{"url_path":"/sec/rdcm/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-03-31","source_url":"https://www.sec.gov/Archives/edgar/data/1016838/0001213900-26-036862-index.html","accession_number":"0001213900-26-036862","cik":"0001016838","ticker":"RDCM","issuer_name":"RADCOM LTD","edgar_url":"https://www.sec.gov/Archives/edgar/data/1016838/0001213900-26-036862-index.html","primary_entity_key":"0001016838","primary_entity_name":"RADCOM LTD"},"word_count":12410,"has_tables":true,"body_markdown":"**ITEM\n3. KEY INFORMATION**\n\n \n\n \n**A.**\n**[RESERVED.]**\n\n \n\n \n**B.**\n**CAPITALIZATION AND INDEBTEDNESS**\n\n \n\nNot\napplicable.\n\n \n\n \n**C.**\n**REASONS FOR THE OFFER\nAND USE OF PROCEEDS**\n\n \n\nNot\napplicable.\n\n \n\n \n**D.**\n**RISK FACTORS**\n\n \n\n*Investing\nin our ordinary shares involves a high degree of risk. You should carefully consider the risks described below before investing in our\nordinary shares. Our business, operating results and financial condition could be seriously harmed due to any of the following risks,\namong others. If we do not successfully address the risks to which we are subject, we could experience a material adverse effect on our\nbusiness, results of operations and financial condition and our share price may decline. We cannot assure you that we will successfully\naddress any of these risks. These disclosures reflect the Company*’*s beliefs and opinions as to factors that could materially\nand adversely affect the Company and its securities in the future. References to past events are provided by way of example only and\nare not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood\nof occurring in the future.*\n\n* *\n\n**Risks\nRelated to Our Business and Our Industry**\n\n \n\n**Our\nbusiness is dependent on a limited number of significant customers and the loss of any significant customer could materially adversely\naffect our results of operations.**\n\n \n\nOur\nbusiness is dependent on a limited number of significant customers. For example, our three largest customers accounted for approximately\n86% of our revenue in fiscal year 2025. The loss of any significant customer, a significant decrease in business from any such customer,\nor a reduction in customer revenue due to adverse changes in the terms of our contractual arrangements, market conditions, customer circumstances\nor other factors could have a material adverse effect on our results of operations and financial condition. Revenue from individual customers\nmay fluctuate from time to time based on the commencement, scope and completion of projects or other engagements, the timing and magnitude\nof which may be affected by market or other conditions.\n\n \n\n**We\nmay lose significant market share as a result of intense competition in the market for our existing and future solutions.**\n\n \n\nSeveral\ncompanies compete with us in the market for service assurance and Customer Experience Management that offer cloud-native, software-based,\nautomated service assurance solutions. We expect that competition will increase in the future, both with respect to solutions that\nwe currently offer and solutions that we are developing and the use of AI within the solutions. Moreover, vendors of data communications\nand telecommunications networks with whom we partner or may partner, may in the future incorporate into their products capabilities similar\nto ours, thus reducing the demand for our solutions. Some of our existing and potential competitors have substantially greater resources,\nincluding financial, technological, engineering, manufacturing, and marketing and distribution capabilities, and several of them may\nenjoy greater market recognition than us. We may not be able to compete effectively with our competitors. A failure to do so\ncould adversely affect our revenues and profitability.\n\n \n\n1\n\n \n\n \n\n**The\npace at which we grow our business depends on our current and potential customers’ internal processes and decisions to deploy new\nassurance systems and our ability to secure new customers, as well as retain and expand business with existing customers. Our expectations\nregarding the pace in which current and potential customers’ transition to new assurance solutions may not materialize.**\n\n \n\nThe\nneed for a new assurance system increases for CSPs transitioning to 5G. The pace of transition to 5G and timeframe for reaching a mature\ninfrastructure for 5G is dependent on CSPs’ internal decisions regarding 5G technology implementation, timing, and budgeting. Such\ndecisions may be affected by the overall pace of 5G deployment in the industry as well as by other technological trends such as the transition\nto fully virtualized cloud-native networks. Our ability to grow our business is further dependent on our ability to secure new customers.\nTo the extent that CSPs will not choose our solution, the pace in which we could grow our business may be adversely affected.\n\n \n\nThe\npace at which we deploy our solutions is directly affected by the pace of CSPs’ internal processes, the pace of maturation of the\n5G market and the pace of CSPs’ decisions to deploy a new assurance system. To the extent that CSPs elect not to deploy 5G, or\nto delay the transition to cloud-native 5G networks, or delay decisions to deploy new assurance systems our sales cycles may lengthen,\nand the growth of our business may be adversely affected.\n\n** **\n\nWe\nbelieve that most of the industry’s leading CSPs will roll out 5G networks which will in turn promote the adoption of cloud-native,\nsoftware-based and AI-based, assurance solutions. Our expectation is that the market for our solutions will materialize and gain momentum\nas a result. However, our expectations may not be correct, and the actual pace of cloud-native, network transformation and/or 5G rollout\nmay take longer than we anticipate or may not occur at all. If the demand for cloud-native, software-based networks and new assurance\nsolutions does not continue to grow or the 5G rollout does not materialize, our business, financial condition and results of operations\nmay suffer.\n\n \n\n**Disruptions\nto our IT systems due to system failures or cybersecurity attacks may impact on our operations, which would materially adversely affect\nour reputation and business.**\n\n \n\nWe\nbelieve that an appropriate IT infrastructure is important in order to support our daily operations and the growth of our business. If\nwe experience difficulties in implementing new or upgraded information systems or experience significant system failures, or if we are\nunable to successfully modify our management information systems or respond to changes in our business needs, we may not be able to effectively\nmanage our business, and we may fail to meet our reporting obligations. Additionally, if our current business continuity plan, back-up\nstorage arrangements and our disaster recovery plan are not operated as planned, we may not be able to effectively recover our information\nsystem in the event of a crisis, which may materially affect our business and results of operations.\n\n \n\nIn the current environment,\nthere are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions,\nindustrial espionage, employee malfeasance and human or technological errors. High-profile security breaches at other companies and in\ngovernment agencies have increased in recent years, and security industry experts and government officials have warned about the risks\nof hackers and cyberattacks targeting businesses such as ours. Computer hackers and others routinely attempt to breach the security of\ntechnology products, services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly\nprovide access to systems or data. Although we have invested in measures to reduce these risks, we can provide no assurance that our current\nIT systems are fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats.\nLegislative or regulatory action in these areas is also evolving, and we may be unable to adapt our IT system to accommodate these changes.\nWe have experienced and expect to continue to experience attempted cyberattacks of our IT networks. Although none of these attempted cyberattacks\nhas had a material adverse effect on our operations or financial condition thus far, we cannot guarantee that any such incidents will\nnot have a material adverse effect on our operations or financial condition in the future. Furthermore, a cyberattack that bypasses our\nIT security systems, causing an IT security breach could lead to a material disruption of our information systems, the loss of business\ninformation and loss of service to our customers. Additionally, we have access to sensitive customer information in the ordinary course\nof business. If a significant data breach occurs and we lose customer information, our reputation may be materially and adversely affected,\nour customers’ confidence in us may be diminished, or we may be subject to legal claims, any of which may contribute to the loss\nof customers and have a material adverse effect on our business and result of operations. In addition, the continued worldwide threat\nof terrorism and heightened security in response to such threat may cause further disruptions and create further uncertainties or may\notherwise materially adversely affect our business. To the extent that such disruptions or uncertainties result in delays or cancellations\nof customer orders, or in theft, destruction, loss, misappropriation or release of our confidential data or our intellectual property,\nour business and results of operations could be materially and adversely affected.\n\n \n\n2\n\n \n\n \n\n**A\nreduction in some CSPs’ revenues and profitability could lead to decreased investment in capital equipment and infrastructure which\nmay, in turn, affect our revenues and results of operations. A continued slowdown in our customers’ investment in capital equipment\nand infrastructure might materially and adversely affect our revenues and results of operations.