Nova Ltd. - 20-F annual report 2025

 

INTRODUCTION

 

 

 

FORWARD – LOOKING STATEMENTS AND RISK FACTORS SUMMARY

 

This Annual Report contains estimates and forward-looking statements, principally in the sections entitled Item 3.D. “Key Information—Risk Factors,” Item 4. “Information on the Company,” and Item 5. “Operating and Financial Review and Prospects.” In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible” or similar words. Statements regarding our future results of operations and financial position, growth strategy and plans and objectives of management for future operations, including, among others, expansion in new and existing markets, are forward-looking statements.

 

Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends which affect or may affect our business, operations and industry. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to numerous risks and uncertainties.

 

These forward-looking statements are subject to a number of known and unknown risks, uncertainties, other factors and assumptions, including the risks described in Item 3.D “Key Information—Risk Factors” and elsewhere in this Annual Report.

 

The below important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements. The below is also a summary of the risk factors described in Item 3.D “Key Information – Risk Factors” of this Annual Report.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

•	Our shares are listed for trade on more than one stock exchange.

•	As a foreign private issuer, we are subject to reporting and corporate governance requirements that differ from those applicable to U.S. domestic companies, and the loss of this status could result in significant additional costs and expenses.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk factors” and elsewhere in this Annual Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Annual Report. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

 

The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

 

 

 

Item 1. Identity of Directors, Senior Management and Advisors

 

Not applicable.

 

Item 2. Offer Statistics and Expected Timetable

 

Not applicable.

 

Item 3. Key Information

 

 

[Reserved]

 

 

Not applicable.

 

 

Not applicable.

 

 

You should carefully consider the risks described below before making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this Annual Report.

 

 

Increased information technology security threats and more sophisticated computer crime could disrupt our business.

 

 

Although we have invested in measures to reduce these risks, such as creating a cybersecurity risk management program and putting in place a cybersecurity incident response plan which includes an incident response plan, we can provide no assurance that our current IT systems are fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats. The cost and operational consequences of implementing, maintaining, and enhancing further data or system protection measures could increase significantly to overcome increasingly intense, complex, and sophisticated global cyber threats. Despite our best efforts, we are not fully insulated from data breaches and system disruptions and, accordingly, we have experienced and expect to continue to experience actual or attempted cyberattacks of our IT networks. Although none of these actual or attempted cyberattacks have had a material adverse effect on our operations or financial condition thus far, we cannot guarantee that any such incidents will not have a material adverse effect on our operations or financial condition in the future. Any material breaches of cybersecurity or media reports of perceived security vulnerabilities to our systems or those of the Company’s third parties, even if no breach has been attempted or occurred, could cause us to experience reputational harm, loss of data, loss of customers and revenue, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard our customers’ information, or financial losses that are either not insured against or not fully covered through any insurance maintained by us. Any of the foregoing may have a material adverse effect on our business, operating results and financial condition.

 

 

We are dependent on international sales, which expose us to foreign political and economic risks that could impede our revenue stream.

 

Our principal customers are located in Taiwan, Japan, South Korea, China and the United States, and we produce our products in Israel, the United States and Germany. International operations expose us to a variety of risks that could seriously impact our financial condition and impede our revenue stream including:

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intergovernmental conflicts or actions, including but not limited to armed conflict, trade wars and acts of terrorism or war, including the current war between Russia and the Ukraine, as well as the growing tensions between Taiwan and China and the Chinese actions in the South China Sea.

All of these risks could result in increased costs or decreased revenues, either of which could have a materially adverse effect on our profitability.

We are subject to laws and regulations that could restrict our operations, including economic sanctions and export restrictions. 

 

Our business is subject to certain laws and restrictions based on the items we export and countries with which we conduct business.

 

Specifically, starting 2018 and to date, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) has taken actions to restrict exports to several Chinese-based semiconductor manufacturers by adding them to the U.S. Export Administration Regulations’ (EAR) Entity List. These manufacturers have acquired and continue to acquire several of our metrology solutions. Due to the abovementioned export restrictions, our U.S. subsidiary is currently restricted from shipping tools or parts, or to provide any form of service to such customers, until it is granted an appropriate license by BIS.

 

In addition, in 2020 the U.S. Department of Commerce introduced restrictions on exporting certain foreign-made items to Huawei and to customers who are suppliers to Huawei, which is a Chinese based electronics supplier.

 

In October 2022, the U.S. Department of Commerce introduced additional restrictions that have limited the ability of our U.S. subsidiary to serve a small portion of the available Chinese market. As part of these restrictions, in addition to the Entity List additions, the U.S. Department of Commerce has also restricted shipment of products used for certain advanced technology nodes, including products that use artificial intelligence and advanced computing products. Consequently, our U.S. subsidiary is required to obtain a license in order to ship to certain Chinese entities which are known to have or are known to plan to have, certain advanced-nodes manufacturing or development abilities (as those are defined in the EAR). These restrictions also apply to shipments of high-power advanced chips to China (as those are defined in the regulations), by any entity. These new restrictions also impose personal liability on any “U.S. Person” who has “knowledge” that any item shipped, transmitted or transferred will be used for certain advanced nodes and/or high-powered chips development or production, and who provides support for such transactions.

 

In October 2023, the U.S. Department of Commerce issued two additional rules further restricting China’s ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors, and added several new Chinese entities to the Entity List. In November 2023, the U.S. Department of Commerce also partially suspended some of the licenses granted by it concerning certain Chinese customers as recipients.

 

In September 2024, the U.S. Department of Commerce issued an interim final rule further restricting certain end uses for semiconductor capital equipment. This interim final rule targets advanced technologies such as GAAFET (Gate-All-Around field effect transistor), advanced semiconductor manufacturing equipment and Quantum computers controls, which includes hardware, software, and related components. Pursuant to this, exporters will need to obtain licenses for the export outside of the US, reexport, or transfer (in-country) of certain items, all subject to the terms of the general license issues together with the interim final rule.

 

In December 2024, BIS issued a package of rules designed to further impair China’s capability to produce advanced-node semiconductors with ‘military applications’, that can be used in the next generation of advanced weapon systems and in artificial intelligence (AI) and advanced computing. Such regulatory measures include, but are not limited to, new controls on semiconductor manufacturing equipment, new controls on software tools, new controls on high-bandwidth memory (HBM), and additions of 140 entities to the Entity List. The regulatory update also includes the establishment of two new Foreign Direct Product (FDP) rules and corresponding de minimis provisions, new software and technology controls, and a clarification to the EAR regarding existing controls on software keys.

In September 2025, BIS issued the "Affiliates Rule," which expands end-user export controls to any foreign entity owned 50% or more, directly or indirectly, by one or more persons on the BIS Entity List or Military End User (MEU) List, as well as certain parties on the Specially Designated Nationals (SDN) List. However, this rule has been suspended for one year, effective November 10, 2025. The suspension is set to terminate on November 9, 2026.

 

In some cases, the abovementioned export restrictions might also be applicable to the items exported from countries other than the U.S., either by international arrangements made between countries, as updated from time to time, imposing export limitation and supervisory duties, or by limitations on the re-export of certain U.S. origin items.

 

Since the introduction of each of these restrictions, we have put in place processes to ensure compliance with applicable restrictions. While we continue to conduct detailed assessments of the new restrictions and monitor new sanctions and restrictions that could arise, any potential violations of such regulations, whether under U.S. or other jurisdictions, could have an adverse impact on our reputation, business, results of operations and financials. 

 

New export control regulations have also been introduced in other jurisdictions, including certain European countries, including Germany and the Netherlands which are adopting or expected to adopt comparative controls to the U.S. EAR; China on items related to gallium and germanium, though the export ban is currently suspended until November 27, 2026; and Japan on advanced semiconductor-manufacturing equipment.

 

While certain export regulations issued in some jurisdictions currently do not have a direct major effect on us, these may have an adverse effect on our supply chain, as well as the semiconductor manufacturing sector in China by reducing the demand for metrology equipment from this sector and therefore indirectly affect our sales. In addition, our growing presence in Europe, through recent acquisitions, may increase our exposure to changes in the European export control regulations and updates to the Wassenaar List of Dual-Use Goods.

We are also subject to the Israeli export control regime, which mainly governs defense exports and export of dual-use items. Dual-use items are defined under the Israeli export control regime in accordance with the Wassenaar List of Dual-Use Goods and Technologies (the Wassenaar Control List), which is adopted into the Israeli law. Our products are not currently subject to control under Israeli law. However, the Wassenaar Control List is updated annually, and any changes in the classification of the components, materials, software or technology used in our products could impact exports from Israel, potentially leading to licensing requirements which may delay our export operations, create additional costs related to handling the licensing requests, and potentially limit our market, as sales and export of controlled items would be subject to the regulator's discretion.

 

Changes in global trade policies and other factors beyond our control may adversely impact our business, financial condition and results of operations.

 

The international environment in which we operate is affected by inter-country trade agreements and tariffs. As a result of recent revisions in the U.S. administrative policy there are, and may be additional, changes to existing trade agreements, greater restrictions on free trade and significant increases in tariffs on goods imported into the United States. Therefore, there is current uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations, and tariffs, and we cannot predict whether, and to what extent, U.S. trade policies will change in the future, including as a result of changes by the current U.S. presidential administration. In 2025, the global tariff landscape began to quickly change following the U.S. government announcing new or increased tariffs on various countries. While we continue to monitor the situation as it evolves, these additional tariffs or any future tariffs or retaliation by another government against such tariffs or policies have introduced significant uncertainty into the market. Future actions of the U.S. administration and that of foreign governments, including China, with respect to tariffs or international trade agreements and policies, remain currently unclear.

 

The escalation of a trade war, tariffs, retaliatory tariffs or other trade restrictions on products and materials either exported by us to China or raw materials imported by us from China may significantly impede our ability to provide our solutions and service our customers in China or other effected locations. Such developments may result in a decrease in demand for our products and technologies as well as delays in payments from our customers. Furthermore, other governmental action related to tariffs or international trade agreements, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries, where our customers are located, could adversely affect our business, financial condition, operating results and cash flows.

 

We may be affected by instability in the global economy and by financial turmoil.

 

There is an inherent risk, based on the complex relationships among China, Japan, Korea, Taiwan, and the United States, that political, diplomatic and national security influences might lead to trade disputes, impacts and/or disruptions, in particular those affecting the semiconductor industry. This would adversely affect our business with China, Japan, Korea, and/or Taiwan and perhaps the entire Asia Pacific region or global economy. A significant trade dispute, impact and/or disruption in any area where we do business could have a materially adverse impact on our future revenue and profits. Instability in the global markets and in the geopolitical environment in many parts of the world, including current war between Russia and the Ukraine, as well as other disruptions may continue to put pressure on global economic conditions. In the event global economic and market conditions, or economic conditions in key markets, remain uncertain or deteriorate further, we may experience material impacts on our business, operating results, and financial condition.

 

The Russia – Ukraine conflict could affect our business.

 

The ongoing war between Russia and Ukraine has impacted not only the global economy but the global energy markets as well, in particular the European energy market. This could result in increased operating expenses in Germany, in the expense of shipping materials to and from our various facilities, and wellbeing of our employees with respect to the energy crisis in Europe and the inability to heat buildings etc. Since the Russian invasion of Ukraine, the cost for liquefied natural gas has more than doubled, this could lead to further energy price increase, causing global market disruption and volatilities in supply chain. The high volatility of energy prices could have an indirect effect on our operations in Germany, and our business expansion in other regions, which may adversely affect our financial condition and operating results.

 

Current market conditions, including inflation and recessionary pressures could affect our growth and profitability.

 

The inflation, slower growth, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment, geopolitical issues increase in energy costs, unstable global conditions and changes in currency exchange rates continue to contribute to global economic instability. Furthermore, although certain central banks, including the U.S. Federal Reserve, have adjusted policy rates in recent periods, such rates remain subject to ongoing market and policy-driven fluctuations and could rise again in the future. These conditions, and their impact on the global macro-economic environment, can impact our business, operating results and financial condition.

 

 

 

Our business is subject to the risks associated with operating in China.

 

Our results of operations, financial conditions, and prospects are subject to a significant degree to economic, political and legal developments in China including government control over capital investments or changes in tax regulations that are applicable to us. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate and control of foreign exchange, and allocation of resources. As one of our subsidiaries is located in China, our business is subject to the risks associated with doing business in China, including:

 

 

 

 

 

 

 

Our business could be disrupted by catastrophic events.

 

The occurrence of unforeseen or catastrophic events such as terrorist attacks, extreme terrestrial or solar weather events or other natural disasters, emergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency), could create economic and financial disruptions, and could lead to operational difficulties that could impair our ability to manage our business.

 

 Risks related to technology and intellectual property

 

Because of the technical nature of our business, our intellectual property is extremely important to our business, and our inability to protect our intellectual property could harm our competitive position.

