6-K
Eltek Ltd (ELTK)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2024
Commission file number 000-28884
Eltek Ltd.
(Name of Registrant)
Sgoola Industrial Zone, Petach Tikva, Israel
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
This Form 6-K is being incorporated by reference into the Registrant’s Form S-8 Registration Statements File Nos. 333-130611 and 333-123559.
Eltek Ltd.
EXPLANATORY NOTE
The following exhibits are attached:
99.1. Eltek Ltd. Interim Condensed Consolidated Financial Statements as of June 30, 2024 (Unaudited)
99.2. Management’s Discussion and Analysis of Results of Operations for the Six Months ended June 30, 2024
EXHIBIT INDEX
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Eltek Ltd.<br><br> <br>(Registrant)<br><br> <br>By: /s/Ron Freund<br><br> <br>Ron Freund<br><br> <br>Chief Financial Officer |
|---|
Dated: August 15, 2024
ELTEK LTD - 1024672 - 2024
Exhibit 99.1
ELTEK LTD.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2024
U.S. Dollars in thousands
UNAUDITED
INDEX
| Page | |
|---|---|
| INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS | F-2 - F-3 |
| INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | F-4 |
| INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY | F-5 - F-6 |
| INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | F-7 - F-8 |
| NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | F-9 - F-16 |
ELTEK LTD. AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| June 30, | December 31, | |||
|---|---|---|---|---|
| 2024 | 2023 | |||
| Unaudited | ||||
| ASSETS | ||||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | 8,877 | 9,278 | ||
| Short-term bank deposits | 9,396 | 2,862 | ||
| Trade receivables (net of allowance for doubtful accounts of 256 and 264 on June 30, 2024 and December 31, 2023, respectively) | 9,948 | 10,898 | ||
| Inventories | 6,440 | 6,135 | ||
| Other accounts receivable and prepaid expenses | 593 | 934 | ||
| Total current assets | 35,254 | 30,107 | ||
| LONG-TERM ASSETS: | ||||
| Severance pay fund | 55 | 57 | ||
| Deferred tax asset, net | 964 | 1,098 | ||
| Operating lease right-of-use assets | 5,965 | 6,555 | ||
| 6,984 | 7,710 | |||
| Property and equipment, net | 12,669 | 9,354 | ||
| Total long-term assets | 19,653 | 17,064 | ||
| Total assets | 54,907 | 47,171 |
All values are in US Dollars.
The accompanying notes are an integral part of these consolidated financial statements.
F - 2
ELTEK LTD. AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| June 30, | December 31, | ||||||
|---|---|---|---|---|---|---|---|
| Note | 2024 | 2023 | |||||
| Unaudited | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| CURRENT LIABILITIES: | |||||||
| Trade payables | 5,273 | 7,503 | |||||
| Other accounts payable and accrued expenses | 5,214 | 5,689 | |||||
| Short-term operating lease liabilities | 763 | 789 | |||||
| Total current liabilities | 11,250 | 13,981 | |||||
| LONG-TERM LIABILITIES: | |||||||
| Accrued severance pay | 399 | 447 | |||||
| Long-term operating lease liabilities | 5,306 | 5,871 | |||||
| Total long-term liabilities | 5,705 | 6,318 | |||||
| COMMITMENTS AND CONTINGENT LIABILITIES | 6 | - | - | ||||
| SHAREHOLDERS' EQUITY: | 7 | ||||||
| Share capital - | |||||||
| Ordinary shares of NIS 3.0 par value –<br><br> <br>Authorized: 10,000,000 shares on June 30, 2024 and December 31, 2023; Issued and outstanding: 6,708,522 shares on June 30, 2024 and 6,020,693 shares at December 31, 2023 | 6,006 | 5,443 | |||||
| Additional paid-in capital | 32,597 | 23,587 | |||||
| Foreign currency translation adjustments | (486 | ) | 783 | ||||
| Capital reserves | 2,186 | 1,900 | |||||
| Accumulated deficit | (2,351 | ) | (4,841 | ) | |||
| Total shareholders' equity | 37,952 | 26,872 | |||||
| Total liabilities and shareholders' equity | 54,907 | 47,171 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 3
ELTEK LTD. AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
U.S. dollars in thousands (except per share data)
| Note | Six months ended June 30, | Three months ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | ||||||||||
| Unaudited | |||||||||||||
| Revenues | 8 | 22,249 | 22,513 | 10,466 | 11,043 | ||||||||
| Cost of revenues | 17,361 | 16,546 | 8,830 | 8,091 | |||||||||
| Gross profit | 4,888 | 5,967 | 1,636 | 2,952 | |||||||||
| Operating expenses: | |||||||||||||
| Research and development, net | 62 | 24 | 47 | 15 | |||||||||
| Selling, general and administrative | 2,700 | 2,960 | 1,184 | 1,543 | |||||||||