**\n\n \n\nOur\nfuture success is dependent upon the continued growth of the telecommunications industry as well as the specific sectors that we target,\nwhich currently include, among others, 5G mobile, Internet of Things, or IoT, 4G mobile, Voice over Long Term Evolution, or VoLTE, Private\nNetworks and Roaming. During the last few years, some of the CSPs have experienced a reduction in their revenues from subscribers and\nlower profitability, which affected their investment budgets. This trend may continue. The global telecommunications industry and various\nsectors within the industry are evolving rapidly and it is difficult to predict its potential growth rate or future trends in technology\ndevelopment. Our future success also depends upon the increased utilization of our solutions by next-generation network operators and\nspecifically cloud-native networks on private and public clouds, who may not adopt our technology.\n\n \n\nDuring\nthe last few years, developments in the telecommunications industry have had a material effect on our existing and/or potential customers\nand may continue to have such an effect in the future. Such developments include changes in general global economic conditions, industry\nconsolidation, emergence of new competitors, commoditization of voice services, regulatory changes, and changes in the plans of CSPs\nto shift, transform and adapt their network operations to rollout 5G networks and cloud-native networks. Over the last few years, the\ntelecommunications industry has experienced financial pressures that have caused many in the industry to reduce investment in capital\nintensive projects, and in some cases, have led to restructurings. While the transformation of network operations to cloud-native networks\narise out of the desire of CSPs to reduce network infrastructure expense, thus creating opportunities for us, it also creates a downward\npressure on the prices of our solutions.\n\n** **\n\n**The\nmarket for our solutions is characterized by rapidly changing technology and we may be materially adversely affected if we do not respond\npromptly and effectively to such changes.**\n\n \n\nThe\ntelecommunications industry is characterized by rapidly changing technology, network infrastructure, and customer requirements and by\nevolving industry standards and frequent new product introductions. In addition, the nature of 5G deployments enables new services to\nbe introduced, which may require additional and costly development. These changes require us to constantly adapt and improve our solutions\nto meet changing industry requirements. If we are unable to stay ahead of industry trends or to timely and successfully complete the\ndevelopment of solutions supporting new standards and technologies such as 5G, our business may be affected as new requirements could\nreduce or shift the market for our solutions or require us to develop new solutions. Additionally, because new or enhanced telecommunications\nand data communications-related products developed by other companies could be incompatible with our solutions, our timely access to\ninformation concerning changes in technology, in customer requirements, and in industry standards, as well as our ability to anticipate\nsuch changes and develop and market new and enhanced solutions successfully and on a timely basis, will be significant factors in our\nability to remain competitive.\n\n \n\n**We\nmay enter into long-term sales agreements with large customers. Such agreements may prove unprofitable as our costs and product mix shift\nover the terms of the agreements.**\n\n** **\n\nWe\nmay enter from time to time into long-term sales agreements with large customers. We may be required under such agreements to sell our\nsolutions at fixed prices over the terms of the agreements. The costs we incur in fulfilling the agreements may vary substantially from\nour initial cost estimates. Any cost overruns that we cannot pass on to our customers could adversely affect our results of operations.\nIn the future, we may also be required under such agreements to sell solutions that we may otherwise wish to discontinue, thereby diverting\nour resources from developing more profitable or strategically important solutions.\n\n \n\n3\n\n \n\n \n\n**Our\nlarge customers have substantial negotiating leverage, which may require that we agree to terms and conditions that may have an adverse\neffect on our business.**\n\n \n\nLarge\nCSPs have substantial purchasing power and leverage in negotiating contractual arrangements with us. These customers may require us to\ndevelop additional features and may impose penalties on us for failure to deliver such features on a timely basis, or failure to meet\nperformance standards. As we seek to increase our sales to large CSPs, we may be required to agree to unfavorable terms and conditions\nwhich may decrease our revenues and/or increase the time it takes to convert orders into revenues and could result in an adverse effect\non our business, financial condition and results of operations. Similarly, some of our contracts may contain change in control provisions\nwhich may have an adverse effect on our business and results if exercised following a change in control transaction or, in the alternative,\nmay act as an impediment to certain change in control transactions.\n\n \n\n**Our\nstrategy to focus most of our sales efforts on Tier 1, Greenfield Operators and other leading CSPs in the North American, European, Japan\nand selected other markets may not be successful.**\n\n** **\n\nWe\nbelieve that the significant share of technology advances, including AI, cloud-native, software-based and 5G deployment activity are\nexpected to continue to take place in North America, Europe, Japan, selected CSPs in Asia-Pacific and selected CSPs in Latin America.\nWe have accordingly enhanced our presence and focused our sales and marketing resources in some of these markets. While we focus our\nsales and marketing resources in such selected markets, we cannot assure the selection of our solutions by Tier 1 CSPs, CSPs that build\nnew networks from scratch, or Greenfield Operators, or other leading CSPs operating in such markets and therefore we may not be successful\nin expanding our business as we plan.\n\n \n\n**Quarterly\nfluctuations and unpredictability in our results of operations may cause our share price to fluctuate or to decline.**\n\n \n\nWe\nhave experienced, and in the future may also experience, significant fluctuations in our quarterly results of operations. Factors\nthat may contribute to fluctuations in our quarterly results of operations including,\n\n \n\n \n●\nthe variation in size and\ntiming of individual purchases by our customers and the relatively long sales cycles for our solutions;\n\n \n\n \n●\nthe request for longer\npayment terms from us or long-term financing of customers’ purchases from us, as well as additional conditions tied to such\npayment terms;\n\n \n\n \n●\ncompetitive conditions\nin our markets;\n\n \n\n \n●\nthe timing of the introduction\nand market acceptance of new solutions or enhancements by us and by our customers, competitors and suppliers;\n\n \n\n \n●\nchanges in the level of\noperating expenses relative to revenues;\n\n \n\n \n●\nquality problems and supply\ninterruptions;\n\n \n\n \n●\nchanges in global or regional\neconomic conditions or in the telecommunications industry;\n\n \n\n \n●\ndelays in or cancellation\nof projects by customers;\n\n \n\n \n●\nchanges in the product\nmix;\n\n \n\n \n●\nthe size and timing of\napproval of grants from the Government of Israel; and\n\n \n\n \n●\nforeign currency exchange\nrates.\n\n \n\n4\n\n \n\n \n\nOur\ncosts of revenues consist of variable costs, which include labor and related costs, including costs incurred in software development\ncustomization for projects and deployment costs, the use of hardware, inventory write-offs, packaging, importation taxes, shipping and\nhandling costs, license fees for software components of third parties, warranty expenses, allocation of overhead expenses, subcontractors’\nexpenses, royalties to the IIA, and share-based compensation. A major part of our costs of sales is relatively variable and determined\nbased on our anticipated revenues. We believe, therefore, that quarter-to-quarter comparisons of our operating results may not be a reliable\nindication of future performance.\n\n \n\nOur\nrevenues in any quarter generally have been, and may continue to be, derived from a relatively small number of orders with relatively\nhigh average revenues per order. Therefore, the loss of any order or a delay in closing a transaction could have a significant impact\non our quarterly revenues and results of operations.\n\n \n\nIn\naddition, we may experience a delay in generating or recognizing revenues for several reasons, including revenue recognition accounting\nrequirements. In many cases, we cannot recognize revenue from an order prior to customer acceptance, which may take multiple months from\nthe commencement of the engagement and in some extreme cases may take more than twelve months. Therefore, a major part of the revenue\nfor any fiscal quarter may be derived from a backlog of orders under delivery and may not correlate to the customer’s order date\nor the delivery date.\n\n \n\nOur\nrevenues for a specific quarter may also be difficult to predict and may be affected if we experience a non-linear sales pattern. We\ngenerally experience significantly higher levels of sales orders towards the end of a quarter as a result of customers submitting their\norders late in the quarter. Furthermore, orders received towards the end of the quarter are usually not delivered within the same quarter\nand are usually only recognized as revenue at a later stage. If our revenues in any quarter remain level or decline in comparison to\nany prior quarter, our financial results for that quarter could be adversely affected.\n\n \n\nDue\nto the factors described above, as well as other unanticipated factors, our results of operations in future quarters could fail to meet\nthe guidance we may from time to time give to the public or the expectations of public market analysts or investors. If this occurs,\nthe price of our ordinary shares may be adversely affected.