UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
☐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, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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
For the transition period from __________ to __________
Commission file number 001-39016
InMode Ltd.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Israel
(Jurisdiction of incorporation or organization)
Tavor Building, Sha’ar Yokneam, P.O. Box 533
Yokneam, 2069206, Israel
(Address of principal executive offices)
Moshe Mizrahy
+972-4-9096313
Tavor Building, Sha’ar Yokneam, P.O. Box 533
Yokneam, 2069206, Israel
(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(s) | Name of each exchange on which registered | ||
Ordinary shares, par value NIS 0.01 per ordinary share | INMD | Nasdaq Global Select Market |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 82,544,9911 Ordinary Shares, par value NIS 0.01 per share.
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 ☒
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
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 filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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. ☐
____________________ |
1 The above number of Ordinary Shares outstanding does not include a total of 1,975,003 Ordinary Shares held at December 31, 2022, as treasury shares, all of which were repurchased by InMode Ltd. |
† 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. N/A
☐ 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 ☒
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
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• | references to “InMode,” the “Company,” “us,” “we” and “our” refer to InMode Ltd., an Israeli company, and its consolidated subsidiaries; |
• | references to “ordinary shares,” “our shares” and similar expressions refer to the Company’s ordinary shares; |
• | references to “dollars,” “U.S. dollars” and “$” are to U.S. Dollars; |
• | references to “shekels” and “NIS” are to New Israeli Shekels, the Israeli currency; |
• | references to the “Companies Law” are to Israel’s Companies Law, 5759-1999, as amended; |
• | references to the “SEC” are to the U.S. Securities and Exchange Commission; and |
• | references to “U.S. GAAP” are to U.S. generally accepted accounting principles. |
• | our ability to identify and penetrate new markets for our products and technology; |
• | our ability to innovate, develop and commercialize our existing and new products and to expand beyond our traditional customer base; |
• | the impacts of the COVID-19 pandemic on our continuing operations, development plans, financial forecasts and expectations, and other matters related to our business and operations; |
• | our ability to obtain and maintain regulatory clearances; |
• | our expectation regarding the safety and efficacy of our products; |
• | the commercial experience of our management team; |
• | our commercialization, marketing and manufacturing capabilities and strategy; |
• | our estimates regarding the potential market opportunity for our products; |
• | developments and projections relating to our competitors or our industry; |
• | our ability to differentiate and distinguish our products from those of our competitors; |
• | our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; |
• | our sales and marketing capabilities and strategy in the United States and internationally; |
• | the implementation of our business model, strategic plans for our business, products and technology; |
• | our ability to attract or retain key personnel; |
• | our intellectual property portfolio and position and our ability to protect our intellectual property rights; and |
• | our assessment of the impact to us of any third-party litigation claiming patent infringement. |
A. | [Reserved]. |
B. | Capitalization and Indebtedness |
C. | Reasons for the Offer and Use of Proceeds |
D. | Risk Factors |
• | our success depends upon market acceptance of our products; |
• | if there is not sufficient demand for the procedures performed with our products, practitioner demand for our products could decline, resulting in unfavorable operating results; |
• | the success and continued development of our products depends, in part, upon maintaining strong relationships with physicians and other healthcare professionals; |
• | we rely heavily on our sales professionals to market and sell our products worldwide. If we are unable to hire, effectively train, manage, improve the productivity of and retain our sales professionals, our business will be harmed, which would impair our future revenue and profitability; |
• | the failure to attract and retain key personnel could adversely affect our business; |
• | if we do not continue to develop and commercialize new products and identify new markets for our products and technologies, we may not remain competitive or expand beyond our traditional customer base, and our revenues and operating results could suffer; |
• | product liability suits could be brought against us due to defective material or design or misuse of our products and could result in expensive and time-consuming litigation, payment of substantial damages and an increase in our insurance rates; |
• | our products and operations are subject to extensive and continuing regulatory compliance obligations in the United States and other countries, and failure to meet those obligations could adversely harm our business; |
• | we outsource almost all of the manufacturing of our products to a small number of manufacturing subcontractors. If our subcontractors’ operations are interrupted or if our orders exceed our subcontractors’ manufacturing capacity, we may not be able to deliver our products on time; |
• | if we are unable to protect our intellectual property rights, our competitive position could be harmed. Our success and ability to compete depends in large part upon our ability to protect our proprietary technology; |
• | third parties have commenced and may in the future commence litigation against us claiming that our products infringe upon their patents or other intellectual property rights; |
• | if we fail to obtain and maintain necessary FDA clearances for our products, if clearances for future products and proposed indications are delayed or not issued, if we or any of our third-party suppliers or manufacturers fail to comply with applicable regulatory requirements, or if there are regulatory changes, our commercial operations could be harmed; and |
• | as a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and Nasdaq corporate governance rules and are permitted to file less information with the Securities and Exchange Commission, or the SEC, than U.S. domestic public companies, which may limit the information available to holders of our ordinary shares. |
• | continue to further penetrate our existing, traditional customer base, including plastic and facial surgeons, aesthetic surgeons, dermatologists and obstetricians/gynecologists, or OB/GYNs, and drive recurring revenues by demonstrating to our customers that our products or product upgrades would be an attractive revenue-generating addition to their practices; |
• | expand our customer base to include non-traditional customers, such as ear, nose and throat physicians, or ENTs, ophthalmologists, general practitioners and aesthetic clinicians; |
• | leverage our existing technology to expand into new minimally invasive and non-invasive applications that either add to or significantly improve our current products; |
• | increase our sales presence to target and expand our market globally; |
• | actively pursue business development opportunities, including potential acquisitions and strategic partnerships to augment our product and technology portfolio; and |
• | expand and maintain our intellectual property and patent portfolio. |
• | consumer disposable income and access to consumer credit; |
• | the cost of procedures performed using our products; |
• | the cost, safety and effectiveness of alternative treatments, including treatments which are not based upon laser or other energy-based technologies and treatments which use pharmaceutical products; |
• | the success of our sales and marketing efforts; |
• | the education of our customers and patients on the benefits and uses of our products compared to competitors’ products and technologies; and |
• | consumer confidence, which may be impacted by economic and political conditions. |
• | implementing appropriate operational and financial systems; |
• | expanding our sales and marketing infrastructure and capabilities; |
• | ensuring compliance with applicable Food and Drug Administration, or FDA, and other regulatory requirements; |
• | providing adequate training and supervision to maintain high quality standards; and |
• | preserving our culture and values. |
• | customer adoption of our products; |
• | the willingness of individuals to pay directly for aesthetic medical procedures in light of the lack of reimbursement by third-party payors; |
• | continued availability of attractive equipment leasing terms for our customers, which may be negatively influenced by interest rate increases; |
• | changes in our ability to obtain and maintain regulatory approvals and maintain compliance with applicable regulatory requirements; |
• | actual or perceived breaches of, or failures relating to, privacy, data protection or data security; |
• | positive or negative coverage in the media or clinical publications of our products or products of our competitors or industry; |
• | increases in the length of our sales cycle; |
• | performance of our independent distributors; |
• | delays in, or failure of, product and component deliveries by our subcontractors and suppliers; and |
• | the impact of the COVID-19 pandemic or other global health crises on our business and general economic conditions. |
• | properly identify and anticipate physician and patient needs; |
• | develop and introduce new products and product enhancements in a timely manner; |
• | avoid infringing upon the intellectual property rights of third parties; |
• | demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials; |
• | obtain the necessary regulatory clearances or approvals for expanded indications, new products or product modifications; and |
• | be fully FDA-compliant with marketing of new devices or modified products. |
• | product performance; |
• | product pricing; |
• | product safety; |
• | intellectual property protection; |
• | quality of customer support; |
• | success and timing of new product development and introductions; and |
• | development of successful distribution channels. |
• | difficulties in staffing and managing our foreign operations; |
• | difficulties in penetrating markets in which our competitors’ products are more established; |
• | reduced protection for intellectual property rights in some countries; |
• | export restrictions, trade regulations and foreign tax laws; |
• | fluctuating foreign currency exchange rates; |
• | obtaining and maintaining foreign certification and compliance with other regulatory requirements; |
• | customs clearance and shipping delays; and |
• | political and economic instability. |
• | loss of customer orders and delay in order fulfillment; |
• | damage to our brand reputation; |
• | increased cost of our warranty program due to product repair or replacement; |
• | inability to attract new customers; |
• | diversion of resources from our manufacturing and research and development departments into our service department; |
• | product recalls; and |
• | legal action. |
• | we or our collaborators may initiate litigation or other proceedings against third parties seeking to invalidate the patents held by those third parties or to obtain a judgment that our products or processes do not infringe those third parties’ patents; |
• | we or our collaborators may participate at substantial cost in International Trade Commission proceedings to abate importation of products that would compete unfairly with our products; |
• | if our competitors file patent applications that claim technology also claimed by us, we may be required to participate in interference, derivation or opposition proceedings to determine the priority of invention, which could jeopardize our patent rights and potentially provide a third party with a dominant patent position; |
• | if third parties initiate litigation claiming that our processes or products infringe their patent or other intellectual property rights, we and our collaborators will need to defend against such proceedings; |
• | if third parties initiate litigation or other proceedings seeking to invalidate patents owned by or licensed to us or to obtain a declaratory judgment that their product, service, or technology does not infringe our patents or patents licensed to us, we will need to defend against such proceedings; |
• | we may be subject to ownership disputes relating to intellectual property, including disputes arising from conflicting obligations of consultants or others who are involved in developing our products; and |
• | if a license to necessary technology is terminated, the licensor may initiate litigation claiming that our processes or products infringe or misappropriate its patent or other intellectual property rights and/or that we breached our obligations under the license agreement, and we and our collaborators would need to defend against such proceedings. |
• | incur substantial monetary liability for infringement or other violations of intellectual property rights, which we may have to pay if a court decides that the product, service, or technology at issue infringes or violates the third party’s rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the third party’s attorneys’ fees; |
• | pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology; |
• | stop manufacturing, offering for sale, selling, using, importing, exporting or licensing the product or technology incorporating the allegedly infringing technology or stop incorporating the allegedly infringing technology into such product, service, or technology; |
• | obtain from the owner of the infringed intellectual property right a license, which may require us to pay substantial upfront fees or royalties to sell or use the relevant technology and which may not be available on commercially reasonable terms, or at all; |
• | redesign our products, services, and technology so they do not infringe or violate the third party’s intellectual property rights, which may not be possible or may require substantial monetary expenditures and time; |
• | enter into cross-licenses with our competitors, which could weaken our overall intellectual property position; |
• | lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others; |
• | find alternative suppliers for non-infringing products and technologies, which could be costly and create significant delay; or |
• | relinquish rights associated with one or more of our patent claims, if our claims are held invalid or otherwise unenforceable. |
• | others may be able to develop and/or practice technology that is similar to our technology or aspects of our technology, but that are not covered by the claims of the patents that we own or control, assuming such patents have issued or do issue; |
• | we or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; |
• | we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions; |
• | others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; |
• | it is possible that our pending patent applications will not lead to issued patents; |
• | issued patents that we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; |
• | our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; |
• | third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license; |
• | parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property; |
• | we may not develop or in-license additional proprietary technologies that are patentable; |
• | we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and |
• | the patents of others may have an adverse effect on our business. |
• | our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory bodies that our products are safe or effective for their intended uses; |
• | the disagreement of the FDA or the applicable foreign regulatory bodies with the design or implementation of our clinical trials or the interpretation of data from pre-clinical studies or clinical trials; |
• | serious and unexpected adverse device effects experienced by participants in our clinical trials; |
• | the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; |
• | our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; |
• | the manufacturing process or facilities we use may not meet applicable requirements; and |