| Operating income | 2,126 | 2,983 | 405 | 1,394 | |||||||||
| Financial income, net | 839 | 477 | 489 | 190 | |||||||||
| Income before income taxes | 2,965 | 3,460 | 894 | 1,584 | |||||||||
| Taxes on income | 9 | 475 | 585 | 143 | 271 | ||||||||
| Net income | 2,490 | 2,875 | 751 | 1,313 | |||||||||
| Other comprehensive income (loss): | |||||||||||||
| Foreign currency translation adjustments | (1,269 | ) | (1,049 | ) | (731 | ) | (468 | ) | |||||
| Total comprehensive income | 1,221 | 1,826 | 20 | 845 | |||||||||
| Basic and diluted income per ordinary share | 0.38 | 0.49 | 0.11 | 0.22 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 4
ELTEK LTD. AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
U.S. dollars in thousands (except share data)
| Company's shareholders | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ordinary<br><br> <br>shares | Amount | Additional<br><br> <br>paid-in<br><br> <br>capital | Accumulated other comprehensive income (loss) | Capital<br><br> <br>reserves | Accumulated<br><br> <br>deficit | Total | |||||||||||
| Balance as of April 1, 2024 | 6,704,830 | 6,003 | 32,584 | 245 | 2,032 | (3,102 | ) | 37,762 | |||||||||
| Share-based compensation | - | - | - | - | 154 | - | 154 | ||||||||||
| Exercise of stock options | 3,692 | 3 | 13 | - | - | - | 16 | ||||||||||
| Comprehensive income: | |||||||||||||||||
| Foreign currency translation adjustments | - | - | - | (731 | ) | - | - | (731 | ) | ||||||||
| Net income | - | - | - | - | - | 751 | 751 | ||||||||||
| Balance as of June 30, 2024 | 6,708,522 | 6,006 | 32,597 | (486 | ) | 2,186 | (2,351 | ) | 37,952 | ||||||||
| Balance as of April 1, 2023 | 5,849,678 | 5,305 | 22,862 | 608 | 1,609 | (8,311 | ) | 22,073 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| Share-based compensation | - | - | - | - | 72 | - | 72 | ||||||||||
| Exercise of stock options | 58,037 | 48 | 251 | - | - | - | 299 | ||||||||||
| Comprehensive income: | |||||||||||||||||
| Foreign currency translation adjustments | - | - | - | (468 | ) | - | - | (468 | ) | ||||||||
| Net income | - | - | - | - | - | 1,313 | 1,313 | ||||||||||
| Balance as of June 30, 2023 | 5,907,715 | 5,353 | 23,113 | 140 | 1,681 | (6,998 | ) | 23,289 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 5
ELTEK LTD. AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
U.S. dollars in thousands (except share data)
| Company's shareholders | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ordinary<br><br> <br>shares | Amount | Additional<br><br> <br>paid-in<br><br> <br>capital | Accumulated other comprehensive income (loss) | Capital<br><br> <br>reserves | Accumulated<br><br> <br>deficit | Total | |||||||||||
| Balance as of January 1, 2024 | 6,020,693 | 5,443 | 23,587 | 783 | 1,900 | (4,841 | ) | 26,872 | |||||||||
| Share-based compensation | - | - | - | - | 286 | - | 286 | ||||||||||
| Issuance of shares, net | 625,000 | 512 | 8,800 | - | - | - | 9,312 | ||||||||||
| Exercise of stock options | 62,829 | 51 | 210 | - | - | - | 261 | ||||||||||
| Comprehensive income: | |||||||||||||||||
| Foreign currency translation adjustments | - | - | - | (1,269 | ) | - | - | (1,269 | ) | ||||||||
| Net income | - | - | - | - | - | 2,490 | 2,490 | ||||||||||
| Balance as of June 30, 2024 | 6,708,522 | 6,006 | 32,597 | (486 | ) | 2,186 | (2,351 | ) | 37,952 | ||||||||
| Balance as of January 1, 2023 | 5,849,678 | 5,305 | 22,862 | 1,189 | 1,537 | (9,873 | ) | 21,020 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| Share-based compensation | - | - | - | - | 144 | - | 144 | ||||||||||
| Exercise of stock options | 58,037 | 48 | 251 | - | - | - | 299 | ||||||||||
| Comprehensive income: | |||||||||||||||||
| Foreign currency translation adjustments | - | - | - | (1,049 | ) | - | - | (1,049 | ) | ||||||||
| Net income | - | - | - | - | - | 2,875 | 2,875 | ||||||||||
| Balance as of June 30, 2023 | 5,907,715 | 5,353 | 23,113 | 140 | 1,681 | (6,998 | ) | 23,289 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 6
ELTEK LTD. AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
| Six months ended<br><br> <br>June 30, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net income | 2,490 | 2,875 | ||||
| Adjustments required to reconcile net income to net cash flows provided by operating activities: | ||||||
| Depreciation | 753 | 630 | ||||
| Accrued interest | (186 | ) | - | |||
| Share-based compensation | 286 | 144 | ||||
| Changes in deferred income tax assets, net | 91 | 566 | ||||