\n\n \n\n**Our\ngross margins may vary over time, and we may not be able to sustain or improve upon our recent levels of gross margin, which may have\nan adverse effect on our future profitability.**\n\n \n\nWe\nmay not be able to sustain or improve upon our recent levels of gross margin. Our gross margins may be adversely affected by numerous\nfactors, including, increased price competition, local taxes which may be incurred for direct sales, increased industry consolidation\namong our customers, which may lead to decreased demand for and downward pricing pressure on our solutions, changes in our customer mix,\ngeographic, product mix, distribution channels, increases in costs such as employment costs or third-party service or component costs,\nlosses on customer contracts, and increases in warranty costs. Further deterioration in gross margins, due to these or other factors,\nmay have a material adverse effect on our business, financial condition and results of operations.\n\n \n\n**Current\nmarket conditions, including inflation and recessionary pressures, could affect our growth and profitability.**\n\n** **\n\nInflation\nrates, geopolitical issues, increase in energy costs, interest rates, unstable global conditions and changes in currency exchange rates\nhave led to global economic instability. Such changes, and their impact on the global macro-economic environment, may result in a slowdown\nin the level of investments made by CSPs, including, the transition of CSPs to 5G, which can impact our business, operating results,\nand financial condition.\n\n \n\n5\n\n \n\n \n\n**Our\nsales derived from emerging market countries may be materially adversely affected by economic, exchange rates, regulatory and political\ndevelopments in those countries.**\n\n \n\nWe\nplan to continue to generate revenue from various emerging market countries which represent a relatively small portion of our existing\nbusiness and our expected growth. Economic or political turmoil in these countries could materially adversely affect our revenues and\nresults of operations. Our investments in emerging market countries may also be subject to risks and uncertainties, including unfavorable\ntaxation treatment, exchange rates, challenges in protecting our intellectual property rights, nationalization, inflation, currency fluctuations,\nor the absence of unexpected changes in, regulation as well as other unforeseeable operational risks.\n\n \n\n**Most\nof our customers usually require a detailed and comprehensive evaluation process before they order our solutions. Our sales process may\nbe subject to delays that could significantly decrease our revenues and result in the eventual cancellations of some sales opportunities.**\n\n \n\nAs\ncommon practice in our industry, our solutions generally undergo a lengthy evaluation process before we can sell them. In recent years,\nour customers have been conducting a more stringent and detailed evaluation of our solutions and decisions are subject to additional\nlevels of internal review. As a result, the sales cycle may be longer than anticipated. Multiple factors affect the length of the approval\nand evaluation process, including among others, the time involved for our customers to determine and announce their specifications, the\ntime required for our customers to process approvals for purchasing decisions, the technological priorities and budgets of our customers\nand the complexity of the solutions involved, and the need for our customers to obtain or comply with any required regulatory approvals. If\ncustomers delay project approval or extend anticipated decision-making timelines, or if continued delays result in the eventual cancellation\nof any sale opportunities, it may have an adverse effect on our ability to sell our solutions, which will materially adversely affect\nour business, financial condition and results of operations.\n\n \n\n**We\nhave experienced periods of growth of our business. If we cannot adequately manage our business, our results of operations may suffer.**\n\n \n\nWe\ncannot be sure that our systems, procedures and managerial controls will be adequate to support our operations. If we cannot adequately\nmanage our business growth, our results of operations may suffer. Any delay in implementing, or transitioning to, new or enhanced systems,\nprocedures or controls may adversely affect our ability to record and report financial and management information on a timely and accurate\nbasis. We believe that significant growth may require us to hire additional personnel.\n\n \n\n**Our\nnon-competition agreements with our employees and consultants may not be enforceable under applicable law. If any of these employees\nleaves us and joins a competitor, such competitor could benefit from the expertise our former employee gained while working for us.**\n\n \n\nWe\ngenerally enter into non-competition agreements with our key employees and consultants. These agreements prohibit those employees and\nconsultants, while they work for us and for a specified length of time after they cease to work for or provide services to us, from directly\ncompeting with us or working for our competitors for a limited period. Under applicable law, we may be unable to enforce these agreements\nor any part thereof against our employees and consultants, including our Israeli employees and consultants. If we cannot enforce our\nnon-competition agreements against our Israeli (or any other) employees, then we may be unable to prevent our competitors from benefiting\nfrom the expertise of these former employees, which could impair our business, results of operations and ability to capitalize on our\nproprietary information.\n\n** **\n\n**Our\nbusiness could be harmed if we were to lose the services of one or more members of our senior management team, or if we are unable to\nattract and retain qualified personnel.**\n\n \n\nOur\nfuture growth and success depend to an extent upon the continuing services of our executive officers and other key employees including\nour Chief Executive Officer, Benjamin (Benny) Eppstein, Chief Operating Officer, Hilik Itman, and our Chief Technology Officer, Rami\nAmit. Competition for qualified management and other high-level telecommunications industry personnel is intense, and we may not be successful\nin attracting and retaining qualified personnel. If we lose the services of any senior management team or key employees, we may not be\nable to manage our business successfully or to achieve our business objectives.\n\n \n\n6\n\n \n\n \n\n**We\nexperience competition for highly skilled technical and other personnel, and as a result we may fail to attract, recruit and retain qualified\nemployees, which could materially and adversely impact our business, financial condition and results of operations.**\n\n** **\n\nWe\ncompete in a market marked by rapidly changing technologies and an evolving competitive landscape. In order for us to successfully compete\nand grow, we must attract, recruit, retain and develop personnel with requisite qualifications to provide expertise across the entire\nspectrum of our intellectual capital and business needs.\n\n \n\nOur\nprincipal research and development as well as significant elements of our marketing and general and administrative activities are conducted\nat our headquarters in Israel, where we face competition on skilled personnel. Although we also engage a talented team in the United\nStates, India and Romania to benefit from the significant pool of talent that is available in such markets, we have also witnessed increased\ncompetition in those markets as well in recent years.\n\n \n\nMany\nof the companies with which we compete for qualified personnel have significant resources, and we may not succeed in recruiting additional\nexperienced or professional personnel, retaining personnel or effectively replacing current personnel who may depart with qualified or\neffective successors.\n\n \n\nIn\naddition, as a result of the competition for qualified human resources, the high-tech market has also experienced and may experience\nin the future significant increases in the levels of salaries and other compensation. Accordingly, our efforts to attract, retain and\ndevelop personnel may also result in significant additional expenses, which could adversely affect our profitability. Furthermore, in\nmaking employment decisions, particularly in the high-technology industry, job candidates often consider the value of the equity they\nare to receive in connection with their employment. Employees may be more likely to leave us if the shares they own or the shares underlying\ntheir equity incentive awards have significantly decreased in value. In light of the foregoing, there can be no assurance that qualified\nemployees will remain in our employ or that we will be able to attract and retain qualified personnel in the future and failure to do\nso could have a material adverse effect on our business, financial condition and results of operations.\n\n \n\n**The\ncomplexity and scope of the solutions we provide to large CSPs is increasing. Large projects entail greater operational risk and an increased\nchance of failure.**\n\n \n\nThe\ncomplexity and scope of the solutions we provide to large CSPs is increasing. The larger and more complex such projects are, the greater\nthe operational risks associated with such projects. These potential risks include failure to successfully deliver our solution, failure\nto fully integrate our solutions with third party products and complex environments in the CSP’s network, and our dependence on\nsubcontractors and partners for the successful and timely completion of such projects. Failure to complete a larger project successfully\ncould expose us to potential contractual penalties, claims for breach of contract and in extreme cases, to cancellation of the entire\nproject, and may result in difficulty in collecting payment and recognizing revenues from such project and may also harm our reputation\nall of which could have a material adverse effect on our business, financial condition and results of operations.