• | the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval. |
• | warning letters or untitled letters, fines, injunctions, consent decrees and civil penalties; |
• | repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizure of our products; |
• | operating restrictions or partial suspension or total shutdown of production; |
• | refusing our requests for 510(k) clearance or premarket approval of new products, new intended uses, or modifications to existing products; |
• | withdrawing 510(k) clearances or premarket approvals or foreign regulatory approvals that have already been granted, resulting in prohibitions on sales of our products; and |
• | criminal prosecution. |
• | fluctuations in our operating results or the operating results of our competitors; |
• | changes in the estimates of the future size and growth rate of our market opportunities; |
• | changes in the general economic, industry and market conditions; |
• | success of competitive technologies and procedures; |
• | recruitment or departure of key personnel; |
• | the announcement of new products or enhancements by us or our competitors; |
• | the commencement or outcome of litigation against us, or involving our general industry or both; |
• | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; |
• | changes in earnings estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ earnings estimates; |
• | developments in our industry, including the announcement of significant new technologies, procedures or acquisitions by us or our competitors; |
• | actual or expected sales of our ordinary shares by the holders of our ordinary shares; and |
• | the trading volume of our ordinary shares. |
• | For ophthalmologists, we are developing a new platform that, in addition to our existing aesthetic handpieces, we expect will assist with the following procedures: |
• | lower and upper eyelid contraction and fat reduction using the AccuTite and Morpheus8 handpieces; and |
• | treatment of periorbital wrinkles and dry eye with a new continuous bi-polar RF energy handpiece. |
• | Our new handpiece to treat dry eye and periorbital wrinkles is currently in clinical trials. We plan to introduce our new product platform for ophthalmologists comprised of three handpieces (AccuTite, Morpheus8 and our new dry eye and periorbital wrinkle treatment handpiece) to the market in 2023. |
• | For ENTs, we are in the initial stage of developing a new platform and handpieces that we believe will provide patients with a medical treatment solution for snoring and rhinitis. The handpiece for treatment of snoring is based on our Deep Subdermal Fractional RF technology and is expected to contract and stiffen the soft palate (located on the back of the roof of the mouth), which blocks the airway, causing tissues to vibrate during sleep. This platform and both handpieces are in the concept design phase. |
• | For urologists, we are in the early-stages of developing a device using RF energy to treat ED (Erectile Dysfunction). We registered a patent application to protect our technological concept, and we believe that our technological concept will work well for this indication but much more research and development is needed. |
• | Small to no incisions, which reduces the drawbacks and risks typically associated with surgical procedures such as significant pain, local or widespread scarring, infection, perforation and hemorrhage. |
• | Outpatient procedures that typically do not require general anesthesia, which can decrease patient downtime, discomfort and other potential complications and typically reduces cost. |
• | Minimally invasive procedures with similar efficacy to surgical procedures that have the ability to expand the addressable patient population for aesthetics procedures. |
• | Effective and long-lasting aesthetic solutions, many of which are supported by compelling clinical data, including 84 peer-reviewed publications. |
• | Differentiated, RF energy-based technology simultaneously kills fat and tightens skin, overcoming the many shortcomings of traditional surgical, minimally and non-invasive aesthetic procedures. |
• | Innovative dual wavelength laser technology that allows for permanent hair reduction on a wider range of skin types and hair textures than other aesthetic solutions currently on the market, reducing the number of treatments required. |
• | Typically less expensive than other aesthetic solutions on the market that provide comparable results as a result of less required physician time and training required. |
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• | Simultaneous non-invasive fat killing and skin tightening. We believe our technology is the first and only RF-based, noninvasive body contouring technology that permanently kills adipose tissue while simultaneously contracting the skin. This technology addresses problematic fatty tissue in large body areas such as the abdomen, back and thighs. Customers use this technology with the Contoura platform and the BodyFX and MiniFX handpieces. |
• | Dual wavelength for permanent hair reduction. Our single-pulse, dual wavelength product for permanent hair reduction, Triton, combines two wavelengths in one platform, overcoming certain limitations of standard lasers. This optimal mix of wavelengths allows the highest efficiency and safety. We believe Triton is the only FDA-cleared, single-pulse, dual wavelength product for permanent hair reduction. Customers use this technology with the Triton Duo Light and Triton Duo Dark handpieces. |
• | High-power Intense Pulsed Light. Our high-power IPL is a breakthrough technology that delivers up to three times more energy than typical IPL devices within the 500 to 600 nanometer, or nm, range to improve efficacy for vascular and pigmented lesions. It is optimized to treat a variety of skin types and conditions in a single session. Customers use this technology with the Optimas platform and the Lumecca handpiece. |
• | Controlled continuous RF heating. We believe our controlled continuous RF technology is the first auto-adjusting non-invasive thermal skin treating technology for deep and uniform tissue stimulation. This technology uses bipolar RF energy delivery that allows uniformity between the electrodes to provide a comfortable thermal effect with immediate and subsequent contraction. Customers use this technology with the Optimas, Votiva, Contoura, Evoke and EvolveX hands-free platforms and EmpowerRF for women’s health. |
i. | A visit by a new physician to one of our many highly qualified plastic surgery facilities for instruction followed by a live patient demonstration; |
ii. | A visit to the new physician’s office by a trained registered nurse or physician’s assistant to attend the first day of treatments to in-service; and |
iii. | Open house workshops organized by us, wherein the new physician invites his or her patient base and we assist him or her in “kick starting” marketing efforts. These events typically secure significant procedural revenues for the physician. |
• | Pioneer of the minimally invasive aesthetic solutions market. We believe our proprietary technologies represent a paradigm shift in the minimally invasive and surgical aesthetic solutions market. We believe our technologies and products demonstrate numerous performance advantages over other aesthetic options and enable physicians and patients to obtain results that can generally only be achieved with more expensive and invasive surgical procedures. Our RF proprietary energy-based technology simultaneously kills fat and tightens skin, overcoming many of the limitations of other surgical, minimally and non-invasive procedures, positioning us to address unmet patient needs and expand the addressable patient population for aesthetic solutions. Although each of our product platforms has a primary handpiece or applicator that is either minimally or non-invasive, our platforms are designed to be modular, which enables the user to provide complementary treatments using a single platform by attaching different handpieces or applicators. |
• | Strong brand recognition. Our brand is associated with product leadership, significant technological advances and extensive clinical data, which has led to strong customer loyalty. Unlike many of our competitors, our technology is not exclusively laser-based or limited to superficial treatment of the skin. Instead, we have developed and commercialized products utilizing medically-accepted RF energy technology, which can penetrate deep into the subdermal fat, allowing adipose tissue remodeling. We believe our brand is synonymous throughout the physician and patient communities with having the broadest RF energy-based portfolio in the minimally invasive aesthetics market for fat destruction and remodeling, face and body contouring and skin tightening. |
• | Provide comprehensive solutions for physicians and patients. We have an extensive product portfolio that includes solutions for a wide range of both minimally and non-invasive procedures across the aesthetic solutions market. For each of our products, we offer post-sales support services including training, installation, practice growth consulting and repair support that minimizes product downtime and associated lost revenues to physicians. |
• | Broad regulatory approvals supported by extensive clinical data. We have 29 FDA clearances and in addition to the United States, are permitted to sell in Europe, Argentina, Australia, Brazil, Canada, China, Colombia, the Commonwealth of Independent States, Israel, Mexico, Panama, Philippines, Russia, South Korea, Taiwan and Thailand. To date, we also have a portfolio of 84 peer-reviewed publications and there are 79 completed and 13 ongoing third-party clinical studies on a number of our products (BodyTite, FaceTite, NeckTite, Optimas, Fractora, Morpheus8, Forma, Lumecca, DiolazeXL, Votiva, Morpheus8V, FormaV, Contoura, BodyFX, MiniFX, Evoke, EvolveX, Morpheus8 and AccuTite). While we did not have any involvement in the clinical studies mentioned above, such studies provide qualitative results that we believe are significant. However, because these were third-party studies, we do not have access to any raw data to conduct any quantitative analyses. We believe our focus on demonstrated clinical data and effectiveness differentiates us from our competition and helps to validate our technology with surgically-trained physicians, who we believe are typically the most difficult segment of the market to penetrate. |
• | Strong management team with proven track record. Our management team has significant expertise in the medical aesthetics industry with a proven track record of successfully developing and commercializing innovative technologies. Moshe Mizrahy and Dr. Michael Kreindel, our co-founders, previously founded Syneron Medical Ltd. Our senior executive team has an average of over 15 years of medical aesthetics industry experience and has served in various leadership positions at Syneron Medical Ltd. and Cynosure, Inc. |
• | Increase our sales presence to target and expand our addressable market globally. We plan to continue to expand our direct sales organization and our distribution network and seek to recruit and train exceptionally talented sales representatives in existing and new markets to help us broaden the adoption of our products, drive further market penetration and expand beyond our traditional customer base. |
• | United States: We have a direct sales presence in United States and plan to keep expanding our direct sales team. |
• | Canada: We have a direct sales presence in Canada and plan to keep expanding our direct sales team. |
• | Europe: We intend to establish sales and marketing organizations and a network of exclusive European distributors (in addition to our subsidiaries network in the United Kingdom, Spain, Italy and France). |
• | Latin America: We plan to enhance our network of exclusive distributors in Argentina, Brazil, Colombia, Mexico, Panama and Chile. |
• | Asia-Pacific: In addition to our direct sales presence in India and Australia, we may also establish direct sales presence in China through our fully-owned subsidiary in Guangzhou, as well as enhance our network of exclusive distributors in Japan, Philippines, South Korea, Taiwan and Thailand. |
• | Continue to further penetrate our existing customer base and drive recurring revenues. We believe that there are opportunities for us to generate additional revenue from existing customers who are already familiar with our products. Additionally, we have experienced growth in the sales of consumables over the past five years. Since inception, we have sold over 1.6 million consumables. We expect that as our customer base grows, the percentage of our revenues attributable to consumables will increase. We also expect that certain customers will be candidates for technology upgrades to enhance the capabilities of their existing InMode products. In addition, as we continue to grow our support services program, we expect to seek to increase the number of customers that enter into extended warranties, which would provide us with additional recurring revenues. |
• | Leverage our existing technology to expand into new minimally and non-invasive applications. We have an active research and development pipeline focused on additional solutions targeted to our traditional customer base. Our near-term product development portfolio consists of new and second generation solutions for various conditions, including wearable, noninvasive face and body reshaping products, cellulite, large area lipolysis, fractional RF treatment of SUI, vaginal laxity pelvic floor muscle restoration, labiaplasty procedures, post-partum treatments and other GSM symptoms, snoring and rhinitis treatments, dry eye and eyelid treatments, TMJ (Temporomandibular Joint Disorders) and ED (Erectile Dysfunction). We launched two new product platforms in 2021 and one of them (EvolveX) replaced our Evolve platform, which we believe will allow us to continue to grow our revenues over the long term and further penetrate the market for aesthetic solutions. Each such product is or will be subject to the FDA regulatory framework, specifically, the FDA’s 510(k) clearance requirements, described in this Annual Report on Form 20-F. |
• | Expand our customer base beyond traditional customers. We intend to develop products that leverage our minimally and non-invasive technologies to address the unmet market needs of a new customer base, which includes OB/gyns, ENTs, ophthalmologists, general practitioners and aesthetic clinicians. We intend to adapt our products to the expertise and skill level of these providers, further expanding our addressable market. |
• | Actively pursue business development opportunities. We may seek to engage in targeted business development activities, including acquisitions of technologies and strategic partnerships, in order to augment our product and technology portfolio in our existing and potentially adjacent markets. We believe we can leverage our global infrastructure and existing relationships to implement a disciplined tuck-in acquisition strategy. |
• | Expand our intellectual properly and patent portfolio. We intend to expand our existing intellectual property and patent portfolio as we develop additional applications and continue to aggressively defend against potential infringement by our competitors. |
Product Platform | Energy Source(s) | Year Introduced | Handpiece(s) | Primary (not Exclusive) Applications* |
BodyTite | Bipolar RF | 2010 | BodyTite | Body Contouring (MI) |
FaceTite | Face Contouring (MI) | |||
NeckTite | Neck Contouring (MI) | |||
AccuTite | Face/Body Contouring (MI) | |||
Optimas | Laser Bipolar RF IPL | 2016 | Morpheus8 | Skin Rejuvenation (MI) |
Forma | Skin Rejuvenation (NI) | |||
Lumecca | Skin Rejuvenation & Pigmentation (NI) | |||
DiolazeXL | Hair Removal (NI) | |||
Vasculaze | Vascular Lesion (NI) | |||
Facial Wrinkles and Texture (MI) | ||||
EmbraceRF | Bipolar RF | 2018 | FaceTite | Face Remodeling (MI) |
Morpheus8 | Facial Wrinkles and Texture (MI) | |||
AccuTite | Face/Body Contouring (MI) | |||
Votiva | Bipolar RF | 2017 | FormaV | Women’s Health (MI) |
Women’s Health (NI) | ||||
Morpheus8 | Bipolar RF | 2021 | Morpheus8 | Face and body fractional RF treatment (MI) |
Morpheus8 Body | ||||
EmpowerRF | Bipolar RF and EMS | 2021 | FormaV, Morpheus8V, VTone, Aviva | Women’s health (MI) |
Product Platform | Energy Source(s) | Year Introduced | Handpiece(s) | Primary (not Exclusive) Applications* |
Contoura | Bipolar RF | 2017 | BodyFX | Body Contouring |
MiniFX | Face/Neck Contouring | |||
Plus | Skin Tightening | |||
Triton | Laser | 2018 | Triton Duo Light | Hair Removal |
Triton Duo Dark | Hair Removal |
