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P2Y6M7D P3Y4M6D P5Y8M19D P6Y0M7D P6Y3M4D P6Y7M13D 1221000 919000 IL 37000 11000 37000 11000 43000 49000 53000 87000 406000 60000 91000 119000 723000 771000 -437000 73000 247000 62000 25000 14270000 5434000 2352000 -13844000 -5162000 -2256000 0.90 0.41 0.56 0.56 8.93 2.86 0.56 0.56 0.56 0.61 1.21 0.56 0.96 0.81 0.81 15587000 5755000 374000 544000 1415000 1800000 737000 1-for-1.789 0.789 7216000 3206000 1247000 199000 2171000 408000 1301000 627000 508000 417000 341131 27451 1626000 372000 P0Y10M21D P0Y1M16D 736647 325836000 0.51 50000000 7200000 1700000 0.49 2019 2019 2016 2019 2015 2019 2015 2014 2019 2019 2015 2019 2016 2019 2018 2019 true 417000 600000 200000 935000 544000 820000 450000 102000 82000 13000 12000 1011500 P0Y P3Y P0Y P2Y P0Y P2Y P0Y P2Y P3Y 414384 955479 1369863 419 600 0.0337 0.1034 P7Y P7Y P7Y P7Y 620126 131207 212176 145804 7.49 7.49 0.56 41.55 41.55 6.32 6.32 13000 -6000 7000 -1000 1000000000 <div><div><div style="line-height: 1.25; font-weight: bold">NOTE 1 - GENERAL</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 49.65pt; line-height: 1.25">InMode Ltd. (separately and together with its subsidiaries, the &#8220;Company&#8221;) was incorporated on January 2, 2008 and commenced operations shortly thereafter. The Company&#8217;s headquarters are located in Israel.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 49.65pt; line-height: 1.25">The Company designs, develops, manufactures and markets innovative minimally-invasive aesthetic medical products based on its proprietary radio frequency assisted lipolysis and deep subdermal fractional radio frequency technologies. These technologies are used to remodel subdermal adipose, or fatty, tissue in a variety of procedures including liposuction with simultaneous skin tightening, body and face contouring and ablative skin rejuvenation treatments. In addition to the minimally-invasive technologies, the Company designs, develops, manufactures and markets non&#8209;invasive medical aesthetic products that target a wide array of procedures including permanent hair reduction, facial skin rejuvenation, wrinkle reduction, cellulite treatment, skin appearance and texture and superficial benign vascular and pigmented lesions.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 49.65pt; line-height: 1.25"><font style="background-color: #FFFFFF">In August 2019, the Company completed an initial public offering (&#8220;IPO&#8220;) on the Nasdaq Global Select Market (the "Nasdaq"), in which it issued 5,000,000 ordinary shares, NIS 0.01 par value per share, at a price per share of $14. </font><font style="background-color: #FFFFFF">During August 2019 the underwriters partially exercised their over-allotment option and purchased an additional 500,000 ordinary shares at the same price per share. The net proceeds received from the IPO were approximately $69,784, after deducting underwriting commissions and other offering expenses. See also note 11a.</font></div> <div style="margin-left: 49.65pt; line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 49.65pt; line-height: 1.25">The Company has eight wholly-owned subsidiaries located in the United States and Canada (&#8220;North America&#8221;), Hong-Kong, Japan, Spain, Israel, India and Australia. In addition, the Company has two subsidiaries located in the United Kingdom and China and holds a 51% interest in each of those subsidiaries. The Company&#8217;s ten subsidiaries are referred to collectively herein as the &#8220;Subsidiaries.&#8221; The Company sells its products primarily through its Subsidiaries. In April and August 2019, the Company established wholly-owned subsidiaries in India and Australia, respectively.</div></div></div> <div><div><div style="line-height: 1.25"></div> <div style="line-height: 1.25"><font style="font-weight: bold">NOTE 2 - SIGNIFICANT</font>&#160;<font style="font-weight: bold">ACCOUNTING</font>&#160;<font style="font-weight: bold">POLICIES:</font></div> <div style="margin-left: 72.8pt; line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z7b12b745b6dd42b7841f754ab2a56c4a" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">a.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Basis of presentation</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company&#8217;s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (&#8220;U.S. GAAP&#8221;).</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zb235b25b0e524e19a53883b007bb88c8" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">b.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Use of estimates</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25">The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z27f12e60c03f45979b79a2b46b0befa9" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">c.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Functional currency</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25"><font style="background-color: #FFFFFF">The U.S. dollar (&#8220;U.S. dollar&#8221; or &#8220;$&#8220;)&#160;is the currency of the primary economic environment in which the operations&#160;</font>of the Company is conducted. Revenues and a substantial portion of the operational costs are denominated in U.S. dollars. <font style="background-color: #FFFFFF">Accordingly, the functional currency of the Company is the U.S. dollar (&#8220;primary currency&#8221;)</font>.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25"><font style="background-color: #FFFFFF">Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. </font><font style="background-color: #FFFFFF">Balances in non- U.S. dollar currencies are translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S. dollar transactions and other items in the statements of income (indicated below), the following exchange rates are used: (i) for transactions - exchange rates at transaction dates or average exchange rates; and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization) - historical exchange rates.&#160; Currency transaction gains and losses are presented in financial income or expenses, as appropriate.</font></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25">The functional currency of each of the Subsidiaries is the <font style="background-color: #FFFFFF">U.S. dollar</font>. For purposes of consolidation, the financial statements of the Subsidiaries are translated into U.S. dollars in accordance with ASC 830, &#8220;Foreign Currency Matters&#8221; (&#8220;ASC 830&#8221;).</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zfff83385c4a343f0a63c22acde460be9" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">d.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Principles of consolidation and presentation</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">The consolidated financial statements include the accounts of the Company and its Subsidiaries. Intercompany transactions and balances are eliminated in consolidation.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Non-controlling interests in subsidiaries represent the equity in subsidiaries not attributable, directly or indirectly, to the Company. Non-controlling interests are presented in equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components of other comprehensive income are attributed to the Company and to non-controlling interests. Losses are attributed to non-controlling interests even if they result in a negative balance of non-controlling interests in the consolidated statements of income.</div> <div style="margin-left: 72pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 72pt; line-height: 1.25">The carrying amount of the redeemable non-controlling interests were based on the higher of: (a) the non-controlling interests based on the initial fair value with the addition of its share in the operating results of the relevant subsidiary net of dividend paid; or (b) the redemption value of the put option. Adjustment of the carrying amount of the redeemable non-controlling interests was charged to retained earnings.</div> <div style="margin-left: 72pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company treats transactions with non-controlling interests as transactions with its equity owners. Accordingly, for purchases of shares from non-controlling interests, the difference between any consideration paid and the portion acquired of the carrying value of the net assets of the subsidiary is recorded in equity.</div> <div style="margin-left: 72pt; line-height: 1.25"><br /> Gains or losses on disposals of shares to non-controlling interests are also recorded in equity.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="za935e0567a4246acb26a22750234fdb6" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">e.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Cash and cash equivalents</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">The Company considers cash equivalents to be all short-term, highly liquid investments, which include money market instruments, that are not restricted as to withdrawal or use,&#160; and short-term bank deposits with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z5b1694d59f594c618583b9eb7d1ba153" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">f.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Short-term bank deposits</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">Bank deposits with maturities of more than three months but less than one year are included in short-term deposits. Such short-term deposits bear interest at an average annual rate of approximately 2.63%-3.08% in 2018 and 0.35%-2.90% in 2019.</div> <div style="line-height: 1.25; margin-left: 72pt"><br /> <br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zbb166f823f18468cbca892e7cedf47f1" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">g.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Marketable securities</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Marketable securities consist of government bonds and corporate debt securities (together &#8220;debt securities&#8221;) and certificates of deposit measured at fair value in each reporting period. The fair value of quoted securities is based on current market value.