Kamada (KMDA) Risk Analysis

We rely on a single manufacturing facility in Beit Kama, which is located in southern Israel, approximately 20 miles east of the Gaza Strip. A significant part of our revenues in our Proprietary Products segment were derived and are expected to continue to be derived from products manufactured at this facility and some of the products that are imported by us under our Distribution segment are packed and stored in this manufacturing facility. Furthermore, our plans to expand the use of this facility to include the future production of WINRHO SDF, HEPAGAM B, and VARIZIG, which are currently manufactured by Emergent, would, if implemented, further increase the criticality of this facility to our operations. If this facility were to suffer an accident or a force majeure event, such as war, terrorist attack, earthquake, major fire or explosion, major equipment failure or power failure lasting beyond the capabilities of our backup generators or similar event, or contamination, our revenues would be materially adversely affected. For more information regarding the current security situation in Israel, see – Risks Relating to Our Incorporation and Location in Israel – "Our business could be adversely affected by political, economic and military instability in Israel and its region." In such a situation, our manufacturing capacity could be shut down for an extended period, we could experience a loss of raw materials, work in process or finished goods and imported products inventory and our ability to operate our business would be harmed. In addition, in any such event, the reconstruction of our manufacturing facility and storage facilities, and the regulatory approval of the new facilities could be time-consuming. During this period, we would be unable to manufacture our plasma-derived protein therapeutics. Our insurance against property damage and business interruption insurance may be insufficient to mitigate the losses from any such accident or force majeure event. We may also be unable to recover the value of the lost plasma or work-in-process inventories, as well as the associated sales opportunities for products we are unable to produce or distribute, and we could experience the loss of customers during such period.

In December 2013, we signed a collective bargaining agreement with the employees' committee established by our employees at our Beit Kama production facility in Israel and the Histadrut (General Federation of Labor in Israel) ("Histadrut"), which expired in December 2017. In November 2018, we signed a further collective bargaining agreement with the employees' committee and the Histadrut, which expired in December 2021. In July 2022, we signed a new collective agreement with the Histadrut; while the agreement will be effective through the end of 2029, certain economic terms may be renegotiated by the parties following the lapse of the four-year anniversary of the agreement by January 1, 2026. In September 2025, we entered into a negotiation process with the employees' committee and the Histadtrut related to the economic terms under the collective bargaining agreement, and such process is still ongoing. We have experienced labor disputes and work stoppages in the past at our Beit Kama facility. For example, in March 2022, during our negotiations with the Histadrut and the employees' committee on the renewal of the collective bargaining agreement, the employee's committee declared a labor dispute, and in April 2022, a strike was initiated by the employee's committee, which continued until the new agreement was signed in July 2022. As a result of the labor strike, in the year ended December 31, 2022, our gross profit was impacted by a $4.3 million loss associated with the effect of the work-stoppage at the Israeli plant. In addition, in December 2020, during the course of our negotiations with the Histadrut and the employees' committee on severance remuneration for employees who may be laid-off as part of the workforce down-sizing as a result of the transfer of GLASSIA manufacturing to Takeda that we implemented during 2021, the employee's committee declared a labor dispute, which was subsequently concluded during February 2021 following the execution of a special collective bargaining agreement governing such severance terms. In March 2023, we entered into an additional special collective bargaining agreement with the employees' committee and the Histadtrut governing severance remuneration terms for employees who may be laid off in connection with the potential staff reductions, when needed, in order to adjust to lower plant utilization. Any future disputes with the employees' committee and the Histadrut over the implementation or the interpretation or the renewal of the collective bargaining agreement may lead to additional labor costs and/or work stoppages, which could adversely affect our business operations, including through a loss of revenue and strained relationships with customers.