Product Platform | Energy Source(s) | Year Introduced | Handpiece(s) | Primary (not Exclusive) Applications* |
EvolveX | Bipolar RF EMS | 2021 | Tite (HF) | Skin Tightening |
Transform (HF) | Body Contouring | |||
Tone (HF) | EMS | |||
Evoke | Bipolar RF | 2020 | Cheek (HF) | Skin Rejuvenation |
Chin (HF) | Skin Rejuvenation |
* | “MI” = Minimally Invasive, “NI” = Non-Invasive, “HF” = Hands-free application |
• | product design and development; |
• | product testing; |
• | product manufacturing; |
• | product safety; |
• | product labeling; |
• | product storage; |
• | record-keeping; |
• | premarket clearance or approval; |
• | advertising and promotion; |
• | manufacturing and production; |
• | product sales and distribution; |
• | import, export and shipping; |
• | establishment registration and device listing; and |
• | recalls, field-safety corrective actions and post-market surveillance. |
Product Platform | Energy Source | Handpiece | FDA 510(k) Clearance and Cleared Indications |
InMode Multi System (interface screen was slightly enlarged from 10 inch to 12 inch) | Radiofrequency (RF), Laser, IPL | Laser Applicators: • Diolaze XL 810nm • Diolaze XL 755/810nm • Diolaze XL 810/1064nm • VLaze (Vasculaze) • IPL Applicator: • SR IPL (Lumecca 580, Lumecca 515) Non-Invasive RF Applicators: • Forma (Plus) • Plus (Plus Plus) • Plus90 • i-Forma • BodyFX™ (WMBody) • MiniFX™ • WMFace Fractional RF Applicators: Fractora • 24 pins tip (FRF) • 60 pins tip • Morpheus8™ • 12 pins tip (Prime Tip) • 24 pins tip )Fractora 3D) • 40 pins tip (Body Tip) • T tip | K221571 (05/26/2022) The InMode Multi System with the Diode laser Applicators is indicated for: • Diolaze XL 810nm Applicator is intended for hair removal and permanent hair reduction defined as the stable, long-term reduction in hair counts at 6, 9, or 12 months following a treatment regime. • Diolaze XL 755/810nm & 810/1064nm Applicators are intended for hair removal. • VLaze Applicator is intended for the treatment of vascular lesions, including angiomas, hemangiomas, telangiectasia, port wine stains, leg veins and other benign vascular lesions. The InMode Multi System with the IPL Applicator is indicated for: • IPL Applicator with wavelengths (515-l200nm) is indicated for use for the following treatments: The treatment of benign pigmented epidermal lesions, including dyschromia, hyperpigmentation, melasma, ephelides (freckles); The treatment of benign cutaneous vascular lesions, including port wine stains, facial, truncal and leg telangiectasias, rosacea, erythema of rosacea, angiomas and spider angiomas, poikiloderma of Civatte, superficial leg veins and venlous malformations. The InMode Multi System with the non-invasive RF Applicators is indicated for: • BodyFX (WMBody) and MiniFX Applicators are intended for the treatment of the following medical conditions: Relief of minor muscle aches and pains, relief of muscle spasm, temporary improvement of local blood circulation; and temporary reduction in the appearance of cellulite. • PLUS/ PLUS90/PLUS-PLUS (FORMA) and i-Forma Applicators are indicated for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation. • FaceFX (WMFace) Applicator is intended for use in dermatologic procedures, for noninvasive treatment of mild to moderate facial wrinkles and rhytids The InMode Multi System with the Fractional RF Applicators is indicated for: • FRACTORA 60 pin Applicator is intended for use in dermatological procedures requiring ablation and resurfacing of the skin. • FRF 24 pin Applicator is intended for use in dermatologic and general surgical procedures for electrocoagulation and hemostasis. Fractora3D and Morpheus8 Applicators are intended for use in dermatologic and general surgical procedures for electrocoagulation and hemostasis. At higher energy levels greater than 62 mJ/pin, use is limited to Skin Types I-IV. |
InMode RF Multi Platform – Contoura | Radiofrequency (RF) | Forma(Plus), Plus90, Plus(Plus-Plus) BodyFX, MiniFX, Wmface, Fractora 24 pins tip Fractora 60 pins tip Morpheus8 24 Pin Applicator Morpheus8 40 Pin treatment tip • Morpheus8 12 Pin treatment tip • Morpheus8 T Pin treatment tip | K201150 (07/21/2020) |
The InMode RF Multi-System with the Non-invasive RF Applicators employs RF energy for various applications: | |||
• Forma (Plus), Plus (Plus Plus) and Plus90 for relief of minor muscle aches and pain, relief of muscle spasm, and temporary improvement of local blood circulation. • WMface is intended for use in dermatologic procedures for non-invasive treatment of mild to moderate facial wrinkles and rhytids. • BodyFX™ (WMBody)/MiniFX™ for relief of minor muscle aches and pain, relief of muscle spasm, temporary improvement of local blood circulation and temporary reduction in the appearance of cellulite. | |||
The InMode RF Multi-System with the Fractional Applicators employs RF energy for various applications: |
• Fractora Applicator with 60 pins tip is designed for use in dermatological procedures requiring ablation and resurfacing of the skin. | |||
• Fractora Applicator with 24 pins tip is intended for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. At higher energy levels greater than 62mJ/pin, use of the applicator is limited to skin types I-IV. | |||
• Morpheus8™ for dermatological and general surgical procedures for electrocoagulation and hemostasis. At higher energy levels greater than 62mJ/pin, use of the applicator is limited to skin types I-IV. | |||
Inmode | Powered muscle stimulator | Tone | K192249 (12/17/2019) |
The Evolve platform is used in EMS mode for: | |||
• prevention or retardation of disuse atrophy; • maintaining or increasing range of motion; • muscle re-education; • relaxation of muscle spasms; • increasing local blood circulation; and • immediate postsurgical stimulation of calf muscles to prevent venous thrombosis. |
And in TENS mode for: | |||
• symptomatic relief and management of chronic, intractable pain; • post-surgical acute pain; and • post-traumatic acute pain. |
Product Platform | Energy Source | Handpiece | FDA 510(k) Clearance and Cleared Indications |
InMode | Powered muscle stimulator | vTone | K200293 (05/05/2020) |
The InMode System with the vTone Applicator is intended to provide electrical stimulation and neuromuscular re-education for the purpose of rehabilitation of weak pelvic floor muscles for the treatment of stress, urge, and mixed urinary incontinence in women. | |||
EmFace (Evoke) | Radiofrequency (RF) | Cheek Chin | K191855 (10/29/2019) |
The EmFace (Evoke) device with the Cheek and Chin applicators is indicated for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation. | |||
EmBody (Evolve) | Radiofrequency (RF) | EMBodyPlus – Tite EmBodyFX – Trim | K183450 (06/20/2019) |
The EmBody (Evolve) platform with its designated applicators is intended for the treatment of the following medical conditions: | |||
The EmBodyPlus (Tite) hands-fee applicator is intended for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation. | |||
The EmBodyFX(Tite) hands-free applicator is intended for the treatment of the following medical conditions using RF combined with massage: |
• relief of minor muscle aches and pain, relief of muscle spasm, and temporary improvement of local blood circulation; and • temporary reduction in the appearance of cellulite. | |||
InMode RF / BodyTite / EmbraceRF | Radiofrequency (RF) | Bodyrite minimally invasive handpiece for thick body areas (>20mm) | K171593 (10/10/2017) |
The InMode RFIBodyTitel EmbraceRF platform with the minimally invasive Bodyrite handpiece for thick body areas is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. |
Product Platform | Energy Source | Handpiece | FDA 510(k) Clearance and Cleared Indications |
InMode RF / Bodyrite / EmbraceRF | Radiofrequency (RF) | Bodyrite minimally invasive handpiece for thin body areas (<20mm) or for large specialty areas | K163190 (12/12/2016) |
The InMode RFIBodyTitel EmbraceRF platform with the minimally invasive Bodyrite handpiece for thin body and large specialty areas is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. | |||
InMode RF / EmbraceRF | Radiofrequency (RF) | FaceTite | K151793 (02/19/2016) |
The InMode RF/EmbraceRF platform with the FaceTite handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. | |||
Optimas / InMode RF | Radiofrequency (RF) | Fractora (60 pin tip) | K102461 (06/02/2011) |
The Optimas/InMode RF platform with the Fractora 60 pin tip handpiece is indicated for use in dermatological procedures requiring ablation and resurfacing of the skin. | |||
Optimas / InMode RF / EmbraceRF | Radiofrequency (RF) | Fractora (24 pin tip) FractoraV | K151273 (01/04/2016) |
The OptimaslInMode RFI EmbraceRF platform with the Fractora 24 pin tip handpiece is indicated for use in dermatologic and general surgical procedures for electrocoagulation and hemostasis. | |||
Optimas | Radiofrequency (RF) | Morpheus8 | K180189 (06/01/2018) |
The Optimas platform with the Morpheus8 handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and homeostasis. | |||
InMode RF | Radiofrequency (RF) | Morpheus8 24 Pin Applicator | K192695 (12/27/2019) |
Morpheus8 40 Pin treatment tip (New tip) • Morpheus8 12 Pin treatment tip (New tip) • Morpheus8 T Pin treatment tip (New tip) (maximal treatment depth 4.00 mm) | The InMode System with the Morpheus8 (Fractora) Applicators is intended for use in dermatological procedures for electrocoagulation and hemostasis. At higher energy levels greater than 62 mJ/pin, use of the Morpheus8 (Fractora) Applicator is limited to Skin Types I-IV. | ||
InMode | Radiofrequency (RF) | Morpheus8 24 Pin Applicator Morpheus8 40 Pin treatment tip (New tip) • Morpheus8 12 Pin treatment tip (New tip) • Morpheus8 T Pin treatment tip (New tip) maximal treatment depth 7.00 mm) | K200947 (06/12/2020) |
The InMode System with the Morpheus8 Applicators is intended for use in dermatological procedures for electrocoagulation and hemostasis. At higher energy levels greater than 62 mJ/pin, use of the Morpheus8 (Fractora) Applicator is limited to Skin Types I-IV. | |||
EmBody (Evolve) | Radiofrequency (RF) | Tone | K201285 (03/05/2021) The EmBody (Evolve) platform with its designated applicators is intended for the treatment of the following medical conditions: The EmBody (Evolve) System with Tone Applicator is designed to operate in two modes – EMS and TENS. In EMS mode it is used for: • Relaxation of muscle spasms • Prevention or retardation of disuse atrophy • Increasing local blood circulation • Muscle re-education • Maintaining or increasing range of motion • Immediate postsurgical stimulation of calf muscles to prevent venous thrombosis And in TENS mode is intended for: • Symptomatic relief and management of chronic, intractable pain • Post-surgical acute pain • Post-trauma acute pain |
EmBody (Evolve) | Radiofrequency (RF) | EMBodyPlus – Tite T3-Transform | K210877 (07/19/2021) The EvolveX System with the T3 Applicator employs RF technology or EMS-TENS technology for the treatment of selected medical conditions. The T3 Applicator in RF mode is intended for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation. The T3 Applicator in EMS mode is intended for: • Relaxation of muscle spasms • Prevention or retardation of disuse atrophy • Increasing local blood circulation • Muscle re-education • Maintaining or increasing range of motion • Immediate postsurgical stimulation of calf muscles to prevent venous thrombosis The T3 Applicator in TENS mode is intended for: • Symptomatic relief and management of chronic, intractable pain • Post-surgical acute pain • Post-trauma acute pain The RF treatment mode and EMS/TENS mode should not be used in combination or sequentially. |
InMode RF Pro Platform – Empower | Radiofrequency (RF) | i-Forma Forma(Plus), Plus90, Plus(Plus-Plus) BodyFX, MiniFX, Wmface, Fractora 24 pins tip Fractora 60 pins tip Morpheus8 24 Pin Applicator Morpheus8 40 Pin treatment tip • Morpheus8 12 Pin treatment tip • Morpheus8 T Pin treatment tip | K201150 (07/21/2021) The InMode RF Pro System with the Non-invasive RF Applicators employs RF energy for various applications: • i-Forma, Forma (Plus), Plus (Plus Plus) and Plus90 for relief of minor muscle aches and pain, relief of muscle spasm, and temporary improvement of local blood circulation. • WMface is intended for use in dermatologic procedures for non-invasive treatment of mild to moderate facial wrinkles and rhytids. • BodyFX™ (WMBody)/MiniFX™ for relief of minor muscle aches and pain, relief of muscle spasm, temporary improvement of local blood circulation and temporary reduction in the appearance of cellulite. The InMode RF Multi-System with the Fractional Applicators employs RF energy for various applications: • Fractora Applicator with 60 pins tip is designed for use in dermatological procedures requiring ablation and resurfacing of the skin. • Fractora Applicator with 24 pins tip is intended for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. At higher energy levels greater than 62mJ/pin, use of the applicator is limited to skin types I-IV. • Morpheus8™ for dermatological and general surgical procedures for electrocoagulation and hemostasis. At higher energy levels greater than 62mJ/pin, use of the applicator is limited to skin types I-IV. |
Product Platform | Energy Source | Handpiece | FDA 510(k) Clearance and Cleared Indications |
InMode RF / EmbraceRF | Radiofrequency (RF) | AccuTite | K182325 (08/27/2018) The InMode RFI EmbraceRF platform with the AccuTite handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. |
Contoura / Optimas | Radiofrequency (RF) | Plus Plus90 Plus-Plus | K172302 (12/08/2017) The Contoura/Optimas platform with the Forma Plus, Plus90, Plus-Plus handpieces is indicated for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation. |
Optimas | Intense Pulsed Light (IPL) | Lumecca 515 Lumecca 580 | K123860 (04/02/2013) The Optimas platform with the Lumecca 515 and Lumecca 580 handpieces is indicated for: • the treatment of benign pigmented epidermal lesions, including dyschrornia, hyperpigmentation, melasma, ephelides (freckles); and • the treatment of benign cutaneous vascular lesions, including port wine stains, facial truncal and leg telangiectasias, rosacea, erythema of rosacea, angiomas and spider angiomas, poikilodenna of civatte, superficial leg veins and venous malformations. |
Triton / Optimas | Laser | DiolazeXL | K170738 (08/07/2017) The Triton/Optimas platform with the DiolazeXL handpiece is indicated for hair removal and permanent hair reduction defined as stable, long-term reduction in hair counts at six, nine or 12 months following a treatment regime. |
Triton / Optimas | Powered Laser | Vasculaze | K173677 (02/23/2018) The Triton/Optimas platform with the Vasculaze handpiece is indicated for the treatment of vascular lesions, including angiomas, hemangiomas, telangiectasia, port wine stains, leg veins and other benign vascular lesions. |
Votiva | Radiofrequency (RF) | FormaV | f (07/12/2016)* The InMode Plus90 (Votiva) platform with the Forma Vhandpiece is indicated for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation. |
Product Platform | Energy Source | Handpiece | FDA 510(k) Clearance and Cleared Indications |
Contoura / Optimas | Radiofrequency (RF) | BodyFX | K131362 (10/08/2013) The Contoura/Optimas platform with the BodyFX handpiece is indicated for the treatment of: • relief of minor muscle aches and pains, muscle spasms and temporary improvement of blood circulation; and • temporary reduction in the appearance of cellulite. |
Contoura / Optimas | Radiofrequency (RF) | MiniFX | K160329 (08/19/2016) The Contoura/Optimas platform with the MiniFX handpiece is indicated for the treatment of: • relief of minor muscle aches and pain, muscle spasms, and temporary improvement of local blood circulation; and • temporary reduction in the appearance of cellulite. |
Triton / Optimas | Laser | Triton Duo Light/ Triton Duo Dark InMode Diolaze XL 755/810nm InMode Diolaze XL 810/1064nm InMode Diolaze XL 810nm | K180719 (06/14/2018) The Triton/Optimas platform with the Triton Duo Light and Triton Duo Dark handpieces is indicated for hair removal and permanent hair reduction. |
InMode | Laser | Diolaze | K142952 (11/24/2014) The InMode Diolaze device is indicated for use for hair removal and for permanent reduction in hair regrowth, defined as the long-term, stable reduction in the number of hairs regrowing when measured at 6, 9, and 12 months after the completion of a treatment regime |
InMode | Laser | Diolaze | K123682 (27/02/2013) The InMode Diolaze device is indicated for use for hair removal |
InMode | Radiofrequency (RF) | WMface | k140926 (12/03/2014) The InMode WMface device is intended for use in dermatologic procedures for noninvasive treatment of mild to moderate facial wrinkles and rhytids. |
