20-F 1 zk2227770.htm 20-F GILAT SATELLITE NETWORKS LTD
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934  

or

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the fiscal year ended December 31, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the transition period from ___________ to ___________

or

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

Date of event requiring this shell company report ___________

Commission file number: 0-21218

GILAT SATELLITE NETWORKS LTD.

(Exact name of Registrant as specified in its charter)

ISRAEL

(Jurisdiction of incorporation or organization)

Gilat House, 21 Yegia Kapayim Street, Kiryat Arye, Petah Tikva, 4913020Israel

(Address of principal executive offices)

Yael Shofar, Adv.

General Counsel

Gilat Satellite Networks Ltd.

Gilat House, 21 Yegia Kapayim Street,

Kiryat Arye, Petah Tikva, 4913020 Israel

Tel: +9723 929 3020

Fax: +972 3 925 2945

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Ordinary Shares, NIS 0.20 nominal value

GILT

NASDAQ Global Select Market

Securities registered or to be registered pursuant of Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None


Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock at the close of the period covered by the annual report:

56,539,237 Ordinary Shares, NIS 0.20 nominal value per share

(as of December 31, 2021)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, a non-accelerated filer, or an emerging growth company. See the definitions of “accelerated filer,” “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer ☐

Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 ☒ 

U.S. GAAP

 ☐

 International Financial Reporting

 Standards as issued by the International

 Accounting Standards Board

 ☐

 Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No

This report on Form 20-F is being incorporated by reference into our Registration Statements on Form F-3 (Registration No. 333-232597) and on Form S-8 (Registration Nos. 333-180552, 333-187021, 333-204867, 333-210820, 333-217022, 333-221546, 333-223839, 333-231442, 333-236028. 333-253972 and 333-255740).


 


INTRODUCTION

          We are a leading global provider of satellite-based broadband communications. We design and manufacture ground-based satellite communications equipment and provide comprehensive solutions and end-to-end services powered by our innovative technology. Our portfolio includes a cloud-based satellite network platform, Very Small Aperture Terminals, or VSATs, amplifiers, high-speed modems, high performance on-the-move antennas and high efficiency, high power Solid State Power Amplifiers, or SSPAs, Block Upconverters, or BUCs,  and Transceivers. Our comprehensive solutions support multiple applications with a full portfolio of products to address key applications including broadband internet access, cellular backhaul over satellite, enterprise, social inclusion solutions, in-flight connectivity, or IFC, maritime, trains, defense and public safety, all while meeting the most stringent service level requirements. We have a large installed base, having sold over 1.6 million satellite terminals spanning approximately 100 countries and currently have hundreds of active networks.
 
We provide managed network and services through terrestrial and satellite networks in addition to developing and marketing ground-based satellite communications equipment. We have proven experience in delivering complex projects and services worldwide. We offer complete turnkey integrated solutions, including:
 

Managed satellite network services solutions, including services over our own networks (which may include satellite capacity);

Network planning and optimization;

Remote network operation;

Call center support;

Hub and field operations; and

Construction and installation of communication networks, typically on a Build, Operate and Transfer, or BOT, or Build, Operate and Own, or BOO, contract basis.
 
In these BOT and BOO projects, we build telecommunication infrastructure typically using fiber-optic and wireless technologies for broadband connectivity.
 
We have 20 sales and support offices worldwide, three Network Operation Centers, or NOCs, and five R&D centers. Our products are sold to communication service providers, satellite operators, Mobile Network Operators, or MNOs, and system integrators that use satellite communications to serve enterprise, social inclusion solutions, government and residential users, MNOs and system integrators that use our technology. Our solutions and services are also sold to defense and homeland security organizations. In addition, we provide services directly to end-users in various market segments, including in certain countries in Latin America.
 
From 2018 through 2021, we operated in three operating segments, comprised of our Fixed Networks, Mobility Solutions and Terrestrial Infrastructure Projects:
 
Fixed Networks provides advanced fixed broadband satellite communication networks, satellite communication systems and associated professional services and comprehensive turnkey solutions (which may include in certain instances managed satellite network services). Our customers are service providers, satellite operators, MNOs, telecommunication companies, or Telcos, and large enterprises and governments worldwide. In addition, it includes our network operation and managed networks and services in Peru. We focus on high throughput satellites, or HTS, and very high throughput satellites, or VHTS, and Non GEO-Stationary Orbit satellite constellation networks, or NGSOs, opportunities worldwide. Principal applications include cellular backhaul, social inclusion solutions, government, defense and enterprise networks and drive meaningful partnerships with satellite operators to leverage our technology and breadth of services to deploy and operate the ground-based satellite communication networks.
 
Mobility Solutions provides advanced on-the-move satellite communications equipment, systems, and solutions, including airborne, maritime, gateways and ground-mobile satellite systems and solutions. This segment provides solutions for land, sea and air connectivity, focusing on the high-growth IFC market, with our unique leading technology as well as defense and homeland security activities. Our product portfolio includes a leading network platform with high-speed VSATs, high performance on-the-move antennas and high efficiency, high power SSPAs, BUCs and transceivers. Our customers are satellite operators, service providers, system integrators, defense and homeland security organizations, as well as other commercial entities worldwide.
 
i

Terrestrial Infrastructure Projects provides fiber and wireless network infrastructure construction of the Programa Nacional de Telecomunicaciones (Pronatel), or PRONATEL, in Peru.
 
Commencing in the first quarter of 2022, in order to reflect our new management’s approach in the management of our operations, organizational alignment, customer base and end markets, we operate in three new operating segments, as follows:  


Satellite Networks is focused on the development and supply of networks that are used as the platform that enables the latest satellite constellations of HTS, VHTS and NGSO opportunities worldwide. We provide advanced broadband satellite communication networks and associated professional services and comprehensive turnkey solutions and managed satellite network services solutions. Our customers are service providers, satellite operators, MNOs, Telcos, large enterprises, system integrators, defense, homeland security organizations and governments worldwide. Principal applications include In-Flight-Connectivity, cellular backhaul, maritime, social inclusion solutions, government, defense and enterprise networks and are driving meaningful partnerships with satellite operators to leverage our technology and breadth of services to deploy and operate the ground-based satellite communication networks. Our product portfolio includes a leading satellite network platform with high-speed VSATs, high performance on-the-move antennas, BUCs and transceivers. 


Integrated Solutions is focused on the development, manufacturing and supply of products and solutions for mission-critical defense and broadcast satellite communications systems, advanced on-the-move and on-the-pause satellite communications equipment, systems and solutions, including airborne, ground-mobile satellite systems and solutions. The integrated solutions product portfolio comprises of leading high-efficiency, high-power SSPAs, BUCs and transceivers with a field-proven, high-performance variety of frequency bands. Our customers are satellite operators, In-Flight Connectivity service providers, defense and homeland security system integrators, and NGSO gateway integrators.
 

Network Infrastructure and Services is focused on telecom operation and implementation of large-scale networks projects in Peru. We provide terrestrial (fiber optic and wireless network) and satellite network construction and operation. We serve our customers through technology integration, managed networks and services, connectivity services, internet access and telephony over our own networks. We implement projects using various technologies (including our equipment), mainly based on BOT and BOO contracts.

 We are evaluating whether the change in our reporting segments, as described above, affects goodwill assignment to reporting units.

Our ordinary shares are traded on the NASDAQ Global Select Market under the symbol “GILT” and on the Tel Aviv Stock Exchange, or the TASE. As used in this annual report, the terms “we”, “us”, “Gilat” and “our” mean Gilat Satellite Networks Ltd. and its subsidiaries, unless otherwise indicated.
 
The marks “Gilat®”, “SkyEdge®”, “Wavestream®”, “AeroStream®”, “Raysat®”, “SatTrooperTM”, “Powerstream®” and “Spatial AdvantEdge™” and other marks appearing in this annual report on Form 20-F are trademarks of our company and its subsidiaries. Other trademarks appearing in this Annual Report on Form 20-F are owned by their respective holders.

ii

This Annual Report on Form 20-F contains various “forward‑looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and within the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements reflect our current view with respect to future events and, financial results of operations. Forward-looking statements usually include the verbs, “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “understands” and other verbs suggesting uncertainty. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual` results, performance, levels of activity, or our achievements, or industry results to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward‑looking statements which speak only as of the date hereof. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. We have attempted to identify additional significant uncertainties and other factors affecting forward-looking statements in the Risk Factors section which appears in Item 3D: “Key Information–Risk Factors”.

Our consolidated financial statements appearing in this annual report are prepared in U.S. dollars and in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. All references in this annual report to “dollars” or “$” are to U.S. dollars and all references in this annual report to “NIS” are to New Israeli Shekels.
 
Statements made in this Annual Report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this Annual Report or to any registration statement or annual report that we previously filed, you may read the document itself for a complete description of its terms.
 
iii

TABLE OF CONTENTS

  1
1
1
1
A.
Reserved
1
B.
Capitalization and Indebtedness
1
C.
Reasons for the Offer and Use of Proceeds
1
D.
Risk Factors
1
INFORMATION ON THE COMPANY 30
A.
History and Development of the Company
30
B.
Business Overview
31
C.
Organizational Structure
50
D.
Property, Plants and Equipment
50
51
51
A.
Operating Results
51
B.
Liquidity and Capital Resources
68
C.
Research and Development
70
D.
Trend Information
71
E.
Critical Accounting Estimates
72
77
A.
 Directors and Senior Management
77
B.
Compensation of Directors and Officers
81
C.
Board Practices
83
D.
 Employees
91
E.
Share Ownership
93
94
A.
Major Shareholders
94
B.
Related Party Transactions
96
C.
Interests of Experts and Counsel
96
96
98
A.
Offer and Listing Details
98
B.
Plan of Distribution
98
C.
Markets
98
D.
Selling Shareholders
98
E.
Dilution
98
F.
Expense of the Issue
98
99
A.
Share Capital
99
B.
Memorandum and Articles of Association
99
C.
Material Contracts
99
D.
Exchange Controls
100
E.
Taxation
100
F.
Dividend and Paying Agents
109
G.
Statement by Experts
109
H.
Documents on Display
109
I.
Subsidiary Information
110
110
111

iv


  111
111
111
111
113
113
113
PRINCIPAL ACCOUNTANT FEES AND SERVICES 113
114
114
114
114
115
115
  115
115
115
116
119

v

PART I
 
ITEM 1:
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable.

ITEM 2:
OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3:
KEY INFORMATION

A.
Reserved

B.
Capitalization and Indebtedness

Not applicable.

C.
Reasons for the Offer and Use of Proceeds

Not applicable

 D.
Risk Factors

Investing in our ordinary shares involves a high degree of risk and uncertainty. You should carefully consider the risks and uncertainties described below before investing in our ordinary shares. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially harmed. In that case, the value of our ordinary shares could decline substantially, and you could lose all or part of your investment. These risks include, but are not limited to, the following:

Risks Relating to Our Business


Our operations and sales have been adversely affected by the impact of COVID -19 pandemic and we are subject to further negative effects from the continued spread of the COVID -19 pandemic and other public health threats.

A significant portion of our revenue in 2021 was attributable to a limited number of customers.

Our failure to deliver upon our large-scale projects in an economical and a timely manner, or a delay in collection of payments due to us in connection with any such large-scale project could have a significant adverse impact on our operating results.

In the past, we incurred major losses and we may not be able to continue to operate profitably in the future.

Our available cash balance may decrease in the future if we cannot generate cash from operations.

If the satellite communications markets fail to grow, our business could be materially harmed.

Because we compete for largescale contracts in competitive bidding processes, losing a small number of bids or a decrease in the revenues generated from our large-scale projects could have a significant adverse impact on our operating results.

1


A large portion of our large-scale contracts are with governments or large governmental agencies in Latin America and any volatility in the political or economic climate or any unexpected unilateral termination, or suspension of payments could have a significant adverse impact on our business.

Some of our significant customers are highly leveraged or dependent on industries affected by the COVID-19 and if any of them encounters financial difficulties, this could have a significant adverse effect on our business and financial results.

Actual results could differ from the estimates and assumptions that we use to prepare our financial statements.

Tax authorities may disagree with our provisions and payments related to income taxes, deduction of withholding taxes, intercompany charges, cross-jurisdictional transfer pricing or other matters which could result in our being assessed additional taxes.

Our insurance coverage may not be sufficient for every aspect or risk related to our business

We operate in the highly competitive network communications industry and may be unsuccessful in competing effectively in the future.

Our lengthy sales cycles could harm our results of operations if forecasted sales are delayed or do not occur.

We may enter into acquisition agreements or form strategic alliances or partnerships in order to remain competitive in our market, and such acquisitions, strategic alliances or partnerships could be difficult to integrate, disrupt our business and dilute shareholder value.

U.S. government spending priorities and terms may change in a manner adverse to our businesses.

   If we are unable to competitively operate within the network communications market and respond to new technologies, our business could be adversely affected.

If we are unable to competitively operate within the GEO, HTS/VHTS, and NGSO satellite environments, our business could be adversely affected.

If existing contracts, or orders for our products or services are terminated, rescheduled or not renewed, our ability to generate revenues will be harmed.

Failure to expand our business in the IFC, cellular backhaul or NGSO markets, could have a material adverse effect on our overall business.

We are dependent upon a limited number of suppliers for key components that are incorporated in our products, including those used to build our hub systems and VSATs, and may be significantly harmed if we are unable to obtain such components on favorable terms or on a timely basis. We are also affected by global supply chain disruptions and price increases caused partially by COVID-19 and may be affected by the military situation in Ukraine.

Our failure to obtain or maintain authorizations under the U.S. export control and trade sanctions laws and export regulations and restrictions could have a material adverse effect on our business.

If we are unable to comply with Israel’s enhanced export control regulations our ability to export our products from Israel could be negatively impacted.

We are dependent on contracts with governments around the world for a significant portion of our revenue. These contracts may expose us to additional business risks and compliance obligations.

We depend on our main facility in Israel and are susceptible to any event that could adversely affect its condition or the condition of our other facilities.

If demand for our mobility applications for air, land and sea, VSATs and other products declines or if we are unable to develop products to meet demand, our business could be adversely affected.

We may be unable to adequately protect our proprietary rights, which may limit our ability to compete effectively.

Failure to protect against cyber-attacks, natural disasters or terrorist attacks, and failures of our information technology systems, infrastructure and data could have an adverse effect on our business.

A decrease in the selling prices of our products and services could materially harm our business.

2


Trends and factors affecting the telecommunications industry are beyond our control and may result in reduced demand and pricing pressure on our products.

Our international sales and business expose us to changes in foreign regulations and tariffs, tax exposures, inflation, political instability and other risks inherent to international business, any of which could adversely affect our operations.

Increasing scrutiny and changing expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance, or ESG, policies may impose additional costs on us or expose us to additional risks.

Currency exchange rates and fluctuations of currency exchange rates may adversely affect our results of operations, liabilities, and assets.

We may be subject to claims by third parties alleging that we infringe intellectual property owned by them. We may be required to commence litigation to protect our intellectual property rights. Any intellectual property litigation may continue for an extended period and may materially adversely affect our business, financial condition and operating results.

Environmental laws and regulations may subject us to significant liability.

Risks Related to Ownership of Our Ordinary Shares


We identified material weaknesses in our internal control over financial reporting as of December 31, 2021, which we are in the process of remediating. If we are unable to remediate these material weaknesses, or if we experience additional material weaknesses or other deficiencies in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately and timely report our financial results, which could cause shareholders to lose confidence in our financial and other public reporting, and adversely affect our share price.

If we are unable to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the reliability of our financial statements may be questioned and our share price may suffer.

Our share price has been highly volatile and may continue to be volatile and decline.

Our operating results may vary significantly from quarter to quarter and from year to year and these quarterly and yearly variations in operating results, as well as other factors, may contribute to the volatility of the market price of our shares.

We may in the future be classified as a passive foreign investment company, or PFIC, which would subject our U.S. investors to adverse tax rules.

Future sales of our ordinary shares and the future exercise of options may cause the market price of our ordinary shares to decline and may result in a substantial dilution.

Risks Related to Our Location in Israel


Political and economic conditions in Israel may limit our ability to produce and sell our products. This could have a material adverse effect on our operations and business condition, harm our results of operations and adversely affect our share price.

As a foreign private issuer whose shares are listed on the NASDAQ Global Select Market, we follow certain home country corporate governance practices instead of certain NASDAQ requirements, which may not afford shareholders with the same protections that shareholders of domestic companies have.

You may not be able to enforce civil liabilities in the U.S. against our officers and directors.

3


Risks Relating to Our Business

Our operations and sales have been adversely affected by the impact of COVID -19 pandemic and we are subject to further negative effects from the continued spread of the COVID -19 pandemic and other public health threats.
 
The ongoing COVID-19 pandemic continues to have an adverse effect on our industry and the markets in which we operate. We are continuing to closely monitor COVID-19 related impacts on all aspects of our business and geographies, including on our workforce, supply chain and customers. The COVID-19 outbreak has significantly impacted the travel and aviation markets in which our significant Inflight Connectivity, or IFC, customers operate and has resulted in a significant reduction of our business with some of these customers. We have also experienced postponed and delayed orders in certain other areas of our businesses. Further, the guidance of social distancing, lockdowns, quarantines and the requirements to work from home in various key territories such as Israel, Peru, California, Australia, Bulgaria, China and other countries, in addition to greatly reduced travel globally, has resulted in a substantial curtailment of business activities, which has affected and is likely to continue to affect our ability to conduct fieldwork as well as deliver products and services in the areas where restrictions are implemented by the local government. In addition, certain of our sales and support teams are unable to travel or meet with customers and the pandemic threat has caused operating, manufacturing, supply chain and project development delays and disruptions, labor shortages, travel and shipping disruptions and shutdowns (including as a result of government regulation and prevention measures). As a result, we experienced a significant reduction in business in 2020, which, despite a recovery in our business in 2021, has not yet reached its 2019 level. In the twelve months ended December 31, 2021, our revenue was $215 million, compared to $166 million in the comparable period of 2020, and $257 million in the comparable period of 2019. While we expect that the adverse effect of this public health threat will ease as a result of global vaccinations and testing and reduced restrictions on travelling, it is still likely to continue to adversely impact us by its negative impact on our ability to generate revenues due to reduced end-market demand from IFC customers, governments and enterprises and our ability to conduct fieldwork leading to order delays and cancellations. Given the current macro-economic environment and the uncertainties regarding the potential impact of COVID-19 on our business, there can be no assurance that our estimates and assumptions used in the measurement of various assets and liabilities in the consolidated financial statements will prove to be accurate predictions of the future. If our assumptions regarding forecasted cash flows are not achieved, it is possible that an impairment review may be triggered and certain assets in the consolidated financial statements may be impaired.
 
State and local governments are also continuing to take actions related to the pandemic, imposing additional and varying requirements on our industry. We are continuing to evaluate these evolving requirements. We cannot at this stage predict the various impacts they may have on our workforce, our suppliers, or our company. These evolving government requirements, including vaccine mandates, along with broader impacts of the continuing pandemic, could impact our workforce and performance, as well as those of our suppliers.

A significant portion of our revenue in 2021 was attributable to a limited number of customers.

We depend on several large-scale contracts for a significant percentage of our revenues. In 2021, a significant portion of our revenue was attributable to our contracts with a major U.S. satellite telecommunication company and with a Peruvian governmental authority, PRONATEL, mainly with respect to six regions in Peru, or the PRONATEL Regional Projects. Our sales to our U.S. major satellite telecommunication customer, accounted for approximately 12% of our revenue in the year ended December 31, 2021. Our sales to PRONATEL accounted for approximately 19% of our revenue in the year ended December 31, 2021. Additionally, our sales to a large U.S. system integrator and a government owned Telco in APAC in 2021, accounted for approximately 5% from each.

The PRONATEL Regional Projects, which were awarded to us in 2015 and in 2018, are of contractual value of $395 million and $154 million, respectively. The expected duration of the PRONATEL Regional Projects was significantly prolonged from their scheduled delivery dates due to continued delays in the construction phase. In addition, due to preventative measures taken by Peruvian governmental authorities with respect to COVID-19, certain restrictions and lockdowns were imposed which resulted in additional delays in progress of the PRONATEL Regional Projects, which are expected to continue for approximately 14-16 years. See Item 4.B. – “Information on the Company – Business Overview – Terrestrial Infrastructure Projects – Overview”. If we fail to deliver in a timely manner upon any of our large contracts or if any of these or other large customers were to terminate their existing contracts with us or substantially reduce the services or quantity of products they purchase from us, our revenues and operating results could be materially adversely affected. Additionally, a recession, depression, excessive inflation or other sustained adverse market events resulting from the spread of COVID-19 could materially and adversely affect our business and that of our customers or potential customers.