| Increase (decrease) in employee severance benefits, net | (30 | ) | 22 | |||
| Decrease (increase) in trade receivables, net | 517 | (1,784 | ) | |||
| Decrease (increase) in operating lease right-of-use assets | 372 | 575 | ||||
| Increase (decrease) in operating lease liabilities | (369 | ) | (597 | ) | ||
| Decrease (increase) in other receivables and prepaid expenses | 309 | (311 | ) | |||
| Decrease (increase) in inventories | (565 | ) | (809 | ) | ||
| Increase (decrease) in trade payables | (536 | ) | 105 | |||
| Increase (decrease) in other liabilities and accrued expenses | (249 | ) | 1,477 | |||
| Net cash provided by operating activities | 2,883 | 2,893 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchase of property and equipment | (5,947 | ) | (711 | ) | ||
| Insurance Proceeds | - | 2,000 | ||||
| Investment in short-term bank deposits, net | (6,534 | ) | ||||
| Restricted deposits | - | 192 | ||||
| Net cash used in investing activities | (12,481 | ) | 1,481 | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Exercise of options | 261 | 299 | ||||
| Repayment of long-term loans | - | (3,348 | ) | |||
| Issuance of shares, net | 9,312 | - | ||||
| Net cash used in financing activities | 9,573 | (3,049 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
F - 7
ELTEK LTD. AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT.)
U.S. dollars in thousands
| Six months ended<br><br> <br>June 30, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| Effect of exchange rate on cash and cash equivalents | (376 | ) | (361 | ) | ||
| Increase (decrease) in cash and cash equivalents | (401 | ) | 964 | |||
| Cash and cash equivalents at the beginning of the year | 9,278 | 7,366 | ||||
| Cash and cash equivalents at end of the year | 8,877 | 8,330 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES: | ||||||
| Cash paid during the year for: | ||||||
| Interest | - | 81 | ||||
| Income taxes | 22 | 5 | ||||
| Supplemental Disclosures of non-cash activity: | ||||||
| Purchase of property and equipment, not yet paid | 1,305 | 450 | ||||
| Right-of-use assets recognized with corresponding lease liabilities | 42 | 432 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 8
ELTEK LTD. AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 1:- | DESCRIPTION OF BUSINESS AND GENERAL |
|---|---|
| a. | General:<br><br> <br><br><br> <br>Eltek Ltd. ("the Company") was established in Israel in 1970, and its ordinary shares have been publicly traded on the NASDAQ Capital Market ("NASDAQ") since 1997. Eltek Ltd. and its subsidiaries (Eltek USA Inc. and Eltek Europe GmbH) are collectively referred to as "the Company". As of June 30, 2024, Eltek Europe GmbH is inactive.<br><br> <br><br><br> <br>The Company manufactures, markets and sells custom made printed circuit boards ("PCBs") including, high density interconnect, flex-rigid and multi-layered boards. The principal markets of the Company are in Israel, Europe, North America and India.<br><br> <br><br><br> <br>The Company markets its products mainly to the medical device, defense and aerospace, industrial, telecom and networking equipment industries, as well as to contract electronic manufacturers.<br><br> <br><br><br> <br>The Company is controlled by Nistec Golan Ltd ("Nistec Golan"). Nistec Golan is controlled indirectly by Mr. Yitzhak Nissan, who owns, indirectly through Nistec Holdings Ltd., all of the shares of Nistec Golan (Nistec Holdings Ltd. and its subsidiaries are referred to as "Nistec"). |
| --- | --- |
| b. | Credit facilities<br><br> <br><br><br> <br>The Company has a revolving credit facility pursuant to which the Company may withdraw an aggregate amount of up to NIS 8.7 million ($2.4 million). As of June 30, 2024, and December 31, 2023, the Company has no outstanding amounts under the facility. |
| --- | --- |
| c. | Business risks and condition: |
| --- | --- |
| - | The Company’s business is subject to numerous risks including, but not limited to, the impact of currency exchange rates (mainly NIS/US$), the Company's ability to implement its sales and manufacturing plans, the impact of competition from other companies, the Company's ability to receive regulatory clearance or approval to market its products, changes in regulatory environment, domestic and global economic conditions and industry conditions, and compliance with environmental laws and regulations. |
| --- | --- |
F - 9
ELTEK LTD. AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 1:- | DESCRIPTION OF BUSINESS AND GENERAL (CONT.) |
