{"url_path":"/sec/mbai/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 Key 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":30094,"has_tables":true,"body_markdown":"** **\n\n**Item\n3. Key Information**\n\n** **\n\n**A.**[Reserved]\n\n** **\n\n**B. Capitalization and Indebtedness**\n\n \n\nNot required.\n\n** **\n\n**C. Reasons for the Offer and Use of Proceeds**\n\n \n\nNot required.\n\n** **\n\n**D. Risk factors**\n\n* *\n\n*In conducting our business,\nwe face many risks that may interfere with our business objectives. Some of these risks could materially and adversely affect our business,\nfinancial condition and results of operations. In particular, we are subject to various risks resulting from changing economic, political,\nindustry, regulatory, business and financial conditions. The risks and uncertainties described below are not the only ones we face. Additional\nrisks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our\nbusiness operations.*\n\n* *\n\n*You should carefully\nconsider the following factors and other information in this Annual Report before you decide to invest in our ordinary shares. These\ndisclosures reflect our beliefs and opinions as to factors that could materially and adversely affect us and our securities in the future.\nReferences to past events are provided by way of example only and are not intended to be a complete listing or a representation as to\nwhether or not such factors have occurred in the past or their likelihood of occurring in the future. If any of the risks referred to\nbelow occur, our business, financial condition and results of operations could suffer. In any such case, the trading price of our ordinary\nshares could decline, and you may lose all or part of your investment.*\n\n** **\n\n1\n\n \n\n \n\n**Summary Risk Factors**\n\n \n\nOur business is subject\nto numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following\nthis summary. The principal factors and uncertainties that make investing in our ordinary shares risky, include, among others:\n\n \n\n**Risks Related to the Merger**\n\n \n\n \n●\nThe issuance of ordinary\nshares in connection with the Merger will substantially dilute the relative voting power of holders of Check-Cap ordinary shares\nprior to the closing of the Merger, and, as a result, such holders will exercise substantially less influence over the management\nand policies of the combined company following the consummation of the Merger;\n\n \n\n \n●\nThe Company has incurred\nand expects to continue to incur substantial non-recurring transaction-related costs in connection with the Merger, including legal,\naccounting, regulatory filing, and other professional fees, which will be incurred regardless of whether the Merger is completed;\n\n \n\n \n●\nThe Company may fail to\nrealize the anticipated benefits of the Merger, including as a result of difficulties in integrating the operations and personnel\nof the two companies, failure to retain key employees, higher-than-expected integration or transaction costs, and unforeseen market\nor economic conditions;\n\n \n\n \n●\nThe Company may become\ninvolved in securities class action litigation or shareholder derivative litigation in connection with the Merger, which could result\nin substantial costs, divert management’s attention and resources, and have a material adverse effect on the Company’s\nbusiness, financial condition, and results of operations;\n\n \n\n \n●\nIf the Merger is not completed\nfor any reason, the Company will need to evaluate its strategic alternatives and will require significant additional funding in order\nto continue operations, and if such funding is not available on acceptable terms, the Company may be forced to significantly curtail\nor cease operations; and\n\n \n\n \n●\nThe Apollo BCA remains\nin effect and will not terminate unless and until the Merger closes, and the Company has outstanding other payables due to Apollo\nin the aggregate principal amount of approximately $1.4 million as of December 31, 2025, the conversion of which to equity in Apollo\nis contingent on the closing of the Merger.\n\n** **\n\n**Risks Related to Our Financial Position**\n\n \n\n \n●\nWe\nhave a history of losses, may incur future losses and require additional funding in order to complete the development of our products\nand technology. If additional capital is not available and we cease the development of our products and technology or are obligated\nto relinquish rights to our intellectual property, we may not ever achieve profitability and be forced to liquidate; and\n\n \n\n \n●\nWe may not recover amounts\nloaned to Apollo, and any equity interest in Apollo we ultimately hold may be illiquid and of uncertain value. The Company has made loans\nto Apollo in the aggregate principal amount of approximately $16.3 million, which are to be exchanged for common shares representing\na 7.5% equity interest in Apollo, pursuant to an Exchange Agreement (defined below) and a BCA Termination Agreement dated September 12,\n2025, by and between Apollo and the Company (the “BCA Termination Agreement”), conditioned on the closing of the Merger.\nIf the Merger does not close, the Exchange Agreement will not close and the Company may not recover these amounts. If the Merger closes,\nthe Company will hold a minority interest in a private company with no readily determinable fair value, and there can be no assurance\nthe Company will realize the carrying value, or any value, from such investment.\n\n** **\n\n**Risks Related to MBody AI’s Business and Operations**\n\n** **\n\n \n●\nMBody AI has a limited\noperating history and an evolving business model, which makes it difficult to evaluate its future prospects and may adversely affect\nthe MBody AI’s ability to achieve its business objectives;\n\n \n\n \n●\nMBody AI currently relies\non a limited number of customers, and the loss or reduction of business from any customer could materially adversely affect its results\nof operations;\n\n \n\n2\n\n \n\n \n\n \n●\nMBody AI’s operations\ndepend on a small number of third-party vendors, deployment partners, and hardware suppliers, and any failure by its suppliers to\ndeliver on schedule, in sufficient quantities, or at anticipated price points could delay customer implementations or impair revenue\ntargets;\n\n \n\n \n●\nMBody AI operates in regulated\nenvironments, including hospitality, gaming, and potentially healthcare, and regulatory requirements may change over time, differ\nby jurisdiction, or impose additional compliance costs that could adversely affect its ability to deploy its platform or expand into\nnew markets;\n\n \n\n \n●\nMBody AI may face liability\nor compliance exposure related to the operation of autonomous systems, and the evolving regulatory landscape for artificial intelligence,\nrobotics, and autonomous systems could impose additional obligations or restrict certain applications;\n\n \n\n \n●\nMBody AI has a history\nof operating losses since inception and may not achieve or sustain profitability, and will require additional capital to execute\nits business plan, which may not be available on acceptable terms;\n\n \n\n \n●\nMBody AI operates in a\nrapidly evolving and competitive market, and new technologies, business models, or competitors may emerge that could reduce demand\nfor its platform or render its offerings less competitive; and\n\n \n\n \n●\nMBody AI’s success\ndepends on its ability to attract and retain key management and technical personnel, and the loss of key personnel or inability to\nattract additional talent could materially adversely affect its business.\n\n \n\n**Risks Related to the ARC ELOC Facility**\n\n** **\n\n \n●\nIt is not possible to predict\nthe actual number of shares we will sell under that certain Purchase Agreement  (the “Purchase Agreement”)\nentered with ARC Group International Ltd. (“ARC”) on December 17, 2025 (the “ARC ELOC Facility”), or the\nactual gross proceeds resulting from those sales, and the total proceeds could be substantially less than the $30.0 million total\ncommitment amount;\n\n \n\n \n●\nWe may require additional\nfinancing to sustain our operations beyond the Purchase Agreement, and such financing may not be available on acceptable terms, or\nat all, which could materially adversely affect our business, financial condition, and results of operations;\n\n \n\n \n●\nFuture sales and issuances\nof our ordinary shares, including pursuant to the Purchase Agreement, might result in significant dilution to existing shareholders\nand could cause the price of our ordinary shares to decline; and\n\n \n\n \n●\nWe undertake to seek shareholder\napproval to re-designate our ordinary shares as no-par value, and any delay or failure to complete the re-designation could limit\nour flexibility to issue shares under the Purchase Agreement and adversely affect our ability to raise capital.\n\n \n\n**Risks Related to the Acquisition of Ghost Kitchen Franchise Rights\nin New Jersey**\n\n** **\n\n \n●\nThere can be no assurance\nthat the Company will realize the anticipated benefits of the acquisition of Ghost Kitchen franchise rights in New Jersey, including\ngenerating revenue from the acquired operations; and\n\n \n\n \n●\nThe Company issued 1,169,596\nordinary shares as consideration for the acquisition of Ghost Kitchen franchise rights in New Jersey, and while the shares are subject\nto a two-year lock-up period and a voting agreement, the eventual availability of those shares for resale in the public market could\nadversely affect the price of our ordinary shares.\n\n \n\n3\n\n \n\n \n\n**Risks Related to Our Historical Business Operations**\n\n \n\n \n●\nAlthough we received Food\nand Drug Administration (“FDA”) approval of our investigational device exemption (“IDE”) (including our IDE\namended application) for our U.S. pivotal study, the most recent efficacy results from our studies did not meet the goal to proceed\nto the powered portion of the U.S. pivotal study, as such we cannot provide any assurance that we will ever be able to redesign such\nstudy or redeploy our technology into other potentially viable products;\n\n \n\n \n●\nClinical failure can occur\nat any stage of clinical development, and we may not succeed in completing the development of our product. Any product we advance\nthrough clinical trials may require further clinical validation and may not have favorable results in later clinical trials or receive\nregulatory approval;\n\n \n\n \n●\nWe may face a number of\nchallenges with respect to our commercialization efforts and may not succeed in the commercialization of our product, obtain required\nregulatory approvals or manufacture commercial quantities of C-Scan at an acceptable cost to enable us to generate significant revenues;\n\n \n\n \n●\nWe have limited manufacturing\nexperience and capabilities and if we are unable to scale up our manufacturing operations to develop our products, our growth could\nbe limited and our business, financial condition and results of operations could be materially adversely affected;\n\n \n\n \n●\nOur reliance on sole or\nsingle source suppliers could harm our ability to conduct clinical trials and meet demand for our product in a timely manner or within\nour budget;\n\n \n\n \n●\nThe use of any of our C-Scan\nCap, C-Scan Track, C-Scan View or any new products and technology could result in product liability or similar claims that could\nbe expensive to defend, damage our reputation and harm our business;\n\n \n\n \n●\nWe have historically depended\non third parties to manage our clinical studies and trials, perform related data collection and analysis, and to enroll patients\nfor our clinical trials, and, as a result, we may face costs and delays that are beyond our control;\n\n \n\n \n●\nWe currently expect to\nsell our products mainly in the United States, Europe, Israel and Japan and, if we are unable to manage our operations in these territories,\nour business, financial condition and results of operations could be materially adversely affected;\n\n \n\n \n●\nWe may not be successful\nin establishing and maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize our\nproducts and technology;\n\n \n\n \n●\nA security breach or disruption\nor failure in a computer or communications systems could adversely affect us;\n\n \n\n \n●\nWe or the third parties\nupon whom we depend may be adversely affected by natural disasters and/or health epidemics or pandemics and our business continuity\nand disaster recovery plans may not adequately protect us from a serious disaster; and\n\n \n\n \n●\nShareholder activism could\nresult in potential operational disruption, divert our resources and management’s attention and have an adverse effect on our\nbusiness.\n\n** **\n\n**Risks Related to Regulations Applicable to Our Historical Business**\n\n \n\n \n●\nIf we or our future manufacturers\nor distributors do not obtain and maintain the necessary regulatory clearances or approvals, or equivalent third country approvals\nin a specific country or region, we or our future distributors will not be able to market and sell C-Scan or future products in that\ncountry or region;\n\n \n\n \n●\nIf the indications for\nuse or instructions for use for which the iodinated oral contrast medium is approved are not sufficiently broad to support its use\nthroughout the C-Scan procedure, the FDA or the competent regulatory authorities in the European Union (“EU”) Member\nStates and other foreign countries may consider that contrast agent is being used off-label;\n\n \n\n4\n\n \n\n \n\n \n●\nThe results of any future\nclinical trials may not support our product candidate requirements or intended use claims or may result in the discovery of adverse\nside effects;\n\n \n\n \n●\nEven if C-Scan or future\nproducts are cleared or approved by regulatory authorities or after obtaining CE Certificates from a notified body, modifications\nto C-Scan or future products may require new regulatory clearances or approvals, new CE Certificates, or may require us to recall\nor cease marketing it until the necessary clearances, approvals or CE Certificates are obtained;\n\n \n\n \n●\nOur failure to comply with\nradiation safety or radio frequency regulations in a specific country or region could impair our ability to conduct our clinical\ntrials, or commercially distribute and market C-Scan or any similar product in that country or region;\n\n \n\n \n●\nOur products may in the\nfuture be subject to product recalls that could harm our reputation, business and financial results;\n\n \n\n \n●\nIf C-Scan or future products\ncause or contribute to a death or a serious injury, or malfunction in such a way that causes or contributes to a death or serious\ninjury, we will be subject to medical device reporting regulations, which can result in corrective actions or enforcement actions\nfrom regulatory authorities;\n\n \n\n \n●\nOur business is subject\nto complex environmental and health legislation in various jurisdictions that may increase our costs and our risk of noncompliance;\n\n \n\n \n●\nFederal and state privacy\nlaws, and equivalent laws of third countries, may increase our costs of operation and expose us to civil and criminal sanctions;\n\n \n\n \n●\nIf we fail to comply with\nthe U.S. federal Anti-Kickback Statute and similar state and third-country laws, we could be subject to criminal and civil penalties\nand exclusion from federally funded healthcare programs including the Medicare and Medicaid programs and equivalent third-country\nprograms, which would have a material adverse effect on our business and results of operations;\n\n \n\n \n●\nOur failure to comply with\nthe necessary regulatory approval regarding the use of radioactive materials could significantly impair our ability to develop, manufacture\nand/or sell C-Scan or similar products; and\n\n \n\n \n●\nOur ability to source and\ndistribute our products profitably or at all could be harmed if new trade restrictions are imposed or existing trade restrictions\nbecome more burdensome.\n\n** **\n\n**Risks Related to Our Legacy Intellectual Property**\n\n \n\n \n●\nIf we are unable to protect\nour intellectual property rights, our competitive position could be harmed;\n\n \n\n \n●\nBecause the medical device\nindustry is litigious, we are susceptible to intellectual property suits that could cause us to incur substantial costs or pay substantial\ndamages or prohibit us from selling C-Scan or any similar products we may develop;\n\n \n\n \n●\nThe steps we have taken\nto protect our intellectual property may not be adequate, which could have a material adverse effect on our ability to compete in\nthe market;\n\n \n\n \n●\nThird parties may challenge\nthe validity of our issued patents or challenge patent applications in administrative proceedings before various patent offices which,\nif successful, could negatively affect our future business and financial performance;\n\n \n\n5\n\n \n\n \n\n \n●\nWe may need to initiate\nlawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive and, if we lose, could\ncause us to lose some of our intellectual property rights, which would harm our ability to compete in the market;\n\n \n\n \n●\nWe rely on trademark protection\nto distinguish our products from the products of our competitors; however, if a third party is entitled to use our trademark, we\ncould be forced to rebrand, which could result in loss of brand recognition and our ability to distinguish our products may be impaired,\nwhich could adversely affect our business; and\n\n \n\n \n●\nWe may not be able to enforce\ncovenants not to compete at all or, we may be unable to enforce them for the duration contemplated in our employment contracts and\nmay, therefore, be unable to prevent competitors from benefiting from the expertise of some of our former employees involved in research\nand development activities.\n\n** **\n\n**Risks Related to Our Operations in Israel**\n\n \n\n \n●\nOur principal offices,\nresearch and development facilities, our manufacturing sites and some of our suppliers are located in Israel and, therefore, our\nbusiness, financial condition and results of operation may be adversely affected by political, economic and military instability\nin Israel;\n\n \n\n \n●\nPursuant to the terms of\nthe Israeli government grants we received for research and development expenditures related to our historical business, we are obligated\nto pay certain royalties on our revenues from our legacy products to the Israeli government. In addition, the terms of an Israeli\ngovernment grant we received require us to satisfy specified conditions and to make additional payments in addition to repayment\nof the grants upon certain events;\n\n \n\n \n●\nYour rights and responsibilities\nas a shareholder are governed by Israeli law, which differ in some material respects from the rights and responsibilities of shareholders\nof U.S. companies;\n\n \n\n \n●\nIt may be difficult to\nenforce a judgment of a U.S. court against us, certain of our officers and directors or the Israeli experts named in this Annual\nReport in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on certain of our officers\nand directors and these experts;\n\n \n\n \n●\nProvisions of Israeli law\nand our amended articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, us, even when\nthe terms of such a transaction are favorable to us and our shareholders; and\n\n \n\n \n●\nWe may become subject to\nclaims for payment of compensation for assigned service inventions by our current or former employees relating to our historical\nbusiness, which could result in litigation and adversely affect our business.\n\n** **\n\n**Risks Related to Ownership of our Ordinary Shares**\n\n \n\n \n●\nWe incur and will continue\nto incur significant costs as a result of operating as a public company in the United States, and our management is required to devote\nsubstantial time to compliance initiatives;\n\n \n\n \n●\nIf we fail to maintain\neffective internal control over financial reporting, the price of our ordinary shares may be adversely affected;\n\n \n\n \n●\nWe may be unable to maintain\ncompliance with Nasdaq’s continued listing requirements, which could result in the delisting of our ordinary shares from Nasdaq;\n\n \n\n \n●\nWe are a foreign private\nissuer and, as a result, we are not subject to U.S. proxy rules and are subject to the Securities Exchange Act of 1934 reporting\nobligations that, to some extent, are more lenient and less frequent than those applicable to a U.S. issuer;\n\n \n\n6\n\n \n\n \n\n \n●\nAs a foreign private issuer,\nwe are permitted, to follow, and follow certain home country corporate governance practices instead of otherwise applicable Nasdaq\nrequirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers;\n\n \n\n \n●\nIf we lose our status as\na foreign private issuer under the SEC’s rules, our compliance costs will increase;\n\n \n\n \n●\nExchange rate fluctuations\nbetween the U.S. dollar and the NIS and the Euro and inflation may negatively affect our earnings and we may not be able to hedge\nour currency exchange risks successfully;\n\n \n\n \n●\nWe have never declared\nor paid a dividend and currently do not intend to pay cash dividends in the foreseeable future. Any return on investment may be limited\nto the value of our securities;\n\n \n\n \n●\nIf securities or industry\nanalysts do not publish research or reports about us or our business or publish unfavorable research about us or our business, the\nprice of our securities and their trading volume could decline;\n\n \n\n \n●\nOur stock price has and\nmay be subject to fluctuation, and purchasers of our securities could incur substantial losses;\n\n \n\n \n●\nThe trading market for\nour ordinary shares is not always active, liquid and orderly, which may inhibit the ability of our shareholders to sell ordinary\nshares;\n\n \n\n \n●\nWe have broad discretion\nin how we use the net proceeds from our financings, and we may not use these proceeds effectively; and\n\n \n\n \n●\nOur business, operating\nresults and growth rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments\nwith respect to financial institutions and associated liquidity risk.\n\n** **\n\n**Risks Related to Taxation**\n\n \n\n \n●\nThere is a risk that we\ncould be treated as a domestic (U.S.) corporation for U.S. federal income tax purposes by reason of the transactions related to our\nacquisition of all of the business operations and substantially all of the assets of Check-Cap LLC on May 31, 2009 (the “Reorganization”);\n\n \n\n \n●\nWe may be eligible for\ntax benefits from government programs relating to our historical assets, which require us to meet certain conditions, including regarding\nthe location of our property, plant and equipment and manufacturing in Israel. We can provide no assurance that we would continue\nto be eligible for such benefits and/or that any such benefits will not be terminated in the future; and\n\n \n\n \n●\nThere is a risk that we\nmay be classified as a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences\nto U.S. investors.\n\n \n\n7\n\n \n\n** **\n\n**Risks Related to the Merger**\n\n \n\n**The consummation\nof the Merger is subject to the satisfaction of certain conditions, which may not be satisfied on a timely basis, if at all.**\n\n \n\nOn September 12, 2025, the Company entered into the Merger Agreement,\npursuant to which Merger Sub will merge with and into MBody AI, with MBody AI surviving as a wholly owned subsidiary of the Company.\nThe Merger was approved by the Company’s shareholders on November 14, 2025. The consummation of the Merger remains subject to the satisfaction\nor waiver of certain closing conditions, including, among others, that no governmental authority shall have issued any order preventing\nthe Merger, the expiration or termination of any applicable waiting periods under antitrust laws, the accuracy of representations and\nwarranties of each party, the performance by each party of its covenants and obligations in all material respects, and the absence of\na material adverse effect with respect to either party. We cannot assure you that all of the conditions will be satisfied or waived.