\nwith Apollo, including the September 2024 Loan Agreement ($6.0 million), the December 2024 Loan Agreement ($6.0 million), the First July\n2025 Loan Agreement ($2.1 million), and the Second July 2025 Loan Agreement ($2.2 million). The principal outstanding under each loan\nbears interest at 5% per annum and is payable 30 days following the termination of the Apollo BCA or the consummation of the business\ncombination contemplated thereunder.\n\n \n\nIn addition, on September 8, 2024, the Company entered into the Amending\nLetter with Apollo, which amended the Apollo BCA and obligated the Company to deposit $11.0 million into a designated, segregated and\ninterest-bearing bank account (the “Segregated Account”). Funds deposited into the Segregated Account may be disbursed upon\nthe mutual written agreement of the designated representatives of Apollo and the Company in order to fund the pursuit of accretive acquisition\ntargets or other growth initiatives of Apollo and for no other purpose. In the event that the Apollo BCA is terminated, then, subject\nto the payment of any termination fees triggered by Section 9.3(c) of the Apollo BCA, funds remaining in the Segregated Account upon termination,\ntogether with interest earned thereon, will accrue to and will be for the account and benefit of the Company.\n\n \n\nAs of December 31, 2025, $2.1 million of the Segregated Account had\nbeen used for acquisition targets and growth initiatives, $0.7 million had been used for certain expenses incurred by the Company, and\n$2.2 million remained in the Segregated Account. In July 2025, in connection with the audit of the Company’s December 31, 2024 financial\nstatements, the Company classified the $2.1 million used for acquisition targets and growth initiatives and the $2.2 million remaining\nin the Segregated Account as loans to Apollo and entered into loan agreements with Apollo on the same terms as the December 2024 Loan\nAgreement to document such classifications, given that the Segregated Account is in the name of an affiliate of Apollo.\n\n \n\nFor a discussion of the impairment and subsequent reversal of the Apollo\nLoans, see Item 5A “Operating and Financial Review and Prospects — Results of Operations.”\n\n \n\n**Asset Purchase Agreement with Parea**\n\n** **\n\nOn September 5, 2025, the Company entered into the Parea APA, pursuant\nto which the Company acquired all right, title, and interest in a contract granting exclusive Ghost Kitchen area representative rights\nacross the state of New Jersey. As consideration for the acquired assets, the Company issued 1,169,596 ordinary shares to Parea LLC. For\na description of the Ghost Kitchen area representative business, see Item 4B “Information on Our Company — Business Overview\n— Parea.”\n\n \n\n109\n\n \n\n \n\n**Purchase Agreement with ARC**\n\n** **\n\nIn December 2025, the Company entered into the Purchase Agreement with\nARC, pursuant to which ARC committed to purchase up to $30.0 million of the Company’s ordinary shares over a period of three years\nfrom the effective date of the registration statement filed in connection therewith. The Company may direct ARC to purchase ordinary shares\nby delivering advance notices from time to time, subject to certain conditions and limitations. In consideration for ARC’s commitment\nunder the Purchase Agreement, the Company issued 267,857 ordinary shares as a commitment fee, having an aggregate value of $450,000.\n\n \n\nThe purchase price for shares sold pursuant to the first advance notice\nis 97% of the lowest daily volume weighted average price of the ordinary shares during three consecutive trading days commencing on the\ndate the advance notice is received by ARC. Any sale of ordinary shares pursuant to the Purchase Agreement is subject to certain limitations,\nincluding that ARC and its affiliates may not own more than 9.99% of the then outstanding ordinary shares at any time. In addition, the\naggregate number of ordinary shares that the Company may issue to ARC under the Purchase Agreement may not exceed 19.99% of the ordinary\nshares outstanding as of the date of the Purchase Agreement (the “Exchange Cap”), unless the Company obtains the requisite\nshareholder approval or Nasdaq grants an exception; provided that because the Company as a foreign private issuer follows home country\npractice, the Exchange Cap does not apply.\n\n \n\nIn connection with the Purchase Agreement, the Company filed a Registration\nStatement on Form F-1 with the SEC on January 30, 2026, as amended on February 2, 2026, which became effective on February 23, 2026, registering\nthe resale by ARC of up to 2,000,000 ordinary shares issuable under the Purchase Agreement.\n\n** **\n\n**D. Exchange controls**\n\n \n\nThere are currently no Israeli\ncurrency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the shares or interest or\nother payments to non- residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of\nwar with Israel.\n\n** **\n\n**E. Taxation**\n\n \n\nThe following description\nis not intended to constitute a complete analysis of all tax consequences relating to our ordinary shares, Series C Warrants and Series\nD Warrants (sometimes referred to collectively or individually as our “securities”). You should consult your own tax advisor\nconcerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state,\nlocal, non-U.S. or other taxing jurisdiction.\n\n** **\n\n**Israeli Tax Considerations and Government Programs**\n\n \n\nThe following is a brief\nsummary of the material Israeli tax laws applicable to us and certain Israeli Government programs that benefit us. This section also contains\na discussion of material Israeli tax consequences concerning the ownership and disposition of our securities purchased by investors who\nare non-Israeli resident shareholders. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular\ninvestor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli\nlaw. Examples of such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered\nin this discussion. Because parts of this discussion are based on new tax legislation that has not yet been subject to judicial or administrative\ninterpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion.\nThe discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative\ninterpretations of Israeli law, which change could affect the tax consequences described below.\n\n** **\n\n110\n\n \n\n** **\n\n**General Corporate Tax Structure in Israel**\n\n \n\nIsraeli resident companies\nare generally subject to corporate tax, currently at the rate of 23% (effective as of January 1, 2018) of a company’s taxable\nincome. However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a Benefited Enterprise a\nPreferred Enterprise or a Preferred Technological Enterprise (as discussed below) may be considerably less. Capital gains derived by an\nIsraeli resident company are subject to tax at the prevailing corporate tax rate.\n\n \n\n**Law for the Encouragement of Industry (Taxes),\n5729-1969**\n\n \n\nThe Law for the Encouragement\nof Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial\nCompanies.” The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which\n90% or more of its income in any tax year, other than income from defense loans, is derived from an “Industrial Enterprise”\nowned by it and located in Israel or in the “Area” (as such term is defined under Section 3A of the Israeli Income Tax Ordinance\n(New Version), 5721-1961, referred to as the Ordinance). An “Industrial Enterprise” is defined as an enterprise whose principal\nactivity in a given tax year is industrial production.\n\n \n\nThe following corporate tax\nbenefits, among others, are available to Industrial Companies:\n\n \n\n \n●\namortization over an eight-year period, beginning from the year in which such rights were first used, of the cost of purchased know-how and patents and rights to use a patent and know-how which are used for the development or advancement of the Industrial Enterprise;\n\n \n\n \n●\nunder limited conditions, a Parent Company (as such term defined in the Industry Encouragement Law) may elect to file consolidated tax returns with related Israeli Industrial Companies; and\n\n \n\n \n●\nexpenses related to a public offering are deductible in equal amounts over three years beginning from the year of the offering.\n\n \n\nEligibility for the benefits\nunder the Industry Encouragement Law is not subject to receipt of prior approval from any governmental authority. We believe that we may\nqualify as an “Industrial Company” within the meaning of the Industry Encouragement Law; however, there can be no assurance\nthat we will qualify as an Industrial Company or that the benefits described above will be available in the future.