|---|---|
| - | On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas and the Israeli military began to call-up reservists for active duty. At the same time, and because of the declaration of war against Hamas, the clash between Israel and Hezbollah in Lebanon has escalated and there is a possibility that it will turn into a greater regional conflict in the future. As of June 2024, these events have had no material impact on the Company's operations. |
| --- | --- |
| - | The Company's commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli government is currently committed to covering the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, the Company cannot assure that this government coverage will be maintained or, if maintained, will be sufficient to compensate fully the damages incurred. |
| --- | --- |
| NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| --- | --- |
| A. | Basis of Presentation<br><br> <br>The accompanying consolidated unaudited financial statements have been prepared in a condensed format and include the consolidated unaudited financial operations of the Company as of June 30, 2024 and for the six month periods then ended, in accordance with U.S. GAAP, relating to the preparation of financial statements for interim periods.<br><br> <br><br><br> <br>Accordingly, the accompanying consolidated unaudited financial statements do not include all the information and footnotes required by generally accepted accounting principles for a complete set of financial statements. These consolidated unaudited financial statements should be read in conjunction with the audited financial statements and the accompanying notes of the Company for the year ended December 31, 2023 that are included in the Company's Annual Report on Form 20-F, filed with the Securities and Exchange Commission on March 26, 2024 (the "Annual Report"). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ended December 31, 2024. |
| --- | --- |
F - 10
ELTEK LTD. AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) | |||
|---|---|---|---|---|
| B. | Use of Estimates<br><br> <br><br><br> <br>The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods and accompanying notes. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates. | |||
| --- | --- | |||
| C. | Significant Accounting Policies<br><br> <br><br><br> <br>The Company’s significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 20-F for the year ended December 31, 2023. There have been no significant changes to these policies during the six and three months ended June 30, 2024. | |||
| --- | --- | |||
| D. | Recently Issued Accounting Pronouncements<br><br> <br><br><br> <br>In November 2023, the Financial Accounting Standard Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. In addition, it provides new segment disclosure requirements for entities with a single reportable segment. The guidance will be effective for the Company for annual periods beginning January 1, 2024 and for interim periods beginning January 1, 2025. Early adoption is permitted. The Company is currently evaluating the impact on its financial statement disclosures. | |||
| --- | --- | |||
| In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation as well as information on income taxes paid. The guidance will be effective for the Company for annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact on its financial statement disclosures. | ||||
| --- | ||||
| NOTE 3:- | CASH AND CASH EQUIVALENTS | |||
| --- | --- | |||
| June 30, | December 31, | |||
| --- | --- | --- | --- | --- |
| 2024 | 2023 | |||
| Unaudited | ||||
| Denominated in U.S. dollars | 706 | 1,218 | ||
| Denominated in NIS | 6,474 | 6,270 | ||
| Denominated in Euro | 1,697 | 1,790 | ||
| 8,877 | 9,278 |
F - 11
ELTEK LTD. AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 4:- | SHORT-TERM BANK DEPOSITS |
|---|
Short-term bank deposits are U.S. Dollar denominated and bear interest of 5.8%.
| NOTE 5:- | INVENTORIES | |||
|---|---|---|---|---|
| June 30, | December 31, | |||
| --- | --- | --- | --- | --- |
| 2024 | 2023 | |||
| Unaudited | ||||
| Raw materials | 3,378 | 3,064 | ||
| Work-in-progress | 2,635 | 2,537 | ||
| Finished goods | 427 | 534 | ||
| 6,440 | 6,135 |
During the periods ended June 30, 2024 and June 30, 2023, the Company recorded inventory write-offs in the amounts of $67 and $192, respectively. Such write-offs were included in cost of revenues.