 

Our continued success depends upon our ability to protect our core technology and intellectual property. We therefore have an extensive program devoting resources to seeking patent protection for our inventions and discoveries that we believe will provide us with competitive advantages. Our patents, utility models and patent applications principally cover various aspects of optical measurement systems and methods, integrated process control implementation concepts, and optical, opto-mechanical and mechanical design. In addition, our patents and applications cover various aspects of X-ray based measurement systems and methods, including process control implementation concepts, X-ray energy sources, electron optics and detection, vacuum systems and equipment integration. Additionally, our chemical metrology equipment requires coverage of various elements and sub-systems performing various types of chemical analysis of the process chemicals and semiconductor wet process control – including electrodeposition, wet etch and clean and CMP sectors.

 

 We cannot assure that:

 

 

 

 

Additionally, as part of our long-term technological collaboration, we are engaged in joint development activities with some of our strategic customers and vendors as well as with research institutes. These activities impose some limitations on the joint intellectual property developed as part of these programs.

 

 

 

 

 

 

 

Any litigation of this type, even if we are ultimately successful, could result in substantial cost and diversion of time and effort by our management, which by itself could have a negative impact on our profit margin, available funds, competitive position and ability to develop and market new and existing products. For additional information on our intellectual property, see “Item 4B. Business Overview — Intellectual Property” in this Annual Report.

 

We may incorporate open-source technology in some of our software and products, which may expose us to liability and have a material impact on our product development and sales.

 

In order to leverage big data and distributed computing, some of our software and products utilize open-source technologies. These technologies may be subject to certain open-source licenses, including but not limited to the General Public License, which, when used or integrated in particular manners, impose certain requirements on the subsequent use of such technologies, and although scanned and reviewed may pose a potential risk to proprietary nature of products. In the event that we have or will in the future, use or integrate software that is subject to such open source licenses into or in connection with our products in such ways that will trigger certain requirements of these open source licenses, we may (i) be required to include certain notices and abide by other requirements in the absence of which we may be found in breach of the copyrights owned by the creators of such open source technologies; and/or (ii) be required to disclose our own source code or parts thereof to the public, which could enable our competitors to eliminate some or any technological advantage that our products may have over theirs. Any such requirement to disclose our source code or other confidential information related to our products, and the failure to abide by license requirement resulting in copyright infringement, could materially adversely affect our competitive position and impact our business results of operations and financial condition.

 

We may use AI technologies which may expose us to liability and have a material impact on our product development.

 

Artificial intelligence (AI) is driving more semiconductor businesses, specifically those in process control. Utilizing AI as part of process control is changing and will change the nature of the solutions and may change the balance between hardware capabilities and software or algorithms needs. AI is a rapidly evolving technology which requires further review and analysis to ensure that any line of code we generate by using these tools is accurate, complies with quality standards, does not infringe any legal or commercial terms, and is secured code. Furthermore, our competitors may be more successful in integrating AI technology into their products. While AI is creating efficiency in some aspects of our development, such as software coding and customer support, there can be no assurance AI will enhance our business operations. While we scan and review these technologies prior to use, when using third party AI technologies, that generate packages and lines of code, certain risks may arise, including, among others: (i) uncertainty regarding the accuracy and quality of the code and the potential generation of inaccurate, misleading, discriminatory, or unexpected content; (ii) enforcement of legal and commercial terms; (iii) security of the code potentially exposing us to cybersecurity risks such as defects, viruses, ransomware or malware; and (iv) potential claims of copyright infringement or other intellectual property misappropriation through the use of third-party AI tools in our products and services.

 

 Risks related to our industry

 

 

 

 

 

 

 

 

 

If we fail to compete in a timely and cost-effective manner against current or future competitors, our revenues and market share will decline.

 

If we do not respond effectively and on a timely basis to rapid technological changes, our ability to attract and retain customers could be diminished, which would have an adverse effect on our sales and ability to remain competitive.

 

 

The ongoing consolidation in our industry may harm us if our competitors are able to offer a broader range of products and greater customer support than we can offer or if our main suppliers cease delivery of important component as a result of being acquired by a larger company.

 

 

 

The semiconductor capital equipment market and industries, which are cyclical, experienced steep downturns and upturns in the last two decades. Although recent fluctuations have been milder, the capital equipment market can still experience downturns in some years, and we cannot predict when recovery or future declines will occur or how they will affect our business.

 

Our operations may be delayed or interrupted, and our business could suffer if we violate environmental, safety and health, or ESH regulations.

 

Some of our activities require the use of various gases, chemicals, hazardous materials and other substances such as solvents and sulfuric acid which may have an impact on the environment. We are subject to Environmental, Safety and Health (“ESH”) regulations, and a failure to manage the use, storage, transportation, emission, discharge, recycling or disposal of raw materials or to comply with these ESH regulations, or a failure of any of the above by a supplier, manufacturer, or other third party in our value chain, could result in (i) regulatory penalties, fines and other legal liabilities, (ii) suspension of production or delays in operation and capacity expansion, (iii) a decrease in our sales, (iv) an increase in pollution cleaning fees and other operation costs, or (v) damage to our public image, any of which could harm our business. In addition, as ESH regulations are becoming more comprehensive and stringent, and may vary by jurisdiction, we may incur a greater amount of capital expenditures in technology innovation, materials substitution, and the hiring and retention of new or existing personnel, in order to comply with such regulations, which may adversely affect our results of operations.

 

 

We implemented a new ERP system, and challenges implementing our new system could negatively impact our business and operations. 

 

In January 2026, following a multi-year implementation, we launched our new enterprise resource planning system (“ERP”). We depend heavily on our ERP to manage our business and report operating results. Although the system is operational, it requires ongoing maintenance, monitoring, and enhancements, and we may implement additional modules in the future. The transition introduced new procedures and various new controls over financial reporting, many of which are still being adjusted to best fit our needs. Inefficiencies may persist until the system and related processes stabilize.

Although our ERP system was launched and is operational, any deficiencies, malfunctions, or limitations in its design or functionality could adversely affect our ability to maintain accurate financial records, manage operations efficiently, serve our customers with effective and timely support and produce timely and accurate financial statements or comply with applicable regulations. System errors, integration challenges with other applications, cybersecurity vulnerabilities, or unexpected technical issues could disrupt our operations, increase costs, or impair our ability to appropriately forecast and report results.

 

Because substantially most of our current sales are dependent on few specific product lines, factors that adversely affect the pricing and demand for these product lines could substantially reduce our sales.

 

We are currently dependent on few process control product lines. We expect these product lines to continue to account for a substantial portion of our revenues in the coming years. As a result, factors adversely affecting the pricing of, or demand for, these product lines, such as competition and technological change, could significantly reduce our sales.

 

We depend on a small number of large customers, and the loss of one or more of them could significantly lower our revenues.

 

Like our peers serving the semiconductor market, our customer base is highly concentrated among a limited number of large customers. We anticipate that our revenues will continue to depend on a limited number of major customers, although the companies considered to be our major customers and the percentage of our revenue represented by each major customer may vary from period to period. As a result of our customer concentration, our financial performance may fluctuate significantly from period to period based, among others, on exogenous circumstances related to our clients. For example, it is possible that any of our major customers could terminate its purchasing relationship with us or significantly reduce or delay the amount of orders for our products, purchase products from our competitors, or develop its own alternative solutions internally. The loss of any one of our major customers would adversely affect our revenues. Furthermore, if any of our customers become insolvent or have difficulties meeting their financial obligations to us for any reason, we may suffer losses. For more information regarding our sales by major customers as percentage of our total sales, see Note 16 to our consolidated financial statements contained elsewhere in this Annual Report.

 

Our inability to significantly reduce spending during a protracted slowdown in the semiconductor industry could reduce our prospects of achieving continued profitability.

 

Historically, we have derived all our revenues, and we expect to continue to derive practically all of our revenues, from sales of our products and related services to the semiconductor industry. Our business depends in large part upon capital expenditures by semiconductor manufacturers, which in turn depend upon the current and anticipated demand for semiconductors. The semiconductor industry has experienced severe and protracted cyclical downturns and upturns. Cyclical downturns, as those we have experienced in the past, including the slowdown in 2023, may cause material reductions in the demand for the products and services that we offer, and may result in a decline in our sales. In addition, our ability to significantly reduce expenses during such cyclical downturn may be limited because of:

 

 

 

 

 

There can be no assurance that revenues from future products or product enhancements will be sufficient to recover the development costs or to ensure the sale of inventory related to these products.

 

 

New product lines that we may introduce in the future may contain defects, which will require us to allocate time and financial resources to correct.

 

 

If any of our systems fail to meet or exceed our internal quality specifications, we cannot ship them until such time as they have met such specifications. If we experience significant delays or are unable to ship our products to our customers as a result of our internal processes or for any other reason, our business and reputation may be adversely affected.

 

 

Our dependence on a single manufacturing facility per product line magnifies the risk of an interruption in our production capabilities.

 

 

Our lease agreements for our Manufacturing Facilities include provisions that exempt the landlord and others from liability for damages to our Manufacturing Facilities.

 

 

 

We schedule production of our systems based upon order backlog and customer forecasts. We include in backlog only those orders received from the customers in which a delivery date has been specified. In general, our ability to rely on our backlog for future forecasting and planning is limited because shipment dates may be changed, some customers may cancel or delay orders with little or no penalty, and our ability to collect cancellation fees from customers is not assured. Thus, our backlog may not be a reliable indicator of actual sales and financial results and this may affect the accuracy of our forecasts.

 

We may not be successful in our efforts to complete and integrate current and/or future acquisitions, which could disrupt our current business activities and adversely affect our results of operations or future growth.

 

Any acquisition may involve many risks, including the risks of:

 

 

 

 

 

 

 

 

 

On January 30, 2025, we completed the acquisition of Sentronics Metrology GmbH (“Sentronics”). If we are unable to successfully integrate Sentronics or any of our future acquisitions, our ability to grow our business or to operate our business effectively could be reduced, and our business, financial condition and operating results could suffer. Even if we are successful in completing acquisitions, we cannot assure that we will be able to integrate the operations of the acquired business without encountering difficulty regarding different business strategies with respect to marketing and integration of personnel with disparate business backgrounds and corporate cultures. Further, in certain cases, mergers and acquisitions require special approvals, or are subject to scrutiny by the local authorities, and failing to comply with such requirements or to receive such approvals, may prevent or limit our ability to complete the acquisitions as well as expose us to legal proceedings prior or following the consummation of such acquisitions. In some cases, such proceedings, if initiated, may conclude in a requirement to divest portions of the acquired business. As of the date of this Annual Report, we are not aware of any pending proceedings as such in connection with the acquisition of Sentronics.

 

We depend on continuous cooperation with Process Equipment Manufacturers (“PEMs”) to enable sales of our systems which are integrated with the process equipment, and the loss of PEMs as business partners could harm our business.

 

We believe that sales of systems which are integrated with the process equipment will continue to be an important source of our products revenues. Sales of such integrated systems, which include Optical CD integrated metrology and chemical metrology, depend upon the ability of PEMs to sell semiconductor equipment products that are able to integrate with these metrology systems. If our PEMs are unable to sell such products, if they choose to focus their attention on products that do not integrate our systems, or if they choose to develop their own metrology solutions, our business could suffer. If we were to lose our PEMs as business partners for any reason, our inability to realize sales from such systems could significantly harm our business. In addition, we may not be able to develop or market such new systems, which could slow or prevent our growth.

 

Some of our commercial agreements with PEMs and customers may include exclusivity provisions, which prevent us from engaging in certain business relationships with third parties. In addition, some of our commercial agreements with PEMs also include limitations on the use of certain joint intellectual property. These exclusivity obligations and limitations are often used as a tool to promote the development and the penetration of innovative new solutions, and are usually limited in terms of scope and length. When considering whether to enter into any such exclusivity arrangements or accepting such limitations, we usually take into consideration the terms of the exclusivity (e.g., length and scope), the expected benefit to the Company, and the risks and limitations associated with such exclusivity or limiting undertakings. Exclusivity obligations or limitation of use relating to certain parts of our technology and products may affect our ability to commercialize our products, engage in potentially beneficial business relationships with third parties (including by means of a merger or acquisition), or introduce new products into relevant markets, which could slow or prevent our growth.

 

We depend on a limited number of suppliers, and in some cases a sole supplier. Any disruption, delay or termination of these supply channels may adversely affect our ability to manufacture our products and to deliver them to our customers.

 

We purchase components, subassemblies and services from a limited number of suppliers and occasionally from a single or a sole source. Disruption or termination of these sources could occur (due to several factors, including, but not limited to, supplier capacity limitations, low availability of raw materials, bankruptcy, work stoppages due to a pandemic, or other reasons, acts of war, terrorism, fire, earthquake, energy shortages, flooding or other natural disasters), and these disruptions could have at least a temporary adverse effect on our operations. Although we generally maintain an inventory of critical components used in the manufacture and assembly of our systems, such supplies may not be sufficient to avoid potential delays that could have an adverse effect on our business.

 

In addition, while in some instances we may have an escrow agreement in place, the acquisition of a major supplier by a larger company may lead to a cease delivery of components that are important to the delivery of our products and will require us to invest resources to find alternative sources.