\nIf the conditions are not satisfied or waived, the Merger will not occur or will be delayed, and we may lose some or all of the intended\nbenefits of the Merger. The Merger Agreement provides that either party may terminate the agreement if the Merger is not consummated\nby June 30, 2026.\n\n** **\n\n**Our shareholders\nwill have a reduced ownership and voting interest in, and will exercise less influence over the management of, the Company following\nthe consummation of the Merger.**\n\n** **\n\nPursuant to the Merger Agreement, at the effective time of the Merger,\neach share of MBody AI capital stock outstanding immediately prior to the effective time will be converted into the right to receive\nordinary shares of the Company such that, following the closing, the former MBody AI shareholders will own approximately 90% of the Company’s\noutstanding share capital on a fully diluted and as-converted basis, and the Company’s shareholders prior to the closing will own approximately\n10%. Accordingly, the issuance of ordinary shares to MBody AI’s shareholders pursuant to the Merger Agreement will significantly reduce\nthe relative voting power of each ordinary share held by the Company’s existing shareholders. Consequently, existing shareholders will\nexercise substantially less influence over the management and policies of the Company than they did prior to the consummation of the\nMerger.\n\n \n\n**During the pendency of the Merger, the Company is subject to operating\nrestrictions and limitations on its ability to pursue alternative transactions, which could adversely affect its financial condition\nand results of operations.**\n\n** **\n\nThe Merger Agreement contains covenants that restrict the Company’s\nability to operate its business during the period between signing and closing. During this interim period, the Company is required to\noperate in the ordinary course of business and is subject to restrictions on, among other things, declaring dividends or distributions,\namending its organizational documents, issuing securities (subject to limited exceptions), making capital expenditures in excess of $50,000,\nentering into material contracts, and acquiring or disposing of material assets, in each case without the prior written consent of MBody\nAI. In addition, the Company is subject to a no-solicitation covenant under which it is prohibited from soliciting, initiating, encouraging,\nor entering into certain transactions with third parties. The Company may consider a Superior Offer (as defined in the Merger Agreement),\nsubject to compliance with specific notice and procedural requirements. These restrictions may prevent the Company from pursuing other\nopportunities that may arise or from taking actions that would otherwise be in the best interests of shareholders and may adversely affect\nthe Company’s financial condition and results of operations.\n\n \n\n**The Company has incurred and expects to continue to incur substantial\ntransaction-related costs in connection with the Merger.**\n\n** **\n\nThe Company has incurred, and expects to continue to incur, a number\nof non-recurring transaction-related costs associated with the Merger and the related transactions, which cannot be accurately estimated\nat this time. These fees and costs have been, and will continue to be, substantial. Non-recurring transaction costs include, but are\nnot limited to, fees paid to legal, financial, and other advisors, SEC filing costs, printing costs, and other regulatory expenses. Additional\nunanticipated costs may be incurred in the Company’s business, which may be higher than expected and could have a material adverse effect\non the Company’s financial condition and operating results.\n\n \n\n**The Company may fail to realize the anticipated benefits of the\nMerger.**\n\n** **\n\nThe success of the Merger will depend on the Company’s ability to\nachieve its business objectives following the closing, including successfully integrating MBody AI’s business and operations, retaining\nkey personnel, maintaining and expanding customer relationships, and raising the necessary capital to fund operations. The integration\nof MBody AI’s business involves a number of risks, including difficulties in combining operations and personnel, the potential disruption\nof each company’s ongoing business, the possible inability to maintain uniform standards, controls, policies, and procedures, and unanticipated\nexpenses and liabilities. If the Company is not able to achieve these objectives, the anticipated benefits of the Merger may not be realized\nfully, may take longer to realize than expected, or may not be realized at all.\n\n \n\n8\n\n \n\n \n\n**MBody AI has a limited operating history and an evolving business\nmodel, which makes it difficult to evaluate its prospects and may increase the risk that the Merger will not achieve its objectives.**\n\n** **\n\nMBody AI was incorporated in October 2024 and has a limited operating\nhistory. MBody AI’s business model is still evolving and its future success depends on, among other things, its ability to develop and\ncommercialize its robotics and artificial intelligence platform, attract and retain customers, and scale its operations. There can be\nno assurance that MBody AI’s business strategy will be successful or that its technology and services will achieve broad market acceptance.\nThe Company has limited historical financial data on which to base its evaluation of MBody AI’s prospects, and MBody AI’s limited operating\nhistory makes it difficult to predict future performance. If MBody AI’s business does not develop as expected, the Company may not realize\nthe anticipated benefits of the Merger and the Company’s business, financial condition, and results of operations could be materially\nadversely affected.\n\n \n\n**The Company may become involved in securities litigation or shareholder\nderivative litigation in connection with the Merger, and this could divert the attention of management and harm the Company’s business.**\n\n** **\n\nSecurities litigation or shareholder derivative litigation frequently\nfollows the announcement of certain significant business transactions. The Company may become involved in this type of litigation in\nconnection with the Merger and is currently involved in shareholder derivative litigation relating to the Apollo BCA. Litigation often\nis expensive and diverts management’s attention and resources, which could adversely affect the business of the Company.\n\n \n\n**We are substantially dependent on our remaining key employees to\nfacilitate the consummation of the Merger and the transition of the Company’s business.**\n\n** **\n\nAs a result of our cash conservation activities, we maintain a significantly\nreduced workforce. Our ability to successfully complete the Merger and integrate with MBody AI’s business operations depends in large\npart on our ability to retain certain key personnel. Despite our efforts to retain these employees, one or more may terminate their employment\non short notice. The loss of the services of any of these employees could potentially harm our ability to complete the Merger, run our\nday-to-day business operations, and fulfill our reporting obligations as a public company.\n\n \n\n**If the Merger is not completed, the Company will require significant\nadditional funding in order to continue operations, and if additional capital is not available, the Company may have to cease operations.**\n\n** **\n\nThe Merger was approved by the Company’s shareholders on November\n14, 2025. The consummation of the Merger remains subject to the satisfaction of certain customary closing conditions. There can be no\nassurance that these conditions will be satisfied on a timely basis, if at all. If the Merger is not completed for any reason, the Company\nwill need to evaluate its strategic alternatives and will require significant additional funding in order to continue its operations.\nThe Company previously entered into the Keystone BCA in August 2023, which was terminated in December 2023 after failing to receive the\nrequisite shareholder approval, and the Apollo BCA in March 2024, which will be subsequently terminated upon closing of the Merger. The\nCompany has incurred significant costs in connection with each of these transactions. A failure to complete the Merger would further\ndeplete the Company’s limited resources. In addition, if the Merger Agreement is terminated under certain circumstances, the Company\nmay be required to pay MBody AI a termination fee of up to $2.5 million. If adequate additional financing on acceptable terms is not\navailable, the Company’s ability to continue to support its business growth and to respond to business challenges could be significantly\nlimited, and the Company may have to curtail or cease operations.\n\n \n\n9\n\n \n\n \n\n**The termination of the Apollo BCA is contingent on the closing\nof the Merger, and if the Merger is not completed, the Apollo BCA an the related loan agreements will remain in effect.**\n\n** **\n\nPursuant to the terms\nof the Merger Agreement and the BCA Termination Agreement, at the effective time of the closing of the Merger, the Apollo BCA will be terminated by mutual consent of\nthe parties such that no termination fee will be due to Apollo or the will remain in effect. In such event, the Company would need\nto evaluate its options with respect to the Apollo BCA, which could include pursuing the transactions contemplated thereby,\nnegotiating a termination, or taking other actions, any of which could require the expenditure of additional resources and\nmanagement attention. There can be no assurance that the resolution of the Apollo BCA on terms favorable to the Company would be\nachieved outside the context of the Merger.\n\n  \n\n**Risks Related to MBody AI’s Business\nand Operations**\n\n** **\n\n**MBody AI has a limited operating history\nand an evolving business model, which makes it difficult to evaluate its future prospects.**\n\n** **\n\nMBody AI was incorporated\nin October 2024 and has a limited operating history as an embedded AI software and service company. As a result, there is limited historical\ninformation upon which investors can evaluate its business, operating results, or future prospects. MBody AI’s business model,\ntechnology platform, and go-to-market strategy continue to evolve, and there can be no assurance that its current approach will result\nin sustainable growth or profitability.\n\n \n\n**MBody AI currently relies on a limited\nnumber of customers, and the loss or reduction of business from any customer could materially adversely affect its results of operations.**\n\n** **\n\nMBody AI currently derives\na significant portion of its revenue from a small number of enterprise customers. While certain customer arrangements have multi-year\nterms, some customer agreements may be terminable under certain circumstances. The loss of a customer, a reduction in deployment scope,\ndelays in implementation, or a failure to expand existing deployments could materially and adversely affect MBody AI’s revenue,\noperating results, and business prospects.\n\n \n\n**MBody AI’s platform is deployed through\na phased and evolving feature set, which may affect the timing and scope of customer adoption.**\n\n** **\n\nMBody AI’s platform\nis deployed through a staged rollout of features, with certain capabilities delivered incrementally or provided to customers through\nasynchronous analysis and reporting rather than fully integrated real-time operation. While this approach is intended to support ongoing\nrefinement and optimization of the platform, there can be no assurance that all planned features will be completed on schedule, fully\nintegrated, or deliver the anticipated operational benefits. Delays in development, integration challenges, or performance limitations\ncould affect customer satisfaction, the pace of deployment expansion, or the renewal of customer arrangements. MBody AI relies in part\non asynchronous deployment, data collection, and analysis, which in certain circumstances may limit customer adoption, expansion, or\nperceived value of the platform.\n\n \n\n**MBody AI’s operations depend on third-party\nvendors, deployment partners, and hardware suppliers.**\n\n** **\n\nMBody AI does not manufacture\nrobots or autonomous hardware and relies on third-party vendors, integrators, and partners for hardware procurement, deployment, financing,\nand maintenance. This comprehensive service model involves customized deployments and coordination with customer personnel. As a result,\nMBody AI’s operations are subject to several material risks related to these third-party dependencies:\n\n \n\n*Procurement and Inventory\nRisk:* MBody AI is responsible for the procurement of third-party hardware to fulfill turnkey customer orders. Any failure by its\nsuppliers to deliver units on schedule, in sufficient quantities, or at anticipated price points could delay customer implementations,\nincrease deployment costs, or impair our ability to meet its revenue targets.\n\n \n\n10\n\n \n\n \n\n*Integration and Technical\nCompatibility:* MBody AI’s proprietary AI Orchestrator™ must integrate with various types of third-party hardware to deliver\na “unified command layer”. Disruptions in technical relationships, changes to Original Equipment Manufacturer (OEM) firmware,\nor lack of access to critical APIs could cause service failures, limit platform functionality, or hinder its ability to coordinate heterogeneous\nrobot fleets.\n\n \n\n*Geopolitical and Supply\nChain Sensitivity:* Certain components or systems may be sourced from vendors located outside the United States, including in jurisdictions\nsubject to evolving trade policies, export controls, or geopolitical tensions. These factors could increase MBody AI’s deployment\ncosts, compress hardware margins, or result in supply chain delays that materially adversely affect its results of operations.\n\n \n\n*Dependence on Financing\nand Maintenance Partners:* MBody AI’s business involves complex implementation and ongoing operational support. MBody AI relies\non third-party partners for hardware, parts and software updates. Any failure by these partners to perform could result in increased\ncosts, contractual disputes, reputational harm, or reduced demand for MBody AI’s offerings causing a material adverse effect on\nits business.\n\n \n\n**MBody AI’s business involves complex\nimplementation and service delivery, which may expose it to operational risks.**\n\n** **\n\nMBody AI’s services\noften involve customized deployments across customer facilities, coordination with customer personnel, and ongoing operational support.\nThese activities may involve unforeseen technical, logistical, or operational challenges. Failure to effectively manage deployments,\nservices, or customer expectations could result in increased costs, contractual disputes, reputational harm, or reduced demand for MBody\nAI’s offerings.\n\n \n\n**Customer Adoption, ROI, and Budget Cycles\ncould adversely affect MBody AI’s revenue, growth, and operating results.**\n\n** **\n\nCustomer adoption, expansion,\nand renewal of MBody AI’s platform may depend on customers achieving expected operational benefits and on customer budget cycles.\nMBody AI’s customers may evaluate continued or expanded deployment of the Company’s platform based on perceived operational\nsavings, efficiency improvements, or return on investment. These evaluations may be influenced by customer-specific factors, including\nbudget cycles, capital allocation priorities, labor conditions, macroeconomic factors, and internal approval processes. Even if customers\nare satisfied with MBody AI’s platform, delays in expansion decisions, reductions in deployment scope, or changes in customer priorities\ncould adversely affect MBody AI’s revenue, growth, and operating results.\n\n \n\n**Dependence on Customer Facilities and Operating\nEnvironments could delay deployments, increase costs, or affect the performance or scalability of MBody AI’s platform.**\n\n** **\n\nMBody AI’s deployments\ndepend on customer-controlled facilities and operating environments, which are outside of its control. MBody AI’s platform is deployed\nwithin customer facilities and physical environments that are owned and operated by customers. Deployment timelines, system performance,\nand operational outcomes may be affected by factors outside MBody AI’s control, including facility layout, network infrastructure,\nphysical access constraints, operational schedules, and coordination with customer personnel. Limitations or changes in customer-controlled\nenvironments could delay deployments, increase costs, or affect the performance or scalability of MBody AI’s platform.\n\n \n\n**Integration with Third-Party Software and\nSystems could increase deployment costs, delay implementations, or reduce customer satisfaction.**\n\n** **\n\nMBody AI’s platform\nmay require integration with third-party software systems used by customers, which may present technical and operational challenges.\nCustomer deployments of MBody AI’s platform may require integration with third-party software systems, including facility management,\nscheduling, or reporting systems. Such integrations may involve technical complexity, reliance on third-party interfaces or application\nprogramming interfaces, and coordination with customers or third-party vendors. Changes to third-party systems, integration delays, or\ncompatibility issues could increase deployment costs, delay implementations, or reduce customer satisfaction.\n\n \n\n11\n\n \n\n \n\n**MBody AI operates in regulated environments\nand may be subject to regulatory requirements that could increase costs or limit growth.**\n\n** **\n\nMBody AI’s customers\noperate in regulated industries, including hospitality, gaming, and potentially healthcare and data centers. In certain jurisdictions,\ndeployment of autonomous systems may require regulatory approvals, licenses, or compliance with industry-specific rules, including gaming\nor safety regulations. Regulatory requirements may change over time, differ by jurisdiction, or impose additional compliance costs, which\ncould adversely affect MBody AI’s ability to deploy its platform or expand into new markets.\n\n \n\n**MBody AI may face liability or compliance\nexposure related to the operation of autonomous systems.**\n\n** **\n\nAlthough MBody AI does not\nmanufacture hardware, it sells, procures, finances, and/or supports the deployment of third-party autonomous hardware in connection with\nits software platform. MBody AI’s software influences the operation and coordination of autonomous systems deployed in customer\nenvironments, and its involvement in hardware procurement, deployment, or ongoing services may increase its exposure to claims, investigations,\nor regulatory scrutiny related to system performance, safety incidents, or operational failures, whether or not caused by its software.\nSuch matters could result in litigation, regulatory action, reputational harm, or increased insurance, indemnification, or compliance\ncosts.\n\n \n\n**The regulatory landscape for artificial\nintelligence, robotics, and autonomous systems is evolving and may adversely affect its business.**\n\n** **\n\nLaws and regulations governing\nartificial intelligence, robotics, and autonomous systems are evolving in the United States and internationally. New or modified requirements\nrelated to safety, accountability, transparency, data use, or deployment of AI-enabled systems could impose additional compliance obligations,\nrestrict certain applications, or increase regulatory oversight. Because MBody AI’s platform influences the operation and coordination\nof autonomous systems deployed in physical environments, regulatory changes may require modifications to its technology, deployment practices,\nor business model, increase operating costs, delay deployments, or limit market opportunities. Failure to comply with applicable or future\nregulations could result in fines, penalties, litigation, or reputational harm, any of which could materially adversely affect its business,\nfinancial condition, and results of operations.\n\n \n\n**MBody AI has a history of operating losses\nand may not achieve or sustain profitability.**\n\n** **\n\nMBody AI has incurred operating\nlosses since inception and expects to continue to incur expenses as it grows its operations, develops its platform, and expands customer\ndeployments. Although MBody AI may achieve profitability in future periods, there can be no assurance that it will do so or that profitability,\nif achieved, will be sustainable.\n\n \n\n**MBody AI will require additional capital\nto execute its business plan, and such capital may not be available on acceptable terms.**\n\n** **\n\nMBody AI expects to require\nadditional financing to fund its operations, growth initiatives, and platform development. There can be no assurance that additional\ncapital will be available when needed, on acceptable terms, or at all. Failure to obtain additional financing could materially adversely\naffect MBody AI’s ability to continue operations or execute its business strategy.\n\n \n\n**Future financings may result in dilution\nand could adversely affect shareholders.**\n\n** **\n\nMBody AI may raise capital\nthrough equity issuances, convertible securities, debt financings, or other structured transactions. Such financings may result in significant\ndilution to existing shareholders, impose restrictive covenants, or grant preferential rights to new investors. Market conditions, stock\nprice volatility, and Nasdaq compliance considerations may further limit financing alternatives.\n\n \n\n**MBody AI operates in a rapidly evolving\nand competitive market.**\n\n** **\n\nThe markets for artificial\nintelligence, automation, and autonomous systems are rapidly evolving and highly competitive. New technologies, business models, and\ncompetitors may emerge that could reduce demand for MBody AI’s platform or render its offerings less competitive.\n\n \n\n12\n\n \n\n \n\n**MBody AI’s success depends on its\nability to attract and retain key personnel.**\n\n** **\n\nMBody AI’s future\nsuccess depends on the continued services of its management team and technical personnel. Competition for qualified employees is intense,\nand the loss of key personnel or inability to attract additional talent could materially adversely affect its business.\n\n \n\n**If the Merger does not close, the debt-for-equity exchange with\nApollo will not close, the Apollo BCA will remain in effect, and approximately $16.3 million of loans to Apollo may not be recoverable.**\n\n** **\n\nThe Company has made loans to Apollo in the aggregate principal amount\nof approximately **$16.3** million (the “Apollo Loans”). On June 30, 2025, the Company and Apollo entered\ninto an Exchange Agreement (the “Exchange Agreement”) providing for the Apollo Loans to be exchanged for common shares representing\na 7.5% equity interest in Apollo. Closing of the Exchange Agreement is conditioned on the closing of the Merger. If the Merger does not\nclose, the Exchange Agreement will not close, the Company will continue to hold the Apollo Loans as receivables, recovery is uncertain,\nand the Apollo BCA will remain in effect and may limit the Company’s flexibility to pursue alternative strategic transactions.\n\n \n\nThe Company recognized the exchange effective November 14, 2025 following\n98.01% shareholder approval of the Merger, based on management’s determination that the closing condition ceased to be substantive at\nthat date. As of December 31, 2025, the equity investment is carried at $6,525,000 under ASC 321, and a payable of approximately $1,400,000\nremains outstanding to Apollo. Legal closing of the Exchange Agreement has not occurred. If the Merger closes and the Exchange Agreement\ncloses, the Company will hold an illiquid minority interest in a private company with no governance rights and no readily determinable\nfair value, and there can be no assurance the Company will realize the carrying value, or any value, from the investment.