4


Our failure to deliver upon our large-scale projects in an economical and a timely manner, or a delay in collection of payments due to us in connection with any such large-scale project could have a significant adverse impact on our operating results.

We have been awarded a number of large-scale projects by our customers, including foreign governments, such as the Peruvian PRONATEL Regional Projects in 2015 and in 2018 and contracts with a major U.S. satellite telecommunication company, and with a large U.S. system integrator and with a government owned Telco. While we have successfully implemented large-scale network infrastructure projects and operations in rural areas, the PRONATEL Regional Projects as well as other projects are complex and require cooperation of third parties. Additionally, the delivery of our large-scale projects requires us to invest significant funds in order to obtain bank guarantees and requires us to incur significant expenses before we receive full payment from our customers. Failure to execute these projects in an economical manner within the projects’ budgets and schedules could result in significant penalties, impact our ability to receive and recognize the expected revenues, reduce our cash balance, and cause us losses, which would significantly adversely impact our operating results. The overall expected duration of the 2015 and 2018 PRONATEL Regional Projects was significantly prolonged from their scheduled delivery dates, due to continued delays in the construction phase. In addition, due to preventative measures taken by Peruvian governmental authorities with respect to COVID-19, certain restrictions and lockdowns were imposed which resulted in delays in the progress of the PRONATEL Regional Projects which are expected to continue for approximately 14-16 years. The construction phase of the first four PRONATEL Regional Projects was accepted by PRONATEL during 2019 and 2021 and we have entered into the operation phase with respect to these projects. Our general practice in the PRONATEL Regional Projects is to resolve delays in the projects schedules and other relevant issues through entering into an amendment agreed upon with our customer, as we have already done with respect to four PRONATEL Regional Projects.  If we fail to complete the remaining two projects in a timely manner or are unable to reach such agreement with PRONATEL for the other projects, we could incur significant penalties which will have a significant adverse effect on our business and financial results.

In the past, we incurred major losses and we may not be able to continue to operate profitably in the future.

We have operated profitably in the fiscal years 2017, 2018, 2019 and 2020, but incurred major losses in certain years prior to fiscal 2017. In 2020 we incurred an operating loss (excluding the payment received from Comtech as described below) and in 2021, we had a net loss of $3.03 million. In 2020, our net profit was $35.1 million, which was attributable to our receipt of  $53.6 million, net of related expenses, in connection with our settlement with Comtech Telecommunications Corp., or Comtech, in connection with the termination of the merger agreement we entered into with Comtech in 2020, or the Merger Agreement. Excluding the payment received from Comtech, net of related expenses, we would have incurred a net loss of $18.5 million in the year ended December 31, 2020. We have an accumulated deficit of $678 million. We cannot assure you that we can operate profitably in the future. If we do not continue to operate profitably, our share price will decline, and the viability of our company will be in question.

Our available cash balance may decrease in the future if we cannot generate cash from operations.

Our cash, cash equivalents including restricted cash as of December 31, 2021 were $84.4 million compared to $116 million as of December 31, 2020. Our positive cash flow (including restricted cash) from operating activities was approximately $18.9 million in the year ended December 31, 2021. In the years ended December 31, 2020 and 2019 we had positive cash flow from operating activities of $43.2 million (including $53.6 million received from Comtech in connection with our settlement agreement) and $34.8 million, respectively. If we do not generate sufficient cash from operations in the future, including from our large-scale projects, our cash balance will decline, and the unavailability of cash could have a material adverse effect on our business, operating results and financial condition.
          
5


The delivery of our large-scale projects requires us to invest significant funds in order to obtain bank guarantees and may require us to incur significant expenses before we receive full payment from our customers. This applies mainly to the 2015 and 2018 PRONATEL Regional Projects, which are of contractual value of $395 million and $154 million, respectively. The revenues from these projects are expected to be generated over a period of 14-16 years. We have used the advance payments received from PRONATEL as well as internal cash resources in order to finance the PRONATEL Regional Projects, and may need to significantly increase the internal cash resources used for further investment in the PRONATEL Regional Projects. We have used surety bonds and our internal resources in order to provide the required bank guarantees for the PRONATEL Regional Projects, which were approximately $73 million in the aggregate as of December 31, 2021. If we fail to obtain the necessary funding or if we fail to obtain such funds on favorable terms, we will not be able to meet our commitments and our cash flow and operational results may be adversely affected.

If the satellite communications markets fail to grow, our business could be materially harmed.
          
New emerging markets in the satellite communications area, including HTS, VHTS and commercial on the move products, as well as movement towards NGSO satellite constellation networks may reduce interest in geostationary satellite, or GEO, technology and services. It is difficult to predict the rate at which these emerging markets will grow or decline and there is no assurance that we will be able to further expand our penetration into the NGSO market. In addition, any significant improvement or increase in the amount of terrestrial capacity which are sought by many companies, particularly with respect to the existing fiber optic cable infrastructure and point-to-point microwave, may cause our fixed networks’ customers to shift their transmissions to terrestrial capacity or make it more difficult for us to obtain new customers. If fiber optic cable networks or other terrestrial-based high-capacity transmission systems are available to service a particular point, that capacity, when available, is generally less expensive than satellite capacity. As terrestrial-based telecommunications services expand, demand for some fixed satellite-based services may be reduced.

 If the markets for commercial satellite communications products fail to grow, or if we fail to further expand our penetration into the NGSO market operating in low earth orbits, or LEO, and in medium earth orbits, or MEO, our business could be materially harmed. Conversely, growth in these markets could come at the expense of geostationary satellite capacity markets, which in turn could materially harm our business and impair the value of our shares. Specifically, we derive most of our revenues from sales of satellite-based communications networks and related equipment and provision of services related to these networks and products a significant decline in this market or the replacement of VSAT and other satellite-based technologies by an alternative technology could materially harm our business and impair the value of our shares.

Because we compete for large‑scale contracts in competitive bidding processes, losing a small number of bids or a decrease in the revenues generated from our large-scale projects could have a significant adverse impact on our operating results.

A significant portion of our revenues is derived from large-scale contracts that we are awarded from time to time in competitive bidding processes. The bidding process sometimes requires us to make significant investments upfront, while the final award is not assured. These large‑scale contracts sometimes involve the installation of thousands of VSATs or massive fiber-optic transport and access networks or production of customized products. The number of major bids for these large‑scale contracts for satellite-based networks and massive telecommunications infrastructure projects in any given year is limited and the competition is intense. Losing or defaulting on a relatively small number of bids each year could have a significant adverse impact on our operating results.

6


A large portion of our large-scale contracts are with governments or large governmental agencies in Latin America and any volatility in the political or economic climate or any unexpected unilateral termination, or suspension of payments could have a significant adverse impact on our business.

In March and December 2015, the Peruvian government awarded us the PRONATEL Regional Projects under four separate bids for the construction of networks, operation of the networks for a defined period and their transfer to the government. In 2018, we were awarded two additional PRONATEL Regional Projects with a contractual value  of $395 million and $154 million, respectively. The revenues from these projects are expected to be generated over a period of 14-16 years.

Agreements with the governments in these countries typically include unilateral early termination clauses and involve other risks such as the imposition of new government regulations and taxation that could pose additional financial burdens on us. Changes in the political or economic situation in these countries can result in the early termination of our business there, or materially adversely affect our ability to successfully complete our projects. Any termination of our business in any of the aforementioned countries or breach of contractual obligations by our customers could have a significant adverse impact on our business. See Item 4.B. – “Information on the Company – Business Overview – Terrestrial Infrastructure Projects – Overview”.

We submit bids on large-scale contracts through regulated bid processes with governments and large governmental agencies and our awards can be challenged by losing parties. If successful, such challenges could significantly adversely affect our business and financial results.

Our awards in bids submitted to governments and large governmental agencies can be challenged by losing parties, and if such challenges succeed our financial results will be adversely affected. In 2018, we were awarded two additional PRONATEL Regional Projects in Peru, with contractual value of approximately $154 million. Revenues from these projects are expected to be generated over approximately 15 years. Two of the three entities comprising the losing bidder consortium, which was disqualified by the bid issuer, applied for cancellation of the bid and obtained a preliminary injunction against the award. This matter is currently pending a judicial decision. Based on advice of counsel, we believe that the chances of success of the application to cancel the bid are remote, yet if successful it could significantly adversely affect our business and financial results.

Some of our significant customers are highly leveraged or dependent on industries affected by the COVID-19 and if any of them encounters financial difficulties, this could have a significant adverse effect on our business and financial results.

Some of our current and potential significant customers are highly leveraged or dependent on the airline industry that has been severely affected by the COVID-19 pandemic. In recent years, some of the significant players in our industry have entered into Chapter 11 bankruptcy protection due to financial difficulties. This includes Intelsat S.A. or Intelsat, Speedcast International Ltd., or Speedcast and Anuvu Inc. (previously Global Eagle Entertainment Inc.), or Anuvu. While these companies have emerged from such Chapter 11 status, if a major customer encounters financial difficulty, such customer may cancel or delay orders of our products and services, or we may find it difficult to collect outstanding receivables, which may adversely affect our business and operating results. In 2020, due to financial difficulties caused by the COVID-19 pandemic, certain of the orders awarded to us by our customers were delayed or cancelled.

Actual results could differ from the estimates and assumptions that we use to prepare our financial statements.

In order to prepare our financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”), our management is required to make estimates and assumptions, as of the date of the financial statements, which affect the reported values of assets and liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. Main areas that require significant estimates and assumptions by our management include contract costs, revenues (including variable consideration) and profits or losses, application of percentage-of-completion accounting, provisions for uncollectible receivables and customer claims, impairment of inventories, impairment of long-lived assets, useful life of long-lived assets, goodwill impairment, valuation allowance in respect of deferred tax assets, uncertain tax positions, valuation of assets acquired and liabilities assumed in connection with business combinations, accruals for estimated liabilities, including litigation and insurance reserves, and stock-based compensation. Our actual results could differ from, and could require adjustments to, those estimates.

7

In particular, we recognize revenues generated from the PRONATEL Regional Projects using the percentage-of-completion method. Under this method, estimated revenue is recognized by applying the percentage of completion of the contract for the period (based on the ratio of costs incurred to total estimated costs of the contract) to the total estimated revenue for the contract. As a result, revisions made to the estimates of revenues and profits are recorded in the period in which the conditions that require such revisions become known and can be estimated. We identified material weaknesses in our internal control over financial reporting as of December 31, 2021 with respect to revenue recognition relating to our regional projects in Peru, and as a result, we have restated our audited consolidated financial statement for the years ended December 31, 2019 and 2020 and revised the previously reported unaudited quarterly and year-end results for the year ended December 31, 2021. The material weaknesses that were identified are in the design and implementation of our Company’s internal controls over the revenue recognition process of our subsidiary in Peru relating to its complex projects. For additional information, see ITEM 15 – “Controls and Procedures - Management’s Annual Report on Internal Control over Financial Reporting” and Note 2 and Note 17 to our audited consolidated financial statements included in Part III, Item 18 to this Annual Report on Form 20-F.

Although we believe that our updated financial statements are correct, that our profit margins are fairly stated and that adequate provisions for losses for fixed-price contracts are recorded in our financial statements, as required under U.S. GAAP, we cannot assure you that our contract profit margins will not decrease or that any loss provisions will not increase materially in the future.

Tax authorities may disagree with our provisions and payments related to income taxes, deduction of withholding taxes, intercompany charges, cross-jurisdictional transfer pricing or other matters which could result in our being assessed additional taxes.

We are subject to taxation in the United States, Israel, Latin America (mainly Peru, Brazil and Colombia) and numerous other jurisdictions, including with respect to income taxes, obligations to withhold taxes and other tax matters. Determining our provision for the various taxes requires significant management judgment. In addition, our provision for income taxes could be adversely affected by many factors, including, among other things, changes to our operating structure, changes in the amounts of earnings in jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws. We are subject to ongoing tax examinations in various jurisdictions Tax authorities may disagree with our intercompany charges, claimed credits, cross-jurisdictional transfer pricing, deduction of withholding taxes or other matters and assess additional taxes. While we regularly evaluate the likely outcomes of these examinations to determine the adequacy of our provision for income taxes, there can be no assurance that the outcomes of such examinations will not have a material impact on our results of operations and cash flows. Among other factors, an ambiguity could exist in cases where services are provided across countries, such as satellite capacity which is provided from a satellite operated by a company incorporated in a certain country and is received in a different country by another company which may be required to withhold taxes on the provided capacity services. While we follow the guidelines of the relevant tax authority, where available, there is no assurance that such guidelines will ultimately be determined to be binding by the relevant authorities or acceptable in the local courts of law. In addition, we may be audited in various jurisdictions, and such jurisdictions may assess additional taxes against us. Although we believe our tax estimates are reasonable, the final determination of any tax audit or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our results of operations or cash flows in the period or periods for which a determination is made. Further, subsequent legislations, guidance, court rulings or regulations that differ from our prior assumptions and interpretations, or other factors which were not anticipated at the time we estimated our tax provision, payments and deduction of withholdings could have a material adverse effect on our business, cash flow, results of operations or financial condition.

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Our insurance coverage may not be sufficient for every aspect or risk related to our business.

Our business includes risks, only some of which are covered by our insurance. For example, in our satellite capacity agreements, we do not have a backup for satellite capacity, and we do not have indemnification or insurance in the event that our supplier’s satellite malfunctions or data is lost. Satellites utilize highly complex technology and operate in the harsh environment of space and therefore are subject to significant operational risks while in orbit. The risks include in-orbit equipment failures, malfunctions and other kinds of problems commonly referred to as anomalies. Satellite anomalies include, for example, circuit failures, transponder failures, solar array failures, telemetry transmitter failures, battery cell and other power system failures, satellite control system failures and propulsion system failures. Liabilities in connection with our products, services, managed networks services, premises, construction and deployment projects, or in connection with risks associated with potential cyber-attacks may not be covered by insurance or may be covered only to a limited extent. Our third-party suppliers do not always have back to back liability or insurance coverage to the same extent guaranteed by us towards our customers. In addition, our insurance does not provide coverage for acts of fraud or theft. Our business, financial condition and operating results could be materially adversely affected if we incur significant costs resulting from these exposures.

 We operate in the highly competitive network communications industry and may be unsuccessful in competing effectively in the future.

We operate in a highly competitive industry of network communications, both in the sales of our products and our services. As a result of the rapid technological changes that characterize our industry, we face intense worldwide competition to capitalize on new opportunities, to introduce new products and to obtain proprietary and standard technologies perceived by the market as superior to those of our competitors.

The network communication market is dominated by larger corporations. As part of the consolidation trend in the market, we are in competition with greater consolidated corporations. Some of our competitors have greater financial resources, providing them with greater research and development and marketing capabilities. Our competitors may also be more experienced in obtaining regulatory approvals for their products and services and marketing them. Our relative position in the network communications industry may place us at a disadvantage in responding to our competitors’ pricing strategies, technological advances and other initiatives. Our principal competitors in the supply of VSAT networks are Hughes Network Systems, LLC (owned by EchoStar Corporation), or HNS, ViaSat Inc., or ViaSat, Singapore Technologies Engineering Ltd., or ST Engineering iDirect, Comtech and UHP Networks Inc. (being acquired by Comtech), or UHP. Key providers of managed satellite network services solutions, are Speedcast, SES, Oneweb, Eutelsat S.A., or Eutelsat, and Intelsat. Most of our competitors have developed or adopted different technology standards for their VSAT products. Our primary competitors with respect to our BUCs and other Wavestream products are Communications & Power Industries LLC, or CPI, General Dynamics Satcom Technologies, Paradise Datacom, Comtech Xicom Technology Inc., or Xicom, and Mission Microwave Technologies.

 Our low-profile in-motion ground, aero and maritime antennas target a competitive market with multiple players such as Honeywell, Astronics AeroSat Corporation, or AeroSat, Qest Quantum Electronic Systems GmbH or Qest, Tecom Industries, Inc., or Tecom, Get SAT Communication Ltd., or Get Sat, and Thinkom Solutions or Thinkom. Competitors in the defense sector include General Dynamics Satcom Technologies, Orbit Communication Systems, or Orbit, Elbit Systems Ltd., or Elbit, and L3Harris Technologies, Inc. or L-3Harris. Multiple additional competitors are entering the low-profile in-motion arena and specifically electronically steered antenna market, some with new and advanced technologies. If these new entrants and/or new technologies are able to significantly penetrate the market our business could be negatively affected.

In addition, ViaSat, HNS, and Oneweb have launched their own satellites, which enable them to offer vertically integrated solutions to their customers, which may further change the competitive environment in which we operate and could have an adverse effect on our business.

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Where we primarily operate public rural telecom services (voice, data and internet) and are engaged in construction of fiber-optic transport and access networks based on wireless systems, we typically encounter competition on government subsidized bids from various service providers, system integrators and consortiums. Some of these competitors offer solutions based on VSAT technology and some on terrestrial technologies (typically, fiber-optic and wireless technologies). In addition, as competing technologies such as cellular network and fiber-optic become available in rural areas where not previously available, our business could be adversely affected. We may not be able to compete successfully against current or future competitors. Such competition may adversely affect our future revenues and, consequently, our business, operating results and financial condition.

Our lengthy sales cycles could harm our results of operations if forecasted sales are delayed or do not occur.

The length of time between the date of initial contact with a potential customer or sponsor and the execution of a contract with the potential customer or sponsor may be lengthy and vary significantly depending on the nature of the arrangement. During any given sales cycle, we may expend substantial funds and management resources and not obtain significant revenue, resulting in a negative impact on our operating results. In some cases, we have seen longer sales cycles in all of the regions in which we do business. In addition, we have seen projects delayed or even canceled, which would also have an adverse impact on our sales cycles. As a result, it may be difficult for us to accurately forecast sales due to the uncertainty around these projects and their award and starting periods.

We may enter into acquisition agreements or form strategic alliances or partnerships in order to remain competitive in our market, and such acquisitions, strategic alliances or partnerships could be difficult to integrate, disrupt our business and dilute shareholder value.

We may from time to time seek to acquire businesses that enhance our capabilities and add new technologies, products, services and customers to our existing businesses. We may not be able to identify acquisition candidates on commercially reasonable terms or at all. If we make additional business acquisitions or enter into a merger agreement, we may not be able to successfully integrate the business acquired or we might not realize the benefits anticipated from these acquisitions or sales, including sales growth, cost synergies and improving margins. Furthermore, we might not be able to obtain additional financing for business acquisitions, since such additional financing could be restricted or limited by the terms of our debt agreements or due to unfavorable capital market conditions. Once integrated, acquisitions may not achieve comparable levels of revenues, profitability or productivity as our existing business or otherwise perform as expected. The occurrence of any of these events could harm our business, financial condition or results of operations.

In 2010, we completed the acquisition of RaySat Antenna Systems, or RAS, a leading provider of on-the-move antenna solutions, of RaySat BG, a Bulgarian research and development center, and of Wavestream, a provider of SSPAs and BUCs. If our projection for growth in the airborne business does not materialize and we fail to obtain additional business in this area, we would likely record an impairment of goodwill. In 2019, 2020 and 2021, no impairment losses were identified.

On January 29, 2020 we entered into a Merger Agreement with Comtech and a wholly-owned subsidiary of Comtech, for the merger of its subsidiary with and into our Company. Following a dispute between the parties, including litigation in the Chancery Court of Delaware, the parties agreed to terminate the Merger Agreement in October 2020 and Comtech paid us $70 million in settlement of the dispute. If we determine to seek other opportunities for business consolidation, we may not be able to negotiate and consummate a transaction on terms comparable to, or better than, the terms of that Merger Agreement.

The risks associated with mergers or acquisitions by us include the following, any of which could seriously harm our results of operations or the price of our shares:


issuance of equity securities as consideration for acquisitions that would dilute our current shareholders’ percentages of ownership;


significant acquisition costs;

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decrease of our cash balance;


the incurrence of debt and contingent liabilities;


difficulties in the assimilation and integration of operations, personnel, technologies, products and information systems of the acquired companies;


diversion of management’s attention from other business concerns;


contractual disputes;


risks of entering geographic and business markets in which we have no or only limited prior experience;


potential loss of key employees of acquired organizations or loss of customers;


the possibility that business cultures will not be compatible;


the difficulty of incorporating acquired technology and rights into our products and services;


unanticipated expenses related to integration of the acquired companies; and


difficulties in implementing and maintaining uniform standards, controls and policies.