 

To date, we have not experienced any material disruption or termination of our supply sources where replacement material has not been found and qualified.

 

A prolonged inability on our part to obtain components included in our systems on a cost-effective basis could adversely impact our ability to deliver products on a timely basis, which could harm our sales and customer relationships.

 

The disclosure rules regarding the use of conflict minerals may affect our relationships with suppliers and customers.

 

The Securities and Exchange Commission, or SEC, requires certain disclosure by companies that use conflict minerals in their products, with substantial supply chain verification requirements in the event that the materials come from, or could have come from, the Democratic Republic of the Congo or adjoining countries. These rules and verification requirements may impose additional costs on us and on our suppliers, and limit the sources or increase the prices of materials used in our products. Among other things, this rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of components that are incorporated into our products. In addition, the number of suppliers who provide conflict-free minerals may be limited, and there may be material costs associated with complying with the disclosure requirements, such as costs related to the process of determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. We may not be able to sufficiently verify the origins of the relevant minerals used in components manufactured by third parties through the procedures that we implement, and we may encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so. While we have created processes and procedures designed to enable compliance with these rules, if in the future we are unable to certify that our products are conflict free, we may face challenges with our customers, which could place us at a competitive disadvantage and harm our reputation.

 

Attention to ESG matters and conservation measures may adversely impact our business or that of our manufacturers.

 

There has been an evolving public focus by investors, customers, environmental and social activists, the media, politicians, governmental authorities, nongovernmental organizations and other stakeholders on a variety of environmental, social, and governance (“ESG”) matters. We experience pressure to make commitments relating to ESG matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to ESG.

 

 

 

Our lengthy sales cycle increases our exposure to customer delays in orders, which may result in obsolete inventory and volatile quarterly revenues.

  

Sales of our systems depend, in significant part, upon our customers adding new manufacturing capacity or expanding existing manufacturing capacity, both of which involve a significant capital commitment. We may experience delays in finalizing sales while a customer evaluates and approves an initial purchase of our systems. Our sales cycle for new customers, products or applications, may take longer than twelve (12) months to complete. During this time, we may expend substantial funds and management effort, but fail to make any sales. Lengthy sales cycles subject us to a number of significant risks, including inventory obsolescence and fluctuations in operating results, over which we have limited control.

 

Due to intense competition for highly skilled personnel, we may fail to attract, recruit, retain and develop qualified employees, which could materially and adversely impact our business, financial condition and results of operations.

 

We compete in a market that involves rapidly changing technological and regulatory developments that require a wide-ranging set of expertise and intellectual capital. In order for us to successfully compete and grow, we must attract, recruit, retain and develop the necessary personnel who can provide the needed expertise across the entire spectrum of our intellectual capital needs. While we have a number of our key personnel who have substantial experience with our operations, we must also develop and exercise our personnel to provide succession plans capable of maintaining continuity in the midst of the inevitable unpredictability of human capital. Our principal research and development activities are conducted from our headquarters in Israel and our subsidiaries in the U.S and Germany, and we face significant competition for suitably skilled developers in these regions. The high-tech industry in Israel, the U.S. and other territories we operate in has experienced significant levels of employee attrition and is currently facing a severe shortage of skilled human capital. We may encounter higher attrition rates in the future depending on the economic growth of each territory. We may not succeed in recruiting additional experienced or professional personnel, retaining current personnel or effectively replacing current personnel who depart with qualified or effective successors.  Many of the companies with which we compete for experienced personnel have greater resources than us.

 

Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. There can be no assurance that qualified employees will continue to be employed or that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

 

 

 

We are incorporated under the laws of the State of Israel, and many of our employees, including certain management members, operate from our offices in Rehovot, Israel. In addition, most of our officers and directors are residents of Israel. Accordingly, our business and operations are directly affected by economic, political, geopolitical and military conditions in Israel.

Since the establishment of the State of Israel in 1948 and in recent years, armed conflicts between Israel and its neighboring countries and terrorist organizations active in the region have involved missile strikes, hostile infiltrations, terrorism against civilian targets in various parts of Israel, and recently abduction of soldiers and citizens.

 

 

Certain of our employees and consultants in Israel have been called, and additional employees may be called, for reserve duty service in the recent or future wars or other armed conflicts. Such employees may be absent for an extended period of time. As a result, our operations may be disrupted by such absences, which disruption may materially and adversely affect our business and results of operations. In addition, military reservists in Israel are expected to perform long reserve duty service in the coming years, which could further impact our operations.

The global perception of Israel and Israeli companies, influenced by actions by international judicial bodies, may lead to increased sanctions and other negative measures against Israel, as well as Israeli companies and academic institutions. There is also a growing movement among countries, activists, and organizations to boycott Israeli goods, services and academic research or restrict business with Israel, which could affect business operations. If these efforts become widespread, along with any future rulings from international tribunals against Israel, they could negatively impact our business operations.

 

Further, prior to the October 2023 war, the Israeli government pursued changes to Israel’s judicial system and has recently renewed its efforts to effect such changes. In response to the foregoing 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. If such changes to Israel’s judicial system are pursued by the government and approved by the parliament, this may have an adverse effect on our business, results of operations, and ability to raise additional funds, if deemed necessary by our management and board of directors.

 

Our convertible senior notes due 2030 (“2030 Convertible Senior Notes”) may impact our financial results, result in the dilution of existing shareholders, create downward pressure on the price of our ordinary shares, and restrict our ability to take advantage of future opportunities.

 

On September 5, 2025, we closed an offering of $750 million aggregate principal amount of 0% Convertible Senior Notes due 2030 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2030 Convertible Senior Notes affect our earnings per diluted share figures, as procedures under the Accounting Standards Update (“ASU”) 2020-06 require that we include in our calculation of earnings per diluted share the number of ordinary shares into which the 2030 Convertible Senior Notes are convertible. See also Note 11 to our consolidated financial statements contained elsewhere in this Annual Report.

 

The 2030 Convertible Senior Notes may be converted, under the conditions of the indenture governing the 2030 Convertible Senior Notes (the “Indenture”), during the periods and subject to the conditions specified in the Indenture, into cash, our ordinary shares, or a or a combination thereof, at our election. If our ordinary shares are issued to the holders of the 2030 Convertible Senior Notes upon conversion, there may be dilution to our shareholders’ equity and the market price of our ordinary shares may decrease due to the additional selling pressure in the market.

 

Furthermore, the Indenture prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the 2030 Convertible Senior Notes. In addition, if a takeover constitutes a “fundamental change” (as defined in the Indenture), then noteholders will have the right to require us to repurchase their 2030 Convertible Senior Notes for cash, and if a takeover constitutes a “make-whole fundamental change” (as defined in the Indenture), then we may be required to temporarily increase the conversion rate of the 2030 Convertible Senior Notes. These and other provisions in the indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable.

We currently anticipate that we will be able to rely on and to implement certain clarifications from the applicable Tax Authorities, with respect to the administration of our Israeli withholding tax obligations in relation to consideration to be paid to the holders of the Convertible Senior Notes upon their future conversion and settlement as well as other related tax aspects. In addition, on November 19, 2025, we applied for a tax ruling from the ITA in order to obtain clarity with respect to the Israeli withholding tax treatment in connection with the Convertible Senior Notes. Unexpected failure to ultimately obtain such anticipated clarifications from the Israeli Tax Authorities could potentially result in increased Israeli withholding tax gross-up costs.

 

We may not have the ability to raise the funds necessary to settle conversions of the 2030 Convertible Senior Notes, if we are obligated to settle such conversions, in whole or in part, in cash, repurchase the 2030 Convertible Senior Notes upon a fundamental change or repay the 2030 Convertible Senior Notes in cash at their maturity, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the 2030 Convertible Senior Notes.

 

Holders of the 2030 Convertible Senior Notes have the right, subject to and under the terms of the Indenture to require us to repurchase all or a portion of their 2030 Convertible Senior Notes upon the occurrence of a “fundamental change” before the applicable maturity date, at a repurchase price equal to 100% of the principal amount of such 2030 Convertible Senior Notes to be repurchased, plus accrued and unpaid “special interest” (as defined in the Indenture), if any. We may not have enough available cash or be able to obtain financing at the time we are required to make such repurchases of the 2030 Convertible Senior Notes and/or repay the 2030 Convertible Senior Notes upon maturity and/or settle conversions of the 2030 Convertible Senior Notes (should we elect to settle such conversions, in whole or in part, in cash or should we be required to settle such conversions, in whole or in part, in cash, if in the future we irrevocably elect to settle the conversions, in whole or in part, in cash).

 

Our ability to repurchase or to pay cash upon conversion of the 2030 Convertible Senior Notes may be limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to repurchase the 2030 Convertible Senior Notes at a time when the repurchase is required by the indenture or to pay cash upon conversion of the 2030 Convertible Senior Notes when required or at maturity as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2030 Convertible Senior Notes or to pay cash upon conversion of the 2030 Convertible Senior Notes or at maturity.

Our capped call transactions may affect the value of our debt and ordinary shares.

In connection with the pricing of the 2030 Convertible Senior Notes, we entered into privately-negotiated capped call transactions (“Capped Calls”) with certain financial institutions. The Capped Calls are expected generally to reduce the potential dilution to our ordinary shares upon any conversion of the 2030 Convertible Senior Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2030 Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap.

The Capped Call counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our ordinary shares and/or purchasing or selling our ordinary shares or other securities of ours in secondary market transactions prior to the maturity of the 2030 Convertible Senior Notes (and are likely to do so following any conversion of the notes, any repurchase of the notes by us on any fundamental change repurchase date, any redemption date or any other date on which the notes are retired by us, in each case, if we exercise the relevant election under the Capped Calls and in connection with any negotiated unwind or modification of the Capped Calls). This activity could cause or avoid an increase or a decrease in the market price of our ordinary shares or the 2030 Convertible Senior Notes.

The potential effect, if any, of these transactions and activities on the trading price of our ordinary shares or the 2030 Convertible Senior Notes will depend in part on market conditions. Any of these activities could adversely affect the trading price of our ordinary shares or the 2030 Convertible Senior Notes.

 

 

Because most of our revenues are generated in U.S. dollars, but a significant portion of our expenses is incurred in currencies other than U.S. dollars, and mainly New Israeli Shekels and Euro, our profit margin may be seriously harmed by currency fluctuations.

 

We generate most of our revenues in U.S. dollars but incur a significant portion of our expenses in currencies other than U.S. dollar, and mainly New Israeli Shekel (commonly referred to as NIS) and Euro. In accordance with ASC 842 of lease accounting standard, we are required to present a significant NIS linked liability related to our operational leases in Israel. In addition, the operations of our German subsidiaries Nova Measuring Instruments GmbH and Sentronics Metrology GmbH are mainly Euro based. As a result, we are exposed to risk of devaluation of the U.S. dollar in relation to the NIS, Euro and other currencies. In such event, the dollar cost of our operations in countries other than the U.S. will increase and our dollar measured results of operations will be adversely affected. During 2025, the U.S. dollar devaluated against the NIS by 12.5%, after being revaluated by approximately 17.3% in the previous three years, and devaluated against the Euro by 11.3%, after being revaluated by approximately 8.7% in the previous three years. We cannot predict the future trends in the rate of devaluation or revaluation of the U.S. dollar against the NIS and the Euro, and our cost of operations could be adversely affected by such trends.

 

We are subject to various regulations and standards relating to data privacy and security. Failure to comply with any applicable privacy, security, data protection laws, regulations, standards or other requirement could have an adverse effect on our business prospects, results of operations, and financial condition.

 

The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. In particular, in the European Union, the General Data Protection Regulation (the “GDPR”) imposes more stringent data protection requirements and provides for greater penalties for noncompliance. For example, we collect, use, maintain and otherwise process certain personal data about candidates and employees. Our ability to collect, use, maintain or otherwise process personal data has been, and could be further, restricted by existing and new laws and regulations relating to privacy and data collection and protection, including the GDPR.

 

Additionally, the uncertainty created by current and future privacy laws and regulations can be compounded when services hosted in one jurisdiction are directed at users in another jurisdiction. For instance, European data protection rules may apply to companies which are not established in the European Union (“EU”) (this is the so-called extraterritorial scope of the GDPR). The GDPR has an even wider territorial scope and contains significant penalties for non-compliance. The GDPR, among other things, imposes requirements to provide detailed and transparent disclosures about how personal data is collected and processed, grants rights for data subjects to access, delete or object to the processing of their personal data, provides for a mandatory breach notification to supervisory authorities (and in certain cases, affected individuals) of certain data breaches, sets limitations on the retention of personal data and outlines significant documentary requirements to demonstrate compliance through policies, procedures, training and audits. To further complicate matters in Europe, to date, supervisory authorities in the member states have some flexibility when implementing European Directives and certain aspects of the GDPR, which can lead to diverging national rules. European supervisory authorities have been very active in terms of enforcing data protection rules, including with respect to cookie-related matters.