\n\n** **\n\n**Law for the Encouragement of Capital Investments,\n5719-1959**\n\n \n\nThe Law for the Encouragement\nof Capital Investments, 5719-1959, generally referred to as the Investment Law, was originally enacted in order to provide certain incentives\nfor capital investments in production facilities (or other eligible assets).\n\n \n\nThe Investment Law has been\namended several times in recent years, primarily: Amendment 60, effective as of April 1, 2005, referred to as the 2005 Amendment;\nAmendment 68, effective as of January 1, 2011, referred to as the 2011 Amendment; Amendment 71, effective as of January 1, 2014,\nreferred to as the 2014 Amendment; Amendment 73, effective as of January 1, 2017, referred to as the 2017 Amendment; and Amendment\n74, effective as of August 15, 2021, referred to as the 2021 Amendment. Pursuant to the foregoing amendments, generally tax benefits\nthat were granted in accordance with the provisions of the Investment Law prior to each such amendment remain in force; however, any benefits\ngranted subsequent to the respective amendment are subject to the provisions of the Investment Law as amended.\n\n* *\n\n*Tax Benefits Prior to the 2005 Amendment*\n\n \n\nPrior to the 2005 Amendment,\na capital investment in eligible production facilities (or other eligible assets) could, upon application to the Investment Center of\nthe Israeli Ministry of Economy (formerly named the Ministry of Industry, Trade and Labor), be designated as an “Approved Enterprise”\nand accordingly, entitled to certain tax benefits under the Investment Law. Each certificate of approval for an Approved Enterprise relates\nto a specific investment program in the Approved Enterprise, delineated both by the financial scope of the investment and by the physical\ncharacteristics of the facility or the asset. We do not have any Approved Enterprises.\n\n* *\n\n111\n\n \n\n* *\n\n*Tax Benefits Subsequent to the 2005 Amendment*\n\n \n\nPursuant to the 2005 Amendment,\na company whose facilities meet certain criteria set forth in the 2005 Amendment may claim certain tax benefits offered by the Investment\nLaw (as further described below) directly in its tax returns, without the need to obtain prior approval. In order to receive the tax benefits,\na company must make an investment which meets all of the conditions, including exceeding a minimum entitling investment amount, set forth\nin the Investment Law. Such investment allows a company to receive “Benefited Enterprise” status, and may be made over a period\nof no more than three years ending at the end of the year in which the company chose to have the tax benefits apply to its Benefited Enterprise,\nreferred to as the “Year of Election.”\n\n \n\nThe extent of the tax benefits\navailable under the 2005 Amendment to qualifying income of a Benefited Enterprise depends on, among other things, the geographic location\nin Israel of the Benefited Enterprise. The location will also determine the period for which tax benefits are available. Under the “Exemption\nTrack” the tax benefits include an exemption from corporate tax on undistributed income generated by the Benefited Enterprise for\na period of two to ten years, depending on the geographic location of the Benefited Enterprise in Israel, and a reduced corporate tax\nrate of 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year.\nThe benefits period is for a duration of seven or ten years, depending on the location of the Benefited Enterprise, from the later of\nthe first year in which the company generated taxable income from its Benefited Enterprise and the Year of Election, but in any event\nnot more than 12 or 14 years from the Year of Election, depending on the location of the Benefited Enterprise. A company qualifying for\ntax benefits under the Exemption Track which pays a dividend (as well as a deemed dividend, such as investments in foreign resident subsidiaries,\ngranting loans to related parties, repurchases of shares, acquisitions of securities/shares, capital reductions and additional events\nwhich reflect the transfer of funds out of the Benefitted Enterprise activity) out of income derived during the tax exemption period by\nits Benefited Enterprise will be subject to corporate tax in respect of the amount of the dividend (grossed-up to reflect the pre-tax\nincome that it would have had to earn in order to distribute the dividend) at the corporate tax rate which would have otherwise been applicable.\nDividends paid out of income attributed to a Benefited Enterprise are generally subject to withholding tax at source at the rate of 20%\nor such lower rate as may be provided in an applicable tax treaty. With respect to such dividends, the recently enacted 2021 Amendment\nintroduced a new dividend distribution ordering rule as well as a Temporary Order to incentivize the distribution thereof (see discussion\nbelow under “*Tax Benefits under the 2021 Amendment”*)*.*Applying reduced tax rates in accordance with a certain\ntax treaty is subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate.\n\n \n\nThe benefits available to\na Benefited Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations. If a company\ndoes not meet these conditions, it may be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index,\nplus interest, or other monetary penalties.\n\n \n\nWe currently have one Benefited\nEnterprise program under the Investment Law, which, we believe, entitles us to certain tax benefits with respect to income to be derived\nfrom our Benefited Enterprise. We chose 2010 as the Year of Election. We believe that we are located in the Zone A specified development\nzone and therefore, believe we are entitled to a 10-year benefit period, during which taxable income from our Benefited Enterprise program\n(once generated) will be tax exempt, commencing with the year we will first earn taxable income relating to such enterprise, subject to\na 14-year limitation from the Year of Election, and therefore, the tax benefit period will in any event end in 2023.\n\n \n\nTax Benefits under the 2011\nAmendment and the 2014 Amendment\n\n \n\nThe 2011 Amendment canceled\nthe availability of the benefits granted to companies under the Investment Law prior to 2011 and, instead, introduced new benefits for\nincome generated by a “Preferred Company” through its “Preferred Enterprise” or “Special Preferred Enterprise”\n(as such terms are defined in the Investment Law) as of January 1, 2011. The definition of a Preferred Company includes, among other\nlimitations detailed under the Investment Law, a company incorporated in Israel that is not wholly-owned by a governmental entity, and\nthat, among other things, owns a Preferred Enterprise or Special Preferred Enterprise and is controlled and managed from Israel. Under\nthe 2014 Amendment, effective as of January 1, 2014, a Preferred Company is entitled to a reduced corporate tax rate of 16% with\nrespect to its income derived by its Preferred Enterprise in 2014 and thereafter, unless the Preferred Enterprise is located in a specified\ndevelopment zone (referred to as “Zone A”), in which case the rate will be 9% for the tax years 2014-2016 and, pursuant to\nthe 2017 Amendment (as discussed below), 7.5% from 2017 and thereafter. We believe our facilities are located in the Zone A specified\ndevelopment zone.\n\n \n\n112\n\n \n\n \n\nDividends paid out of income\nattributed to a Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% or such lower rate as may be\nprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although,\nif such dividends are subsequently distributed to individuals or a non-Israeli company, withholding tax at a rate of 20% or such lower\nrate as may be provided in an applicable tax treaty will apply).\n\n  \n\nThe 2011 Amendment also provided\ntransitional provisions to address companies already enjoying existing tax benefits under the Investment Law. These transitional provisions\nprovide, among other things, that unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011\nwith respect to income to be derived as of January 1, 2011, a Benefited Enterprise can elect to continue to benefit from the benefits\nprovided to it before the 2011 Amendment came into effect, provided that certain conditions are met.\n\n \n\nWe are currently examining\nwhether we are eligible for the tax benefits under the 2011 Amendment and the possible effect, if any, of the provisions of the 2011 Amendment\non our financial statements.\n\n* *\n\n*Tax Benefits under the 2017 Amendment*\n\n \n\nThe 2017 Amendment was enacted\nas part of the Economic Efficiency Law that was published on December 29, 2016, and became effective as of January 1, 2017.\nThe 2017 Amendment provides new tax benefits for two types of “Technological Enterprises”, as described below, and is in addition\nto the other existing tax beneficial programs under the Investment Law.