| NOTE 6:- | COMMITMENTS AND CONTINGENT LIABILITIES |
|---|---|
| a. | Pledges:<br><br> <br><br><br> <br>The Company has pledged certain items of its equipment and the rights to any insurance claims on such items, as well as placed floating liens on all of its remaining assets in favor of the banks. |
| --- | --- |
| b. | Indemnification agreement:<br><br> <br><br><br> <br>The Company entered into indemnification agreements with each of its directors and officers and undertook to enter into the same agreement with future directors and officers. Such indemnification amount will not exceed: (i) the value of 25% of the Company’s net equity according to the audited or reviewed financial statement known at the time the request for indemnification was submitted; or (ii) $3,000,000, whichever is greater. |
| --- | --- |
F - 12
ELTEK LTD. AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 6:- | COMMITMENTS AND CONTINGENT LIABILITIES (CONT.) |
|---|---|
| The Israeli Companies Law provides that an Israeli company cannot exculpate an officer holder from liability with respect to a breach of his or her duty of loyalty. If permitted by its articles of association, a company may exculpate in advance an officer from his or her liability to the company, in whole or in part, with respect to a breach of his or her duty of care. However, a company may not exculpate in advance a director from his or her liability to the company with respect to a breach of his duty of care with respect to distributions.<br><br> <br><br><br> <br>The Company's articles of association allow it to exculpate any office holder from his or her liability for breach of duty of care, to the maximum extent permitted by law, before or after the occurrence giving rise to such liability. | |
| --- | |
| c. | Contingent Liabilities:<br><br> <br><br><br> <br>Environmental Related Matters<br><br> <br><br><br> <br>During 2022, the Company's permit providing for deviations from the standards for discharges into the municipal sewage system was extended. There can be no assurance that such an extension will be granted in the future.<br><br> <br><br><br> <br>In January 2023, the Company received a notification from the MinistryIsrael’s Ministry of Environmental Protection (the “Ministry”) that it intends to impose a penalty of approximately $0.6 million for an alleged breach of the Clean Air Law during the years 2019-2020. The Company paid this penalty and recorded a relevant expense in its financial statements. The Company filed an administrative appeal to reduce the penalty and received a 10% refund of the paid penalty.<br><br> <br><br><br> <br>In October 2023, the Company received a notice from the Ministry regarding the suspicion of contamination of the soil from a drilling survey that was done in May 2021 at the factory. On January 24, 2024, representatives of the Ministry visited the Company's facility and informed the Company that an additional survey of the soil and groundwater in the facility area would be required. As of June 30, 2024 the Company is still in conversations with the Ministry as to the scope of the required survey. |
| --- | --- |
| NOTE 7:- | SHAREHOLDERS' EQUITY |
| --- | --- |
| Share Option Plan:<br><br> <br><br><br> <br>The Company’s 2018 Share Incentive Plan (the "Plan") authorizes the grant of options to purchase shares and restricted shares units (“RSUs”) to officers, employees, directors and consultants of the Company and its subsidiaries. Awards granted under the Plan to participants in various jurisdictions may be subject to specific terms and conditions for such grants as may be approved by the Company’s board from time to time.<br><br> <br><br><br> <br>Each option granted under the Plan is exercisable for a period of ten years from the date of the grant of the option or the expiration dates of the option plan. The options primarily vest gradually over four years of employment.<br><br> <br><br><br> <br>As of June 30, 2024 options to purchase 360,327 ordinary shares were outstanding under the Plan, exercisable at an average exercise price of $8.17 per share. The share-based compensation expense related to employees' equity-based awards, recognized during the six months ended June 30, 2024 and 2023 was $286 and $144, respectively. | |
| --- |
F - 13
ELTEK LTD. AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 7:- | SHAREHOLDERS' EQUITY (CONT.) |
|---|
A summary of employee option activity under the Plan as of June 30, 2024 and changes during the six months period ended June 30, 2024 are as follows:
| Number of options | Weighted-average exercise<br><br> <br>price | Weighted- average remaining contractual life<br><br> <br>(in years) | Aggregate intrinsic<br><br> <br>value<br><br> <br>(in thousands) | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Outstanding at January 1, 2024 | 375,156 | 6.49 | 8.1 | 2,799 | |||||
| Exercised | (62,829 | ) | 4.87 | - | - | ||||
| Granted | 48,000 | 16.02 | - | - | |||||
| Outstanding at June 30, 2024 | 360,327 | 8.17 | 89 | 570 | |||||
| Exercisable at June 30, 2024 | 193,046 | 4.90 | 80 | 383 |
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing share price on the last trading day of the second quarter of fiscal 2024 and the exercise price, multiplied by the number of in-the-money options). This amount changes based on the fair market value of the Company's shares. As of June 30, 2024, there was approximately $1,413 of unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Company's share option plan. This cost is expected to be recognized over a period of up to 4 years.