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Debt securities and certificates of deposit are classified as available-for-sale, with changes in fair value, net of taxes (if applicable), are reflected in other comprehensive income or loss. Realized gains and losses on sales of marketable debt securities as well as premium or discount amortization are included in the consolidated statements of income as finance income or expense. Unrealized losses are recorded in consolidated statements of income as finance income or expense when a decline in fair value is determined to be other than temporary.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company classifies investments that are readily convertible to known amounts of cash and have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company determines the appropriate classification of its investments in marketable securities at the time of purchase.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">As of January 1, 2018 the Company adopted ASU 2016-01,&#160;&#8220;Financial Instruments - Overall (Subtopic 825&#8209;10): Recognition and Measurement of Financial Assets and Liabilities&#8221;&#160;(&#8220;ASU 2016-01&#8221;), which relates to certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Therefore, commencing January 2018, changes in fair value of marketable equity securities and mutual funds, are reflected in the consolidated statements of income as finance income or expense. Prior to January 2018, these investments were classified as available-for-sale securities with changes in fair value, net of taxes, reflected in other comprehensive income. When such investments were sold or impaired, the accumulated fair value adjustments recognized in other comprehensive income were reclassified and included in the consolidated statements of income as finance income or expense.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">At the time of adoption, the Company reclassified an unrealized net gain on taxes of $316 related to the Company&#8217;s equity investments from accumulated other comprehensive income (&#8220;AOCI&#8221;) to retained earnings. The amount of $38, remaining in the AOCI at the time of adoption, relate to investments in debt securities.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z6271ab094b704fe6b2c16eafe2304e1d" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">h.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Other Investments</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">For other investments, the Company applies the measurement alternative upon the adoption of ASU 2016-01, and elected to record equity investments without readily determinable fair values at cost, less impairment, adjusted for subsequent observable price changes. In this measurement alternative method, changes in the carrying value of the equity investments are reflected in current earnings. Changes in the carrying value of the equity investment are required to be made whenever there are observable price changes in orderly transactions for the identical or similar investment of the same issuer.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Investment in convertible debt is measured at cost, less any impairment (see also note 7).</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z295f3aae8bc546468d5080fe85d76619" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">i.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Inventories</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">Inventories include raw materials and finished products and are valued at the lower of cost or net realizable value.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">Cost is determined as follows:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zaf782f21d149402fba7c726efbcda679" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 88.9pt"><br /> </td> <td style="width: 18pt; vertical-align: top">&#8226;</td> <td style="width: auto; vertical-align: top"> <div>Raw materials: first in, first out (&#8220;FIFO&#8221;) method.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zc49911a2378b461880bf7c6d06f6e418" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 88.9pt"><br /> </td> <td style="width: 18pt; vertical-align: top">&#8226;</td> <td style="width: auto; vertical-align: top"> <div>Finished products: using the &#8220;moving average&#8221; basis. The moving average is calculated as each additional inventory unit is purchased.<br /> </div> </td> </tr> </table> </div> <br style="line-height: 1.25" /> </div> <div style="margin-right: 1.15pt; margin-left: 72pt; line-height: 1.25">The Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following: historical usage rates, forecasted sales or usage, estimated current and future market values and new product introductions.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zc605e91ceef444c2bfa39916127b0577" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">j.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Leases</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25">&#160;</div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25">On January 1, 2019 the Company adopted ASU No. 2016-02, Leases (Topic 842), The Company determines if an arrangement is a lease at inception. Balances related to operating leases are included in operating lease right-of-use (&#8220;ROU&#8221;) assets, other current liabilities, and operating lease liabilities in the consolidated balance sheets.</div> <div style="line-height: 1.25">&#160;</div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25">ROU assets represent the Company&#8217;s right to use an underlying asset for the lease term and lease liabilities represent the Company&#8217;s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized as of the commencement date based on the present value of lease payments over the lease term. The Company&#8217;s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. As the Company&#8217;s leases do not provide an implicit rate, the Company&#8217;s uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term (see also note 2z and note 8).</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z1b9a64443c6f4055b90367e2ff838cb5" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">k.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Property and equipment</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the following estimated useful lives:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <table cellspacing="0" cellpadding="0" border="0" align="center" id="zeaf0cad35db3474fa9d819927b53db7e" style="font: 10pt Times New Roman, Times, serif; width: 60%; color: #000000; text-align: left"> <tr> <td style="width: 54.95%; vertical-align: top; background-color: rgb(204, 238, 255)"> <div style="text-indent: -13.7pt; margin-right: 20.45pt; margin-left: 24.25pt; line-height: 1.25">Computers</div> </td> <td style="width: 45.05%; vertical-align: bottom; background-color: rgb(204, 238, 255)"> <div style="text-align: center; margin-right: 20.45pt; margin-left: 13.7pt; line-height: 1.25">3 - 4 years</div> </td> </tr> <tr> <td style="width: 54.95%; vertical-align: bottom; background-color: rgb(255, 255, 255)"> <div style="text-indent: -13.7pt; margin-right: 20.45pt; margin-left: 24.25pt; line-height: 1.25">Molds</div> </td> <td style="width: 45.05%; vertical-align: bottom; background-color: rgb(255, 255, 255)"> <div style="text-align: center; margin-right: 20.45pt; margin-left: 13.7pt; line-height: 1.25">4 - 10 years</div> </td> </tr> <tr> <td style="width: 54.95%; vertical-align: bottom; background-color: rgb(204, 238, 255)"> <div style="text-indent: -13.7pt; margin-right: 20.45pt; margin-left: 24.25pt; line-height: 1.25">Equipment and furniture</div> </td> <td style="width: 45.05%; vertical-align: bottom; background-color: rgb(204, 238, 255)"> <div style="text-align: center; margin-right: 20.45pt; margin-left: 13.7pt; line-height: 1.25">10 - 17 years</div> </td> </tr> </table> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Leasehold improvements are amortized on a straight-line basis over the expected lease term, which is typically shorter than the estimated useful life of the improvements.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z8e0562ed2e444bb1ae3d390944a36e52" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">l.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Impairment of long-lived assets</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the long-lived asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the sum of the expected undiscounted cash flow is less than the carrying amount of the asset, the Company recognizes an impairment loss, which is the excess of the carrying amount over the fair value of the asset, using the expected future discounted cash flows.<br /> <br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">As of December 31, 2019, 2018 and 2017, the Company did not recognize an impairment loss on its long-lived assets.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z9491f47a058b4540a4454e3ee4ab38a6" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">m.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Legal and other contingencies</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Certain conditions may exist as of the date of the consolidated financial statements, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company&#8217;s management assesses such contingent liabilities, if any, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company&#8217;s management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Management applies the guidance in ASC 450-20, &#8220;Loss Contingencies&#8221; when assessing losses resulting from contingencies. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is recorded as accrued expenses in the Company&#8217;s consolidated financial statements.</div> <div style="margin-left: 72pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 72pt; line-height: 1.25">Legal costs incurred in connection with loss contingencies are expensed as incurred.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">As of December 31,2018 the Company recorded a provision of $10,000 in relation to litigation that was resolved in January 2019 (see also note 10b).