Sales of products supplied by Biotest AG, Kedrion, Chiesi Farmaceutici S.p.A, Bio Products Laboratories ("BPL") Valneva SE and Mabxience, which are sold in our Distribution segment, together represented approximately 9%, 8%, and 18% of our total revenues for the years ended December 31, 2025, 2024 and 2023, respectively. While we have distribution agreements with each of our suppliers, these agreements do not obligate these suppliers to provide us with minimum amounts of our Distribution segment products. Purchases of our Distribution segment products from our suppliers are typically on a purchase order basis. We work closely with our suppliers to develop annual forecasts, but these forecasts are not obligations or commitments. However, if we fail to submit purchase orders that meet our annual forecasts or if we fail to meet our minimum purchase obligations, we could lose exclusivity or, in certain cases, the distribution agreement could be terminated. These suppliers may experience capacity constraints that result in their being unable to supply us with products in a timely manner, in adequate quantities and/or at a reasonable cost. Contributing factors to supplier capacity constraints may include, among other things, industry or customer demands in excess of machine capacity, labor shortages, changes in raw material flows or shortages in raw materials, which may result from different market conditions including, but not limited to, shortages resulting from increased global demand for these raw materials due to global healthcare issues, epidemics and pandemics. These suppliers may also choose not to supply us with products at their discretion or raise prices to a level that would render our products noncompetitive. Any significant interruption in the supply of these products could result in us being unable to meet the demands of our customers, which would have a material adverse effect on our business, financial condition and results of operations as a result of being required to pay fines or penalties, be subject to claims of breach of contract, loss of reputation or even termination of agreement. If our relationship with these suppliers were to deteriorate, our distribution sales could be adversely affected. Additionally, our future growth in the Distribution segment is dependent on our ability to successfully engage other manufacturers for distribution in Israel of other products. Failure to engage new suppliers may have an adverse effect on our revenue growth and profitability.

Before we may sell products in the Distribution segment in Israel or other territories, mainly in the MENA region, we must register the products, at our own expense, with the IMOH. We cannot predict how long the IMOH registration process may take or whether any such registration will ultimately be obtained. The IMOH has substantial discretion in the registration process, and we can provide no assurance of successful registration. In the MENA region, such process may be conducted by our sub-distributor in the relevant country. Our business, financial condition, or results of operations could be materially adversely affected if we, or our sub-distributor, fail to receive registration for the products in the Distribution segment from the applicable regulatory authority.

Following the establishment of our U.S. commercial operations through our subsidiaries Kamada Inc. and Kamada Plasma LLC, we have entered into intercompany agreements for the transfer of products. Our intercompany agreements for the sale of products or provision of services are required to be made on an arms-length basis and must comply with transfer pricing provisions of tax laws in Israel and the U.S. In order to determine the adequate transfer pricing arrangement, we are required to perform a transfer pricing study to compare the contemplated intercompany transaction with similar transactions entered into amongst non-related parties. There can be no assurance that the Israeli and/or tax authorities would accept such transfer pricing study when determining our, or any of our subsidiary's income, profitability and tax assessment. Failure to comply with transfer pricing rules may result in increased tax expenses, penalties and legal actions against us, our subsidiaries or our executive officers.

In recent years, public companies have faced scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder advocacy groups, other market participants, and other stakeholder groups. Such scrutiny may result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition, or results of operations. In 2025, we issued our first ESG report. Although the costs we incurred in the process were not material, future initiatives in connection with ESG practices and disclosures may be costly and may not achieve the desired effect. If our ESG practices and reporting do not meet investor or other stakeholder expectations, we may be subject to investor or regulator engagement regarding such matters. Our failure to comply with any applicable ESG rules or regulations could lead to penalties and adversely impact our reputation, access to capital, and employee retention. Such ESG matters may also impact our third-party contract manufacturers and other third parties on which we rely, which may augment or cause additional impacts on our business, financial condition, or results of operations.