Any of these events would likely result in a material adverse effect on our results of operations, cash flows and financial position.

U.S. government spending priorities and terms may change in a manner adverse to our businesses.

Our contracts with and sales to systems integrators in connection with government contracts in the U.S. are subject to the congressional budget authorization and appropriations process. Congress appropriates funds for a given program on a fiscal year basis, even though contract periods of performance may extend over many years. Consequently, at the beginning of a major program, the contract is partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress in future fiscal years. Department of Defense, or DoD, budgets are a function of factors beyond our control, including, but not limited to, changes in U.S. procurement policies, budget considerations, continuing resolutions, current and future economic conditions, presidential administration priorities, changing national security and defense requirements, geopolitical developments and actual fiscal year congressional appropriations for defense budgets. Any of these factors could result in a significant decline in, or redirection of, current and future DoD budgets and impact our future results of operations. In addition, government shutdowns could result in the suspension of work on contracts in progress or in payment delays which would adversely affect our future revenue and cash flow.

Our products compete with other government policy needs, which may be viewed as more necessary, for limited resources and an ever-changing amount of available funding in the budget and appropriation process. Budget and appropriations decisions made by the U.S. government are outside of our control and have long-term consequences for our business. While we expect the U.S. government will continue to place a high priority on national security and will continue to invest in products such as ours, U.S. government spending priorities and levels remain uncertain and difficult to predict and are affected by numerous factors, including until recently sequestration (automatic, across-the-board U.S. government budgetary spending cuts), and the purchase of our products could be superseded by alternate arrangements. A change in U.S. government spending priorities or an increase in non-procurement spending at the expense of our programs, or a reduction in total U.S. government spending, could have material adverse consequences on our future business.

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Since we generate significant revenues from system integrators that bid on contracts with U.S. government agencies, our operating results could be adversely affected by spending caps or changes in the budgetary priorities of the U.S. government, as well as by delays in bidding processes, program starts or the award of contracts or task orders under contracts.

Furthermore, in light of the current geopolitical situation, with reductions in U.S. operational presence in Iraq, Afghanistan and potentially in the Middle East, there may be additional declines in the U.S. government’s demand for and use of commercial satellite services in the future. If procurement priorities related to defense transformation or overseas operations cease or slow down, then our business, financial condition and results of operations could be impacted negatively.

If we are unable to competitively operate within the network communications market and respond to new technologies, our business could be adversely affected.

The network communications market, which our products and services target, is characterized by rapid technological changes, new product introductions and evolving industry standards. If we fail to stay abreast of significant technological changes, our existing products and technology could be rendered obsolete. Historically, we have endeavored to enhance the applications of our existing products to meet the technological changes and industry standards. Our success is dependent upon our ability to continue to develop new innovative products, applications and services and meet developing market needs.

To remain competitive in the network communications market, we must continue to be able to anticipate changes in technology, market demands and industry standards and to develop and introduce new products, applications and services, as well as enhancements to our existing products, applications and services. Competitors in satellite ground equipment market, low-profile antenna market and high power transceivers market are introducing new and improved products and our ability to remain competitive in this field will depend in part on our ability to advance our own technology. New communications networks that integrate satellites operating in low or medium earth orbits may compete significantly with current networks and may reduce the market prices and success of our current products until such time as we adapt our technology to support NGSO satellites. If we are unable to respond to technological advances on a cost-effective and timely basis, or if our new products or applications are not accepted by the market, our business, financial condition and operating results could be adversely affected.

If we are unable to competitively operate within the GEO, HTS/VHTS, and NGSO satellite environments, our business could be adversely affected.

Some of our competitors have launched Ka-band satellites. These actions may affect our competitiveness due to the relative lower cost of the Ka-band space segment per user and the increased integration of the VSAT technology in the satellite solution. Due to the current nature of the HTS solution where the initial investment in ground-based satellite communication gateway equipment is relatively high, ground-based satellite communication equipment effectively becomes tightly coupled to the specific satellite technology. As such, there may be circumstances where it is difficult for competitors to compete with the incumbent VSAT vendor using the particular HTS satellite. If this occurs, the market dynamics may change to favor a VSAT vendor partnering with the satellite service provider, which may decrease the number of vendors who may be able to succeed. We believe that this trend will intensify as the market moves toward VHTS and NGSO constellation networks. If we are unable to forge such a partnership our business could be adversely affected.

Although we have entered the HTS market with responsive HTS VSAT technology, we expect that our penetration into that market will be gradual and our success is not assured. In addition, our competitors, who are producing large numbers of HTS VSATs, may benefit from cost advantages. If we are unable to reduce our HTS VSAT costs sufficiently, we may not be competitive in the international market. We also expect that competition in this industry will continue to increase.

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If existing contracts, or orders for our products or services are terminated, rescheduled or not renewed, our ability to generate revenues will be harmed.

A significant part of our business is generated from recurring customers. From time to time, projects and orders may be cancelled by customers. In 2020, due to the negative impact of COVID-19 pandemic, certain of orders awarded to us by our customers were cancelled or delayed. The termination or non-renewal of our contracts could have a material adverse effect on our business, financial condition and operating results. Some of our existing contracts could be terminated or not renewed due to any of the following reasons, among others:


dissatisfaction of our customers with our products and/or the services we provide or our inability to provide or install additional products or requested new applications on a timely basis;


customers’ default on payments due;


our failure to comply with covenants or obligations in our contracts;


the cancellation of the underlying project by the customers or the sponsoring government body; or


change in the shareholders controlling our company.

If we are not able to retain our present customer base and gain new customers, our revenues will decline significantly. In addition, if our service business in Peru does not win new government related contracts, our financial position may be adversely affected.

 Failure to expand our business in the IFC, cellular backhaul or NGSO markets, could have a material adverse effect on our overall business.

Although we have signed contracts with Telcos, service providers and other customers in the IFC, commercial and cellular backhaul markets, with a large satellite operator and with a large U.S. system integrator for NGSO communications systems, we may not be successful in our plans to expand our business in these markets. The markets in which we operate, and in particular the IFC market, have been hugely impacted by the COVID-19 Pandemic and we cannot predict at this stage when the market will recover. These markets are relatively new and are highly concentrated with a limited number of players and will require additional expenditures for research and development and sales and marketing. While new players such as Amazon.com, Inc. and SpaceX have entered the NGSO market and while this may present us with business opportunities, their greater resources and integrated offerings (ground and space segments) will affect our position in this market. In addition, the cellular backhaul market with Telcos, the commercial IFC market and the NGSO market may fail to grow in accordance with our expectations. 

We may also not be able to develop new technologies for those markets on a timely basis. Some of our projects include long and costly development programs, which could incur unexpected delays, or may require additional investment of resources, broader than expected. If we fail to meet the requirements of our development programs in a timely manner, we will incur penalties and other losses, which could have a significant adverse impact on our business and operating results. Barriers to further develop those markets as well as the continued downturn in the commercial aviation and travel markets caused by the COVID-19 could have a material adverse effect on our business and operating results.

We are dependent upon a limited number of suppliers for key components that are incorporated in our products, including those used to build our hub systems and VSATs, and may be significantly harmed if we are unable to obtain such components on favorable terms or on a timely basis. We are also affected by global supply chain disruptions and price increases caused partially by COVID-19 and may be affected by the military situation in Ukraine.

Several of the components required to build our products are manufactured by a limited number of suppliers. Although we have managed to solve the difficulties we experienced in the past with our suppliers with respect to availability of components, we cannot assure the continued availability of key components or our ability to forecast our component requirements sufficiently in advance. Although we are working with our suppliers to obtain components for our products on favorable terms there is no assurance that our efforts will be successful. The COVID-19 outbreak has caused certain delays and world-wide disruptions in manufacturing, supply chain, labor shortages, travel and shipping disruption and shutdowns, as well as cost increase of raw material and electronic components. We have also witnessed an increase in components’ prices and labor costs, while we may not be able to increase our products’ prices to cover these increased costs. Although the disruption in components supply was not material to the overall activity of our Company, it may adversely affect our ability to procure the necessary volume of materials in the future. If we are unable to obtain the necessary volume of components at sufficiently favorable terms or prices, we may be unable to produce our products at competitive prices. As a result, these supply chain issues may increase our costs, disrupt or reduce production and sales of our products may be lower than expected, which could have a material adverse effect on our business, financial condition and operating results. In addition, our suppliers are not always able to meet our requested lead times. If we are unable to satisfy customers’ needs on time, we could lose their business.

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Certain of the significant components required to build almost all of our VSAT units, our hub systems as well as our other products are manufactured by external suppliers, sometime by a sole manufacturer. Some of our suppliers have terminated the line of products that we use as components in our products as a result of COVID-19 or for other reasons, and may do so in the future as well. Such dependency exposes us to certain risks in connection with the availability of the respective component, which could include failure in meeting time tables and production requirements and may expose us to material price increases which may affect our ability to provide competitive prices or require us to re-design some of our products. We estimate that the replacement of a manufacturer would, if required, take a substantial period of time.

We receive manufacturing services from a global manufacturer’s facility in Ukraine. While the manufacturer assured us that the operations of the plant have not been interrupted by the military situation in Ukraine and has a recovery plan in place, there is no assurance that negative developments in the area in the future will not disrupt our business and materially adversely affect our business.

We are dependent upon a limited number of suppliers of space segment, or transponder capacity and may be significantly harmed if we are unable to obtain the space segment for the provision of services on favorable terms or on a timely basis.

There are a limited number of suppliers of satellite transponder capacity and a limited amount of space segments available (although space segment availability is expected to gradually increase over the next few years and prices are expected to decrease as a result). We are dependent on these suppliers for our provision of services mainly in Peru, the Philippines, Mexico and North America. While we do secure long-term agreements with our satellite transponder providers, we cannot assure the continuous availability of space segments, the pricing upon renewals of space segments and the continuous availability and coverage in the regions where we supply services. If we are unable to secure contracts with satellite transponder providers with reliable service at competitive prices, or if such satellite capacity becomes unavailable due to a satellite anomaly or other reason, our services business could be adversely affected. We rely on satellite capacity providers, who commit to certain key performance indicators, or KPIs, in connection with the operation of our managed networks and services. Such KPIs are limited and do not always reflect the same level of KPIs guaranteed by us towards our customers.

Our failure to obtain or maintain authorizations under the U.S. export control and trade sanctions laws and export regulations and restrictions could have a material adverse effect on our business.

The export of some of our satellite communication products, related technical information and services may be subject to U.S. State Department, Commerce Department and Treasury Department regulations, including the International Traffic in Arms Regulations, or ITAR, and the Export Administration Regulations, or EAR. Under these laws and regulations, our non-U.S. employees, including employees of our headquarters in Israel, might be barred from accessing certain information of our U.S. subsidiaries unless appropriate licenses are obtained. In addition to the U.S. export control laws and regulations applicable to us, some of our subcontractors and vendors may also be subject to U.S. export control laws and regulations and required to flow down requirements and restrictions imposed on products and services we purchase from them. If we do not maintain our existing authorizations or obtain necessary future authorizations under the export control laws and regulations of the U.S., including potential requirements related to entering into technical assistance agreements to disclose technical data or provide services to non-U.S. persons, we may be unable to export technical information or equipment to non-U.S. persons and companies, including to our own non-U.S. employees, as may be required to fulfill contracts we may enter into. We may also be subjected to export control compliance audits in the future that may uncover improper or illegal activities that would subject us to material remediation costs, civil and criminal fines, penalties or an injunction.

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In addition, to participate in classified U.S. government programs, we may have to obtain security clearances from the U.S. Department of Defense for one or more of our subsidiaries that want to participate. Such clearance may require us to enter into a proxy agreement or another similar arrangement with the U.S. government, which would limit our ability to control the operations of the subsidiary and which may impose substantial administrative requirements in order for us to comply. Further, if we materially violate the terms of any proxy agreement, the subsidiary holding the security clearance may be suspended or debarred from performing any government contracts, whether classified or unclassified. If we fail to maintain or obtain the necessary authorizations under the U.S. export control and national security laws and regulations, we may not be able to realize our market focus and our business could be materially adversely affected.

The United States has adopted economic sanctions against certain persons and entities, including certain Russian entities operating in the financial, energy and defense sectors and Chinese entities. These sanctions restrict, among other things, exports and transfer of technologies to these entities. The recent Russian-Ukraine crisis have led to additional expanded sanctions on Russia. In addition, recent events, including policies introduced by the current and past U.S. administrations, have resulted in substantial regulatory uncertainty regarding international trade and trade policy. For example, substantial changes to trade agreements has increased tariffs on certain goods imported into the United States and could lead to further imposition of significant tariff increases. The announcement of unilateral tariffs on imported products has triggered retaliatory actions from certain foreign governments, including China and Russia, and may trigger retaliatory actions by other foreign governments, resulting in what is largely referred to as a “trade war.” While we do not believe that the tariff increases or actions of foreign governments have had an adverse effect on our business to date, we cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products in the future, a “trade war” of this nature or other similar governmental actions and economic sanctions could have an adverse impact on demand for our services, sales and customers and affect the economies of the United States and various countries, having an adverse effect on our business, financial condition and results of operations.

Against the backdrop of the recent military conflict of Russia and Ukraine and the rising tensions between the U.S. and other countries, on the one hand, and Russia, on the other hand, major economic sanctions and export controls restrictions on Russia and various Russian entities were imposed by the U.S., European Union and the United Kingdom commencing February 2022, and additional sanctions and restrictions may be imposed in the future. Theses sanctions and restrictions may materially restrict our business in Russia which mainly includes exports to Russia, which amounted to approximately $6.3 million in 2021, and may delay or prevent us from collecting funds and perform money transfers from Russia. While our business in Russia is of limited in scope and not material to our consolidated results, these restrictions may cause a reduction of our sales and financial results.
 
If we are unable to comply with Israel’s enhanced export control regulations our ability to export our products from Israel could be negatively impacted.

Our export of military products and “dual use” products (items that are typically sold in the commercial market but that may also be used in the defense market) and related technical information is also subject to enhanced Israeli export laws and regulation by the Ministry of Defense and Ministry of Economy. Some of our products may include features, such as encryption, that require an export license. Some of our commercial products are exempted from Israeli Ministry of Defense export control. The Israeli Ministry of Defense and Ministry of Economy may change the classification of our existing commercial products or may determine that new products we develop are not exempt from Israeli Ministry of Defense or Ministry of Economy export control. This would place such products subject to the Israeli Ministry of Defense or Ministry of Economy export control regulations as military products or “dual use” items, which would impose on our sales process stringent constraints in relation to each sale transaction and limit our markets. If we do not maintain our existing authorizations and exemptions or obtain necessary future authorizations and exemptions under the export control laws and regulations of Israel, including export licenses for the sale of our equipment and the transfer of technical information, we may be unable to export technical information or equipment outside of Israel, we may not be able to realize our market projections and our business could be materially adversely affected.  We may also be subjected to export control compliance audits or actions in the future that may uncover improper or illegal activities that would subject us to material remediation costs, civil and criminal fines, penalties or an injunction.
 
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We are dependent on contracts with governments around the world for a significant portion of our revenue. These contracts may expose us to additional business risks and compliance obligations.

We have focused on expanding our business to include contracts with or for various governments and governmental agencies around the world, in the defense market and other areas, including the Peruvian government and U.S. federal and local government agencies either directly or through contractors or systems integrators. Such contracts account for a significant portion of our revenues. Our contracts with international governments generally contain unfavorable termination provisions. Governmental customers generally may unilaterally suspend us from receiving new contracts pending resolution of alleged violations of procurement laws or regulations and terminate existing contracts and audit our contract-related costs. If a termination right is exercised by a governmental customer, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Additionally, the business we generate from government contracts may be materially adversely affected if:

our reputation or relationship with government agencies is impaired;

we are suspended or otherwise prohibited from contracting with a domestic or foreign government or any significant law enforcement agency;

levels of government expenditures and authorizations for law enforcement, security and defense related programs decrease or shift to program in areas where we do not provide products and services;

we are prevented from entering into new government contracts or extending existing government contracts based on violations or suspected violations of laws or regulations, including those related to procurement;

we are not granted security clearances that are required to sell our products to domestic or foreign governments or such security clearances are deactivated;

there is a change in government procurement procedures or conditions of remuneration; or

there is a change in the political climate that adversely affects our existing or prospective relationships.

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We depend on our main facility in Israel and are susceptible to any event that could adversely affect its condition or the condition of our other facilities.

A material portion of our laboratory capacity, our principal offices and principal research and development facilities for the principal part of our business are concentrated in a single location in Israel. We also have significant facilities for research and development and manufacturing of components for our low-profile antennas at a single location in Bulgaria as well as a research and development center in Moldova and Singapore and research and development, engineering and manufacturing facilities in California. Fire, natural disaster, lockdowns and other effects of the COVID-19 pandemic or any other cause of material disruption in our operations in any of these locations could have a material adverse effect on our business, financial condition and operating results.

 We are dependent on our management team, especially managers of our large entities around the world, as well as on our key employees, and the loss of one or more of them could harm our business and prevent us from implementing our business plan in a timely manner.

Our success depends in part upon the continued services of our executive officers and other key members of management, and especially managers of our large entities around the world. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives. Such changes in our executive management team may be disruptive to our business.

Our success also depends in part on sales, marketing and development personnel and our continuing ability to attract and retain highly qualified personnel, including with respect to our acquired companies. There is an increasing competition for the services of such personnel in Israel and elsewhere. The loss of the services of senior or mid-level management and qualified personnel, and the failure to attract highly qualified personnel in the future, may have a negative impact on our business. Moreover, our competitors may hire and gain access to the expertise of our former employees or our former employees may compete with us. There is no assurance that former employees will not compete with us or that we will be able to find replacements for departing key employees in the future.

If demand for our mobility applications for air, land and sea, VSATs and other products declines or if we are unable to develop products to meet demand, our business could be adversely affected.

Our low-profile in-motion antenna systems and a portion of our VSAT and SSPA product lines are intended for mobility applications for air, land and sea. As a result of the impact of the spread of the COVID-19 pandemic, we have experienced a decline in demand for such products. If the demand for such products or other products does not improve, or if we are unable to develop products that are competitive in technology and pricing, we may not be able to realize our market focus and our satellite communication on the move business and other businesses could be materially adversely affected.

We may be unable to adequately protect our proprietary rights, which may limit our ability to compete effectively.

Our business is based mainly on our proprietary technology and related products and services. We establish and protect proprietary rights and technology used in our products by the use of patents, trade secrets, copyrights and trademarks. We also utilize non-disclosure and intellectual property assignment agreements. Because of the rapid technological changes and innovation that characterize the network communications industry, our success will depend in large part on our ability to protect and defend our intellectual property rights. Our actions to protect our proprietary rights in our VSATs, hubs, SSPAs and antennas technology as well as other products may be insufficient to protect our intellectual property rights and prevent others from developing products similar to our products. In addition, the laws of many foreign countries do not protect our intellectual property rights to the same extent as the laws of the U.S., or we may have failed to enter into non-disclosure and intellectual property assignment agreements with certain persons, or the agreements we entered into may be found inadequate or we may encounter difficulties in enforcing our legal or contractual rights. If we are unable to protect our intellectual property, our ability to operate our business and generate expected revenues may be harmed.

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Failure to protect against cyber-attacks, natural disasters or terrorist attacks, and failures of our information technology systems, infrastructure and data could have an adverse effect on our business.

Failure to protect against cyber-attacks, unauthorized access or network security breaches, inclement weather, natural or man-made disasters, earthquakes, explosions, terrorist attacks, acts of war, floods, fires, computer viruses, power loss, telecommunications or equipment failures, transportation interruptions, accidents or other disruptive events or attempts to harm our systems may cause equipment failures or disrupt our systems, products, networks and operations. Actual and threatened security breaches or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, have increased in recent years and have become more complex. Criminal hackers may develop and deploy viruses, worms and other malicious software programs, some of which may be specifically designed to attack our products, systems, computers or networks. Additionally, external parties may induce our employees or users of our products to disclose sensitive information in order to gain access to our data or our customers' data. We have been subject, and will likely continue to be subject, to attempts to breach the security of our networks and Information Technology, or IT, infrastructure, and our products and services, through cyber-attack, malware, computer viruses, social engineering, email phishing attacks and other means of unauthorized access. Techniques used in such attempted or actual breaches and cyber-attacks are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected until a substantial period has elapsed thereafter, or not at all. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk. Since we provide products and services to communications companies, we may face an added risk of a security breach or other significant disruption to certain of our products used by some of our customers and related customer systems relating to wireless carriers as well as government functions. While none of these actual or attempted attacks has had a material impact on our operations or financial condition, we cannot provide any assurance that our business operations will not be negatively materially affected by such attacks in the future.