Issuance of shares:
On February 15, 2024, the Company issued a total of 625,000 ordinary shares, at a price of $16.00 per share, for a total consideration of $10 million, before deducting underwriting discounts and offering expenses.
| NOTE 8:- | ENTITY WIDE DISCLOSURES | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| a. | Customers who accounted for over 10% of the total consolidated revenues: | |||||||||||
| --- | --- | |||||||||||
| Six months ended<br><br> <br>June 30, | Three months ended<br><br> <br>June 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Unaudited | ||||||||||||
| Customer A - sales of manufactured products | 12.2 | % | 14.4 | % | 10.7 | % | 13.5 | % | ||||
| Customer B - Sales of manufactured products | 16.0 | % | 11.0 | % | 18.8 | % | 11.9 | % | ||||
| b. | Revenues by geographic areas: | |||||||||||
| --- | --- | |||||||||||
| Six months ended<br><br> <br>June 30, | Three months ended<br><br> <br>June 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Unaudited | ||||||||||||
| Israel | 14,832 | 11,548 | 7,642 | 6,332 | ||||||||
| North America | 1,664 | 2,911 | 716 | 1,826 | ||||||||
| Netherlands | 1,980 | 2,884 | 864 | 1,187 | ||||||||
| India | 2,144 | 3,222 | 901 | 908 | ||||||||
| Others | 1,629 | 1,948 | 343 | 790 | ||||||||
| 22,249 | 22,513 | 10,466 | 11,043 |
F - 14
ELTEK LTD. AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 9:- | TAXES ON INCOME |
|---|---|
| a. | Deferred tax assets and liabilities:<br><br> <br><br><br> <br>The Company has net operating loss carryforwards for tax purposes of approximately $2.6 million, which may be carried forward indefinitely for which deferred tax assets was created. |
| --- | --- |
| b. | Reconciliation of the theoretical income tax expense to the actual income tax expense:<br><br> <br><br><br> <br>For the six months period ended June 30, 2024 and 2023 the main differences between the theoretical tax expenses (statutory tax rate of 23%) and the actual tax expenses are tax benefits arising from "Preferred enterprises" and non-deductible items and others. |
| --- | --- |
| NOTE 10:- | RELATED PARTY BALANCES AND TRANSACTIONS |
| --- | --- |
Nistec, the controlling shareholder of the Company, is also a customer of the Company. The Company sells products to Nistec, pays management fees to Nistec, purchases certain services from Nistec and shares certain expenses with Nistec, for services that it acquires jointly with Nistec. The Company's transactions with Nistec were carried out on an arm's-length basis.
| a. | Balances with related parties: | |||||||
|---|---|---|---|---|---|---|---|---|
| Six months ended<br><br> <br>June 30, | Year ended<br><br> <br>December 31, | |||||||
| --- | --- | --- | --- | --- | ||||
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| Trade accounts receivable | 249 | 190 | ||||||
| Trade accounts payable | 30 | 277 | ||||||
| b. | Transactions with related parties: | |||||||
| --- | --- | |||||||
| Six months ended<br><br> <br>June 30, | Three months ended<br><br> <br>June 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | 2024 | 2023 | |||||
| Unaudited | ||||||||
| Revenues | 517 | 419 | 358 | 182 | ||||
| Purchases, selling, general and administrative expenses | 147 | 365 | 75 | 288 |
F - 15
ELTEK LTD. AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- | RELATED PARTY BALANCES AND TRANSACTIONS (CONT.) |
|---|
PCB purchases by Nistec - Nistec purchases PCBs from the Company solely to provide assembled boards to its customers. The Company sells to Nistec based on its standard pricing, which may be subject to a discount at such rate as offered by the Company from time to time to its other customers, provided that in no event shall the quoted price fall below 1.6 times the variable cost of such PCBs. Should the order be for PCBs imported by the Company, the quote reflects the actual price of such PCBs, plus a mark-up of at least twenty percent (20%).
Soldering and assembly services - The Company may acquire soldering services and/or purchase services from Nistec. Nistec’s pricing for its soldering services will be its standard pricing (the “Pricing”), less a five percent (5%) discount. Nistec may charge for Purchasing Services in accordance with the actual costs of the orders, plus a fourteen and a quarter (14.25%) commission, which reflects a five percent (5%) discount, as compared to the commission charged to third parties by Nistec for similar services. The Company’s purchases of services under the soldering and assembly and design services procedures may not exceed NIS 3,000,000 per annum.
Management fees - In March 2024, the Company's Audit Committee, Compensation Committee and Board of Directors, as applicable, approved the terms of the amended Management Agreement. This amended Management Agreement was approved by the Company's shareholders at the annual general meeting held on July 8, 2024. Nistec is entitled to a monthly management fee (the "Fee") of NIS 120 ($32).
I addition, it was approved that commencing on the year ended December 31, 2024, and each calendar year thereafter, in the event that the Company’s audited consolidated financial Statements reflect that the Company’s net income equals 4% or more of the Company’s revenues, Nistec will be entitled to receive an annual performance-based bonus with respect to Mr. Nissan’s active chairman services, in an amount equal to three (3) times the Fee.