Our Proprietary Products compete with products distributed by well-established biopharmaceutical companies, including several large competitors in the plasma industry. These large competitors include CSL Behring, Takeda, and Grifols S.A. ("Grifols"), which acquired a previous competitor, Talecris Biotherapeutics, Inc. ("Talecris") in 2011, Octapharma, Kedrion (other than for KEDRAB), Biotest AG and ADMA Biologics Inc. ("ADMA"). We compete against these companies for, among other things, licenses, expertise, and third-party strategic partners. We also compete with these companies for market share for certain products in the Proprietary Products segment. Our large competitors have advantages in the market because of their size, financial resources, markets and the duration of their activities and experience in the relevant market, especially in the United States and countries of the European Union. These competitors may also be able to sustain longer periods of substantial reduction in the price of their products or services. These competitors also have an additional advantage regarding the availability of raw materials, as they own or control large networks of plasma collection centers and/or plasma fractionation facilities. In addition, our plasma-derived protein therapeutics face, or may face in the future, competition from existing or newly developed non-plasma products and other courses of treatments. New treatments, such as antivirals, gene therapies, small molecules, correctors, monoclonal or recombinant products, may also be developed for indications for which our products are now used, as well as courses of treatment such as subcutaneous treatment. Our hyper-immune IgG products in the Proprietary Products segment face competition from several competing plasma derived products and non-plasma derived pharmaceuticals, mainly anti-viral. See "Item 4B "Information on the Company - Business Overview- Competition - Proprietary Products Segment." In the AAT market, our two main competitors are Grifols and CSL Behring. For details regarding their competing products, see "Item 4B "Information on the Company - Business Overview- Competition - Proprietary Products Segment." In addition, each of Grifols and CSL Behring owns more than 300 operating plasma collection centers located across the United States. Furthermore, several of our competitors are conducting preclinical and clinical trials for the development of gene therapies, recombinant AAT, small molecule treatments or correctors for AATD, which, if successfully developed and launched, could adversely affect our revenue and the growth of GLASSIA sales or GLASSIA-related royalties. For example, in January 2024, Inhibrx and Sanofi announced that they had entered into a definitive agreement under which Aventis Inc., a subsidiary of Sanofi, would acquire all assets and liabilities associated with INBRX-101, which was in a registrational trial for the treatment of patients with AATD. On May 30, 2024, Sanofi completed the acquisition, and INBRX-101 was subsequently added to Sanofi's rare disease pipeline under the program identifier SAR447537 (also referred to by Sanofi as efdoralprin alfa). In October 2025, Sanofi announced positive Phase 2 results from the ElevAATe study in AATD emphysema, reporting that efdoralprin alfa met all primary and key secondary endpoints and demonstrated superiority to a standard plasma-derived augmentation therapy in a head-to-head comparison, with three- to four-week dosing regimens. Sanofi also initiated an open-label extension for long-term follow-up. These developments may intensify competition in AATD. If Sanofi successfully completes late-stage development, secures regulatory approvals, and launches efdoralprin alfa, such a recombinant therapy could reduce demand for plasma-derived AAT products, shift prescriber and payor preferences, and increase pricing pressure on GLASSIA. The impact could be material, depending on the product's ultimate efficacy, safety, dosing convenience, pricing, reimbursement, as well as the timing of any regulatory clearances in the geographies where we market plasma-derived AAT. Similarly, if a new AAT formulation or a new route of administration with significantly improved characteristics is adopted (including, for example, self-administering by way of subcutaneous route of administration), the market share of our current AAT product, GLASSIA, could be negatively impacted. Our products generally do not benefit from patent protection and compete against similar products produced by other providers. Additionally, the development by a competitor of a similar or superior product or increased pricing competition may result in a reduction in our net sales or a decrease in our profit margins.

The Israeli market for drug products includes a relatively small number of HMOs and several hospitals. Sales to Clalit Health Services, Israel's largest HMO, accounted for approximately 50%, 48% and 34% of our Distribution segment revenues in the years ended December 31, 2025, 2024 and 2023, respectively. If our relationship with any of our Israeli customers deteriorated, our distribution sales could be adversely affected. Failure to maintain our existing relationships with these customers could lead to a decrease in our revenues and profitability.