* | In addition to the 510(k) clearance, we also market the FormaV for use with the Votiva platform pursuant to a classification regulation for “genital vibrators for therapeutic use” under 21 C.F.R. 884.5960, which permits “electronically operated devices intended and labeled for therapeutic use in the treatment of sexual dysfunction or as an adjunct to Kegel’s exercise (tightening of the muscles of the pelvic floor to increase muscle tone)” to be marketed without a 510(k) clearance. |
• | QSR, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process; |
• | clearance or approval of product modifications to 510(k)-cleared or PMA-approved devices that could affect safety or effectiveness; |
• | labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses; |
• | advertising and promotion requirements; |
• | medical device reporting regulations, which require that manufacturers report to the FDA if their devices may have caused or contributed to deaths or serious injuries or malfunctioned in ways that would likely cause or contribute to deaths or serious injuries if the malfunctions were to recur; |
• | medical device correction and removal reporting regulations, which require the manufacturers to report to the FDA corrections and removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; and |
• | post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the devices. |
• | warning or untitled letters, fines, injunctions, consent decrees and civil penalties; |
• | unanticipated expenditures, repair, replacement, refunds, recalls, administrative detention or seizure of products; |
• | operating restrictions, partial suspension or total shutdown of production; |
• | refusing requests for 510(k) clearance or PMAs of new products or new intended uses; |
• | withdrawing 510(k) clearance or PMAs that have already been granted; and |
• | criminal prosecution. |
• | strengthen the rules on placing devices on the market and reinforce surveillance once they are available; |
• | establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; |
• | improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; |
• | set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and |
• | strengthened the rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market. |
Name | Jurisdiction of Incorporation | Percentage Ownership |
Invasix Inc. | Delaware, USA | 100% |
Invasix Corp. | Canada | 100% |
InMode M.D. Ltd. | Israel | 100% |
Invasix UK Ltd. | United Kingdom | 100% |
InMode Japan KK | Japan | 100% |
Invasix Iberia S.L. | Spain | 100% |
Guangzhou InMode Medical Technology Ltd. | China | 100% |
InMode Asia Limited. | Hong Kong | 100% |
InMode India Private Limited | India | 100% |
InMode Australia Pty Ltd | Australia | 100% |
IMD France EURL | France | 100% |
InMode Innovations Ltd. | Israel | 100% |
InMode Italy S.r.l | Italy | 100% |
D. | Property, Plants and Equipment |
Years Ended December 31, | ||||||||
Geographic region | 2022 | 2021 | ||||||
United States | 66 | % | 66 | % | ||||
Europe | 11 | % | 10 | % | ||||
International | 23 | % | 24 | % | ||||
Total | 100 | % | 100 | % |
Years Ended December 31, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
($) | (% of Revenues) | ($) | (% of Revenues) | |||||||||||||
(in thousands) | ||||||||||||||||
Revenues | 454,271 | 100 | 357,565 | 100 | ||||||||||||
Cost of revenues | 73,485 | 16 | 53,592 | 15 | ||||||||||||
Gross profit | 380,786 | 84 | 303,973 | 85 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 12,425 | 3 | 9,532 | 3 | ||||||||||||
Sales and marketing | 160,576 | 35 | 119,353 | 33 | ||||||||||||
General and administrative | 9,931 | 2 | 8,411 | 2 | ||||||||||||
Other income | - | - | (800 | ) | 0 | |||||||||||
Total operating expenses | 182,932 | 40 | 136,496 | 38 | ||||||||||||
Income from operations | 197,854 | 44 | 167,477 | 47 | ||||||||||||
Finance income, net | 3,612 | 1 | 525 | 0 | ||||||||||||
Income before taxes | 201,466 | 45 | 168,002 | 47 | ||||||||||||
Income taxes | 39,946 | 9 | 2,928 | 1 | ||||||||||||
Net income | 161,520 | 36 | 165,074 | 46 | ||||||||||||
Add: Loss (net income) attributable to non-controlling interests | - | - | (103 | ) | 0 | |||||||||||
Net income attributable to InMode Ltd. | 161,520 | 36 | 164,971 | 46 |
Years ended December 31, | ||||||||
2022 | 2021 | |||||||
Net cash provided by (used in): | (in thousands) | |||||||
Operating activities | $ | 181,578 | $ | 174,885 | ||||
Investing activities | (109,474 | ) | (160,106 | ) | ||||
Financing activities | (41,085 | ) | (15,022 | ) | ||||
Effects of exchange rate changes on cash | (1,615 | ) | (559 | ) | ||||
Net increase (decrease) in cash and cash equivalents | $ | 29,404 | $ | (802 | ) |
A. | Directors and Senior Management |
Name | Age | Position | ||
Moshe Mizrahy | 70 | Chief Executive Officer and Chairman of Board of Directors | ||
Yair Malca | 45 | Chief Financial Officer | ||
Dr. Michael Kreindel | 56 | Chief Technology Officer and Director | ||
Shakil Lakhani | 40 | President, North America | ||
Dr. Hadar Ron, M.D.(1)(2) | 64 | Director | ||
Bruce Mann(1)(2) | 88 | Director | ||
Dr. Michael Anghel(1)(2) | 84 | Director |
Board Diversity Matrix | ||||
Country of Principal Executive Offices: | Israel | |||
Foreign Private Issuer | Yes | |||
Disclosure Prohibited under Home Country Law | No | |||
Total Number of Directors | 5 | |||
Female | Male | Non- Binary | Did Not Disclose Gender | |
Part I: Gender Identity | ||||
Directors | 1 | 4 | 0 | 0 |
Part II: Demographic Background | ||||
Underrepresented Individual in Home Country Jurisdiction | 0 | |||
LGBTQ+ | 0 | |||
Did Not Disclose Demographic Background | 0 |
B. | Compensation |
Name and Principal Position | Salary (1) (USD in thousands) | Bonus (USD in thousands) | Equity-Based Compensation (2) (USD in thousands) | Total (USD in thousands) | |||||||||
Shakil Lakhani President, North America (3) | $ | 893 | $ | 2,075 | $ | 1,844 | $ | 4,812 | |||||
Yair Malca Chief Financial Officer (4) | $ | 358 | $ | 116 | $ | 1,468 | $ | 1,942 | |||||
Alon Yaari VP Operations (5) | $ | 259 | $ | 22 | $ | 529 | $ | 810 | |||||
Nava Tal-Launer Chief Information Officer (6) | $ | 186 | $ | 13 | $ | 164 | $ | 363 | |||||
Dr. Michael Kreindel Chief Technology Officer and Director | $ | 221 | $ | - | $ | - | $ | 221 |
(1) | Salary includes Covered Executives’ gross salary plus payment of social benefits made by us on behalf of such Covered Executive. Such benefits may include, to the extent applicable to the Covered Executive, payments, pension, car expenses, medical and other insurances, 401K company contribution, payments for social security and tax gross-up payments, vacation and other benefits consistent with our policies. |
(2) | Represents the share-based compensation expenses recorded in our consolidated financial statements for the year ended December 31, 2022, based on the Share-based Compensation fair value, calculated in accordance with accounting guidance for share-based compensation. For a discussion of the assumptions used in reaching this valuation, see Note 13 to our consolidated financial statements. |
(3) | On February 9, 2022, Mr. Lakhani was granted with 35,000 RSUs under our 2018 Incentive Plan, of which 17,500 were vested as of December 31, 2022. On May 1, 2022, Mr. Lakhani was further granted with 19,000 RSUs under our 2018 Incentive Plan, of which 14,250 were vested immediately. |
(4) | On February 9, 2022, Mr. Malca was granted with 32,000 RSUs under our 2018 Incentive Plan, of which 16,000 were vested as of December 31, 2022. |
(5) | On February 9, 2022, Mr. Yaari was granted with 10,000 RSUs under our 2018 Incentive Plan, of which 5,000 were vested as of December 31, 2022. |
(6) | On February 9, 2022, Ms. Tal-Launer was granted with 3,300 RSUs under our 2018 Incentive Plan, of which 1,650 were vested as of December 31, 2022. |
C. | Board Practices |
• | such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in approving such resolution that are voted at the meeting, excluding abstentions; or |
• | the total number of shares voted by non-controlling shareholders and by shareholders who do not have a personal interest against approving such resolution does not exceed 2% of the aggregate voting rights in the company. |
• | oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law; |
• | recommending the engagement or termination of the person filling the office of our internal auditor; and |
• | recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors. |
• | determining whether there are deficiencies in the business management practices of the Company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices; |
• | determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether such transaction is extraordinary or material under the Companies Law) (see “—Approval of Related Party Transactions under Israeli Law—Office Holders”); |
• | establishing the approval process (including by conducting competitive proceedings) for certain transactions with a controlling shareholder or in which a controlling shareholder has a personal interest; |
• | where the board of directors approves the working plan of the internal auditor, examining such working plan before its submission to the board of directors and proposing amendments thereto; |
• | examining our internal audit controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to fulfill his responsibilities; |
• | examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or shareholders, depending on which of them is considering the appointment of our auditor; and |
• | establishing procedures for the handling of employees’ complaints as to deficiencies in the management of our business and the protection to be provided to such employees. |
• | the education, skills, expertise and accomplishments of the relevant office holder; |
• | the office holder’s roles and responsibilities and prior compensation agreements with him or her; |
• | the ratio between the cost of the terms offered and the cost of the employment of other employees of the company, including those employed through outsourcing firms, in particular the ratio between such cost to the average and median salary of such employees of the company; |
• | the impact of disparities in salary upon work relationships in the company; |
• | the possibility of reducing variable compensation at the discretion of the board of directors; |
• | the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and |
• | as to severance compensation, the period of service of the office holder, the terms of his or her compensation during such service period, the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company. |
• | with the exception of office holders who report directly to the chief executive officer, determining the link between variable compensation and long-term performance and measurable criteria; however, the company may determine that an immaterial part of the variable components of an office holder’s compensation package shall be awarded based on non-measurable criteria, if such amount is not higher than three months’ salary per annum, while taking into account such office holder’s contribution to the company; |
• | the ratio between variable and fixed compensation, and the ceiling for the value of variable compensation at the time of their payment, or in the case of share-based compensation, at the time of grant; |
• | the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was restated in the company’s financial statements; |
• | the minimum holding or vesting period for variable, equity-based compensation while referring to an appropriate long-term perspective based incentives; and |
• | maximum limits for retirement payments. |
• | recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than five years from the company’s initial public offering, or otherwise three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur five years from the company’s initial public offering, or otherwise every three years); |
• | recommending to the board of directors periodic updates to the compensation policy; |
• | assessing implementation of the compensation policy; |
• | determining whether to approve the terms of compensation of certain office holders which, according to the Companies Law, require the committee’s approval; |
• | determining whether the compensation terms of a candidate for the position of the chief executive officer of the company needs to be brought to approval of the shareholders according to the Companies Law; and |
• | determining, subject to the approval of the board of directors and under special circumstances, whether to override a determination of the company's shareholders regarding certain compensation related issues. |
• | the responsibilities set forth in the compensation policy; |
• | reviewing and approving the granting of options and other incentive awards to the extent such authority is delegated by our board of directors; and |
• | reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors. |
• | overseeing our corporate governance functions on behalf of the board; |
• | making recommendations to the board regarding corporate governance issues; |
• | identifying and evaluating candidates to serve as our directors consistent with the criteria approved by the board; |
• | reviewing and evaluating the performance of the board; |
• | serving as a focal point for communication between director candidates, non-committee directors and our management; |
• | selecting or recommending to the board for selection candidates to the board; and |
• | making other recommendations to the board regarding affairs relating to our directors. |
• | a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights; |
• | a person (or a relative of a person) who has the power to appoint a director or the general manager of the company (i.e., the chief executive officer); |
• | an office holder (including a director) of the company (or a relative thereof); or |
• | a member of the company’s independent accounting firm, or anyone on its behalf. |
• | extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest; and |
• | transactions for the provision of services, whether directly or indirectly, by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, and transactions concerning the terms of engagement of a controlling shareholder or a controlling shareholder’s relative, whether as an office holder or an employee. |
• | at least a majority of the shares held by the shareholders who have no personal interest in the transaction and are present and voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or |
• | the total shareholdings of those who have no personal interest in the transaction and who vote against the transaction must not represent more than 2% of the aggregate voting rights in the company. |
• | an amendment to the articles of association; |
• | an increase in the company’s authorized share capital; |
• | a merger; or |
• | approval of related party transactions and acts of office holders that require shareholder approval. |
• | a monetary liability incurred by or imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitration award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount, or according to criteria, determined by the board of directors as reasonable under the circumstances. Such undertaking shall detail the foreseen events and amount or criteria mentioned above; |
• | reasonable litigation expenses, including reasonable attorneys’ fees, incurred by the office holder (i) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against such office holder as a result of such investigation or proceeding, and (b) no financial liability was imposed upon him or her as a substitute for a criminal proceeding against them as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that did not require proof of criminal intent; and (ii) in connection with a monetary sanction; |
• | reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent; |
• | expenses incurred by the office holder with respect to proceedings held pursuant to certain provisions of the Economic Competition Law; |
• | a monetary liability imposed on the office holder in favor of a payment for a breach offended at an Administrative Procedure (as defined below) as set forth in Section 52(54)(a)(1)(a) of the Securities Law; |
• | expenses expended by the office holder with respect to an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees; and |
• | any other obligation or expense in respect of which it is permitted or will be permitted under applicable law to indemnify an office holder, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities law. |
• | a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company; |
• | a breach of the duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; |
• | a financial liability imposed on the office holder in favor of a third party; |