 

Additionally, organizations transferring personal data across-borders need to implement a lawful transfer mechanism, for example by executing Standard Contractual Clauses or registering with the Data Privacy Framework, and to perform a data transfer impact assessment to evaluate the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals, and that additional measures and/or contractual provisions may need to be put in place. However, the nature of these additional measures is currently uncertain.

 

We are also subject to evolving EEA privacy laws on cookies and tracking technologies, including the Privacy and Electronic Communications (EC Directive) Regulations 2003, “ePrivacy Directive”. Informed and freely given consent is required for the placement of non- essential cookies and similar technologies on websites available in the EEA. The GDPR also imposes conditions on obtaining valid consent for cookies collecting personal data, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. Recent European court and regulatory decisions are driving increased attention to cookies and tracking technologies, which could increase costs and subject us to additional liabilities.

 

Similarly, there have been laws and regulations adopted throughout the United States and Israel that impose obligations in areas such as privacy, in particular protection of personal data and implementing adequate cybersecurity measures to protect such data. One of the most prominent current privacy state laws is the California Consumer Privacy Act (CCPA) as amended by the California Privacy Rights Act (CPRA). Additionally, the U.S. has recently seen an increase in claims and litigation based on the California Invasion of Privacy Act (CIPA) and the Electronic Communications Privacy Act (ECPA) in regard to tracking tools such as cookies and similar technologies. This trend exposes companies to potential statutory damages, class action lawsuits, and reputational harm. Additional U.S. states have implemented, or are in the process of implementing, similar new laws or regulations that regulate privacy rights and obligations. More generally, some observers have noted that these new state privacy laws could mark the beginning of a trend toward more stringent United States federal privacy legislation, which could increase our potential liability and adversely affect our business.

 

The Cyberspace Administration of China created uncertainty by publishing the Personal Information Protection Law, which came into force on June 1, 2023. For the outbound data transfer before the effective date, the law included a rectification period of six months ending on December 1, 2023 (inclusive). This law imposes more stringent data protection requirements, restricts cross-border data transfers, and imposes significant fines for non-compliant conduct.

 

In addition, we are subject to the Israeli Privacy Protection Law, 1981 (the “PPL”) and its regulations, as well as the guidelines of the Israeli Privacy Protection Authority.

 

There have also been privacy bills enacted in other countries around the world which have introduced new or expanded privacy, security, cyber-security and artificial intelligence requirements and we expect that legislation will continue to evolve in the coming years. For example, the rising adoption of AI and Generative AI in daily operations and products poses additional and new risks, including, without limitation, data privacy and security risks, intellectual property infringement, ownership issues and/or confidentiality issues. Threats include potential data leaks, social engineering attacks, and decision-making based on manipulated information. Growing regulatory requirements for information security and data protection add to the challenge. Moreover, attackers leverage AI as both a tool and exploit vulnerabilities in AI systems. Therefore, it is difficult to determine whether and how such existing laws and regulations will apply to and impact the internet and our business.

 

In December 2023, new laws regulating artificial intelligence have been enacted in China. The European Union’s Artificial Intelligence Act (the “EU AI Act”) was published in the EU Official Journal on July 12, 2024, and is the first comprehensive horizontal legal framework for the regulation of AI across the EU. The EU AI Act entered into force on August 1, 2024. While the majority of its obligations are expected to take effect by 2026, provisions regulating prohibited AI practices and AI literacy came into effect on February 2, 2025, and provisions pertaining to General Purpose AI Models on August 2, 2025. The fines under the EU AI Act range from (i) the higher of €35,000,000 or up to 7 percent of a company’s total worldwide annual turnover for non-compliance with prohibited AI practices, to (ii) the higher of €7,500,000 or up to 1 percent of a company’s total worldwide annual turnover for the supply of incorrect, incomplete, or misleading information to notified bodies and national competent authorities. Once gradually applicable, the EU AI Act will have a material impact on the way artificial intelligence is regulated in the EU, including requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy, and general purpose artificial intelligence models. Further, the cost to comply with such laws or regulations could be significant and could increase our operating expenses, require technical changes, development and implementations, which could adversely affect our business, financial condition and results of operations. The European Commission’s Digital Omnibus Proposal, published in November 2025, includes proposed amendments to certain EU laws and regulations, including (among others) the EU AI Act and the GDPR. However, the proposal remains at an early stage of the EU legislative process. California also recently enacted new laws that further regulate use of AI technologies and provide consumers with additional protections around companies’ use of AI technologies, such as requiring companies to disclose certain uses of Generative AI. Such additional regulations may impact our ability to develop, use, procure and commercialize AI technologies in the future.

 

The EU Data Act, adopted on November 27, 2023, establishes rules for data sharing (personal data and non-personal data) and reuse in the European Union, with most obligations having taken effect in September 2025. Amongst others, the EU Data Act sets general conditions for data sharing between businesses and imposes measures to boost fairness and competition in the European cloud market. Additionally, the EU Data Act safeguards companies from unfair contractual terms related to data sharing imposed by dominant market players. Compliance may require us to implement new data management protocols, technological development and changes of our semiconductors and review contractual practices, potentially increasing operational costs.

 

Any inability to adequately address privacy and security concerns or comply with applicable privacy and data security laws, rules and regulations could have an adverse effect on our business prospects, results of operations and/or financial position.

 

We participate in government programs under which we receive research and development grants. Some of these programs imposes restrictions on our ability to use the technologies developed under these programs. The reduction or termination of these programs would increase our costs.

 

We participate in Israel Innovation Authority, or IIA royalty free grant programs. In addition, through the years, we participated in consortia which are either solely managed and funded by the IIA, or by the EU commission or jointly funded by the EU commission and the National Innovation Authorities of the participating companies, i.e. The Israel Innovation Authority can jointly fund Nova Ltd. participation and the BMBF (The German National Innovation Authority) can jointly fund Nova Measuring Instruments GmbH.  To maintain our eligibility for these programs, we must continue to meet certain conditions.

 

Some of these programs also restrict our ability to manufacture particular products and transfer particular technology, which were developed as part of the local Innovation Authority funding agent (i.e., the IIA in Israel and the BMBF in Germany) programs, outside of the country in which these were manufactured. The restrictions associated with these programs may require obtaining approval of the research and development committee nominated by the IIA or BMBF for certain actions and transactions and pay additional payments to the IIA or BMBF. Approval to manufacture products, which their development was partially funded by the local Innovation Authority funding agent, the country they are manufactured in or consent to the transfer of technology, if requested, might not be granted and if granted, may increase our financial liabilities to the respected Innovation Authority. In addition, if we fail to comply with certain restrictions associated with formerly received funding from IIA or BMBF, we may be subject to criminal charges.

 

We may be further exposed to risks related to the receipt of funding from other governments or governmental agencies in connection with strategic development programs, under which we receive funding. Under such strategic development programs, governments and governmental agencies typically have the right to terminate the program’s funding at any time. In addition, a project may be terminated by a mutual agreement, if the parties determine that the project's goals or milestones are not being achieved. As a result, there is no assurance that these sources of external funding will continue to be available to us in the future. Moreover, under the terms of certain governmental funding programs in which we receive funding, the applicable granting agency has the right to audit the costs that we incur, directly and indirectly, in connection with such programs. Any such audit could result in modifications to, or even termination of, the applicable governmental funding program. Any adverse finding resulting from any such audit could lead to penalties (financial or otherwise), termination of funding programs, suspension of payments or other adverse consequences to our ability to receive governmental funding. In addition, obligations related to grants received from the IIA grants bear an annual interest which are linked to the U.S. dollar. Pursuant to the latest IIA regulations, grants received until January 1, 1999, bear no interest.  Grants received before June 30, 2017, bear an annual interest rate that applied at the time of the approval of the applicable IIA file, and that interest rate will apply to all of the funding received under that IIA approval. Grants received from the IIA after June 30, 2017, bear an annual interest rate based on the 12-month London Interbank Offered Rate, or LIBOR, until December 31, 2023, and as of January 1, 2024, bear an annual interest rate based on the 12-month Secured Overnight Financing Rate, or the SOFR, or at an alternative rate published by the Bank of Israel, with the addition of 0.72%. Grants approved after January 1, 2024, will bear the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%.

 

The application of tax laws is subject to interpretation and if tax authorities challenge our methodologies or our analysis of our tax rates it could result in an increase to our worldwide effective tax rate and cause us to change the way we operate our business.

 

The application of the tax laws of various jurisdictions to our international business activities (as well as to entities which we acquired) is subject to interpretation and also depends on our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The tax authorities of the jurisdictions in which we (and entities we acquired) operate may challenge our methodologies for valuing developed technology or intercompany arrangements, including the transfer pricing, or determine that the manner in which we (and the entities we acquired) operate the business does not achieve the expected tax consequences, which could result in tax and penalty payments and in an increase of our worldwide effective tax rate, and could adversely affect our financial position and results of operations.

A certain degree of judgment is required in evaluating our tax positions and determining our provision for income taxes. In the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in foreign currency exchange rates or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. As we operate in numerous taxing jurisdictions, the application of tax laws can be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for tax authorities in different countries to have conflicting views. In addition, tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. For example, the work being carried out by the OECD on base erosion and profit shifting as a response to increasing globalization of trade could result in changes in tax treaties or the introduction of new legislation that could impose an additional tax on businesses. As a result of changes to laws or interpretations, our tax positions could be challenged, and our income tax expenses could increase in the future.

 

For instance, if tax authorities in any of the countries in which we operate were to successfully challenge our transfer prices, they could require us to reallocate our income to reflect transfer pricing adjustments, which could result in an increased tax liability to us. In addition, if the country from which the income was reallocated did not agree with the reallocation asserted by the first country (including in the process of Mutual Agreement Procedure or otherwise), we could become subject to tax on the same income in both countries, resulting in double taxation. If tax authorities were to allocate income to a higher tax jurisdiction, subject our income to double taxation or assess interest and penalties, it could increase our tax liability, which could adversely affect our financial position and results of operations.

 

The enactment of legislation implementing changes in taxation of international business activities, the adoption of other corporate tax reform policies, or changes in tax legislation or policies could impact our future financial position and results of operations.

 

There can be no assurance that our effective tax rate for the year ended December 31, 2025 will not change over time as a result of changes in corporate income tax rates or other changes in the tax laws the jurisdictions in which we operate. Any changes in tax laws could have an adverse impact on our financial results. Corporate tax reform, base-erosion efforts and tax transparency continue to be high priorities in many tax jurisdictions where we have business operations. As a result, policies regarding corporate income and other taxes in numerous jurisdictions are under heightened scrutiny and tax reform legislation is being proposed or enacted in a number of jurisdictions. For example, the Inflation Reduction Act of 2022 signed into law in the United States on August 16, 2022 among other changes, introduced a 15% corporate minimum tax on certain corporations. In addition, in July 2025, Public Law No: 119-21, known as the “One Big Beautiful Bill Act” (the OBBBA), was signed into law. The OBBBA made certain changes to U.S. federal income tax laws, which could have implications for us and also for investors. In particular, the OBBBA has modified the rules applicable to Foreign Derived Deduction Eligible Income (FDDEI) (formerly Foreign Derived Intangible Income), decreasing the percentage of FDDEI not subject to tax in the U.S. from 37.5% to 33.34%. The change in FDDEI percentage can have a material and adverse impact to our effective tax rate beginning in 2026. In addition, there have been proposals to impose retaliatory measures with respect to jurisdictions that have, or are likely to, put in place tax rules that are extraterritorial or disproportionately affect American companies. Such proposals have since been withdrawn as the G7 agreed to exempt U.S. companies from certain Organization for Economic Cooperation and Development (OECD) Pillar Two global minimum tax provisions (discussed in more detail below), creating a “side-by-side” system, which is described in the Side-by-Side Package released on January 5, 2026. However, the interaction of the U.S. tax rules with such side-by-side system remains unclear. We are currently unable to predict whether any changes in U.S. federal tax laws will occur in response and, if so, the ultimate impact on our business. 

In addition, there is growing pressure in many jurisdictions and from multinational organizations such as the OECD and the EU to amend existing international taxation rules in order to align the tax regimes with current global business practices. Specifically, in October 2015, the OECD published its final package of measures for reform of the international tax rules as a product of its Base Erosion and Profit Shifting (BEPS) initiative, which was endorsed by the G20 finance ministers. Many of the initiatives in the BEPS package required and resulted in specific amendments to the domestic tax legislation of various jurisdictions and to existing tax treaties. We continuously monitor these developments. Although many of the BEPS measures have already been implemented or are currently being implemented globally (including, in certain cases, through adoption of the OECD’s “multilateral convention” (to which Israel is also a party) to effect changes to tax treaties which entered into force on July 1, 2018 and through the European Union’s “Anti Tax Avoidance” Directives), it is still difficult in some cases to assess to what extent these changes our tax liabilities in the jurisdictions in which we conduct our business or to what extent they may impact the way in which we conduct our business or our effective tax rate due to the unpredictability and interdependency of these potential changes. In January 2019 the OECD announced further work in continuation of the BEPS project, focusing on two “pillars”. On October 8, 2021, 136 countries approved a statement known as the OECD BEPS Inclusive Framework, which builds upon the OECD’s continuation of the BEPS project. The first pillar is focused on the allocation of taxing rights between countries for in-scope large multinational enterprises (with revenue in excess of Euro 20 billion and profitability of at least 10%) that sell goods and services into countries with little or no local physical presence. The second pillar is focused on developing a global minimum tax rate of at least 15 percent applicable to in-scope multinational enterprises (with revenue in excess of Euro 750 million). Israel is one of the 136 jurisdictions that has agreed in principle to the adoption of the global minimum tax rate. Given these developments, it is generally expected that tax authorities in various jurisdictions in which we operate may increase their audit activity and may seek to challenge some of the tax positions we have adopted. It is difficult to assess if and to what extent such challenges, if raised, might impact our effective tax rate. On December 15, 2022, Council of the EU unanimously adopted the EU Directive on Global Minimum Tax.  Subsequently, various EU member states enacted the Pillar II mechanism such that it shall become effective by December 31, 2024 or after that date.