</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z81c6b921421c4764bc660af04739710b" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">n.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Income taxes:<br /> </div> </td> </tr> </table> </div> <br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z33223fbdd84e4c8081c45f0d3b6ce972" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">1)</td> <td style="width: auto; vertical-align: top"> <div>The Company accounts for income taxes in accordance with ASC 740, &#8220;Income Taxes&#8221; (&#8220;ASC&#160;740&#8221;). ASC 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized, based on the weight of available positive and negative evidence. Deferred tax liabilities and assets are classified as non-current in accordance with ASU&#160;2015&#8209;17.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z033313f271dd4354bf8b256f5643dbea" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">2)</td> <td style="width: auto; vertical-align: top"> <div>Upon the distribution of dividends from the tax-exempt income of a Benefited Enterprise (see also note 12a(2)), the amount distributed is subject to tax at the rate that would have been applicable had the Company not been exempted from payment thereof. The tax amount will be recorded as an income tax expense in the period in which the Company declares the dividend. As to the amount of tax that would be owed if the Company distributed all of the retained earnings that would be subject to the tax exemption, see note 12a.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zeb7cca7cc4f84145aafdb610427c5739" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">3)</td> <td style="width: auto; vertical-align: top"> <div>The Company may incur an additional tax liability in the event of an inter-company dividend distribution from Foreign Subsidiaries; no additional deferred income taxes have been provided, since the Company does not expect to distribute inter-company dividends in the foreseeable future that may result in additional tax liability.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z4a0d5584dda441e6b30627368e8677b8" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">4)</td> <td style="width: auto; vertical-align: top"> <div>Taxes that would apply in the event of disposal of investments in Subsidiaries have not been taken into account in computing the deferred income taxes, as it is the Company&#8217;s intent and ability to hold these investments.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zc4261a891d484116bdba3e61aae22a7f" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">5)</td> <td style="width: auto; vertical-align: top"> <div>The Company accounts for uncertain tax positions in accordance with ASC 740-10. ASC 740&#8209;10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit of the largest amount that is more than 50% (cumulative probability) likely to be realized upon ultimate settlement. The Company accrues interest and penalties related to unrecognized tax benefits under taxes on income (tax benefit).</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z264b61065b8247c485e3da8c54e97872" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">o.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Share-based compensation</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company grants share options to its employees, directors and non-employees in consideration for services rendered. See note 11(a)(2) for details on outstanding share capital.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company accounts for share-based payment awards classified as equity awards using the grant-date fair value method. The fair value at grant-date of the issued equity award is recognized as an expense on a straight-line basis over the requisite service period, net of estimated forfeitures. The fair value of each share-based payment granted is estimated using the Binomial Model. The Company estimates forfeitures based on historical experience and anticipated future conditions at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from those estimates.</div> <div style="margin-left: 70.9pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company elected to recognize share-based compensation cost for awards with only service conditions that have a graded vesting schedule using the straight-line method based on the multiple-option award approach.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company applies ASU 2018-07 (Topic 718) that expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Under the provision of the amendment, the Company measures share-based compensation to non-employees in the same manner (except for certain exceptions) as share-based compensation to employees.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Prior to January 1, 2018, when options were granted as consideration for services provided by consultants and other non-employees, the grant was accounted for based on the fair value of the consideration received or the fair value of the options issued, whichever is more reliably measurable. The fair value of the options granted was measured on a final basis at the end of the related service period and recognized over the related service period using the straight-line method.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zbf6cb6c7d8b545609d5f836d012dce15" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">p.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Revenue recognition</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company applies ASC 606,&#160;&#8220;Revenue from Contracts with Customers&#8221; (&#8220;ASC 606&#8221;). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.&#160;To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zf35c0cb43fd34c919e47374af10aa6b4" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(i)</td> <td style="width: auto; vertical-align: top"> <div>Identify the contract(s) with a customer;</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z17a708cf453e43ee899b261c8efb228d" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(ii)</td> <td style="width: auto; vertical-align: top"> <div>Identify the performance obligations in the contract. The Company determined that its arrangements are generally comprised of the following elements that are recognized as separate performance obligations: products, consumables and extended warranties.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z08727949ff62427e9a124c5997409a39" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(iii)</td> <td style="width: auto; vertical-align: top"> <div>Determine the transaction price;</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zf01e8d9c5e0d463d85062821433cd41a" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(iv)</td> <td style="width: auto; vertical-align: top"> <div>Allocate the transaction price to the performance obligations in the contract.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 106.9pt; line-height: 1.25">The Company estimates the standalone selling prices of the services to be provided based on expected pricing of the service contract purchased on a standalone basis and uses the residual approach to estimate the selling price of the products; and</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z0f901306773f43a9876ab3204a26b779" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(v)</td> <td style="width: auto; vertical-align: top"> <div>Recognize revenue when (or as) the performance obligation is satisfied.&#160;</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 106.9pt; line-height: 1.25">The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer, after considering any price concession expected to be provided to the customer, when applicable.&#160;At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct.&#160;The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.&#160;</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 106.9pt; line-height: 1.25">The Company uses the following practical expedients that are permitted under the rules:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zc8061bc344d2415097b1f896a2532a4c" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 106.9pt"><br /> </td> <td style="width: 18pt; vertical-align: top">&#8226;</td> <td style="width: auto; vertical-align: top"> <div>The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in sales and marketing expenses.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zfb1f7f0b8d2b43f59f97bf8437d18197" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 106.9pt"><br /> </td> <td style="width: 18pt; vertical-align: top">&#8226;</td> <td style="width: auto; vertical-align: top"> <div>The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 106.9pt; line-height: 1.25">The following is a description of the principal activities from which the Company generates its revenue.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25; font-style: italic">Product Revenue, Net</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Revenues from product sales are recognized when the customer obtains control over the Company&#8217;s product, typically upon shipment to the customer.&#160;Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from&#160;revenues.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Payment terms and conditions vary by customer. The Company&#8217;s standard terms for end users usually require of payment upon delivery and for distributors require 50% down payment and 50% payment within 30 days from the invoice date.&#160;</div> <div style="margin-left: 70.9pt; line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company may enter into installment sales contracts with end users in North America that provide them with long-term (generally up to 60 months) financing for the purchase of the Company&#8217;s products. The interest rate used in these contracts reflects the credit characteristics of the party receiving financing in the contract, as well as any collateral or security provided by the customer. Interest income on these receivables is recognized as finance income and earned over the terms of the contract.