\n\n \n\n**Cyber-attacks\non our customers’ networks involving our products could have an adverse effect on our business.**\n\n \n\nMaintaining\nthe security of our products which are installed with our customers is a critical issue for us, therefore we invest resources and technologies\nto better protect our assets. However, security researchers, criminal hackers and other third parties regularly develop new techniques\nto penetrate computer and network security measures. Cyber-attacks, or other breaches of security on our customers’ networks, may\nbe initiated at any network location or device including initiation through our products. Although we maintain high levels of cyber-security\naware development processes, we cannot assure that such attacks, or other breaches of security through our products, will fail and therefore\nmay negatively affect our customers’ business. While we maintain insurance coverage for some of these events, we cannot be certain\nthat our coverage will be adequate for liabilities actually incurred. In addition, these events could also result in damage to our reputation\nwhich will further negatively impact our business.\n\n \n\nMore and more CSPs require\nus to perform a product hardening in order to prevent security vulnerabilities via our products that may result in security breaches in\nour customers’ data. Although we dedicate substantial efforts to improve our development processes in order to address the customers’\nsecurity requirements, we may not be able to implement improvements in an efficient or timely manner and may discover deficiencies in\nexisting controls, programs, systems and procedures, and we may not be able to fully comply with such requirements, which may cause cancellation\nof contracts or damages as well as loss of reputation and claims by our CSP customers and may have an adverse effect on our business and\nfinancial results. See Item “16.K—Cybersecurity” for additional information.\n\n** **\n\n7\n\n \n\n** **\n\n**We\ncould be subject to claims under our warranties and extended maintenance and support agreements which may affect our financial condition.**\n\n \n\nOur\nsolutions are complex and may sometimes contain undetected errors which can delay introductions or necessitate redesign. Failures in\nnetworks in which our solutions are deployed arising out of our solutions may result in customer dissatisfaction, contractual claims\nand, potentially, liability claims being filed against us. Our warranties require us to correct any errors or defects in our solutions.\nThe warranty period we provide for our services is mostly for one year but could be extended either in the initial purchase of our solution\nor after the initial warranty period ends through the purchase of extended support and maintenance. Moreover, under the warranty and\nextended maintenance agreements, we need to meet certain service levels and if we fail to meet them, we may be exposed to penalties. Any\nfailure of a network in which our solutions are deployed (whether or not our solutions are the cause) and any customer claims against\nus, along with any associated negative publicity, could result in the loss of, or delay in, market acceptance of our solutions and harm\nto our business.\n\n \n\n**We\nincorporate open-source technology in our solutions which may expose us to certain liabilities and may have a material impact on our\nproduct development and sales.**\n\n** **\n\nSome\nof our solutions utilize open-source technologies. These technologies are licensed to us under varying license structures. These licenses\npose a potential risk to our solution in the event they are inappropriately integrated. If we have not, or do not in the future, properly\nintegrate software that is subject to such licenses into our solutions or if we utilize open-source software that is subject to licensing\nterms that are incompatible with our use, we may be required to disclose our own source code to the public or may lose rights to our\nsolutions. Any such requirement to disclose or grant rights to our source code or other confidential information related to our solutions\ncould, therefore, materially adversely affect our competitive advantage and impact our business, financial condition and results of operations.\n\n \n\n**Our\nuse of AI, GenAI, Agentic AI, ML, data analytics and similar tools and technologies, or, collectively, AI and Related Tools, as well\nas applications, features, and functionality that we may introduce in the future, may result in difficulties, including with product\ndevelopment and integration and accuracy of the results and may otherwise not prove efficient or profitable, may not be widely or timely\naccepted by our customers or the market, may enhance intellectual property, cybersecurity, operational and technological risks, or may\notherwise adversely impact our business or operations, or subject us to possible litigation**.\n\n \n\nAs\nwe continue to diversify our product offerings, we may utilize AI and Related Tools in connection with our business and in our solutions.\nWe have begun to include GenAI and Agentic AI capabilities through our RADCOM ACE portfolio and as part of our RADCOM AIM (AI Framework).\nGiven the short time that has elapsed since GenAI and Agentic AI became commercially viable, and the rapid pace of change in the GenAI\nand Agentic AI space, we have limited experience with GenAI and Agentic AI and may experience any number of difficulties including with\nrespect to product development and integration with our existing offerings and IT systems, or accuracy of the results. Additionally,\nthere are significant risks involved in utilizing AI and Related Tools and no assurance can be provided that the usage of such AI and\nRelated Tools will enhance our business, the business of our customers, or assist us in being more efficient or profitable. Further,\nAI and Related Tools may have errors or inadequacies that are not easily detectable. For example, certain AI and Related Tools may utilize\nhistorical telecom related data in their analytics. To the extent that such historical data is not indicative of the current or future\nconditions in the sector, or the AI and Related Tools fail to filter biases in the underlying data or collection methods, the usage of\nAI and Related Tools may lead us or our customers to make determinations on behalf of our products or our customers’ business that\nare based on such flawed data, including decisions, that may have an adverse effect. If AI and Related Tools are incorrectly designed\nor the data used to train them is incomplete, inadequate or biased in some way, use of AI and Related Tools may inadvertently reduce\nefficiency or cause unintentional or unexpected outputs that are incorrect, do not match our or our customers’ business goals,\ndo not comply with our or our customers’ policies or interfere with the performance of our or our customers’ products, services,\nbusiness and reputation.\n\n \n\n8\n\n \n\n \n\nAdditionally,\nthere can be no assurance that any GenAI, Agentic AI or other AI and Related Tool solutions we develop will be adopted by the market,\nor be profitable or viable. Our limited experience with respect to GenAI and Agentic AI offerings could limit our ability to successfully\nbring new GenAI and other AI and Related Tool solutions and offerings to market or adapt to market changes. If we are unsuccessful in\ndeveloping, integrating and offering GenAI, Agentic AI and other AI and Related Tool solutions, our business, results of operations and\nfinancial condition could be adversely affected.\n\n  \n\nIn\naddition, the use of AI and Related Tools may enhance intellectual property, cybersecurity, operational and technological risks. The\ntechnologies underlying AI and Related Tools and their use cases are subject to a variety of laws, including intellectual property, privacy,\nconsumer protection and federal equal opportunity laws. If we do not have sufficient rights to use the data on which AI and Related Tools\nrely, we may incur liability through the violation of such laws, third-party privacy or other rights or contracts to which we are a party.\nFurthermore, the technologies underlying AI and Related Tools are complex and rapidly developing, and as a result, it is not possible\nto predict all of the legal, operational or technological risks related to the use of AI and Related Tools. Moreover, AI and Related\nTools are the subject of evolving review by various governmental and regulatory agencies, including the SEC, and the U.S. Federal Trade\nCommission and European Union regulatory bodies, and changes in laws, rules, directives and regulations governing the use of AI and Related\nTools may adversely affect the ability of our business to use AI and Related Tools.\n\n \n\n**Our\nproprietary technology is difficult to protect and unauthorized use of our proprietary technology by third parties may impair our ability\nto compete effectively.**\n\n \n\nOur\nsuccess and ability to compete depend in large part upon protecting our proprietary technology. We rely upon a combination of contractual\nrights, software licenses, trade secrets, copyrights, non-disclosure agreements and technical measures to establish and protect our intellectual\nproperty rights in our solutions and technologies. In addition, we sometimes enter into non-competition, non-disclosure and confidentiality\nagreements with our employees, distributors, sales representatives and certain suppliers with access to sensitive information. We\ncurrently have nine registered patents, one pending patent application and one pending provisional patent application. However, these\nmeasures may not be adequate to protect our technology from third-party infringement. Additionally, effective intellectual property\nprotection may not be available in every country in which we offer, or intend to offer, our solutions.\n\n \n\n**We\nmay expand our business or enhance our technology through partnerships and acquisitions that could result in diversion of resources and\nextra expenses. This could disrupt our business and adversely affect our financial condition.