Eltek Ltd F-1, filed Oct 14, 2020
Eltek Ltd (ELTK)
F-1
2020-10-14
View Original
Added on
October 18, 2026
Registration No. 333-____
As filed with the Securities and Exchange Commission on October 14, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________
Eltek Ltd.
(Exact name of Registrant as specified in its charter)
_____________
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State of Israel
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3672
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Not Applicable
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer Identification No.)
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20 Ben Zion Gelis Street,
Sgoola Industrial Zone,
Petach Tikva 4927920, Israel
+972-3-9395025
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
_____________
Eltek USA Inc.
250 Commercial Street,
Suite 2022
Manchester,
New Hampshire, 03101
USA
+1- 603 421 0020
(Name, address, including zip code, and telephone number, including area code, of agent for service)
_____________
Copies to:
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Steven J. Glusband, Esq.
Guy Ben-Ami, Esq.
Carter Ledyard & Milburn LLP
2 Wall Street
New York, NY 10005
Tel: 212-238-8605
Fax: 212-732-3232
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Alon Mualem , CFO
Eli Yaffe, CEO
20 Ben Zion Gelis Street,
Sgoola Industrial Zone,
Petach Tikva 4927920, Israel
Tel: +972-3-9395025
Fax: +972-3- 9342584
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Ian Rostowsky, Adv.
Amichay Finkelstein, Adv.
Amit, Pollak, Matalon & Co.
APM House,
18 Raoul Wallenberg St.
Tel Aviv 6971915, Israel
Tel: +972-3-5689000 Fax: +972-3-5689001
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Approximate date of commencement of proposed sale to the public: As soon as practicable after effectiveness of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration
statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration
statement for the same offering. ☐
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. 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 7(a)(2)(B) of the Securities Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
CALCULATION OF REGISTRATION FEE
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Title of each class of
securities to be registered |
Proposed maximum aggregate offering price(1)
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Amount of registration fee
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||||||
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Subscription rights to purchase ordinary shares, par value NIS 3.00 per share
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N/A
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N/A
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||||||
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Ordinary shares, par value NIS 3.00 per share
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$
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6,000,000
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(2)
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$
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655
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(2)
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||
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The subscription rights are being issued without separate consideration. Pursuant to Rule 457(g) under the Securities Act, no separate registration fee is payable.
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| (2) |
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
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The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to such Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED OCTOBER 14, 2020
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
PRELIMINARY PROSPECTUS
SUBSCRIPTION RIGHTS TO PURCHASE UP TO [_______] ORDINARY SHARES
We are distributing at no charge to the holders of our ordinary shares at 5:00 p.m., New York City time on [_____ __], 2020, which we refer to as the
record date, subscription rights to purchase up to an aggregate of [_____] of our ordinary shares. We will distribute to you one right for every [___] ordinary shares that you own on the record date. Your rights will be rounded down to the
nearest whole number and accordingly, no fractional rights will be issued in the rights offering.
Each right entitles the holder to purchase, at a price of $___ per share, one ordinary share. The subscription price, the number of shares that must be
owned to receive one right and the number of ordinary shares to be issued for each right exercised have been set by us. There is no minimum subscription amount required for consummation of the rights offering.
Subscription right holders who fully exercise their basic subscription rights will be entitled to subscribe for additional ordinary shares that remain
unsubscribed as a result of any unexercised basic subscription rights, which we refer to as the over-subscription right. If an insufficient number of ordinary shares are available to satisfy fully the over-subscription requests, then the
available ordinary shares will be distributed among subscription rights holders who exercised their over-subscription right, based on the procedures set forth herein.
Mr. Nissan, who beneficially owns 65.4% of our outstanding shares, has expressed a non-bindingindication that he will participate in the contemplated
rights offering, subject to our share price at the time of offering, provided that a portion of the amount raised in such offering will be used to repay the Nistec Loans (as described in “Use of Proceeds” and Risk Factors”).
The subscription rights will expire at 5:00 p.m., New York City time, on [_____ __], 2020, which we refer to as the expiration date. Any rights not
exercised at or before that time will expire worthless without any payment to the holders of those unexercised rights, unless we decide in our sole discretion to extend the expiration date of the rights offering. The subscription rights may
not be sold or transferred except for being transferable by operation of law, and will not be tradable on any trading market.
The issuance of ordinary shares purchased in the rights offering will be made on or about [_____ __], 2020. American Stock Transfer & Trust Company, LLC will send
electronic certificates representing ordinary shares purchased in the rights offering to record holders registered in our shareholders register maintained by it promptly after such date. Beneficial owners of our ordinary shares whose shares
are held by a nominee, such as a broker, dealer or bank, rather than in their own name, will have any ordinary shares acquired in the rights offering credited to the account of such nominee on or about [_____ __], 2020.