In line with the above-mentioned global developments in international taxation, the state of Israel has recently enacted the Law for the Taxation of Multinational Enterprise Groups – 2025, entered into force as of January 1, 2026, implementing key aspects of the OECD’s Pillar II framework. In particular, the proposed legislation introduces a domestic minimum top-up tax (Qualified Domestic Minimum Top-Up Tax, or QDMTT) generally applicable to Israeli entities that are part of multinational enterprise groups with consolidated annual revenues of at least EUR 750 million, with the objective of ensuring a minimum effective tax rate of 15% on profits attributable to activities in Israel and preventing the allocation of taxing rights to foreign jurisdictions under the Income Inclusion Rule or the Undertaxed Profits Rule under the Pillar II framework.

It is noted that, the Israeli Ministry of Finance has recently published a draft legislation as part of the 2026 Economic Plan, proposing a revised incentive regime for research and development activities in Israel, structured primarily as refundable or credit-based tax incentives designed to qualify under the OECD’s “qualified” incentive criteria in a Pillar II environment.

 

Changes in certain tax benefits under the Israeli Capital Investment Encouragement Law may increase our ETR.

 

Starting 2017, we made an election to receive Tax benefits under Israeli “Economic Efficiency Law” as a “Preferred Technological Enterprise”. While we believe that we meet the statutory conditions to entitle us to such benefits there can be no assurance that the tax authorities in Israel will concur to our position in general or with respect to certain portions of our income and may impact all or specific year (which are open for an audit). Should it be determined that we have not, or do not meet such conditions, the benefits received would be cancelled. We would also be required to pay increased taxes or refund any benefits previously received, adjusted to the Israeli consumer price index and interest, or other monetary penalty.

 

For additional information regarding Approved and Benefited Enterprise, Preferred Enterprise and Preferred Technological Enterprise see, “Item 10E. Taxation – Israeli Taxation” in this Annual Report.

 

As noted above, the Israeli government may reduce or eliminate the above-mentioned benefits in the future, inter-alia, in light of or as a response to the OECD or the “two Pillars” initiatives. The termination or reduction of these grants or tax benefits could harm our financial condition and results of operations, and result in significantly higher tax payment. In addition, if we increase our activities outside Israel due to, for example, future acquisitions or outsourcing of manufacturing or development activities, these activities generally will not be eligible for inclusion in Israeli grants or tax benefit programs. Accordingly, our effective corporate tax rate could increase significantly in the future.

 

We experience quarterly fluctuations in our operating results, which may adversely impact our share price.

 

Our quarterly operating results within a specific year can fluctuate significantly. A principal reason is that we derive a substantial portion of our revenue from the sale of a relatively small number of systems to a relatively small number of customers. As a result, our revenues and results of operations for any given quarter may decrease due to factors relating to the timing of orders, the timing of shipments of systems, and the timing of recognizing these revenues. Furthermore, our quarterly results are affected by the cyclical nature of the semiconductor capital equipment market and industries.

We also have a limited ability to predict revenues for future quarterly periods and, as a result, face risks of revenue shortfalls. If the number of systems we actually ship, and thus the amount of revenues we are able to record in any particular quarter, is below our expectations, the adverse effect may be magnified by our inability to adjust spending quickly enough to compensate for the revenue shortfall.

 

We produce highly complex optical, mechanical and electronic components and, accordingly, there is a risk that defects may occur in any of our products. Such defects can give rise to significant costs, including expenses relating to recalling products, replacing defective items, writing down defective inventory and loss of potential sales. In addition, the occurrence of such defects may give rise to product liability and warranty claims, including liability for damages caused by such defects.

 

In our commercial relationship with customers, we attempt to negotiate waivers of consequential and indirect damages arising from damages for loss of use, loss of product, loss of revenue and loss of profit caused by our products. However, some contracts and arrangements we are bound by, expose us to product liability claims resulting in personal injury or death, up to an unlimited amount, and the incurrence of the risk of material penalties for consequential or liquidated damages. Additionally, under such contracts and arrangements, we may be named in product liability claims even if there is no evidence that our products caused the damage in question, and such claims could result in significant costs and expenses relating to attorneys’ fees and damages.

 

In addition, such contracts and arrangements may include non-limited liability provisions for infringement of a third party’s intellectual property rights in connection with our products.

 

Although we have not incurred in the past any material penalties for consequential or liquidated damages, we may incur such penalties in the future. Such penalties for consequential or liquidated damages may be significant (and so is the legal process conducted in connection with such penalties) and could negatively affect our financial condition or results of operations.

 

A large number of our ordinary shares continue to be owned by a relatively small number of shareholders, whose future sales of our shares, if substantial, may depress our share price.

 

If our principal shareholders sell substantial amounts of our ordinary shares, including shares issued upon the exercise of outstanding options or warrants, the market price of our ordinary shares may fall. For additional information on our major shareholders, see “Item 7A – Major Shareholders” in this Annual Report.

Certain shareholders may control the outcome of matters submitted to a vote of our shareholders, including the election of directors.

 

To the best of our knowledge, approximately 42% of our outstanding ordinary shares are cumulatively held by six of our shareholders. As a result, and although we are currently not aware of any voting agreement between such shareholders, if these shareholders voted together or in the same manner, they would have the ability to control the outcome of corporate actions requiring an ordinary majority vote of shareholders as set in the Company’s Amended and Restated Articles of Association. Even if these shareholders do not vote together, each one of them may have the ability to influence the outcome of corporate actions requiring the vote of shareholders as set in the Company’s Amended and Restated Articles of Association. For additional information on our major shareholders, see “Item 7A – Major Shareholders” in this Annual Report.

 

The market price of our ordinary shares may be affected by a limited trading volume and may fluctuate significantly.

 

In the past, there has been a limited public market for our ordinary shares and there can be no assurance that an active trading market for our ordinary shares will continue. An absence of an active trading market could adversely affect our shareholders’ ability to sell our ordinary shares in short time periods. Our ordinary shares have experienced, and are likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our ordinary shares without regard to our operating performance. Financial forecasts and announcement of major players in the industry may have an effect on our share price.

 

In addition, the price of our ordinary shares could also be affected by possible sales of our ordinary shares by investors who view our convertible senior notes as a more attractive means of equity participation in our company, and by hedging and arbitrage trading activity that such investors may engage in.

 

We manage our available cash through various bank institutions and invest large portions of our cash reserves in bank deposits. The bankruptcy of one of the banks in which or through which we hold or invest our cash reserves, might prevent us to access that cash for an uncertain period of time.

 

We manage our available cash through various bank institutions and invest large portions of our cash reserves in bank deposits. As of December 31, 2025, a large portion of our cash reserves were invested in bank institutions, of which approximately 22% (from total cash reserves and investment portfolio) was invested in one bank institution in Israel. The bankruptcy of one of the bank institutions in which we hold our cash reserves or through which we invest our cash reserves, might prevent us to access that cash for an uncertain period of time.

 

Our investment portfolio may be adversely affected by market conditions and interest rates.

 

We maintain substantial balances of liquid investments, for purposes of financing our operations and acquisitions. Our marketable securities totaled $907 million as of December 31, 2025. The performance of the capital markets affects the values of funds that are held in marketable securities. These assets are subject to market fluctuations and various developments, including, without limitation, rating agency downgrades that may impair their value. We generally buy and hold our portfolio positions, while minimizing credit risk by setting limits for minimum credit rating and maximum concentration per issuer. Our investments consist primarily of government and corporate debentures, which are primarily fixed-income securities.

 

Although we believe that we generally adhere to conservative investment guidelines, the continuing turmoil in the financial markets may result in impairments of the carrying value of our investment assets. In addition, as our investment portfolio is invested primarily in fixed-income securities it is affected by changes in interest rates. Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions. Any significant decline in our financial income or the value of our investments as a result of the changes in interest rates and interest rate expectations of the financial markets, deterioration in the credit rating of the securities in which we have invested, or general market conditions, could have an adverse effect on our results of operations and financial condition. We classify our investments as available-for-sale. Changes in the fair value of investments classified as available-for-sale are not recognized as income during the period, but rather are recognized as other comprehensive income, or OCI, which is a separate component of equity until realized. Realized losses in our investments portfolio may adversely affect our financial position and results.

 

We may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

 

 

Provisions of our Amended and Restated Articles of Association and Israeli law may delay, prevent or make difficult an acquisition of Nova, which could prevent a change of control and negatively affect the price of our ordinary shares.

 

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, for special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to some of our shareholders. See Exhibit 2.1 to this Annual Report for a more detailed discussion regarding some anti-takeover effects of Israeli law.

 

These provisions of Israeli law may delay, prevent or make difficult an acquisition of Nova, which could prevent a change of control and therefore depress the price of our shares.

 

 

We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our Amended and Restated Articles of Association and by the Israeli Companies Law, 1999 (the “Companies Law”) and the regulations promulgated thereunder. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at the general meeting of shareholders and class meetings, on amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers, and transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment of a director or officer in the company, or has other powers toward the company, has a duty of fairness toward the company. However, Israeli law does not define the substance of this duty of fairness. Because Israeli corporate law has undergone extensive revision in recent years, there is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior.

 

Any shareholder with a cause of action against us as a result of buying, selling or holding our ordinary shares may have difficulty asserting a claim under U.S. securities laws or enforcing a U.S. judgment against us or our officers, directors or Israeli auditors.

 

We are organized under the laws of the State of Israel, and we maintain most of our operations in Israel. Most of our officers and directors as well as our Israeli auditors reside outside of the United States and a substantial portion of our assets and the assets of these persons are located outside the United States. Therefore, if you wish to enforce a judgment obtained in the United States against us, or our officers, directors and auditors, you will probably have to file a claim in an Israeli court. Additionally, you might not be able to bring civil actions under U.S. securities laws if you file a lawsuit in Israel. We have been advised by our Israeli counsel that Israeli courts generally enforce a final executory judgment of a U.S. court for liquidated amounts in civil matters after a hearing in Israel. If a foreign judgment is enforced by an Israeli court, it will be payable in Israeli currency. However, payment in the local currency of the country where the foreign judgment was given will be acceptable, subject to applicable foreign currency restrictions.

 

Our shares are listed for trade on more than one stock exchange, and this may result in price variations.

 

Our ordinary shares are listed for trading on the Nasdaq Global Select Market and on the Tel Aviv Stock Exchange Ltd., or TASE. This may result in price variations. Our ordinary shares are traded on these markets in different currencies, U.S. dollars on the Nasdaq Global Select Market and New Israeli Shekels on the TASE. These markets have different opening times and close on different days. Different trading times and differences in exchange rates, among other factors, may result in our shares being traded at a price differential on these two markets. In addition, market influences in one market may influence the price at which our shares are traded on the other.

 

Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.

 

In recent years, certain Israeli issuers listed on United States exchanges have been faced with governance-related demands from activist shareholders, as well as unsolicited tender offers and proxy contests. Although as a foreign private issuer we are currently not subject to U.S. proxy rules, responding to these types of actions by activist shareholders could be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees. Such activities could interfere with our ability to execute our strategic plan. In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our board of directors. The perceived uncertainties due to these potential actions of activist shareholders also could affect the market price and volatility of our securities.

 

We may be classified as a “passive foreign investment company” for U.S. income tax purposes, which could have significant and adverse tax consequences to U.S. shareholders.

 

Generally, if for any taxable year 75% or more of our gross income consists of specified types of passive income, or, on average, at least 50% of our assets are held for the production of, or produce, passive income, we may be characterized as a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes. Classification of Nova as a PFIC could result in adverse U.S. tax consequences to our U.S. shareholders, such as ineligibility for any preferential tax rates on capital gains or on dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. If we are a PFIC, it may be possible for U.S. holders of our ordinary shares to mitigate certain of these consequences by making an election to treat us as a “qualified electing fund” under Section 1295 of the Internal Revenue Code of 1986, as amended (the “Code”) or a “mark-to-market election” under Section 1296 of the Code. U.S. shareholders should consult with their own U.S. tax advisors with respect to the U.S. tax consequences of investing in our ordinary shares.