• | expenses incurred by the office holder with respect to proceedings held pursuant to certain provisions of the Economic Competition Law; |
• | a monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and |
• | expenses incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees. |
• | a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company; |
• | a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
• | an act or omission committed with intent to derive illegal personal benefit; or |
• | a fine, civil fine, monetary sanction or forfeit levied against the office holder. |
D. | Employees |
E. | Share Ownership |
Name of Beneficial Owner: | Number of Ordinary Shares | Percentage(1) | ||||||
Directors and Named Executive Officers | ||||||||
Dr. Michael Kreindel(2) | 3,464,762 | 4.19 | % | |||||
Moshe Mizrahy(3) | 2,894,030 | 3.50 | % | |||||
Dr. Hadar Ron, M.D.(4) | 99,030 | * | ||||||
Bruce Mann(5) | 20,270 | * | ||||||
Dr. Michael Anghel (6) | 15,000 | * | ||||||
Yair Malca(7) | 97,661 | * | ||||||
Shakil Lakhani(8) | 54,360 | * | ||||||
Total for all directors and executive officers as a group (7 persons) | 6,465,113 | 8.03 | % |
* | Represents less than 1.0%. |
(1) | Percentage ownership is based on 82,544,991 ordinary shares outstanding (excluding treasury shares) as of December 31, 2022, and (ii) restricted share units and options to purchase ordinary shares in a total of 143,000 exercisable within 60 days of December 31, 2022, of our officers, directors and major shareholders (see “Item 7A. Major Shareholders and Related Party Transactions-Major Shareholders”). |
(2) | Consists of 3,464,762 ordinary shares. |
(3) | Consists of 2,894,030 ordinary shares. |
(4) | Consists of: (i) 67,030 ordinary shares, (ii) options to purchase 30,000 ordinary shares exercisable within 60 days of December 31, 2022, with an exercise price of $7. These options expire on August 13, 2026, and (iii) 2,000 restricted share units vested within 60 days of December 31, 2022. |
(5) | Consists of: (i) 18,270 ordinary shares, and (ii) 2,000 restricted share units vested within 60 days of December 31, 2022. |
(6) | Consists of: (i) 1,000 ordinary shares, (ii) options to purchase 12,000 ordinary shares exercisable within 60 days of December 31, 2022, with an exercise price of $7. These options expire on August 13, 2026, and (ii) 2,000 restricted share units vested within 60 days of December 31, 2022. |
(7) | Consists of: (i) 36,661 ordinary shares, (ii) options to purchase 30,000 ordinary shares exercisable within 60 days of December 31, 2022, with an exercise price of $9.85. These options expire on March 14, 2027, and (iii) 31,000 restricted share units vested within 60 days of December 31, 2022. |
(8) | Consists of (i) 20,360 ordinary shares, (ii) 34,000 restricted share units vested within 60 days of December 31, 2022. |
A. | Major Shareholders |
Number of Ordinary Shares | Percentage | |||||||
BoomerangFX International SRL (1) | 4,821,193 | 5.83 | % |
(1) | BoomerangFX International SRL, a Barbados society with restricted liability (“BoomerangFX”), directly owned 4,821,193 ordinary shares of the Company. BoomerangFX is a wholly owned direct subsidiary of I.V.C. Enterprises SRL, a Barbados society with restricted liability (“IVC”), which is a wholly owned direct subsidiary of DRM2 Investments SRL (formerly NEV Property Investments SRL), a Barbados society with restricted liability (“DRM2”). DRM2 is 100% owned by Dr. Stephen Mulholland (together with DRM2, IVC and BoomerangFX, the “Reporting Persons”). Although the ordinary shares are directly owned by BoomerangFX, each of the Reporting Persons may be deemed to beneficially own such ordinary shares. The address for each of the reporting persons is #15 Maxwell Main Road, Christ Church, Barbados BB15042. |
B. | Related Party Transactions |
C. | Interests of Experts and Counsel |
A. | Consolidated Statements and other Financial Information |
B. | Significant Changes |
A. | Offer and Listing Details |
B. | Plan of Distribution |
C. | Markets |
D. | Selling Shareholders |
E. | Dilution |
F. | Expenses of the Issue |
A. | Share Capital |
B. | Articles of Association |
C. | Material Contracts |
D. | Exchange Controls |
E. | Taxation |
• | amortization of the cost of purchased know-how, patents and certain other intangible property rights (other than goodwill), which are used for the development or promotion of the Industrial Enterprise, over an eight-year period for tax purposes, commencing in the year where the Industrial Company began to utilize them; |
• | accelerated depreciation rates on equipment and buildings; |
• | under specified conditions, an election to file consolidated tax returns with additional related Israeli Industrial Companies; and |
• | expenses related to a public offering are deductible in equal amounts over three years, beginning from the year of the offering. |
• | a citizen or resident of the United States; |
• | a corporation created or organized in or under the laws of the United States or any political subdivision thereof, including the District of Columbia; |
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust if the trust has elected validly to be treated as a United States person for U.S. federal income tax purposes or if a U.S. court is able to exercise primary supervision over the trust’s administration and one or more United States persons have the authority to control all of the trust’s substantial decisions. |
• | insurance companies; |
• | dealers in stocks, securities or currencies; |
• | financial institutions and financial services entities; |
• | real estate investment trusts; |
• | regulated investment companies; |
• | partnerships and other pass-through entities, and investors in such entities; |
• | persons that receive ordinary shares as compensation for the performance of services; |
• | tax-exempt organizations; |
• | persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument or persons entering into a constructive sale with respect to the ordinary shares; |
• | persons subject to special tax accounting rules under Section 451(b) of the Code; |
• | individual retirement and other tax-deferred accounts; |
• | expatriates of the United States; |
• | persons having a functional currency other than the U.S. dollar; and |
• | direct, indirect or constructive owners of 10% or more of our ordinary shares and/or other equity by vote or value. |
F. | Dividends and Paying Agents |
G. | Statement by Experts |
H. | Documents on Display |
I. | Subsidiary Information |
B. | Warrants and Rights |
C. | Other Securities |
D. | American Depositary Shares |
Year ended December 31, | ||||||||
2022 | 2021 | |||||||
USD, in thousands | ||||||||
Audit fees(1) | 564 | 457 | ||||||
Audit-related fees(2) | — | — | ||||||
Tax fees(3) | 108 | 80 | ||||||
Other fees | — | — | ||||||
Total | 672 | 537 |
(1) | Audit fees consist of fees billed or expected to be billed for the annual audit services engagement and other audit services, which are those services that only the external auditor can reasonably provide, and include the Company audit; statutory audits; comfort letters and consents; attest services; and assistance with and review of documents filed with the SEC. |
(2) | Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements or that are traditionally performed by the external auditor, and include consultations concerning financial accounting and reporting standards; internal control reviews of new systems, programs and projects; review of security controls and operational effectiveness of systems; review of plans and control for shared service centers, due diligence related to acquisitions; accounting assistance and audits in connection with proposed or completed acquisitions; and employee benefit plan audits. |
(3) | Tax fees include fees billed for tax compliance services that were rendered during the most recent fiscal year, including the preparation of original and amended tax returns and claims for refund; tax consultations, such as assistance and representation in connection with tax audits and appeals, tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing authority; tax planning services; and expatriate tax planning and services. |
Period | (a) Total Number of Shares (or Units Purchased) | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Share Repurchase Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Publicly Announced Share Repurchase Plans or Programs |
February 15, 2022 – February 28, 2022 | 290,000 | $43.15 | 290,000 | 229,384(1) |
March 1, 2022 – March 17, 2022 | 787,213 | $38.27 | 787,213 | 442,171(2) |
Total | 1,077,213 | $39.58 | 1,077,213 | 442,171 |
• | Quorum. As permitted under the Companies Law and pursuant to our amended and restated articles of association, the quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law, who hold at least 25% of the voting rights in the Company (and in an adjourned meeting, with some exceptions, at least one shareholder holding any number of the voting rights in the Company), instead of 33 1/3% of the issued share capital required under Nasdaq rules. A proxy may be deemed to be two (2) or more shareholders pursuant to the number of shareholders represented by the proxy holder. |
• | Nomination of Directors. Our directors are elected through a staggered board mechanism. With the exception of directors elected by our Board of Directors due to vacancy, our directors are elected by an annual general meeting of our shareholders to hold office until the next annual meeting following three years from his or her election. The nominations for directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself or a duly authorized committee thereof, but nominations may be made by one or more of our shareholders, all in accordance with the provisions of our amended and restated articles of association and the Companies Law. Nominations need not be made by a nominating committee of our board of directors consisting solely of independent directors, as required under Nasdaq rules. |
• | Compensation Committee. Nasdaq rules require a listed company to have a compensation committee composed entirely of independent directors that operates pursuant to a written charter addressing its purpose, responsibilities and membership qualifications and may receive counselling from independent consultants, after evaluating their independence. The purpose, responsibilities and membership qualifications of our compensation committee are governed by the Companies Law, rather than the Nasdaq rules. In addition, under the Companies Law, there are no specific independence evaluation requirements for outside consultants. |
• | Compensation of Officers. We comply with the requirements set forth under the Companies Law with respect to the approval of officer compensation. For a discussion regarding the approvals required under the Companies Law and the regulations promulgated thereunder for the approval of compensation of the chief executive officer, all other executive officers and directors, see “Item 6.C – Board Practices –Approval of Related Party Transactions and under Israeli Law”. |
• | Proxy Statements. We are not required to and, in reliance on home country practice, we do not intend to, comply with certain Nasdaq rules regarding the provision of proxy statements for general meetings of shareholders. Israeli corporate law does not have a regulatory regime for the solicitation of proxies. We intend to provide notice convening an annual general meeting, including an agenda and other relevant documents. |
• | Shareholder Approval. We are not required to and, in reliance on home country practice, we do not intend to comply with certain Nasdaq rules regarding shareholder approval for certain issuances of securities under Nasdaq Rule 5635. Instead, we will seek our shareholders’ approval for all corporate actions requiring such approval under the requirements of the Companies Law. In accordance with the provisions of our amended and restated articles of association and the Companies Law, our board of directors is authorized to issue securities, including ordinary shares, warrants and convertible notes. |
• | Executive Sessions. We are not required to and, in reliance on home country practice, we do not intend to comply with certain Nasdaq rules regarding regularly scheduled meetings at which only independent directors are present. |
• | Approval of Related Party Transactions. All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts and transactions, set forth in the Companies Law and the regulations promulgated thereunder, which require the approval of the audit committee or the compensation committee, as the case may be, the board of directors and shareholders, as may be applicable, for specified transactions, rather than approval by the audit committee or other independent body of our Board of Directors as required under the Nasdaq rules. |
• | Third Party Director Compensation. We follow Israeli law requirements with respect to disclosure of compensation for our directors and executive officers. Israeli law does not require that we disclose information regarding third party compensation of our directors or director nominees. As a result, our practice varies from the third-party compensation disclosure requirements of Nasdaq. |
• | Annual Shareholders Meeting. As opposed to the Nasdaq Rule 5620(a), which mandates that a listed company hold its annual shareholders meeting within one year of the company’s fiscal year-end, we are required, under the Companies Law, to hold an annual shareholder meeting each calendar year and within 15 months of the last annual shareholders meeting. |
Exhibit No. | Description | |
INMODE LTD. | ||
By: | /s/ Yair Malca | |
Yair Malca | ||
Chief Financial Officer |
INMODE LTD.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS:
(PCAOB ID 1309).
CONSOLIDATED FINANCIAL STATEMENTS:
F-4 | |
F-5 | |
F-6 | |
F-7 | |
F-8 | |
F-9 |
Report of Independent Registered Public Accounting Firm |
To the Board of Directors and Shareholders of InMode Ltd.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of InMode Ltd. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
F - 2
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Kesselman & Kesselman Certified Public Accountants (lsr.) A member firm of PricewaterhouseCoopers International Limited |
|
Tel-Aviv, Israel February 14, 2023 |
We have served as the Company’s auditor since 2008.
Kesselman & Kesselman, 146 Derech Menachem Begin, Tel-Aviv 6492103, Israel,
P.O Box 7187 Tel-Aviv 6107120, Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il
F - 3
December 31 | ||||||||
2022 | 2021 | |||||||
Assets | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | 97,540 | 68,136 | ||||||
Marketable securities (amortized cost of $384,320 and $296,243, as of December 31, 2022 and 2021, respectively) | 374,589 | 294,530 | ||||||
Short-term bank deposits | 75,254 | 53,248 | ||||||
Accounts receivable, net of allowance for credit losses of $836 and $1,107, as of December 31, 2022 and 2021, respectively | 26,997 | 20,236 | ||||||
Prepaid expense and other receivables | 15,094 | 12,938 | ||||||
Inventories | 39,897 | 21,026 | ||||||
TOTAL CURRENT ASSETS | 629,371 | 470,114 | ||||||
NON-CURRENT ASSETS: | ||||||||
Accounts receivable net of allowance for credit losses of $482 and $0 as of December 31, 2022 and 2021, respectively | 3,973 | 768 | ||||||
Deferred income tax assets | 3,094 | 1,334 | ||||||
Operating lease right-of-use assets | 5,073 | 4,321 | ||||||
Property and equipment, net | 2,298 | 1,404 | ||||||
Other investments | 600 | 600 | ||||||
TOTAL NON-CURRENT ASSETS | 15,038 | 8,427 | ||||||
TOTAL ASSETS | 644,409 | 478,541 | ||||||
Liabilities and shareholders’ equity | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | 16,242 | 8,779 | ||||||
Contract liabilities | 13,798 | 13,805 | ||||||
Other liabilities | 51,980 | 29,266 | ||||||
TOTAL CURRENT LIABILITIES | 82,020 | 51,850 | ||||||
NON-CURRENT LIABILITIES: | ||||||||
Contract liabilities | 3,959 | 2,751 | ||||||
Other liabilities | 303 | 4,831 | ||||||
Operating lease liabilities | 3,509 | 3,307 | ||||||
TOTAL NON-CURRENT LIABILITIES | 7,771 | 10,889 | ||||||
TOTAL LIABILITIES | 89,791 | 62,739 | ||||||
COMMITMENTS AND CONTINGENCIES (note 12) | ||||||||
SHAREHOLDERS’ EQUITY: | ||||||||
InMode Ltd. shareholders’ equity: | ||||||||
Ordinary shares, NIS 0.01 par value, authorized 100,000,000 shares at December 31, 2022 and 2021 | ||||||||
Issued 84,519,994 and 83,875,905 shares at December 31, 2022 and 2021, respectively | ||||||||
Outstanding 82,544,991 and 82,978,115 shares at December 31, 2022 and 2021, respectively | 241 | 239 | ||||||
Additional paid-in capital | 148,803 | 122,698 | ||||||
Retained earnings | 495,507 | 333,987 | ||||||
Accumulated other comprehensive loss | (7,493 | ) | (1,319 | ) | ||||