\n\n \n\nThe 2017 Amendment provides\ntwo new tax incentive tracks - the “Preferred Technological Enterprise” track and “Special Preferred Technological Enterprise”\ntrack (as such terms are defined in the Investment Law). The benefits available to a Preferred Technological Enterprise or Special Preferred\nTechnological Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law.\n\n \n\nA Preferred Technological\nEnterprise is entitled (among other things) to a reduced corporate tax rate of 12% with respect to its income which qualifies as “Preferred\nTechnology Income”, as defined in the Investment Law, unless the Preferred Technological Enterprise is located in a specified development\nzone (referred to as “Zone A”), in which case the rate will be 7.5%. A Special Preferred Technological Enterprises is entitled\nto a reduced corporate tax rate of 6% with respect to its Preferred Technology Income, regardless of the company’s enterprise geographic\nlocation within Israel.\n\n \n\nWe are currently examining\nwhether we are eligible for the tax benefits under the 2017 Amendment and the possible effect, if any, of the provisions of the 2017 Amendment\non our financial statements.\n\n* *\n\n*Tax Benefits under the 2021 Amendment*\n\n \n\nThe 2021 Amendment introduced\na new dividend distribution ordering rule to cause the distribution of earnings that were tax-exempt under the historical Approved or\nBeneficial Enterprise regimes (Trapped Earnings), to be on a pro-rata basis from any dividend distribution, which is applicable to distributions\nstarting from August 15, 2021 onwards. Accordingly, the corporate income tax claw-back will apply to any dividend distribution, as\nlong as the company has Trapped Earnings.\n\n* *\n\n*The termination or substantial\nreduction of any of the benefits available under the Investment Law could materially increase our future tax liabilities.*\n\n** **\n\n113\n\n \n\n** **\n\n**The Encouragement of Research, Development\nand Technological Innovation in the Industry Law 5744-1984 (formerly known as the Encouragement of Industrial Research and Development\nLaw, 5744-1984)**\n\n \n\nUnder the Encouragement of\nResearch, Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Encouragement of Industrial Research\nand Development Law, 5744-1984), referred to as the Innovation Law, research and development programs that meet specified criteria and\nare approved by the IIA are eligible for grants. As of December 31, 2025, we had received funding from the IIA for the financing\nof a portion of our research and development expenditures for C-Scan in the aggregate amount of approximately $5.6 million. As of December 31,\n2025, we had not paid any royalties to the IIA and had a contingent liability to the IIA with respect to such funding in the amount of\napproximately $6.2 million. In addition, in January 2021, we received an IIA grant approval to support the funding of our transition\nfrom research and development to manufacturing. The final IIA grant amounted to $620,000 (NIS 2.25 million) (along with a co-investment\nby us of the same amount), subject to the terms and conditions set forth in the grant approval, which we are not required to repay to\nthe IIA, of which we received approximately $0 (NIS 0) in 2025 and 2024, and $225,000 (NIS 816,075) in February 2023.\n\n \n\nUnder the Innovation Law\nas currently in effect, the research and development grants are typically up to 50% of the project’s approved expenditures. The\ngrantee is required to pay royalties to the State of Israel from the sale of products (and associated services) developed using IIA research\nand development funding. Regulations under the Innovation Law, as currently in effect, generally provide for the payment of royalties\nof 3% or 4% (and at an increased rate under certain circumstances) on sales of products and services based on technology and know-how\ndeveloped using such IIA research and development grants, until 100% (which may be increased under certain circumstances) of the grant,\nlinked to the U.S. dollar and bearing interest at the LIBOR rate, is repaid.\n\n \n\nThe terms of IIA grants that\nwe have received (the research and development grants and the transition to manufacturing grants) require that products developed with\nIIA funded be manufactured in Israel, unless the IIA approved grant program includes a pre-determined portion of manufacturing that may\nbe performed outside Israel (as certain of our IIA approved grants included). The approval of the IIA is required for the transferring\nof manufacturing outside Israel in excess of such pre-determined portion (however, only a notice to the IIA, as opposed to approval, is\nrequired for the transfer outside Israel of up to 10% of the cumulative manufacturing in excess of such pre-approved portion). If manufacturing\nof IIA-funded products is transferred outside Israel (following IIA approval) in excess of the pre-determined percentage included in the\ngrant approval, then the royalty repayment rate is increased by 1% with respect to the additional approved percentage to be manufactured\noutside Israel and the royalty repayment for the entire approved program may be increased to up to three times the amount of the grants\nreceived, depending on the percentage manufactured outside Israel (plus accrued interest). We may explore from time to time whether certain\nother components of C-Scan can be assembled outside of Israel. For example, we may in the future explore whether it would be possible\nto assemble the capsule without the X-ray source in Israel, and have the X-ray source subsequently manufactured and assembled into C-Scan\nat a certified radioisotope production facility or at a distribution center outside Israel.\n\n \n\nOver the years, we received\napproval of grant applications (research and development grants and the transition to manufacturing grant) that included a certain predetermined\npercentage of manufacturing of the X-ray source to be performed outside of Israel but additional examination of these approvals and consequent\nmanufacturing is required to determine liabilities to the IIA, if any.\n\n \n\nIIA prior approval is also\nrequired for the transfer of IIA-funded know-how to a third party outside of Israel (including by way of license), which we may not receive\n(and any such approval would be subject to payment of a redemption fee, calculated according to a formula under the Innovation Law, which\nmay be in the amount of up to six times the amount of the grants received, (less paid royalties, if any, and depreciation, but no less\nthan the total grants received), plus accrued interest). Even following the full repayment of any IIA grants, we must nevertheless continue\nto comply with the requirements of the Innovation Law. If we fail to comply with any of the conditions and restrictions imposed by the\nInnovation Law and regulations and guidelines thereunder, or by the specific terms under which we received the grants, we may be required\nto refund any grants previously received together with interest and penalties, and, in certain circumstances, may be subject to criminal\ncharges.\n\n** **\n\n114\n\n \n\n** **\n\n**Taxation of our Shareholders**\n\n* *\n\n*Capital Gains Taxes Applicable\nto Non-Israeli Resident Shareholders*. A non-Israeli resident who derives capital gains from the sale of securities of an Israeli resident\ncompany will be exempt from Israeli tax so long as (i) the capital gains are not attributed to a permanent establishment that the non-resident\nmaintains in Israel, (ii) the securities were not received from a relative or in a tax free reorganization transaction and (iii) the securities\nare not traded on the Tel Aviv Stock Exchange on the date of sale (provided, however, that other exemptions may apply if a an Israeli\nresident company is listed for trading on the Tel Aviv Stock Exchange). However, non-Israeli corporations will not be entitled to the\nforegoing exemption if Israeli residents: (i) have a controlling interest of 25% or more in such non-Israeli corporation; or (ii) are\nthe beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or\nindirectly.