Subject to Company’s reimbursement policy approved by the Audit Committee on May 15, 2016, Mr. Nissan receives reimbursement of his travel expenses (other than food and beverage expenses) while traveling internationally on behalf of the Company, provided that such reimbursement will not exceed an aggregate amount of NIS 10,000 ($2,700) per calendar quarter.
In addition, the Company's shareholders at the annual general meetings held on August 31, 2022 and July 8, 2024 approved the following:
| a. | The extension of the Directors and Officers Indemnity Agreement with Mr. Nissan. |
|---|---|
| b. | The extension of the Exculpation Letter issued to Mr. Nissan for an additional three (3) year period |
| --- | --- |
| c. | The application of the Company’s directors' and officers' liability insurance policy with respect to Mr. Nissan. |
| --- | --- |
F - 16
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis which follows contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to future events and financial results. These include statements regarding our earnings, projected growth and forecasts, and similar matters which are not historical facts. We remind shareholders that forward-looking statements are merely predictions and therefore are inherently subject to uncertainties and other factors which could cause the actual future events or results to differ materially from those described in the forward-looking statements.
The interim condensed consolidated financial statements appearing elsewhere in this report should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 20-F for the year ended December 31, 2023. The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the operating results for the full fiscal year.
Overview
We manufacture, market and sell technologically advanced custom-made printed circuit boards, or PCBs, including high density interconnect, or HDI, flex-rigid and rigid, with high layer count boards. Our principal customers include manufacturers of defense and aerospace, medical, industrial, telecom and networking equipment, as well as contract electronic manufacturers. PCBs are constructed from a variety of base raw materials. PCBs can be double-sided or multi-layered and made of rigid, flexible, flex-rigid or high-frequency materials. In essence, they are platforms that conduct electrical signals among active and passive microelectronics components, microprocessors, memories, resistors and capacitors. Photolithographic type processes transfer the images of the electrical circuit onto the layers, and chemical processes etch these lines on the boards. Our focus is on short run quick-turnaround, prototype, pre-production and low to medium volume runs of high-end PCB products for high growth, advanced electronics applications, mainly flex-rigid PCBs. We also act as an agent for the importation of PCBs from Southeast Asia when customers require high volume production runs, although such activity was less material in recent years.
Critical Accounting Estimates
The preparation of our consolidated financial statements and other financial information requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate on an on-going basis these estimates, mainly related to inventory, deferred tax assets and share-based compensation expenses.
We base our estimates on our experience and on various assumptions that we believe are reasonable under the circumstances. The results of our estimates form the basis for our management’s judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial information:
Inventory
We are required to state our inventories at the lower of cost or net realizable value. Cost is determined on the weighted average basis for raw materials. For work in progress and finished goods, the cost is determined based on calculation of accumulated actual direct and indirect costs. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
We periodically evaluate the inventory quantities on hand relative to historical and projected sales volumes, current and historical selling prices and contractual obligations to maintain certain levels of parts. Based on these evaluations, inventory write-offs are provided to cover risks arising from slow-moving items, discontinued products, excess inventories, market prices lower than cost and adjusted revenue forecasts. Any write-off is recognized in our consolidated statements of income as cost of revenues. In addition, if required, we record a liability for firm non-cancelable and unconditional purchase commitments with contract manufacturers for quantities in excess of our forecast of future demand consistent with our valuation of excess and obsolete inventory.
The process for evaluating these write-offs often requires us to make subjective judgments and estimates concerning future sales potential at which such inventory will be sold in the normal course of business. Incorrect estimates of future sales potential may cause actual results to differ from the estimates at the time such inventory is disposed of or sold. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the valuations to be a critical accounting estimate.
Explanation of Key Income Statement Items
Revenues. Our revenues are mainly derived from sales of PCBs, including high density interconnect, flex-rigid and multi-layered boards. The principal markets of the Company are in Israel, Europe, India and North America.
Cost of Revenues. Cost of revenues consists primarily of salaries, raw materials, subcontractor expenses, related depreciation costs, inventories write-downs and overhead allocated to cost of revenues activities.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of salaries and related expenses for executive and for selling, and marketing personnel, marketing activities, accounting, legal, administrative personnel, professional fees, provisions for doubtful accounts and other general corporate expenses.
Financial Expenses, Net. Financial expenses consist of interest and bank expenses, interest on loans, and currency re-measurement losses. Financial income consists of interest on cash and cash equivalent balances and currency re-measurement gains.
Results of Operations
Revenues. Our revenues for the six months ended June 30, 2024, were $22.2 million as compared to $22.5 million for the six months ended June 30, 2023, a decrease of $0.3 million. The decrease in revenues is primarily attributable to a significant timing shift by some key customers, who prioritized orders for PCBs with medium technology requirements, resulting in lower prices and margins. Orders for more complex, higher-margin PCBs were pushed back to the end of Q2 2024 and faced production delays due to manpower-related capacity constraints. In addition, during Q2 2024 we had only 59 workings days.