We may terminate or cancel the rights offering in our sole discretion at any time prior to [_____ __], 2020, for any reason. If the rights offering is terminated,
then we will return your subscription price payment, but without any payment of interest.
You should carefully consider whether to exercise your subscription rights before the expiration date. All exercises of subscription rights are irrevocable. Our
ordinary shares are listed on the NASDAQ Capital Market under the symbol “ELTK.” The last sale price of our ordinary shares on NASDAQ on October 12, 2020 was $4.97per share. The ordinary shares issued in the rights offering will also be
listed for trading on NASDAQ.
Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 15 of this prospectus and under similar headings
in the other documents that are incorporated by reference into this prospectus to read about factors you should consider before deciding whether to exercise your subscription rights.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is a criminal offense under the laws of the United States.
Prospectus dated , 2020
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You should rely only on the information included or incorporated by reference in this prospectus or any supplement or free writing prospectus prepared by us. Neither we, nor any of our
respective agents, have authorized anyone to provide information or represent anything other than that contained in, or incorporated by reference in, this prospectus. We have not authorized anyone to provide you with different
information. If you receive any other information, you should not rely on it. We are not making an offer in any state or jurisdiction or under any circumstances where the offer is not permitted. You should assume that the information
in this prospectus or any supplement or free writing prospectus prepared by us is accurate only as of the date on their cover pages and that any information we have incorporated by reference is accurate only as of the date of the
document incorporated by reference.
For investors outside of the United States: Neither we, nor any of our respective agents, have done anything that would permit this offering or
possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about, and to observe any restrictions relating to,
this offering and the distribution of this prospectus outside of the United States.
In this prospectus, “we,” “us,” “our,” the “Company” and “Eltek” refer to Eltek Ltd., an Israeli company, and where applicable, its subsidiaries.
All references to “dollars” or “$” in this prospectus are to U.S. dollars, and all references to “shekels” or “NIS” are to New Israeli Shekels.
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations, market position,
market opportunity and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets for our products and services.
This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In the absence of reliable data, the market position, market opportunity and market size information
included in this prospectus is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of
uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by
the independent parties and by us.
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The following are examples of what we anticipate may be common questions about the rights offering. The answers are based on selected information from this prospectus. The following
questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about the rights offering. This prospectus contains more detailed descriptions of the terms
and conditions of the rights offering and provides additional information about us and our business, including potential risks relating to the rights offering, our business, our ordinary shares and our location in Israel.
Exercising the subscription rights and investing in our securities involves a high degree of risk. We urge you to carefully read the section entitled “Risk Factors” beginning on page 15 of this prospectus and
all other information included or incorporated by reference in this prospectus in its entirety before you decide whether to exercise your rights.
Q: What is a rights offering?
A: A rights offering is a distribution of subscription rights on a pro rata basis to all existing shareholders of a company to buy a proportional number of
additional securities at a given price. We are distributing to holders of our ordinary shares, at no charge, as of the close of business on the record date ([____ __], 2020), subscription rights to purchase up to an aggregate of [___] of our
ordinary shares. You will receive one (1) subscription right for every [__ (_)] ordinary shares you own at the close of business on the record date. Each right carries with it a basic subscription right and an over-subscription right. The
basic and over-subscription rights will be evidenced by subscription rights certificates, which may be physical certificates but will more likely be electronic instruments issued through the facilities of the Depository Trust Company, or DTC.
Q: Why are we undertaking the rights offering, and how will we use the proceeds from the rights offering?
A: We are undertaking this rights offering in order to improve our cash position and grow our business, increase our shareholders’ equity and extinguish our debt to Nistec Golan Ltd. (“Nistec Golan”).
Nistec Golan is a privately held company indirectly controlled by our Chairman, Mr. Yitzhak Nissan, through Nistec Holdings Ltd. (Nistec Holdings Ltd. and its subsidiaries are referred to herein as “Nistec”). Mr. Nissan, who beneficially owns
65.4% of our outstanding shares, has expressed a non-binding indication that he will participate in the contemplated rights offering, subject to our share price at the time of offering, provided that a portion of the amount raised in such
offering will be used to repay the Nistec Loans. We will have broad discretion in the way that we use the remaining net proceeds of this offering.
The rights offering provides our existing shareholders the opportunity to participate in our capital raising efforts, in a manner that allows them to maintain, and possibly increase, their
proportional ownership interest in us.
Q: How much money will Eltek raise as a result of the rights offering?
A: We estimate that the proceeds from the rights offering will be approximately $[__] million (assuming the sale of [__] ordinary shares at an assumed subscription price of $[__] per share), after
deducting expenses related to the rights offering payable by us, estimated at approximately $[__].