\n\n \n\nRisks Related to Our Financial Position\n\n \n\nWe have a history of losses, may\nincur future losses and require additional funding in order to complete the development of our products and technology. If additional\ncapital is not available and we cease the development of our products and technology or are obligated to relinquish rights to our intellectual\nproperty, we may not ever achieve profitability and be forced to liquidate.\n\n \n\nWe are a clinical and development-stage medical\ndiagnostics company with a limited operating history, and our operations have consumed substantial amounts of cash. We have historically\nincurred net losses since we commenced operations in 2009. We incurred net income of $4.1 million in 2025, and net losses of $25.1 million\nin 2024, and $17.6 million in 2023, respectively. As of December 31, 2025, our accumulated deficit was $165.9 million. On March 21, 2023,\nwe announced that following our internal assessment of the clinical data collected from the calibration studies until such date, we determined\nthat the most recent efficacy results from our calibration studies did not meet the goal to proceed to the powered portion of the U.S.\npivotal study and, as such, the initiation of the second part of the U.S. pivotal study that was expected in mid-2023 was also postponed.\nOn June 6, 2023, we announced that after further review of additional data and interaction with the FDA on a revised pivotal study protocol\ntogether with the anticipated time and investment necessary to further develop the technology, we were reducing our workforce significantly\nto reduce cash burn, concentrating our resources on essential research activities, discontinuing our calibration studies, and evaluating\nand pursuing strategic options. As a result of our evaluation and pursuit of strategic options, on August 16, 2023, we entered into the\nKeystone BCA. At our 2023 annual general meeting of shareholders, such business combination transactions did not receive the requisite\nmajority required for approval under Section 320 of the Israeli Companies Law 5759-1999. On December 24, 2023, we received a notice on\nbehalf of Keystone, terminating the Keystone BCA in light of the results. On March 25, 2024, we entered into a business combination agreement\nwith Apollo. In May 2024, we reimbursed Apollo $3,808,815 pursuant to the provisions of the Apollo BCA. On September 4, 2025, the Company\nacquired certain assets relating to a Ghost Kitchen area representative business. On September 12, 2025, the Company entered into the\nMerger Agreement.\n\n \n\n13\n\n \n\n \n\nWe expect that we will need\nsubstantial amounts of cash resources in order to complete the development of the products and technology derived from our intellectual\nproperty so that we can find new or alternative ways to redeploy them into other existing or new products and technologies. We intend\nto use our limited cash resources to support these efforts, including through the Business Combination. See Item 5B “Operating\nand Financial Review and Prospects - Liquidity and Capital Resources - Sources of Liquidity.”\n\n  \n\nMoreover, we may seek additional\nfunding through equity offerings, debt financings, collaborations, licensing arrangements or any other means. If we raise additional\nfunds by issuing equity securities, you may experience significant dilution of your ownership interest, and the newly issued securities\nmay have rights senior to those of the holders of our ordinary shares. In addition, the issuance of additional equity securities by us,\nor the possibility of such issuance, may cause the market price of our ordinary shares to decline. Alternatively, if we raise funds by\nobtaining loans from third parties, the terms of those financing arrangements may include negative covenants, may require us to grant\na lender a security interest in our assets or may include other restrictions on our business that could impair our operational flexibility,\nand could also result in high interest expense. If we raise additional funds through collaborations, licensing arrangements or other\nstructured financing transactions, we may relinquish rights to certain of our technologies or products, grant security interests in our\nassets or grant licenses to third parties on terms that are unfavorable to us.\n\n \n\nSecuring additional financing\nmay divert our management’s attention from its day-to-day activities, which may adversely further delay and affect our ability\nto complete the development of our products and technology and such additional financing may not be available to us on a timely basis\nor on terms acceptable to us, or at all. Accordingly, the extent of our future operating losses, the timing or even the potential of\nbecoming profitable are highly uncertain, and we may never achieve or sustain profitability. Any of these factors could materially and\nadversely affect our business, financial condition and results of operations.\n\n** **\n\n**The issuance of ordinary shares in connection\nwith the Merger will substantially dilute the relative voting power of shareholders of Check-Cap prior to the closing of the Merger,\nand, as a result, such shareholders prior to the closing of the Merger will exercise substantially less influence over the management\nof the Company following the consummation of the Merger.**\n\n \n\nFollowing the closing of\nthe Merger, shareholders of Check-Cap prior to the closing of the Merger (the “Previous Shareholders”) are expected to own\napproximately 10% of the Company’s outstanding share capital, on a fully diluted and as-converted basis, and the MBody AI shareholders\nare expected to own approximately 90% of the Company’s outstanding share capital, on a fully-diluted and as-converted basis. Accordingly,\nthe issuance of ordinary shares to MBody AI’s shareholders pursuant to the Merger Agreement will significantly reduce the relative\nvoting power of each ordinary share held by the Previous Shareholders. Consequently, the Previous Shareholders will exercise substantially\nless influence over the management and policies of the Company than they did prior to the consummation of the Merger.\n\n \n\n**The Company has incurred and expects to\ncontinue to incur substantial transaction-related costs in connection with the Merger.**\n\n \n\nThe Company has incurred,\nand expects to continue to incur, a number of non-recurring transaction-related costs associated with the Merger and the related transactions,\nwhich cannot be accurately estimated at this time. These fees and costs have been, and will continue to be, substantial. Non-recurring\ntransaction costs include, but are not limited to, fees paid to legal and other advisors, SEC filing costs and printing costs. Additional\nunanticipated costs may be incurred in the Company’s business, which may be higher than expected and could have a material adverse\neffect on the Company’s financial condition and operating results.\n\n \n\n14\n\n \n\n \n\n**The Company may fail to realize the anticipated\nbenefits of the Merger.**\n\n \n\nThe success of the Merger\nand the related transactions will depend on the Company’s ability to achieve its business objectives and raise the necessary capital\nto fund its operations. If the Company is not able to achieve these objectives, the anticipated benefits of the Merger and the related\ntransactions may not be realized fully, may take longer to realize than expected, or may not be realized at all.\n\n \n\n**The Company may become involved in securities\nlitigation or shareholder derivative litigation in connection with the Merger, and this could divert the attention of management and\nharm the Company’s business.**\n\n \n\nSecurities litigation or\nshareholder derivative litigation frequently follows the announcement of certain significant business transactions. The Company may become\ninvolved in this type of litigation in connection with the Merger and is currently involved in shareholder derivative litigation relating\nto the Apollo BCA. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect\nthe business of the Company.\n\n \n\n**If the Merger is not completed, the Company\nwill require significant additional funding in order to continue operations, and if additional capital is not available, the Company\nmay have to cease operations.**\n\n \n\nThe Merger was approved\nby the Company’s shareholders on November 14, 2025. The consummation of the Merger remains subject to the satisfaction of certain\ncustomary closing conditions. There can be no assurance that these conditions will be satisfied on a timely basis, if at all. If the\nMerger is not completed for any reason, the Company will need to evaluate its strategic alternatives and will require significant additional\nfunding in order to continue its operations. The Company previously entered into a business combination agreement with Apollo in March\n2024, and the Company incurred significant costs in connection with that transaction, including the reimbursement of approximately $3.8\nmillion to Apollo. A failure to complete the Merger would further deplete the Company’s limited resources. If adequate additional\nfinancing on acceptable terms is not available, the Company’s ability to continue to support its business growth and to respond\nto business challenges could be significantly limited, and the Company may have to curtail or cease operations.\n\n \n\n**Our management and\nboard of directors have concluded that a substantial doubt is deemed to exist concerning our ability to continue as a going concern**.\n\n \n\nAccounting standards require\nmanagement to assess our ability to continue as a going concern for one year after the date the financial statements are issued. As discussed\nin Note 2 to our consolidated financial statements, conditions exist that raise substantial doubt about our ability to continue as a\ngoing concern for the one-year period from the date these financial statements are issued. Management’s plans to address these conditions\n— principally the pending Merger and the ARC ELOC Facility — depend on external approvals and market conditions outside our\nsole control and are not, under ASC 205-40, probable of alleviating that doubt. These conditions could materially adversely affect the\nmarket price of our ordinary shares, our access to additional capital, our ability to complete the Merger, and our relationships with\ncounterparties and employees. If our plans do not materialize, we may be required to wind down operations or liquidate our assets, and\nthe values realized could be materially less than those reflected in our consolidated financial statements.\n\n \n\n**Risks Related to the ARC ELOC Facility**\n\n** **\n\n**It is not possible to predict the actual\nnumber of shares we will sell under the Purchase Agreement to ARC, or the actual gross proceeds resulting from those sales.**\n\n** **\n\nOn December 17, 2025, we\nentered into the Purchase Agreement with ARC, pursuant to which ARC has committed to purchase up to $30.0 million of our ordinary shares,\nsubject to certain limitations and conditions set forth in the Purchase Agreement. The ordinary shares that may be issued under the Purchase\nAgreement may be sold by us to the ARC at our discretion from time to time over a three-year period commencing on the date of the Purchase\nAgreement. We generally have the right to control the timing and amount of any sales of our ordinary shares to ARC under the Purchase\nAgreement. Sales of our ordinary shares, if any, to ARC under the Purchase Agreement will depend upon market conditions and other factors.\nWe may ultimately decide to sell to ARC all, some or none of the ordinary shares that may be available for us to sell to ARC pursuant\nto the Purchase Agreement. Because the purchase price per share to be paid by ARC for the ordinary shares that we may elect to sell to\nARC under the Purchase Agreement, if any, will fluctuate based on the market prices of ordinary shares during the applicable purchase\nvaluation period for each purchase made pursuant to the Purchase Agreement, it is not possible for us to predict, as of the date of this\nannual report and prior to any such sales, the total number of ordinary shares that we will sell to ARC under the Purchase Agreement,\nthe purchase price per share that ARC will pay for shares purchased from us under the Purchase Agreement, or the aggregate gross proceeds\nthat we will receive from those purchases by ARC under the Purchase Agreement.\n\n \n\n15\n\n \n\n \n\n**Investors who buy shares at different times\nwill likely pay different prices.**\n\n** **\n\nPursuant to the Purchase\nAgreement, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to ARC. If and when\nwe do elect to sell ordinary shares to ARC pursuant to the Purchase Agreement, ARC may resell, some or none of such shares at any time\nor from time to time in its discretion and at different prices. As a result, investors who purchase shares from ARC at different times\nwill likely pay different prices for those shares, and therefore, may experience different levels of dilution and in some cases substantial\ndilution and different outcomes in their investment results. In addition, investors may experience a decline in the value of the shares\nthey purchase from ARC as a result of future sales made by us to ARC at prices lower than the prices such investors paid for their shares.\n\n \n\n**We may require additional financing to\nsustain our operations, and such financing may not be available on acceptable terms, or at all.**\n\n** **\n\nThe extent to which we rely\non ARC as a source of funding will depend on a number of factors, including the prevailing market price of our ordinary shares, our ability\nto meet the conditions necessary to deliver Advance Notices (as defined in the Purchase Agreement) under the Purchase Agreement and the\nextent to which we are able to secure funding from other sources. Regardless of the amount of funds we ultimately raise under the Purchase\nAgreement, if any, we may continue to seek other sources of funding. Even if we were to sell to ARC the total commitment of $30.0 million\nunder the Purchase Agreement, we may still need additional capital to fully implement our business plan. There can be no assurance that\nadditional financing will be available on acceptable terms, or at all, and any inability to obtain such financing could materially adversely\naffect our business, financial condition, and results of operations.\n\n \n\n**Future sales and issuances of our ordinary\nshares or other securities might result in significant dilution and could cause the price of our ordinary shares to decline.**\n\n** **\n\nTo raise capital, including\npursuant to the Purchase Agreement, we may sell ordinary shares, convertible securities or other equity securities in one or more transactions\nat prices and in a manner we determine from time to time. We may sell shares or other securities in any other offering at a price per\nshare that is less than the price per share paid by investors, and investors purchasing shares or other securities in the future could\nhave rights superior to existing shareholders. The price per share at which we sell additional ordinary shares, or securities convertible\nor exchangeable into ordinary shares, in future transactions may be higher or lower than the price per share previously paid by investors.\nAny sales of additional shares will dilute our shareholders. Sales of a substantial number of ordinary shares in the public market or\nthe perception that these sales might occur could depress the market price of our ordinary shares and could impair our ability to raise\ncapital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market\nprice of our ordinary shares. In addition, the sale of substantial numbers of our ordinary shares could adversely impact their price.\n\n ** **\n\n**We undertake to seek shareholder approval\nto re-designate our ordinary shares as no-par value, and there can be no assurance that such re-designation will be completed.**\n\n** **\n\nThe ordinary shares currently\nhave a nominal value of NIS 48.0 per share. Our board of directors undertakes that it will not seek to make calls on or forfeit the shares\noffered at any time if the nominal amount per share has not been paid. We also undertake to include on the agenda for our next annual\ngeneral meeting of shareholders a proposal to amend our amended articles of association to re-designate the ordinary shares as no-par\nvalue shares, subject to applicable law and shareholder approval. Any delay or failure to complete the re-designation could limit our\nflexibility to issue ordinary shares, including under the Purchase Agreement, and could adversely affect our ability to raise capital.\n\n \n\n**Risks Related to the Acquisition of Ghost Kitchen\nFranchise Rights in New Jersey**\n\n** **\n\n**The Company may not realize the anticipated\nbenefits of the acquisition of Ghost Kitchen franchise rights in New Jersey, including generating revenue from the acquired Ghost Kitchen\narea representative operations.**\n\n** **\n\nOn September 4, 2025, the\nCompany entered into that certain  Asset Purchase Agreement with Parea LLC (the “Parea APA”) to acquire certain assets\nrelating to a Ghost Kitchen area representative business for the State of New Jersey. The acquisition is intended to provide the Company\nwith a source of near-term revenue from franchise area representative operations. However, there can be no assurance that the Company\nwill successfully integrate the acquired assets, generate revenue from the Ghost Kitchen operations, or realize the anticipated benefits\nof this acquisition. The Company’s ability to generate revenue from the acquired operations will depend on a number of factors,\nincluding the performance of the Ghost Kitchen franchise system, the Company’s ability to manage area representative operations,\nand prevailing market conditions in the New Jersey territory. If the Company is unable to generate expected revenue or if the Ghost Kitchen\nfranchise system experiences operational difficulties, the acquisition may not contribute to the Company’s financial performance\nas anticipated.\n\n \n\n16\n\n \n\n \n\n**The Company issued 1,169,596 ordinary shares\nas consideration for the Parea APA, and the eventual availability of those shares for resale in the public market could adversely affect\nthe price of our ordinary shares.**\n\n** **\n\nIn connection with the Parea\nAPA, the Company issued 1,169,596 Ordinary Shares as consideration to the sellers. While these shares are subject to a two-year lock-up\nperiod and a two-year voting agreement with the Company, upon expiration of the lock-up period the shares will become available for resale\nin the public market. The resale of a significant number of these shares, or the perception that such resales may occur, could adversely\naffect the market price of our ordinary shares. In addition, the issuance of the consideration shares resulted in dilution to existing\nshareholders.\n\n \n\n**Risks Related to Our Historical Business Operations**\n\n** **\n\n**Although we received FDA approval of our\nIDE (including our IDE amended application) for our U.S. pivotal study, the most recent efficacy results from our studies did not meet\nthe goal to proceed to the powered portion of the U.S. pivotal study, as such we cannot provide any assurance that we will ever be able\nto redesign such study or redeploy our technology into other potentially viable products.**\n\n \n\nWe received FDA approval\nof our IDE and our IDE amended application for our planned U.S. pivotal study. While we initiated the first part of the U.S. pivotal\nstudy in May 2022, the initiation of the powered portion of the U.S. pivotal study was dependent upon successful completion of the\ncalibration portion of the U.S. pivotal study. On March 21, 2023, we announced that following our internal assessment of the clinical\ndata collected from the calibration studies until such date, we determined that the most recent efficacy results from our calibration\nstudies did not meet the goal to proceed to the powered portion of the U.S. pivotal study and, as such, the initiation of the second\npart of the U.S. pivotal study that was expected in mid-2023 was also postponed. On June 6, 2023, we announced that after further\nreview of additional data and interaction with the FDA on a revised pivotal study protocol together with the anticipated time and investment\nnecessary to further develop the technology, we were reducing our workforce significantly to reduce cash burn, concentrating our resources\non essential research activities, discontinuing our calibration studies, and evaluating and pursuing strategic options.\n\n  \n\nIn light of such developments,\nwe cannot provide any timeline or assurance of when, if ever, or whether we will be able to compile an IDE supplement for submission\nto the FDA. There can be no assurance that the FDA would approve any such an IDE supplement or that we will be ever able to commence\nor complete the powered portion of the U.S. pivotal study. Furthermore, even if we were able to redesign the study and submit such IDE\nsupplement, the FDA or other regulatory authority may require us to complete additional studies or satisfy other FDA or other regulatory\nrequests, which would further delay any further U.S. pivotal studies.\n\n \n\nAs a result of the foregoing,\nour ability to redesign our U.S. studies, complete the development of our products and technology for the redeployment into other potentially\nviable products is inherently uncertain, and may take significant time to complete, if any such options are ever completed at all.\n\n** **\n\n17\n\n \n\n** **\n\n**Clinical failure can occur at any stage\nof clinical development and we may not succeed in completing the development of our product. Any product we advance through clinical\ntrials may require further clinical validation and may not have favorable results in later clinical trials or receive regulatory approval.**\n\n \n\nClinical failure can occur\nat any stage of clinical development, and we may not succeed in completing the development of our product. To date, we have performed\nclinical studies with iterative versions of both scanning and non-scanning capsules, in conjunction with iterative versions of the C-Scan\nTrack, C-Scan View application. The C-Scan system utilizes ultra-low-dose X- rays to scan the inner lining of the colon for precancerous\npolyps, and other structural abnormalities. In addition, our clinical trials to date were conducted under differing protocols, while\nusing specific inclusion criteria and enrolling both average risk and high-risk patients (e.g., “enriched population”). Therefore,\nour ability to identify potential problems and/or inefficiencies concerning current and future versions of C-Scan in advance of its use\nin general and expanded groups of average risk patients has been limited and we cannot assure you that the actual clinical performance\nwill be satisfactory to support proposed indications, obtain regulatory approvals and gain clinical acceptance and adoption, or that\nits use will not result in unanticipated complications. Although we continuously collect additional clinical data to improve reliability\nof our products and technology, we cannot provide any assurance that such studies will yield favorable results. For example, we conducted\na study in Israel for which we initially enrolled both average risk and high-risk patients and subsequently shifted to enrollment of\nonly average risk patients commencing in May 2022. The purpose of the additional study was to improve calibration of the C-Scan\nsystem, in parallel to conducting the first stage of the U.S. pivotal study that was initiated in May 2022. As part of the approved\namended IDE, we designed the U.S. pivotal study to include two stages: the first stage, aimed to support our C-Scan calibration among\nthe average risk population, which is intended to include up to 200 patients in the U.S.; and the second stage, which was intended to\ninclude up to 800 subjects (400 in the U.S. and 400 in Israel), aimed to compare the performance of C-Scan to traditional colonoscopy\nthrough a statistically powered and randomized study. The initiation of the powered portion of the U.S. pivotal study was dependent upon\nsuccessful completion of the calibration portion of the U.S. pivotal study. Because we determined that the efficacy results from our\ncalibration studies did not meet the goal to proceed to the powered portion of the U.S. pivotal study and discontinued further studies,\nwe reduced our workforce to preserve and concentrate our resources on essential research activities and evaluated and pursued strategic\noptions.