We currently have three plasma collection centers in the United States. We acquired our first FDA-licensed plasma collection center in Beaumont, Texas in March 2021, which specializes in the collection of hyper-immune plasma to be used in the manufacture of WINRHO SDF, KAMRAB and KEDRAB. In 2024, we opened our second plasma collection center in Houston, Texas, which received FDA approval in 2025. In addition, in 2025, after completing construction and obtaining the required site registration, we commenced operations at our third plasma collection site in San Antonio, Texas, for which an FDA site audit was completed in February 2026 and we expect to receive FDA approval during the first half of 2026. We intend to seek a subsequent inspection and approval by the EMA of both our Houston and San Antonio sites. Both centers are expected to become two of the largest hyper-immune plasma collection sites in the United States and will also collect normal source plasma for sale to third parties. We may, in the future, leverage our experience with plasma collection to establish additional plasma collection centers in the United States; however, the success of these operations depends on factors beyond our control, including but not limited to the availability and eligibility of donors, regulatory requirements, macroeconomic conditions and competitive dynamics in the plasma collection industry. We believe that the ramping up of our plasma collection operations will allow us to better support our hyperimmune plasma needs and reduce our dependency on third-party suppliers, as well as generate revenues through sales of collected normal source plasma. However, given our limited prior experience in managing plasma collection operations and the complexities in negotiating third-party agreements, as well as the overall conditions of the plasma collection industry, we may not be able to fully realize our investment or maximize the anticipated benefits of such activities. Our ability to collect sufficient quantities of plasma may be adversely affected by reductions in the donor pool resulting from public health developments, changes in donor eligibility criteria, regulatory actions, immigration policies or enforcement, or shifts in macroeconomic conditions that reduce the financial incentive for individuals to donate plasma or impair our ability to staff plasma collection centers. Further, even if we are able to collect sufficient quantities of plasma, the cost of plasma may increase significantly due to increased competition for donors, industry consolidation or vertical integration among plasma-derived product manufacturers, changes in regulatory requirements, or supply disruptions. In addition, we may not be able to adequately collect sufficient quantities of specialty plasma through our plasma collection operations to support our specialty plasma sourcing needs, including due to a lack of appropriate or sufficient donors, which would result in continued dependency on third-party suppliers and expose us to supply constraints or unfavorable pricing. Even if we are successful in the collection of sufficient quantities of such plasma, there can be no assurance that we will be able to reduce the cost of plasma through our collection operations, as compared to costs associated with procuring plasma from third parties. In addition, there can be no assurance that we will be able to collect adequate quantities of normal source plasma, successfully commercialize such plasma, secure supply agreements with customers at adequate prices, or that there will be sufficient or sustained demand for normal source plasma. Any failure to achieve the anticipated operational, cost or revenue benefits from our plasma collection strategy could materially adversely affect our business, financial condition and results of operations. See also "-We could become supply-constrained, and our financial performance could suffer, if we were unable to obtain adequate quantities of source plasma, plasma derivatives or specialty ancillary products that meet the regulatory requirements of the FDA, the EMA, Health Canada or the regulatory authorities in Israel, or if our suppliers were to fail to modify their operations to meet regulatory requirements or if prices of source plasma or plasma derivatives were to rise significantly"; and "-Our long-term continued growth is dependent on our ability to engage in additional strategic transactions to acquire assets, businesses, products or technologies or engage in in-license or out-license transactions of products or technologies or form collaborations. Our inability to secure such transactions on cost-effective terms or our inability to realize the anticipated benefits from these transactions, may negatively affect our projected growth and operating results, dilute our shareholders' ownership or cause us to incur debt or significant expense."

In addition to company-sponsored studies, we from time to time participate in Investigator-Initiated Clinical Trials ("IITs"), which are conducted and managed independently by external investigators or academic institutions. In IITs, we may provide study drug, limited funding, scientific input, or other non-operational support; however, we do not control the design, conduct, data collection, analysis or reporting of such studies. Because these studies are not sponsored by us, we have limited ability to ensure that they adhere to applicable regulatory requirements, including GCP, data integrity standards or appropriate oversight and monitoring procedures. Any failure by investigators or institutions to properly conduct these trials could result in unreliable data, negative clinical observations, publication of unfavorable results, or safety findings that could adversely impact our ability to use the results of such IITs for the purpose of generating additional data assisting us in our product commercialization efforts. Furthermore, under typical IIT arrangements, all intellectual property generated in the course of the study, including discoveries, know-how, data, and inventions, remains with the principal investigator or the institution conducting the research. As a result, we may not obtain rights to potentially valuable IP arising from the use or evaluation of our products in these studies. Our inability to secure access to IP developed in IITs may therefore restrict our ability to fully leverage clinical insights gained from such studies and impede our product commercialization efforts.