Any disruption, disabling, or attack affecting our equipment and systems, products and the hardware, software and infrastructure on which we rely could result in a security or privacy breach. Whether such event is physical human error or malfeasance (whether accidental, fraudulent or intentional) or electronic in nature (such as malware, virus, or other malicious code) such an event could result in our inability to operate our facilities or continually operate our networks, which, even if the event is for a limited period of time, may result in significant expenses and/or loss of market share to other competitors in the market. While we maintain insurance coverage for some of these events, which could offset some of the losses, the potential liabilities associated with these events could exceed the insurance coverage we maintain. Any of the events described above could result in litigation and potential liability or fines for us, a material impact to our operations or financial condition, damage our brand and reputation or otherwise harm our business.
 
Regulators globally have adopted privacy regulations and new regulations imposing greater obligations and monetary fines for privacy violations. For example, the General Data Protection Regulation, or GDPR, adopted by the European Union and became effective in 2018. The GDPR establish requirements regarding the handling of personal data, and non-compliance with the GDPR may result in monetary penalties of up to 4% of worldwide revenue. Other examples are the California Consumer Privacy Act, or CCPA, followed by the California Privacy Rights Act, or CPRA, recently enacted, which provides California residents new rights restricting collection, use, and sharing of their “Personal Information” and the Brazilian General Data Protection Law, or LGPD, effective as of September 2020 which provides Brazilian residents new data protection rights, and the Australian Privacy Act and the Australian Privacy Principles.The Israeli Privacy Protection Regulations of 2017 also impose high penalties and sanctions on violations.  In addition, violation of applicable local privacy laws may entail criminal consequences. The GDPR, CCPA, CPRA and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions that we operate. Further, if we fail to comply with the GDPR, CCPA and other privacy regulations applicable to us we may incur high monetary and other penalties, which may have significant adverse effect on our business.
 
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A decrease in the selling prices of our products and services could materially harm our business.

The average selling prices of communications products historically decline over product life cycles. In particular, we expect the average selling prices of our products to decline as a result of competitive pricing pressures and customers who negotiate discounts based on large unit volumes. A decrease in the selling prices of our products and services could have a material adverse effect on our business.

Trends and factors affecting the telecommunications industry are beyond our control and may result in reduced demand and pricing pressure on our products.

We operate in the telecommunication industry and are influenced by trends of that industry, which are beyond our control and may affect our operations. These trends include:


adverse changes in the public and private equity and debt markets and our ability, as well as the ability of our customers and suppliers, to obtain financing or to fund working capital and capital expenditures;


adverse changes in the credit ratings of our customers and suppliers;


adverse changes in the market conditions in our industry and the specific markets for our products;


access to, and the actual size and timing of, capital expenditures by our customers;


inventory practices, including the timing of product and service deployment, of our customers;


the amount of network capacity and the network capacity utilization rates of our customers, and the amount of sharing and/or acquisition of new and/or existing network capacity by our customers;


the overall trend toward industry consolidation among our customers, competitors, and suppliers;


several reorganizations among entities in the industry as a result of insolvency and similar proceedings;


price reductions by our direct competitors and by competing technologies including, for example, the introduction of HTS satellite systems by our direct competitors which could significantly drive down market prices or limit the availability of satellite capacity for use with our VSAT systems;


conditions in the broader market for communications products, including data networking products and computerized information access equipment and services;


governmental regulation or intervention affecting communications or data networking;


monetary instability in the countries where we operate;


the risks of outbreaks of pandemic or contagious diseases, such as COVID- 19, Ebola, measles, avian flu, severe acute respiratory syndrome (SARS), H1N1 (swine) flu and Zika virus; and


the effects of war and acts of terrorism, such as disruptions in general global economic activity, changes in logistics and security arrangements and reduced customer demand for our products and services.

These trends and factors may reduce the demand for our products and services or require us to increase our research and development expenses and may harm our financial results.

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Our international sales and business expose us to changes in foreign regulations and tariffs, tax exposures, inflation, political instability and other risks inherent to international business, any of which could adversely affect our operations.

We sell and distribute our products and provide our services internationally, particularly in the United States, Latin America, Asia, Asia Pacific and Europe. We also operate our business and manufacture our products internationally. A component of our strategy is to continue and expand in international markets. Our operations can be limited or disrupted by various factors known to affect international trade. These factors include the following:


imposition of governmental controls, regulations and taxation which might include a government’s decision to raise import tariffs or license fees in countries in which we do business;


government regulations that may prevent us from choosing our business partners or restrict our activities;


the U.S. Foreign Corrupt Practices Act, or the FCPA, and applicable anti-corruption laws in other jurisdictions, which include anti-bribery provisions. Our policies mandate compliance with these laws. Nevertheless, we may not always be protected in cases of violation of the FCPA or other applicable anti-corruption laws by our employees or third-parties acting on our behalf. A violation of anti-corruption laws by our employees or third-parties during the performance of their obligations for us may have a material adverse effect on our reputation, operating results and financial condition;


tax exposures in various jurisdictions relating to our activities throughout the world;


political and/or economic instability in countries in which we do or desire to do business or where we operate or manufacture our products. Such unexpected changes could have an adverse effect on the gross margin of some of our projects. This includes similar risks from potential or current political and economic instability as well as volatility of foreign currencies in countries such as Peru, Colombia, Brazil, Russia, Ukraine, certain countries in Eastern Europe and East Asia and other countries in which we will conduct business in the future;


difficulties in staffing and managing foreign operations that might mandate employing staff in various countries to manage foreign operations. This requirement could have an adverse effect on the profitability of certain projects;


adverse economic conditions and general uncertainty about economic recovery or growth,  including recession, depression and inflation concerns;


longer payment cycles and difficulties in collecting accounts receivable;


foreign exchange risks due to fluctuations in local currencies relative to the dollar; and


relevant zoning ordinances that may restrict the installation of satellite antennas and might also reduce market demand for our service. Additionally, authorities may increase regulation regarding the potential radiation hazard posed by transmitting earth station satellite antennas’ emissions of radio frequency energy that may negatively impact our business plan and revenues.

Any decline in commercial business in any country may have an adverse effect on our business as these trends often lead to a decline in technology purchases or upgrades by private companies. We expect that in difficult economic periods, countries in which we do business will find it more difficult to raise financing from investors for the further development of the telecommunications industry and private companies will find it more difficult to finance the purchase or upgrade of our technology. Any such changes could adversely affect our business in these and other countries.

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Increasing scrutiny and changing expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance, or ESG, policies may impose additional costs on us or expose us to additional risks.

Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investors, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG may hinder our access to capital, as investors and lenders may reconsider their capital investment allocation as a result of their assessment of our ESG practices. If we do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition and price our company’s shares could be materially and adversely affected.

If we fail to meet our obligations in our credit and guarantee agreements with banks, including any failure to meet covenants in our credit agreements, the banks may terminate the agreements or require additional assurances and our business could be seriously harmed.
 
Our credit and guarantee facilities with banks contain covenants regarding our maintenance of certain financial ratios. A failure by our Company to meet the obligations contained in our credit facilities, would trigger acceleration of payments or restrict, among other things, our ability to pledge our assets, dispose of assets, give guarantees or restrict certain changes in the ownership of our shares. Additionally, our credit and guarantee facilities with a certain bank contains covenants regarding our maintenance of certain financial ratios. Our ability to continue to comply with these and other obligations depends in part on the future performance of our business. We cannot assure you that we shall be able to continue to comply with the covenants included in our agreements with the banks. If we fail to comply, we shall be required to renegotiate the terms of our credit facilities with the banks. We cannot assure you that we shall be able to reach an agreement with the banks or that such agreements will be on favorable terms to us. Our ability to restructure or refinance our credit facilities depends on the condition of the capital markets and our financial condition. Any refinancing of our existing credit facilities could be at higher interest rates and may require us to comply with different covenants, which could restrict our business operations.

We may face difficulties in obtaining regulatory approvals for our telecommunication services and products, which could adversely affect our operations.

Certain of our telecommunication operations require licenses and approvals by the Israeli Ministry of Communication, the Federal Communications Commission in the U.S., or FCC, and by regulatory bodies in other countries. In Israel, the U.S. and other countries, the operation of satellite earth station facilities and VSAT systems such as ours are prohibited except under licenses issued by the Israeli Ministry of Communication and the FCC in the U.S. Our airborne products require licenses and approvals by the Federal Aviation Agency, or FAA, which are obtained by our customers or our Wavestream subsidiary. We must also obtain approval of the regulatory authority in each country in which we propose to provide network services or operate VSATs. The approval process in Latin America and elsewhere can often take a substantial amount of time and require substantial resources.

In addition, any licenses and approvals that are granted may be subject to conditions that may restrict our activities or otherwise adversely affect our operations. Also, after obtaining the required licenses and approvals, the regulating agencies may, at any time, impose additional requirements on our operations. Failure to obtain the required license where such license is required may result in high monetary and other penalties. We cannot assure you that we will be able to comply with any new requirements or conditions imposed by such regulating agencies on a timely or economically efficient basis.

Our products are also subject to requirements to obtain certification of compliance with local regulatory standards. Delays in receiving such certification could also adversely affect our operations.

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Currency exchange rates and fluctuations of currency exchange rates may adversely affect our results of operations, liabilities, and assets.
 
Since we operate in several countries, we are impacted by currency exchange rates and fluctuations of various currencies. Although partially mitigated by our hedging activities, we are impacted by currency exchange rates and fluctuations thereof in a number of ways, including the following:


A significant portion of our expenses, principally salaries and related personnel expenses, are incurred in NIS, and to a lesser extent, other non-U.S. dollar currencies, whereas the currency we use to report our financial results is the U.S. dollar and a significant portion of our revenue is generated in U.S. dollars. During 2021 and 2020, we witnessed a significant devaluation of the U.S. dollar against the NIS. The continuation of such strengthening of the NIS against the U.S. dollar can considerably increase the U.S. dollar value of our expenses in Israel and our results of operations may be adversely affected.


A portion of our international sales is denominated in currencies other than the U.S. dollar, including but not limited to the Euro, Australian Dollar, Brazilian Real, Peruvian Sol, Russian Ruble, Malaysian Ringgit and the Mexican Peso, therefore we are exposed to the risk of devaluation of such currencies relative to the dollar which could have a negative impact on our revenues.


We have assets and liabilities that are denominated in non-U.S. dollar currencies. Therefore, significant fluctuation in these other currencies could have significant effect on our results.


A portion of our U.S. dollar revenues are derived from customers operating in local currencies which are different from the U.S. dollar. Therefore, devaluation in the local currencies of our customers relative to the U.S. dollar could cause our customers to cancel or decrease orders or delay payment.

We are also subject to other foreign currency risks including repatriation restrictions in certain countries, particularly in Latin America. As noted above, from time to time, we enter into hedging transactions to attempt to limit the impact of foreign currency fluctuations. However, the protection provided by such hedging transactions may be partial and leave certain exchange rate-related losses and risks uncovered. Therefore, our business and profitability may be harmed by such exchange rate fluctuations.

The transfer and use of some of our technology and its production outside of Israel is limited because of the research and development grants we received from the Israeli government to develop such technology.

Our research and development efforts associated with the development of certain of our products have been partially financed through grants from the Israeli Innovation Authority, or Innovation Authority, formerly the Office of the Chief Scientist of the Israeli Ministry of Economy. We are subject to certain restrictions under the terms of these grants. Specifically, manufacturing outside of Israel, of any product incorporating technology developed with the funding provided by these grants is limited to a certain extent as set forth in the relevant program. In addition, the technology developed with the funding provided by these grants (which is embodied in our products) may not be transferred, without appropriate governmental approvals. Such approvals, if granted, may involve penalties payable to the Israeli authorities as well as increased royalty payments to the Innovation Authority for royalty-bearing programs. These restrictions do not apply to the sale or export from Israel of our products developed with this technology.

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We may not be compliant, currently or in the future, with the requirements for Benefited Enterprise status and may be denied benefits. Israeli government programs and tax benefits may be terminated or reduced in the future.

We participate in programs of the Innovation Authority and the Israel Investment Center, for which we receive tax and other benefits as well as funding for the development of technologies and products. Our company chose 2011 as the year of election in order to receive tax benefits as a “Benefited Enterprise”. Our period of benefits as a Benefitted Enterprise under the 2011 election will expire in 2023. If we fail to comply with the conditions applicable to this status under the Investment Law, we may be required to pay additional taxes and penalties or make refunds and may be denied future benefits. From time to time, the government of Israel has discussed reducing or eliminating the benefits available under such programs, and therefore these benefits may not be available in the future at current levels or at all.

We may be subject to claims by third parties alleging that we infringe intellectual property owned by them. We may be required to commence litigation to protect our intellectual property rights. Any intellectual property litigation may continue for an extended period and may materially adversely affect our business, financial condition and operating results.

There are numerous patents, both pending and issued, in the network communications industry. We may unknowingly infringe on a patent. We may from time to time be notified of claims that we are infringing on patents, copyrights or other intellectual property rights owned by third parties. While we do not believe that we have infringed in the past or are infringing at present on any intellectual property rights of third parties, we cannot assure you that we will not be subject to such claims or that damages for any such claim will not be awarded against us by a court.

In addition, we may be required to commence litigation to protect our intellectual property rights and trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against third‑party claims of invalidity or infringement. An adverse result of any litigation could force us to pay substantial damages, stop designing, manufacturing, using or selling related products, spend significant resources to develop alternative technologies, discontinue using certain processes, obtain licenses or compensate our customers. We may also not be able to develop alternative technology, and we may not be able to find appropriate licenses on reasonably satisfactory terms. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition and operating results.

Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our solutions.
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes disclosure requirements regarding the use in components of our products of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries, whether the components of our products are manufactured by us or third parties. These requirements could affect the pricing, sourcing and availability of minerals used in the manufacture of components we use in our products. Although the U.S. Securities and Exchange Commission, or the SEC, has provided guidance with respect to a portion of the conflict mineral filing requirements that may somewhat reduce our reporting practices, there are costs associated with complying with the disclosure requirements and customer requests, such as costs related to our due diligence to determine the source of any conflict minerals used in our products. Because of the complexity of our supply chain, we may face reputational challenges if we are unable to sufficiently verify the origins of the subject minerals. Moreover, we are likely to encounter challenges to satisfy those customers who require that all of the components of our products are certified as “conflict free.” If we cannot satisfy these customers, they may choose a competitor’s products.

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Potential liability claims relating to our products or services could have a material adverse effect on our business.

We may be subject to liability claims relating to the products we sell or services we provide. Potential liability claims could include, among others, claims for exposure to electromagnetic radiation from the antennas we provide or use. We endeavor to include in our agreements with our business customers provisions designed to limit our exposure to potential claims. We also maintain a product liability insurance policy. However, we may fail to include limitations of our liability in our contracts, or our contractual limitations of liability may be rejected or limited in certain jurisdictions. Additionally, our insurance does not cover all relevant claims, such as claims for exposure to electromagnetic radiation, and does not provide sufficient coverage. To date, we have not been subject to any material product liability claim. Our business, financial condition and operating results could be materially adversely affected if costs resulting from future claims are not covered by our insurance or exceed our coverage.

Environmental laws and regulations may subject us to significant liability.

Our operations are subject to various Israeli, U.S. federal, state and local as well as certain other foreign environmental laws and regulations within the countries in which we operate relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes used in our operations.

New laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements may require us to incur a significant amount of additional costs in the future and could decrease the amount of cash flow available to us for other purposes, including capital expenditures, research and development and other investments and could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects. We may identify deficiencies in our compliance with local legislation within countries in which we operate. Failure to comply with such legislation could result in sanctions by regulatory authorities and could adversely affect our operating results. Examples of these laws and regulations include the E.U. Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive, and the E.U. Waste Electrical and Electronic Equipment Directive.

We may suffer from a short-term decrease in our revenues due to customers shifting to our SkyEdge IV next generation system.

In early 2022, we launched SkyEdge IV, our next generation system for VHTSs and NGSOs as part of our SkyEdge product family. We plan to provide our current and potential customers with both SkyEdge II-c and SkyEdge IV in parallel in the near future. Some of our customers may wish to postpone their purchases in order to receive our advanced platform SkyEdge IV and refrain from ordering our currently available SkyEdge II-c. Accordingly, we may suffer from a short-term decrease in our revenues.

Risks Related to Ownership of Our Ordinary Shares

We identified material weaknesses in our internal control over financial reporting as of December 31, 2021, which we are still in the process of remediating. If we are unable to remediate these material weaknesses, or if we experience additional material weaknesses or other deficiencies in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately and timely report our financial results, which could cause shareholders to lose confidence in our financial and other public reporting, and adversely affect our share price.
 
In the course of preparing our consolidated financial statements for the year ended December 31, 2021, we identified material weaknesses in our internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified were with respect to revenue recognition relating to our regional projects in Peru. As a result, we have restated our audited consolidated financial statements for the years ended December 31, 2019 and 2020 and revised the previously reported unaudited quarterly and year-end results for the year ended December 31, 2021. The material weaknesses that were identified are in the design and implementation of our Company’s internal controls over the revenue recognition process of our subsidiary in Peru relating to its complex projects.  As a result, management concluded that our internal control over financial reporting was not effective as of December 31, 2021. To remediate our identified material weaknesses, we are now in the process of developing a remediation plan to improve our internal control over financial reporting. For additional information regarding the material weaknesses and our remediation plan, see ITEM 15 – “Controls and Procedures - Management’s Annual Report on Internal Control over Financial Reporting” and Note 2 and Note 17 to our audited consolidated financial statements included in Part III, Item 18 to this Annual Report on Form 20-F. Although we plan to adopt a remediation plan and implement the measures identified under the remediation plan to address the material weaknesses, there can be no assurance that our efforts will be successful. Implementation of these measures may not fully remediate the material weaknesses in a timely manner, and there is no assurance that we will not have material weaknesses or significant deficiencies in the future. Our failure to restore effective internal controls and procedures, could prevent us from meeting our financial reporting obligations on a timely basis.  If other currently undetected material weaknesses in our internal controls exist, it could result in material misstatements in our financial statements requiring us to restate previously issued financial statements, which could cause investors to lose confidence in our reported financial information, and could subject us to regulatory scrutiny and to litigation from shareholders, which could have a material adverse effect on our business and the price of our shares.

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If we are unable to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the reliability of our financial statements may be questioned and our share price may suffer.
 
The Sarbanes-Oxley Act of 2002 imposes certain duties on us and on our executives and directors. To comply with this statute, we are required to document and test our internal control over financial reporting, and our independent registered public accounting firm must issue an attestation report on our internal control procedures, and our management is required to assess and issue a report concerning our internal control over financial reporting. Our efforts to comply with these requirements have resulted in increased general and administrative expenses and a diversion of management time and attention, and we expect these efforts to require the continued commitment of significant resources. We identified material weaknesses in our internal control over financial reporting as of December 31, 2021 with respect to revenue recognition relating to our regional projects in Peru. As a result, we have restated our audited consolidated financial statement for the year ended December 31, 2019 and 2020 and revised the previously reported unaudited quarterly and year-end results for the year ended December 31, 2021. While we are in the process of designing a remediation plan to improve our internal controls and procedures, we may in the future identify material weaknesses or significant deficiencies in our assessments of our internal controls over financial reporting. Failure to maintain effective internal control over financial reporting could result in investigation or sanctions by regulatory authorities, and could adversely affect our operating results, investor confidence in our reported financial information and the market price of our ordinary shares.

Our share price has been highly volatile and may continue to be volatile and decline.

The trading price of our shares as well as the market generally has fluctuated widely in the past and may continue to do so in the future as a result of a number of factors, many of which are outside our control. During the period from January 4, 2021 to May 9, 2022, our ordinary shares traded in a range from $6.58 to a high of $22.69 and the daily trade volume on NASDAQ ranged from 126,800 shares to 10,735,800 shares. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market prices of many technology companies, particularly telecommunication and internet related companies, and that have often been unrelated or disproportionate to the operating performance of these companies or stimulated by market rumors. These broad market fluctuations could adversely affect the market price of our shares. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. Securities class action litigation against us could result in substantial costs and a diversion of our management’s attention and resources.