\n\n \n\nAdditionally, a sale of securities\nby a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example,\nunder the Convention Between the Government of the United States of America and the Government of the State of Israel with respect to\nTaxes on Income, as amended, generally referred to as the United States-Israel Tax Treaty, the sale, exchange or other disposition of\nshares by a shareholder who (i) is a U.S. resident (for purposes of the treaty); (ii) holds the shares as a capital asset; and (iii) is\nentitled to claim the benefits afforded to such person by the treaty, is generally exempt from Israeli capital gains tax. Such exemption\nwill not apply if, among other things: (i) the capital gain arising from such sale, exchange or other disposition is treated as industrial\nor commercial profits attributed to a permanent establishment in Israel, subject to certain conditions; (ii) the shareholder holds, directly\nor indirectly, shares representing 10% or more of the voting capital of the corporation during any part of the 12-month period preceding\nthe disposition, subject to certain conditions; (iii) the capital gain arising from such sale, exchange or disposition is treated as royalties;\nor (iv) such U.S. resident is an individual and was present in Israel for 183 days or more during the relevant taxable year. In such case,\nthe sale, exchange or disposition of our securities would be subject to Israeli tax, to the extent applicable; however, under the United\nStates-Israel Tax Treaty, the taxpayer would be permitted to claim a credit for such taxes against the U.S. federal income tax imposed\nwith respect to such sale, exchange or disposition, subject to the limitations under U.S. law applicable to foreign tax credits. The United\nStates-Israel Tax Treaty does not relate to U.S. state or local taxes. The United States-Israel Tax Treaty is currently under review and\nsubject to change.\n\n \n\nIn some instances where our\nshareholders may be liable for Israeli tax on the sale of their securities, the payment of the consideration may be subject to the withholding\nof Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains and to obtain\nan exemption from withholding tax certificate from the Israel Tax Authority in order to avoid withholding at source at the time of sale.\n\n* *\n\n*Taxation of Non-Israeli\nShareholders on Receipt of Dividends*. Non-Israeli residents are generally subject to Israeli withholding tax on the receipt of dividends\npaid on our ordinary shares at the rate of 25%, unless relief is provided in a treaty between Israel and the shareholder’s country\nof residence (subject to the receipt of a valid certificate from the Israeli Tax Authority allowing for a reduced tax rate). With respect\nto a person who is a “substantial shareholder” at the time of receiving the dividend or at any time during the preceding 12\nmonths, the applicable withholding tax rate is 30%, unless such “substantial shareholder” holds such shares through a nominee\ncompany, in which case the rate is 25%. A “substantial shareholder” is generally a person who alone or together with such\nperson’s relative (as such term is defined in the Ordinance) or another person who collaborates with such person on a permanent\nbasis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control”\ngenerally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or\norder someone who holds any of the aforesaid rights how to act, regardless of the source of such right.\n\n \n\nHowever, a distribution of\ndividends to non-Israeli residents is subject to withholding tax at source at a rate of 15% if the dividend is distributed from income\nattributed to an Approved Enterprise or a Benefited Enterprise and 20% if the dividend is distributed from income attributed to a Preferred\nEnterprise or a Preferred Technological Enterprise, unless a reduced tax rate is provided under an applicable tax treaty. The corporate\nincome tax claw-back may apply upon any dividend distribution, as long as the company has Trapped Earnings (see discussion above under\n“*Tax Benefits under the 2021 Amendment”*). We cannot assure you that in the event we declare a dividend we will designate\nthe income out of which the dividend is paid in a manner that will reduce shareholders’ tax liability.\n\n \n\n115\n\n \n\n \n\nUnder the United States-Israel\nTax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a U.S. resident\n(for purposes of the United States-Israel Tax Treaty) is 25%. With respect to dividends paid to a U.S. corporation that held 10% or more\nof the capital of the paying corporation throughout the tax year in which the dividend is distributed and the preceding tax year and provided\nthat not more than 25% of the gross income of the paying corporation for such prior taxable year (if any) consists of certain interest\nor dividends, the maximum rate of tax withheld at source is 12.5%; provided, however, that if the paying corporation is an Approved Enterprise,\nthe applicable withholding tax rate under such circumstances is reduced to 15% (rather than 12.5%). We believe that the reference in the\nUnited States-Israel Tax Treaty to an Approved Enterprise under the Investment Law is deemed to include also a Benefitted Enterprise Preferred\nEnterprise and Preferred Technological Enterprise under the Investment Law. The United States-Israel Tax Treaty is currently under review\nand subject to change.\n\n  \n\nU.S. residents who are subject\nto Israeli withholding tax on a dividend may be entitled to a credit or deduction for U.S. federal income tax purposes in the amount of\nthe taxes withheld, subject to detailed rules contained in U.S. tax legislation.\n\n* *\n\n*Exercise or Lapse of Series\nC Warrant or Series D Warrant.*A holder of a Series C Warrant or Series D Warrant generally will not recognize gain or loss upon the\nexercise of a Series C Warrant or Series D Warrant for cash. An ordinary share acquired pursuant to the exercise of a Series C Warrant\nor Series D Warrant for cash generally will have a tax basis equal to the holder’s tax basis in the Series C Warrant or Series D\nWarrant (as the case may be), increased by the amount paid to exercise the Series C Warrant or Series D Warrant. The holding period of\nsuch ordinary share generally would begin on the day after the date of exercise of the Series C Warrant or Series D Warrant. If a Series\nC Warrant or Series D Warrant is allowed to lapse unexercised, the holder generally will recognize a capital loss equal to such holder’s\ntax basis in the Series C Warrant or Series D Warrant (as the case may be).\n\n \n\nIt is possible that a cashless\nexercise would be treated as a taxable exchange in which gain or loss is recognized. In such event, a holder could be deemed to have surrendered\na number of Series C Warrants or Series D Warrants with a fair market value equal to the exercise price for the number of Series C Warrants\nor Series D deemed exercised. For this purpose, the number of Series C Warrants or Series D Warrants deemed exercised would be equal to\nthe number of Series C Warrants or Series D Warrants, as applicable, that would entitle the holder to receive upon exercise the number\nof ordinary shares issued pursuant to the cashless exercise of the Series C Warrants or Series D Warrants (as the case maybe). In this\nsituation, the holder would recognize capital gain or loss in an amount equal to the difference between the fair market value of the Series\nC Warrants or Series D Warrants deemed surrendered to pay the exercise price and the holder’s tax basis in the Series C Warrants\nor Series D Warrants deemed surrendered.\n\n* *\n\n*Adjustments with Respect\nto Warrants.*The terms of the Series C Warrant and Series D Warrant provide for an adjustment to the number of ordinary shares for\nwhich the warrant may be exercised or adjustment to the exercise price of the warrant in certain events. An adjustment of the exercise\nprice or an adjustment that has the effect of preventing dilution generally is not taxable. However, the holders of the Series C Warrants\nand Series D Warrants may be treated as receiving a constructive distribution from us if, for example, the adjustment increases the warrant\nholders’ proportionate interest in our assets or earnings and profits (e.g., through a decrease in the exercise price of the Series\nC Warrants or Series D Warrants) as a result of a distribution of cash to the holders of our ordinary shares, which is taxable to the\nholders of such ordinary shares as described under “-Taxation of our Shareholders” above. Such constructive distribution would\nbe subject to tax as described under that section in the same manner as if the holders of the Series C Warrants or Series D Warrants received\na cash distribution from us equal to the fair market value of such increased interest. Holders of Series C Warrants and Series D Warrants\nare urged to consult their own tax advisors on these issues.\n\n** **\n\n**Surtax**\n\n \n\nSubject to the provisions\nof an applicable tax treaty, individuals who are subject to tax in Israel are also subject to an additional tax at a rate of 3% on annual\nincome (including, but not limited to, dividends, interest and capital gain) exceeding NIS 721,560 for 2024, which amount is linked to\nthe annual change in the Israeli consumer price index.\n\n** **\n\n**Estate and Gift Tax**\n\n \n\nIsraeli law presently does\nnot impose estate or gift taxes.