**\n\n \n\nPart\nof our growth strategy may be to selectively pursue partnerships and acquisitions, such as our acquisition of Continual Ltd., or Continual,\nthat provide us access to complementary technologies and accelerate our penetration into new markets. The negotiation of acquisitions,\ninvestments or joint ventures, as well as the integration of acquired or jointly developed businesses or technologies, could divert our\nmanagement’s time and resources. Acquired businesses, technologies or joint ventures may not be successfully integrated with our\nsolutions and operations. We may not realize the intended benefits of any acquisition, investment or joint venture and we may incur future\nlosses from any acquisition, investment or joint venture.\n\n \n\nIn\naddition, acquisitions could result in, among other things, substantial cash expenditures, potentially dilutive issuances of equity securities,\nthe incurrence of debt and contingent liabilities, a decrease in our profit margins, and amortization of intangibles and potential impairment\nof goodwill.\n\n \n\nIf\nthe implementation of our growth strategy by acquiring other businesses will result in operational disruption, our business, financial\ncondition and results of operations could be adversely affected.\n\n \n\n9\n\n \n\n \n\n**Because\nwe received grants from the IIA, we are subject to ongoing restrictions.**\n\n \n\nWe have received an aggregate\nof $50.2 million in royalty-bearing grants for certain research and development activities pursuant to an incentive program. Accordingly,\nwe are obligated to pay royalties to the IIA on revenues from products developed pursuant to the program or deriving therefrom. In addition,\nunder the terms of the program our ability to transfer any resulting know-how is subject to certain terms and conditions. The Law for\nthe Encouragement of Research, Development and Technological Innovation in the Industry, 1984-5744, or the Innovation Law, generally requires\na grant recipient and its controlling shareholders to notify the IIA of changes in the ownership of the recipient company and to undertake\nto the IIA to observe the laws governing the grant programs. We are committed to pay royalties with respect to aforesaid grants until\n100% of the U.S. dollar-linked grant plus annual London Interbank Offered Rate, or LIBOR, interest is repaid, or, as outlined below, according\nto the Secured Overnight Financing Rate, or SOFR. Nonetheless, the amount that we may be required to pay to the IIA, may be higher in\ncertain circumstances, such as when the manufacturing activity or know how is transferred outside of Israel. In September 2021, the Bank\nof Israel, which determines annual interest rates, published a directive which stated that annual interest at a variable rate linked to\nthe LIBOR rate for loans in U.S. dollars will be replaced by SOFR, in June 2023. Pursuant to the latest IIA regulations, grants received\nfrom the IIA on applications that had been approved before June 30, 2017, bear an annual interest rate that applied at the time of the\napproval of the applicable IIA filing, and that interest rate will apply to all of the funding received under that IIA approval. Grants\nreceived from the IIA on applications that had been approved after June 30, 2017, bear an annual interest rate based on the 12-month LIBOR,\nuntil December 31, 2023, and as of January 1, 2024, bear an annual interest rate based on the 12-month SOFR, or at an alternative rate\npublished by the Bank of Israel, with the addition of 0.72%. Grants approved after January 1, 2024 bear the higher of (i) the 12 months\nSOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%.\n\n \n\n**We\nmay be subject to claims of infringement of third-party intellectual property which may have an adverse effect on our business.**\n\n \n\nThird\nparties may from time to time assert against us infringement claims or claims that we have violated license terms, a patent or infringed\na copyright, trademark or other proprietary right belonging to them. If such infringement were found to exist, we might be required to\nmodify our products or intellectual property or to obtain a license or right to use such technology or intellectual property. Any infringement\nclaim, even if not meritorious, could result in the expenditure of significant financial and managerial resources.\n\n \n\n**We\nhave incurred net losses in the past and we may not sustain profitability in the future.**\n\n \n\nIn\n2025, 2024 and 2023 we achieved net income of approximately $12.0 million, $7.0 million and $3.7 million, respectively, while in 2022,\nwe incurred a net loss of approximately $2.3 million. We may be unable to sustain profitability or may again incur losses in the future,\nwhich could materially affect our cash and liquidity and could adversely affect the value and market price of our ordinary shares.\n\n \n\n**Our\ninternational presence exposes us to risks associated with varied and changing political, cultural, legal and economic conditions worldwide\nand if we fail to adapt appropriately to the challenges associated with operating internationally the expected growth of our business\nmay be impeded, and our operating results may be affected.**\n\n \n\nWhile\nwe are headquartered in Israel, most of our revenues are being generated outside of Israel. Our international sales will be limited if\nwe cannot continue to establish and maintain relationships with international distributors and resellers, set up additional foreign operations,\nexpand international sales channel management, hire additional personnel, develop relationships with international CSPs and operate adequate\nafter-sales support internationally.\n\n \n\nEven\nif we are able to successfully further expand our international operations, we may not be able to maintain or increase international\nmarket demand for our solutions. Our international operations are subject to a number of risks, including:\n\n \n\n \n●\nlegal, language and cultural\ndifferences in the conduct of business;\n\n \n\n \n●\nchallenges in staffing\nand managing foreign operations due to the limited number of qualified candidates and due to employment laws and business practices\nin foreign countries;\n\n \n\n \n●\nour inability to comply\nwith import/export, environmental and other trade compliance and other regulations of the countries in which we do business\nincluding additional labor laws, particularly in Brazil and India, together with unexpected changes in such regulations;\n\n \n\n10\n\n \n\n \n\n \n●\ninsufficient measures to\nensure that we design, implement, and maintain adequate controls over our financial processes and reporting in the future;\n\n \n\n \n●\nour failure to adhere to\nlaws, regulations, and contractual obligations relating to customer contracts in various countries;\n\n \n\n \n●\nour inability to maintain\na competitive list of distributors and resellers for indirect sales;\n\n \n\n \n●\neconomic and political\ninstability in foreign market, including tariffs;\n\n \n\n \n●\nwars, acts of terrorism\nand political unrest (including the current conflict between Russia and Ukraine);\n\n \n\n \n●\nlack of integration of\nforeign operations;\n\n \n\n \n●\ncurrency fluctuations;\n\n \n\n \n●\nvariations in effective\nincome tax rates among countries where we conduct business;\n\n \n\n \n●\npotential foreign and domestic\ntax consequences and withholding taxes that limit the repatriation of earnings;\n\n \n\n \n●\ntechnology standards that\ndiffer from those on which our solutions are based, which could require expensive redesign and retention of personnel familiar with\nthose standards;\n\n \n\n \n●\nlaws and business practices\nfavoring local competitors;\n\n \n\n \n●\nlonger accounts receivable\npayment cycles and possible difficulties in collecting payments; and\n\n \n\n \n●\nfailure to meet certification\nrequirements.\n\n \n\nAny\nof these factors could harm our international operations and have an adverse effect on our business, operating efficiency, results of\noperations, financial performance and financial condition. The continuing weakness in certain foreign economies could have a significant\nnegative effect on our future operating results.\n\n \n\n**Our\nbusiness may be affected by sanctions, export controls and similar measures targeting Russia and other countries and territories in connection\nwith the military conflict between Russia and Ukraine.**\n\n \n\nWe\nconduct our business in compliance with applicable economic and trade sanctions laws and regulations, including those administered and\nenforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department\nof Commerce, and other relevant governmental authorities. Accordingly, our business may be adversely affected by sanctions, export controls\nand similar measures targeting Russia and other countries and territories in response to Russia’s military conflict in Ukraine,\nincluding by indefinite suspension of operations in Russia, dealings with Russian entities, preventing us from performing existing contracts,\nrecognizing revenue, pursuing new business opportunities or receiving payment for products already supplied or services already performed\nwith customers. Depending on the extent and breadth of sanctions, export controls and other measures that may be imposed in connection\nwith the conflict in Ukraine, it is possible that our business and results of operations could be adversely affected.\n\n \n\n**Because\nour revenues are generated primarily in foreign currencies (mostly in U.S. dollars but also in other currencies), but a significant portion\nof our expenses are incurred in New Israeli Shekels or NIS, our results of operations may be seriously adversely affected by currency\nfluctuations.**\n\n** **\n\nWe\nsell in markets throughout the world and most of our revenues are generated in U.S. dollars. We also generate revenues in Euro, Brazilian\nreal, and other currencies. Our financing activities are also made in U.S. dollars. Accordingly, we consider the U.S. dollar to be our\nfunctional currency. However, a significant portion of our expenses is in NIS, mainly related to employee expenses. Therefore, fluctuations\nin exchange rates between the NIS and the U.S. dollar as well as between other currencies and the U.S. dollar may have an adverse effect\non our results of operations and financial condition. We do not currently maintain a hedging program to mitigate these risks.