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Our operating results may vary significantly from quarter to quarter and from year to year and these quarterly and yearly variations in operating results, as well as other factors, may contribute to the volatility of the market price of our shares.

Our operating results have and may continue to vary significantly from quarter to quarter. The causes of fluctuations include, among other things:


the timing, size and composition of requests for proposals or orders from customers;


the timing of introducing new products and product enhancements by us and the level of their market acceptance;


the mix of products and services we offer;


the level of our expenses;


the changes in the competitive environment in which we operate; and


Our ability to supply the goods ordered within the quarter.

The quarterly variation of our operating results, may, in turn, create volatility in the market price for our shares. Other factors that may contribute to wide fluctuations in our market price, many of which are beyond our control, include, but are not limited to:


economic instability;


announcements of technological innovations;


customer orders or new products or contracts;


competitors’ positions in the market;


changes in financial estimates by securities analysts;


conditions and trends in the VSAT and other technology industries relevant to our businesses;


our earnings releases and the earnings releases of our competitors; and


the general state of the securities markets (with particular emphasis on the technology and Israeli sectors thereof).

In addition to the volatility of the market price of our shares, the stock market in general and the market for technology companies in particular has been highly volatile and at times thinly traded. Investors may not be able to resell their shares during and following periods of volatility.

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We may in the future be classified as a passive foreign investment company, or PFIC, which would subject our U.S. investors to adverse tax rules.

U.S. holders of our ordinary shares may face income tax risks. There is a risk that we will be treated as a “passive foreign investment company”. Our treatment as a PFIC could result in a reduction in the after-tax return to the holders of our ordinary shares and would likely cause a reduction in the value of such shares. A foreign corporation will be treated as a PFIC for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income,” or (2) at least 50% of the average value of the corporation’s gross assets produce, or are held for the production of, such types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, gains from the sale or exchange of investment property and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income”. If we are treated as a PFIC, U.S. Holders of shares (or rights) would be subject to a special adverse U.S. federal income tax regime with respect to the income derived by us, the distributions they receive from us, and the gain, if any, they derive from the sale or other disposition of their ordinary shares (or rights). In particular, any dividends paid by us, if any, would not be treated as “qualified dividend income” eligible for preferential tax rates in the hands of non-corporate U.S. shareholders. We believe that we were not a PFIC for the 2021 taxable year. However, since PFIC status depends upon the composition of our income and the market value of our assets from time to time, there can be no assurance that we will not become a PFIC in any future taxable year. U.S. Holders should carefully read Item 10E. “Additional Information – Taxation” for a more complete discussion of the U.S. federal income tax risks related to owning and disposing of our ordinary shares (or rights).

Future sales of our ordinary shares and the future exercise of options may cause the market price of our ordinary shares to decline and may result in a substantial dilution.

During 2021 and through the date of this filing, our largest shareholder, FIMI Opportunity Funds, or the FIMI Funds, sold approximately 24.0% of our outstanding ordinary shares and granted an option to Phoenix Holdings Ltd., or Phoenix, to acquire its remaining ordinary shares (approximately 9.8% of our outstanding ordinary shares) through the end of 2022.  We cannot predict what effect, if any, future sales of our ordinary shares by our significant shareholders, or the availability for future sale of our ordinary shares, including shares issuable upon the exercise of our options, will have on the market price of our ordinary shares. In July 2019, we filed a shelf registration statement with the Securities and Exchange Commission allowing for our issuance and sale of up to $150 million of ordinary shares and other securities. At that time, we also registered ordinary shares of our company then held by the FIMI Funds and Mivtach Shamir Holdings Ltd for resale, most of which shares have subsequently been resold pursuant to Rule 144. The registration statement will expire in July 2022. Sales of substantial amounts of our ordinary shares in the public market by our company or our significant shareholders, or the perception that such sales could occur, could adversely affect the market price of our ordinary shares and may make it more difficult for you to sell your ordinary shares at a time and price you deem appropriate.

Certain of our shareholders beneficially own a substantial percentage of our ordinary shares.
 
FIMI Funds, our largest shareholder, holds approximately 9.8% of our outstanding ordinary shares, Phoenix holds approximately 9.3% of our outstanding ordinary shares and options to purchase FIMI Funds’ holdings in our company, and our third largest shareholder holds approximately 6.6% of our outstanding ordinary shares. This concentration of ownership of our ordinary shares could delay or prevent mergers, tender offers, or other purchases of our ordinary shares that might otherwise give our shareholders the opportunity to realize a premium over the then-prevailing market price for our ordinary shares. This concentration could also accelerate these same transactions in lieu of others depriving shareholders of opportunities. This concentration of ownership may also cause a decrease in the volume of trading or otherwise adversely affect our share price.

In April 2019 we distributed a cash dividend for the first time, followed by additional dividends distributed in December 2020 and January 2021. No assurance can be given that we will continue to distribute dividends in the future.

In April 2019 we distributed a cash dividend in the amount of $0.45 per share (approximately $24.9 million in the aggregate). Following receipt of the settlement amount from Comtech in December 2020, we distributed a cash dividend of $0.36 per share and in January 2021 (following the receipt of court approval) we distributed a cash dividend of $0.63 per share (approximately $20 million and $35 million, respectively). We have not adopted a general policy regarding the distribution of dividends and make no statements as to the distribution of dividends in the foreseeable future. The terms of some of our financing arrangements require us to meet certain financial covenants regarding minimum cash balance and the distribution of dividends requires prior approval of certain banks which provide us with credit facilities and guarantees. Any future dividend distributions are subject to the discretion of our board of directors and will depend on various factors, including our operating results, future earnings, capital requirements, financial condition, and tax implications of dividend distributions on our income, future prospects and any other factors deemed relevant by our board of directors. The distribution of dividends is also limited by Israeli law, which permits the distribution of dividends by an Israeli corporation only out of its retained earnings as defined in Israel’s Companies Law, 5759-1999, or the Companies Law, provided that there is no reasonable concern that such payment will cause us to fail to meet our current and expected liabilities as they become due, or otherwise with the court’s approval (as we obtained for the January 2021 dividend). You should not invest in our company if you seek a secured dividend income from your investment. For information regarding taxation of dividend, see ITEM 10.E – “Additional Information - Taxation - Israeli Tax Consequences of Holding Our Stock - Dividends”.

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Our ordinary shares are traded on more than one market and this may result in price variations.

Our ordinary shares are traded on the NASDAQ Global Select Market and on the TASE. Trading in our ordinary shares on these markets is made in different currencies (U.S. dollars on the NASDAQ Global Select Market, and NIS on the TASE), and at different times (resulting from different time zones, different trading days and different public holidays in the U.S. and Israel). Consequently, the trading prices of our ordinary shares on these two markets often differ. Any decrease in the trading price of our ordinary shares on one of these markets could cause a decrease in the trading price of our ordinary shares on the other market.

Risks Related to Our Location in Israel

Political and economic conditions in Israel may limit our ability to produce and sell our products. This could have a material adverse effect on our operations and business condition, harm our results of operations and adversely affect our share price.

We are incorporated under the laws of the State of Israel, where we also maintain our headquarters and most of our manufacturing and research and development facilities. As a result, political, economic and military conditions affecting Israel directly influence us. Any major hostilities involving Israel, a full or partial mobilization of the reserve forces of the Israeli army, the interruption or curtailment of trade or air traffic between Israel and its trading partners, or a significant downturn in the economic or financial condition of Israel could adversely affect our business, financial condition and results of operations.
 
Conflicts in North Africa and the Middle East, including in Egypt and Syria which countries border Israel, have resulted in continued political uncertainty and violence in the region. Efforts to improve Israel’s relationship with the Palestinian Authority have failed to result in a permanent solution, and there have been numerous periods of hostility in recent years. In addition, relations between Israel and Iran continue to be seriously strained, especially with regard to Iran’s nuclear program. Such instability may affect the economy, could negatively affect business conditions and, therefore, could adversely affect our operations. To date, these matters have not had any material effect on our business and results of operations; however, the regional security situation and worldwide perceptions of it are outside our control and there can be no assurance that these matters will not negatively affect our business, financial condition and results of operations in the future.
 
While Israel and the United Arab Emirates signed a normalization agreement in 2020, there are a number of countries, primarily in the Middle East, as well as Malaysia and Indonesia that restrict business with Israel or Israeli companies, and we are precluded from marketing our products to these countries directly from Israel. Restrictive laws or policies directed towards Israel or Israeli businesses may have an adverse impact on our operations, our financial results or the expansion of our business. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods. Such actions, particularly if they become more widespread, may adversely impact our ability to sell our products.
 
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Your rights and responsibilities as a shareholder are governed by Israeli law and differ in some respects from those under Delaware law.

Because we are an Israeli company, the rights and responsibilities of our shareholders are governed by our Articles of Association and by Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in a Delaware corporation. In particular, a shareholder of an Israeli company has a duty to act in good faith towards the company and other shareholders and to refrain from abusing his, her or its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. Israeli law provides that these duties are applicable to shareholder votes on, among other things, amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and interested party transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness towards the company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior.
 
As a foreign private issuer whose shares are listed on the NASDAQ Global Select Market, we follow certain home country corporate governance practices instead of certain NASDAQ requirements, which may not afford shareholders with the same protections that shareholders of domestic companies have.

As a foreign private issuer whose shares are listed on the NASDAQ Global Select Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of The NASDAQ Marketplace Rules. We follow Israeli law and practice instead of The NASDAQ Marketplace Rules with respect to the director nominations process and the requirement to obtain shareholder approval for the establishment or material amendment of certain equity-based compensation plans and arrangements. As a foreign private issuer listed on the NASDAQ Global Select Market, we may also follow home country practice with regard to, among other things, the requirement to obtain shareholder approval for certain dilutive events (such as for an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company). A foreign private issuer that elects to follow a home country practice instead of NASDAQ requirements must submit to NASDAQ in advance a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the SEC each such requirement that it does not follow and describe the home country practice followed by the issuer instead of any such requirement. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s corporate governance rules.
 
Our results of operations may be negatively affected by the obligation of our personnel to perform military service.

A significant number of our employees in Israel are obligated to perform annual reserve duty in the Israeli Defense Forces and may be called for active duty under emergency circumstances at any time. If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of time. Our operations could be disrupted by a significant absence of one or more of our key employees or a significant number of other employees due to military service. Any disruption in our operations could adversely affect our business.

You may not be able to enforce civil liabilities in the U.S. against our officers and directors.

We are incorporated in Israel. All of our directors and executive officers reside outside the U.S., and a significant portion of our assets and the personal assets of most of our directors and executive officers are located outside the U.S. Therefore, it may be difficult to effect service of process upon any of these persons within the U.S. In addition, a judgment obtained in the U.S. against us, or against such individuals, including but not limited to judgments based on the civil liability provisions of the U.S. federal securities laws, may not be collectible within the U.S.
 
Additionally, it may be difficult for an investor or any other person or entity, to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws on the ground that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it may determine that Israeli law is applicable to the claim. Certain matters of procedures will also be governed by Israeli law.

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Under current Israeli law, U.S. law and the laws of other jurisdictions, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

We currently generally include non-competition clauses in the employment agreements of our employees in certain regions. The provisions of such clauses prohibit our employees, if they cease working for us, from directly competing with us or working for our competitors for a certain period of time. Israeli labor courts have required employers, seeking to enforce non-compete undertakings against former employees, to demonstrate that the competitive activities of the former employee will cause harm to one of a limited number of material interests of the employer recognized by the courts (for example, the confidentiality of certain commercial information or a company’s intellectual property). In the event that any of our employees chooses to leave and work for one of our competitors, we may be unable to prevent our competitors from benefiting from the expertise of our former employee obtained from us, if we cannot demonstrate to the court that our interests as defined by case law would be harmed. Non-competition clauses may be unenforceable or enforceable only to a limited extent in other jurisdictions as well.

ITEM 4: INFORMATION ON THE COMPANY

A.
History and Development of the Company

We were incorporated in Israel in 1987 and are subject to the laws of the State of Israel. We are a public limited liability company under Israel’s Companies Law and operate under that law and associated legislation. Our corporate headquarters, executive offices and main research and development and engineering facilities, as well as facilities for product assembly are located at Gilat House, 21 Yegia Kapayim Street, Kiryat Arye, Petah Tikva 4913020, Israel. Our telephone number is (972) 3-925-2000. Our address in the U.S. is c/o Wavestream Corporation at 545 West Terrace Drive, San Dimas, California 91773. Our website address is www.gilat.com. The information on our website is not incorporated by reference into this annual report.

We are a leading global provider of satellite-based broadband communications. We design and manufacture ground-based satellite communications equipment and provide comprehensive solutions and end-to-end services powered by our innovative technology. Our portfolio includes a cloud-based satellite network platform, VSAT terminals, amplifiers, high-speed modems, high-performance on-the-move antennas, high efficiency, high power SSPA amplifiers, BUCs and transceivers. Our comprehensive solutions support multiple applications with a full portfolio of products to address key applications including broadband internet access, cellular backhaul, enterprise, social inclusion solutions, in-flight connectivity, maritime, trains, defense and public safety, all while meeting stringent service level requirements. We also provide connectivity services, internet access and telephony to enterprise, government and residential customers over networks built using our own equipment and over other networks that we install, mainly based on BOT and BOO contracts. We build telecommunication infrastructure in these projects typically using fiber-optic and wireless technologies for broadband connectivity.
 
Our products are primarily sold to satellite operators, communication service providers MNOs and system integrators that use satellite communications for their customers and to government organizations and system integrators that use our technology. We are particularly active in the following market sectors: enterprise and government broadband applications; consumer broadband access; cellular connectivity; national telecommunication connectivity; defense and homeland security and mobility applications for air, land and sea. We provide services directly to end-users in various market sectors including in certain countries in Latin America and provide managed network services in certain countries, such as Australia, Peru, Mexico, Philippines and the U.S., over a satellite network owned by a third party. We have 20 sales and support offices worldwide, three network operations centers and five R&D centers.

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We shipped our first generation VSAT in 1989 and since then, we have been among the technological leaders in the satellite ground equipment industry. Our continuous investment in research and development has resulted in the development of new and industry leading products and our intellectual property portfolio includes 73 issued patents (57 U.S. and 16 foreign) relating to our VSAT and other systems as well as 11 issued patents in the U.S. relating to our satellite communication on the move antenna solutions and 13 issued patents (3 U.S. and 10 foreign) for our high power SSPAs.

In 2021, 2020 and 2019, our property and equipment purchases amounted to approximately $8.9 million, $4.7 million and $8.0 million, respectively. These amounts do not include the reclassification of inventory to property and equipment and other non-cash purchases made during 2021, 2020 and 2019 in the approximate amounts of $2.4 million, $0.3 million and $1.4 million respectively.

B.
Business Overview

We are a leading provider of ground-based satellite communications and other network communications solutions and services. We believe in the right of all people to be connected. Our mission is to create and deliver deep technology solutions for satellite, ground and new space connectivity.

With proven expertise, a can-do attitude and a winning global team, we aspire to be the natural partner, bringing real value in the satcom market. We design and manufacture ground-based satellite networking communications equipment, which we sell to our customers either as network components (modems, BUCs, antennas) or as complete network solutions (which include hubs and related terminals and services) or turnkey projects. We develop the equipment that includes commercial VSAT systems, defense and homeland security satellite communications systems, SSPAs, BUCs, transceivers, low-profile antennas, on-the-Move and on-the-Pause terminals and modems. Our equipment is used by satellite operators, service providers, telecommunications operators, MNOs, system integrators, government and defense organizations, large corporations and enterprises. We sell and distribute our products and provide our services internationally, in Latin America, Asia, Asia Pacific, North America, Africa and Europe. In particular, we provide connectivity services, internet access and telephony, to enterprise, government and residential customers over our own networks, built using both our equipment and equipment purchased from other manufacturers in various technologies and over other networks that we install, mainly based on BOT and BOO contracts. We build telecommunication infrastructure in these projects typically using fiber-optic and wireless technologies for broadband connectivity. We also provide NOC services and hub services.

From 2018 through 2021, we operated in three operating segments - Fixed Networks, Mobility Solutions and Terrestrial Infrastructure Projects, as follows:
 
Fixed Networks provides advanced fixed broadband satellite communication networks, satellite communication systems and associated professional services and comprehensive turnkey solutions (which may include in certain instances managed satellite network services). Our customers are service providers, satellite operators, MNOs, or Telcos, and large enterprises and governments worldwide. In addition, it includes our network operation and managed networks and services in Peru. We focus on HTS VHTS and NGSO opportunities worldwide. Principal applications include cellular backhaul, social inclusion solutions, government, defense and enterprise networks and drive meaningful partnerships with satellite operators to leverage our technology and breadth of services to deploy and operate the ground-based satellite communication networks.
 
Mobility Solutions provides advanced on-the-move satellite communications equipment, systems, and solutions, including airborne, maritime, gateways and ground-mobile satellite systems and solutions. This segment provides solutions for land, sea and air connectivity, focusing on the high-growth IFC market, with our unique leading technology as well as defense and homeland security activities. Our product portfolio comprises of a leading network platform with high-speed VSATs, high performance on-the-move antennas and high efficiency, high power SSPAs, BUCs and transceivers. Our customers are satellite operators, service providers, system integrators, defense and homeland security organizations, as well as other commercial entities worldwide.
 
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Terrestrial Infrastructure Projects provides fiber and wireless network infrastructure construction of the Programa Nacional de Telecomunicaciones (Pronatel), or PRONATEL, in Peru.

Commencing in the first quarter of 2022, in order to reflect our new management’s approach in the management of our operations, organizational alignment, customer base and end markets, we  operate in three new operating segments, as follows:  


Satellite Networks is focused on the development and supply of networks that are used as the platform that enables the latest satellite constellations of HTS, VHTS and NGSO opportunities worldwide. We provide advanced broadband satellite communication networks and associated professional services and comprehensive turnkey solutions and managed satellite network services solutions. Our customers are service providers, satellite operators, MNOs, Telcos, large enterprises, system integrators, defense, homeland security organizations and governments worldwide. Principal applications include In-Flight-Connectivity, cellular backhaul, maritime, social inclusion solutions, government, defense and enterprise networks and are driving meaningful partnerships with satellite operators to leverage our technology and breadth of services to deploy and operate the ground-based satellite communication networks. Our product portfolio includes a leading satellite network platform with high-speed VSATs, high performance on-the-move antennas, BUCs and transceivers. 


Integrated Solutions is focused on the development, manufacturing and supply of products and solutions for mission-critical defense and broadcast satellite communications systems, advanced on-the-move and on-the-pause satellite communications equipment, systems and solutions, including airborne, ground-mobile satellite systems and solutions. The integrated solutions  product portfolio comprises of leading high-efficiency, high-power SSPAs, BUCs and transceivers with a field-proven, high-performance variety of frequency bands. Our customers are satellite operators, In-Flight Connectivity service providers, defense and homeland security system integrators and NGSO gateway integrators.


Network Infrastructure and Services is focused on telecom operation and implementation of large-scale networks projects in Peru. We provide terrestrial (fiber optic and wireless network) and satellite network construction and operation. We serve our customers through technology integration, managed networks and services, connectivity services, internet access and telephony over our own networks. We implement projects using various technologies (including our equipment), mainly based on BOT and BOO contracts.

We are evaluating whether the change in our reporting segments, as described above, affects goodwill assignment to our reporting units.
 
In the year ended December 31, 2021, we derived approximately 53%, 36% and 11% of our revenues from our Fixed Networks, Mobility Solutions and Terrestrial Infrastructure Projects segments, respectively.

We have diversified revenue streams that result from both sales of products, which include construction of networks, and services. In the year ended December 31, 2021, approximately 65% of our revenues were derived from sales of products and 35% from services. During the same period, we derived 33%, 33%, 21% and 13% of our revenues from Latin America, U.S. and Canada, APAC and EMEA, respectively.

Industry Overview

There is a global demand for satellite-based communications solutions for several reasons. Primarily, satellite-based communication is still the only truly ubiquitous networking solution. Secondly, satellite communications are more readily available as compared to alternative terrestrial communications networks. Lastly, satellite communications solutions offer rapidly deployed secure broadband connectivity and broadband communications on the move.

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A two-way broadband satellite communications solution is comprised of the following elements:


Communications satellite – Typically a satellite in geostationary orbit (synchronized with the earth’s orbit) or NGSO.