Our success depends in large part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology and products, especially intellectual property related to our manufacturing processes. However, the patent landscape in the biotechnology and pharmaceutical fields is highly complicated and uncertain and involves complex legal, factual and scientific questions. Changes in either patent laws or in the interpretation of patent laws in the United States and other countries may diminish the value and strength of our intellectual property or narrow the scope of our patent protection. In addition, we may fail to apply for or be unable to obtain patents necessary to protect our technology or products or enforce our patents due to lack of information about the exact use of our processes by third parties. Even if patents are issued to us or to our licensors, they may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, which could limit our ability to prevent competitors from using similar technology or marketing similar products, or limit the length of time our technologies and products have patent protection. Additionally, many of our patents relate to the processes we use to produce our products, not to the products themselves. In many cases, the plasma-derived products we produce or intend to develop in the future will not, in and of themselves, be patentable. Since many of our patents relate to processes or uses of the products obtained therefrom, if a competitor is able to utilize a process that does not rely on our protected intellectual property, that competitor could sell a plasma-derived product similar to one we have developed or sell it without infringing these patents. Patent rights are territorial; thus, any patent protections we have will only be enforceable in those countries in which we have issued patents. In addition, the laws of certain countries do not protect our intellectual property rights to the same extent as do the laws of the U.S. and the European Union. Competitors may successfully challenge our patents, produce similar drugs or products that do not infringe our patents, or produce drugs in countries where we have not applied for patent protection or that do not recognize or provide enforcement mechanisms for our patents. Furthermore, it is not possible to know the scope of claims that will be allowed in pending applications or which claims of granted patents, if any, will be deemed enforceable in a court of law. Due to the extensive time needed to develop, test and obtain regulatory approval for our therapeutic candidates or any product we may sell or market, any patents that protect our therapeutic candidates or any product we may sell, or market may expire early during commercialization. This may reduce or eliminate any market advantages that such patents may give us. Following patent expiration, we may face increased competition through the entry of recombinant or generic products into the market and a subsequent decline in market share and profits. In some cases, we may rely on our licensors or partners to conduct patent prosecution, patent maintenance or patent defense on our behalf. Therefore, our ability to ensure that these patents are properly prosecuted, maintained, or defended may be limited, which may adversely affect our rights in our therapeutic candidates and potential approved for marketing products. Any failure by our licensors or development or commercialization partners to properly conduct patent prosecution, maintenance, enforcement, or defense could materially harm our ability to obtain suitable patent protection covering our therapeutic candidates or products or ensure freedom to commercialize the products in view of third-party patent rights, thereby materially reducing our potential profits. Our patents also may not afford us protection against competitors or other third parties with similar technology. Because patent applications worldwide are typically not published until 18 months after their filing, and because publications of discoveries in scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to file for protection of the inventions set forth in such patent applications. As a result, the patents we own and license may be invalidated in the future, and the patent applications we own and license may not be granted. Moreover, in the US, during 2012, the Leahy-Smith America Invents Act ("AIA") created a new legal proceeding, the inter partes review petition, that allows third parties to challenge the validity of patents before the Patent Trials and Appeals Board. The costs of these proceedings could be substantial and our efforts in them could be unsuccessful, resulting in a loss of our anticipated patent position. In addition, if a third party prevails in such a proceeding and obtains an issued patent, we may be prevented from practicing technology or marketing products covered by that patent. Additionally, patents and patent applications owned by third parties may prevent us from pursuing certain opportunities such as entering into specific markets or developing or commercializing certain products or reducing the cost effectiveness of the relevant business as a result of needing to make royalty payments or other business conciliations. Finally, we may choose to enter into markets where certain competitors have patents or patent protection over technology that may impede our ability to compete effectively. Our patents are due to expire at various dates between 2027 and 2044. However, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby limiting advantages of the patent. Our pending and future patent applications may not lead to the issuance of patents or, if issued, the patents may not be issued in a form that will provide us with any competitive advantage. We also cannot guarantee that: any of our present or future patents or patent claims or other intellectual property rights will not lapse or be invalidated, circumvented, challenged or abandoned; our intellectual property rights will provide competitive advantages or prevent competitors from making or selling competing products; our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties; any of our pending or future patent applications will be issued or have the coverage originally sought; our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; or we will not lose the ability to assert our intellectual property rights against, or to license our technology to, others and collect royalties or other payments. In addition, our competitors or others may design around our patents or protected technologies. Effective protection of our intellectual property rights may also be unavailable, limited or not applied in some countries, and even if available, we may fail to pursue or obtain necessary intellectual property protection in such countries. In addition, the legal systems of certain countries do not favor the aggressive enforcement of patents and other intellectual property rights, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. In order to preserve and enforce our patent and other intellectual property rights, we may need to make claims, apply certain patent or other regulatory procedures or file lawsuits against third parties. Such proceedings could entail significant costs to us and divert our management's attention from developing and commercializing our products. Lawsuits may ultimately be unsuccessful and may also subject us to counterclaims and cause our intellectual property rights to be challenged, narrowed, invalidated or held to be unenforceable. Additionally, unauthorized use of our intellectual property may have occurred or may occur in the future, including, for example, in the production of counterfeit versions of our products. Counterfeit products may use different and possibly contaminated sources of plasma and other raw materials, and the purification process involved in the manufacture of counterfeit products may raise additional safety concerns, over which we have no control. Although we have taken steps to minimize the risk of unauthorized uses of our intellectual property, including for the production of counterfeit products, any failure to identify unauthorized use of, and otherwise adequately protect, our intellectual property could adversely affect our business, including reducing the demand for our products. Additionally, any reported adverse events involving counterfeit products that purported to be our products could harm our reputation and the sale of our products in particular and consumer willingness to use plasma-derived therapeutics in general. Moreover, if we are required to commence litigation related to unauthorized use, whether as a plaintiff or defendant, such litigation would be time-consuming, force us to incur significant costs and divert our attention and the efforts of our management and other employees, which could, in turn, result in lower revenue and higher expenses.