\n\n \n\nFurthermore, results from\nlaboratory, non-clinical and completed clinical studies, as well as results from any ongoing clinical trials may not always be indicative\nof final clinical results. As such, any product we advance through clinical trials may require further clinical validation and may not\nhave favorable results in later clinical trials or receive regulatory approval. In addition, the results of clinical trials are subject\nto human analyses and interpretation of the data accumulated, which could be affected by various errors due to, among others, lack of\nsufficient clinical experience with C-Scan, assumptions used in the statistical analysis of results, interpretation errors in the analysis\nof the clinical trials results, including the reconstructed images by C-Scan, or due to uncertainty in the actual efficacy of C-Scan\nin its current clinical stage. Therefore, the safety and efficacy of C-Scan and the clinical results to date will require further independent\nprofessional validation and require further clinical study. If C-Scan does not function as expected over time, we may not be able to\ndevelop C-Scan at the rate or to the stage we desire, we could be subject to liability claims, our reputation may be harmed, C-Scan may\nnot achieve regulatory clearances, and C-Scan may not be widely adopted by healthcare providers and patients.\n\n \n\n18\n\n \n\n \n\n**We may face a number of challenges with\nrespect to our commercialization efforts and may not succeed in the commercialization of our product, obtain required regulatory approvals\nor manufacture commercial quantities of C-Scan at an acceptable cost to enable us to generate significant revenues.**\n\n \n\nSince commencing our operations,\nwe focused on the research and development and limited clinical trials of C-Scan and then reduced investment in research and development\nactivities in anticipation of the initiation of our strategic development plan. Although we previously received a CE-certificate from\na notified body according to the EU Regulation 2017/745 on Medical Devices for the marketing and sale of C-Scan in the European Union,\nvalid until December 1, 2026, we were unable to commence marketing and sales in the European Union and, to extent we are able to\nredesign any study protocols or C-Scan, additional or new regulatory approval in Member States of the European Union, for instance from\nthe German Federal Office for Radiation Protection (Bundesamt für Strahlenschutz, BfS) may be required before we are able to launch\nany such redesigned studies or deploy redesigned products or technology. Furthermore, we may require additional regulatory certifications,\nregistrations and/or approvals from regulatory authorities in European jurisdictions outside the European Union, including with the UK\nMedicines and Healthcare Products Regulatory Agency and the Swiss National Cooperative for the Disposal of Radioactive Waste (Nagra).\nIn Israel, we received approval from the Medical Devices and Accessories Division of the Israeli Ministry of Health, or AMAR, for the\nmarketing and sale of C-Scan in Israel, which was valid until December 31, 2024. We have not received approvals in other jurisdictions,\nincluding the United States, and there can be no assurance that we will be able to receive regulatory approvals to commence marketing\nand sales for C-Scan in the foreseeable future or ever. Our ability to generate revenues and achieve profitability depends on our ability\nto successfully complete the development of our C-Scan product, demonstrate sufficient clinical evidence, obtain required regulatory\napprovals and commercial licenses, and manufacture commercial quantities of C-Scan at an acceptable cost to enable us to generate significant\nrevenues.\n\n \n\nThe future success of our\nbusiness cannot be determined at this time, and, in light of recent developments, we do not anticipate generating any revenues from product\nsales for the foreseeable future. In addition, we have no experience in commercializing C-Scan, so even if we are able to redesign such\nclinical studies, we may face a number of challenges with respect to our commercialization efforts, including, among others, that:\n\n \n\n \n●\nwe may not have adequate\nfinancial or other resources to complete the development of our product, demonstrate adequate clinical results, attain required regulatory\napprovals and licensures, obtain adequate manufacturing and capacity and begin the commercialization efforts for C-Scan;\n\n \n\n \n●\nwe may fail to obtain or\nmaintain required regulatory approvals and licensures for C-Scan in our target markets or may face adverse regulatory or legal actions\nrelating to our system even if regulatory approval is obtained;\n\n \n\n \n●\nwe may not demonstrate\nadequate clinical safety and clinical effectiveness results from our current or future versions of C-Scan, to support regulatory\nbody approval or market acceptance and adoption;\n\n \n\n \n●\nwe may face ongoing limitations\nimposed by the Nuclear Regulatory Commission, or NRC, or other nuclear regulatory commissions in jurisdictions in which we intend\nto commercialize C-Scan in relation to the disposal of our C-Scan Cap in the sanitary system, such as requiring patients to retrieve\nour C-Scan Cap after use, which could impact engagement with clinical sites and enrollment pace in our clinical studies and make\nC-Scan less attractive;\n\n \n\n \n●\nwe may not be able to maintain\nan adequate supply chain due to reliance on single or sole suppliers for critical components and scale up the manufacture of C-Scan\nto commercial quantities at an adequate quality or at an acceptable cost;\n\n \n\n19\n\n \n\n \n\n \n●\nwe may not be able to establish\nadequate sales, marketing and distribution channels;\n\n \n\n \n●\nhealthcare professionals\nand patients may not accept C-Scan;\n\n \n\n \n●\nwe may not be aware of\npossible complications from the continued use of C-Scan because we have limited clinical experience with respect to the actual use\nof C-Scan;\n\n \n\n \n●\nother technological breakthroughs\nin colorectal cancer, or CRC, screening, treatment and prevention may reduce the demand for C-Scan;\n\n \n\n \n●\nchanges in the market for\nCRC screening, new alliances between existing market participants and the entrance of new market participants may interfere with\nour market penetration efforts;\n\n \n\n \n●\ngovernment and private\nthird-party payors may not agree to provide coding, coverage and payment adequate to reimburse healthcare providers and patients\nfor any or all of the purchase price in conjunction with clinical effectiveness of C-Scan, which may adversely affect healthcare\nproviders’ and patients’ willingness to purchase C-Scan;\n\n \n\n \n●\nuncertainty as to market\ndemand may result in inefficient pricing of C-Scan; and\n\n \n\n \n●\nwe may not be able to adequately\nprotect our intellectual property or may face third-party claims of intellectual property infringement.\n\n \n\nIf we determine to resume\nthe development of C-Scan and are unable to meet any one or more of these challenges successfully, our ability to complete the development\nof and effectively commercialize C-Scan could be limited, which in turn could have a material adverse effect on our business, financial\ncondition and results of operations.\n\n** **\n\n**We have limited manufacturing experience\nand currently have no manufacturing capabilities. If we resume development of C-Scan and are unable to scale up our manufacturing operations\nto develop our products, our growth could be limited and our business, financial condition and results of operations could be materially\nadversely affected.**\n\n \n\nWe currently have limited\nresources, facilities and experience in manufacturing. Following the determination to discontinue our clinical studies and conserve our\nresources, on September 8, 2023, we terminated our sub-lease agreement and service agreement with the sole supplier of the X-ray source\nused in C-Scan pursuant to which we leased approximately 70 square meters of laboratory production space at the supplier premises and\nindependently produced the X-ray source using our own production employees. See “*Information on Our Company - Business - Manufacturing\nand Suppliers.*”\n\n \n\nWe have in the past, and\nwe may in the future, continue to face technical challenges to obtain, increase or adjust manufacturing capacity, including, among others,\nequipment design and automation, material procurement and lower than expected yields and increased scrap costs, as well as challenges\nrelated to maintaining quality control and assurance standards, manufacturing commercial quantities of products at an acceptable cost\nand logistics associated with the handling of radioactive materials, such as was the case in our C-Scan Cap, which have resulted in and\ncould result in delays in our clinical trial and commercialization plans and lost revenue. We may be unable to establish or maintain\nreliable, high-volume manufacturing capacity. Even if we can establish and maintain this capacity, the cost of doing so may increase\nthe cost of our products and reduce our ability to compete successfully. If we resume development of C-Scan and are unable to scale up\nour manufacturing capabilities to meet market demand, or to achieve adequate product cost, our growth could be limited and our business,\nfinancial condition and results of operations could be materially adversely affected.\n\n \n\n20\n\n \n\n \n\nIn addition, we received\nand may receive in the future grants from the Government of the State of Israel through the Innovation Authority of the Ministry of Economy\nand Industry (the “IIA”) for the financing of a portion of our research and development expenditures and to support the funding\nof our transition from research and development to manufacturing, pursuant to the Encouragement of Research, Development and Technological\nInnovation in the Industry Law 5744-1984 (formerly known as the Encouragement of Industrial Research and Development Law 5744-1984),\nor the Innovation Law. The terms of the IIA grants subject us to certain restrictions relating to (among other things) the transfer of\nthe manufacturing of IIA-funded products outside Israel. See “*Risk Factors - Risks Related to Our Operations in Israel - Pursuant\nto the terms of the Israeli government grants we received for research and development expenditures, we are obligated to pay certain\nroyalties on our revenues to the Israeli government. In addition, the terms of Israeli government grants we received require us to satisfy\nspecified conditions and to make additional payments in addition to repayment of the grants upon certain events*.” Such restrictions\nmay impair our ability to outsource or transfer development or manufacturing activities with respect to any product or technology outside\nof Israel.\n\n** **\n\n**Our reliance on sole or single source suppliers\ncould harm our ability to conduct clinical trials and meet demand for our product in a timely manner or within budget.**\n\n \n\nWe have historically depended\non sole or single source suppliers for some of the components and materials necessary for the production of C-Scan. If we determine to\nresume the development of C-Scan and are required to change the supplier of any of these key components, there may be a significant delay\nin locating a suitable alternative manufacturer. In addition, we may be required to verify that the new manufacturer maintains facilities\nand procedures that comply with FDA and other applicable quality standards and with all applicable regulations and guidelines. To the\nextent we ever are able to redesign the clinical studies for submission to the FDA or other regulatory authorities or redeploy our technology\ninto other potentially viable products, we will be required to find new suppliers, which we may not be able to do in a timely manner.\nThe delays associated with the introduction of a new manufacturer for certain key components or new suppliers for certain materials,\ncould delay our ability to manufacture any redesigned products in a timely manner or within budget. Furthermore, in the event that the\nmanufacturer of a key component of any our products ceases operations or otherwise ceases to do business with us, we may not have access\nto the information necessary to enable an alternative supplier to manufacture the component. The occurrence of any of these events could\nharm our ability to complete the development of our products and meet demand in a timely manner or within budget.\n\n** **\n\n**The use of any of our C-Scan Cap, C-Scan\nTrack, C-Scan View or any new products and technology could result in product liability or similar claims that could be expensive to\ndefend, damage our reputation and harm our business.**\n\n \n\nOur business exposes us\nto an inherent risk of potential product liability or similar claims related to the manufacturing, marketing and sale of medical devices.\nThe medical device industry has historically been litigious, and we face financial exposure to product liability or similar claims if\nthe use of any of our C-Scan Cap, C-Scan Track or C-Scan View were to cause or contribute to injury or death, including, without limitation,\nharm to the body caused by the procedure or inaccurate diagnoses from the procedure that could affect treatment options. There is also\nthe possibility that defects in the design or manufacture of any of these products or any new products and technology we redesign or\nredeploy might necessitate a product recall. We do not currently maintain product liability insurance. A product liability claim, regardless\nof merit or ultimate outcome, or any product recall could result in substantial costs to us, damage to our reputation, customer dissatisfaction\nand frustration, and a substantial diversion of management attention. A successful claim brought against us could have a material adverse\neffect on our business, financial condition and results of operations.\n\n** **\n\n**We have historically depended on third\nparties to manage our clinical studies and trials, perform related data collection and analysis, and to enroll patients for our clinical\ntrials, and, as a result, we may face costs and delays that are beyond our control.**\n\n \n\nWe have historically relied\non third parties, such as third-party clinical research organizations, or CROs, clinical investigators, clinical research coordinators,\nphysicians and clinical sites, to manage our clinical trials and perform data collection and analysis, and to enroll patients for our\nclinical trials. Although we have and expect to continue to have contractual arrangements with these third parties, we control only certain\naspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the\napplicable protocol and legal, regulatory and scientific standards, and our reliance on such third parties does not relieve us of our\nregulatory responsibilities. If such third parties fail to comply with applicable regulatory requirements, the clinical data generated\nin our clinical trials may be deemed unreliable and regulatory authorities may require us to perform additional clinical trials before\napproving our marketing applications, which would delay the regulatory approval process. Furthermore, we may not be able to control the\namount and timing of resources that these parties devote to our studies and trials or the quality of these resources. In addition, our\nengagement with clinical centers for conducting our clinical trial in the U.S depends upon site-specific licensing and regulatory requirements\nassociated with the X-ray technology within our C-Scan capsules related to nuclear regulatory compliance.\n\n \n\n21\n\n \n\n \n\nIf these third parties fail\nto properly manage our studies and trials or enroll patients for our clinical trials, we will be unable to complete them at all or in\na satisfactory or timely manner, which could delay or prevent us from obtaining regulatory approvals for, or achieving market acceptance\nof, our product.\n\n \n\nIn addition, termination\nof relationships with third parties may result in delays, inability to enter into arrangements with alternative third parties or do so\non commercially reasonable terms. Switching or adding additional clinical sites involves additional cost and requires management time\nand focus. In addition, there is a natural transition period when a new clinical site commences work. As a result, delays occur, which\ncan materially impact our ability to meet our desired clinical development timelines.\n\n** **\n\n**We may sell our products in the United\nStates, Europe, Israel and Japan and, if we are unable to manage our operations in these territories, our business, financial condition\nand results of operations could be materially adversely affected.**\n\n \n\nOur headquarters and substantially\nall of our operations and employees are presently located in Israel, but we may market our products in the United States, Europe, Israel\nand Japan. Accordingly, we may be subject to risks associated with international operations, and our international sales and operations\nmay require significant management attention and financial resources. In addition, our international sales and operations may subject\nus to risks inherent in international business activities, many of which are beyond our control and include, among others:\n\n \n\n \n●\nforeign\ncertification, registration and other regulatory requirements;\n\n \n\n \n●\ncustoms\nclearance and shipping delays;\n\n \n\n \n●\nimport\nand export controls;\n\n \n\n \n●\ntrade\nrestrictions;\n\n \n\n \n●\nmultiple\nand possibly overlapping tax structures;\n\n \n\n \n●\ndifficulty\nforecasting the results of our international operations and managing our inventory due to our reliance on third-party distributors;\n\n \n\n \n●\ndiffering\nlaws and regulations, business and clinical practices, licensures, government and private third-party payor reimbursement policies\nand patient preferences;\n\n \n\n \n●\ndiffering\nstandards of intellectual property protection among countries;\n\n \n\n \n●\ndifficulties\nin staffing and managing our international operations;\n\n \n\n \n●\ndifficulties\nin penetrating markets in which our competitors’ products are more established and achieving a competitive sale price for our\nproduct;\n\n \n\n \n●\ncurrency\nexchange rate fluctuations and foreign currency exchange controls and tax rates; and\n\n \n\n \n●\npolitical\nand economic instability, war or acts of terrorism or natural disasters, emergence of a pandemic, or other widespread health emergencies\n(or concerns over the possibility of such an emergency, including for example, the COVID-19 pandemic).\n\n \n\nIf we are unable to manage\nour international operations effectively, our business, financial condition and results of operations could be materially adversely affected.\n\n** **\n\n22\n\n \n\n** **\n\n**We may not be successful in establishing\nand maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize our products and technology.**\n\n \n\nA part of our strategy is\nto evaluate and, as deemed appropriate, enter into partnerships in the future when strategically attractive, including potentially with\nmajor medical device companies. We face significant competition in seeking appropriate partners for our products and technology, and\nthe negotiation process is time-consuming and complex. Potential partners must view our products and technology as economically valuable\nin markets they determine to be attractive in light of the terms that we are seeking and other available products for licensing by other\ncompanies. Even if we are successful in our efforts to establish strategic partnerships, the terms that we agree upon may not be favorable\nto us, and we may not be able to maintain such strategic partnerships if, for example, development or approval of a product is delayed\nor sales of an approved product are disappointing. Any delay in entering into strategic partnership agreements for our products and technology\ncould delay the development and commercialization of any product candidates and reduce their competitiveness even if they reach the market.\n\n \n\nIn addition, our strategic\npartners may breach any future agreement with us, and we may not be able to adequately protect our rights under these agreements. Furthermore,\nour strategic partners will likely negotiate for certain rights to control decisions regarding the development and commercialization\nof our products and technology, and may not conduct those activities in the same manner as we would do so.\n\n \n\nIf we fail to establish\nand maintain strategic partnerships, we will bear all the risks and costs related to the development and commercialization of our products\nand technology, and we will need to seek additional significant financing, hire additional employees and otherwise develop expertise\nwhich we do not have and for which we have not budgeted.\n\n** **\n\n**A security breach or disruption or failure\nof our computer or communications systems could adversely affect us.**\n\n \n\nDespite the implementation\nof security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to\ndamage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war, and telecommunication and\nelectrical failures. If such an event were to occur and interrupt our operations, it could result in a material disruption to our business.\nTo the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets\nor inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of clinical\ntrial participants or employees or former employees, access to our clinical data, or disruption of the manufacturing process, we could\nincur liability and the further development of our products and technology could be delayed. We may also be vulnerable to cyber-attacks\nby hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidential information and/or our financial\ninformation and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflict reputational\nharm upon us that may result in decreased market value and erode public trust.\n\n** **\n\n**We or the third parties upon whom we depend\nmay be adversely affected by natural disasters, health epidemics or pandemics, and/or war and conflicts and our business continuity and\ndisaster recovery plans may not adequately protect us from a serious disaster.**\n\n \n\nNatural disasters could\nseverely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition and prospects.\nIf a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our office,\nmanufacturing and/or lab spaces, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract\nmanufacturers, subcontractors, suppliers, CROs, clinical sites, clinical investigators, clinical coordinators, third parties ongoing\nactivities and schedules or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue\nour plans and business for a substantial period of time. See “*Risk Factors - Risks Related to Our Operations in Israel - Our\nprincipal offices, research and development facilities our manufacturing sites and some of our suppliers are located in Israel and, therefore,\nour business, financial condition and results of operation may be adversely affected by political, economic and military instability\nin Israel*.”\n\n \n\n23\n\n \n\n \n\nOur principal offices, research\nand development facilities, manufacturing sites and certain key suppliers are located in Israel. As a result, our business, financial\ncondition and results of operations may be adversely affected by political, economic and military instability in Israel.