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Variable consideration mainly includes price concessions related to installment sales contracts. The Company recognizes any variable consideration at the time that it is&#160;probable&#160;that a significant reversal in the amount of cumulative&#160;revenue&#160;recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company does not grant a right of return, refund, cancelation or termination. From time to time, the Company participates in its customers' marketing activities and deducts such amounts from revenue.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25; font-style: italic">Service Revenue</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company also generates revenues from long-term maintenance contracts (&#8220;Extended Warranty&#8221;). Revenue from Extended Warranty is recognized ratably, on a straight-line basis, over the period of the applicable service contract. These maintenance agreements are included in contract liabilities. Revenue from repairs performed in the absence of Extended Warranty is recognized when the related services are performed.</div> <div style="margin-left: 70.9pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company classifies the portion of contract liabilities not expected to be earned in the subsequent 12 months as long-term.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zd515e31dcc144fdd85dc72014cb0f885" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">q.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Allowance for doubtful accounts</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-right: 1.95pt; margin-left: 72pt; line-height: 1.25">The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and records an allowance when there is doubt as to the collectability of individual balances during the period in which such loss is determined to be probable based on an assessment of specific evidence indicating doubtful collection, historical experience, account balance aging and prevailing economic conditions. 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vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">12,801</div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> </tr> <tr> <td colspan="1" style="vertical-align: bottom; vertical-align: middle; padding-left: 9pt; width: 76%; background-color: rgb(255, 255, 255)"> <div style="text-indent: -2.5pt; margin-right: 7.1pt; margin-left: 20.35pt; line-height: 1.25">1 to 2 years</div> </td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(255, 255, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; 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padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="6" style="vertical-align: bottom; border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: top"> <div style="line-height: 1.25"> <div style="text-align: center; line-height: 1.25; font-weight: bold">December 31</div> </div> </td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; padding-bottom: 2px">&#160;</td> </tr> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="2" style="vertical-align: bottom; border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: top"> <div style="line-height: 1.25; font-weight: bold"> <div style="text-align: center; line-height: 1.25"> 2019</div> </div> </td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; font-weight: bold; text-align: center; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="2" style="vertical-align: bottom; border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: top; font-weight: bold; text-align: center">2018</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; font-weight: bold; vertical-align: bottom; padding-bottom: 2px">&#160;</td> </tr> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom">&#160;</td> <td rowspan="1" colspan="2" style="vertical-align: bottom; vertical-align: top">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom">&#160;</td> <td rowspan="1" colspan="2" style="vertical-align: bottom; vertical-align: top">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; vertical-align: top; width: 76%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">Raw materials</div> </td> <td colspan="1" style="vertical-align: bottom; text-align: right; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">2,725</div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; text-align: right; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">2,508</div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; vertical-align: top; width: 76%; padding-bottom: 2px; background-color: rgb(255, 255, 255)"> <div style="line-height: 1.25">Finished products</div> </td> <td colspan="1" style="vertical-align: bottom; text-align: right; vertical-align: bottom; width: 1%; padding-bottom: 2px; background-color: rgb(255, 255, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; border-bottom: rgb(0, 0, 0) 2px solid; 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background-color: rgb(255, 255, 255)"> <div style="line-height: 1.25"> <div style="line-height: 1.25">4,455</div> </div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; padding-bottom: 2px; background-color: rgb(255, 255, 255)">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; vertical-align: top; width: 76%; padding-bottom: 4px; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">Total inventories</div> </td> <td colspan="1" style="vertical-align: bottom; text-align: right; vertical-align: bottom; width: 1%; padding-bottom: 4px; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; border-bottom: rgb(0, 0, 0) 4px double; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; border-bottom: rgb(0, 0, 0) 4px double; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25"> <div style="line-height: 1.25">9,408</div> </div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; padding-bottom: 4px; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; text-align: right; vertical-align: bottom; width: 1%; padding-bottom: 4px; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; border-bottom: rgb(0, 0, 0) 4px double; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; border-bottom: rgb(0, 0, 0) 4px double; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25"> <div style="line-height: 1.25">6,963</div> </div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; padding-bottom: 4px; background-color: rgb(204, 238, 255)">&#160;</td> </tr> </table> </div></div> <div><div><div style="line-height: 1.25; font-weight: bold">NOTE 6 - PROPERTY AND EQUIPMENT, NET:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-right: 1.95pt; margin-left: 49.65pt; line-height: 1.25">Composition of property and equipment grouped by major classifications is as follows:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <table cellspacing="0" cellpadding="0" border="0" align="right" id="z13d6bcd883ec46ba901b7c44fa99fe5f" style="font: 10pt Times New Roman, Times, serif; width: 93%; color: #000000; text-align: left"> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="6" style="border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: bottom; vertical-align: bottom"> <div style="line-height: 1.25"> <div style="text-align: center; line-height: 1.25; font-weight: bold">December 31</div> </div> </td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; padding-bottom: 2px">&#160;</td> </tr> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; font-weight: bold; text-align: center; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="2" style="border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: bottom; vertical-align: bottom; font-weight: bold; text-align: center"> 2019</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; font-weight: bold; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="2" style="border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: bottom; vertical-align: bottom"> <div style="line-height: 1.25; font-weight: bold"> <div style="text-align: center; line-height: 1.25">2018</div> </div> </td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; 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On January 13, 2019, the Company signed a supplement lease agreement, expanding its headquarters in Israel, which expires in December 2021 (&#8220;Supplement Lease Agreement&#8221;). The cost under the Supplement Lease Agreement is linked to the Israeli Consumer Price Index. 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line-height: 1.25">Total lease payments</div> </td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">1,459</div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; vertical-align: bottom; width: 88%; padding-bottom: 2px; background-color: rgb(255, 255, 255)"> <div style="margin-left: 15.9pt; line-height: 1.25">Less imputed interests</div> </td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; padding-bottom: 2px; background-color: rgb(255, 255, 255)">&#160;</td> <td colspan="1" style="border-bottom: rgb(0, 0, 0) 2px solid; 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background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">392</div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; vertical-align: top; width: 88%; background-color: rgb(255, 255, 255)"> <div style="text-indent: 15.85pt; line-height: 1.25">2020</div> </td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(255, 255, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(255, 255, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(255, 255, 255)"> <div style="line-height: 1.25">399</div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; background-color: rgb(255, 255, 255)">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; 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line-height: 1.25">Other liabilities consist of the following:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <table cellspacing="0" cellpadding="0" border="0" align="center" id="z797e7f95eb8743f691aee0914f3dc1b5" style="font: 10pt Times New Roman, Times, serif; width: 70%; color: #000000; text-align: left"> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="6" style="border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: bottom; vertical-align: top"> <div style="line-height: 1.25"> <div style="text-align: center; line-height: 1.25; font-weight: bold">December 31</div> </div> </td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; padding-bottom: 2px">&#160;</td> </tr> <tr> <td rowspan="1" style="vertical-align: bottom; 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padding-bottom: 2px">&#160;</td> </tr> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom">&#160;</td> <td rowspan="1" colspan="2" style="vertical-align: bottom; vertical-align: top">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom">&#160;</td> <td rowspan="1" colspan="2" style="vertical-align: bottom; vertical-align: top">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; vertical-align: top; width: 76%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">Employees and related expenses</div> </td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">8,164</div> </td> <td colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">5,473</div> </td> <td colspan="1" style="vertical-align: bottom; 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margin-left: 108pt">As of December 31, 2019, the weighted-average remaining contractual life of exercisable options was 3.25 years. 