 

We believe that for our 2025 taxable year we were not a PFIC. Nonetheless, because the determination of whether we are, or will be, a PFIC for a taxable year depends on the application of complex U.S. federal income tax rules, which are subject to various interpretations, there is a risk that we were a PFIC in 2025. Absent one of the elections referenced above, if we are a PFIC for any taxable year during which a U.S. holder holds our ordinary shares, we generally will continue to be treated as a PFIC with respect to such U.S. holder in all succeeding years regardless of whether we cease to meet the PFIC tests in one or more subsequent years. Currently we expect that we will not be a PFIC in 2026 or subsequent years. However, PFIC status is determined based on our assets and income over the course of each taxable year, and is dependent on a number of factors, including the value of our assets, the trading price of our ordinary shares and the amount and type of our gross income. Therefore, there can be no assurances that we will not become a PFIC for the 2026 taxable year, or any future year, or that the Internal Revenue Service (“IRS”) will not challenge any determination made by us concerning our PFIC status. For a discussion on how we might be characterized as a PFIC and related tax consequences, please see the section of this Annual Report entitled “Taxation - U.S. Taxation – Passive Foreign Investment Companies.” Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to our ordinary shares.

 

As a foreign private issuer, we are subject to reporting and corporate governance requirements that differ from those applicable to U.S. domestic companies, and the loss of this status could result in significant additional costs and expenses.

 

We currently qualify as a foreign private issuer and report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as a non-U.S. company. As a result of our foreign private issuer status, our shareholders are subject to different risks and may not receive the same protections afforded to shareholders of U.S. domestic public companies. In particular, we are exempt from, or subject to less stringent and less frequent, certain Exchange Act reporting and disclosure requirements applicable to U.S. domestic issuers, including U.S. proxy rules, short-swing profit liability under Section 16 of the Exchange Act, and the requirement to file quarterly reports on Form 10-Q, although we intend to furnish quarterly information on Form 6-K; however, following a recent amendment to Section 16(a) of the Exchange Act, our directors and certain officers (as such term is defined under Rule 16a-1(f) of the Exchange Act) will no longer be exempt from the reporting requirements under Section 16(a), effective March 18, 2026. We are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act, which generally requires U.S. domestic companies to disclose material information to all investors simultaneously, although we voluntary comply with these rules. In addition, foreign private issuers 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 private issuer that follows certain home country corporate governance practices, we may also rely on exemptions from certain Nasdaq corporate governance requirements, which could result in our shareholders not having the same protection as shareholders of companies subject to all Nasdaq corporate governance rules.

 

  

Item 4. Information on the Company

 

4.A      History and Development of the Company

 

Nova Ltd. was incorporated in May 1993 under the laws of the State of Israel. We commenced operations in October 1993 to design, develop and produce integrated process control systems for use in the manufacture of semiconductors, also known as integrated circuits or chips.

 

In April 2000, we conducted an initial public offering and our shares were listed for trading on the Nasdaq Stock Exchange.

 

In June 2002, we listed our shares on the TASE, pursuant to legislation which enables Israeli companies whose shares are traded on certain stock exchanges outside of Israel to be registered on the TASE, while reporting, in substance, in accordance with the provision of the relevant foreign securities law applicable to the Company.

 

Until 2008, most of our products were sold to PEMs such as Applied Materials, Inc. and Ebara Corp., which later sold these products to semiconductor manufacturers. Since then, we have changed our business model, selling substantially all of our products directly to semiconductor manufacturers. Through this process, which has also enabled us to introduce to these customers additional products and features, we have improved our products gross margins and net profitability.

 

In April 2015, we acquired ReVera Inc., a privately held company headquartered in Santa Clara, California, which develops, manufactures and sells stand-alone metrology tools for measurements of thin-films and composition applications in the semiconductor industry, and on December 31, 2017, we merged ReVera into its parent company, Nova Measuring Instruments, Inc.

 

On July 25, 2021, we changed the legal name of the Company from Nova Measuring Instruments Ltd. to Nova Ltd. to match the Company’s long-term strategy. The Company retained its NVMI ticker symbol and its Process Insight® tagline.

 

In January 2022, we acquired ancosys GmbH, a privately held company with headquarters in Pliezhausen, Germany which is a leading provider of chemical analysis and metrology solutions for advanced semiconductor manufacturing, supporting both frontend and backend semiconductor manufacturing. On June 26, 2023, ancosys GmbH merged into its parent company, Nova Measuring Instruments GmbH.

 

In January 2025, we acquired Sentronics Metrology GmbH, a privately held company with headquarters in Mannheim, Germany which is a global provider of wafer metrology tools for the backend semiconductor fabrication. The addition of Sentronics’ modular dimensional metrology technology to Nova’s dimensional metrology portfolio will enable Nova to diversify its offering in the growing field of advanced wafer level packaging and specialty devices.

 

At the end of 2025, we had seven direct fully owned subsidiaries, in the U.S., Taiwan, Korea, China, Japan, Singapore and Germany and a wholly owned subsidiary of Nova Measuring Instruments GmbH.

 

Our headquarter office is located in Israel at 5 David Fikes St., 10^th Floor, Rehovot.

 

Our website address is www.novami.com, and our telephone number is +972-73-229-5600. We use our website as a means of disclosing material non-public information. Such disclosures will be included on our website in the “Investors” sections. Accordingly, investors should monitor such sections of our website, in addition to following our press releases and SEC filings. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report and is not incorporated by reference herein. We have included our website address in this Annual Report solely for informational purposes. Our SEC filings are available to you on the SEC’s website at http://www.sec.gov. This site contains reports and other information regarding issuers that file electronically with the SEC. The information on that website is not part of this Annual Report and is not incorporated by reference herein.

 

Our agent for service of process in the United States is Nova Measuring Instruments Inc., which maintains its principal offices at 3342 Gateway Blvd, Fremont, CA 94538. Its telephone number is 1-408-510-7400.

 

 

 

Nova is a leading innovator and key provider of metrology solutions for advanced process control used in semiconductor manufacturing. Nova delivers continuous innovation by providing high-performance metrology solutions for effective process control throughout the semiconductor fabrication process. We bring pioneering metrology solutions to semiconductors process control, by industrializing lab and research-grade technologies and developing emerging metrology solutions. Nova’s product portfolio, deployed at the world’s largest integrated-circuit manufacturers, combines high-precision hardware and cutting-edge software, and provides its customers with deep insight into the development and production of the most advanced semiconductor devices. Nova’s capability to deliver innovative Optical, X-ray, SIMS and Chemical analysis technology solutions enables its customers to improve performance, enhance product yields and accelerate time to market.

 

Nova delivers a comprehensive suite of metrology solutions spanning optical, materials, and chemical technologies. These technology areas collectively support both dimensional and materials characterization, as well as chemical process control, enabling advanced process insight across semiconductor manufacturing.

 

In January 2025, through the acquisition of Sentronics, we expanded our optical technology base to wafer metrology tools for backend semiconductor fabrication. The addition of Sentronics’ modular dimensional metrology technology to Nova’s dimensional metrology portfolio is meant to enable Nova to enter the growing field of advanced wafer level packaging and specialty devices.

The corporate units, such as marketing, next generation technology, human resources, finance and global business group, support all divisions.

 

 

 

The semiconductor manufacturing process is divided into front-end and back-end. The front-end process starts with a flat silicon disc known as a silicon wafer upon which integrated circuits are constructed. To construct the integrated circuits, a series of layers of thin films that act as conductors, semiconductors or insulators are applied. During the manufacturing process, these film layers are subjected to processes which remove and add portions of the film, create circuit patterns and perform other functions. The back-end process, known as packaging, begins after the integrated circuits are completed on the wafer. The wafer is diced into individual chips, which are then mounted on a substrate and connected to external leads through techniques such as wire bonding or flip-chip. Recently introduced advanced packaging technologies incorporate processes such as hybrid bonding for high-density interconnects, chiplet integration for modular design flexibility, and 3D chip stacking to achieve greater performance and bandwidth in a smaller footprint. Finally, the chips are encapsulated to protect them from physical damage and environmental factors, while ensuring efficient heat dissipation and electrical performance before final testing and shipment.

The semiconductor manufacturing process requires numerous precise steps and strict control of equipment performance and process sequences. Tight process control can be achieved through monitoring silicon wafers and measuring relevant parameters before, during or after each process step, with metrology tools.

 

The demand for our metrology systems is driven by capital equipment spending of the semiconductor manufacturers, which is in turn driven by the worldwide demand for semiconductor components embedded in technology devices. Industry data indicates worldwide demand for semiconductors will continue to grow, driven by the growing adoption of AI, networks and data centers constructed to support the influx of data, and additional growth engines such as internet of things (“IoT”) applications, advanced network infrastructure, automotive, and green energy solutions.

 

The growing investment in advanced technology nodes introduces growing complexity and new challenges into the semiconductor manufacturing process, as manufacturers are continuously pushed to improve performance and cost to gain competitive advantage. In a climate of constant growth, suppliers and manufacturers are asked to constantly come up with new products with greater functionality, lower power consumption, faster connectivity and better performance at lower prices. As a result, many new complex materials, advanced structures, packaging schemes and processes are being introduced into the semiconductor manufacturing ecosystem. An environment of growing complexity in chip design and manufacturing set favorable business conditions for process control demand.

  

Over the past several years we have seen growing demand for trailing node capacity, driven by the growing need for IoT and sensors that do not require leading edge technologies. This trend is expected to continue in coming years and to increase the demand for metrology and process control solutions.

 

In addition, we are seeing a rapid growth in investments in advanced packaging production lines, driven by the heightened need for high-performance, high-intensity devices to support the increase in computing power required by AI-related applications. New architectures are emerging in the advanced packaging space, designed to enable a swift leap in performance rather than wait for the next generation of chip architecture.

 

 

Semiconductors devices typically consist of transistors, memory cells or other components connected by an intricate system of circuitry on silicon wafers. Integrated circuit manufacturing involves many individual steps, some of which are repeated several times, through which numerous copies of an integrated circuit are formed on a single silicon wafer. Because semiconductor specifications are extremely tight, and integrated circuits are becoming more complex, the process steps are constantly monitored, and critical parameters are measured at each step using metrology equipment. Key process steps, such as Deposition, Photolithography, Etch, ion implementation, Electro-Chemical Plating, and Chemical-Mechanical Planarization, rely on metrology systems to monitor film thickness, uniformity, critical dimensions, material and chemical characteristics to ensure the correct result has been achieved.

 

The measurements taken by metrology systems during the manufacturing process help ensure process uniformity and help semiconductor manufacturers avoid costly rework and misprocessing, therefore increasing efficiency, yield and time to market.

 

 

Several technical and operational trends within the semiconductor manufacturing industry are strengthening the need for more effective process control and metrology solutions. These trends include:

 

In order to address the continuous increasing costs and challenges associated with these trends, semiconductor manufacturers must improve manufacturing procedures, production yields and time to market. Beyond improving the technology, introducing new process steps and innovative fabrication capabilities, Semiconductors manufacturers must tighten the control over the process and therefore must increase the Metrology intensity as well as introduce new innovative Metrology solutions. These new solutions will allow manufactures to overcome new challenges in dimensions, materials and chemical engineering.

 

 

According to Gartner forecasts, semiconductor revenues are expected to grow by 33% in 2026, following a growth of 21% in 2025. WFE (Wafer Fab Equipment) is expected to grow by 12% in 2026, following a growth of 11% in 2025 (Gartner Forecast Semiconductor Wafer Fab Equipment, Worldwide, Q425 Update, published December 2025).

 

According to research reports, future demand drivers for semiconductors include AI, smart sensors, internet-of-things industrial devices, green energy, automotive, data center and cloud infrastructure, and other electronic equipment.

 

          Products & Technologies

 

Our product portfolio includes a complete set of metrology platforms suited for dimensional, films, materials and chemical metrology measurements for process control across multiple semiconductor manufacturing process steps including lithography, Etch, CMP, deposition, electrochemical plating, ion implementation and advanced packaging. Our offering is comprised of several key product lines, spanning multiple technologies and addressing key challenges in semiconductor process control, from R&D to High-Volume-Manufacturing.

 

Our strategy to offer holistic and diversified portfolio supports the industry’s frequent transitions, establishing the advantages and unique value we bring to our customers. With the introduction of new technologies and products, we cover a wider variety of applications, which increase our served and available markets and footprint in the semiconductor manufacturing market.

 

Following the acquisition of Sentronics in January 2025, we expanded our technology offering. Sentronics develops flexible and modular metrology tools equipped with multiple metrology sensors for a variety of critical dimension applications, including thickness, roughness, and topography.  The addition of Sentronics’ modular dimensional metrology technology to Nova’s dimensional metrology portfolio will enable Nova to diversify its offering in the growing field of advanced wafer level packaging and specialty devices.

 

About the product lines

 

Our product portfolio is composed of 4 major metrology categories:

Integrated, Standalone (dimensional and materials), Chemical and Software.