\n\n \n\nSince October 2023, Israel\nhas experienced heightened and sustained armed conflict and security tensions, including military operations in Gaza, hostilities along\nIsrael’s northern border, missile and drone attacks, and broader regional instability involving neighboring states and non-state\nactors. Although the intensity and geographic scope of these events have fluctuated, the situation remains unpredictable and could escalate\nfurther or persist for an extended period. Past conflicts have disrupted commercial activity in Israel, and similar or more severe disruptions\ncould occur in the future.\n\n \n\nIn particular, military\noperations such as Operation Epic Fury and Israel’s ongoing actions against Hezbollah have heightened security risks in northern\nIsrael, including in areas near the Company’s headquarters, resulting at times in rocket alerts, air-defense activity, transportation\ndisruptions and temporary limitations on business operations. These conditions increase the risk of operational interruptions, employee\nunavailability and logistical delays affecting facilities and personnel located in this region. These conditions have resulted, and may\ncontinue to result, in a range of adverse effects on our operations, including, but not limited to:\n\n \n\n●Workforce\navailability constraints, including due to military service obligations of Israeli employees,\nrestrictions on movement, safety concerns, or displacement of personnel;\n\n \n\n●Disruptions\nto research, development and manufacturing activities, including temporary facility closures,\nreduced productivity, or delays in product development or commercialization;\n\n \n\n●Supply\nchain interruptions, including delays in the delivery of raw materials, components or finished\ngoods, higher logistics and shipping costs, increased transit times, or the need to source\nalternative suppliers;\n\n \n\n●Infrastructure\nand operational risks, including disruptions to transportation networks, ports, utilities,\ncommunications or other critical infrastructure;\n\n \n\n●Increased\noperating expenses, including costs associated with security measures, insurance, employee\nsupport, facility hardening, redundancy planning and business continuity efforts;\n\n \n\n●Restrictions\non trade or investment, including the impact of actual or potential sanctions, export control\nrestrictions, trade embargoes, or changes in diplomatic relations between Israel and other\ncountries;\n\n \n\n●Macroeconomic\nimpacts, including volatility in the Israeli economy, currency fluctuations, interest rate\nchanges, credit rating actions, inflationary pressures or reduced access to capital;\n\n \n\n●Reputational\nrisks, including negative perceptions by customers, partners, investors or other stakeholders\narising from our presence or activities in Israel, which could affect commercial relationships\nor demand for our products; and\n\n \n\n●Insurance\nlimitations, including increased premiums, exclusions or the unavailability of coverage for\nlosses resulting from acts of war, terrorism or civil unrest.\n\n \n\nIf our facilities, suppliers\nor logistics partners in Israel were damaged, destroyed or rendered inoperable, or if we were required to suspend or significantly modify\noperations there for any reason, we may not be able to replace such capacity, personnel or capabilities in a timely or cost-effective\nmanner, if at all. Any prolonged interruption could materially impair our ability to manufacture products, meet customer demand, execute\nour growth strategy or maintain our competitive position.\n\n \n\n24\n\n \n\n \n\nIn addition, regional instability\ncould negatively affect global financial markets, international trade routes or investor confidence more broadly, which could further\nadversely impact our business, liquidity or market valuation.\n\n** **\n\n**Shareholder activism could result in potential\noperational disruption, divert our resources and management’s attention and have an adverse effect on our business.**\n\n \n\nShareholder activism, which\nmay arise in various forms and situations, could divert management’s attention from its current strategies, require us to incur\nsubstantial legal, consulting, and public relations fees, and could result in potential operational disruption. For example, on September\n29, 2023, Symetryx Corporation, a self-described family office based in Toronto, Canada (“Symetryx”) delivered a letter to\nCheck-Cap in which it demanded that Check-Cap convene an extraordinary general meeting of shareholders, the purpose of which would be\nto dismiss all five then current members of the Check-Cap Board and to appoint five director nominees as proposed by Symetryx. It then\nfiled with the Haifa District Court (Economic Department) a claim against Check-Cap and its directors, to instruct Check-Cap to comply\nwith the resolutions that shall be adopted at the extraordinary general meeting convened by Symetryx. On November 12, 2023, Check-Cap\nand Symetryx reached a settlement under which Symetryx cancelled the extraordinary shareholders meeting that it purported to self-convene\nand Check-Cap converted the extraordinary shareholder meeting Symetryx convened to an annual general meeting of shareholders held on\nDecember 18, 2023, where the five director nominees proposed by the shareholder were elected to the Board of the Company.\n\n \n\nPerceived uncertainties\nas to our future direction and control arising from shareholder activism may result in the loss of potential business opportunities and\nmay make it more difficult to attract and retain qualified employees, any of which could adversely affect our business and operating\nresults.\n\n** **\n\n**Risks Related to Regulations Applicable to\nOur Historical Business**\n\n** **\n\n**If we or our future manufacturers or distributors\ndo not obtain and maintain the necessary regulatory clearances or approvals, or equivalent third country approvals in a specific country\nor region, we or our future distributors will not be able to market and sell C-Scan or future products in that country or region.**\n\n \n\nTo be able to market and\nsell C-Scan or any future products in a specific country or region, we and/or our distributors must comply with the regulations of that\ncountry or region. These regulations, and the time required for regulatory review, vary from country to country. Obtaining regulatory\napprovals is expensive and time-consuming, and we cannot be certain that we or our distributors will receive regulatory approvals required\nfor C-Scan or any future products in each country or region in which we plan to market such products. We currently do not have a notified\nbody. If we modify C-Scan or any future products, we or our distributors may need to apply for new regulatory approvals, or a notified\nbody may need to review the planned changes before we are permitted to sell the respective products. We may not meet the quality and\nsafety standards required to maintain the authorizations that we or our distributors have received. If we or if permitted, our distributors\nare unable to maintain our authorizations or CE Certificates in a particular country or region, we will no longer be able to sell C-Scan\nand/or any potential future products in that country or region, and our ability to generate revenues will be materially and adversely\naffected.\n\n** **\n\n25\n\n \n\n** **\n\n**If the indications for use or instructions\nfor use for which the iodinated oral contrast medium is approved are not sufficiently broad to support its use throughout the C-Scan\nprocedure, the FDA or the competent regulatory authorities in the European Union (EU) Member States and other foreign countries may consider\nthat contrast agent is being used off-label.**\n\n \n\nIngestion of C-Scan requires\nthe preparatory use of iodinated oral contrast medium to provide a coating for colonic imaging. We cannot be sure that the indications\nfor which iodinated oral contrast medium are approved in the United States, or in other countries is sufficiently broad to cover such\nuse. If the FDA or the competent regulatory authorities in other countries consider that iodinated oral contrast medium is not approved\nfor the purpose for which it is used with the system, we may be considered to promote the off-label use of the iodinated oral contrast\nmedium. Because the promotion of off-label use of drugs or medicinal products is prohibited in the United States, and in other countries,\nwe could face both related issues with the FDA and/or the competent authorities of and/or other countries. In these circumstances, the\nFDA and/or the competent regulatory authorities and/or other countries may require us to obtain appropriate regulatory approvals for\nthe iodinated oral contrast medium prior to marketing C-Scan with such substances. Under such circumstances, should we fail to obtain\napproval of the contrast agent for use with C-Scan, in a timely fashion, or at all, this could delay or prevent regulatory clearance\nor approval of the C-Scan, and our business and financial condition will be adversely affected.\n\n** **\n\n**The results of any future clinical trials\nmay not support our product candidate requirements or intended use claims or may result in the discovery of adverse side effects.**\n\n \n\nEven if future clinical\ntrials are completed, we cannot be certain that their results will support our product requirements or intended use claims, which could\ninhibit our marketing strategies, or that the FDA, foreign authorities or a notified body will agree with our conclusions regarding them.\nSuccess in non-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot\nbe sure that clinical trials will replicate the results of prior trials. The clinical trial process may fail to demonstrate that C- Scan,\nor any future products, are safe and effective for the desired or proposed indicated uses, which could cause us to abandon a product\nand may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions\nand, ultimately, our ability to commercialize C-Scan, or any future products, and generate revenues. It is also possible that patients\nenrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.\n\n** **\n\n**Even if C-Scan or future products are cleared\nor approved by regulatory authorities or after obtaining CE Certificates from a notified body, modifications to C-Scan or future products\nmay require new regulatory clearances or approvals, new CE Certificates, or may require us to recall or cease marketing it until the\nnecessary clearances, approvals or CE Certificates are obtained.**\n\n \n\nOnce cleared, approved or\nmarketed, modifications to C-Scan or future products may require new regulatory approvals, clearances, including CE Certificates from\na notified body, 510(k) clearances or PMAs, or require us to recall or cease marketing the modified devices until these clearances or\napprovals are obtained. Obtaining clearances and approvals, or new or amended CE Certificates for device modifications can be a time-consuming\nprocess, and delays in obtaining required future clearances, approvals, or CE Certificates could adversely affect our ability to introduce\nnew or enhanced products in a timely manner, which in turn could harm our future growth.\n\n** **\n\n**Even if C-Scan and future products are\ncleared or approved by regulatory authorities or after obtaining CE Certificates from a notified body, if we or our suppliers fail to\ncomply with ongoing FDA or other foreign regulatory authority requirements, or if we experience unanticipated problems with our products,\nour products could be subject to restrictions or withdrawal from the market.**\n\n \n\nThe manufacturing processes,\nreporting requirements, post-approval clinical data and promotional activities associated with any product for which we obtain clearance,\napproval or CE Certificates, or equivalent third country approval will be subject to continuous regulatory review, oversight and periodic\ninspections by the FDA other domestic and foreign regulatory authorities. If any adverse actions relating to the foregoing were to occur,\nour reputation would be harmed, our product sales and profitability would suffer and we may not be able to generate revenue. Furthermore,\nour key suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements which could\nresult in our failure to produce our products on a timely basis and in the required quantities, if at all. Even if regulatory clearance\nor approval of a product is granted, or after obtaining CE Certificates, such clearance or approval, or CE Certificates may be subject\nto limitations on the intended uses for which the product may be marketed and reduce our potential to successfully commercialize the\nproduct and generate revenue from the product.\n\n** **\n\n26\n\n \n\n** **\n\n**Our failure to comply with radiation safety\nor radio frequency regulations in a specific country or region could impair our ability to conduct our clinical trials, or commercially\ndistribute and market C-Scan or any similar product in that country or region.**\n\n \n\nC-Scan includes a small\nX-ray source and wireless radio frequency transmitter and receiver and is therefore subject to equipment authorization requirements in\na number of countries and regions. In the United States, the EU and Japan, authorities often require advance clearance of all radiation\nand radio frequency devices before they can be sold or marketed in these jurisdictions, subject to limited exceptions. Competent authorities\nfor such additional approval requirements include the Swiss National Cooperative for the Disposal of Radioactive Waste (Nagra) and the\nGerman Federal Office for Radiation Protection (Bundesamt für Strahlenschutz, BfS). Modifications to the approved C-Scan version\ndesign and specifications may require new or further regulatory clearances or approvals before we are permitted to market and sell a\nmodified C-Scan version. If we are unable to obtain any required clearances or approvals from the authorities responsible for the radiation\nas well as the radio frequency regulations in these and other jurisdictions, the sale or use of C-Scan or any similar product could be\nprevented in these countries. Any such action could negatively affect our business, financial condition and results of operations.\n\n** **\n\n**Our products may in the future be subject\nto product recalls that could harm our reputation, business and financial results.**\n\n \n\nThe FDA and similar foreign\ngovernmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or\ndefects in design or manufacture or a public health/safety issue. In the case of the FDA, the authority to require a recall must be based\non an FDA finding that there is a reasonable probability that the device would cause injury or death. In addition, foreign governmental\nbodies have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture.\nManufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated\nor voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling\ndefects or other deficiencies and issues. Once marketed, recalls of any of our products, including C-Scan, would divert managerial and\nfinancial resources and have an adverse effect on our business, financial condition and results of operations. FDA requires that certain\nclassifications of recalls be reported to the FDA within 10 working days after the recall is initiated. Companies are required to maintain\ncertain records of recalls, even if they are not reportable to FDA. We may initiate voluntary recalls involving our products in the future\nthat we determine do not require us to notify the FDA. If the FDA disagrees with our determinations, they could require us to report\nthose actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition,\nthe FDA could take enforcement action against us based on our failure to report the recalls when they were conducted.\n\n** **\n\n**If C-Scan or future products cause or contribute\nto a death or a serious injury, or malfunction in such a way that causes or contributes to a death or serious injury, we will be subject\nto medical device reporting regulations, which can result in corrective actions or enforcement actions from regulatory authorities.**\n\n \n\nIf we resume development\nof C-Scan and obtain approval to commercialize our product, we expect that we will be required to conduct post-market testing and surveillance\nto monitor the safety or effectiveness of our products, which is costly, and we must comply with medical device reporting requirements,\nincluding the reporting of adverse events and malfunctions related to our products.\n\n \n\nUnder FDA medical device\nreporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused\nor contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to a death or serious\ninjury if the malfunction of our device (or any similar future product) were to recur. If we fail to investigate and report these events\nto FDA within the required timeframes, or at all, the FDA could take enforcement action against us.\n\n \n\nUnder the EU MDR we will\nnow have to comply with the increased requirements of medical devices vigilance provisions. In particular, according to Art. 83 MDR,\nwe are required to have a post-market surveillance system in place in a manner that is proportionate to the risk class and appropriate\nfor the type of device, as an integral part of the quality management system. Depending on the devices’ risk class, either a post\nmarket surveillance report or a periodic safety update report, or PSUR, must be created and provided to the competent authority upon\nrequest. The PSUR also has to be provided to a notified body. Furthermore, requirements on vigilance and incident reporting are increased\nand market surveillance competencies of the authorities are strengthened.\n\n \n\n27\n\n \n\n \n\nAccordingly, later discovery\nof previously unknown problems with our products, including unanticipated adverse side effects or adverse side effects of unanticipated\nseverity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as the Quality System Regulations,\nmay result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market,\nvoluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute,\nfines, suspension or withdrawal of regulatory approvals or CE Certificates, product seizures, injunctions or the imposition of civil\nor criminal penalties. If any such adverse event results in legal action taken against us, it will require us to devote sufficient time\nand capital to the matter, distract management from operating our business, and may harm our reputation. Any such occurrence would adversely\naffect our business, financial condition and operating results and prospects.\n\n** **\n\n**Our business is subject to complex environmental\nand health legislation in various jurisdictions that may increase our costs and our risk of noncompliance.**\n\n \n\nOur research and development\nand manufacturing processes, including through our service providers, involve the handling of potentially harmful radioactive and other\nhazardous materials. Therefore, we and our service providers may be subject to various environmental, health and safety laws and regulations,\nincluding governing the use, shipping, handling, storage and disposal of these materials, and we incur expenses related to compliance\nwith these laws and regulations. If we are found to have violated applicable environmental, health and safety laws, whether as a result\nof human error, equipment failure or other causes, we could be held liable for damages, penalties and costs of remedial actions and could\nbe subject to work stoppages or delays, which could materially adversely affect our business, financial condition and results of operations.\nThe risk of contamination or injury from these materials cannot be eliminated. If an accident or release of any radioactive or other\nhazardous material occurs, we could be held liable for resulting damages, including for investigation, remediation and monitoring of\nthe contamination, including the costs of which could be substantial. In addition, we may be required to pay damages or civil judgments\nin respect of third-party claims, including those relating to personal injury (including exposure to radioactive materials) or contribution\nclaims. In the future, we could be subject to additional environmental requirements or existing environmental laws could become more\nstringent, which could lead to greater compliance costs and increasing risks and penalties associated with violations. For example, changes\nto, or restrictions on, permitting requirements or processes, hazardous or radioactive material storage or handling might require an\nunplanned capital investment or relocation. If we or our service providers fail to comply with existing or new environmental laws or\nregulations, our business, financial condition and results of operations could be materially adversely affected.\n\n** **\n\n**Federal and state privacy laws, and equivalent\nlaws of third countries, may increase our costs of operation and expose us to civil and criminal sanctions.**\n\n \n\nThe Health Insurance Portability\nand Accountability Act of 1996, as amended, and the regulations that have been issued under it, to which we refer collectively as HIPAA,\nand similar laws outside the United States, contain substantial restrictions and requirements with respect to the use and disclosure\nof individuals’ protected health information. The HIPAA privacy rules prohibit “covered entities,” such as healthcare\nproviders and health plans, from using or disclosing an individual’s protected health information, unless the use or disclosure\nis authorized by the individual or is specifically required or permitted under the privacy rules. Under the HIPAA security rules, covered\nentities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability\nof electronic protected health information maintained or transmitted by them or by others on their behalf. While we do not believe that\nwe are a covered entity under HIPAA, many of our customers may be covered entities subject to HIPAA. Such customers may require us to\nenter into business associate agreements, which will obligate us to safeguard certain health information we obtain in the course of our\nrelationship with them, restrict the manner in which we use and disclose such information and impose liability on us for failure to meet\nour contractual obligations.\n\n \n\nIn addition, under The Health\nInformation Technology for Economic and Clinical Health Act of 2009, or HITECH, which was signed into law as part of the U.S. stimulus\npackage in February 2009, certain of HIPAA’s privacy and security requirements are now also directly applicable to “business\nassociates” of covered entities and subject them to direct governmental enforcement for failure to comply with these requirements.\nWe may be deemed as a “business associate” of some of our customers. As a result, we may be subject as a “business\nassociate” to civil and criminal penalties for failure to comply with applicable privacy and security rule requirements. Moreover,\nHITECH created a new requirement obligating “business associates” to report any breach of unsecured, individually identifiable\nhealth information to their covered entity customers and imposes penalties for failing to do so.\n\n \n\n28\n\n \n\n \n\nIn addition to HIPAA, most\nU.S. states have enacted patient confidentiality laws that protect against the disclosure of confidential medical information, and many\nU.S. states have adopted or are considering adopting further legislation in this area, including privacy safeguards, security standards,\nand data security breach notification requirements. These U.S. state laws, which may be even more stringent than the HIPAA requirements,\nare not preempted by the federal requirements, and we are therefore required to comply with them to the extent they are applicable to\nour operations.