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According to the agreement, the Company would provide to the JVC a license to use the Company&#8217;s knowledge in exchange for a 51% interest in the JVC, and GIBF would invest (in a Chinese local currency &#8220;RMB&#8221;) an amount of RMB 50 million (approximately $7.2 million), in exchange for a 49% interest in the JVC. 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padding-bottom: 4px; background-color: rgb(204, 238, 255)">&#160;</td> </tr> </table> </div></div> <div><div><div style="line-height: 1.25; font-weight: bold">NOTE 12- TAXES ON INCOME:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="text-align: justify; line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z9b83618722a74d56be4279b92ccb8b9c" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 49.65pt"><br /> </td> <td style="width: 21.25pt; vertical-align: top; font-weight: bold">a.</td> <td style="width: auto; vertical-align: top; text-align: justify"> <div style="font-weight: bold">InMode Ltd.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company is taxed according to Israeli tax laws:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z3d33e496270e48e0b323984fd57b4ec9" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 21.5pt; vertical-align: top">1)</td> <td style="width: auto; vertical-align: top"> <div>Measurement of results for tax purposes</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 92.15pt; line-height: 1.25">Since 2008, the Company has measured the results of the Israeli Company for tax purposes in nominal terms in NIS.</div> <div style="margin-left: 92.15pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 92.15pt; line-height: 1.25">These consolidated financial statements are presented in U.S. dollars. The changes in the exchange rate of the dollar, both on an annual and a cumulative basis cause a difference between taxable income and income reflected in these consolidated financial statements. ASC 740-10-25 prohibits the recognition of deferred tax liabilities or assets that arise from differences between the financial reporting and tax bases of assets and liabilities that are re-measured from the local currency into dollars using historical exchange rates, and that result from changes in exchange rates or indexing for tax purposes. 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The Israeli company&#8217;s facility obtained the status of a Benefited Enterprise, which made it eligible for tax benefits for a period of up to ten years.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 103.1pt; line-height: 1.25">The period of benefits of the Benefited Enterprise of the Company commenced in 2012. As of December 31, 2019, the Company&#8217;s retained earnings derived mostly from the benefits of Benefited Enterprise.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 103.1pt; line-height: 1.25">In the event of a distribution of dividends (or deemed dividends) from income that was tax exempt as discussed above, the Company will be required to pay the applicable corporate tax that would otherwise have been payable on such income (25%). In addition, upon distribution of dividends from tax-exempt income, the recipient shall be subject to tax at the rate of 15% (or lower, if so provided under an applicable tax treaty), which would generally be withheld at source by the distributing company.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z994cbb9a6da441009337391ff25a573a" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 85.1pt"><br /> </td> <td style="width: 18pt; vertical-align: top">b)</td> <td style="width: auto; vertical-align: top"> <div>Conditions for entitlement to the benefits</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 103.1pt; line-height: 1.25">The Israeli company entitlement to the benefits described above is subject to its fulfilling the conditions stipulated by the law, rules and regulations published thereunder, in its Benefited Enterprise as determined on the ruling received. These conditions include, among other things, that the production, directly or through subcontractors, of all the Company&#8217;s products should be performed in certain areas of Israel. If there is any failure by the Israeli company to comply with these conditions, the benefits may be cancelled and the Israeli company may be required to refund the amount of the benefits, in whole or in part, with interest.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zca18984725384be78041920e39d2f421" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 85.1pt"><br /> </td> <td style="width: 18pt; vertical-align: top">c)</td> <td style="width: auto; vertical-align: top"> <div>Amendments of the Law for the Encouragement of Capital Investments, 1959</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 103.1pt; line-height: 1.25">Additional amendments to the Investment Law became effective in January 2011 and were further amended in August 2013 (the &#8220;2011 Amendment&#8221;). Under the 2011 Amendment, income derived by &#8216;Preferred Companies&#8217; from &#8216;Preferred Enterprises&#8217; (both as defined in the 2011 Amendment) would be subject to a uniform rate of corporate tax for an unlimited period as opposed to the incentives prior to the 2011 Amendment that were limited to income from Approved or Benefited Enterprises during their benefits period. According to the 2011 Amendment, the tax rate applicable to such income, referred to as &#8216;Preferred Income,&#8217; would be 10% in areas in Israel that are designated as Development Zone &#8220;A&#8221; and 15% elsewhere in Israel in 2011 and 2012, 7% and 12.5%, respectively, in 2013, 9% and 16% respectively, in 2014, 2015 and 2016, and 7.5% and 16%, respectively, from 2017 and thereafter. Income derived by a Preferred Company from a &#8216;Special Preferred Enterprise&#8217; (as defined in the Investment Law) would enjoy further reduced income tax rates for a period of ten years of 5% in Development Zone A and 8% elsewhere. As of January 1, 2014, dividends distributed from Preferred Income would subject the recipient to a 20% tax (or lower, if so provided under an applicable tax treaty), which would generally be withheld at source by the distributing company; provided, however, that dividends distributed from &#8216;Preferred Income&#8217; from one Israeli corporation to another would not be subject to tax. 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Under the 2017 Amendment, and provided the conditions stipulated therein are met, income derived by Preferred Companies from &#8216;Preferred Technological Enterprises&#8217; (&#8220;PTE&#8221;) (as defined in the 2017 Amendment), would be subject to reduced corporate tax rates of 7.5% in Development Zone &#8220;A&#8221; and 12% elsewhere, or 6% in case of a &#8216;Special Preferred Technological Enterprise&#8217; (&#8220;SPTE&#8221;) as defined in the 2017 Amendment) regardless of the company&#8217;s geographical location within Israel. A Preferred Company distributing dividends from income derived from its PTE or SPTE, would subject the recipient to a 20% tax (or lower, if so provided under an applicable tax treaty). The 2017 Amendment further provides that, in certain circumstances, a dividend distributed to a corporate shareholder who is not an Israeli resident for tax purposes would be subject to a 4% tax (inter alia, if the amount of foreign investors in the distributing company exceeds 90%). Such taxes would generally be withheld at source by the distributing company.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 103.1pt; line-height: 1.25">On June 14, 2017, the Encouragement of Capital Investments Regulations (Preferred Technology Income and Capital Profits for a Technological Enterprise), 2017 (the &#8220;Regulations&#8221;) were published, which adopted Action 5 under the base erosion and profit shifting (&#8220;BEPS&#8221;) regulations. The Regulations describe, inter alia, the mechanism used to determine the calculation of the benefits under the PTE and under the SPTE Regime and determine certain requirements relating to documentation of intellectual property for the purpose of the PTE. According to these provisions, a company that complies with the terms under the PTE regime may be entitled to certain tax benefits with respect to income generated during the company&#8217;s regular course of business and derived from the preferred intangible asset (as determined in the Investments Law), excluding income derived from intangible assets used for marketing and income attributed to production activity. In the event that intangible assets used for marketing purposes generate over 10% of the PTE&#8217;s income, the relevant portion, calculated using a transfer pricing study, would be subject to regular corporate income tax. If such income does not exceed 10%, the PTE will not be required to exclude the marketing income from the PTE&#8217;s total income. The Regulations set a presumption of direct production expenses plus 10% with respect to income related to production, which can be countered by the results of a supporting transfer pricing study. Tax rates applicable to such production income expenses will be similar to the tax rates under the Preferred Enterprise regime, to the extent such income would be considered as eligible. In order to calculate the preferred income, the PTE is required to take into account the income and the research and development expenses that are attributed to each single preferred intangible asset. Nevertheless, it should be noted that the transitional provisions allow companies to take into account the income and research and development expenses attributed to all of the preferred intangible assets they have.