\n\n \n\nEACH HOLDER OF OUR SECURITIES\nIS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND\nDISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY ISRAELI TAX LAWS AND ANY APPLICABLE TAX TREATIES.\n\n** **\n\n116\n\n \n\n** **\n\n**If a United States person is treated as\nowning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax consequences.**\n\n \n\nIf a United States person\nis treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may\nbe treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group\n(if any). A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable\nincome its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S.\nproperty by controlled foreign corporations, whether or not we make any distributions, and may be subject to tax reporting obligations.\nAn individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain\ntax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. A failure to comply\nwith these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect\nto your U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we\nwill assist any shareholder in determining whether such shareholder is treated as a United States shareholder with respect to any “controlled\nforeign corporation” in our group (if any) or furnish to any United States shareholders information that may be necessary to comply\nwith the aforementioned reporting and tax paying obligations. A United States investor should consult its tax advisors regarding the potential\napplication of these rules to its investment in the shares.\n\n** **\n\n**U.S. Federal Income Taxation**\n\n \n\nThe following are certain\nmaterial U.S. federal income tax consequences of the acquisition, ownership and disposition of our securities.\n\n \n\nThe discussion below of the\nU.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of our securities that is for U.S.\nfederal income tax purposes:\n\n \n\n \n●\nan individual citizen or resident of the United States;\n\n \n\n \n●\na corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;\n\n \n\n \n●\nan estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or\n\n \n\n \n●\na trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust; or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.\n\n \n\nA beneficial owner of our\nsecurities that is described above is referred to herein as a “U.S. Holder.” If a beneficial owner of our securities is not\ndescribed as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes,\nsuch owner will be considered a “Non-U.S. Holder.” Certain material U.S. federal income tax consequences of the acquisition,\nownership and disposition of our securities applicable specifically to Non-U.S. Holders are described below under the heading “Non-U.S.\nHolders.”\n\n \n\nThis discussion is based\non the Code, its legislative history, U.S. Treasury regulations promulgated thereunder, the United States-Israel Tax Treaty, or the Treaty,\npublished rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations,\npossibly on a retroactive basis.\n\n \n\nThis discussion does not\naddress all aspects of U.S. federal income taxation that may be relevant to any particular holder based on such holder’s individual\ncircumstances. In particular, this discussion considers only holders that own and hold our securities as capital assets within the meaning\nof Section 1221 of the Code (generally, property held for investment), and does not address the potential application of the alternative\nminimum tax or the U.S. federal income tax consequences to holders that are subject to special rules, including, but not limited to:\n\n \n\n \n●\nfinancial institutions or financial services entities;\n\n \n\n \n●\nbroker-dealers;\n\n \n\n117\n\n \n\n \n\n \n●\npersons that are subject to the mark-to-market accounting rules under Section 475 of the Code;\n\n \n\n \n●\ntax-exempt entities;\n\n \n\n \n●\nretirement plans;\n\n \n\n \n●\ngovernments or agencies or instrumentalities thereof;\n\n \n\n \n●\ninsurance companies;\n\n \n\n \n●\nregulated investment companies;\n\n \n\n \n●\nreal estate investment trusts;\n\n \n\n \n●\ngrantor trusts;\n\n \n\n \n●\ncertain expatriates or former long-term residents of the United States;\n\n \n\n \n●\npersons that actually or constructively own 5% or more of our shares (by vote or value);\n\n \n\n \n●\npersons that acquired our securities pursuant to an exercise of employee options, in connection with employee incentive plans or otherwise as compensation;\n\n \n\n \n●\npersons that hold our securities as part of a straddle, constructive sale, hedging, conversion or other integrated transaction;\n\n \n\n \n●\npersons whose functional currency is not the U.S. dollar;\n\n \n\n \n●\npassive foreign investment companies; or\n\n \n\n \n●\ncontrolled foreign corporations.\n\n \n\nThis discussion does not\naddress any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws or, except\nas discussed herein, any tax reporting obligations applicable to a holder of our securities. Additionally, this discussion does not consider\nthe tax treatment of partnerships or other pass-through entities or persons who hold our securities through such entities. If a partnership\n(or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our securities, the U.S.\nfederal income tax treatment of a partner (or person or entity treated as a partner) in the partnership generally will depend on the status\nof the partner and the activities of the partnership. This discussion also assumes that any distribution made (or deemed made) to a holder\nin respect of our securities and any consideration received (or deemed received) by a holder in connection with the sale or other disposition\nof our securities will be in U.S. dollars. In addition, as described in “Risk Factors - Risks Related to Taxation”, there\nis a risk that we could be treated as a domestic (U.S.) corporation for U.S. federal income tax purposes by reason of the Reorganization;\nthis discussion also assumes that we will be and have been treated as a foreign corporation for U.S. federal income tax purposes. Moreover,\nthis discussion assumes that a holder owns a sufficient number of Series C Warrants and/or Series D Warrants, such that the holder will\nnot have a fractional warrant upon the exercise of a Series C Warrant and/or, Series D Warrant, as the case may be.\n\n \n\nWe have not sought, and will\nnot seek, a ruling from the IRS or an opinion of counsel as to any U.S. federal income tax consequence described herein. The IRS may disagree\nwith the description herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation,\nregulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.\n\n \n\nEACH HOLDER OF OUR SECURITIES\nIS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND\nDISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL\nTAX LAWS AND ANY APPLICABLE TAX TREATIES.\n\n** **\n\n118\n\n \n\n** **\n\n**U.S. Holders**\n\n* *\n\n*Taxation of Cash Distributions*\n\n \n\nAs noted above, we currently\ndo not intend to pay cash dividends on our ordinary shares in the foreseeable future. Subject to the passive foreign investment company,\nor PFIC, rules discussed below, a U.S. Holder generally will be required to include in gross income as ordinary income the amount of any\ncash dividend paid in respect of our ordinary shares. A cash distribution on our ordinary shares generally will be treated as a dividend\nfor U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits (as\ndetermined for U.S. federal income tax purposes). Such dividend generally will not be eligible for the dividends-received deduction generally\nallowed to U.S. corporations in respect of dividends received from other U.S. corporations. The portion of such cash distribution, if\nany, in excess of such earnings and profits will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax\nbasis in the ordinary shares. Any remaining excess generally will be treated as gain from the sale or other taxable disposition of such\nordinary shares. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder\nshould expect that a distribution will be reported as a dividend even if that distribution would otherwise be treated as a non-taxable\nreturn of capital or as capital gain under the rules described above.