** **\n\n** **\n\nMoreover,\nas our revenues are currently denominated primarily in U.S. dollars, devaluation in the local currencies of our customers relative to\nthe U.S. dollar could cause customers to default on payment. Also, as a portion of our revenues is denominated in Brazilian real, devaluation\nin this currency may cause financial expenses related to our intercompany short-term balances. In the future, additional revenues may\nbe denominated in currencies other than U.S. dollars, thereby exposing us to gains and losses on non-U.S. currency transactions.\n\n \n\nWe\nincur expenses in different currencies, including U.S. dollars and NIS, but our financial statements are denominated in U.S. dollars.\nU.S. dollars is our functional currency and is the currency that represents the principal economic environment in which we operate. As\na result, we are affected by foreign currency exchange fluctuations through both translation risk and transaction risk. As a result,\nwe are exposed to the risk that the NIS may appreciate relative to the dollar, or, if the NIS instead devalues relative to the dollar,\nthat the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind\ninflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results\nof operations would be adversely affected.\n\n** **\n\n11\n\n \n\n \n\n**Risks\nRelated to our Ordinary Shares**\n\n \n\n**Wide\nfluctuations in the market price of our ordinary shares could adversely affect us and our shareholders.**\n\n \n\nBetween\nJanuary 1, 2025, and March 23, 2026, our ordinary shares’ closing price on the Nasdaq Capital Market, or the Nasdaq, was as high\nas $15.40 and as low as $10.36 per share. As of March 23, 2026, the closing price of our ordinary shares on Nasdaq was $11.17 per share. The\nmarket price of our ordinary shares has been and is likely to continue to be volatile and could be subject to wide fluctuations in response\nto numerous factors, including the other risks identified in this “Item 3.D—Risk Factors”.\n\n \n\nIn\naddition, the stock market in general, and the market for Israeli and technology companies in particular, has been highly volatile. Many\nof these factors are beyond our control and may materially adversely affect the market price of our ordinary shares, regardless of our\nperformance. Shareholders may not be able to resell their ordinary shares following periods of volatility because of the market’s\nadverse reaction to such volatility.\n\n \n\n**The\ntrading volume of our shares is relatively low, and it may remain low in the future.**\n\n \n\nOur\nshares have been traded at low volumes in the past and may be traded at low volumes in the future for reasons related or unrelated to\nour performance. This low trading volume may result in lesser liquidity and lower than expected market prices for our ordinary shares,\nand our shareholders may not be able to resell their shares for more than they paid for them. This low trading volume may also result\nin greater share price volatility as result of short trading activities or the acquisition or disposition of shares by any single larger\nor institutional shareholder.\n\n \n\n**Although\nwe believe we were not a “passive foreign investment company”, or PFIC, for U.S. federal income tax purposes in the current\ntaxable year, we may become one in any subsequent taxable year. There might be negative tax consequences for U.S. taxpayers that are\nholders of our ordinary shares if we are or were to become a PFIC.**\n\n \n\nBased on our current and anticipated\noperations and the composition of our assets, we believe we were not a “passive foreign investment company,” or PFIC, for\nU.S. federal income tax purposes for our taxable year ended December 31, 2025. As for 2026, there can be no assurance that we will not\nbe classified as a PFIC due to various market conditions and relative values of our assets and the amount of our passive income. We\nmight be classified as a PFIC if either: (i) at least 75% of our gross income is passive income, or (ii) at least 50% of the value\nof our assets is attributable to assets that produce or are held for the production of, passive income.\n\n \n\nFor this purpose, passive\nincome generally includes dividends, interest, certain royalties or rents, and gains from commodities and securities transactions and\nfrom the sale or exchange of property that gives rise to passive income. If we are a PFIC for any year in which a U.S. taxpayer holds\nour ordinary shares, such holder may face increased tax liabilities. Unless a timely election is made (such as a “qualified electing\nfund” or “mark-to-market” election), any \"excess distributions\" or gains from the sale of shares would generally\nbe taxed at the highest ordinary income rates and could be subject to an interest charge for the period the tax was deemed deferred. Furthermore,\nwe do not currently intend to provide the annual notifications or information necessary for U.S. holders to make or maintain any election.\nWe strongly encourage U.S. holders to consult their tax advisors regarding the potential application of the PFIC rules and the availability\nof any tax elections.\n\n \n\n**Shareholders’ activism\nmay negatively impact the price of our ordinary shares and cause changes to our business.**\n\n \n\nOur shareholders may from\ntime to time engage in proxy solicitations, advance shareholder proposals or otherwise attempt to effect changes or acquire control over\nus. On March 25, 2026, we received a letter, or the Demand Letter, which was subsequently filed as part of Schedule 13Ds filed with the\nSEC on March 26, 2026, from certain shareholders, or the Proposing Shareholders, who beneficially own approximately 19.3% of our ordinary\nshares, demanding that our Board of Directors call a special meeting of shareholders pursuant to applicable Israeli law and our amended\nand restated articles of association and proposing, among other matters, amendments to our articles of association, the removal of certain\ndirectors and the election of new director nominees. Campaigns by shareholders to effect changes at publicly traded companies are\nsometimes led by investors seeking to increase short-term shareholder value through actions such as financial restructuring, increased\ndebt, special dividends, share repurchases or sales of assets or the entire company. Responding to proxy contests and other actions by\nactivist shareholders can be costly and time-consuming, disrupting our operations and diverting the attention of our Board of Directors\nand senior management from the pursuit of business strategies. Accordingly, the Demand Letter might result in significant costs and diversion\nof management’s and the Board of Directors’ attention, including with respect to engaging outside legal, financial and other\nadvisors, and may require us to expend significant time and resources to respond to the Shareholders' proposals and to prepare for, and\nconduct, any such special meeting.\n\n \n\nAny perceived uncertainties\nas to our future direction and control, might impact our ability to execute on our strategy, and could lead to potential loss of business opportunities\nand adversely impact our business results. In addition, actions such as those described above could cause significant fluctuations in\nthe trading prices of our ordinary shares based on temporary or speculative market perceptions or other factors that do not necessarily\nreflect the underlying fundamentals and prospects of our business.\n\n \n\nLikewise, to the extent that\nwe implement any proposals made by any of our shareholders, including any proposals reflected in the Demand Letter, the resulting\nchanges in our business, assets, results of operations and financial condition could be material and could have an impact, which may\nbe material, on the market price of our ordinary shares.** **\n\n12\n\n \n\n** **\n\n**Risks\nRelated to Our Location in Israel**\n\n \n\n**Security,\npolitical and economic instability in the Middle East in general, and in Israel in particular may harm our business.**\n\n \n\nWe\nare incorporated under the laws of the State of Israel, and our principal offices and research and development facilities are located\nin Central Israel. Accordingly, security, political and economic conditions in the Middle East in general, and in Israel in particular,\nmay directly affect our business. Any armed conflicts, political instability, terrorism, cyberattacks or any other hostilities involving\nIsrael or the interruption or curtailment of trade between Israel and its trading partners could affect adversely our operations. Ongoing\nand revived hostilities in the Middle East or other Israeli political or economic factors, could harm our operations and solution development\nand cause any future sales to decrease.\n\n \n\nSince\nOctober 7, 2023, Israel has been engaged in an ongoing war against Hamas following a large-scale terrorist attack initiated by Hamas\noriginating from the Gaza Strip and involving a series of attacks on civilian and military targets. Hamas also launched extensive rocket\nattacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within\nthe State of Israel. In October 2025, a peace framework brokered by the United States was announced involving a ceasefire, hostage releases,\npartial Israeli withdrawal, and humanitarian aid provisions. The ceasefire is technically still in effect but remains extremely fragile,\nwith frequent violations.\n\n \n\nSince the commencement of\nthese events, there have been continued hostilities originating from the West Bank, along Israel’s northern border with the Hezbollah\nterror organization, with Iran, the Houthis in Yemen and on other fronts with various extremist groups in the region, such as various\nrebel militia groups in Syria and Iraq. In October 2024, Israel began limited ground operations against Hezbollah in Lebanon, and in November\n2024, a ceasefire was brokered between Israel and Hezbollah, which collapsed in early March 2026. Since then, fighting has escalated,\nincluding Israeli ground operations in southern Lebanon and sustained Hezbollah rocket fire into Israel.