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 103.1pt; line-height: 1.25">Under the transitional provisions of the law, a company is allowed to continue to enjoy the tax benefits available under the law prior to its amendment until the end of the period of benefits, as defined in the law. In each year during the period of benefits as a Benefited Enterprise, the Company will be able to opt for application of the amendment, thereby making available the tax rates discussed above. 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Except for certain provisions, the U.S. Tax Legislation is effective for tax years beginning on or after January 1, 2018. The U.S. Tax Legislation significantly revises several sections of the US Internal Revenue Code including, among other things, lowering the corporate income tax rate from 35% to 21% effective January 1, 2018, limiting deductibility of interest expense and implementing a territorial tax system that imposes a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Company reduced its deferred tax assets by $406 for the year ended December 31, 2017 due to the change in the statutory tax rate.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z951fde2bde1a4d8886245341ff179c49" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 49.65pt"><br /> </td> <td style="width: 18pt; vertical-align: top; font-weight: bold">c.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Deferred income taxes</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 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width: 91%; color: #000000; text-align: left"> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top; padding-bottom: 2px">&#160;</td> <td colspan="1" rowspan="1" style="vertical-align: bottom; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td colspan="10" rowspan="1" style="border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: bottom; vertical-align: bottom"> <div style="line-height: 1.25"> <div style="text-align: center; line-height: 1.25; font-weight: bold">Year ended December 31</div> </div> </td> <td colspan="1" rowspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; padding-bottom: 2px">&#160;</td> </tr> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top; padding-bottom: 2px">&#160;</td> <td colspan="1" rowspan="1" style="vertical-align: bottom; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td colspan="2" rowspan="1" style="border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: bottom; 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Revenues and a substantial portion of the operational costs are denominated in U.S. dollars. <font style="background-color: #FFFFFF">Accordingly, the functional currency of the Company is the U.S. dollar (&#8220;primary currency&#8221;)</font>.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25"><font style="background-color: #FFFFFF">Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. </font><font style="background-color: #FFFFFF">Balances in non- U.S. dollar currencies are translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S. dollar transactions and other items in the statements of income (indicated below), the following exchange rates are used: (i) for transactions - exchange rates at transaction dates or average exchange rates; and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization) - historical exchange rates.&#160; Currency transaction gains and losses are presented in financial income or expenses, as appropriate.</font></div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25">The functional currency of each of the Subsidiaries is the <font style="background-color: #FFFFFF">U.S. dollar</font>. 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Intercompany transactions and balances are eliminated in consolidation.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Non-controlling interests in subsidiaries represent the equity in subsidiaries not attributable, directly or indirectly, to the Company. Non-controlling interests are presented in equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components of other comprehensive income are attributed to the Company and to non-controlling interests. Losses are attributed to non-controlling interests even if they result in a negative balance of non-controlling interests in the consolidated statements of income.</div> <div style="margin-left: 72pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 72pt; line-height: 1.25">The carrying amount of the redeemable non-controlling interests were based on the higher of: (a) the non-controlling interests based on the initial fair value with the addition of its share in the operating results of the relevant subsidiary net of dividend paid; or (b) the redemption value of the put option. Adjustment of the carrying amount of the redeemable non-controlling interests was charged to retained earnings.</div> <div style="margin-left: 72pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company treats transactions with non-controlling interests as transactions with its equity owners. Accordingly, for purchases of shares from non-controlling interests, the difference between any consideration paid and the portion acquired of the carrying value of the net assets of the subsidiary is recorded in equity.</div> <div style="margin-left: 72pt; line-height: 1.25"><br /> Gains or losses on disposals of shares to non-controlling interests are also recorded in equity.</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="za935e0567a4246acb26a22750234fdb6" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">e.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Cash and cash equivalents</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">The Company considers cash equivalents to be all short-term, highly liquid investments, which include money market instruments, that are not restricted as to withdrawal or use,&#160; and short-term bank deposits with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z5b1694d59f594c618583b9eb7d1ba153" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">f.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Short-term bank deposits</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">Bank deposits with maturities of more than three months but less than one year are included in short-term deposits. Such short-term deposits bear interest at an average annual rate of approximately 2.63%-3.08% in 2018 and 0.35%-2.90% in 2019.</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zbb166f823f18468cbca892e7cedf47f1" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">g.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Marketable securities</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Marketable securities consist of government bonds and corporate debt securities (together &#8220;debt securities&#8221;) and certificates of deposit measured at fair value in each reporting period. The fair value of quoted securities is based on current market value.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Debt securities and certificates of deposit are classified as available-for-sale, with changes in fair value, net of taxes (if applicable), are reflected in other comprehensive income or loss. Realized gains and losses on sales of marketable debt securities as well as premium or discount amortization are included in the consolidated statements of income as finance income or expense. Unrealized losses are recorded in consolidated statements of income as finance income or expense when a decline in fair value is determined to be other than temporary.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company classifies investments that are readily convertible to known amounts of cash and have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company determines the appropriate classification of its investments in marketable securities at the time of purchase.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">As of January 1, 2018 the Company adopted ASU 2016-01,&#160;&#8220;Financial Instruments - Overall (Subtopic 825&#8209;10): Recognition and Measurement of Financial Assets and Liabilities&#8221;&#160;(&#8220;ASU 2016-01&#8221;), which relates to certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Therefore, commencing January 2018, changes in fair value of marketable equity securities and mutual funds, are reflected in the consolidated statements of income as finance income or expense. Prior to January 2018, these investments were classified as available-for-sale securities with changes in fair value, net of taxes, reflected in other comprehensive income. When such investments were sold or impaired, the accumulated fair value adjustments recognized in other comprehensive income were reclassified and included in the consolidated statements of income as finance income or expense.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">At the time of adoption, the Company reclassified an unrealized net gain on taxes of $316 related to the Company&#8217;s equity investments from accumulated other comprehensive income (&#8220;AOCI&#8221;) to retained earnings. The amount of $38, remaining in the AOCI at the time of adoption, relate to investments in debt securities.</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z6271ab094b704fe6b2c16eafe2304e1d" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">h.