Less treasury shares, at cost: 1,975,003 and 897,790 ordinary shares at December 31, 2022 and 2021, respectively | (82,440 | ) | (39,803 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 554,618 | 415,802 | ||||||
TOT L LIABILITIES AND SHAREHOLDERS’ EQUITY | 644,409 | 478,541 |
(U.S. dollars in thousands, except for per share data)
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
| ||||||||||||
REVENUES | 454,271 | 357,565 | 206,107 | |||||||||
COST OF REVENUES | 73,485 | 53,592 | 30,849 | |||||||||
GROSS PROFIT | 380,786 | 303,973 | 175,258 | |||||||||
OPERATING EXPENSES: | ||||||||||||
Research and development | 12,425 | 9,532 | 9,467 | |||||||||
Sales and marketing | 160,576 | 119,353 | 86,532 | |||||||||
General and administrative | 9,931 | 8,411 | 6,418 | |||||||||
Other income | - |
| (800 | ) | - | |||||||
TOTAL OPERATING EXPENSES | 182,932 | 136,496 | 102,417 | |||||||||
| ||||||||||||
INCOME FROM OPERATIONS | 197,854 | 167,477 | 72,841 | |||||||||
Finance income, net | 3,612 | 525 | 3,291 | |||||||||
INCOME BEFORE TAXES | 201,466 | 168,002 | 76,132 | |||||||||
INCOME TAXES | 39,946 | 2,928 | 1,107 | |||||||||
NET INCOME | 161,520 | 165,074 | 75,025 | |||||||||
Add: Loss (net income) attributable to non-controlling interests | - |
| (103 | ) | 5 |
| ||||||
NET INCOME ATTRIBUTABLE TO INMODE LTD | 161,520 | 164,971 | 75,030 | |||||||||
| ||||||||||||
NET INCOME PER SHARE: | ||||||||||||
Basic | 1.96 | 2.03 | 1.04 | |||||||||
Diluted | 1.89 | 1.92 | 0.89 | |||||||||
| ||||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF NET INCOME PER SHARE | ||||||||||||
Basic | 82,482,090 | 81,444,938 | 72,114,364 | |||||||||
Diluted | 85,403,714 | 86,017,203 | 84,184,598 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 5
(U.S. dollars in thousands, except for per share data)
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
| ||||||||||||
NET INCOME | 161,520 | 165,074 | 75,025 | |||||||||
OTHER COMPREHENSIVE INCOME: | ||||||||||||
Change in net unrealized gains (loss) of marketable securities, net of tax | (6,174 | ) | (1,675 | ) | 232 | |||||||
TOTAL COMPREHENSIVE INCOME, net | 155,346 | 163,399 | 75,257 | |||||||||
Add: Comprehensive loss (income) attributable to non-controlling interests | - |
| (103 | ) | 5 |
| ||||||
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO INMODE LTD. | 155,346 | 163,296 | 75,262 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 6
(U.S. dollars in thousands, except for per share data)
InMode Ltd. Shareholders’ Equity | Non- | Total | ||||||||||||||||||||||||||||||
Ordinary Shares | Additional paid-in capital | Retained | Accumulated other comprehensive income | Treasury shares | ||||||||||||||||||||||||||||
Number of shares outstanding | Amount | |||||||||||||||||||||||||||||||
BALANCE AS OF JANUARY 1, 2020 | 65,598,164 | 186 | 81,770 | 93,986 | 124 | - | 3,737 | 179,803 | ||||||||||||||||||||||||
CHANGES DURING 2020: | ||||||||||||||||||||||||||||||||
Net income | - | - | - | 75,030 | - | - | (5 | ) | 75,025 | |||||||||||||||||||||||
Other comprehensive income, net | - | - | - | - | 232 | - | - |
| 232 | |||||||||||||||||||||||
Share-based compensation | - | - | 12,845 | - | - | - | - | 12,845 | ||||||||||||||||||||||||
Acquisition of non-controlling interest in exchange of ordinary shares (see note 13b) | - | - | 2,220 | - |
| - | - | (2,220 | ) | - |
| |||||||||||||||||||||
Repurchase of ordinary shares | (786,882 | ) | - | - | - | - | (17,218) | - | (17,218 | ) | ||||||||||||||||||||||
Exercise of options | 10,756,272 | 30 | 4,758 | - | - | - | - | 4,788 | ||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | 75,567,554 | 216 | 101,593 | 169,016 | 356 | (17,218 | ) | 1,512 | 255,475 | |||||||||||||||||||||||
CHANGES DURING 2021: | ||||||||||||||||||||||||||||||||
Net income | - | - | - | 164,971 | - | - | 103 |
| 165,074 | |||||||||||||||||||||||
Other comprehensive loss, net | - | - | - | - | (1,675 | ) | - | - | (1,675 | ) | ||||||||||||||||||||||
Share-based compensation | - | - | 11,962 | - | - | - | - | 11,962 | ||||||||||||||||||||||||
Acquisition of non-controlling interest in exchange of ordinary shares (see note 13b) | 582,826 | - | (11,165 | ) | - | - | 12,780 | (1,615 | ) | - | ||||||||||||||||||||||
Repurchase of ordinary shares | (693,734 | ) | - | - | - | - | (35,365 | ) | - | (35,365 | ) | |||||||||||||||||||||
Exercise of options | 7,521,469 | 23 | 20,308 | - | - | - | - | 20,331 | ||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2021 | 82,978,115 | 239 | 122,698 | 333,987 | (1319 | ) | (39,803 | ) | - | 415,802 | ||||||||||||||||||||||
CHANGES DURING 2022: | ||||||||||||||||||||||||||||||||
Net income | - | - | - | 161,520 | - | - | - | 161,520 | ||||||||||||||||||||||||
Other comprehensive loss, net | - | - | - | - | (6,174 | ) | - | - | (6,174 | ) | ||||||||||||||||||||||
Share-based compensation | - | - | 24,452 | - | - | - | - | 24,452 | ||||||||||||||||||||||||
Repurchase of ordinary shares | (1,077,213 | ) | - | - | - | - | (42,637 | ) | - | (42,637 | ) | |||||||||||||||||||||
Exercise of options | 644,089 | 2 | 1,653 | - | - | - | - | 1,655 | ||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2022 | 82,544,991 | 241 | 148,803 | 495,507 | (7,493 | ) | (82,440 | ) | - | 544,618 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 7
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | 161,520 | 165,074 | 75,025 | |||||||||
Adjustments required to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 680 | 517 | 416 | |||||||||
Share-based compensation expenses | 24,452 | 11,962 | 12,845 | |||||||||
Change in allowance for credit losses of trade receivable | 449 | 516 | 442 | |||||||||
Loss on marketable securities, net | 71 | 175 | 5 | |||||||||
Finance expense (income), net | (1,210 | ) | 1,223 | (625 | ) | |||||||
Deferred income tax assets, net | 84 | (770 | ) | 1,729 | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Increase in accounts receivable | (10,415 | ) | (10,544 | ) | (4,416 | ) | ||||||
Increase in other receivables | (1,787 | ) | (6,400 | ) | (2,647 | ) | ||||||
Increase in inventories | (18,871 | ) | (6,043 | ) | (5,575 | ) | ||||||
Increase in accounts payable | 7,463 | 2,369 | 2,708 | |||||||||
Increase in other liabilities | 17,941 | 14,138 | 4,830 | |||||||||
Increase (decrease) in contract liabilities | 1,201 | 2,668 | (5,512 | ) | ||||||||
Net cash provided by operating activities | 181,578 | 174,885 | 79,225 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Investment in short-term deposit | (93,701 | ) | (73,090 | ) | (55,699 | ) | ||||||
Proceeds from short-term deposit | 73,090 | 69,180 | 34,810 | |||||||||
Purchase of fixed assets | (1,575 | ) | (939 | ) | (463 | ) | ||||||
Purchase of marketable securities | (168,680 | ) | (273,834 | ) | (169,689 | ) | ||||||
Proceeds from sale of marketable securities | 2,303 | 93,652 | 110,536 | |||||||||
Proceeds from maturity of marketable securities | 79,089 | 24,925 | 37,200 | |||||||||
Net cash used in investing activities | (109,474 | ) | (160,106 | ) | (43,305 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Repurchase of ordinary shares | (42,637 | ) | (35,365 | ) | (17,218 | ) | ||||||
Exercise of options | 1,552 | 20,343 | 4,776 | |||||||||
Net cash used in financing activities | (41,085 | ) | (15,022 | ) | (12,442 | ) | ||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (1,615 | ) | (559 | ) | 733 | |||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 29,404 | (802 | ) | 24,211 | ||||||||
CASH AND CASH EQUIVALENTS AT | ||||||||||||
BEGINNING OF THE YEAR | 68,136 | 68,938 | 44,727 | |||||||||
CASH AND CASH EQUIVALENTS AT | ||||||||||||
END OF THE YEAR | 97,540 | 68,136 | 68,938 | |||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: | ||||||||||||
Income taxes paid * | 25,843 | 1,658 | 217 | |||||||||
Interest received | 4,856 | 3,358 | 2,771 | |||||||||
NON-CASH ACTIVITIES | ||||||||||||
Recognition of operating lease right-of-use assets and liabilities | 2,342 | 4,315 | 566 | |||||||||
Exercise of Options | 103 | - | 12 | |||||||||
Acquisition of non-controlling interest in exchange of ordinary shares | - | 12,780 | - |
NOTE 1 - GENERAL:
InMode Ltd. (separately and together with its subsidiaries, the “Company”) was incorporated on January 2, 2008 and commenced operations shortly thereafter. The Company’s headquarters are located in Israel. The Company is traded in the Nasdaq Global Select Market (the “Nasdaq”) since August 2019.
The Company designs, develops, manufactures and markets innovative minimally-invasive aesthetic medical products based on its proprietary radio frequency assisted lipolysis and deep subdermal fractional radio frequency technologies. These technologies are used to remodel subdermal adipose or fatty tissue in a variety of procedures including liposuction with simultaneous skin tightening, body and face contouring and ablative skin rejuvenation treatments, as well as, for use in certain women’s health conditions and procedures. In addition to the minimally-invasive technologies, the Company designs, develops, manufactures and markets non‑invasive medical aesthetic products that target a wide array of procedures including permanent hair reduction, facial skin rejuvenation, wrinkle reduction, cellulite treatment, skin appearance and texture and superficial benign vascular and pigmented lesions. The Company also designs, develops, manufactures and markets hands-free medical aesthetic products that target a wide array of procedures such as skin tightening, fat reduction and muscle stimulation.
The Company has wholly-owned subsidiaries located in the United States and Canada (“North America”), Hong Kong, Japan, Spain, two subsidiaries in Israel, India, Australia, China, the United Kingdom (“UK”), France and Italy. During the third and fourth quarter of 2021 the Company established a second wholly owned subsidiary in Israel and a wholly owned subsidiary in Italy, respectively. The Company’s subsidiaries are referred to collectively herein as the “Subsidiaries.” The Company sells its products primarily through its Subsidiaries. See note 13b for an update regarding change in ownership of the China and UK subsidiaries.
a. | Basis of presentation |
b. | Use of estimates |
F - 9
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
c. | Functional currency |
d. | Principles of consolidation and presentation |
e. | Cash and cash equivalents |
f. | Short-term bank deposits |
F - 10
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
g. | Marketable securities |
h. | Other Investments |
F - 11
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
i. | Inventories |
j. | Leases |
k. | Property and equipment |
Computers | 3 – 4 years |
Molds | 4 – 10 years |
Equipment and furniture | 10 – 17 years |
F - 12
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
l. | Impairment of long-lived assets |
m. | Legal and other contingencies |
n. | Income taxes: | |
1) | The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized, based on the weight of available positive and negative evidence. Deferred tax liabilities and assets are classified as non-current in accordance with ASU 2015‑17. |
2) | The Company may incur an additional tax liability in the event of an inter-company dividend distribution from Subsidiaries outside of Israel; no additional deferred income tax assets have been provided, since the Company does not expect to distribute inter-company dividends in the foreseeable future that may result in additional tax liability. |
F - 13
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
3) | Taxes that would apply in the event of disposal of investments in Subsidiaries have not been taken into account in computing the deferred income tax assets, as it is the Company’s intent and ability to hold these investments. |
4) | The Company accounts for uncertain tax positions in accordance with ASC 740-10. ASC 740‑10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit of the largest amount that is more than 50% (cumulative probability) likely to be realized upon ultimate settlement. |
o. | Advertising expenses |
p. | Share-based compensation |
F - 14
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
q. | Revenue recognition |
(i) | Identify the contract(s) with a customer; |
(ii) | Identify the performance obligations in the contract. The Company determined that its arrangements are generally comprised of the following elements that are recognized as separate performance obligations: products, consumables and extended warranties; |
(iii) | Determine the transaction price; |
(iv) | Allocate the transaction price to the performance obligations in the contract; |
(v) | Recognize revenue when (or as) the performance obligation is satisfied. |
• | The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in sales and marketing expenses. |
• | The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. |
F - 15
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
r. | Allowance for doubtful accounts and financial instruments – credit loss |
F - 16
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
s. | Warranty reserve |
2022 | 2021 | 2020 | ||||||||||
Balance at beginning of year | 1,248 | 705 | 472 | |||||||||
Cost incurred | (2,099 | ) | (1,453 | ) | (1,127 | ) | ||||||
Expense recognized | 2,269 | 1,996 | 1,360 | |||||||||
Balance at end of year | 1,418 | 1,248 | 705 |
F - 17
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
t. | Cost of revenues |
u. | Research and development costs |
v. | Net income per share |
w. | Fair value measurement |
F - 18
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
x. | Segments |
y. | Employee severance benefits |
z. | Treasury Shares |
F - 19
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 3 - COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. During 2021, there has been a wide distribution of several vaccinations and medicines to overcome the pandemic.
The uncertainty to which the COVID-19 pandemic impacts the Company’s business, affects management’s judgment and assumptions resulted an immaterial influence at the end of 2020 and did not have influence in 2021 and 2022. COVID-19 also resulted in re-pricing of the Company’s existing Share-Based Compensations in March of 2020 (see also note 13a).
NOTE 4 - MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS:
AFS securities as of December 31, 2022 and 2021, consisted of government bonds, municipal bonds, corporate debt securities, commercial paper and certificates of deposit. These marketable securities are recorded at fair value.
The following table sets forth the Company’s marketable securities for the periods indicated:
December 31 |
| ||||||
2022 | 2021 |
| |||||
Government bonds * | 339,684 | 264,265 |
| ||||
Municipal bonds | 2,551 | 2,925 | |||||
Corporate debt securities | 21,252 | 19,913 |
| ||||
Commercial paper | 4,195 | - | |||||
Certificates of deposit | 6,907 | 7,427 |
| ||||
Total | 374,589 | 294,530 |
|
| |
* As of December 31, 2022 and 2021, consists of $1,502 and $4,039 non-U.S. government bonds, respectively. |
The Company classifies AFS securities within Level 2 because it uses alternative pricing sources and models utilizing market observable inputs to determine their fair value. See also note 2(w).
The following table sets forth the Company’s financial assets as of December 31, 2022 and 2021, that are measured at fair value on a recurring basis during the period:
December 31, 2022 |
| ||||||||||||
Fair value | Cost or amortized cost | Gross unrealized holding loss | Gross unrealized holding gains |
| |||||||||
Level 2 securities: |
| ||||||||||||
Government bonds | 339,684 | 348,687 | (9,003 | ) | - |
| |||||||
Municipal bonds | 2,551 | 2,674 | (123 | ) | - | ||||||||
Corporate debt securities | 21,252 | 21,850 | (612 | ) | 14 |
| |||||||
Commercial paper | 4,195 | 4,195 | - | - | |||||||||
Certificates of deposit | 6,907 | 6,914 | (7 | ) | - |
| |||||||
Total | 374,589 | 384,320 | (9,745 | ) | 14 |
|
F - 20
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 4 - MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS (continued):
December 31, 2021 | |||||||||||||
Fair value | Cost or amortized cost | Gross unrealized holding loss | Gross unrealized holding gains |
| |||||||||
Level 2 securities: |
| ||||||||||||
Government bonds | 264,265 | 265,829 | (1,635 | ) | 71 |
| |||||||
Municipal bonds | 2,925 | 2,951 | (26 | ) | - | ||||||||
Corporate debt securities | 19,913 | 20,041 | (131 | ) | 3 |
| |||||||
Certificates of deposit | 7,427 | 7,422 | (1 | ) | 6 |
| |||||||
Total | 294,530 | 296,243 | (1,793 | ) | 80 |
|
As of December 31, 2022 and 2021, the Company considered, based on its evaluation, that the decreases in market value on relevant marketable securities were temporarily impaired and primarily attributable to changes in interest rates, and therefore did not result in an impairment charge in finance income (expenses), net.