We and our employees increasingly utilize artificial intelligence ("AI") tools to support various business functions. While these tools offer efficiencies, they may also result in potential inaccuracies and miscommunications leading to misunderstandings with stakeholders, such as customers and regulatory entities. Furthermore, the use of AI solutions by our employees or third parties on which we rely, may lead to the public disclosure of confidential information (including personal data and proprietary information) in contravention of our internal policies, data protection laws, or contractual requirements. In the future, we may consider the use of additional AI tools for various aspects of our business. While these advancements could provide significant benefits, they also present new risks. The integration of new AI technologies could lead to unforeseen technical challenges, increased reliance on AI systems, and potential disruptions in our operations. Additionally, the rapidly evolving nature of AI may necessitate continuous updates to our risk management strategies and compliance frameworks to address emerging ethical and regulatory concerns. As we expand our use of AI, we are committed to mitigating these risks through robust data protection measures, regular monitoring, and ongoing employee training; however, there can be no assurance that these measures will fully mitigate the associated risks.

We are incorporated under Israeli law, and our principal offices and internal manufacturing facilities are located in Israel. In addition, most of our officers and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in 1948, and in recent years, armed conflicts have occurred between Israel and its neighboring countries and terrorist organizations active in the region. These conflicts have involved missile strikes, hostile infiltrations, terrorism against civilian targets in various parts of Israel, and the abduction of soldiers and citizens. On October 7, 2023, Hamas terrorists infiltrated Israel's border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers. These attacks resulted in extensive deaths, injuries, and the kidnapping of civilians and soldiers. Following the attacks, Israel's security cabinet declared war against Hamas and as a result, the Israeli military began to call-up reservists for active duty. See also "- Our operations may be disrupted by the obligations of personnel to perform military service." Israel has subsequently been involved in military conflicts with Hamas, Hezbollah (a terrorist organization based in Lebanon), and Iran, both directly and through Iranian proxies such as the Houthi movement in Yemen and armed groups in Iraq and other terrorist organizations. Additionally, following the fall of the Assad regime in Syria, Israel conducted limited military operations targeting the Assad-led Syrian army, Iranian military assets, and infrastructure linked to Hezbollah and other Iran-supported groups. In November 2024, a ceasefire agreement was reached with Hezbollah in Lebanon. In June 2025, in light of continued nuclear threats and intelligence assessments, Israel launched a military operation directly targeting military and nuclear infrastructure inside Iran, aimed at disrupting Iran's capacity to coordinate or launch further hostilities against Israel and to degrade its nuclear program. In response, Iran launched multiple waves of drones and ballistic missiles at Israeli cities. While most of these attacks were intercepted, several caused civilian deaths and casualties, as well as some damage to infrastructure and property. A ceasefire was declared between Israel and Iran in June 2025 after 12 days of hostilities; however, the situation remains volatile. In October 2025, a ceasefire in the conflict with Hamas came into effect; however, the situation remains fragile, with isolated incidents of fighting. On February 28, 2026, Israel and the United States commenced coordinated military strikes against targets in Iran, including military and strategic infrastructure in response to ongoing regional tensions and recent escalations involving Iran's nuclear and military activities. In response, Iran launched a series of retaliatory attacks against Israel, targeting major cities and strategic sites, which are ongoing. While most of these attacks have been intercepted to date, some resulted in civilian casualties and damage to property. Subsequently, Hezbollah launched attacks against Israel in retaliation for the killing of Ali Hosseini Khamenei, the former Supreme Leader of Iran, and in response, Israel launched attacks against Lebanon and Israeli ground forces have entered into Southern Lebanon, and hostilities between Israel and Hezbollah are ongoing. Iran subsequently began launching retaliatory strikes against U.S. and other targets in the Gulf region. The Israeli government has raised its alert level nationwide, and the situation remains highly unstable, with ongoing exchanges of fire and heightened risk of further escalation. Regional and international responses are ongoing, and the risk of broader conflict in the Middle East has increased. While we have not been materially impacted during these conflicts to date, and we successfully managed our business and operational continuity throughout the entire period since October 7, 2023, hostilities continue to exist, and the situation in Israel and the region remains volatile with the potential for further escalation or deterioration of regional conditions. We