Satellite communications ground station equipment – These are devices that have a combination of data communications and Radio Frequency, or RF elements designed to deliver data via communication satellites. Examples of ground station equipment are remote site terminals, such as VSATs, central hub station systems,  amplifiers, BUCs and antennas.


A VSAT is comprised of the following elements:


o
Modem – This is the device that modulates the digital data into an analog RF signal for delivery to the upconverter, and demodulates the analog signals from the downconverter back into digital data. The modem, which is typically located indoors, performs data processing functions such as traffic management and prioritization and provides the digital interfaces (Ethernet port/s) for connecting to the user’s equipment (PC, switch, etc.).


o
Amplifiers and BUCs – These are the components that connect the ground station equipment with the antenna. The purpose of the amplifiers and BUCs is to amplify the power and convert the frequency of the transmitted RF signal.


o
Antenna – Antennas can vary quite significantly in size, power and complexity depending on the ground equipment they are connected to, and their application. For example, antennas connected to remote sites generally are in the range of one meter in diameter while those connected to the central hub system can be in the range of ten meters in diameter. Antennas used on moving platforms need to be compact and have a mechanically or electronically auto-pointing mechanism so that they can remain locked onto the satellite during motion.

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Broadband satellite networks are comprised of ground stations at multiple locations that communicate through a satellite, providing continent-wide wireless connectivity. Satellite broadband networks are used to provide a variety of traffic types such as broadband data, video and voice. The value chain of satellite network services consists of the following four main elements:



Satellite operators provide satellite capacity (a portion of the satellite’s bandwidth and power which is used to establish one or more communication channels). A typical GEO satellite can cover a geographic area the size of the continental U.S. or larger. NGSO satellite constellations are global and can cover most of the earth area. The satellite receives information from the ground station equipment, amplifies it and transmits it back to earth on a different frequency. Satellite operators sell the capacity in a variety of leasing agreements to their customers. Our technology is compatible with GEO and NGSO satellites, C‑band, Ku‑band and Ka‑band satellites including, special extended C‑band and extended Ku‑band satellites. Some of the leading satellite operators are Intelsat, SES, Telesat, Hispasat, Eutelsat and Chinasat. New potential large NGSO satellite constellation operators include SpaceX, Amazon, Telesat and OneWeb.

Ground equipment providers manufacture network equipment for both satellite communications networks and broadcast markets. Satellite communications systems connect a large central earth station, called a hub, with multiple remote sites equipment, called VSATs (ranging from tens to thousands of sites), which communicate via satellite. We are a leading ground equipment provider for hubs, VSATs, high-power amplifiers and low-profile antennas for satellite communications on-the-move.

Communication service providers buy equipment from ground equipment providers, install and maintain such equipment, lease capacity from satellite operators and sell a full package of communication services to the end user.

End users are customers that use satellite communications equipment and services. Examples of end users range from enterprises, to government ministries and defense organizations, to residential consumers.

System integrators are companies that provide customized solutions to end users by integrating the necessary equipment and services. For example, defense organizations often work with specialized system integrators that integrate various components, such as power amplifiers and low-profile antennas, into a satellite terminal.

Satellite broadband networks are typically systems deployed in a hub-and-spoke configuration, with remote locations connecting via satellite to a central hub station. Satellite communications networks have a diverse range of uses and applications, and provide communication services as a stand‑alone, alternative, or complementary service to terrestrial networks.

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We believe that the advantages of satellite communications networks include:


Universal availability – Satellite communications provide service to any location within a satellite footprint.


Timely implementation – Large satellite communications networks with thousands of remote sites can be deployed within a few weeks.


Broadcast and multicast capabilities – Satellite is an optimal solution for broadcast and multicast transmission as the satellite signal is simultaneously received by any group of users in the satellite footprint.


Reliability and service availability – Satellite communications network availability is high due to the satellite and ground equipment reliability, the small number of components in the network and terrestrial infrastructure independence.


Scalability – Satellite communications networks scale easily from a single site to thousands of locations.


Cost-effectiveness – The cost of satellite communications networks is independent of distance and therefore it is a cost-effective solution for networks comprised of multiple sites in remote locations.


Applications delivery – Satellite communications networks offer a wide variety of customer applications such as e‑mail, virtual private networks, video, voice, internet access, distance learning, cellular backhaul and financial transactions.


Portability and Mobility – Satellite communications solutions can be mounted on moving platforms for communications on the move, or deployed rapidly for communications in fixed locations and then relocated or moved as required.

Given the technological and implementation benefits afforded by satellite communications networks, we believe that the market for satellite communications products and services will continue to grow. In particular, according to a 2021 report from Northern Sky Research, or NSR, a leading international telecom market research and consulting firm, the revenue growth for enterprise and Cellular backhaul, or CBH, segments in GEO/NGSO , is expected to grow at a compounded annual growth rate, or CAGR, of 14% through 2029.

Further, according to a 2021 NSR report, aggregated satellite capacity has grown significantly in recent years and is forecasted to grow further in the coming years. According to the report, the growing availability of satellite capacity has resulted in significant reduction in the cost of satellite capacity.

In addition, satellite communication is an effective solution for mobility, especially for maritime applications and for international flights.

New communications networks that integrate satellites operating in low or medium earth orbits (LEO, MEO or NGSO) have been launched and additional ones are scheduled to be launched in the coming years and are forecasted to account for a significant portion of the aggregated satellite capacity and of the equipment unit shipments to broadband satellite sites, platforms and subscribers.

The availability of auto-pointing satellite antennas designed for in-motion two way communications has created market demand from both commercial and government/defense segments. These antennas are usually mounted on a moving platform (airplane, boat, train, unmanned aerial vehicles, or UAVs) and connected to a satellite terminal within or on the platform. An important requirement for these applications is that they have light-weight and low-profile antennas, to minimize air drag and fuel consumption. We believe that the demand for light-weight, low-profile antenna systems will increase as well.

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Another important requirement emerging is for next generation SSPA’s able to provide high output power, greater efficiency and field-proven reliability in smaller, lighter weight product packages suitable for fixed, mobile, and airborne antenna systems. These amplifiers designed and thoroughly tested for use in extreme environments, help provide uninterrupted connectivity to support mission-critical defense operations, as well as demanding inflight connectivity and consumer broadband applications.

There are six primary market categories that require broadband satellite products and services:

Enterprise and Business. End-users include large companies and organizations, Small- Medium Enterprises, or SMEs, and Small Office/Home Office (SOHO) users. For enterprises, satellite communications networks offer network connectivity and deliver voice, data and video within corporations (known as corporate intranets), internet access, transaction‑based connectivity that enables on‑line data delivery such as point‑of‑sale (credit and debit card authorization), inventory control and real time stock exchange trading.

Cellular Backhaul. Cellular networks comprised of backhaul connections to connect the cellular base stations that serve multiple customers. Cellular backhaul connectivity requires more demanding network performance. These requirements usually include a high level of quality of service, or QoS, high speed connectivity, and more control over the network. Satellite backhaul applications include both primary and backup connectivity.

Rural Telecommunications. The rural telecommunications market is comprised of communities throughout the world that require telephone, and internet access in areas that are unserved or underserved by existing telecommunications services. These communication services are usually provided to the rural population via government‑subsidized initiatives. This market sector is comprised of “Build‑Operate” projects, in which governments subsidize the establishment and the operation of a rural network to be served by a satellite, wireless or cellular service provider that is usually selected in a bid process. In other instances, local communications operators have universal service obligations, or USOs, which require them to serve rural areas lacking terrestrial infrastructure. Some local communications operators elect to fulfill this obligation by hiring third parties in a model known as BOT. In these instances, the network is established and made operational by a third party service provider, which operates it for a certain period of time and then it is transferred to the operator.

Consumer. The consumer market consists of residential users. These users require a high‑speed internet connection similar to a digital subscriber line, or DSL, or cable modem service. Internet connectivity in all reaches of the world is a means to provide equal opportunity to all and digital inclusion, which is part of our vision and mission.
 
Government. The government sector consists of homeland security and military users. The versatility, reliability, and resiliency of satellite broadband networks, the in-motion low profile antennas and the lightweight SSPAs are a perfect fit for security and armed forces. For example, low power lightweight satellite communications systems can be quickly deployed in disaster areas, as a replacement for destroyed wireless or wire line networks, providing communication services to emergency personnel and law enforcement units.

Mobility. The mobility market is comprised of on the move platforms, on land at sea and in the air, such as aircraft, ships, trains and vehicles, that require broadband connectivity. Satellite-based solutions for these platforms include ground network platform, modems, on-the-move antennas and transceivers.

Our Competitive Strengths

We are a leading provider of satellite communication and networking products and services. Our competitive strengths include:

Market leadership in large and growing markets. Since our inception, we have sold more than 1.6 million satellite terminals (VSATs)and over 40,000 BUCs, SSPAs and Transceivers and many other products, to customers in approximately 100 countries. Our customer base includes a large number of satellite‑based communications service providers, system integrators and operators worldwide. In addition, we are one of the largest satellite communications service providers to rural communities in Latin America.

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Technology leadership. We have been at the forefront of satellite communications technology and services for over 30 years and continue to be an innovator and developer of new satellite technologies. Our customizable satellite communications technology enables us to provide a wide range of broadband, internet, voice, data and video solutions to our customers. We offer hubs and optimized satellite terminals (VSATs) which can attain a rate of up to 400 Mbps and plan to supply speeds over 1Gbps. Our product and operations infrastructure is capable of running hubs with greater than 99.8% availability while rolling out thousands of new VSAT site locations each month. In 2022, we launched SkyEdge IV – our next generation system for VHTS and NGSO that will join our successful proven SkyEdge product family. SkyEdge IV is targeted as a solution for the latest state-of-the art VHTS Software Defined Satellites (SDS) that will be launched in the coming decade. SkyEdge IV provides extreme high performance and space segment efficiency. Our product lines are known for their durability and resilience. We provide advanced on-the- move terminals, including all components such as antennas, BUCs and modems. Our low-profile, satellite communications on-the-move solutions antennas provide reliable broadband communications for commercial and defense applications. Our SSPAs provide high performance, even at the extreme end of temperature and environmental performance specifications. X-Architecture, our cloud-based distributed architecture, and our Electronically-Steered Array / Phased Array Antenna (ESA/PAA) are our leading innovations that, we believe, have positioned us as a leader in providing satellite communications technology. With SkyEdge IV we introduced our next generation Elastix-Architecture that provides substantial improvements in scalability and performance. Our research, development and engineering teams, located in several locations worldwide, enable us to rapidly develop new features and applications. Moreover, by directly serving end-users through our service organizations, we are able to quickly respond to changing market conditions and maintain our position in the market.

Global presence and local support. We have sold our products in approximately 100 countries on six continents. Our products and services are used by a large and diverse group of customers including some of the largest enterprises in the world, several government agencies and many rural communities. We have 20 sales and service offices worldwide. Through our network of offices, we are able to maintain a two-tier customer support program offering local support offices and a centralized supply facility.

Complementary business lines for turnkey solutions. Our operating segments are able to provide a full turnkey solution to our customers by integrating a diverse range of value‑added products and services. Our product and service offerings - satellite communications network equipment, small cell solutions, power amplifiers, low-profile satellite communications on-the-move terminals, antennas, installation, operation and maintenance – provide communication services ranging from broadband, internet, voice, data and video to managed solutions that can be customized and are flexible. Our business model enables us to be attuned to our customers’ needs and to adapt to changing market trends. Our satellite communications-based networks sometimes serve as platforms for the delivery of complete systems, providing versatile solutions for enterprises, government agencies, SMEs, rural communities, SOHOs and consumers.

Diversified revenue streams and customer base. In the year ended December 31, 2021, approximately 65% of our revenues were generated from equipment sales and 35% of our revenues were generated from services. Our equipment sales are generally independent equipment orders which often generate maintenance contracts and additional opportunities for future equipment sales and also include the revenues from the construction phase of large-scale projects. Our service sales are characterized by long-term contracts that provide a recurring revenue base. In the year ended December 31, 2021, our three operating segments, Fixed Networks, Mobility Solutions and Terrestrial Infrastructure Projects, accounted for 53%, 35% and 12% of our revenues, respectively.

Delivery Capabilities. Over the years we have demonstrated our ability to deploy communication networks in the most remote areas, which are difficult both to reach and service. This experience enhances both our ability to plan and implement sophisticated communication networks in remote areas, as well as in challenging terrain, and our ability to meet technological challenges like a lack of electrical power infrastructure or a lack of any physical infrastructure. Our teams are proficient in delivering solutions in these areas.

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Experienced management team. Our management is comprised of an experienced executive team. Mr. Adi Sfadia, our Chief Executive Officer since November 2020, has broad experience in senior executive positions. Mr. Sfadia served as our Interim CEO from July 2020 and as Chief Financial Officer for 5 years, and prior to that he served as Chief Financial Officer at other leading public and private companies. Our Company’s leadership is comprised of highly skilled senior managers who have an extensive experience each in her or his field of expertise, including high expertise in cutting-edge technology and field proven success in development of our business and organization.

Our Growth Strategy

Our objective is to leverage our technology and services capabilities in order to:

Continue to Serve as a Key Partner of VHTS/HTS and NGSO Satellite Operators – We intend to continue to serve as a prime partner of VHTS/HTS operators, leveraging our new SE IV system which is a leading technology in this market (Elastix- Architecture for multi orbit and Software Defined satellites)  and our breadth of services to deploy and operate both GEO and NGSO ground-based satellite communication networks.

Expand Presence in the IFC Market – We continue to develop our hub and modem technology and our Ka and Ku airborne BUCs, Transceivers, and Power supplies to serve the connectivity needs of aviation service providers. We are also placing a major focus on developing a flat Electronically Steered antenna leveraging our unique in-house developed ally technology. These solutions are designed to serve the high growth of IFC services in commercial aviation and business aviation markets.

Fortify our Leadership Position in the 4G/LTE and 5G Cellular Backhaul Market - We intend to continue to leverage our technology, as well as our experience, to serve mobile network operators’ 4G/LTE and 5G connectivity needs in rural, metro-edge and metro areas with long term projects.

Expand our Presence in the defense and on-the-move satcom market - We enhance our technology leadership and growing presence with armed forces around the world, we are increasing our focus on this growing market segment both in the United States and globally. We are also focusing efforts on the emerging opportunities both with products applicable for commercial and defense applications. We increased our investment in this market as we believe its global growth will contribute to our business. We see the SkyEdge IV as a system that will allow our satellite operator customers attractive offering for defense and government agencies.

Provide internet Broadband to Rural Areas – We intend to build on our experience in bringing broadband internet to rural areas in Latin America and Asia and identify additional markets in which to expand.

Our Businesses in 2021

Fixed Networks Segment

Overview

Our Fixed Networks segment provides satellite communications network systems and associated professional and in certain instances, managed satellite network services, to satellite operators, governments, Telcos and service providers worldwide. Our operational experience in deploying large networks together with our global network of local offices enable us to work closely and directly with those providers. We provide equipment, solutions and services to the commercial, mobile, government, enterprise, social inclusion solutions and consumer markets. We provide solutions tailored to the requirements of individual industries. Based on our open SkyEdge platform, our solutions provide added value to operators through better performance and integration as well as simpler deployment.

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Our SkyEdge product family, including our SkyEdge II-c and SkyEdge IV products, allow us to deliver efficient, reliable and affordable broadband connectivity such as internet, voice, data and video. Both platforms support multiple applications such as Broadband Access, Enterprise connectivity; Cellular Backhaul and Mobility applications.

We also support satellite networking through professional services, training and a full range of turnkey solutions and outsourced network operations.

Products and Solutions

Broadband Satellite Network System

SkyEdge II-c and SkyEdge IV systems support large-scale broadband services for enterprise, CBH, IFC, maritime and consumer, applications, including fast web browsing, high-speed trunking, video streaming, internet Protocol Television, or IPTV, Voice Over internet Protocol, or VoIP, and other bandwidth-intensive services. Our SkyEdge II-c system and SkyEdge IV system (when fully developed) also support cellular backhauling of 2G, 3G, 4G/ LTE and 5G technologies. The SkyEdge II-c system designed with highest scalability supporting multi satellite - multi beam networks, with any number of gateways and user terminals. The SkyEdge II-c platform supports four VSAT types: Scorpio, Gemini, Capricorn, and Taurus. It includes a unified, centralized network management system, or Total NMS which manages all hub elements at all gateways from a central NOC location and enables the definition of different types of virtual network operators to support different types of business models and services in multiple regions. Enhanced FCAPS functions, or fault-management, configuration, accounting, performance, and security, a network management framework created by the International Organization for Standardization and the electronic machine to machine interface, enable full visibility, control and seamless integration with the operator’s operations support system/ business support system, or OSS/BSS, environment. As part of our road map to support multi-service capabilities and very high speed (up to 1.5 Gbps) services we recently launched SkyEdge IV which uses a new VSAT platform – Aquarius. Our plan is to gradually support all the segments that are currently supported by SkyEdge II-c, including mobility, enterprise, CBH and consumer.

Our VSATs provide operational simplicity and reduced operational expenditures. They provide simple Do-It-Yourself VSAT installation that expedites deployment and reduces costs. The VSAT kit is designed with minimum assembly parts and an easy to point antenna. In addition, our Ka-band transceiver Scorpio terminals and Ka transceivers are equipped with audible indicators to assist in the fine pointing. The VSAT customer premises equipment, or CPE, includes an intuitive graphical user interface that guide the installer step by step through the installation and service activation process.

SkyEdge II-c Gemini is a family of compact high-throughput routers, designed to enable high speed broadband services while meeting cost efficiencies required by residential customers and businesses. Gemini enables fast web browsing, video streaming, IPTV, VoIP, and other bandwidth intensive services. This solution comes in variations for enterprise applications such as retail, banking, automatic teller machines, or ATMs, lotteries and USO/USF government-funded programs aimed to expand broadband connectivity to underserved regions.

SkyEdge II-c Capricorn, including our latest released, SkyEdge II-c Capricorn PLUS, is a family of ultra-high-performance satellite routers that are used for corporate services, 2G/3G/4G/5G cellular backhauling, IP trunks and mobility services. For IP trunks and mobility, Capricorn delivers acceleration and packet-per-second performance that support hundreds of users per VSAT. For LTE cellular backhauling, Capricorn includes our patented (granted in Japan, U.S. and patent-pending in other countries) cellular data acceleration technology that enables full LTE speeds of up to 150Mbps for cellular handheld devices. To reach these high return speeds, Capricorn supports both Time Division Multiple Access, or TDMA, and Single Channel Per Carrier, or SCPC, transmission. Some of the Capricorn VSATs are planned to also operate on SkyEdge IV.

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SkyEdge II-c Taurus used for in-flight satellite communication connectivity with simultaneous support for broadband IFC and internet Protocol Television, or IPTV and is a key component of our Ku and Ka aeronautical satellite communication solution, as our ultra-high-performance aero-modem manager (MODMAN) for in-flight connectivity. Taurus is planned to be supported by SkyEdge IV and will allow continuous operations of IFC between the systems.

SkyEdge IV Aquarius is a new family of VSATs that we plan to introduce which will support higher speeds of up to 1.5 Gbps. The Aquarius VSAT family is based on a next generation technology that will support the demands of 5G, cloud computing and very high speeds for mobility and maritime. It will feature a new capability that will allow roaming between NGSO and GEO networks (for example SES mPOWER and GEO). Our plan is to release over the next three years a range of VSATs  - Aquarius-Pro (enterprise, mobility and cellular backhaul indoor use), Aquarius- Outdoor (enterprise, mobility, cellular backhaul outdoor use), Aquarius-S (SCPC symmetric applications) and Aquarius- E (lower cost enterprise application) that will support Mobile Edge Computing, TDMA and SCPC applications, operations with Very Low Signal to Noise Ratio for mobility and defense applications.

Fixed Networks Solutions

Vertical Solutions

We target specific vertical markets where our products and solutions are most suitable and in which we have multiple references and credibility. These vertical markets include the consumer market, cellular backhaul, oil and gas, banking and finance and rural and e-government markets, among others.

System Integration and Turnkey Implementation

We have expanded our business beyond core VSAT networks to deliver complete and comprehensive solutions to meet our customers’ needs even where VSATs are not the main part of the solution. We see a growth in market demand for vendors capable of fully delivering integrated solutions for interdisciplinary, communication based projects.