As of December 31, 2022 and 2021, the Company’s debt securities and certificates of deposit had the following maturity dates:
December 31 |
| ||||||
2022 | 2021 |
| |||||
Due within one year | 243,094 | 61,120 |
| ||||
1 to 2 years | 124,037 | 141,034 |
| ||||
2 to 3 years | 7,458 | 92,376 |
| ||||
Total | 374,589 | 294,530 |
|
NOTE 5 - ACCOUNTS RECEIVABLE:
Accounts receivable consist of the following:
December 31 |
| |||||||
2022 | 2021 |
| ||||||
|
| |||||||
Trade | 29,859 | 19,809 |
| |||||
Notes receivable | 2,429 | 2,302 |
| |||||
Less - allowance for credit losses | (1,318 | ) | (1,107 | ) | ||||
30,970 | 21,004 |
| ||||||
Less - non-current accounts receivable | (3,973 | ) | (768 | ) | ||||
Total current accounts receivable | 26,997 | 20,236 |
|
NOTE 6 - PREPAID EXPENSES AND OTHER CURRENT RECEIVABLES:
Prepaid expenses and other current receivables consist of the following:
December 31 | ||||||||
2022 | 2021 | |||||||
Advances to suppliers | 11,898 | 7,201 | ||||||
Prepaid expenses | 1,928 | 1,203 | ||||||
Government institutions | 879 | 641 | ||||||
Income tax | 44 | 3,303 | ||||||
Other | 345 | 590 | ||||||
Total other current receivables | 15,094 | 12,938 |
F - 21
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 7 - INVENTORIES:
Inventories consist of the following:
December 31 |
| |||||||
2022 | 2021 |
| ||||||
|
| |||||||
Raw materials | 13,686 | 3,842 |
| |||||
Finished products | 26,211 | 17,184 |
| |||||
Total inventories | 39,897 | 21,026 |
|
NOTE 8 - PROPERTY AND EQUIPMENT, NET:
Composition of property and equipment grouped by major classifications is as follows:
December 31 |
| |||||||
2022 | 2021 |
| ||||||
| ||||||||
Computers | 1,191 | 956 |
| |||||
Office furniture and equipment | 562 | 304 |
| |||||
Molds | 2,550 | 1,729 |
| |||||
Leasehold improvements | 829 | 569 |
| |||||
5,132 | 3,558 |
| ||||||
Less: accumulated depreciation | (2,834 | ) | (2,154 | ) | ||||
Total property and equipment, net | 2,298 | 1,404 |
|
Total depreciation and amortization in respect of property and equipment were $680, $517 and $416 for the years ended December 31, 2022, 2021 and 2020, respectively.
NOTE 9 - OTHER INVESTMENTS:
In November 2019, the Company signed a Share Purchase and Shareholders Agreement (the “SPA”) with (BY) Medimor Ltd., one of the Company’s turnkey manufacturing subcontractors (“Medimor”). Pursuant to the SPA, the Company has invested an aggregate amount of $600 in consideration for 1,369,863 ordinary shares of Medimor (which reflected at the signing date and as of December 31, 2022 a 14.78% ownership interest on an as-issued basis and 10.34% ownership interest on a fully diluted basis), of which 414,384 ordinary shares were issued upon consummation of the initial closing on December 31, 2019, and the remaining 955,479 ordinary shares were issued in July 2020 following Medimor achieving certain pre-defined milestone events.
The Company’s investment in Medimor is measured at cost, less impairment and adjusted for subsequent observable price changes if any. As of December 31, 2022, 2021 and 2020, the Company did not recognize an impairment or adjustment on its other investments.
NOTE 10 - LEASES:
The Company’s main leasing properties are located in Israel, USA and Canada as detailed below:
a.In May 2018, the Company signed a lease agreement for its headquarters in Israel. In January 2019, February 2020 and March 2021 the Company signed supplement lease agreements, further expanding its headquarters in Israel (collectively, the “Lease Agreement”). The Lease Agreement will expire in December 2024. The current monthly rent payment under the Lease Agreement is approximately $45.2.
The costs under the Lease Agreement in Israel are linked to the Israeli Consumer Price Index. For purposes of ensuring the Company’s obligation towards the lessor, the Company has provided the lessor with a bank guarantee of NIS 667 thousand (approximately $190).
F - 22
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 10 - LEASES (continued):
The Company also leases vehicles for several employees in Israel for a period of three years.
b. The Company’s U.S. subsidiary had a lease agreement for its offices that expired in August 2022.
In August 2020, the Company’s U.S. subsidiary, has signed a new lease agreement, for additional lease agreement of property and for its offices (“Additional U.S Lease”). The Additional U.S. Lease is for 7 years and 4 months which began in the middle of April of 2021. The current monthly rent payment is approximately $26 .
c.The Company’s Canadian subsidiary has signed a new lease agreement in April 2022 for property and for its offices (“New Canadian Lease”). The New Canadian Lease is for 3 years which began in July 2022. The current monthly rent payment is approximately $16.6 .
From time to time the Company also leases small properties, mainly for offices for Subsidiaries around the world which range for periods of up to 3 years.
The lease cost was as follows:
Year ended December 31 |
| |||||||
| 2022 | 2021 |
| |||||
Operating lease cost | 1,628 | 1,297 |
|
Supplemental cash flow information related to leases was as follows:
Year ended December 31 |
| |||||||
| 2022 | 2021 |
| |||||
Operating cash flows from operating leases | 1,881 | 1,328 |
|
Supplemental balance sheet information related to leases was as follows:
December 31, |
| |||||||
| 2022 | 2021 |
| |||||
Operating Leases |
| |||||||
Operating lease right-of-use assets | 5,073 | 4,321 |
| |||||
|
| |||||||
Other current liabilities | 1,453 | 1,209 |
| |||||
Operating lease liabilities | 3,509 | 3,307 |
| |||||
Total operating lease liabilities | 4,962 | 4,516 |
| |||||
|
| |||||||
Weighted Average Remaining Lease Term |
| |||||||
Operating leases | 4.30 years | 4.70 years |
| |||||
|
| |||||||
Weighted Average Discount Rate |
| |||||||
Operating leases | 2.00%-5.80 | % | 2.00%-2.75 | % |
F - 23
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 10 - LEASES (continued):
As of December 31, 2022, the maturities of lease liabilities were as follows:
Operating Leases |
| |||
|
| |||
Year Ending December 31, |
| |||
2023 | 1,583 |
| ||
2024 | 1,529 |
| ||
2025 | 666 |
| ||
2026 and beyond | 1,495 | |||
Total lease payments | 5,273 |
| ||
Less imputed interests | (311 | ) | ||
Total | 4,962 |
|
NOTE 11 - OTHER CURRENT LIABILITIES:
Other current liabilities consist of the following:
December 31 | ||||||||
2022 | 2021 | |||||||
Employees and related expenses | 19,439 | 17,807 | ||||||
Government institutions | 4,052 | 3,178 | ||||||
Income tax payable | 19,241 | 1,239 | ||||||
Warranty reserve | 1,418 | 1,248 | ||||||
Operating lease liabilities | 1,453 | 1,209 | ||||||
Other | 6,377 | 4,585 | ||||||
Total other current liabilities | 51,980 | 29,266 |
NOTE 12 - COMMITMENTS AND CONTINGECIES:
Subcontracting Agreements
The Company has an existing turnkey manufacturing agreements with three of its major subcontractors providers in Israel in connection with manufacturing and assembling the Company’s products.
The Company has agreements with two of the subcontractors which are renewed automatically every year for an additional one-year period, unless either the Company or the turnkey manufacturer gives written notice three months prior to the expiration of the term of its decision not to renew the agreement. Additionally, the Company or the turnkey manufacturer has the ability to terminate the contract at any time and for any reason with a prior written notice of four months.
In addition, in October 2019, the Company entered into a turnkey manufacturing agreement with another of its major subcontractors provider in Israel, Medimor. The agreement is for three years and renewed automatically every year afterwards for an additional one-year period, unless either the Company or Medimor gives written notice three months prior to the expiration of the term of its decision not to renew the agreement. Additionally, the Company or Medimor has the ability to terminate the agreement at any time and for any reason with a prior written notice of six months. As to investment in Medimor, see also note 9.
According to the agreements above, the Company does not have a minimum order obligation, but the Company provides the subcontractors a six-month rolling forecast with the projected demand for products. In case of termination of the agreement with each subcontractor, the Company has to compensate that subcontractor for non-returnable inventory, materials in orders that cannot be cancelled and finished products inventory. As of December 31, 2022, the subcontractors’ finished goods inventory, raw materials and open orders amounted to approximately $46,316.
F - 24
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
a) | 2008 Israeli Option Plan (“2008 Israeli Plan”) allowing the Company to grant ordinary shares and options to purchase ordinary shares to Israeli employees, officers, directors, consultants and service providers. Each option under the 2008 Israeli Plan grants the right to exercise such option into one ordinary share of the Company. |
b) | 2008 ROW Option Plan (“2008 ROW Plan”) allowing the Company to grant ordinary shares and options to purchase ordinary shares to non-Israeli employees, officers, directors, consultants and service providers. Each option under the 2008 ROW Plan grants the right to exercise such option into one ordinary share of the Company. |
F - 25
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
Total awards under 2018 Incentive Plan that have been authorized to be issued as ordinary shares:
Number of awards | ||||
Upon adoption of the 2018 Incentive Plan | 3,578,000 | * | ||
Automatic increase approved by the Board of the Company in: | ||||
January 2020 | 1,600,000 | * | ||
January 2021 | 1,600,000 | * | ||
January 2022 | 800,000 | |||
January 2023 | 800,000 | |||
Total | 8,378,000 |
* The number of awards has been adjusted retroactively to reflect the 2021 Share Split.
As of December 31, 2022, 1,756,231 awards were available for grant under the 2018 Incentive Plan.
F - 26
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 13 - SHAREHOLDERS' EQUITY (continued):
Details Regarding Grant of Awards:
During 2022 and 2021, the Company granted only RSUs to its employees, officers, directors, non-employees.
Year Ended December 31, 2022 | ||||||||||||
Award amount | Exercise price range | Vesting period | ||||||||||
Employees, officers, directors, service providers and consultants: | ||||||||||||
| ||||||||||||
February 9, 2022 | 598,455 | - | 1-2 Years | |||||||||
May 1, 2022 | 21,500 | - | 1-2 Years | |||||||||
July 27, 2022 | 3,000 | - | 1.5 Years | |||||||||
October 26, 2022 | 1,500 | - | 1.25 Years |
Year Ended December 31, 2021 | ||||||||||||
Award amount | Exercise price range | Vesting period | ||||||||||
Employees, officers, directors, service providers and consultants: | ||||||||||||
| ||||||||||||
February 9, 2021 | 511,500 | - | 1-2 Years | |||||||||
May 6, 2021 | 23,500 | - | 2 Years | |||||||||
July 27, 2021 | 9,000 | - | 1.5 Years |
During 2020, the Company granted only options to its employees, officers, directors, service providers and consultants.
Modification of share-based compensation
On March 15, 2020, the Company’s board of directors approved: (i) the re-pricing of outstanding options under Section 102 to the Israeli Tax Ordinance that were granted during November 2019 and February 2020, to a lower exercise price of $9.845 (as further approved by a respective tax-ruling received from the Israeli tax authority), and (ii) the cancellation of all other outstanding options granted to Non-Israeli grantees in November 2019, January 2020 and February 2020, and the grant of replacement options thereof under the same terms as originally granted but with a lower exercise price of $9.845. The cancellation and grant of replacement options thereof with respect to such options granted to executive officers of the Company was ratified and approved by the Company's shareholders on June 16, 2020.
As a result, for 449,000 outstanding options (of which 30,000 options granted on November 25, 2019 at an exercise price of $20.775 and the rest granted on February 17, 2020, at an exercise price of $21.98) that were granted to Israeli grantees under Section 102 to the Israeli Tax Ordinance the exercise price was re-priced and reduced to $9.845, and 2,518,300 options (of which 224,500 options granted on November 25, 2019 at an exercise price of $20.775, 1,906,000 options granted on January 7, 2020 at an exercise price of $17.52, 85,000 options granted on January 28, 2020 at an exercise price of $21.95 and the rest granted on February 17, 2020 at an exercise price of $21.98) were cancelled and 2,518,300 options were granted (under the same terms as originally granted but with a lower exercise price of $9.845) simultaneously to non-Israeli grantees.
The reduction of the exercise price of the options was considered a Type I modification. The total incremental fair value of these options amounted to $3,283. The incremental fair value of the options granted, that were fully vested on March 15, 2020, in the amount of $666 were recognized immediately, and the remaining incremental fair value was recognized over the remaining vesting period until December 31, 2022.
F - 27
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 13 - SHAREHOLDERS' EQUITY (continued):
*** GIBF Options
Options granted as part of share exchange agreement entered into by and between the Company and Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP). See note 13(b)(1) below.
Share Options
The following tables summarize information concerning options as of December 31, 2022 and 2021:
Year ended December 31 | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Number of Options | Weighted Average Exercise price* | Number of Options | Weighted average exercise price* | |||||||||||||
Outstanding at beginning of year | 2,930,727 | $ | 5.23 | 10,492,910 | $ | 3.43 | ||||||||||
Changes during the year: | ||||||||||||||||
Granted | - | - | - |
| - | |||||||||||
Cancelled | - | - | - |
| - | |||||||||||
Exercised | (365,799 | ) | 4.52 | (7,521,469 | ) | 2.70 | ||||||||||
Forfeited | (5,788 | ) | 10.78 | (40,714 | ) | 9.00 | ||||||||||
Expired | (5,500 | ) | 10.90 | - |
| - | ||||||||||
Outstanding at end of year | 2,553,640 | $ | 5.30 | 2,930,727 | $ | 5.23 | ||||||||||
Exercisable at end of year | 2,550,474 | $ | 5.30 | 2,635,973 | $ | 4.71 |
| |
* | In U.S. dollars per Ordinary Share |
As of December 31, 2022, the weighted-average remaining contractual life of exercisable options were 2.95 years. The total intrinsic value of options exercised during 2022, 2021 and 2020 were approximately $10,549, $277,978 and $190,498, respectively.
The fair value of each option granted is estimated on the date of grant using the binomial option-pricing model, with the following assumptions:
2020 | |||
Fair value of one ordinary share | $9.845-$21.98 | ||
Dividend yield | 0% | ||
Expected volatility | 46.07%-49.22% | ||
Risk-free interest rate | 0.53%-1.74% | ||
Early exercise multiple (“EEM”) | 0% - 250% | ||
Contractual term | 6.7-7 years |
The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted in dollar terms.
The employee termination exit rate assumption is based on current geographical data of the Company.
F - 28
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 13 - SHAREHOLDERS' EQUITY (continued):
The total fair value of options granted during the year ended December 31, 2020 was $16,345.
As of December 31, 2022, the Company had 3,166 unvested options. The total unrecognized compensation cost of employee options as of December 31, 2022 is $11, which is expected to be recognized over a weighted average period of 0.25 years.