\n\n \n\nWith respect to non-corporate\nU.S. Holders, any such cash dividends may be subject to U.S. federal income tax at the lower applicable regular long term capital gains\ntax rate (see “- Taxation on the Disposition of Ordinary Shares or Series C Warrants or Series D Warrants” below) provided\nthat (a) our ordinary shares are readily tradable on an established securities market in the United States or we are eligible for the\nbenefits of the Treaty, (b) we are not a PFIC, as discussed below, for either the taxable year in which the dividend was paid or the preceding\ntaxable year, and (c) certain holding period requirements are met. Therefore, if our ordinary shares are not readily tradable on an established\nsecurities market, and we are not eligible for the benefits of the Treaty, then cash dividends paid by us to non-corporate U.S. Holders\nwill not be subject to U.S. federal income tax at the lower regular long term capital gains tax rate. Under published IRS authority, shares\nare considered for purposes of clause (a) above to be readily tradable on an established securities market in the United States only if\nthey are listed on certain exchanges, which presently include the Nasdaq Capital Market. Although our ordinary shares are currently listed\nand traded on the Nasdaq Capital Market, U.S. Holders nevertheless should consult their own tax advisors regarding the availability of\nthe lower rate for any cash dividends paid with respect to our ordinary shares.\n\n \n\nDividends paid to a U.S.\nHolder with respect to our ordinary shares generally will be foreign source income, which may be relevant in calculating such U.S. Holder’s\nforeign tax credit limitations. Subject to certain conditions and limitations, non-refundable Israeli tax withheld on dividends may be\ndeducted from such U.S. Holder’s taxable income or credited against such U.S. Holder’s U.S. federal income tax liability.\nThe election to deduct, rather than credit, foreign taxes, is made on a year-by-year basis and applies to all foreign taxes paid by a\nU.S. Holder or withheld from a U.S. Holder that year. The limitation on foreign taxes eligible for credit is calculated separately with\nrespect to specific classes of income. For this purpose, dividends that we distribute generally should constitute “passive category\nincome,” or, in the case of certain U.S. Holders, “general category income.” A foreign tax credit for foreign taxes\nimposed on distributions may be denied if a U.S. Holder does not satisfy certain minimum holding period requirements. In addition, U.S.\nTreasury regulations that apply to taxable years beginning on or after December 28, 2021 may preclude a U.S. Holder from claiming\na foreign tax credit with respect to Israeli taxes on gain from dispositions of ordinary shares unless the U.S. Holder is eligible for\nbenefits under the Treaty and elects its application and other applicable requirements are satisfied. However, a recent notice from the\nIRS indicates that the U.S. Department of the Treasury and the IRS are considering proposing amendments to such U.S. Treasury regulations\nand allows, subject to certain conditions, taxpayers to defer the application of many aspects of such U.S. Treasury regulations for taxable\nyears beginning on or after December 28, 2021 and ending before the date that a notice or other guidance withdrawing or modifying\nthe temporary relief is issued (or any later date specified in such notice or other guidance). The rules relating to the determination\nof the foreign tax credit are complex, and U.S. Holders should consult their tax advisors to determine whether and to what extent they\nwill be entitled to this credit.\n\n* *\n\n119\n\n \n\n* *\n\n*Adjustments with Respect to Warrants*\n\n \n\nThe terms of each Series\nC Warrant and Series D Warrant provide for an adjustment to the number of ordinary shares for which the warrant may be exercised or to\nthe exercise price of the warrant in certain events. An adjustment that has the effect of preventing dilution generally is not taxable.\nHowever, the U.S. Holders of the Series C Warrants and Series D Warrants would be treated as receiving a constructive distribution from\nus if, for example, the adjustment increases the warrant holders’ proportionate interest in our assets or earnings and profits (e.g.,\nthrough a decrease in the exercise price of the Series C Warrants or Series D Warrants) as a result of a distribution of cash to the holders\nof our ordinary shares, which is taxable to the U.S. Holders of such ordinary shares as described under “- Taxation of Cash Distributions,”\nabove. Such constructive distribution would be subject to tax as described under that section in the same manner as if the U.S. Holders\nof the Series C Warrants and Series D Warrants received a cash distribution from us equal to the fair market value of such increased interest.\nU.S. Holders of Series C Warrants and Series D Warrants are urged to consult their own tax advisors on these issues.\n\n* *\n\n*Taxation on the Disposition of Ordinary Shares\nor Series C Warrants or Series D Warrants*\n\n \n\nUpon a sale or other taxable\ndisposition of our ordinary shares or the Series C Warrants or Series D Warrants, and subject to the PFIC rules discussed below, a U.S.\nHolder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s\nadjusted tax basis in the securities.\n\n \n\nThe regular U.S. federal\nincome tax rate on capital gains recognized by U.S. Holders generally is the same as the regular U.S. federal income tax rate on ordinary\nincome, except that long term capital gains recognized by non-corporate U.S. Holders generally are subject to U.S. federal income tax\nat a maximum regular rate of 20%. Capital gain or loss will constitute long term capital gain or loss if the U.S. Holder’s holding\nperiod for the securities exceeds one year. The deductibility of capital losses is subject to various limitations. Any such gain or loss\nthat a U.S. Holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.\n\n \n\nAs discussed in “Israel\nTax Consideration and Government Programs − Taxation of our Shareholders” above. an Israeli capital gains tax may apply to\nany gains from the disposition of our ordinary shares or the Series C Warrants or Series D Warrants by a U.S. Holder. If such Israeli\ntax applies to any such gain, Treasury regulations that apply to taxable years beginning on or after December 28, 2021 may preclude\na U.S. Holder from claiming a foreign tax credit for such tax unless the U.S. holder is eligible for benefits under the Treaty, if such\nholder is considered a resident of the United States for purposes of the Treaty, and otherwise meets the requirements for claiming benefits\nunder the Treaty. However, a recent notice from the IRS indicates that the U.S. Department of the Treasury and the IRS are considering\nproposing amendments to such Treasury regulations and allows, subject to certain conditions, taxpayers to defer the application of many\naspects of such Treasury regulations for taxable years beginning on or after December 28, 2021 and ending before the date that a\nnotice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other\nguidance). In lieu of claiming a credit, a U.S. Holder may be able to elect to deduct the Israeli taxes in computing taxable income, subject\nto applicable limitations. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid\nor accrued in the relevant taxable year. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any\nsuch Israeli tax and their eligibility for the benefits of the Treaty.\n\n* *\n\n*Additional Taxes*\n\n \n\nU.S. Holders that are individuals,\nestates or trusts and whose income exceeds certain thresholds generally may be subject to a 3.8% Medicare contribution tax on unearned\nincome, including, without limitation, dividends on, and gains from the sale or other taxable disposition of, our ordinary shares or the\nSeries C Warrants or Series D Warrants, subject to certain limitations and exceptions. U.S. Holders should consult their own tax advisors\nregarding the effect, if any, of such tax on their ownership and disposition of our ordinary shares or the Series C Warrants or Series\nD Warrants.\n\n*  *\n\n120\n\n \n\n* *\n\n*Exercise or Lapse of a Series C Warrant or\nSeries D Warrant*\n\n \n\nSubject to the PFIC rules\ndiscussed below, a U.S. Holder generally will not recognize gain or loss upon the exercise of a Series C Warrant or Series D Warrant for\ncash. An ordinary share acquired pursuant to the exercise of a Series C Warrant or Series D Warrant for cash generally will have a tax\nbasis equal to the U.S. Holder’s tax basis in the Series C Warrant or Series D Warrant, as applicable, increased by the amount paid\nto exercise the Series C Warrant or Series D Warrant. The holding period of such ordinary share generally would begin on the day after\nthe date of exercise of the Series C Warrant or Series D Warrant. If a Series C Warrant or Series D Warrant is allowed to lapse unexercised,\na U.S. Holder generally will recognize a capital loss equal to such holder’s tax basis in the Series C Warrant or Series D Warrant.