\n\n \n\nThese and other possible\nchanges to HIPAA or other U.S. federal or state laws or regulations, or comparable laws and regulations in countries where we conduct\nbusiness, could affect our business and the costs of compliance could be significant. Failure by us to comply with any of the standards\nregarding patient privacy, identity theft prevention and detection, and data security may subject us to penalties, including civil monetary\npenalties and in some circumstances, criminal penalties. In addition, such failure may damage our reputation and adversely affect our\nability to retain customers and attract new customers.\n\n \n\nThe protection of personal\ndata, particularly patient data, is subject to strict laws and regulations in many countries. The collection and use of personal health\ndata in the EU is governed by the General Data Protection Regulation Reg. EU 2016/679, which became applicable on May 25, 2018,\nor the GDPR. The GDPR imposes a number of requirements, including an obligation to seek the consent of individuals to whom the personal\ndata relate, the information that must be provided to the individuals, notification of data processing obligations to the competent national\ndata protection authorities of individual EU Member States and the security and confidentiality of the personal data. The GDPR also imposes\nstrict rules on the transfer of personal data out of the EU to the U.S. Failure to comply with the requirements of the GDPR and the related\nnational data protection laws of the EU Member States may result in fines and other administrative penalties and harm our business. We\nmay incur extensive costs in ensuring compliance with these laws and regulations, particularly if we are considered to be a data controller\nwithin the meaning of the GDPR.\n\n** **\n\n**If we fail to comply with the U.S. federal\nAnti-Kickback Statute and similar state and third-country laws, we could be subject to criminal and civil penalties and exclusion from\nfederally funded healthcare programs including the Medicare and Medicaid programs and equivalent third-country programs, which would\nhave a material adverse effect on our business and results of operations.**\n\n \n\nA provision of the Social\nSecurity Act, commonly referred to as the federal Anti-Kickback Statute, prohibits the knowing and willful offer, payment, solicitation\nor receipt of any form of remuneration, directly or indirectly, in cash or in kind, to induce or reward the referring, ordering, leasing,\npurchasing or arranging for, or recommending the ordering, purchasing or leasing of, items or services payable, in whole or in part,\nby Medicare, Medicaid or any other federal healthcare program. PPACA, among other things, clarified that a person or entity needs not\nto have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it. Although there are a number of statutory\nexemptions and regulatory safe harbors to the federal Anti- Kickback Statute protecting certain common business arrangements and activities\nfrom prosecution or regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that do not fit squarely\nwithin an exemption or safe harbor may be subject to scrutiny. The federal Anti-Kickback Statute is very broad in scope and many of its\nprovisions have not been uniformly or definitively interpreted by existing case law or regulations. In addition, most of the states have\nadopted laws similar to the federal Anti-Kickback Statute, and some of these laws are even broader than the federal Anti-Kickback Statute\nin that their prohibitions may apply to items or services reimbursed under Medicaid and other state programs or, in several states, apply\nregardless of the source of payment. Violations of the federal Anti-Kickback Statute may result in substantial criminal, civil or administrative\npenalties, damages, fines and exclusion from participation in federal healthcare programs.\n\n \n\nAll of our financial relationships\nwith healthcare providers, purchasers, and others who provide products or services to federal healthcare program beneficiaries are potentially\ngoverned by the federal Anti-Kickback Statute and similar state laws. We believe our operations are in compliance with the federal Anti-Kickback\nStatute and similar state laws. However, we cannot be certain that we will not be subject to investigations or litigation alleging violations\nof these laws, which could be time-consuming and costly to us and could divert management’s attention from operating our business,\nwhich in turn could have a material adverse effect on our business. In addition, if our arrangements were found to violate the federal\nAnti- Kickback Statute or similar state laws, the consequences of such violations would likely have a material adverse effect on our\nbusiness, results of operations and financial condition.\n\n \n\n29\n\n \n\n \n\nThere are other federal\nand state laws that may affect our ability to operate, including the federal civil False Claims Act, which prohibits, among other things,\nindividuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government\nfunds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to\nthe government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to\nthe federal government. PPACA amended the Social Security Act to provide that the government may assert that a claim including items\nor services resulting from a violation of the federal Anti- Kickback Statute constitutes a false or fraudulent claim for purposes of\nthe federal civil False Claims Act. Moreover, we may be subject to other federal false claim laws, including, among others, federal criminal\nhealthcare fraud and false statement statutes that extend to non-government healthcare benefit programs. Moreover, there are analogous\nstate laws. Violations of these laws can result in substantial criminal, civil or administrative penalties, damages, fines and exclusion\nfrom participation in federal healthcare programs.\n\n \n\nSimilar restrictions are\nimposed by the national legislation of many third countries in which our medical devices will be marketed. Moreover, the provisions of\nthe Foreign Corrupt Practices Act of 1997 and other similar anti-bribery laws in other jurisdictions generally prohibit companies and\ntheir intermediaries from providing money or anything of value to officials of foreign governments, foreign political parties, or international\norganizations with the intent to obtain or retain business or seek a business advantage. Recently, there has been a substantial increase\nin anti-bribery law enforcement activity by U.S. regulators, with more aggressive and frequent investigations and enforcement by both\nthe U.S. Securities and Exchange Commission and the Department of Justice. A determination that our operations or activities violated\nUnited States or foreign laws or regulations could result in imposition of substantial fines, interruption of business, loss of supplier,\nvendor or other third-party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. In\naddition, lawsuits brought by private litigants may also follow as a consequence.\n\n** **\n\n**Our failure to comply with the necessary\nregulatory approval regarding the use of radioactive materials could significantly impair our ability to develop, manufacture and/or\nsell C-Scan or similar products.**\n\n \n\nThe manufacture of C-Scan\nrequires the use and storage of radioactive materials. In order to use such materials in the development and manufacture of C-Scan in\nIsrael, we are required to obtain a permit from the Israeli Commissioner for Environmental Radiation, or the Commissioner, pursuant to\nthe Israeli Pharmaceutical Regulations (Radioactive Elements and By-Products), 5740-1980. Should we fail to comply with the conditions\nof our currently existing permit, the Commissioner would have authority to cancel our permit. Should the Commissioner determine that\nour activities or facilities, or the activities or facilities adjacent to our premises, constitute a danger to the health and well-being\nof a person, the public or the environment, the cancellation or suspension of our permit could be immediate and without prior notice.\nFurthermore, we cannot guarantee the annual renewal of our permit and/or annual renewal subject to identical conditions, as the approval\nof an annual application and the conditions thereof are at the discretion of the Commissioner. Similar requirements and regulations may\napply to the manufacture of C-Scan or similar products in other countries. Cancellation of or failure to renew our permit could have\nmaterially adverse consequences on our ability to manufacture and sell our products and therefore on our ability to continue our business\nand operations.\n\n** **\n\n**Our ability to source and distribute our\nproducts profitably or at all could be harmed if new trade restrictions are imposed or existing trade restrictions become more burdensome.**\n\n \n\nThere have been significant\nchanges and proposed changes in recent years to U.S. trade policies, tariffs and treaties affecting imports. The Trump administration\nhas announced additional tariffs on imports from a number of countries. Such tariffs and any further legislation or actions taken by\nthe U.S. or other countries that restrict trade, such as additional tariffs, trade barriers, tax policies related to international commerce,\nexport controls, sanctions and investment restrictions, renegotiation of existing trade agreements with U.S. trading partners, and other\nprotectionist or retaliatory measures taken by such governments, could adversely impact our business, financial condition and results\nof operations. If any forms of duties or tariffs are imposed on our products, we may be required to charge higher prices in the United\nStates than we expect, which may result in fewer customers and harm our operating performance. Alternatively, we or our contractors may\nseek manufacturers and/or suppliers in countries not affected, or less affected by the tariffs, resulting in significant costs and disruption\nto our operations and business. Our business could also be impacted by retaliatory trade measures taken by other countries in response\nto existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could materially harm our business,\nfinancial condition and results of operations. Escalating trade tensions between the U.S. and other countries may also disrupt global\nsupply chains or result in significant price increases. The imposition of tariffs or other similar trade restrictions may also be inflationary,\nwhich could cause the cost of inputs to increase. Volatile trade relations have also caused and may continue to cause significant volatility\nin the global financial markets. Further, political tensions as a result of trade policies could reduce trade volume, investment, technological\nexchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic\nconditions. Any of these developments could have a material adverse effect on our business, financial condition and results of operations.\n\n** **\n\n30\n\n \n\n** **\n\n**Risks Related to Our Legacy Intellectual Property**\n\n** **\n\n**If we are unable to protect our intellectual\nproperty rights, our competitive position could be harmed.**\n\n \n\nOur success and ability\nto compete depends in large part upon our ability to protect our intellectual property. Although we have patents issued in Israel, Europe,\nUnited States, Japan, China, India, Hong Kong, Canada, South Korea, Brazil and Australia, we continue to file and prosecute in many of\nthe same countries and additional countries. We face several risks and uncertainties in connection with our intellectual property rights,\nincluding, among others:\n\n \n\n \n●\npending\nand future patent applications may not result in the issuance of patents or, if issued, may not be issued in a form that will be\nadvantageous to us;\n\n \n\n \n●\nour issued\npatents may be challenged, invalidated or legally circumvented by third parties;\n\n \n\n \n●\nour patents\nmay not be upheld as valid and enforceable or prevent the development of competitive products;\n\n \n\n \n●\nthe eligibility\nof certain inventions related to diagnostic medicine, more specifically diagnostic methods and processes, for patent protection in\nthe United States has been limited recently which may affect our ability to enforce our issued patents in the United States or may\nmake it difficult to obtain broad patent protection going forward in the United States;\n\n \n\n \n●\nthe eligibility\nto protect methods for treating humans, which is available in the US, is generally not available in other countries, for example\nin Europe;\n\n \n\n \n●\nfor a\nvariety of reasons, we may decide not to file for patent protection on various improvements or additional features; and\n\n \n\n \n●\nintellectual\nproperty protection and/or enforcement may be unavailable or limited in some countries where laws or law enforcement practices may\nnot protect our proprietary rights to the same extent as the laws of the United States, the European Union, Canada or Israel.\n\n \n\nConsequently, our competitors\ncould develop, manufacture and sell products that directly compete with our products, which could decrease our sales and diminish our\nability to compete. In addition, competitors could attempt to develop their own competitive technologies that fall outside of our intellectual\nproperty rights. If our intellectual property does not adequately protect us from our competitors’ products and methods, our competitive\nposition could be materially adversely affected.\n\n** **\n\n**Because the medical device industry is\nlitigious, we are susceptible to intellectual property suits that could cause us to incur substantial costs or pay substantial damages\nor prohibit us from selling C-Scan or any similar products we may develop.**\n\n \n\nThere is a substantial amount\nof litigation over patent and other intellectual property rights in the medical device industry. Whether a product infringes a patent\ninvolves complex legal and factual issues, the determination of which is often uncertain. Searches typically performed to identify potentially\ninfringed patents of third parties are often not conclusive and because patent applications can take many years to issue, there may be\napplications now pending, which may later result in issued patents which our current or future products may infringe. In addition, our\ncompetitors or other parties may assert that C-Scan or any similar products we may develop and the methods they employ may be covered\nby patents held by them. If C-Scan, any similar products we may develop or any of their components infringes a valid patent, we could\nbe prevented from manufacturing or selling it unless we can obtain a license or redesign the product to avoid infringement. Third parties\nmay currently have, or may eventually be issued, patents on which our current or future products or technologies may infringe.\n\n \n\n31\n\n \n\n \n\nIn addition, litigation\nin which we are accused of infringement may cause negative publicity, adversely impact prospective customers, cause product shipment\ndelays, prohibit us from manufacturing, marketing or selling our current or future products, require us to develop non-infringing technology,\nmake substantial payments to third parties or enter into royalty or license agreements, which may not be available on acceptable terms,\nor at all. If a successful claim of infringement were made against us and we could not develop non-infringing technology or license the\ninfringed or similar technology in a timely and cost-effective manner, our ability to generate significant revenues may be substantially\nharmed and we could be exposed to significant liability. A court could enter orders that temporarily, preliminarily or permanently enjoin\nus, our suppliers, distributors or our customers from making, using, selling, offering to sell or importing our current or future products,\nor could enter an order mandating that we undertake certain remedial activities. Claims that we have misappropriated the confidential\ninformation or trade secrets of third parties can have a similar negative impact on our reputation, business, financial condition or\nresults of operations.\n\n \n\nWe may also become involved\nin litigation in connection with our brand name rights. We do not know whether others will assert that our brand name infringes their\ntrademark rights. In addition, names we choose for our products may be claimed to infringe names held by others. If we have to change\nthe names we use, we may experience a loss in goodwill associated with our brand name, customer confusion and a loss of sales. Infringement\nand other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate and could divert our management’s\nattention from operating our business.\n\n** **\n\n**The steps we have taken to protect our\nintellectual property may not be adequate, which could have a material adverse effect on our ability to compete in the market.**\n\n \n\nIn addition to patents,\nwe rely on confidentiality, non-compete, non-disclosure and assignment of inventions provisions, as appropriate, with our employees,\nconsultants, subcontractors, suppliers and clinical investigators to protect and otherwise seek to control access to, and distribution\nof, our proprietary information. These measures may not be adequate to protect our intellectual property from unauthorized disclosure,\nthird-party infringement or misappropriation, for the following reasons:\n\n \n\n \n●\nthe agreements\nmay be breached, may not provide the scope of protection we believe they provide or may be determined to be unenforceable, in part\nor in whole;\n\n \n\n \n●\nwe may\nhave inadequate remedies for any breach;\n\n \n\n \n●\nproprietary\ninformation could be disclosed to our competitors; or\n\n \n\n \n●\nothers\nmay independently develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to\nour trade secrets or disclose such technologies.\n\n \n\nIf, for any of the above\nreasons, our intellectual property is disclosed or misappropriated, it could harm our ability to protect our rights and could have a\nmaterial adverse effect on our business, financial condition and results of operations.\n\n \n\n32\n\n \n\n \n\nFurthermore, although our\nemployees and consultants have agreed to assign to us all rights to any intellectual property created in the scope of their employment\nor engagement with us and most of our current employees and consultants, have agreed to waive their economic rights with respect to our\nintellectual property, we cannot assure you that such claims will not be brought against us by current or former employees or consultants,\ndespite their contractual representations and obligations toward us, or by any of the medical and/or governmental institutions that employ\nor engage such consultants, claiming alleged rights to our intellectual property or demanding remuneration in consideration for assigned\nintellectual property rights, which could result in litigation and adversely affect our business, financial condition and results of\noperations. See “*Risk Factors - Risks Related to Our Operations in Israel - We may become subject to claims for payment of compensation\nfor assigned service inventions by our current or former employees, which could result in litigation and adversely affect our business.*”\n\n** **\n\n**Third parties may challenge the validity\nof our issued patents or challenge patent applications in administrative proceedings before various patent offices which, if successful,\ncould negatively affect our future business and financial performance.**\n\n \n\nVarious patent offices,\nincluding in the United States and Europe, provide administrative proceedings by which a third party can challenge the validity of an\nissued patent or challenge an application that is being examined absent any threat of litigation. In some instances, including in the\nUnited States, the administrative proceedings provide a more efficient and favorable forum to challenge our patents which may lead to\nmore opportunities for competitors to do so, particularly smaller competitors with limited resources. Moreover, the standards utilized\nin these administrative proceedings, at least in the United States, provide certain legal advantages versus challenging the validity\nof a patent in a district court. If a third party is successful in one of these administrative proceedings, the patent will no longer\nbe enforceable in the corresponding jurisdiction. In addition, we did not renew certain patents in pursuit of strategic options. With\nthis loss in patent rights, we will not be able to prevent third parties from offering identical or similar competing products which\nmay result in lower profits and a less substantial market share.\n\n** **\n\n**We may need to initiate lawsuits to protect\nor enforce our patents and other intellectual property rights, which could be expensive and, if we lose, could cause us to lose some\nof our intellectual property rights, which would harm our ability to compete in the market.**\n\n \n\nWe rely on patents to protect\na portion of our intellectual property and our competitive position. Patent law relating to the scope of claims in the technology fields\nin which we operate is still evolving and, consequently, patent positions in the medical device industry are generally uncertain. In\norder to protect or enforce our patent rights, we may initiate patent and related litigation against third parties, such as infringement\nsuits or interference proceedings. Any lawsuits that we initiate could be expensive, take significant time and divert our management’s\nattention from other business concerns and the outcome of litigation to enforce our intellectual property rights in patents, copyrights,\ntrade secrets or trademarks is highly unpredictable. Litigation also puts our patents and other registered intellectual property at risk\nof being invalidated or interpreted narrowly and our patent applications at risk of not being issued. In addition, we may provoke third\nparties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, including\nattorney fees, if any, may not be commercially valuable. The occurrence of any of these events could have a material adverse effect on\nour business, financial condition and results of operations.\n\n** **\n\n**We rely on trademark protection to distinguish\nour products from the products of our competitors; however, if a third party is entitled to use our trademark, we could be forced to\nrebrand, which could result in loss of brand recognition and our ability to distinguish our products may be impaired, which could adversely\naffect our business.**\n\n \n\nWe rely on trademark protection\nto distinguish our products from the products of our competitors. In jurisdictions where we have not registered our trademarks and logos\nand are using them, and as permitted by applicable local law, we rely on common law trademark protection. Third parties may oppose our\ntrademark applications, or otherwise challenge our use of the trademarks, and may be able to use our trademarks in jurisdictions where\nthey are not registered or otherwise protected by law. If our trademarks are successfully challenged or if a third party is using confusingly\nsimilar or identical trademarks in particular jurisdictions before we do, we may be prevented from using our brands and/or domain names\nand/or could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote additional\nresources to marketing new brands. If others are able to use our trademarks, our ability to distinguish our products may be impaired,\nwhich could adversely affect our business. Further, we cannot assure you that competitors will not infringe upon our trademarks, or that\nwe will have adequate resources to enforce our trademarks.\n\n** **\n\n33\n\n \n\n** **\n\n**We may not be able to enforce covenants\nnot to compete at all or, we may be unable to enforce them for the duration contemplated in our employment contracts and may, therefore,\nbe unable to prevent competitors from benefiting from the expertise of some of our former employees involved in research and development\nactivities.