December 31, 2022 | ||||||||||||||||||
Options outstanding | Options exercisable | |||||||||||||||||
Number of | Weighted | Number of | Weighted | |||||||||||||||
options | average | options | average | |||||||||||||||
outstanding | remaining | exercisable | remaining | |||||||||||||||
Exercise | at end of | contractual | at end of | contractual | ||||||||||||||
prices * | year | Life | year | life | ||||||||||||||
$ | 0.28 | 641,166 | 1.36 | 641,166 | 1.36 | |||||||||||||
$ | 0.29 | 203,438 | 1.42 | 203,438 | 1.42 | |||||||||||||
$ | 3.16 | 211,782 | 2.71 | 211,782 | 2.71 | |||||||||||||
$ | 3.75 | 272,741 | 3.02 | 272,741 | 3.02 | |||||||||||||
$ | 5.11 | 99,360 | 3.26 | 99,360 | 3.26 | |||||||||||||
$ | 7.00 | 42,000 | 3.61 | 42,000 | 3.61 | |||||||||||||
$ | 9.85 | 1,044,265 | 4.16 | 1,041,099 | 4.16 | |||||||||||||
$ | 12.16 | 32,388 | 4.35 | 32,388 | 4.35 | |||||||||||||
$ | 21.62 | 6,500 | 4.86 | 6,500 | 4.86 |
The aggregate intrinsic value of total vested and exercisable options as of December 31, 2022 is $77,537.
Restricted Share Unit
The following tables summarize information concerning RSUs as of December 31, 2022 and 2021:
| Year ended December 31 | Year ended December 31 | ||||||||||||||
| 2022 | 2021 | ||||||||||||||
|
| Weighted |
| Weighted | ||||||||||||
|
| Average |
| Average | ||||||||||||
| Number of | Grant Date | Number of | Grant Date | ||||||||||||
| RSUs | Fair Value | RSUs | Fair Value | ||||||||||||
Outstanding at beginning of year | 508,080 | 35.48 | - | - | ||||||||||||
Changes during the year: | ||||||||||||||||
Granted | 624,455 | 49.35 | 544,000 | 35.44 | ||||||||||||
Exercised | (278,290 | ) | 34.98 | - | - | |||||||||||
Forfeited | (49,670 | ) | 46.43 | (35,920 | ) | 34.87 | ||||||||||
Outstanding at end of year * | 804,575 | 45.74 | 508,080 | 35.48 |
* As of December 31, 2022, 517,076 RSUs were vested and were settled by issuance of respective shares at the beginning of January 2023.
F - 29
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 13 - SHAREHOLDERS' EQUITY (continued):
Each RSU represents the right to receive one ordinary share of the Company upon the vesting thereof. The fair value of an RSU is identical to the value of the underlying share at the close of the last trading day prior to the day of grant. The fair value of each RSU granted in 2022 were $50.37, $25.11, $27.77 and $33.39, and in 2021 were $34.87, $40.6 and $54.61 based on the Company’s share price at closing of trading day prior to the day of grant.
The total fair value of RSUs granted during the year ended December 31, 2022 and 2021, was $30,817 and $19,279, respectively.
As of December 31, 2022, the Company had 287,499 unvested RSUs. The total unrecognized compensation cost of employee RSUs as of December 31, 2022 is $13,907, which is expected to be recognized over a weighted average period of 0.99 years.
The aggregate intrinsic value of total exercisable RSUs as of December 31, 2022 is $18,460.
The following table illustrates the effect of share-based compensation on the consolidated statements of income:
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Cost of sales | 1,917 | 1,108 | 520 | |||||||||
Research and development expenses | 3,166 | 1,554 | 2,264 | |||||||||
Selling and marketing expenses | 17,302 | 8,274 | 9,398 | |||||||||
General and administrative expenses | 2,067 | 1,026 | 663 | |||||||||
24,452 | 11,962 | 12,845 |
b. Non-Controlling Interests:
1)From 2016 the Company was in joint venture agreement (the “JV Agreement”) with Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“GIBF”), ”), and an Equity Joint Venture Company (“JVC”) was established, in which the Company had 51% interest upon establishment. the non-controlling partner equity interests in JVC has been considered and treated as a non-controlling interest.
On November 11, 2020 (the “Signing Date”), the Company, GIBF and JVC entered into a share exchange agreement (the “JVC Exchange Agreement”) whereby, GIBF sold to the Company all of its outstanding share capital in the JVC (thereby making the JVC a wholly-owned subsidiary of the Company) and all of its rights pursuant to the JV Agreement, in exchange for a purchase consideration of $2,700 (the “Purchase Consideration”) which was paid by the Company at the closing of such JVC Exchange Agreement in January 2021, by way of issuance to GIBF by the Company, in a private placement, of 124,914 of the Company’s ordinary shares, par value NIS 0.01, which reflected the Purchase Consideration amount at the time of approval of the JVC Exchange Agreement by the Company.
For certain services provided by GIBF to the JVC, the Company has granted GIBF 13,000 options to purchase ordinary shares of the Company, at an exercise price of $21.615.
2) On April 23, 2021, the Company, Dilazar Limited (“Dilazar”), Wigmore and Invasix UK entered into a share exchange agreement (the “UK Exchange Agreement”) whereby, Dilazar (which owned 49% of the Invasix UK’s shares immediately prior to the UK Exchange Agreement, which shares were previously transferred to Dilazar from its wholly-owned subsidiary Wigmore) sold to the Company all of its outstanding share capital in Invasix UK and Wigmore sold to the Company all of its rights pursuant to the Founders Memorandum of Understanding, dated March 4, 2014, by and between Wigmore and the Company, in exchange for the issuance at closing to Dilazar by the Company in a private placement of 457,912 of the Company’s ordinary shares, par value NIS 0.01. Upon closing, in May 2021, 457,912 of the Company’s ordinary shares were issued to Dilazar from the Company’s treasury shares.
F - 30
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
2) | Basis of taxation |
a) | Incentives Applicable until 2021 |
b) | Incentives Applicable starting 2022 - The New Technological Enterprise Incentives Regime – Amendment 73 to the Investment Law |
F - 31
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
3) | Corporate tax rate in Israel |
F - 32
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 14 - INCOME TAXES (continued):
b. | Subsidiaries outside of Israel |
F - 33
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
c. Deferred income tax assets
Deferred income tax assets reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company’s net deferred tax assets (liabilities) at December 31, 2022 and 2021 were as follows:
December 31 |
| |||||||
2022 | 2021 |
| ||||||
Deferred tax assets in respect of: |
| |||||||
|
| |||||||
Subsidiaries carryforward losses | 60,229 | 58,389 |
| |||||
Other temporary differences | 2,369 | 2,874 |
| |||||
Share-based compensation | 5,073 | 2,884 |
| |||||
Deferred tax asset in respect to other comprehensive loss | 2,238 | 394 | ||||||
Total deferred tax assets before valuation allowance | 69,909 | 64,541 |
| |||||
Valuation allowance | (66,815 | ) | (63,207 | ) | ||||
Total deferred tax assets | 3,094 | 1,334 |
|
Deferred taxes are computed using the tax rates expected to be in effect when those differences reverse.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized in the foreseeable future. As of each reporting date, management considers new evidence, both positive and negative, that could impact management’s view with regard to the future realization of deferred tax assets for each jurisdiction.
d.Reconciliation of theoretical tax expense to actual tax expense
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Income before taxes on income | 201,466 | 168,002 | 76,132 | |||||||||
Theoretical tax expenses at the statutory rate of InMode | 23 | % | 23 | % | 23 | % | ||||||
46,337 | 38,640 | 17,510 | ||||||||||
Increase (decrease) in taxes on income due to: | ||||||||||||
Benefits to the Benefited Enterprise | (29,429 | ) | (37,478 | ) | (16,652 | ) | ||||||
Different effective tax rates applicable to the Subsidiaries | (1,453 | ) | (2,033 | ) | 235 | |||||||
NOL carry back as part of the CARES Act relief | - | - | (2,894 | ) | ||||||||
Valuation allowance | 130 | 40 | 17 | |||||||||
Uncertain tax position | 303 | 1,921 | 1,416 | |||||||||
Non-deductible expenses and other permanent differences, mainly share based compensation expenses | 1,842 | 1,838 | 1,426 | |||||||||
Previous year | - | - | 49 | |||||||||
Amendment to the Investments Law payment - see also note 14a(2)(b) | 12,017 | - | - | |||||||||
settlements with the Israeli tax authority net of decrease of related uncertain tax | 10,199 | - | - | |||||||||
39,946 | 2,928 | 1,107 |
F - 34
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 14 - INCOME TAXES (continued):
e. | Tax assessments |
f. Income before income taxes is composed of the following:
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
InMode Ltd. and Israeli subsidiaries | 196,354 | 163,370 | 72,712 | |||||||||
Subsidiaries outside of Israel | 5,112 | 4,632 | 3,420 | |||||||||
201,466 | 168,002 | 76,132 |
g. | Tax expenses (tax benefit): |
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Current: | ||||||||||||
Israel | 38,248 | 3,829 | 1,411 | |||||||||
Subsidiaries | 1,614 | (131 | ) | (2,033 | ) | |||||||
39,862 | 3,698 | (622 | ) | |||||||||
Deferred: | ||||||||||||
Israel | 84 | (770 | ) | 30 | ||||||||
Subsidiaries | - | - | 1,699 | |||||||||
84 | (770 | ) | 1,729 | |||||||||
Total taxes on income | 39,946 | 2,928 | 1,107 |
F - 35
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 14 - INCOME TAXES (continued):
h.Uncertain tax positions:
ASC No. 740, Income Taxes, requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect the operating results of the Company.
The following table summarizes the activity of the Company’s unrecognized tax benefits:
Year ended December 31 |
| |||||||
2022 | 2021 |
| ||||||
Balance at January 1 | 4,831 | 2,910 |
| |||||
Decrease in uncertain tax positions for the previous years | (4,831 | ) | (804 | ) | ||||
Increase in uncertain tax positions for the current year, net | 303 | 2,725 |
| |||||
Balance at December 31 | 303 | 4,831 |
|
The Company does not expect uncertain tax positions to change significantly over the next 12 months.
NOTE 15 - ENTITY-WIDE DISCLOSURE:
a.Revenue
1)Net sales by geographic area were as follows:
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
United States | 298,612 | 237,263 | 149,488 | |||||||||
Europe | 49,274 | 36,588 | 15,881 | |||||||||
Other | 106,385 | 83,714 | 40,738 | |||||||||
Total sales: | 454,271 | 357,565 | 206,107 |
2)Net sales based on products' technology were as follows:
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
| % | % | % | |||||||||
Minimal-Invasive | 81 | 72 | 62 | |||||||||
Hands-Free | 10 | 20 | 32 | |||||||||
Non-Invasive | 9 | 8 | 6 | |||||||||
100 | 100 | 100 |
F - 36
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 15 - ENTITY-WIDE DISCLOSURE (continued):
3)The changes in contract liabilities are as follows:
Year ended December 31 | ||||||||
2022 | 2021 | |||||||
Balance as of January 1 | 16,556 | 13,888 | ||||||
Increases due to issuance of new contracts, excluding amounts recognized as revenue during the period | 14,987 | 14,527 | ||||||
Revenue recognized that was included in the contract liability balance at the beginning of the period | (13,786 | ) | (11,859 | ) | ||||
Balance as of December 31 | 17,757 | 16,556 | ||||||
Contract liability presented in non-current liabilities (1) | 3,959 | 2,751 | ||||||
Contract liability presented in current liabilities | 13,798 | 13,805 |
(1) | As of December 31, 2022, non-current deferred revenue is estimated to be recognized as following: 82% in year 2024 and the rest in year 2025-2026. |
b.Long-Lived Assets
December 31 | ||||||||
2022 | 2021 | |||||||
Israel | 3,911 | 3,747 | ||||||
United States | 5,938 | 2,996 | ||||||
Other | 2,095 | 350 | ||||||
11,944 | 7,093 |
NOTE 16 - RELATED PARTIES:
a.The Company receives and provides certain services from and to Home Skinovations Ltd., a related party as part of a service agreement between them. The services include an office sublease in Israel, use of certain computer hardware and switchboard infrastructure, certain software licenses, joint purchases of employee’s welfare products and services from third parties and limited manpower services. The Chairman of the Board and Chief Executive Officer of the Company is also a substantial shareholder and board member of Home Skinovations Ltd. and one of the Company’s directors, serves on the board of directors of Home Skinovations Ltd. The Company recorded expenses related to services received and provided from Home Skinovations Ltd. of $332, $239 and $82 for the years ended December 31, 2022, 2021 and 2020, respectively. In February 2022 the Company have entered into an Asset Purchase Agreement with Home Skinovations, whereby Home Skinovations Ltd. sold and assigned to the Company all of Home Skinovations Ltd.’s right, title and interest in and to Home Skinovations Ltd.’s Spa segment assets (including molds, tooling, inventory and trademarks) and further granted the Company an exclusive license to certain IP rights of Home Skinovations Ltd., all the foregoing in consideration for an aggregate amount of $497.
b.The Company’s subsidiary in Canada receives and provides certain services from and to a subsidiary of Home Skinovations Ltd. in Canada as part of a service agreement between them. The services include mobile phone services, an office sublease, use of certain computer hardware and switchboard infrastructure, certain software licenses, joint purchases of employee’s welfare products and services from third parties and limited manpower services. In relation to these services received and provided, the Company recorded expenses in the amount of $123, $433 and $379 for the years ended December 31, 2022, 2021 and 2020, respectively.
F - 37
INMODE LTD. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(U.S. dollars in thousands, except per share amounts) |
NOTE 16 - RELATED PARTIES (continued):
c.The Company’s subsidiaries in North America received marketing services from SpaMedica International SRL, which was amalgamated with an affiliate company into the Company’s major shareholder BoomerangFX International SRL during 2021. Dr. Stephan Mulholland is a beneficiary owner of 100% of our major shareholder BoomerangFX. The Company recorded expenses related to those services in the amount of $172 and $307, for the years ended December 31, 2021 and 2020, respectively. Starting from 2022 calendar year, Dr. Stephen Mulholland provides the Company and its subsidiaries certain marketing services as an independent contractor. The Company recorded expenses related to those services in the amount of $723 for the years ended December 31, 2022.
d.The Company receives certain investment portfolio management services from Himalaya Family Office Consulting Ltd., with respect to part of its investment portfolio. The Chairman of the Board and Chief Executive Officer of the Company, is a minor shareholder and a board member of Himalaya Family Office Consulting Ltd. In relation to these services, the Company recorded expenses in the amount of $100, $90 and $94 for the years ended December 31, 2022, 2021 and 2020, respectively.
NOTE 17 - SUBSEQUENT EVENTS
During January 2023, the Company paid NIS 50.2 million (approximately $14.3 million) according to the agreement with the Israeli Tax Authority for its undistributed exempt income for the year ended December 31, 2021.
F - 38