 

 

Nova’s integrated metrology (IM) - Integrated platforms that enable advanced process control (APC) required for the most advanced logic and memory technology nodes. Nova’s IM market portfolio offers fast metrology with high productivity, targeting manufacturing of advanced logic, advanced memory and advanced packaging technologies. Integrated metrology systems are directly integrated with manufacturing process equipment and provide semiconductor manufacturers with effective and efficient process control by measuring wafers within the process environment. This family of products allows wafer to wafer, within-wafer and within-die variation control. Enriched with Nova’s advanced modeling, machine learning and algorithmic solutions, Nova’s integrated metrology provides enhancements in metrology accuracy, precision, and tool matching.

Nova’s stand-alone metrology portfolio is comprised of multiple product lines utilized to characterize critical dimensions such as width, shape and profile with high precision and accuracy. The expression “stand-alone metrology” generically describes free standing metrology equipment, located in line, i.e., next to the processing equipment measuring wafer samples in a station of its own.

Nova’s stand-alone platforms are targeted for critical dimensions (CD), topography, thin-film, roughness and film thickness measurements at the most advanced process steps in logic, memory and advanced packaging technology nodes including backend wafer-level packaging, TSV, PCB and IC-Substrate. Nova’s unique channels of information enables high metrology performance combined with high productivity. When incorporating Nova’s advanced suites of software, modeling and machine learning solutions, the Optical CD stand-alone platforms provide cutting-edge performance for the most complex layer stacks and 3D structures.

Comparison of Years Ended December 31, 2025 and 2024

 

 

 

 

 

 

 

Comparison of Years Ended December 31, 2024 and 2023 is incorporated by reference to the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on February 20, 2025.

 

 

 

 

 

Inventories increased from $157 million as of December 31, 2024 to $184 million as of December 31, 2025. The increase in inventory was driven by higher business activity. Operating activities in 2025 generated positive cash flow from operating activities of $245 million compared to a positive cash flow from operating activities of $235 million in 2024.

 

 

In 2025, the gross investment in capital expenditures, including inventory items moved to capital and investment in the new ERP, was approximately $33 million, and was financed from our operating cash flow. In 2026, we expect our gross capital spending to remain at a similar level, primarily driven by ongoing investments in facilities and infrastructure.

 

Our principal liquidity requirement is expected to be for working capital and capital expenditures as well as additional acquisitions and investment in the new ERP. We believe that our current cash reserves will be adequate to fund our planned activities for at least the next twelve months. Our long-term capital requirements will be affected by many factors, including the success of our current products, our ability to enhance our current products and our ability to develop and introduce new products that will be accepted by the semiconductor industry. We plan to finance our long-term capital needs with our cash reserves together with positive cash flow from operations, if any. If these funds are insufficient to finance our future business activities, which may include acquisitions, we would have to raise additional funds through the issuance of additional equity or debt securities, through borrowing or through other means. We cannot assure that additional financing will be available on acceptable terms.

 

Presently, our long-term debt is comprised from Convertible Senior Notes.

 

We do not have a readily available source of other short-term or long-term debt financing such as a line of credit.

 

With regard to usage of hedging financial instruments and the impact of inflation and currency fluctuations, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk” in this Annual Report.

 

 

For information regarding our research and development activities, see “Item 4B – Research and Development” in this Annual Report.

 

 

 

We participate in a generic research and development programs sponsored by the IIA, available for Israeli companies that meet specific criteria’s set forth by the IIA. Companies eligible to participate in these programs receive IIA funding intended to focus on long-term creation of know-how and technological infrastructure, used for the development or production of future innovative products. These programs do not require payments of royalties to the IIA, but all other restrictions under the Innovation Law, such as local manufacturing obligations and know-how transfer limitations, as further detailed hereunder, are applicable to the know how developed by us with the funding received in such programs.

 

 

We participate in European consortia, which are joint programs governed by the Electronic Component Systems (ECSEL), Key Digital Technologies (KDT), which starting from 2023 is re-named to European CHIPACTS, for European Leadership Joint Undertaking (the “JU”) as part of the Horizon 2020 & Horizon Europe, respectively, which form cooperations between the participating companies.

Some of the obligations and undertakings specified hereunder in connection with IIA or BMBF activities (such as the restrictions under the Innovation Law and obligation to grant certain access rights to our technology and intellectual property rights) apply with respect to some of these joint projects. In addition, the participation in an EU Consortia includes specific obligations, such as the following: The budgeted grant will be paid to the company pursuant to certain rules regarding ‘eligible costs’; Obligations to properly implement the activities assigned under the specific EU Consortia project grant agreement; Restrictions in contributions of third parties (by service or otherwise); Obligations to keep information up to date and to inform about events and circumstances likely to affect the consortium activity; Obligations related to records keeping, investigations and audits by the JU in order to verify the proper implementation of the specific EU Consortium project and compliance with the obligations under the terms of the program, including assessing deliverables and reports during a period of up to two years following the receipt by the company of the full grant payment; Obligations related to Intellectual property allocation generated by an EU Consortium, background intellectual property designation prior to the commencement of the EU Consortium’s project and the provision of access rights to results obtained as part of the EU Consortium. Breach of such obligations may result in the reduction of the aggregate expected grant amount or claiming back previously received grants. In addition, the company may be subject to administrative and financial penalties such as temporary exclusion from all JU European Consortia and fines of up to 10% of the maximum expected grant, as well as to contractual liabilities.

 

 

We also participate in European consortia which are not part of the JU (Joint Undertaking) program, thus, these programs are funded only by the European commission with no national funding from the Israel Innovation Authority. The restrictions under the Israeli Innovation Law do not apply to the project under these programs.

 

 

Some of our previous research and development efforts were financed in part through royalty-bearing grants. We were obligated to pay royalties from sales of products funded with these grants. This obligation included different annual interest rates ranging up to 5%. In August 2016, we entered into a royalty buyout arrangement (the “Arrangement”) with the IIA. As part of the Arrangement, we paid approximately $12.9 million to the IIA in September 2016. The contingent net royalty liability to the IIA at the time we executed the Arrangement was approximately $24 million. As a result of the foregoing payment, we are released from any future royalty payments on these previous funds received from the IIA. However, to the extent that we will be able to commercialize products that were developed as part of IIA programs and were declared as “failed” at the time of the Arrangement, we will be required to pay royalties to the IIA from income generated from such commercialization. Currently, we do not anticipate that such failed projects will generate revenues in the future. We note that the Arrangement does not release the Company from other obligations towards the IIA as further detailed herein. In addition, in the future, we may, alone or together with third parties, participate in research and development programs, which may bear royalty obligations (depending on the specific terms of the applicable program).

 

 

Under the Encouragement of Research, Development and Technological Innovation in the Industry Law 1984 and the provisions of the applicable regulations, rules, procedures and benefit tracks, together the Innovation Law, a qualifying research and development program is typically eligible for grants of up to 55% of the program’s pre-approved research and development expenses. The program must be approved by a committee of the IIA. The recipient of the grants is required to return the grants by the payment of royalties on the revenues generated from the sale of products (and related services) developed (in whole or in part) under IIA program up to the total amount of the grants received from IIA, linked to the U.S. dollar and bearing annual interest (as determined in the Innovation Law). Following the full payment of such royalties and interest, there is generally no further liability for royalty payment for our currently developed and sold products. Nonetheless, the restrictions under the Innovation Law (as generally specified below) will continue to apply even after our company has repaid the grants, including accrued interest, in full.

 

The main pertinent obligations under the Innovation Law are as follows:

 

 

 

Approval of the transfer of IIA funded technology to another Israeli company requires a pre-approval by IIA and may be granted only if the recipient undertakes to fulfil all the liabilities to IIA and undertakes abides by all the provisions of the Innovation law and related regulations, including the restrictions on the transfer of know-how and manufacturing rights outside of Israel and the obligation to pay royalties. In light of the Arrangement (as further discussed below), in certain circumstances, under such sale transactions (i.e., the transfer of IIA funded technology or portion thereof to another Israeli company), we might be obligated to pay royalties to the IIA from any income derived from such a sale transaction.

 

These restrictions may impair our ability to enter into agreements for those products or technologies which were developed with assistance of the IIA grants without the approval of the IIA. We cannot be certain that any approval of the IIA will be obtained on terms that are acceptable to us, or at all. Furthermore, in the event that we undertake a transaction involving the transfer to a non-Israeli entity of know-how developed with IIA funding pursuant to a merger or similar transaction, the consideration available to our shareholders may be reduced by the amounts we are required to pay to the IIA. Any approval, if given, will generally be subject to additional financial obligations. Failure to comply with the requirements under the Innovation Law may subject us to mandatory repayment of grants received by us (together with interest and penalties), as well as may expose us to criminal proceedings. In addition, IIA may from time-to-time audit sales of products which it claims incorporate technology funded via IIA programs and this may lead to additional royalties being payable on additional products.

 

 

For information regarding the most significant recent trends in our market, see “Item 4B– Our Market – The Semiconductor Market – Update” in this Annual Report.

 

 

We have provided a summary of our significant accounting policies, estimates and judgments in Note 2 to our consolidated financial statements, which are included elsewhere in this Annual Report. The following critical accounting discussion pertains to accounting estimates management believes are most critical to the portrayal of our historical financial condition and results of operations and that require significant, difficult, subjective or complex judgments. Other companies in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our financial condition, results of operations and cash flows to those of other companies.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our management evaluates its estimates on an ongoing basis, including those related to, but not limited to revenue recognition, allowance for credit losses related to marketable securities, inventory write-offs, business combination, fair value and useful lives of intangible assets, and income taxes and tax uncertainties. These estimates are based on management's knowledge about current events and expectations about actions the Company may undertake in the future. Actual results could differ from those estimates.

 

 

Under ASC 606, the company derives revenue from the sales of advanced process control systems, spare parts, labor hours (mainly systems installation) and service contracts.

 

Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative Standalone Selling Price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount to be allocated based on the relative SSP of the various products and services.

 

The Company enters into revenue arrangements that include products and services which are generally distinct and accounted for as separate performance obligations. The Company determines whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether the Company's commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract.

  

 

Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are provided to cover risks arising from slow-moving items, technological obsolescence, excess inventories, discontinued products, and for market prices lower than cost, if any. We periodically evaluate the quantities on hand relative to historical and projected sales volume (which is determined based on an assumption of future demand and market conditions), the age of the inventory and the expected consumption of service spare parts. At the point of the loss recognition, a new lower cost basis for that inventory is established. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.

 

 

The results of an acquired business in a business combination are included in the Company’s consolidated financial statements from the date of acquisition according to the guidance of ASC Topic 805, “Business Combinations.” The Company allocates the purchase price, which is the sum of the consideration provided and may consist of cash, equity or a combination of the two, to the identifiable assets and liabilities of the acquired business at their fair values as of the acquisition date. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill.

  

We allocate the purchase price to the tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values. These valuations require management to make significant estimations and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include future expected cash flows from technology acquired, backlog and customer relationships. Management’s estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.

 

Intangible assets are comprised of acquired technology and customer relations.

 

 

We are subject to income taxes in Israel, the United States and numerous foreign jurisdictions. Judgment is required in evaluating our uncertain tax positions and determining our taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

 

Judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

 

For a discussion of other significant accounting policies used in the preparation of our financial statements and recent accounting pronouncements, see Note 2 to our consolidated financial statements contained elsewhere in this Annual Report.

 

Item 6. Directors, Senior Management and Employees

 

 

           The following is the list of senior management and directors as of February 5, 2026:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voting Agreement

 

We are not aware of any voting agreement currently in effect.

 

 

 

 

 

 

 

 

 

 

 

In the event that prior to the completion of the vesting of equity awards granted to Mr. Waisman an acquisition of the Company or asset transfer of all or substantially all the assets of the Company (collectively, “M&A Event”) will occur while Mr. Waisman is employed by the Company and holds the position of the Company’s Chief Executive Officer & President, then immediately prior to, and contingent upon, the closing of such M&A Event, all of Mr. Waisman unvested equity awards will become fully vested and exercisable, or substituted for equity awards in a successor company.

 

In the event an M&A Event will occur while Mr. Waisman is employed by the Company and holds the position of the Company’s Chief Executive Officer & President, the compensation committee and the Board may grant to Mr. Waisman a special bonus of up to 12 monthly salaries.

 

 

 

 

 

In accordance with our current equity-based compensation policy, the exercise price of granted options is equal to the closing sale price of the Company's ordinary shares on Nasdaq on the day of grant.

 

 

 

 

 

 

 

 

 

 

Under the Companies Law, companies incorporated under the laws of the State of Israel that are “public companies,” including companies with shares listed on the Nasdaq Global Select Market, are required to appoint at least two external directors.

 

Pursuant to regulations promulgated under the Companies Law, companies with shares traded on a U.S. stock exchange, including the Nasdaq Global Select Market, may, subject to certain conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors. In accordance with these regulations, in May 2018, we elected to “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors.