In certain other situations, we are required to provide our VSAT solutions in a turnkey mode where we are responsible for the complete end-to-end solution. In the case of turnkey solutions, and occasionally in projects requiring system integrations, we provide our customers with a full and comprehensive solution including:


Project management – accompanying the customer through all stages of a project and ensuring that the project objectives are within the predefined scope, time and budget;


Satellite network design – translating the customer’s requirements into a system to be deployed, performing the sizing and dimensioning of the system and evaluating the available solutions;


Deployment logistics – transportation and rapid installation of equipment in all of the network sites;


Implementation and integration – combining our equipment with third party equipment such as solar panel systems and surveillance systems as well as developing tools to allow the customer to monitor and control the system;


Operational services – providing professional services, program management, network operations and field services; and


Maintenance and support – providing 24/7 helpdesk services, on-site technician support and equipment repairs and updates.


Space segment - where applicable, providing space capacity with back to back agreements with the satellite operators

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Manufacturing, Customer Support and Warranty

Our products are designed and tested at our facilities in Israel as well as our four other R&D facilities around the world. We outsource a significant portion of the VSAT and hub products manufacturing to third parties. We also work with third‑party vendors for the development and manufacture of components integrated into our products, as well as for assembly of components for our products.

We offer a customer care program for our products, which we refer to as SatCare or SkyCare, and professional services programs that improve customer network availability through ongoing support and maintenance cycles.

As part of our professional services, we provide:


Outsourced operations such as VSAT installation, service commissioning and hub operations;


Proactive troubleshooting, such as periodic network analysis, to identify symptoms in advance; and


Training and certification to ensure customers and local installers are proficient in VSAT operation.

We typically provide a one-year warranty to our customers as part of our standard contract.

In addition, we provide back office support in Peru for subsidized telephony and internet networks as well as for private internet, data and telephony clients including a call center, network operations center, field service maintenance and a pre-paid calling card platform and distribution channels.

Marketing and Sales

We use both direct and indirect sales channels to market our products, solutions and services. Our Fixed Networks segment has organized its sales activities by geographic areas, with groups or subsidiaries covering most regions of the world. Our sales teams are comprised of account managers and sales engineers who establish account relationships and determine technical and business requirements for the customer’s network. These teams also support the other distribution channels with advanced technical capabilities and application experience. Sales cycles in the VSAT network market vary significantly, with some sales requiring 18 months and even more, from an initial lead through signing of the contract, while sales stemming from an immediate need for product delivery can be completed within two to three months. The sales process includes gaining an understanding of customer needs, several network design iterations and network demonstrations.

Customers and Markets

We provide our Satellite Communication solutions to satellite operators, governments, system integrators, telecommunication companies and MNOs, satellite communication providers, ISPs, and homeland security and defense agencies. Our customers benefit from:


a single accountable partner for all of their satellite communication network needs;
 
high credibility and experience;
 
local presence and partnerships;
 
industry-leading technology and system integration;
 
flexibility and customization; and
 
proven ability to deliver innovative end-to-end solutions.

We sell and distribute our products and provide services internationally, particularly in Latin America, Asia, Asia Pacific, the U.S., Africa and Europe.

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We sell VSAT communications networks and solutions primarily to service providers that mostly serve the enterprise consumer, cellular backhauling, and mobility market. We have hundreds of such customers worldwide.
Enterprise and service provider customers use our networks for internet access, broadband data, voice and video connectivity and for applications such as credit card authorizations, online banking, corporate intranet, interactive distance learning, lottery transactions, retail point‑of‑sale, inventory control and supervisory control and data acquisition, or SCADA, services.

Service providers serving the rural communications market are typically public telephony and internet operators providing telephony and internet services through public call offices, telecenters, internet cafes or pay phones. Some of the rural communication projects are for government customers. Examples of our rural telecom customers include Telefonica in Peru, Cable & Wireless in Panama and SCT in Mexico.

Service providers for the consumer market are typically Telcos planning to expand internet service to the consumer markets.

Our VSAT networks also provide underserved areas with a high-speed internet connection similar to DSL service provided to residential users. Among such customers are Optus in Australia, Hispasat in Latin America, Gazprom Space Systems, or GSS, and Eutelsat in Russia and SBBS in several countries in Europe.

Public Rural Telecom Services:

In a large number of remote and rural areas, primarily in developing countries, there is limited or no telephone or internet service, due to inadequate terrestrial telecommunications infrastructure. In these areas, VSAT networks utilize existing satellites to rapidly provide high-quality, cost-effective telecommunications solutions. In contrast to terrestrial networks, VSAT networks are simple to reconfigure or expand, relatively immune to difficulties of topography and can be situated almost anywhere. Additionally, VSATs can be installed and connected to a network quickly without the need to rely on local infrastructure. For example, some of our VSATs are powered by solar energy where there is no existing power infrastructure. Our VSATs provide reliable service, seldom require maintenance and, when necessary, repair is relatively simple.

As a result of the above advantages, there is a demand for government‑sponsored, VSAT-based bundled services of fixed telephony and internet access. Many of these government‑funded projects have been expanded to provide not only telephony services and internet access, but to also provide tele-centers that can serve the local population. These tele-centers include computers, printers, fax machines, photocopiers and TVs for educational programs. Additional revenue may be received, both in the form of subsidies and direct revenues from the users, when these additional services are provided.

We provide broadband services and public telephony in rural areas, incorporating our hubs, satellite network equipment and terrestrial technologies (typically, fiber-optic and wireless technologies) as described under this Item below. The operation of our terrestrial fixed networks is provided under our fixed networks segment.

Since our first rural telephony project for PRONATEL in Peru in 1998, we have been awarded several of the rural communications projects by the Peruvian government, including deployment and operation of wireless transport and distribution networks. Overall, we deployed operated approximately 7,500 telephony sites in Peru, and approximately 850 internet services sites, most of which were dissembled through the end of 2019. Additionally, we have developed services for financial sector companies, such as Banco de la Nacion, providing internet, data and telephony services. Our rural networks serve more than six million people.

We have been awarded large-scale government contracts to build and operate, and in certain cases, to, transfer fiber and wireless networks of PRONATEL in Peru, namely the Peru Regionals Projects. We expect to continue to generate additional revenues from the PRONATEL Regional Projects to be operated by us by enabling cellular carriers and other service providers to acquire capacity over these networks to address the growing needs for voice, data, and internet in these regions, as well as the development of platforms for e-learning, e-health and similar applications. These additional revenues together with the revenue from the operation of the networks are part of our Fixed Networks segment revenues, while the construction of the PRONATEL Regional Projects is accounted under our Terrestrial Infrastructure Projects segment (see in this Item below).

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Our first project in Colombia was awarded to us in 1999 by the government and was followed by several projects under which Gilat Colombia operated large networks encompassing thousands of rural sites and provided broadband internet connectivity, telephony, fax and other services. The project was concluded in May 2019. This project generated revenues of 312 billion Colombian Pesos (approximately $103 million) over the life of the contract.

Enterprise and Government Agencies

We provide network equipment and related services to selected enterprises and government agencies. In some markets, existing telecom operators are mandated by the government to provide universal services. Providing these services in remote areas is a challenge to these operators, and they sometimes outsource these services to rural telecom service providers. These customers contract with Gilat Peru for VSAT equipment and associated network services to be deployed at customer locations, typically for a contract term of three to five years. We also resell managed terrestrial connectivity equipment and services from facilities‑based Local Exchange Carrier partners.

Mobility Solutions

We provide satellite communication on the move systems with solutions for land, sea and air, while placing major focus on IFC. Our portfolio includes a cloud based VSAT network platform, high-speed modems, high performance on-the-move antennas and high efficiency, high power SSPAs and BUCs.

SkyEdge family of Network Systems

We utilize our SkyEdge II-c and SkyEdge IV systems to deliver efficient, reliable and affordable broadband connectivity such as internet, voice, data and video in travelling environments. The systems supports bandwidth-intensive services with a network management system that can manage all hub elements at all gateways from a central NOC location.

SkyEdge II-c Taurus

SkyEdge II-c Taurus is used for  in-flight satellite communication connectivity with simultaneous support for broadband IFC and internet Protocol Television, or IPTV and is a key component of our Ku and Ka aeronautical satellite communication solution, as our ultra-high-performance aero-modem manager (MODMAN) for in-flight connectivity. All SkyEdge II-c VSATs are full-featured IP routers, supporting enhanced IP routing features such as DHCP, NAT/PAT and IGMP. Advanced application-based QoS, guarantees the performance of real-time applications such as VoIP and video streaming, while also supporting other data applications. SkyEdge II-c VSATs also support next generation IPv6 networking. Taurus will also be supported on SkyEdge IV.

SkyEdge IV

The SkyEdge IV system is our next generation system for mobility.  In addition to providing backward compatibility to the Taurus VSAT it will support new mobility speeds of up to 1.5Gbps for IFC and Maritime. SkyEdge IV will also allow smooth operation between GEO and NGSO on the same VSATs.

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Raysat Low-Profile Satellite Communication on the Move Antenna Systems

Our RaySat series consists of low-profile, in-motion, two-way antennas for satellite communication on the move. Compact, aerodynamic and vehicle-mounted, RaySat antennas deliver mission-critical data, voice and video in real-time. Our RaySat products operate in Ku and Ka bands and are intended for both civilian and military satellite communication on the move applications such as:


In-Flight Connectivity and UAS – Single and Dual Band solutions for commercial, business and military aviation including panel based high efficiency antennas.  In early 2022, we successfully demonstrated with Airbus a flat ESA antennas with no moving parts.


Train Data Connectivity – Reliable and wide band alternative to cellular based data connectivity for trains over satellite supporting high-speed trains. Provides access in remote and rural places with smooth coverage and cross-country access with no roaming limitation;


Military - strategic military advantage by supporting the transfer of real-time intelligence while on-the-move with a small, low profile, hard to track antenna;


Digital satellite news gathering – always on, no set up time, real-time streaming video;


First responders - supports vehicles’ mobility, agility and stability required for teams to be the first to reach the scene; and


Search and exploration teams, close-to-shore vessels etc.

A full suite of two-way, low-profile antennas is available with multiple onboard tracking sensors, enabling accurate tracking, short initial acquisition and instantaneous reacquisition. RaySat antenna products are designed, manufactured and assembled at our facilities in Bulgaria.

RaySat Products


RaySat ER7000 maximizes throughput using high-efficiency waveguide panel technology and the antenna’s light weight ensures easy and safe vehicle mounting. It has been widely deployed on trains and large vehicles worldwide.


Electronically-Steered-Array, Phased-Array Antenna (ESA/PAA) (Ka, Ku) is an ultra-slim (low-profile) antenna with no moving parts that electronically steers the transmission and reception beams towards the satellite, allowing operation even around the equator. The antenna design is highly scalable, with array dimensions that can be changed to optimally match specific gain requirements, making it suitable for a wide range of mobile platforms (aerial, land and maritime) and various throughput performance needs. Owing to its scalability and ultra-low profile, the antenna is particularly suited to supporting mobile connectivity for platforms that are constrained by size and weight.


Other Antennas that are currently supported are RaySat’s SR300; BRP 60; BR 71/72 and ER5000. SR 300 and ER 5000 are COTM antennas that are used for commercial defense and government applications. BRP 60- and BR71/72 are used for UAS applications.

Wavestream

Our Wavestream subsidiary designs and manufactures next generation SSPA’s for mission-critical defense and broadcast satellite communications systems. Wavestream’s innovative, patented Spatial AdvantEdge™ technology provides higher output power, greater reliability and lower energy usage in more compact packages than traditional amplifier solutions. Wavestream’s product line meets the growing demand for greater efficiency and significant lifecycle cost reductions for satellite communications systems worldwide.

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Wavestream’s headquarters, research and development, engineering and manufacturing facilities are located in San Dimas, California, with an additional research and development center in Singapore. The Wavestream product line is manufactured in the San Dimas facility.

The Wavestream product line addresses the following applications and markets:


Defense Communications - satellite-based airborne and highly secured point-to-point. This market is typically categorized by customers requiring high quality products – at times for mission critical communications in extreme environmental conditions. The satellite terminals (e.g., VSAT, Single Channel Per Carrier, or SCPC) are usually provided to the defense agencies via system integrators and not directly from the power amplifier suppliers.


Government - public safety, emergency response and disaster recovery. Similar to the market for defense agencies, though usually less demanding in terms of environmental conditions, these terminals are provided to various local, state and federal agencies that need to manage. emergency communications. The satellite terminals (e.g., VSAT, SCPC) are usually provided via system integrators or service providers and not directly from the power amplifier suppliers.


Commercial terminals - A high power amplifier is used with high-end VSAT terminals for various applications where there is the requirement to transmit large amounts of data. Examples include airborne IFC terminals/antennas in commercial and business airplanes, high speed for internet access, NGSO satellite constellations and gateway opportunities. The satellite terminals/antennas are usually provided via system integrators, service providers or airframe manufacturers and not directly from the power amplifier suppliers.

Wavestream’s customers include the US Army, AeroSat, Tampa Microwave, DataPath, General Dynamics Satcom Mission Systems, Honeywell International Inc., L-3 Harris, Anuvu, Envistacom LLC., and HNS.

RF amplifiers, BUCs and transceivers

The Wavestream product line consists of RF amplifiers, BUCs and transceivers that use solid-state sources to produce high power at microwave and millimeter-wave frequencies. Our Wavestream patented Spatial AdvantEdge™ technology allows us to create more compact product packages that provide higher power, greater reliability and improved efficiency for any mission-critical applications. The spatially power combined amplifier employs a different technique for combining the transistor outputs than traditional Monolithic Microwave Integrated Circuit, or MMIC, based amplifiers. Rather than combining in multiple steps, increasing loss and size with each combining stage, all transistor outputs are combined in a single step. Many amplifying elements synchronously amplify the input signal, and their outputs are combined in free space for very high combining efficiency.

Our Wavestream patented technology allows us to create amplifiers and BUCs with high output power in more compact product packages that generate less heat, use less energy, and reduce lifecycle costs. Our Wavestream products help customers meet the stringent power requirements for mission-critical communications system. We perform full factory acceptance testing on every unit we manufacture and deliver, ensuring each product has guaranteed performance over the full temperature range and over extended frequency bands.

We believe that we have established a leadership position with our compact, highly efficient SSPAs with a field-proven family of high to medium powered Ka, Ku, and X band products. Our Wavestream line of products are designed and tested to meet strenuous requirements for temperature, shock and vibration, over the full range of frequency and at the extremes of environmental performance specifications. Our Wavestream field-proven technology and reputation for innovation and quality drive solutions for multiple applications targeting military, aerospace, commercial and broadcast satellite systems.

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Wavestream AeroStream™

The Wavestream AeroStream™ is a state-of-the-art transceiver for challenging inflight satellite communications environments. AeroStream products meet RTCA/DO-160G, Boeing, Airbus and ARINC specifications for commercial aircraft as well as MIL-STD requirements for military aircraft. The AeroStream™ transceiver is in certification process with the FAA. AeroStream incorporates Wavestream’s next generation Spatial AdvantEdge™ technology to provide high power output with greater efficiency and reliability for airborne satellite communications applications. The AeroStream transceiver offers all necessary interfaces to work seamlessly with leading modems and Antenna Control Units, or ACUs, to provide a convenient turnkey solution.

Integrated Solutions

We offer fully integrated solutions based on our own technology and components. Our integrated solutions feature the highest standards of reliability and efficiency combining our own VSAT/modems, antennas and BUCs. We leverage our innovative and industry-leading technological capabilities from R&D centers around the world.

We provide an integrated quick-deploy mobile Satellite Communication solution for net-centric emergency and battle situations. We offer both commercial and military manpack terminals, named SatRanger and SatTrooper, respectively. These lightweight, portable solutions provide data, video and telephony under the toughest environmental and battle conditions. The small-size antenna can be set up in just a few minutes with automatic pointing and does not require any tools for assembly. The manpacks are highly integrated with our operationally proven components: antennas, built-in modems, BUCs and LNBs, all incorporated into one ruggedized enclosure. Low power consumption enables long hours of battery operation. The manpacks provide high availability, secure communications and excellent performance in extremely low signal to noise ratio conditions.

Our BlackRay Satellite Communication terminals are specially designed for UAV and USV applications. These terminals have been used worldwide in commercial and military applications which require high-throughput communications and minimal size, weight, and power. The system’s miniscule dimensions allow Beyond-Line-of-Sight (BLoS) operations for even the smallest platforms, in harsh weather conditions, while supporting video and data downlink and uplink applications. These highly integrated terminals feature best-of-breed antenna, modem and BUC technologies developed and manufactured by us. Customized solutions of the BlackRay platform are also available for specific customer platforms and needs.


Unmanned Aerial Vehicles - Our BlackRay panel and parabolic systems serve the critical need to exploit the full capabilities of an aircraft’s operational range. As one of the industry’s smallest and most compact aerial solutions in its category, our integrated approach can dramatically increase mission effectiveness. We offer a full range of Satellite Communication systems for Group 3, 4 and 5 UAVs, operating in Ku-, Ka- and X- band, and available in different sizes and bit rates.

Terrestrial Infrastructure Projects Segment

Overview

We provide network infrastructure construction of the fiber and wireless network of PRONATEL in Peru mainly through BOT and BOO contracts subsidized by the government. Accordingly, we build the infrastructure, act as a licensed telecommunications operator for a defined period and in some of the cases, then transfer the network to the customer (a governmental entity).

In March and December 2015, we were awarded four PRONATEL Regional Projects by the Peruvian government with expected revenues of $395 million over approximately 14-16 years, for the construction of fiber-optic transport network and access networks based on wireless technologies, operation of the networks for a defined period and their transfer to the government. We have completed the construction phase of the four PRONATEL Regional Projects awarded to us in 2015, and are in the operation phase of the access network. We will operate the access networks for 10 years, prior to transferring them to the Peruvian government.

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In September 2021, PRONATEL awarded us a two year contract for the operation and maintenance of the transport networks that are part of the projects awarded to us in March 2015 and a  three year contract for the operation and maintenance of the transport networks that are part of the project awarded to us in December 2015.

In 2018, we were awarded two additional PRONATEL Regional Projects for the construction and operation of networks with contractual value of approximately $154 million. The construction phase was prolonged due to continued delays and due to preventative measures taken by Peruvian governmental authorities with respect to COVID-19 pandemic. As a result, the expected duration of these projects is expected to continue for 15 years. Under these PRONATEL Regional Projects we will deliver transport networks and operate them for up to eighteen months before transferring them to the Peruvian government. The access networks, which we will operate for 10 years, will be owned by us.

Through 2021, the construction of the PRONATEL Regional Projects was part of our Terrestrial Infrastructure Projects segment, while the services provided over these networks were part of our Fixed Networks segment (See this Item above).

Our Peruvian subsidiary has offices in Lima, Peru as well as in the principal cities in the regions awarded.

Sales and Marketing

We use direct and indirect sales channels to market our equipment and related services. Our sales team of account managers and sales engineers are the primary account interfaces and work to establish account relationships and determine technical and business demands.

Competition

The telecommunications industry operates in a competitive, rapidly changing market. In some cases, our competitors can also be our customers or partners. Accordingly, maintaining an open and cooperative relationship is essential.

In the equipment market, we face competition from providers of satellite communications systems, products and services, such as HNS, ViaSat, ST Engineering iDirect, Comtech and a few other smaller providers.

We compete in some HTS and VHTS markets with competitors such as HNS that have launched high throughput satellites. Although we have entered the HTS and VHTS market with competitive technology, we expect competition in this market will continue to increase.

Due to the nature of the satellite solution, the VSAT technology is, at times, commercially tied to the satellite technology itself, and, consequently, there may be circumstances where it is difficult for competitors to compete with an incumbent VSAT vendor using the particular satellite.

Our low-profile on the move antennas compete with products from competitors such as Cobham, Panasonic Corporation, Orbit, Get Sat, Thinkom, C-Com Satellite Systems Inc., Wiworld Co Ltd., L-3 Harris, SATPRO M&C Tech Co., Ltd. and Tecom. This market is nascent, and not as mature as the satellite communications or satellite services markets.

Our primary competitors with respect to our BUCs and other Wavestream products are CPI, General Dynamics Satcom Technologies, Paradise Datacom, Xicom, and Mission Microwave Technologies.

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Where we primarily operate public rural telecom services (voice, data and internet) and are engaged in construction of fiber-optic transport and access networks based on wireless systems, we typically encounter competition on government subsidized bids from various service providers, system integrators and consortiums. Some of these competitors offer solutions based on VSAT technology and some on terrestrial technologies (typically, fiber-optic and wireless technologies). In addition, as competing technologies such as cellular network and fiber-optic become available in rural areas where not previously available, our business could be adversely affected. We may not be able to compete successfully against current or future competitors. Such competition may adversely affect our future revenues and, consequently, our business, operating results and financial condition.