Cost of Revenues. Cost of revenues increased by 5% to $17.4 million for the six months ended June 30, 2024 from $16.5 million for the six months ended June 30, 2023.
Gross Profit. Our gross profit decreased to $4.9 million or 21.2% for the six months ended June 30, 2024 from $6.0 million, or 26.5% for the six months ended June 30, 2023. The decrease in our gross profit and gross margin in 2024 is attributed to the unfavorable mix of products sold during the six months ended June 30, 2024.
Our operating expenses were $2.8 million for the six months ended June 30, 2024 as compared to $3.0 million for the six months ended June 30, 2023.
Financial Expenses, Net. We had net financial income of $0.8 million in first six months of 2024 compared to net income of $0.5 million in the first six months of 2023. The increase in financial income is primarily attributable to the rate of devaluation of the NIS exchange rate against the US Dollar and its impact on our outstanding Dollar denominated balances.
Net Profit. Our net profit for first six months of 2024 was $2.5 million compared to net profit of $2.9 million in the first six months of 2023.
Liquidity and Capital Resources
Historically, we have financed our operations through cash generated by operations, shareholder loans, long-term and short-term bank loans, borrowings under available credit facilities and the proceeds from our initial public offering in 1997, rights offerings in 2019 and 2020 and public offering in 2024.
As of June 30, 2024, our cash position (cash and cash equivalents and short-term bank deposits) totaled $18.3 million compared to $12.1 million in cash and cash equivalents as of December 31, 2023. As of June 30, 2024, we had working capital of $24.2 million as compared to working capital of $16.1 million as of December 31, 2023.
As of June 30, 2024, we had revolving lines of credit aggregating NIS 8.7 million ($2.4 million) with our banks, none of which was utilized as of such date. As of June 30, 2024, we were in compliance with our banks' covenants. All of our assets are pledged to our banks, whose consents are required for any future pledge of such assets. As of June 30, 2024, we had no debt.
Net cash provided by operating activities for the first six months of 2024 was $2.9 million as compared to $2.9 million during the first six months of 2023. This was primarily due to the net profit of $2.5 million incurred during this period and non-cash expenses in the amount of $1.0 which were offset by an increase in working capital items.
Net cash used in investing activities during the first six months of 2024 was $12.5 million as compared to net cash provided by investing activities of $1.5 million during the first six months of 2023. This was primarily due to purchase of fixed assets in the amount of $ 6.0 million and investment in short-term bank deposits in the amount of $6.5 million, during the first six months of 2024.
Net cash provided by financing activities during the first six months of 2024 was $9.6 million, mainly attributable to issuance of shares, net, compared to cash used in financing activities of $3.0 million during the first six months of 2023.
Our working capital requirements and cash flow provided by our operating and financing activities are likely to vary from quarter to quarter, depending on the following factors: (i) the timing of orders and deliveries; (ii) net profit in the period; (iii) the purchase of new equipment; (iv) the build‑up of inventories; (v) the payment terms offered to our customers; (vi) the payment terms offered by our suppliers; (vii) the repayment of existing lines of credit and loans; and (vii) approval of the current or additional lines of credit and long-term loans from banks.
To the extent that the funds generated from our operations and our existing capital resources are insufficient to fund our operating, financial and capital investment requirements, we will need to raise additional funds through public or private financing or other sources. Additional financing may not be available on commercially reasonable terms, if at all. If adequate funds are not available on terms acceptable to us, we may be required to delay, scale back or eliminate certain aspects of our operations, and our business, financial condition and results of operations would be materially adversely affected.
Corporate Tax Rate
The corporate tax in Israel, as of June 30, 2023, is 23%. According to the Law for the Encouragement of Capital Investments and our Preferred Enterprise status, our applicable tax rate is 16%.
Impact of Currency Fluctuation and of Inflation
A significant portion of the cost of our Israeli operations, primarily personnel and facility-related, is incurred in NIS. Therefore, our NIS related costs, as expressed in Dollars, are influenced by the exchange rate between the Dollar and the NIS. In addition, if the rate of inflation in Israel will exceed the rate of devaluation of the NIS in relation to the Dollar, or if the timing of such devaluations were to lag considerably behind inflation, our cost as expressed in Dollars may increase. NIS linked balance sheet items may also create foreign exchange gains or losses, depending upon the relative Dollar values of the NIS at the beginning and end of the reporting period, affecting our net income and earnings per share. Although we may use hedging techniques, we may not be able to eliminate the effects of currency fluctuations. Therefore, exchange rate fluctuations could have a material adverse impact on our operating results and share price.