cannot predict if and how such conflicts will ultimately affect our business and operations (including our manufacturing facility in Beit Kama, which is located in southern Israel, approximately 20 miles east of the Gaza Strip, and our supply chains) or Israel's economy in general. These events could lead to increased costs, risks to employee safety, and potential challenges to business continuity, potentially resulting in financial losses. Our commercial insurance does not cover losses that may occur as a result of events associated with war. Losses resulting from acts of terrorism may be partially covered under certain circumstances. Although the Israeli government is currently committed to covering a certain portion of direct damages caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. In addition, the war led to a deterioration of certain indicators of Israel's economic standing, for instance, a downgrade in Israel's credit rating by rating agencies such as by Moody's, S&P Global, and Fitch. The global perception of Israel and Israeli companies may lead to sanctions or other measures against Israel and Israeli companies, including boycotts of Israeli goods and services or restrictions on doing business with Israel and Israeli companies. These restrictions may materially limit our ability to obtain raw materials from these countries or sell our products to companies in these countries. Any hostilities involving Israel, the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel, could adversely affect our operations, cause our sales to decrease, and adversely affect the share price of publicly traded companies having operations in Israel, such as ours. Furthermore, political conditions within Israel may affect our operations. Israel held five general elections between 2019 and 2022, with the next general election scheduled for October 27, 2026. Prior to October 2023, the Israeli government pursued extensive changes to Israel's judicial system and has recently renewed its efforts to effect such changes. In response to these developments, certain individuals, organizations, and institutions, both within and outside of Israel, voiced concerns that such proposed changes, if adopted, may negatively impact the business environment in Israel. Such proposed changes may also lead to political instability or civil unrest. Actual or perceived political instability in Israel or any negative changes in the political environment may, individually or in the aggregate, adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations, and growth prospects, as well as the market price of our shares and our ability to raise additional capital, if deemed necessary by our management and board of directors.

As a public company whose shares are traded on the Nasdaq Global Select Market ("Nasdaq") and the Tel Aviv Stock Exchange (the "TASE"), we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and regulatory requirements is time consuming, and may result in increased costs to us and could have a negative effect on our business, results of operations and financial condition. As a public company in the United States, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the requirements of the Sarbanes-Oxley Act of 2002 ("SOX"). These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual and current reports, and file or make public certain additional information, with respect to our business and financial condition. SOX requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we may need to commit significant resources, hire additional staff and provide additional management oversight. These activities may divert management's attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, as our business changes and if we expand either through acquisitions or by means of organic growth, our internal controls may become more complex and we will require significantly more resources to ensure our internal controls remain effective. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could impact our financial information and adversely affect our operating results or cause us to fail to meet our reporting obligations. If we identify material weaknesses, the disclosure of that fact, even if quickly remediated, could require significant resources to remediate, expose us to legal or regulatory proceedings, and reduce the market's confidence in our financial statements and negatively affect our share price.

We receive payment for our sales and make payments for resources in a number of different currencies. While our sales and expenses are primarily denominated in U.S. dollars, our financial results may be adversely affected by fluctuations in currency exchange rates as a portion of our sales and expenses are denominated in other currencies, including the NIS and the Euro. Market volatility and currency fluctuations may limit our ability to cost-effectively hedge against our foreign currency exposure and, in addition, our ability to hedge our exposure to currency fluctuations in certain emerging markets may be limited. Hedging strategies may not eliminate our exposure to foreign exchange rate fluctuations and may involve costs and risks of their own, such as devotion of management time, external costs to implement the strategies and potential accounting implications. Foreign currency fluctuations, independent of the performance of our underlying business, could lead to materially adverse results or could lead to positive results that are not repeated in future periods.