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Other Investments</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">For other investments, the Company applies the measurement alternative upon the adoption of ASU 2016-01, and elected to record equity investments without readily determinable fair values at cost, less impairment, adjusted for subsequent observable price changes. In this measurement alternative method, changes in the carrying value of the equity investments are reflected in current earnings. Changes in the carrying value of the equity investment are required to be made whenever there are observable price changes in orderly transactions for the identical or similar investment of the same issuer.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Investment in convertible debt is measured at cost, less any impairment (see also note 7).</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z295f3aae8bc546468d5080fe85d76619" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">i.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Inventories</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">Inventories include raw materials and finished products and are valued at the lower of cost or net realizable value.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">Cost is determined as follows:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zaf782f21d149402fba7c726efbcda679" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 88.9pt"><br /> </td> <td style="width: 18pt; vertical-align: top">&#8226;</td> <td style="width: auto; vertical-align: top"> <div>Raw materials: first in, first out (&#8220;FIFO&#8221;) method.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zc49911a2378b461880bf7c6d06f6e418" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 88.9pt"><br /> </td> <td style="width: 18pt; vertical-align: top">&#8226;</td> <td style="width: auto; vertical-align: top"> <div>Finished products: using the &#8220;moving average&#8221; basis. 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Balances related to operating leases are included in operating lease right-of-use (&#8220;ROU&#8221;) assets, other current liabilities, and operating lease liabilities in the consolidated balance sheets.</div> <div style="line-height: 1.25">&#160;</div> <div style="margin: 0px 0px 0px 72pt; line-height: 1.25">ROU assets represent the Company&#8217;s right to use an underlying asset for the lease term and lease liabilities represent the Company&#8217;s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized as of the commencement date based on the present value of lease payments over the lease term. The Company&#8217;s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. As the Company&#8217;s leases do not provide an implicit rate, the Company&#8217;s uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term (see also note 2z and note 8).</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z1b9a64443c6f4055b90367e2ff838cb5" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">k.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Property and equipment</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25; margin-left: 72pt">Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the following estimated useful lives:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <table cellspacing="0" cellpadding="0" border="0" align="center" id="zeaf0cad35db3474fa9d819927b53db7e" style="font: 10pt Times New Roman, Times, serif; width: 60%; color: #000000; text-align: left"> <tr> <td style="width: 54.95%; vertical-align: top; background-color: rgb(204, 238, 255)"> <div style="text-indent: -13.7pt; margin-right: 20.45pt; margin-left: 24.25pt; line-height: 1.25">Computers</div> </td> <td style="width: 45.05%; vertical-align: bottom; background-color: rgb(204, 238, 255)"> <div style="text-align: center; margin-right: 20.45pt; margin-left: 13.7pt; line-height: 1.25">3 - 4 years</div> </td> </tr> <tr> <td style="width: 54.95%; vertical-align: bottom; background-color: rgb(255, 255, 255)"> <div style="text-indent: -13.7pt; margin-right: 20.45pt; margin-left: 24.25pt; line-height: 1.25">Molds</div> </td> <td style="width: 45.05%; vertical-align: bottom; background-color: rgb(255, 255, 255)"> <div style="text-align: center; margin-right: 20.45pt; margin-left: 13.7pt; line-height: 1.25">4 - 10 years</div> </td> </tr> <tr> <td style="width: 54.95%; vertical-align: bottom; background-color: rgb(204, 238, 255)"> <div style="text-indent: -13.7pt; margin-right: 20.45pt; margin-left: 24.25pt; line-height: 1.25">Equipment and furniture</div> </td> <td style="width: 45.05%; vertical-align: bottom; background-color: rgb(204, 238, 255)"> <div style="text-align: center; margin-right: 20.45pt; margin-left: 13.7pt; line-height: 1.25">10 - 17 years</div> </td> </tr> </table> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Leasehold improvements are amortized on a straight-line basis over the expected lease term, which is typically shorter than the estimated useful life of the improvements.</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z8e0562ed2e444bb1ae3d390944a36e52" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">l.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Impairment of long-lived assets</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the long-lived asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the sum of the expected undiscounted cash flow is less than the carrying amount of the asset, the Company recognizes an impairment loss, which is the excess of the carrying amount over the fair value of the asset, using the expected future discounted cash flows.<br /> <br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">As of December 31, 2019, 2018 and 2017, the Company did not recognize an impairment loss on its long-lived assets.</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z9491f47a058b4540a4454e3ee4ab38a6" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">m.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Legal and other contingencies</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Certain conditions may exist as of the date of the consolidated financial statements, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company&#8217;s management assesses such contingent liabilities, if any, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company&#8217;s management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">Management applies the guidance in ASC 450-20, &#8220;Loss Contingencies&#8221; when assessing losses resulting from contingencies. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is recorded as accrued expenses in the Company&#8217;s consolidated financial statements.</div> <div style="margin-left: 72pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 72pt; line-height: 1.25">Legal costs incurred in connection with loss contingencies are expensed as incurred.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 72pt; line-height: 1.25">As of December 31,2018 the Company recorded a provision of $10,000 in relation to litigation that was resolved in January 2019 (see also note 10b).</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z81c6b921421c4764bc660af04739710b" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">n.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Income taxes:<br /> </div> </td> </tr> </table> </div> <br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z33223fbdd84e4c8081c45f0d3b6ce972" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">1)</td> <td style="width: auto; vertical-align: top"> <div>The Company accounts for income taxes in accordance with ASC 740, &#8220;Income Taxes&#8221; (&#8220;ASC&#160;740&#8221;). ASC 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized, based on the weight of available positive and negative evidence. Deferred tax liabilities and assets are classified as non-current in accordance with ASU&#160;2015&#8209;17.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z033313f271dd4354bf8b256f5643dbea" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">2)</td> <td style="width: auto; vertical-align: top"> <div>Upon the distribution of dividends from the tax-exempt income of a Benefited Enterprise (see also note 12a(2)), the amount distributed is subject to tax at the rate that would have been applicable had the Company not been exempted from payment thereof. The tax amount will be recorded as an income tax expense in the period in which the Company declares the dividend. As to the amount of tax that would be owed if the Company distributed all of the retained earnings that would be subject to the tax exemption, see note 12a.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zeb7cca7cc4f84145aafdb610427c5739" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">3)</td> <td style="width: auto; vertical-align: top"> <div>The Company may incur an additional tax liability in the event of an inter-company dividend distribution from Foreign Subsidiaries; no additional deferred income taxes have been provided, since the Company does not expect to distribute inter-company dividends in the foreseeable future that may result in additional tax liability.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z4a0d5584dda441e6b30627368e8677b8" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">4)</td> <td style="width: auto; vertical-align: top"> <div>Taxes that would apply in the event of disposal of investments in Subsidiaries have not been taken into account in computing the deferred income taxes, as it is the Company&#8217;s intent and ability to hold these investments.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zc4261a891d484116bdba3e61aae22a7f" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 72pt"><br /> </td> <td style="width: 26.7pt; vertical-align: top">5)</td> <td style="width: auto; vertical-align: top"> <div>The Company accounts for uncertain tax positions in accordance with ASC 740-10. ASC 740&#8209;10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit of the largest amount that is more than 50% (cumulative probability) likely to be realized upon ultimate settlement. The Company accrues interest and penalties related to unrecognized tax benefits under taxes on income (tax benefit).</div></td></tr></table></div></div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z264b61065b8247c485e3da8c54e97872" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">o.