Certain consolidations and acquisitions have occurred during 2020 and 2021 among key players in the market, such as Intelsat and Gogo, Viasat, and RigNet, and Viasat and Inmarsat (which is pending closing). These market changes affect the competitive landscape and position Gilat in rivalry with more significant consolidated corporations with comprehensive resources. On the other hand, such changes may lead to new opportunities for our business.

Geographic Distribution of Our Business

The following table sets forth our revenues from operations by geographic area for the periods indicated below as a percent of our total sales:

   
Years Ended December 31,
 
   
2021
   
2020
   
2019
 
         
As Restated (1)
 
Latin America
   
33
%
   
35
%
   
29
%
U.S. and Canada
   
33
%
   
36
%
   
42
%
APAC
   
21
%
   
15
%
   
17
%
EMEA
   
13
%
   
14
%
   
12
%
Total
   
100
%
   
100
%
   
100
%


(1)
We restated our previously issued consolidated financial statements. For additional information, see Note 2 and Note 17 to our audited consolidated financial statements included in Part III, Item 18 to this Annual Report on Form 20-F.

Environmental, Social and Governance (ESG) Practices

For over 30 years, we worked to fulfil our vision to make connectivity accessible and available to individuals, corporations and community institutions in the unserved and underserved regions of the globe, thus bridging the digital divide via satellite communication. As a global company, we are committed to fulfil our vision alongside our commitment to act responsibly considering our community and the world we live in. As part of this commitment we set our guidelines and policies on various subjects, and we are continuously learning and looking at ways to improve our ESG strategy.

Community

Social Investment and Volunteer Statement. As part of our standards for corporate responsibility, we acknowledge the importance of social contribution, and therefore participate and encourage our employees to participate in different volunteering and donation activities in the communities in which our employees reside on a regular basis.

Human Resources

Human rights and labor policy. We are committed to protect human rights and conduct our businesses without infringing human rights. We are further committed to conduct fair labor standard, and to create a safe working environment that contributes to our employees’ well-being, where they can feel empowered, challenged, and have the tools to thrive. We also acknowledge the importance of our employees’ health, and have adopted a health, safety and environment policy.

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Workforce Diversity and Equality Statement. We are a global company, operating in multiple countries around the world. The scope and nature of our projects and business activities often require the involvement and collaboration of employees with various backgrounds, from different jurisdictions. We find this multicultural diversity approach as a way to help the company and our employees to develop and succeed.

Training policy. We implement organizational learning processes and invest in the professional knowledge and development of our employees, in order to improve their work skills and achievements, and encourage their desire for success. Such approach is aligned with our values, and we believe that it will contribute to our businesses as well.

Anti-Slavery Policy. We firmly condemn any kind of modern slavery or any human trafficking.

Environmental Standards

We recognize the increasing importance of protecting the environment and fighting climate change, and therefore we have taken actions and are working on additional actions that may help ensuring the sustainability of the world’s resources and environment.

Environmental Policy. We have adopted a Conflict Minerals Policy and encourage our suppliers and sub-contractors to comply with the foregoing as well.

Corporate governance.

Corporate governance guidelines. We have adopted Corporate Governance Guidelines to assist the Board and its committees in the exercise of their duties and responsibilities and to serve the best interests of our company, in a manner consistent with applicable laws and stock exchange rules and the company’s articles of association.

Committee Charters. We have adopted written charters specifying the duties and responsibilities of each of our Audit Committee and Compensation Committee to assist the committee members in carrying out their responsibilities.

Ethics

Code of ethics. As a worldwide leader in satellite networking technology, solutions and services, we are committed to conduct our business ethically, and in accordance with applicable laws and regulations. We expect such behavior and conduct from all of our directors, officers and employees (including those of our subsidiaries). Our written public policy sets our standards and expectations.

Privacy Policy

We respect and value the privacy of data subjects whose personal information we may process. Our privacy policies inter alia describe how we (including our subsidiaries) collect, use, process and share personal information of data subjects in our premises, website and during our business activities, and also explain the rights data subject may have in relation to their personal information.

Whistle Blower Procedure

In order to support and ensure compliance with our standards, practices and policies, we have in placed a mechanism that allows our employees to anonymously report actual or suspected misconduct through designated channels. We find this mechanism important in order to maintain higher standard of ethical conduct.

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Insider Trading Policy

Our insider trading policy applies to our personnel and personnel of our subsidiaries worldwide, and provides guidelines relating to of improper conduct by anyone that is employed by the company or otherwise associated with our company, with respect to transactions in the securities of, and non-disclosure of information regarding our company and its business.

Anti-Corruption and anti-Bribery Policy.

Our policy prohibiting briary and corruption applies to our directors, officers and employees, and also to our business partners worldwide. We have also adopted anti-corruption guidelines that apply to all our commercial transactions and commitments, including our subsidiaries and officers worldwide.

C.
Organizational Structure
 

Country/State
 
Significant Subsidiaries
of Incorporation
% Ownership
     
1. Gilat Satellite Networks (Holland) B.V.
Netherlands
100%
2. Wavestream Corporation (Asia) Pte. Ltd.
Singapore
100%
3. Gilat to Home Peru S.A
Peru
100%
4. Gilat do Brazil Ltda.
Brazil
100%
5. Gilat Satellite Networks (Mexico) S.A. de C.V.
Mexico
100%
6. Wavestream Corporation
Delaware (U.S.)
100%
7. Gilat Networks Peru S.A
Peru
100%
8. Gilat Satellite Networks Australia Pty Ltd.
Australia
100%
9. Gilat Satellite Networks (Eurasia) Limited
Russia
100%
10. Gilat Satellite Networks MDC (Moldova)
Moldova
100%
11. Raysat Bulgaria EOOD
Bulgaria
100%
12. Gilat Satellite Communication Technology (Beijing) Ltd.
China
100%
13. Gilat Satellite Networks (Philippines) Inc.
Philippines
100%

D.
Property, Plants and Equipment
 
Our headquarters are located in a modern office park which we own in Petah Tikva, Israel. This facility consists of approximately 380,000 square feet, a substantial part of which are currently used by us and the remainder is subleased or offered for sublease to third parties.

We have local Global NOCs coverage in Australia, Moldova and Peru from which we perform network services and customer support functions.

We own facilities which consist of approximately 55,700 square feet located in Backnang, Germany. Since May 2002, these facilities are leased to a third party, which lease expired in February 2022. We have entered into an agreement for sale of the property, subject to fulfillment of certain conditions. The property is now classified as held for sale. We own approximately 13,500 square feet of research and development facilities and rent approximately 12,600 square feet of manufacturing facilities in Sofia, Bulgaria, which lease will expire on May 31, 2022, and rent approximately 10,000 square feet in Moldova for research and development, global service and global NOC activities. Our Wavestream subsidiary currently occupies approximately 44,972 square feet of office space, research and development and manufacturing facilities in San Dimas. In November 2019, Wavestream entered into a new lease agreement to rent an additional 12,474 square feet, in addition to the lease of 32,498 square feet, bringing the total space to 44,972 square feet. The new lease agreement will expire on October 31, 2024. Our subsidiaries in Peru currently occupy approximately 8,300 square feet of office space, and NOC facilities in Lima, which leases will expire between 2021 and 2023.
          
50

We also maintain facilities in Brazil, Colombia, Mexico, China, Peru, Australia, Thailand, India, Singapore and Russia along with representative offices in Texas, Kazakhstan, Philippines and Indonesia.

We consider our current office space, research and development and manufacturing facilities sufficient to meet our anticipated needs for the foreseeable future and suitable for the conduct of our business.

ITEM 4A:
UNRESOLVED STAFF COMMENTS

There are no unresolved staff comments.

ITEM 5:
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
A.
Operating Results

The following discussion of our results of operations should be read together with our audited consolidated financial statements and the related notes, which appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs and involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report.

Restatement and Revision of Previously Issued Consolidated Financial Information

In this Item 5, “ Operating and Financial Review and Prospects” we have restated our previously issued Consolidated Balance Sheets, Consolidated Statements of Income and Comprehensive Income, Consolidated Statements of Cash Flows, Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2019 and 2020 (the “Prior Financial Statements”), to reflect the restatement more fully described in Note 2 and Note 17 to the audited consolidated financial statements included in Part III, Item 18 to this Annual Report on Form 20-F. The financial information that has been previously filed or otherwise reported for the Prior Financial Statements is superseded by the information in this Annual Report on Form 20-F.

Restatement Background

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2021, we identified misstatements related to revenues and cost of revenues in the accounting treatment of our construction and operation of fiber and wireless networks in Peru for the years 2015 through 2020. The misstatements are primarily related to errors due to inaccurate interpretation during the implementation of accounting standard ASC 606 “Revenue from Contracts with Customers” which became effective in 2018, as well as accounting for costs subject to deferral and allocation of considerations to performance obligations.

We evaluated the misstatements and determined that correcting the cumulative impact of the misstatements would be significant to our shareholders equity as of December 31, 2019, 2020 and 2021. However, the related impact was not material to our consolidated statements of income (loss) for the years ended December 31, 2019 and 2020.The restatement did not impact our cash from operations, our cash position, or estimated collectability of receivables.

51

Restatement Overview

In connection with the restatement of the Prior Financial Statements, the Company, in this 2021 Form 20-F:


Restated its consolidated balance sheets as of December 31, 2020, consolidated statements of income (loss) and other comprehensive income (loss), consolidated statement of changes in shareholders’ equity, and the consolidated statement of cash flows for the years ended December 31, 2019 and 2020;


Restated the accumulated effect of the misstatements as of and for the years ended December 31, 2015 through 2018 through a decrease in our accumulated deficit opening balance as of January 1, 2019;

Revised its “Operating and Financial Review and Prospects,” as it relates to the years ended December 31, 2019 and 2020;

Updated its disclosures regarding its controls and procedures in Part II, Item 15. of the 2021 Form 20-F.

For additional information, see Note 2 and Note 17 to our audited consolidated financial statements included in Part III, Item 18 to this Annual Report on Form 20-F.

Internal Control Considerations

In the course of preparing our consolidated financial statements for the year ended December 31, 2021, we identified material weaknesses in the design and implementation of our internal controls over the revenue recognition process of our subsidiary in Peru relating to its complex projects, as follows: (i) inappropriate control over the accounting implementation due to inaccurate interpretation of Accounting Standard ASC 606, "Revenues from contracts with customers" which was adopted in 2018; and (ii) inappropriate control over the level of documented evidence when performing management review control over management estimates of costs. For a discussion of management’s considerations of the Company’s disclosures controls and procedures, internal controls over financial reporting, and material weaknesses identified, refer to “Controls and Procedures” in Part II, Item 15 in this Annual Report.

52

The following tables represent the impact of revisions to our unaudited summary financial information that were previously filed or furnished by the Company for each of the quarters in the year ended December 31, 2021:

Consolidated Balance Sheets:

ASSETS

   
March 31, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
                   
Account Receivables
 
$
28,975
   
$
-
   
$
28,975
 
Contract assets
   
46,060
     
3,678
     
49,738
 
Total current assets
   
201,600
     
3,678
     
205,278
 
Long-term contract assets
   
-
     
13,400
     
13,400
 
Total long-term assets
   
159,073
     
13,400
     
172,473
 
Total assets
 
$
360,673
   
$
17,078
   
$
377,751
 

LIABILITIES AND SHAREHOLDERS' EQUITY

   
March 31, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
                   
Accrued expenses
 
$
47,465
   
$
2,028
   
$
49,493
 
Advances from customers and deferred revenues
   
35,404
     
(6,096
)
   
29,308
 
Total current liabilities
   
122,147
     
(4,068
)
   
118,080
 
Long-term advances from customers
   
307
     
4,440
     
4,747
 
Total long-term liabilities
   
10,426
     
4,440
     
14,866
 
Accumulated deficit
   
(696,552
)
   
16,706
     
(679,846
)
Total shareholders' equity
   
228,100
     
16,706
     
244,806
 
Total liabilities and shareholders' equity
 
$
360,673
   
$
17,078
   
$
377,751
 

53

ASSETS


                 
   
June 30, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
                   
Account Receivables
 
$
34,152
   
$
293
   
$
34,445
 
Contract assets
   
23,830
     
2,463
     
26,293
 
Total current assets
   
190,942
     
2,756
     
193,698
 
Long-term contract assets
   
-
     
12,019
     
12,019
 
Total long-term assets
   
159,681
     
12,019
     
171,700
 
Total assets
 
$
350,624
   
$
14,775
   
$
365,399
 

LIABILITIES AND SHAREHOLDERS' EQUITY

   
June 30, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
                   
Accrued expenses
 
$
48,359
   
$
-
   
$
48,359
 
Advances from customers and deferred revenues
   
23,881
     
(1,191
)
   
22,690
 
Total current liabilities
   
108,072
     
(1,191
)
   
106,881
 
Long-term advances from customers
   
1,180
     
2,360
     
3,540
 
Total long-term liabilities
   
13,845
     
(644
)
   
13,201
 
Accumulated deficit
   
(696,682
)
   
16,610
     
(680,072
)
Total shareholders' equity
   
228,707
     
16,610
     
245,317
 
Total liabilities and shareholders' equity
 
$
350,624
   
$
14,775
   
$
365,399
 

ASSETS

   
September 30, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
                   
Account Receivables
 
$
30,972
   
$
733
   
$
31,705
 
Contract assets
   
24,469
     
1,813
     
26,282
 
Total current assets
   
195,337
     
2,546
     
197,883
 
Long-term contract assets
   
-
     
12,343
     
12,343
 
Total long-term assets
   
156,332
     
12,343
     
168,675
 
Total assets
 
$
351,669
   
$
14,889
   
$
366,558
 

54


LIABILITIES AND SHAREHOLDERS' EQUITY
         

   
September 30, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
                   
Accrued expenses
 
$
47,722
   
$
-
   
$
47,722
 
Advances from customers and deferred revenues
   
29,550
     
(1,128
)
   
28,422
 
Total current liabilities
   
110,196
     
(1,128
)
   
109,068
 
Long-term advances from customers
   
3,022
     
(460
)
   
2,562
 
Total long-term liabilities
   
12,284
     
(460
)
   
11,824
 
Accumulated deficit
   
(696,513
)
   
16,477
     
(680,036
)
Total shareholders' equity
   
229,189
     
16,477
     
245,666
 
Total liabilities and shareholders' equity
 
$
351,669
   
$
14,889
   
$
366,558
 

Consolidated Statements of income:

   
Three months ended March 31, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
Revenues:
                 
Products
 
$
30,227
   
$
(1,308
)
 
$
28,919
 
Services
   
14,486
     
(34
)
   
14,452
 
Total revenues
   
44,713
     
(1,342
)
   
43,371
 
                         
Cost of revenues:
                       
Products
   
22,830
     
(1,465
)
   
21,365
 
Services
   
9,526
     
-
     
9,526
 
Total cost of revenues
   
32,356
     
(1,465
)
   
30,891
 
                         
Gross profit
   
12,357
     
123
     
12,480
 
Operating income (loss)
   
(3,657
)
   
123
     
(3,534
)
Income (loss) before taxes on income
   
(4,849
)
   
123
     
(4,726
)
Net income (loss)
 
$
(5,096
)
 
$
123
   
$
(4,973
)
Total earnings (loss) per share:
                       
Basic
 
$
(0.09
)
 
$
0.00
   
$
(0.09
)
Diluted
 
$
(0.09
)
 
$
0.00
   
$
(0.09
)

55


   
Three months ended June 30, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
Revenues:
                 
Products
 
$
39,240
   
$
(1,879
)
 
$
37,361
 
Services
   
17,683
     
(246
)
   
17,437
 
Total revenues
   
56,923
     
(2,125
)
   
54,798
 
                         
Cost of revenues:
                       
Products
   
30,581
     
(2,029
)
   
28,552
 
Services
   
9,627
     
-
     
9,627
 
Total cost of revenues
   
40,208
     
(2,029
)
   
38,179
 
                         
Gross profit
   
16,715
     
(96
)
   
16,619
 
Operating income (loss)
   
(337
)
   
(96
)
   
(433
)
Income before taxes on income
   
98
     
(96
)
   
2
 
Net income (loss)
 
$
(129
)
 
$
(96
)
 
$
(225
)
Total earnings (loss) per share:
                       
Basic
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)
Diluted
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)

   
Six months ended June 30, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
Revenues:
                 
Products
 
$
69,467
   
$
(3,187
)
 
$
66,280
 
Services
   
32,169
     
(280
)
   
31,889
 
Total revenues
   
101,636
     
(3,467
)
   
98,169
 
                         
Cost of revenues:
                       
Products
   
53,411
     
(3,494
)
   
49,917
 
Services
   
19,153
     
-
     
19,153
 
Total cost of revenues
   
72,564
     
(3,494
)
   
69,070
 
                         
Gross profit
   
29,072
     
27
     
29,099
 
Operating income (loss)
   
(3,994
)
   
27
     
(3,967
)
Income (loss) before taxes on income
   
(4,751
)
   
27
     
(4,724
)
Net income (loss)
 
$
(5,225
)
 
$
27
   
$
(5,198
)
Total earnings (loss) per share:
                       
Basic
 
$
(0.09
)
 
$
0.00
   
$
(0.09
)
Diluted
 
$
(0.09
)
 
$
0.00
   
$
(0.09
)

56

   
Three months ended September 30, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
Revenues:
                 
Products
 
$
32,189
   
$
218
   
$
32,407
 
Services
   
17,722
     
(351
)
   
17,371
 
Total revenues
   
49,911
     
(133
)
   
49,778
 
                         
Cost of revenues:
                       
Products
   
22,175
     
-
     
22,175
 
Services
   
10,131
     
-
     
10,131
 
Total cost of revenues
   
32,306
     
-
     
32,306
 
                         
Gross profit
   
17,605
     
(133
)
   
17,472
 
Operating income
   
918
     
(133
)
   
785
 
Income before taxes on income
   
217
     
(133
)
   
84
 
Net income
 
$
168
   
$
(133
)
 
$
35
 
Total earnings per share:
                       
Basic
 
$
0.00
   
$
(0.00
)
 
$
0.00
 
Diluted
 
$
0.00
   
$
(0.00
)
 
$
0.00
 

   
Nine months ended September 30, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
Revenues:
                 
Products
 
$
101,656
   
$
(2,969
)
 
$
98,687
 
Services
   
49,891
     
(631
)
   
49,260
 
Total revenues
   
151,547
     
(3,600
)
   
147,947
 
                         
Cost of revenues:
                       
Products
   
75,586
     
(3,494
)
   
72,092
 
Services
   
29,284
     
-
     
29,284
 
Total cost of revenues
   
104,870
     
(3,494
)
   
101,376
 
                         
Gross profit
   
46,677
     
(106
)
   
46,571
 
Operating income (loss)
   
(3,076
)
   
(106
)
   
(3,182
)
Income (loss) before taxes on income
   
(4,534
)
   
(106
)
   
(4,640
)
Net income (loss)
 
$
(5,057
)
 
$
(106
)
 
$
(5,163
)
Total earnings (loss) per share:
                       
Basic
 
$
(0.09
)
 
$
(0.00
)
 
$
(0.09
)
Diluted
 
$
(0.09
)
 
$
(0.00
)
 
$
(0.09
)

57

   
Three months ended December 31, 2021
 
   
As Reported
   
Adjustments
   
As Revised
 
   
Unaudited
   
Unaudited
   
Unaudited
 
   
U.S. dollars in thousands
 
Revenues:
                 
Products
 
$
41,114
   
$
171
   
$
41,285
 
Services
   
26,157
     
(418
)
   
25,739
 
Total revenues
   
67,271
     
(247
)
   
67,024
 
                         
Cost of revenues:
                       
Products
   
28,369
     
-
     
28,369
 
Services
   
13,959
     
-
     
13,959
 
Total cost of revenues
   
42,328
     
-
     
42,328
 
                         
Gross profit
   
24,943
     
(247
)
   
24,696
 
Operating income
   
5,610
     
(247
)
   
5,363
 
Income before taxes on income
   
5,346
     
(247
)
   
5,099
 
Net income
 
$
2,377
   
$
(247
)
 
$
2,130
 
Total earnings per share:
                       
Basic
 
$
0.04
   
$
(0.00
)
 
$
0.04
 
Diluted
 
$
0.04
   
$
(0.00
)
 
$
0.04
 

Adjusted EBITDA:

   
As Reported
   
Adjustments