\n\n \n\nIn\nJune 2025, Israel launched a surprise airstrike against Iranian nuclear and military sites. This initial attack triggered a rapid exchange\nof fire over the following 12 days, with Iran retaliating by launching hundreds of drones and ballistic missiles at Israel. A fragile\nceasefire, mediated by the United States, was agreed upon around June 24, 2025. However, on February 28, 2026, the United States and\nIsrael launched coordinated military strikes against Iran, including attacks on strategic military infrastructure and leadership targets.\nIn response, Iran has fired missiles and drones toward population centers and military installations in Israel and neighboring countries\nin the Gulf region, and also launched counter-strikes against U.S. forces and allied bases throughout the Gulf region. A broader regional\nconflict involving additional state and non-state actors remains a significant risk.\n\n \n\nIt\nis possible that hostilities with Iran, Hezbollah, the Houthis and terrorist groups in Syria and other militant groups will continue\nto escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank, will join the hostilities.\nIran, is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon,\nthe Houthis in Yemen and various rebel militia groups in Syria and Iraq. These situations may continue to escalate in the future to more\nviolent events which may affect Israel and us. Any hostilities, armed conflicts, terrorist activities and war involving Israel or the\ninterruption or curtailment of trade between Israel and its trading partners, or any political instability in the region could adversely\naffect business conditions and our results of operations and could make it more difficult for us to raise capital and could adversely\naffect the market price of our ordinary shares. An escalation of tensions or violence might result in a significant downturn in the economic\nor financial condition of Israel, which could have a material adverse effect on our operations in Israel and our business.\n\n \n\nSince\nthe war broke out on October 7, 2023, our operations have not been adversely affected by this situation, and we have not experienced\ndisruptions to our business operations. As such, our product and business development activities remain on track. However, the intensity\nand duration of Israel’s current war against Hamas and Iran is difficult to predict at this stage, as are such war’s economic\nimplications on our business and operations and on Israel’s economy in general. If the hostilities continue or expand to other\nfronts our operations may be adversely affected.\n\n \n\nFurthermore, many Israeli\ncitizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the\nage of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict,\nmay be called to active duty for substantial periods of time. In response to the October attack and the ensuing war that followed along\nwith the increases in terrorist activity, the Israeli army has exercised significant call-ups of military reservists, for substantial\nperiods. It is possible that there will be additional military reserve duty call-ups in the future. As of March 23, 2026, four of our\nemployees and none of our executive management have been called to service. Our operations could be disrupted by such call-ups, which\nmay include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial\ncondition and results of operations.\n\n \n\n13\n\n \n\n \n\nIn\naddition, commencing in 2023, the Israeli government pursued extensive changes to Israel’s judicial system. This sparked extensive\npolitical debate and protests. In response to the foregoing developments, many individuals, organizations and institutions, both within\nand outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel, including\ndue to reluctance of foreign investors to invest or transact business in Israel, increased currency fluctuations, downgrades in credit\nrating, increased interest rates, increased volatility in security markets, and other changes in the Israeli macroeconomic conditions.\nTo the extent that the Israeli government would further pursue such extensive changes to Israel’s judicial system and any of these\nnegative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to hire and\npreserve our employees and to raise additional funds, if deemed necessary by our management and Board of Directors.\n\n** **\n\n**Provisions\nof Israeli law may make it easy for our shareholders to demand that we convene a shareholders meeting, and/or allow shareholders to convene\na shareholder meeting without the consent of our management, which may disrupt our management’s ability to run our company.**\n\n** **\n\nSection\n63(b) of the Israeli Companies Law, 5759-1999, or the Israeli Companies Law, together with Section 7B of the Israeli Companies Regulations\n(Relief for Public Companies with Shares Listed for Trading on a Stock Market Outside of Israel), 5760-2000, or the Relief Regulations,\nmay allow any one or more of our shareholders holding at least 10% of our voting rights to demand that we convene an extraordinary shareholders\nmeeting. Also, in the event that we choose not to convene an extraordinary shareholders meeting pursuant to such a request, Sections\n64-65 of the Israeli Companies Law provide, among others, that such shareholders may independently convene an extraordinary shareholders\nmeeting within three months (or under court’s ruling) and require us to cover the costs, within reason, and as a result thereof,\nour directors might be required to repay us such costs. If our shareholders decide to exercise these rights in a way inconsistent with\nour management’s strategic plans, our management’s ability to run our company may be disrupted, and this process may entail\nsignificant costs to us.\n\n \n\n**We\ncurrently benefit from government programs that may be discontinued or reduced.**\n\n \n\nWe\ncurrently receive grants under Government of Israel programs. In order to maintain our eligibility for these programs, we must continue\nto meet specific conditions and pay royalties with respect to grants received. In addition, some of these programs restrict our ability\nto develop particular products outside of Israel or to transfer particular technology. If we fail to comply with these conditions\nin the future, the benefits received could be canceled and we could be required to refund any payments previously received under these\nprograms. Additionally, these programs may be discontinued or curtailed in the future. If we do not receive these grants in the future,\nwe will have to allocate funds to product development at the expense of other operational costs. If the Government of Israel discontinues\nor curtails these programs, our business, financial condition and results of operations could be materially adversely affected. For more\ninformation, see “Item 4.B—Information on the Company—Business Overview—Israel Innovation Authority.”\n\n \n\n**Provisions\nof Israeli law may delay, prevent or make difficult a merger or acquisition of us, which could prevent a change of control and depress\nthe market price of our ordinary shares.**\n\n \n\nThe\nIsraeli Companies Law, regulates acquisitions of shares through tender offers, requires special approvals for transactions involving\nshareholders holding 25% or more of the company’s capital, and regulates other matters that may be relevant to these types of transactions.\nThese provisions of Israeli law could have the effect of delaying or preventing a change in control and may make it more difficult for\na third party to acquire us, even if doing so would be beneficial to our shareholders. These provisions may limit the price that investors\nmay be willing to pay in the future for our ordinary shares. Furthermore, Israeli tax considerations may make potential transactions\nundesirable to us or to some of our shareholders.\n\n \n\n14\n\n \n\n \n\n**It\nmay be difficult to effect service of process, assert U.S. securities laws claims and enforce U.S. judgments in Israel against us\nor our directors, officers and auditors named in this Annual Report.**\n\n \n\nWe\nwere incorporated in Israel. All but one of our directors reside outside of the United States, and most of our assets are located outside\nof the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability\nprovisions of the U.S. federal securities laws, may not be collectible in the United States and may not necessarily be enforced by an\nIsraeli court. It also may be difficult to effect service of process on these persons in the United States or to assert U.S. securities\nlaw claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity,\nto initiate an action with respect to United States securities laws in Israel. Israeli courts may refuse to hear a claim based on an\nalleged violation of United States securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim.\nIn addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not United States law is applicable\nto the claim. If United States law is found to be applicable, the content of applicable United States law must be proven as a fact by\nexpert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law.\nThere is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with\nenforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a United States or foreign court.\n\n \n\n**As a foreign private issuer,\nwe are subject to reporting and other requirements that differ from those applicable to U.S. domestic companies.