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Share-based compensation</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company grants share options to its employees, directors and non-employees in consideration for services rendered. See note 11(a)(2) for details on outstanding share capital.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company accounts for share-based payment awards classified as equity awards using the grant-date fair value method. The fair value at grant-date of the issued equity award is recognized as an expense on a straight-line basis over the requisite service period, net of estimated forfeitures. The fair value of each share-based payment granted is estimated using the Binomial Model. The Company estimates forfeitures based on historical experience and anticipated future conditions at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from those estimates.</div> <div style="margin-left: 70.9pt; line-height: 1.25"> <br /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company elected to recognize share-based compensation cost for awards with only service conditions that have a graded vesting schedule using the straight-line method based on the multiple-option award approach.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company applies ASU 2018-07 (Topic 718) that expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Under the provision of the amendment, the Company measures share-based compensation to non-employees in the same manner (except for certain exceptions) as share-based compensation to employees.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Prior to January 1, 2018, when options were granted as consideration for services provided by consultants and other non-employees, the grant was accounted for based on the fair value of the consideration received or the fair value of the options issued, whichever is more reliably measurable. The fair value of the options granted was measured on a final basis at the end of the related service period and recognized over the related service period using the straight-line method.</div></div></div> <div><div><div style="line-height: 1.25"><div><table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zbf6cb6c7d8b545609d5f836d012dce15" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 48.4pt"><br /> </td> <td style="width: 22.5pt; vertical-align: top; font-weight: bold">p.</td> <td style="width: auto; vertical-align: top"> <div style="font-weight: bold">Revenue recognition</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company applies ASC 606,&#160;&#8220;Revenue from Contracts with Customers&#8221; (&#8220;ASC 606&#8221;). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.&#160;To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zf35c0cb43fd34c919e47374af10aa6b4" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(i)</td> <td style="width: auto; vertical-align: top"> <div>Identify the contract(s) with a customer;</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z17a708cf453e43ee899b261c8efb228d" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(ii)</td> <td style="width: auto; vertical-align: top"> <div>Identify the performance obligations in the contract. The Company determined that its arrangements are generally comprised of the following elements that are recognized as separate performance obligations: products, consumables and extended warranties.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z08727949ff62427e9a124c5997409a39" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(iii)</td> <td style="width: auto; vertical-align: top"> <div>Determine the transaction price;</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zf01e8d9c5e0d463d85062821433cd41a" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(iv)</td> <td style="width: auto; vertical-align: top"> <div>Allocate the transaction price to the performance obligations in the contract.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 106.9pt; line-height: 1.25">The Company estimates the standalone selling prices of the services to be provided based on expected pricing of the service contract purchased on a standalone basis and uses the residual approach to estimate the selling price of the products; and</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="z0f901306773f43a9876ab3204a26b779" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 70.9pt"><br /> </td> <td style="width: 36pt; vertical-align: top">(v)</td> <td style="width: auto; vertical-align: top"> <div>Recognize revenue when (or as) the performance obligation is satisfied.&#160;</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 106.9pt; line-height: 1.25">The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer, after considering any price concession expected to be provided to the customer, when applicable.&#160;At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct.&#160;The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.&#160;</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 106.9pt; line-height: 1.25">The Company uses the following practical expedients that are permitted under the rules:</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zc8061bc344d2415097b1f896a2532a4c" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 106.9pt"><br /> </td> <td style="width: 18pt; vertical-align: top">&#8226;</td> <td style="width: auto; vertical-align: top"> <div>The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in sales and marketing expenses.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="line-height: 1.25"> <div> <table cellspacing="0" cellpadding="0" class="DSPFListTable" id="zfb1f7f0b8d2b43f59f97bf8437d18197" style="font: 10pt Times New Roman, Times, serif; width: 100%; text-align: left; color: #000000"> <tr> <td style="width: 106.9pt"><br /> </td> <td style="width: 18pt; vertical-align: top">&#8226;</td> <td style="width: auto; vertical-align: top"> <div>The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.</div> </td> </tr> </table> </div> </div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 106.9pt; line-height: 1.25">The following is a description of the principal activities from which the Company generates its revenue.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25; font-style: italic">Product Revenue, Net</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Revenues from product sales are recognized when the customer obtains control over the Company&#8217;s product, typically upon shipment to the customer.&#160;Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from&#160;revenues.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Payment terms and conditions vary by customer. The Company&#8217;s standard terms for end users usually require of payment upon delivery and for distributors require 50% down payment and 50% payment within 30 days from the invoice date.&#160;</div> <div style="margin-left: 70.9pt; line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company may enter into installment sales contracts with end users in North America that provide them with long-term (generally up to 60 months) financing for the purchase of the Company&#8217;s products. The interest rate used in these contracts reflects the credit characteristics of the party receiving financing in the contract, as well as any collateral or security provided by the customer. Interest income on these receivables is recognized as finance income and earned over the terms of the contract.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">Variable consideration mainly includes price concessions related to installment sales contracts. The Company recognizes any variable consideration at the time that it is&#160;probable&#160;that a significant reversal in the amount of cumulative&#160;revenue&#160;recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.</div> <div style="line-height: 1.25"><br style="line-height: 1.25" /> </div> <div style="margin-left: 70.9pt; line-height: 1.25">The Company does not grant a right of return, refund, cancelation or termination. 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width: 93%; color: #000000; text-align: left"> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="6" style="border-bottom: rgb(0, 0, 0) 2px solid; vertical-align: bottom; vertical-align: top"> <div style="line-height: 1.25"> <div style="text-align: center; line-height: 1.25; font-weight: bold">December 31</div> </div> </td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom; padding-bottom: 2px">&#160;</td> </tr> <tr> <td rowspan="1" style="vertical-align: bottom; vertical-align: top; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; font-weight: bold; text-align: center; vertical-align: bottom; padding-bottom: 2px">&#160;</td> <td rowspan="1" colspan="2" style="border-bottom: rgb(0, 0, 0) 2px solid; 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white-space: nowrap; vertical-align: bottom">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; vertical-align: bottom">&#160;</td> <td rowspan="1" colspan="2" style="vertical-align: bottom; vertical-align: top">&#160;</td> <td rowspan="1" colspan="1" style="vertical-align: bottom; white-space: nowrap; vertical-align: bottom">&#160;</td> </tr> <tr> <td style="vertical-align: bottom; vertical-align: top; width: 76%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">Raw materials</div> </td> <td colspan="1" style="vertical-align: bottom; text-align: right; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; width: 1%; background-color: rgb(204, 238, 255)">&#160;</td> <td colspan="1" style="vertical-align: bottom; vertical-align: bottom; text-align: right; width: 9%; background-color: rgb(204, 238, 255)"> <div style="line-height: 1.25">2,725</div> </td> <td colspan="1" style="vertical-align: bottom; 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In U.S. dollars per Ordinary Share. As of December 31, 2019, non- current deferred revenue is estimated to be recognized as following: 81% in year 2021, and the rest in year 2022. As of December 31, 2019 and 2018, consists of $2,104 and $2,054 non-U.S government bonds, respectively. In U.S. dollars per Ordinary Share.