\n\n \n\nThe tax consequences of a\ncashless exercise of Series C Warrants and Series D Warrants are not clear under current tax law. A cashless exercise may be tax-free,\neither because it is not a realization event (i.e., not a transaction in which gain or loss is realized) or because the transaction is\ntreated as a recapitalization for U.S. federal income tax purposes. In either tax-free situation, a U.S. Holder’s tax basis in the\nordinary shares received would equal the U.S. Holder’s basis in the Series C Warrants or Series D Warrants surrendered. If the cashless\nexercise were treated as not being a realization event, the U.S. Holder’s holding period in the ordinary shares could be treated\nas commencing on the date following the date of exercise of the Series C Warrants or Series D Warrants. If the cashless exercise were\ntreated as a recapitalization, the holding period of the ordinary shares received would include the holding period of the Series C Warrants\nor Series D Warrants, as applicable.\n\n \n\nIt is also possible that\na cashless exercise could be treated as a taxable exchange in which gain or loss is recognized. In such event, a U.S. Holder could be\ndeemed to have surrendered a number of Series C Warrants or Series D Warrants, as applicable, with a fair market value equal to the exercise\nprice for the number of Series C Warrants or Series D Warrants deemed exercised. For this purpose, the number of Series C Warrants or\nSeries D Warrants deemed exercised would be equal to the amount needed to receive on exercise the number of ordinary shares issued pursuant\nto the cashless exercise of the Series C Warrants or Series D Warrants. In this situation, the U.S. Holder would recognize capital gain\nor loss in an amount equal to the difference between the fair market value of the Series C Warrants or Series D Warrants deemed surrendered\nto pay the exercise price and the U.S. Holder’s tax basis in such Series C Warrants or Series D Warrants deemed surrendered. Such\ngain or loss would be long-term or short-term depending on the U.S. Holder’s holding period in the Series C Warrants or Series D\nWarrants, as applicable. In this case, a U.S. Holder’s tax basis in the ordinary shares received would equal the sum of the fair\nmarket value of the Series C Warrants or Series D Warrants deemed surrendered to pay the exercise price and the U.S. Holder’s tax\nbasis in the Series C Warrants or Series D Warrants deemed exercised, and a U.S. Holder’s holding period for the ordinary shares\nshould commence on the date following the date of exercise of the Series C Warrants or Series D Warrants. There also may be alternative\ncharacterizations of any such taxable exchange that would result in similar tax consequences, except that a U.S. Holder’s gain or\nloss would be short-term.\n\n \n\nDue to the absence of authority\non the U.S. federal income tax treatment of a cashless exercise of Series C Warrants and Series D Warrants, it is unclear which, if any,\nof the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, U.S.\nHolders should consult their tax advisors regarding the tax consequences of a cashless exercise of Series C Warrants and Series D Warrants.\n\n* *\n\n*Passive Foreign Investment Company Rules*\n\n \n\nA foreign (i.e., non-U.S.)\ncorporation will be a PFIC if either (a) at least 75% of its gross income in a taxable year of the foreign corporation, including its\npro rata share of the gross income of any corporation in which it is considered to own at least 25% of the corporation by value, is passive\nincome, or (b) at least 50% of the average value of its assets in a taxable year of the foreign corporation, including its pro rata share\nof the assets of any corporation in which it is considered to own at least 25% of the corporation by value, are held for the production\nof, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents or\nroyalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.\n\n \n\nWe believe that we were a\nPFIC for the taxable year ended December 31, 2025 and may be a PFIC for the taxable year ending December 31, 2026. Our PFIC\nstatus for our current taxable year or any subsequent taxable year is uncertain and will not be determinable until after the end of such\ntaxable year. Accordingly, there can be no assurance with respect to our status as a PFIC for our taxable year ending December 31,\n2026 or any subsequent taxable year.\n\n  \n\n121\n\n \n\n \n\nIf we are determined to be\na PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our ordinary shares or Series\nC Warrants or Series D Warrants, and, in the case of our ordinary shares, the U.S. Holder did not make a timely qualified electing fund\nor a QEF, election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) the ordinary shares, a purging\nelection, a QEF election along with a purging election, or a mark-to-market election, each as described below, such holder generally will\nbe subject to special rules for regular U.S. federal income tax purposes with respect to:\n\n \n\n \n●\nany gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares or Series C Warrants or Series D Warrants; and\n\n \n\n \n●\nany “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the ordinary shares).\n\n \n\nUnder these rules,\n\n \n\n \n●\nthe U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares or Series C Warrants or Series D Warrants;\n\n \n\n \n●\nthe amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we qualified as a PFIC will be taxed as ordinary income;\n\n \n\n \n●\nthe amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest ordinary tax rate in effect for that year and applicable to the U.S. Holder; and\n\n \n\n \n●\nthe interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.\n\n \n\nAlthough a determination\nas to our PFIC status is made annually, an initial determination that we are a PFIC generally will apply for subsequent years to a U.S.\nHolder that held (or was deemed to hold) our ordinary shares or Series C Warrants or Series D Warrants while we were a PFIC, whether or\nnot we meet the test for PFIC status in those subsequent years. If we are determined to be a PFIC in any taxable year, and then cease\nto meet the test for PFIC status in a subsequent taxable year, a U.S. Holder may be able to make a purging election to eliminate this\ncontinuing PFIC status with respect to its ordinary shares in certain circumstances. A purging election generally creates a deemed sale\nof such ordinary shares at their fair market value on the last day of our tax year during which we qualified as a PFIC (or, in the case\nof a purging election made in connection with a QEF election, the first day of our taxable year in which qualify as a QEF with respect\nto such U.S. Holder). Any gain recognized by the purging election generally will be treated as an excess distribution subject to the special\ntax and interest charge rules described above. As a result of the purging election, the U.S. Holder generally will increase the adjusted\nbasis in its ordinary shares by the amount of gain recognized and will also have a new holding period in its ordinary shares for purposes\nof the PFIC rules.\n\n \n\nIn general, if we are determined\nto be a PFIC, a U.S. Holder may avoid the PFIC tax consequences described above with respect to the ordinary shares by making a timely\nQEF election (or a QEF election along with a purging election). Pursuant to the QEF election, a U.S. Holder generally will be required\nto include in income its pro rata share of our net capital gains (as long term capital gain) and other earnings and profits (as ordinary\nincome), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our\ntaxable year ends if we are treated as a PFIC for that taxable year. However, a U.S. Holder may make a QEF election only if we agree to\nprovide certain tax information to such holder annually. At this time, we do not intend to provide U.S. Holders with such information\nas may be required to make a QEF election effective. In any event, a QEF election may not be made with respect to warrant.\n\n  \n\n122\n\n \n\n \n\nAlternatively, if a U.S.\nHolder, at the close of its taxable year, owns ordinary shares in a PFIC that are treated as marketable stock, the U.S. Holder may make\na mark-to-market election with respect to such ordinary shares for such taxable year. If the U.S. Holder makes a valid mark-to-market\nelection for the first taxable year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) the ordinary shares and for\nwhich we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above with respect to its\nordinary shares as long as such shares continue to be treated as marketable stock. Instead, in general, the U.S. Holder will include as\nordinary income for each year that we are treated as a PFIC the excess, if any, of the fair market value of its ordinary shares at the\nend of its taxable year over the adjusted tax basis in its ordinary shares. The U.S. Holder also will be allowed to take an ordinary loss\nin respect of the excess, if any, of the adjusted tax basis of its ordinary shares over the fair market value of its ordinary shares at\nthe end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market\nelection). The U.S. Holder’s adjusted tax basis in its ordinary shares will be adjusted to reflect any such income or loss amounts,\nand any further gain recognized on a sale or other taxable disposition of the ordinary shares in a taxable year in which we are treated\nas a PFIC generally will be treated as ordinary income. Special tax rules may also apply if a U.S. Holder makes a mark-to-market election\nfor a taxable year after the first taxable year in which the U.S. Holder holds (or is deemed to hold) our ordinary shares and for which\nwe are determined to be a PFIC. Currently, a mark-to-market election may not be made with respect to warrants.