 

Under these regulations, the exemptions from such Companies Law requirements will continue to be available to us so long as: (i) we do not have a “controlling shareholder” (as such term is defined under the Companies Law), (ii) our shares are traded on a U.S. stock exchange, including the Nasdaq Global Select Market, and (iii) we comply with the director independence requirements, the audit committee and the compensation committee composition requirements, under U.S. laws (including applicable Nasdaq Rules) applicable to U.S. domestic issuers.

 

Our board of directors has determined that all of our directors, except for Mr. Oppenhaim, qualify as ‘‘independent directors’’ as defined by the Nasdaq Stock Market Rules.

 

 

According to the Companies Law, the board of directors of a public company must establish the minimum number of board members that are to have accounting and financial expertise while considering,inter alia, the nature of the company, its size, the scope and complexity of its operations and the number of directors stated in the Articles.

 

Our board of directors resolved that the minimum number of board members that need to have accounting and financial expertise is one (1).

 

Our board of directors determined that Ms. Sarit Sagiv has accounting and financial expertise as described in the regulations promulgated pursuant to the Companies Law, and that, therefore, the requirement of the minimum number of board members that need to have accounting and financial expertise, as set by the board of directors, has been met.

 

Our board of directors has adopted a training program for newly appointed directors. Once appointed and following the completion of their onboard training, our directors continue to receive ongoing training as part of our directors training and development efforts.

 

 

 There are no family relationships between any members of our executive management and our directors.

 

Board of Directors’ Committees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Companies Law requires that office holders of a company, including directors and executive officers, promptly disclose to the board of directors any personal interest they may have and all related material information known to them about any existing or proposed transaction with such company. The approval of the board of directors is required for 'non-extraordinary' transactions between a company and its office holders, or between a company and other persons in which an office holder has a personal interest, unless such company's articles of association provide otherwise. Under the Companies Law, a 'non-extraordinary' transaction between a company or between the company and a third party in which an office holder of a company has a personal interest, will require the approval of the board of directors or a committee authorized by the board of directors, unless such company's articles of association provide otherwise. Our Articles do not provide otherwise, and therefore such transaction requires the approval of our board of directors. If a transaction is an “extraordinary transaction”, it is subject to the approval of the audit committee prior to its approval by the board of directors. For information regarding the necessary approvals under the Companies Law for transactions with office holders and directors regarding their terms of engagement with the company, see “— Compensation of Officers and Directors” in this Item below.

 

In addition, an extraordinary transaction between a public company and a controlling shareholder (i.e. a shareholder who has the ability to direct the activities of a company, including a shareholder that owns 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights, but excluding a shareholder whose power derives solely from its position on the board of directors or any other position with the company), or in which a controlling shareholder has a personal interest, including a private placement in which the controlling shareholder has a personal interest, a transaction between a public company and a controlling shareholder, the controlling shareholders' relative, or entities under its control, directly or indirectly, with respect to services to be provided to the public company, and a transaction concerning the terms of compensation of the controlling shareholder or the controlling shareholder’s relative, who is an office holder or an employee, requires the approval of the audit committee or, in some cases, the compensation committee (see "— Compensation of Officers and Directors" in this Item below), the board of directors and a majority of the shares voted by the shareholders of the company participating and voting on the matter in a shareholders’ meeting. In addition, the shareholder approval must fulfill one of the following requirements: (i) the majority must include at least a majority of the shares of the voting shareholders who have no personal interest in the transaction (in counting the total votes of such shareholders, abstentions are not taken into account); or (ii) the total of opposition votes among the shareholders who have no personal interest in the transaction may not exceed 2% of the aggregate voting rights in the company. Any such transaction the term of which is more than three years, must be approved in the same manner every three years, unless with respect to certain transactions as permitted by the Companies Law, the audit committee has determined that longer term is reasonable under the circumstances.

 

According to the Companies Law, if an extraordinary transaction is discussed by the board of directors or the audit committee, directors and office holders that have personal interest in the proposed transaction, may not participate in the discussion or vote. However, if the majority of the members of the audit committee or the board of directors (as applicable) have personal interest in the proposed transaction, then all directors (including those with personal interest) may participate in the discussion and vote, provided that in the event the majority of the members of the board of directors have personal interest in the transaction, said transaction will also be subject to the approval of the Company's shareholders.

 

 

Under the Companies Law, Israeli public companies are required to establish a compensation committee and adopt a policy regarding the compensation and terms of employment of their directors and officers. For information on the composition, roles and objectives of the compensation committee pursuant to the Companies Law and our compensation committee charter, see above “—Board of Directors’ Committees — Compensation Committee" in this Annual Report.

 

Pursuant to the Companies Law, the compensation policy must be approved by the company's board of directors after reviewing the recommendations of the compensation committee. The compensation policy also requires the approval of the general meeting of the shareholders, which approval must satisfy one of the following (the "Majority Requirement"): (i) the majority should include at least a majority of the shares of the voting shareholders who are non-controlling shareholders or do not have a personal interest in the approval of the compensation policy (in counting the total votes of such shareholders, abstentions are not be taken into account) or (ii) the total number of votes against the proposal among the shareholders mentioned in paragraph (i) does not exceed two percent of the aggregate voting power in the company. Under certain circumstances and subject to certain exceptions, the board of directors may approve the compensation policy despite the objection of the shareholders, provided that both the compensation committee and the board of directors determine that it is for the benefit of the company, following an additional discussion and based on detailed arguments.

 

The Companies Law provides that the compensation policy must be re-approved (and re-considered) every three years, in the manner described above. Moreover, the board of directors is responsible for reviewing from time to time the compensation policy and deciding whether or not there are any circumstances that require an adjustment to the company's compensation policy. When approving the compensation policy, the relevant organs must take into consideration the goals and objectives listed in the Companies Law, and include reference to specific issues listed in the Companies Law. Such issues include, among others (the “Compensation Policy Mandatory Criteria”): (i) the relevant person’s education, qualifications, professional experience and achievements; (ii) such person's position within the company, the scope of his responsibilities and previous compensation arrangements with the company; (iii) the proportionality of the employer cost of such person in relation to the employer cost of other employees of the company, and in particular, the average and median pay of other employees in the company, including contract workers, and the impact of the differences between such person's compensation and the other employees' compensation on the labor relations in the company; (iv) the authority, at the board of director's sole discretion, to lower any variable compensation components or set a maximum limit (cap) on the actual value of the non-cash variable components, when paid; and (v) in the event that the terms of engagement include any termination payments - the term of employment of the departing person, the company’s performance during that term, and the departing person’s contribution to the performance of the company.

 

In addition, the Companies Law provides that the following matters must be included in the compensation policy (the "Compensation Policy Mandatory Provisions"): (i) the award of variable components must be based on long term and measurable performance criteria (other than non-material variable components, which may be based on non-measurable criteria taking into account the relevant person's contribution to the performance of the company); (ii) the company must set a ratio between fixed and variable pay, set a cap on the payment of any cash variable compensation components as of the payment of such components, and set a cap on the maximum cash value all non-cash variable components as of their grant date; (iii) the compensation policy must include a provision requiring the relevant person to return to the company any compensation that was awarded on the basis of financial figures that were subsequently restated; (iv) equity based variable compensation components should have an appropriate minimum vesting periods, which should be linked to long term performance objectives; and (v) the company must set a clear limit on termination payments.

 

Furthermore, our Compensation Policy contains a compensation recovery provision which enables us under certain circumstances to recover bonuses paid in excess due to an accounting restatement, allows our chief executive officer to approve immaterial changes in the terms of employment of executive officers, provided such changes are in accordance with our Compensation Policy, and enables us to exculpate, indemnify and insure our directors and executive officers subject to certain limitations as set forth therein.

 

Pursuant to the Companies Law, any transaction with an office holder (except directors and the chief executive officer of the company) with respect to such office holder's compensation arrangements and terms of engagement, requires the approval of the compensation committee and the board of directors. Such transaction must be consistent with the provisions of the company's compensation policy, provided that the compensation committee and the board of directors may, under special circumstances, approve such transaction that is not in accordance with the company's compensation policy, if both of the following conditions are met: (i) the compensation committee and the board of directors discussed the transaction in light of the roles and objectives of the compensation committee (also see above "—Board of Directors' Committees — Compensation Committee" in this Annual Report) and after taking into consideration the Compensation Policy Mandatory Criteria and including in such transaction the Compensation Policy Mandatory Provisions; and (ii) the company's shareholders approved the transaction, provided that in public companies the approval must satisfy the Majority Requirement. Notwithstanding the above, the compensation committee and the board of directors may, under special circumstances, approve such transaction even if the shareholders' meeting objected to its approval, provided that (i) both the compensation committee and the board of directors re-discussed the transactions and decided to approve it despite the shareholder's objection, based on detailed arguments, and (ii) the company is not a 'Public Pyramid Held Company'. For the purpose hereof, a "Public Pyramid Held Company" is a public company that is controlled by another public company (including companies that issued only debentures to the public), which is also controlled by another public company (including companies that issued only debentures to the public) that has a controlling shareholder.

 

Transactions between public companies (including companies that have issued only debentures to the public) and their chief executive officer, with respect to his or her compensation arrangement and terms of engagement, require the approval of the compensation committee, the board of directors and the shareholder's meeting, provided that the approval of the shareholders' meeting must satisfy the Majority Requirement. Notwithstanding the above, the compensation committee and the board of directors may, under special circumstances, approve such transaction with the chief executive officer even if the shareholders' meeting objected to its approval, provided that (i) both the compensation committee and the board of directors re-discussed the transactions and decided to approve it despite the shareholder's objection, based on detailed arguments, and (ii) the company is not a Public Pyramid Held Company. Such transaction with the chief executive officer must be consistent with the provisions of the company's compensation policy, provided that the compensation committee and the board of directors may, under special circumstances, approve such transaction that is not in accordance with the company's compensation policy, if both of the following conditions are met: (i) the compensation committee and the board of directors discussed the transaction in light of the roles and objectives of the compensation committee (see above —“Board of Directors' Committees – Compensation Committee" in this Annual Report) and after taking into consideration the Compensation Policy Mandatory Criteria and including in such transaction the Compensation Policy Mandatory Provisions; and (ii) the company's shareholders approved the transaction, provided that in public companies the approval must satisfy the Majority Requirement. In addition, the compensation committee may determine that such transaction with the chief executive officer of the company does not have to be approved by the shareholders of the company, provided that: (i) the chief executive officer is independent based on criteria set forth in the Companies Law; (ii) the compensation committee determined, based on detailed arguments, that bringing the transaction to the approval of the shareholders may compromise the chances of entering into the transaction; and (iii) the terms of the transaction are consistent with the provisions of the company's compensation policy. Under the Companies Law, non-material amendments of transactions relating to the compensation arrangement or terms of engagement of office holders (including the chief executive officer), require only the approval of the compensation committee.

 

With respect to transactions relating to the compensation arrangement and terms of engagements of directors in public companies (including companies that have issued only debentures to the public), the Companies Law provides that such transaction is subject to the approval of the compensation committee, the board of directors and the shareholders' meeting. Such transaction must be consistent with the provisions of the company's compensation policy, provided that the compensation committee and the board of directors may, under special circumstances, approve such transaction that is not in accordance with the company's compensation policy, if both of the following conditions are met: (i) the compensation committee and the board of directors discussed the transaction in light of the roles and objectives of the compensation committee (see above "—Board Practices –Board of Directors' Committees – Compensation Committee" in this Annual Report) and after taking into consideration the Compensation Policy Mandatory Criteria and including in such transaction the Compensation Policy Mandatory Provisions; and (ii) the company's shareholders approved the transaction, provided that in public companies the approval must satisfy the Majority Requirement.

 

Pursuant to the Companies Law, a compensation policy must be re-approved (and re-considered) at least once every three years. The current compensation policy was approved by our shareholders on June 18, 2025.

 

Internal Auditor

 

 

 

Set forth below is a chart showing the number of people we employed at the times indicated:

 

 

In the high-tech industry in general and specifically in the semiconductors industry, there is intense competition for high-skilled employees. We believe that the company’s future success will depend, by a large part, on our continued ability to attract, hire and retain qualified and highly motivated employees in every role and seniority level.

 

Under applicable Israeli law, we and our employees are subject to protective labor provisions such as restrictions on working hours, minimum wages, paid vacation, sick pay, severance pay and advance notice of termination of employment as well as equal opportunity and anti-discrimination laws. Orders issued by the Israeli Ministry of Economy and Industry make certain industry-wide collective bargaining agreements applicable to us. These agreements affect matters such as cost of living adjustments to salaries, length of working hours and week, recuperation and travel expenses. In Israel, we are subject to the instructions of the Extension Order in the Industrial Field for Extensive Pension Insurance 2006 according to the Israeli Collective Bargaining Agreements Law, 1957 (the “Extension Order”). The Extension Order determines the pension terms of the employees which fall under its criteria.

 

 

 

Beneficial ownership of shares is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Ordinary shares that are subject to warrants or options that are presently exercisable or exercisable within 60 days of the date of February 5, 2026 are deemed to be outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage of any other person.