**\n\n \n\nWe historically have entered\ninto non-compete agreements that prohibit our employees, if they cease working for us, from directly competing with us or working for\nour competitors for a limited period of time following termination of employment. In many jurisdictions, courts are increasingly refusing\nto enforce restrictions on competition by former employees or have interpreted them narrowly. For example, in Israel, where currently\nall of our employees reside, courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate\nthat the competitive activities of the former employee will harm one of a limited number of material interests of the employer which\nhave been recognized by the courts, such as the secrecy of a company’s confidential commercial information or its intellectual\nproperty. If we cannot demonstrate that harm would be caused to us, an Israeli court may refuse to enforce our non-compete restrictions\nor reduce the contemplated period of non- competition such that we may be unable to prevent our competitors from benefiting from the\nexpertise of our former employees. A growing number of states in the U.S. have refused to enforce non-compete provisions in employment\ncontracts and the federal government has recently done the same. While employees may compete against us, they cannot use our trade secrets\nand other confidential information. If that were to occur, we would have to prove such activities. Intellectual property litigation is\nexpensive, diverts management time and the results are uncertain.\n\n** **\n\n**Risks Related to Our Operations in Israel**\n\n** **\n\n**Our principal offices, research and development\nfacilities, our manufacturing sites and some of our suppliers are located in Israel and, therefore, our business, financial condition\nand results of operation may be adversely affected by political, economic and military instability in Israel.**\n\n \n\nOur principal offices are\nlocated in Israel. In addition, all of our employees are residents of Israel. Accordingly, political, economic and military conditions\nin Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have\ntaken place between Israel and its neighboring countries. Although Israel has entered into various agreements with Egypt, Jordan and\nthe Palestinian Authority, there has been an increase in unrest and terrorist activity, which began in September 2000 and continued with\nvarying levels of severity throughout 2025. Following the October 7, 2023 attacks by Hamas terrorists in Israel’s southern border,\nIsrael declared war against Hamas and since then, Israel has been involved in military conflicts with Hamas, Hezbollah, a terrorist organization\nbased in Lebanon, Syria and Iran, both directly and through proxies. Although a ceasefire between Israel and Hamas took effect on October\n10, 2025, there is no assurance that this agreement will continue to be upheld. On February 28, 2026 the U.S. and Israel initiated air\nstrikes against Iranian military targets and leadership. Since then, retaliation by Iran against U.S. and Israeli interests in the Middle\nEast has been widespread. As of the date of the filing of this Annual Report on Form 20-F, military activity and hostilities continue\nto escalate in the Middle East, and the situation throughout the region remains volatile, with the potential for continued escalation\ninto a broader and more sustained regional conflict.\n\n \n\nTo date, none of our facilities\nor infrastructure, including our technology platform and IT system, have been damaged nor have our supply chains been significantly impacted\nsince the war broke out. However, a prolonged war could adversely impact our supply chain and our ability to ship products from Israel,\nwhich could disrupt our operations. Our commercial insurance does not cover losses that may occur as a result of events associated with\nwar and terrorism, and the war and terrorism insurance we maintain may not be adequate to cover any losses we may incur associated with\narmed conflicts and terrorist attacks. Although the Israeli government currently covers the reinstatement value of direct damages that\nare caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will\nsufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.\n\n \n\nIn the past, the State of\nIsrael and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel\nand with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition\nor the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also\nadversely impact our business. Parties with whom we may do business could decline to travel to Israel during periods of heightened unrest\nor tension. In addition, the political and security situation in Israel may result in parties with whom we may have agreements involving\nperformance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure\nprovisions in such agreements. In addition, any hostilities involving Israel could have a material adverse effect on our facilities including\nour corporate office or on the facilities of our local suppliers, in which event all or a portion of our inventory may be damaged, and\nour ability to deliver products to customers could be materially adversely affected.\n\n \n\n34\n\n \n\n \n\nIn addition, our operations\ncould also be disrupted by the obligations of personnel to perform military service. All our employees and independent contractors are\nbased in Israel. Some of our personnel in Israel may be obligated to perform annual military reserve duty in the Israel Defense Forces,\ndepending on their age and position in the army. Our operations could be disrupted by the absence of one or more of our executive officers\nor key employees for a significant period due to military service and any significant disruption in our operations could harm our business.\nThe full impact on our workforce or business if some of our executive officers and employees are called upon to perform military service,\nespecially in times of national emergency, is difficult to predict. Our operations could be disrupted by the absence of a significant\nnumber of employees related to military service, which could materially adversely affect our business and results of operations.\n\n \n\nAny hostilities involving\nIsrael, terrorist activities or political instability in the region or the interruption or curtailment of trade between Israel and its\npresent trading partners, or significant downturns in the economic or financial condition of Israel, could adversely affect our operations\nand product development, cause our revenues to decrease and adversely affect our share price.\n\n \n\nFurthermore, the Israeli\ngovernment has pursued, and continues to debate, significant changes to Israel’s judicial system. While the scope and timing of\nthese measures have evolved over time, and certain initiatives have been delayed, modified or suspended, the underlying issues remain\na source of political division and public controversy. In response to these developments, individuals, organizations and institutions,\nboth within and outside of Israel, have expressed concerns that actual or proposed changes to the judicial framework could negatively\naffect Israel’s business environment, including through reduced willingness of foreign investors to invest or conduct business\nin Israel, increased currency volatility, adverse actions or outlooks by credit rating agencies, higher interest rates, increased volatility\nin securities markets, and other adverse macroeconomic effects. These developments could also adversely affect the Israeli labor market\nor contribute to political instability or civil unrest. To the extent that any of these factors persist or intensify, they could have\na material adverse effect on our business, results of operations, financial condition and our ability to raise additional capital on\nfavorable terms, or at all.\n\n** **\n\n**Pursuant to the terms of the Israeli government\ngrants we received for research and development expenditures, we are obligated to pay certain royalties on our revenues to the Israeli\ngovernment. In addition, the terms of Israeli government grant we received require us to satisfy specified conditions and to make additional\npayments in addition to repayment of the grants upon certain events.**\n\n \n\nOur research and development\nefforts have been financed, in part, through funding from the IIA and the BIRD Foundation. We have received grants from the Government\nof the State of Israel through the IIA (formerly the OCS) for the financing of a portion of (i) our research and development expenditures\nand (ii) a portion of the development of our manufacturing line, pursuant to the Innovation Law and related regulations and guidelines.\nAs of December 31, 2025, we had received funding from the IIA and the BIRD Foundation in the total amount of approximately $5.6\nmillion and $0.11 million, respectively. As of December 31, 2025, we had not paid any royalties to the IIA and had a contingent\nobligation to the IIA with respect to such funding in the amount of approximately $6.2 million. In addition, in January 2021, we\nreceived an IIA grant approval to support the funding of our transition from research and development to manufacturing. The final IIA\ngrant amounted to $620,000 (NIS 2.25 million) (along with a co-investment by us of the same amount), which we are not required to repay\nto the IIA, subject to the terms and conditions set forth in the grant approval, of which we received approximately $0 (NIS 0) in 2025\nand 2024, and $225,000 (NIS 816,075) in February 2023. We may apply for additional IIA grants in the future; however, there is no\nassurance that such applications will be approved in the amount requested or at all. Furthermore, the funds available for IIA grants\nout of the annual budget of the State of Israel have been reduced in the past and may be further reduced in the future. We cannot predict\nwhether we will be entitled to any future grants, or the amounts of any such grants.\n\n \n\n35\n\n \n\n \n\nUnder the terms of the Innovation\nLaw as currently in effect, products developed with IIA funding are required to be manufactured in Israel, unless the IIA approved grant\nprogram includes a pre-determined portion of manufacturing that may be performed outside Israel (as certain of our IIA approved grants\nincluded). The approval of the IIA is required for the transferring of manufacturing outside Israel in excess of such pre-determined\nportion (however, only a notice to the IIA, as opposed to approval, is required for the transfer outside Israel of up to 10% of the cumulative\nmanufacturing in excess of such pre-approved portion). If manufacturing of IIA-funded products is transferred outside Israel (following\nIIA approval) in excess of the pre-determined percentage included in the grant approval, then the royalty repayment rate will be increased\nby 1% with respect to the additional approved percentage to be manufactured outside Israel and the royalty repayment for the entire approved\nprogram may be increased to up to three times the amount of the grants received, depending on the percentage manufactured outside Israel\n(plus accrued interest). We may explore from time to time whether certain other components of C-Scan can be assembled outside of Israel.\nFor example, we may in the future explore whether it would be possible to assemble the capsule without the X-ray source in Israel and\nhave the X-ray source subsequently manufactured and assembled into C-Scan at a certified radioisotope production facility or at a distribution\ncenter outside Israel.\n\n \n\nOver the years, we received\napproval of grant applications that included a certain predetermined percentage of manufacturing to be performed outside of Israel of\nthe X-ray source but additional examination of these approvals and consequent manufacturing is required to determine liabilities to the\nIIA, if any. IIA prior approval is also required for the transfer of IIA-funded know-how to a third party outside of Israel (including\nby way of license), which we may not receive (and any such approval would typically be subject to payment of a redemption fee, calculated\naccording to a formula under the Innovation Law, which may be in the amount of up to six times the amount of the grants received less\npaid royalties, if any, and depreciation, but no less than the total grants received), plus accrued interest. Even following the full\nrepayment of any IIA grants, we must nevertheless continue to comply with the requirements of the Innovation Law and related regulations\nand guidelines. The foregoing restrictions and requirements for payment may impair our ability to sell our technology assets outside\nof Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel.\nFurthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology\nor know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to\npay to the IIA.\n\n \n\nIf we fail to comply with\nany of the conditions and restrictions imposed by the Innovation Law and related regulations and guidelines, or by the specific terms\nunder which we received the grants, we may be required to refund any grants previously received together with interest and penalties,\nand, in certain circumstances, may be subject to criminal charges.\n\n** **\n\n**Your rights and responsibilities as a shareholder\nare governed by Israeli law, which differ in some material respects from the rights and responsibilities of shareholders of U.S. companies.**\n\n \n\nThe rights and responsibilities\nof the holders of our ordinary shares are governed by our amended articles of association and by Israeli law. These rights and responsibilities\ndiffer in some material respects from the rights and responsibilities of shareholders in U.S. based corporations. In particular, a shareholder\nof an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations\ntowards the company and other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting\nat a general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s\nauthorized share capital, mergers and acquisitions and certain related party transactions requiring shareholder approval under Israeli\nlaw. In addition, a controlling shareholder of an Israeli company or a shareholder who is aware that it possesses the power to determine\nthe outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company or has other\npowers towards the company, has a duty of fairness toward the company. There is limited case law available to assist us in understanding\nthe nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations\nand liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.\n\n \n\n36\n\n \n\n** **\n\n**It may be difficult to enforce a judgment\nof a U.S. court against us, certain of our officers and directors or the Israeli experts named in this Annual Report in Israel or the\nUnited States, to assert U.S. securities laws claims in Israel or to serve process on certain of our officers and directors and these\nexperts.**\n\n \n\nWe are incorporated in Israel.\nA majority of our executive officers and directors are not residents of the United States, and a substantial portion of our assets are\nlocated outside the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on\nthe civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced\nby an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert\nU.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation\nof U.S. securities laws on the grounds that Israel is not the most appropriate forum in which to bring such a claim. In addition, even\nif an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law\nis found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming\nand costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that\naddresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may\nnot be able to collect any damages awarded by either a U.S. or foreign court.\n\n** **\n\n**Provisions of Israeli law and our amended\narticles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, us, even when the terms of such a\ntransaction are favorable to us and our shareholders.**\n\n \n\nIsraeli corporate law regulates\nmergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving\ndirectors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example,\na full tender offer for all of a public company’s issued and outstanding shares can only be completed if the acquirer receives\npositive responses from the holders of at least 95% of the issued share capital and the approval of a majority of the offerees that do\nnot have a personal interest in the tender offer, unless at least 98% of the company’s outstanding shares are tendered. Furthermore,\nthe shareholders, including those who indicated their acceptance of the tender offer (unless the acquirer stipulated in its tender offer\nthat a shareholder that accepts the offer may not seek appraisal rights), may, at any time within six months following the completion\nof the tender offer, petition an Israeli court for an appraisal right, to alter the consideration for the acquisition. In addition, a\nstatutory merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger\nwas filed by each party with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger was\napproved by the shareholders of each party.\n\n** **\n\n**We may become subject to claims for payment\nof compensation for assigned service inventions by our current or former employees, which could result in litigation and adversely affect\nour business.**\n\n \n\nUnder the Israeli Patents\nLaw, 5727-1967, or the Patents Law, inventions conceived by an employee during the scope of his or her employment are regarded as “service\ninventions” and are owned by the employer, absent a specific agreement between the employee and employer giving the employee service\ninvention rights. Section 134 of the Patents Law provides that if no agreement between an employer and an employee exists that prescribes\nwhether, to what extent, and on what conditions the employee is entitled to remuneration for his or her service inventions, then such\nmatters may, upon application by the employee, be decided by a government-appointed compensation and royalties committee established\nunder the Patents Law, or the Committee. Although our employees have agreed to assign to us all rights to any intellectual property created\nin the scope of their employment and most of our current employees, including all those involved in the development of our intellectual\nproperty, have agreed to waive their economic rights with respect to service inventions, we cannot assure you that claims will not be\nbrought against us by current or former employees demanding remuneration in consideration for assigned service inventions. If any such\nclaims were filed, we could potentially be required to pay remuneration to our current or former employees for such assigned service\ninventions, or be forced to litigate such claims, which could negatively affect our business.\n\n** **\n\n37\n\n \n\n** **\n\n**Risks Related to Ownership of our Ordinary\nShares**\n\n** **\n\n**We incur and will continue to incur significant\ncosts as a result of operating as a public company in the United States, and our management is required to devote substantial time to\ncompliance initiatives.**\n\n \n\nAs a public company whose\nsecurities are traded in the United States, we incur and will continue to incur significant legal, accounting and other expenses. The\nSarbanes-Oxley Act of 2002, as well as rules and regulations implemented by the U.S. Securities and Exchange Commission and the Nasdaq,\nimpose various requirements on public companies, including requiring the establishment and maintenance of effective disclosure and financial\ncontrols. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Changes in the laws,\nrules and regulations affecting public companies would result in increased costs to us as we respond to their requirements. These rules\nand regulations could make it more difficult or more expensive for us to obtain certain types of insurance, including directors’\nand officers’ liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantial costs\nto obtain or maintain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract\nand retain qualified persons to serve on our Board of Directors, our Board committees or as executive officers. We cannot predict or\nestimate the amount or timing of additional costs we may incur in order to comply with such requirements.\n\n** **\n\n**If we fail to maintain effective internal\ncontrol over financial reporting, the price of our ordinary shares may be adversely affected.**\n\n \n\nOur internal control over\nfinancial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have\nan adverse impact on the price of our ordinary shares. We are required to establish and maintain appropriate internal control over financial\nreporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public\ndisclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment\nof internal control over financial reporting may identify weaknesses and conditions that need to be addressed in our internal control\nover financial reporting or other matters that may raise concerns for investors. In addition, as a “non-accelerated filer,”\nwe are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting\nfirms provide an attestation report on the effectiveness of internal control over financial reporting. Decreased disclosures in our SEC\nfilings due to our status as a “non-accelerated filer” may make it harder for investors to analyze our results of operations\nand financial prospects and may make our ordinary shares a less attractive investment. Any actual or perceived weaknesses and conditions\nthat need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal\ncontrol over financial reporting may have an adverse impact on the price of our ordinary shares.\n\n** **\n\n**We may be unable to maintain compliance\nwith Nasdaq’s continued listing requirements, which could result in the delisting of our ordinary shares from the Nasdaq Capital\nMarket.**\n\n** **\n\nNasdaq has established certain\nstandards for the continued listing of a security on Nasdaq. On September 3, 2025, we received a deficiency letter from the Nasdaq Listing\nQualifications Department notifying us that we were not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires us to maintain\na minimum of $2,500,000 in shareholders’ equity. The letter further stated that we had 45 calendar days, or by October 20, 2025,\nto submit a plan to regain compliance with respect to the deficiency identified in the letter. We submitted the plan on October 20, 2025.\nOn January 30, 2026, we announced that we had regained compliance with Nasdaq’s minimum shareholders’ equity requirement;\nhowever, such compliance is conditional on our ability to maintain compliance on an ongoing basis. There can be no assurance that we\nwill be able to maintain compliance with Nasdaq’s continued listing requirements in the future. If we are delisted from Nasdaq,\nour ordinary shares may be eligible for trading on an over-the-counter market in the United States. In the event that we are not able\nto obtain a listing on another U.S. stock exchange or quotation service for our ordinary shares, it may be extremely difficult or impossible\nfor shareholders to sell their ordinary shares in the United States. Moreover, if we are delisted from Nasdaq, but obtain a substitute\nlisting for our ordinary shares in the United States, it will likely be on a market with less liquidity, and therefore, experience potentially\nmore price volatility than experienced on Nasdaq. Shareholders may not be able to sell their ordinary shares on any such substitute U.S.\nmarket in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result\nof these factors, if our ordinary shares are delisted from Nasdaq, the price of our ordinary shares is likely to decline. A delisting\nof our ordinary shares from Nasdaq could also adversely affect our ability to obtain financing for our operations and/or result in a\nloss of confidence by investors, or employees.