\n\n \n\nThe mark-to-market election\nis available only for stock that is regularly traded on a national securities exchange that is registered with the U.S. Securities and\nExchange Commission, including the Nasdaq Capital Market, or on a foreign exchange or market that is regulated or supervised by a governmental\nauthority of the country in which the exchange or market is located and which (A) meets certain requirements, that are enforced by law,\nrelating to trading volume, listing, financial disclosure, surveillance and other requirements that are designed to (i) prevent fraudulent\nand manipulative acts and practices, (ii) remove impediments to and perfect the mechanism of a free and open, fair and orderly market\nand (iii) protect investors and (B) has rules that effectively promote the active trading of listed stock. Although our ordinary shares\nare currently listed and traded on the Nasdaq Capital Market, U.S. Holders nevertheless should consult their own tax advisors regarding\nthe availability and tax consequences of a mark-to-market election with respect to our ordinary shares under their particular circumstances.\n\n \n\nIf we are a PFIC and, at\nany time, have a foreign subsidiary that is classified as a PFIC, a U.S. Holder of our ordinary shares generally should be deemed to own\na portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described\nabove if we receive a distribution from, or dispose of all or part of our interest in, or the U.S. Holder were otherwise deemed to have\ndisposed of an interest in, the lower-tier PFIC. A mark-to-market election generally would not be available with respect to such a lower-tier\nPFIC. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.\n\n \n\nA U.S. Holder that owns (or\nis deemed to own) ordinary shares in a PFIC during any taxable year of the U.S. Holder generally is required to file an IRS Form 8621\n(whether or not a mark-to-market election is or has been made) with such U.S. Holder’s U.S. federal income tax return and provide\nsuch other information as may be required by the U.S. Treasury Department. Failure to file IRS Form 8621 for each applicable taxable year\nmay result in substantial penalties and the statute of limitations on the assessment and collection of U.S. federal income taxes of such\nU.S. Holder for the related taxable year may not close until three years after the date on which the required information is filed.\n\n \n\nThe rules dealing with PFICs\nand purging and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly,\nU.S. Holders of our securities should consult their own tax advisors concerning the application of the PFIC rules to our securities under\ntheir particular circumstances.\n\n** **\n\n**Non-U.S. Holders**\n\n \n\nCash dividends paid or deemed\npaid to a Non-U.S. Holder with respect to our ordinary shares generally will not be subject to U.S. federal income tax unless such dividends\nare effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by\nan applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained\nin the United States).\n\n \n\nIn addition, a Non-U.S. Holder\ngenerally will not be subject to U.S. federal income tax on any gain attributable to a sale or other taxable disposition of our securities\nunless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable\nincome tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States)\nor the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of such sale or other\ndisposition and certain other conditions are met (in which case, such gain from U.S. sources generally is subject to U.S. federal income\ntax at a 30% rate or a lower applicable tax treaty rate).\n\n  \n\n123\n\n \n\n \n\nDividends and gains that\nare effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an\napplicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in\nthe United States) generally will be subject to regular U.S. federal income tax at the same regular U.S. federal income tax rates as applicable\nto a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also\nbe subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.\n\n** **\n\n**Backup Withholding and Information Reporting**\n\n \n\nIn general, information reporting\nfor U.S. federal income tax purposes should apply to distributions made on our securities within the United States to a U.S. Holder (other\nthan an exempt recipient) and to the proceeds from sales and other dispositions of our securities by a U.S. Holder (other than an exempt\nrecipient) to or through a U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the\nUnited States will be subject to information reporting in limited circumstances. In addition, certain information concerning a U.S. Holder’s\nadjusted tax basis in its securities and adjustments to that tax basis and whether any gain or loss with respect to such securities is\nlong term or short term also may be required to be reported to the IRS, and certain holders may be required to file an IRS Form 8938 (Statement\nof Specified Foreign Financial Assets) to report their interest in our securities.\n\n \n\nMoreover, backup withholding\nof U.S. federal income tax, currently at a rate of 24%, generally will apply to dividends paid on our securities to a U.S. Holder (other\nthan an exempt recipient) and the proceeds from sales and other dispositions of our securities by a U.S. Holder (other than an exempt\nrecipient), in each case who:\n\n \n\n \n●\nfails to provide an accurate taxpayer identification number;\n\n \n\n \n●\nis notified by the IRS that backup withholding is required; or\n\n \n\n \n●\nin certain circumstances, fails to comply with applicable certification requirements.\n\n \n\nA Non-U.S. Holder generally\nmay eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under\npenalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.\n\n \n\nBackup withholding is not\nan additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S.\nHolder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is\ntimely furnished to the IRS.\n\n \n\nHolders are urged to consult\ntheir own tax advisors regarding information reporting, the application of backup withholding, and the availability of and procedures\nfor obtaining an exemption from backup withholding in their particular circumstances.\n\n** **\n\n**THE DISCUSSION ABOVE IS\nA GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS\nURGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES,\nSERIES C WARRANTS OR SERIES D WARRANTS, IN EACH CASE IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES, INCLUDING THE CONSEQUENCES OF\nANY PROPOSED CHANGE IN APPLICABLE LAWS.**\n\n**  **\n\n**F. Dividends and paying agents**\n\n \n\nNot applicable.\n\n** **\n\n124\n\n \n\n** **\n\n**G. Statement by experts**\n\n \n\nNot applicable.\n\n** **\n\n**H. Documents on display**\n\n \n\nWe are subject to the informational\nrequirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports\non Form 20-F and reports on Form 6-K. As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the\nrules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from\nthe short swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange\nAct to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are\nregistered under the Exchange Act. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements\nand other information regarding registrants like us that file electronically with the SEC. You can also inspect this Annual Report on\nsuch website.\n\n \n\nA copy of each document (or\na translation thereof to the extent not in English) concerning our company that is referred to in this Annual Report is available for\npublic view (subject to confidential treatment of certain agreements pursuant to applicable law) at our principal executive offices at\nCheck-Cap Building, 29 Abba Hushi Avenue, P.O. Box 1271, Isfiya, 3009000, Israel.\n\n** **\n\n**I. Subsidiary Information**\n\n \n\nNot applicable.\n\n** **\n\n**J. Annual Report to Security Holders**\n\n \n\nNot applicable."}