**\n\n \n\nWe currently qualify as a\nforeign private issuer and report under the Exchange Act. As a result of our foreign private issuer status, our shareholders are subject\nto different risks and may not receive the same protections afforded to shareholders of U.S. domestic public companies. In particular,\nwe are exempt from, or subject to less stringent and less frequent, certain Exchange Act reporting and disclosure requirements applicable\nto U.S. domestic issuers, including U.S. proxy rules, short-swing profit liability under Section 16 of the Exchange Act, and the requirement\nto file quarterly reports on Form 10-Q, although we intend to furnish quarterly information on Form 6-K. We are also not subject to the\nrequirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act, which generally requires U.S. domestic companies to\ndisclose material information to all investors simultaneously, although we voluntarily comply with these rules. In addition, foreign private\nissuers are permitted a longer period to file annual reports on Form 20-F than U.S. domestic issuers filing on Form 10-K. As a foreign\nprivate issuer that follows certain home country corporate governance practices, we may also rely on exemptions from certain Nasdaq corporate\ngovernance requirements, which could result in our shareholders not having the same protection as shareholders of companies subject to\nall Nasdaq corporate governance rules. See Item 16.G—Corporate Governance.\n\n \n\n15\n\n \n\n \n\n**General\nRisk Factors**\n\n \n\n**Natural\ndisasters and other events beyond our control could harm our business.**\n\n \n\nNatural\ndisasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy,\nand thus could have a negative effect on us. Our business operations are subject to interruption by natural disasters, flooding, fire,\npower shortages, pandemics such as the recent spread of the coronavirus, terrorism, political unrest, telecommunications failure, vandalism,\ncyber-attacks, geopolitical instability, war, such as the recent war between Israel and the terrorist organization Hamas and the current\nwar between Israel and Iran and the hostilities between Israel and the terrorist organizations Hezbollah and the Houthis, the effects\nof climate change (such as drought, wildfires, increased storm severity and sea level rise) and other events beyond our control. Although\nwe maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our solutions\nand services to our customers, could decrease demand for our solutions and services, and could cause us to incur substantial expense.\n\n \n\n**Global\neconomic conditions may adversely affect our business.**\n\n \n\nChanges\nin global economic conditions could have a negative impact on business around the world and on the telecommunications sector. Conditions\nmay be depressed, or may be subject to deterioration, which could lead to a reduction in consumer and customer spending overall and may\nin turn have an adverse impact on sales of our solutions. A disruption in the ability of our significant customers to access liquidity\ncould cause serious disruptions or an overall deterioration of their businesses, which could lead to a significant reduction in their\norders of our solutions and the inability or failure on their part, to meet their payment obligations to us, any of which could have\nan adverse effect on our business, financial condition, results of operations and liquidity. In addition, any disruption in the\nability of our customers to access liquidity could require us to assume greater credit risk relating to our receivables or could limit\nour ability to collect receivables related to purchases by affected customers. As a result, we may have to defer recognition of revenues,\nour reserves for doubtful accounts and write-offs of accounts receivable may increase and we may incur losses.\n\n \n\n**Certain\nprivacy and data security laws and regulations may affect the use of our solutions.**\n\n \n\nOur\nsolutions and their use may be subject to certain laws and regulations regarding privacy and data security including United States federal\nand state laws and European privacy laws. Generally, attention to privacy and data security requirements is increasing worldwide and\nis resulting in increased regulation.\n\n \n\nSuch\nregulations may impose significant penalties for non-compliance, such as the penalties proposed under the European data protection regulations,\nor GDPR. The GDPR imposes through binding guidance by the European Data Protection Board (and supplemented by national laws in individual\nEuropean Union member states), stringent data protection compliance requirements and provides for significant penalties for noncompliance\nin Europe. The GDPR created additional compliance obligations applicable to our business and users, which could cause us to change our\nbusiness practices, and increases financial penalties for noncompliance (including possible fines of up to the greater of €20 million\nand 4% of our global annual turnover for the preceding financial year for the most serious violations, as well as the right to compensation\nfor financial or non-financial damages claimed by any individuals under Article 82 of the GDPR). Compliance with the GDPR is an ongoing\nprocess.\n\n \n\nAdditionally,\nin California the Consumer Privacy Act, or CCPA, provides for data privacy rights for consumers and operational requirements for companies.\nFurther, the California Privacy Rights Act, or CPRA, significantly modified the CCPA, including providing for additional privacy rights\nand increasing regulation on online advertising. Additionally, the CCPA, the CPRA, and other legal and regulatory changes are making\nit easier for certain individuals to opt-out of having their personal data processed and disclosed to third parties through various opt-out\nmechanisms, which could result in an increase to our operational costs to ensure compliance with such legal and regulatory changes.\n\n \n\nUse\nof our solutions could be subject to such regulations, which could significantly increase the cost of implementing our solutions and\nimpact our ability to compete in the marketplace. Such regulations could also impose additional data security requirements which will\nimpact the cost of developing new solutions and limit the return we can expect to achieve on past and future investments in our solutions.\n\n \n\n16\n\n \n\n \n\n**Our\ninternational sales and operations are subject to complex laws relating to foreign corrupt practices and bribery, among many other subjects.\nA violation of, or change in, these laws could adversely affect our business, financial condition or results of operations.**\n\n \n\nOur\noperations in countries outside the United States are subject, among others, to the Foreign Corrupt Practices Act of 1977 as amended\nfrom time to time, or FCPA, which prohibits U.S. companies or foreign companies whose shares traded on a U.S. stock exchange, or their\nagents and employees, from providing anything of value to a foreign public official, as defined in the FCPA, for the purposes of influencing\nany act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person\nor corporate entity, or obtain any unfair advantage. We have internal control policies and procedures with respect to the FCPA. However,\nwe cannot assure that our policies and procedures will always protect us from reckless or criminal acts that may be committed by our\nemployees or agents. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities,\nwhich could have a material adverse effect on our business, results of operations and financial condition. In addition, investigations\nby governmental authorities as well as legal, social, economic and political issues in countries where we operate could have a material\nadverse effect on our business and results of operations. We are also subject to the risks that our employees or agents outside of the\nUnited States may fail to comply with other applicable laws. The costs of complying with these and similar laws may be significant and\nmay require significant management time and focus. Any violation of these or similar laws, intentional or unintentional, could have a\nmaterial adverse effect on our business, financial condition or results of operations.\n\n \n\n**Any\ninability to comply with Section 404 of the Sarbanes-Oxley Act of 2002 regarding effective internal control procedures may negatively\nimpact the report on our financial statements to be provided by our independent auditors.**\n\n \n\nPursuant\nto rules of the SEC, adopted pursuant to Section 404, or Section 404, of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, we\nare required to include in our annual report a report of management on our internal control over financial reporting including an assessment\nby management of the effectiveness of our internal control over financial reporting. In addition, because we are an accelerated\nfiler under the SEC rules, our independent registered public accounting firm is required to attest to and report on the effectiveness\nof our internal control over financial reporting. Our management or our auditors may conclude that our internal control over financial\nreporting is not effective. Such conclusion could result in a loss of investor confidence in the reliability of our financial statements,\nwhich could negatively impact the market price of our shares. Further, our auditors or we may identify material weaknesses or significant\ndeficiencies in our assessments of our internal control over financial reporting. Failure to maintain effective internal control\nover financial reporting could result in investigation or sanctions by regulatory authorities and could have an adverse effect on our\nbusiness, financial condition and results of operations, and on investor confidence in our reported financial information.\n\n \n\nIf\nwe determine that we are not in compliance with Section 404, we may be required to implement new internal controls and procedures\nand re-evaluate our financial reporting. We may experience higher than anticipated operating expenses as well as third party advisory\nfees during the implementation of these changes and thereafter. Further, we may need to hire additional qualified personnel in order\nto comply with Section 404. If we are unable to implement these changes effectively or efficiently, it could have a material adverse\neffect on our business, financial condition, results of operations, financial reporting or financial results and could result in our\nconclusion that our internal controls over financial reporting are not effective.\n\n \n\n17"}