\n\n \n\n38\n\n \n\n** **\n\n**We are a foreign private issuer and, as\na result, we are not subject to U.S. proxy rules and are subject to the Securities Exchange Act of 1934 reporting obligations that, to\nsome extent, are more lenient and less frequent than those applicable to a U.S. issuer.**\n\n \n\nWe report under the Securities\nExchange Act of 1934, as amended, or the Exchange Act as a foreign private issuer. Because we qualify as a foreign private issuer under\nthe Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including (i)\nthe sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered\nunder the Exchange Act; (ii) the liability for insiders who profit from trades made in a short period of time; and (iii) the rules under\nthe Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified\ninformation, or current reports on Form 8-K, upon the occurrence of specified significant events. We intend to furnish quarterly reports\nto the SEC on Form 6-K for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act, although\nthe information we furnish may not be the same as the information that is required in quarterly reports on Form 10-Q for U.S. domestic\nissuers. In addition, while U.S. domestic issuers that are not large-accelerated filers or accelerated filers are required to file their\nannual reports on Form 10-K within 90 days after the end of each fiscal year, foreign private issuers are not required to file their\nannual report on Form 20-F until 120 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation\nFD (Fair Disclosure), aimed at preventing issuers from making selective disclosures of material information. Although we intend to make\ninterim reports available to our shareholders in a timely manner, you may not have the same protections afforded to shareholders of companies\nthat are not foreign private issuers.\n\n** **\n\n**As a foreign private issuer, we are permitted,\nto follow, and follow certain home country corporate governance practices instead of otherwise applicable Nasdaq requirements, which\nmay result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.**\n\n \n\nAs a foreign private issuer,\nwe are permitted to follow certain home country corporate governance practices instead of those otherwise required under the listing\nrules of the Nasdaq for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things,\ndirector nomination procedures, the approval of compensation of officers and quorum requirements at general meetings of our shareholders.\nIn addition, we follow our home country law instead of the listing rules of the Nasdaq that require us to obtain shareholder approval\nfor certain dilutive events, such as the establishment or amendment of certain equity based compensation plans, an issuance that will\nresult in a change of control of the Company, certain transactions other than a public offering involving issuances of a 20% or greater\ninterest in the Company, and certain acquisitions of the stock or assets of another company. Following our home country governance practices\nas opposed to the requirements that would otherwise apply to a United States company listed on Nasdaq may provide less protection to\nyou than what is accorded to investors under the listing rules of the Nasdaq Stock Market applicable to domestic U.S. issuers.\n\n** **\n\n**If we lose our status as a foreign private\nissuer under the SEC’s rules, our compliance costs will increase.**\n\n \n\nWe would lose our foreign\nprivate issuer status if more than 50 percent of our outstanding voting securities are directly or indirectly held of record by residents\nof the United States and if a majority of our directors or executive officers are U.S. citizens or residents and we fail to meet additional\nrequirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory\nprovisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs for us\nunder U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be\nrequired to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and\nextensive than the forms available to a foreign private issuer. We would also be required to follow U.S. proxy disclosure requirements,\nincluding the requirement to disclose more detailed information about the compensation of our senior executive officers on an individual\nbasis. We may also be required to modify certain of our policies to comply with corporate governance practices associated with U.S. domestic\nissuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions\nfrom certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.\n\n** **\n\n39\n\n \n\n** **\n\n**Exchange rate fluctuations between the\nU.S. dollar and the NIS and the Euro and inflation may negatively affect our earnings and we may not be able to hedge our currency exchange\nrisks successfully.**\n\n \n\nThe dollar is our functional\nand reporting currency. However, a significant portion of our operating expenses, including personnel and facilities related expenses,\nare incurred in NIS. As a result, we are exposed to the risks that the NIS may appreciate relative to the U.S. dollar, or, if the NIS\ninstead depreciates relative to the U.S. dollar, that the inflation rate in Israel may exceed such rate of depreciation of the NIS, or\nthat the timing of such depreciation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel\nwould increase and our dollar- denominated results of operations would be adversely affected. In 2025, the NIS appreciated by approximately\n12.5% relative to the U.S. dollar, compared to a depreciation of 0.80% in 2024, a depreciation of 3.07% in 2023, and a depreciation of\n13.2% in 2022. The rate of inflation in Israel was 2.6% in 2025, compared to 3.2% in 2024, and 4.2% and 5.3% in 2023 and 2022, respectively.\nAlthough we do not expect such appreciation and inflation to have a material adverse effect on our financial condition into fiscal 2026,\nwe cannot predict any future trends in the rate of inflation in Israel or whether the NIS will appreciate or depreciate against the U.S.\ndollar. In addition, we may incur operating expenses denominated in Euros, and therefore, our operating results may also be subject to\nfluctuations due to changes in the U.S. dollar/Euro exchange rate. We cannot predict any future trends in the rate of inflation in Israel\nor the rate of devaluation (if any) of the NIS, the Euro and other foreign currencies against the U.S. dollar. Although we engage in\ncurrency hedging arrangements from time to time, these measures may not adequately protect us from fluctuations in the exchange rates\nof the NIS, the Euro and other foreign currencies in relation to the U.S. dollar (and/or from inflation of such foreign currencies) and\ninvolve costs and risk of their own.\n\n** **\n\n**We have never declared or paid a dividend\nand currently do not intend to pay cash dividends in the foreseeable future. Any return on investment may be limited to the value of\nour securities.**\n\n \n\nWe have never declared and\ndo not anticipate paying cash dividends on our ordinary shares in the foreseeable future. Our Board of Directors has discretion to declare\nand pay dividends on our ordinary shares and will make any determination to do so based on a number of factors, such as our operating\nresults, financial condition, current and anticipated cash needs and other business and economic factors that our Board of Directors\nmay deem relevant. In addition, we are only permitted to pay dividends out of “profits” (as defined by the Israeli Companies\nLaw, 1999, or the Israeli Companies Law), provided that there is no reasonable concern that the dividend distribution will prevent us\nfrom meeting our existing and foreseeable obligations, as they become due. If we do not pay dividends, our ordinary shares may be less\nvaluable because a return on your investment will only occur if the trading price of our securities appreciates. Further, you should\nnot rely on an investment in us if you require dividend income from your investments.\n\n** **\n\n**If securities or industry analysts do not\npublish research or reports about us or our business or publish unfavorable research about us or our business, the price of our securities\nand their trading volume could decline.**\n\n \n\nThe trading market for our\nsecurities will depend in part on the research and reports that securities or industry analysts publish about us or our business. Management\nis not aware of any research coverage by securities and industry analysts. If one or more of the analysts who covers us downgrades our\nsecurities, the price of our securities would likely decline. We do not have control over these analysts, and we do not have commitments\nfrom them to continue to write research reports about us or our business. The price of our ordinary shares could decline if one or more\nequity research analysts downgrade our ordinary shares or if those analysts issue other unfavorable commentary or cease publishing reports\nabout us or our business.\n\n \n\n40\n\n \n\n** **\n\n**Our stock price has and may be subject\nto fluctuation, and purchasers of our securities could incur substantial losses.**\n\n \n\nOur stock price has been\nsubject to considerable fluctuation since our initial public offering in February 2015. The stock market in general has experienced\nextreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility,\ninvestors may not be able to sell their securities at or above the purchase price. The market price for our ordinary shares on Nasdaq\nmay fluctuate as a result of a number of factors, some of which are beyond our control, including, among others:\n\n \n\n \n●\nwe may\nnot be able to complete the development of or redesign our products and technology, or redeploy our technology into other potentially\nviable products;\n\n \n\n \n●\ninability\nto complete the Merger;\n\n \n\n \n●\ninability\nto obtain the approvals necessary to commence further clinical trials and/or unsatisfactory results of clinical trials;\n\n \n\n \n●\nannouncements\nof regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes\nor delays in the regulatory review process;\n\n \n\n \n●\nany intellectual\nproperty infringement actions in which we may become involved;\n\n \n\n \n●\nannouncements\nconcerning our competitors or the medical device industry in general;\n\n \n\n \n●\nachievement\nof expected product sales and profitability or our failure to meet expectations;\n\n \n\n \n●\nour commencement\nof, or involvement in, litigation;\n\n \n\n \n●\nany major\nchanges in our Board of Directors or management;\n\n \n\n \n●\nlegislation\nin the United States relating to the sale or pricing of medical device;\n\n \n\n \n●\nfuture\nsubstantial sales of our ordinary shares;\n\n \n\n \n●\nchanges\nin earnings estimates or recommendations by securities analysts, if our ordinary shares are covered by analysts;\n\n \n\n \n●\nthe trading\nvolume of our ordinary shares; or\n\n \n\n \n●\nnatural\ndisasters and political and economic instability, including wars, terrorism, political unrest, results of certain elections and votes,\nemergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency, including\nfor example, the COVID-19 pandemic), boycotts, adoption or expansion of government trade restrictions, and other business restrictions.\n\n \n\nIn addition, the stock market\nin general, and Nasdaq in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate\nto the operating performance of small companies. Broad market and industry factors may negatively affect the market price of our ordinary\nshares, regardless of our actual operating performance. Further, a systemic decline in the financial markets and related factors beyond\nour control may cause our share price to decline rapidly and unexpectedly. See “*Risk Factors - Risks Related to Ownership of\nour Ordinary Shares - We may be unable to maintain compliance with Nasdaq’s continued listing requirements, which could result in the delisting of our ordinary shares from the Nasdaq Capital Market.”*\n\n \n\n41\n\n \n\n** **\n\n**The trading market for our ordinary shares\nis not always active, liquid and orderly, which may inhibit the ability of our shareholders to sell ordinary shares.**\n\n \n\nSince our initial public\noffering in February 2015, the trading market for our ordinary shares has not always been active, liquid or orderly. The lack of\nan active market at times may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider\nreasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our\nability to raise capital by selling shares.\n\n** **\n\n**We have broad discretion in how we use\nthe net proceeds from our financings, and we may not use these proceeds effectively.**\n\n \n\nOur management has broad\ndiscretion as to the application of the net proceeds of our financings. Our shareholders may not agree with the manner in which our management\nchooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not\nincrease our market value.\n\n** **\n\n**Our business, operating results and growth\nrates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments with respect\nto financial institutions and associated liquidity risk.**\n\n \n\nOur business depends on\nthe economic health of the global economies. If the conditions in the global economies remain uncertain or continue to be volatile, or\nif they deteriorate, including as a result of the impact of military conflict, such as the war between Russia and Ukraine, armed conflict\nin Israel and Gaza, terrorism or other geopolitical events, our business, operating results and financial condition may be materially\nadversely affected. See “*Risk Factors - Risks Related to Our Operations in Israel - Our principal offices, research and development\nfacilities our manufacturing sites and some of our suppliers are located in Israel and, therefore, our business, financial condition\nand results of operation may be adversely affected by political, economic and military instability in Israel*.” Economic weakness,\ninflation and increases in interest rates, limited availability of credit, liquidity shortages, trade restrictions and constrained capital\nspending could negatively affect our financial condition, results of operations or cash flows. In addition, the military conflict may\naffect the ability to purchase materials sourced in Russia. For example, one of our suppliers sources the enriched X-ray isotope substance\nused in C-Scan from Russia. To the extent we continue to use such component in any redesigned or future products, we could experience\ndisruptions in our supply chain in the future if sanctions and export control restrictions on Russian entities and individuals are still\nimposed, and we may not be able to find alternative sources for such key material in a timely manner.\n\n \n\nIncreases in inflation raise\nour costs for commodities, labor, materials and services and other costs required to operate our business, and failure to secure these\non reasonable terms may adversely impact our financial condition. Additionally, increases in inflation, geopolitical developments and\nglobal supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest\nrate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure to adequately\nrespond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.\n\n \n\nIn addition, adverse developments\naffecting the financial services industry, such as the closures of SVB and Signature Bank and their placement into receivership with\nthe Federal Deposit Insurance Corporation, other actual events or concerns involving liquidity and defaults or non-performance by financial\ninstitutions or transactional counterparties, could have a material adverse effect on our business, financial condition, results of operations\nand cash flows.\n\n** **\n\n42\n\n \n\n** **\n\n**Risks Related to Taxation**\n\n** **\n\n**There is a risk that we could be treated\nas a domestic (U.S.) corporation for U.S. federal income tax purposes by reason of the transactions related to our acquisition of all\nof the business operations and substantially all of the assets of Check-Cap LLC on May 31, 2009, or the Reorganization.**\n\n \n\nSection 7874(b) of the Internal\nRevenue Code of 1986, as amended, or the Code, generally provides that a foreign corporation (i.e., a corporation created or organized\nunder the laws of a jurisdiction outside of the United States) would be treated as a domestic (U.S.) corporation for U.S. federal income\ntax purposes if, pursuant to a plan or a series of related transactions, (1) the foreign corporation acquires, directly or indirectly,\nsubstantially all of the assets of a domestic corporation (or substantially all of the properties constituting a trade or business of\na domestic partnership), (2) after the acquisition, the former shareholders of the acquired corporation by reason of holding shares of\nthe acquired corporation (or, in the case of an acquisition with respect to a domestic partnership, the former partners of the domestic\npartnership by reason of holding a capital or profits interest in the domestic partnership) own at least 80% of the stock (by vote or\nvalue) of the acquiring corporation, and (3) after the acquisition, the expanded affiliated group that includes the acquiring corporation\ndoes not have substantial business activities in the foreign country in which, or under the laws of which, the acquiring corporation\nis created or organized when compared to the total business activities of such expanded affiliated group. On the basis of analysis of\nthe relevant facts and circumstances and the relevant law (including the temporary regulations under Section 7874 applicable at the time\nof the Reorganization), it was determined that the third condition described in the preceding sentence was not met with respect to the\nReorganization and, therefore, that the inversion tax rules of Section 7874(b) would not apply to treat us as a domestic corporation\nfor U.S. federal income tax purposes. However, since this determination was made on the basis of all of the relevant facts and circumstances,\nand it is not clear which facts and circumstances the Internal Revenue Service, or the IRS, may consider more important than others,\nthis conclusion is not free from doubt.\n\n \n\nIf Section 7874(b) were\nto apply to the Reorganization (and we were to be treated as a domestic corporation for U.S. federal income tax purposes), then, among\nother things, (i) we would be subject to U.S. federal income tax on our worldwide taxable income (if and when we have taxable income);\n(ii) certain payments (e.g., interest and dividends) that we make (or have made) to our foreign investors may be (or may have been) subject\nto U.S. withholding taxes; (iii) we may be subject to significant penalties for the failure to file certain tax returns and reports,\nincluding reports with respect to our foreign bank accounts; and (iv) the U.S. unitholders of Check-Cap LLC would not have been subject\nto U.S. federal income tax on royalties that are deemed to be paid to them under Section 367(d) of the Code as a result of the Reorganization.\nAs discussed under Item 5B “Operating and Financial Review and Prospects - Liquidity and Capital Resources - Application of Critical\nAccounting Policies and Estimates - Royalties provision - Reimbursement liability to Check-Cap LLC unitholders,” as part of the\nReorganization, we committed to reimburse the unitholders of Check-Cap LLC for any tax burdens that may be imposed on them due to the\nReorganization, including royalties that are deemed to be paid to the U.S. unitholders under Section 367(d) of the Code.\n\n \n\nProspective investors are\nurged to consult their own advisors on these issues. The balance of this discussion, including the discussion under Item 10E “Additional\nInformation - Taxation - U.S. Federal Income Taxation,” assumes that we will be and have been treated as a foreign corporation\nfor U.S. federal income tax purposes.\n\n** **\n\n**We may be eligible for tax benefits from\ngovernment programs, which require us to meet certain conditions, including regarding the location of our property, plant and equipment\nand manufacturing in Israel. We can provide no assurance that we would continue to be eligible for such benefits and/or that any such\nbenefits will not be terminated in the future.**\n\n \n\nOur manufacturing facilities\nin Israel may qualify as a “Benefited Enterprise” under the Israeli Law for Encouragement of Capital Investments, 5719-1959,\nwhich would entitle us to receive certain tax benefits. In order to be eligible for such benefits, we would be required to meet certain\nconditions, including the making of a minimum capital investment in our productive assets and the carrying on of a required portion of\nour manufacturing in Israel. The amount of the benefit will be determined in accordance with various conditions, including the location\nof our property, plant and equipment and the location of certain of our sub-contractors. If we cease to meet the required conditions\nfor eligibility, the tax benefits could be cancelled and we could be required to pay increased taxes or to refund the amounts of the\nbenefits received with interest and penalties. We can provide no assurance as to the amount of future capital investment in our productive\nassets, our future manufacturing location and the future location of our property, plant and equipment and certain of our sub-contractors,\nand therefore, we cannot provide assurance that we will be eligible for such tax benefits or assurance as to the amount of such tax benefits.\nEven if we continue to meet the relevant requirements, the tax benefits that Benefited Enterprises receive may not be continued in the\nfuture at their current levels or at all. If these tax benefits were reduced or eliminated, the amount of taxes that we would be required\nto pay would likely increase, as all of our operations would consequently be subject to corporate tax at the standard rate, which could\nadversely affect our results of operations. See Item 10E “Additional Information-Taxation-Israeli Tax Considerations and Government\nPrograms-Law for the Encouragement of Capital Investments, 5719-1959” for additional information concerning these tax benefits.\n\n** **\n\n43\n\n \n\n** **\n\n**There is a risk that we may be classified\nas a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S. investors.**\n\n \n\nIn general, we will be treated\nas a passive foreign investment company, or a PFIC, for any taxable year in which either (1) at least 75% of our gross income (including\nour pro rata share of the gross income of our 25% or more- owned corporate subsidiaries) is passive income or (2) at least 50% of the\naverage value of our assets (including our pro rata share of the assets of our 25% or more-owned corporate subsidiaries) is attributable\nto assets that produce, or are held for the production of, passive income. Passive income generally includes dividends, interest, rents,\nroyalties, and gains from the disposition of passive assets. If we are determined to be a PFIC for any taxable year (or portion thereof)\nthat is included in the holding period of a U.S. Holder (as defined in Item 10E “Additional Information-Taxation-U.S. Federal Income\nTaxation”) of our securities, the U.S. Holder may be subject to increased U.S. federal income tax liability upon a sale or other\ndisposition of our securities or the receipt of certain excess distributions from us and may be subject to additional reporting requirements.\nBased on the past and projected composition and classification of our income and assets, we believe that we were a PFIC for the taxable\nyear ended December 31, 2025 and may be a PFIC for the taxable year ending December 31, 2026. Our actual PFIC status for our\ncurrent taxable year or any subsequent taxable year is uncertain and will not be determinable until after the end of such taxable year.\nAccordingly, there can be no assurance with respect to our status as a PFIC for our taxable year ending December 31, 2026 or any\nsubsequent taxable year.\n\n \n\nU.S. investors are urged\nto consult their own tax advisors regarding the possible application of the PFIC rules. For more information, see Item 10E “Additional\nInformation-Taxation-U.S. Federal Income Taxation-U.S. Holders-Passive Foreign Investment Company Rules.”"}