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Q: What is a subscription right?
A: Each subscription right carries with it a basic subscription right and an over-subscription right and entitles the holder of the right the opportunity to purchase, at the subscription price of $[__]
per right, one (1) ordinary share. We expect to issue one (1) subscription right for every [__ (_)] of our ordinary shares that you own on the record date. Your subscription rights will be rounded down to the nearest whole number and
accordingly, no fractional rights will be issued in the rights offering.
Q. May I transfer my subscription rights?
A: No. The subscription rights may not be sold or transferred except for being transferable by operation of law. The subscription rights will not be traded on the NASDAQ Capital Market or any other
trading market.
Q: What is a basic subscription right?
A: Each basic subscription right gives you the opportunity to purchase one (1) of our ordinary shares. You may exercise any number of your basic subscription rights or you may choose not to exercise any
subscription rights at all.
For example, if you own 2,000 of our ordinary shares on the record date and you are granted one (1) subscription right for every [__] ordinary shares you own at that time, then you would have
the basic right to purchase, at an aggregate price of up to $[__] (assuming a subscription price of $[__] per share), up to [] ordinary shares.
If you hold your ordinary shares in the name of a broker, dealer, bank or other nominee who uses the services of the DTC, then DTC will credit the account of the nominee with one right for
every [__]ordinary shares you own at the record date.
Q: What is an over-subscription right?
A: If you elect to purchase all of the securities available to you pursuant to your basic subscription right, you may also
elect to subscribe for additional rights that remain unsubscribed as a result of any other shareholders not exercising their basic subscription rights. If an insufficient number of shares are available to satisfy fully the over-subscription
requests, then the available shares will be distributed proportionately among subscription rights holders by calculating the number of rights you properly exercised using your basic subscription rights relative to the number of rights
properly exercised by all subscribers who have over-subscribed. Payments in respect of over-subscription rights are due at the time payment is made for the basic subscription right. Any excess subscription price payments will be returned,
without interest or deduction, promptly after the expiration of the rights offering.
Subscription rights may only be exercised for whole numbers of ordinary shares; no fractional ordinary shares will be issued in the
rights offering.
Q: Who may participate in the rights offering?
A: Only holders of record of our ordinary shares as of [____ __], 2020 (the record date) are entitled to participate in the rights offering.
Q: Will the officers, directors and significant shareholders of Eltek be exercising their rights?
A: Our controlling shareholder and chairman of the board of directors, Mr. Nissan who beneficially owns 65.4% of our outstanding shares, has expressed a non-binding indication that he will participate in
the contemplated rights offering, subject to our share price at the time of offering, provided that a portion of the amount raised in such offering will be used to repay the Nistec Loans , as described in the “Use of Proceeds” section. Such
loan repayment, which was approved by our audit committee and board of directors, is subject to shareholder approval in the Annual General Meeting to be held on October 29, 2020.
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Q: Will the subscription rights and the ordinary
shares that I receive upon exercise of my rights be tradable on the NASDAQ Capital Market?
A: Our ordinary shares are listed on the NASDAQ Capital Market under the ticker symbol “ELTK.” The ordinary shares issued in the rights offering will also be listed for trading on the NASDAQ Capital
Market. However, the subscription rights may not be sold or transferred except for being transferable by operation of law, and will not be tradable on the NASDAQ Capital Market or any other trading market.
Q: How do
I exercise my basic subscription right and over-subscription right?
A: Shortly after the record date we will send a subscription rights certificate to each holder of our ordinary shares that on the record date is registered in our shareholder register maintained by American Stock Transfer & Trust Company, LLC, the transfer agent of our ordinary shares, which is also acting as the subscription agent for the rights offering. The subscription rights certificate will evidence the number of subscription rights issued to each holder and will be accompanied by a copy of this prospectus.
If you are a record holder of our ordinary shares and you wish to exercise your subscription rights, you should complete the exercise form on the
back of the rights certificate and send the certificate, accompanied by the subscription price, to the subscription agent. The subscription rights certificate, together with full payment of the subscription price, must be received by the
subscription agent on or prior to the expiration date of the rights offering.
If you are a record holder, in order to properly exercise your over-subscription right, you must: (i) indicate on your subscription rights
certificate that you submit with respect to the exercise of the rights issued to you how many additional rights you are willing to exercise pursuant to your over-subscription right and (ii) concurrently deliver the subscription payment
related to your over-subscription right at the time you make payment for your basic subscription right. All funds from over-subscription rights that are not honored will be promptly returned to shareholders, without interest or deduction.
If you use the mail, we recommend that you use insured, registered mail, return receipt requested. We will not be obligated to honor your exercise
of subscription rights if the subscription agent receives the documents relating to your exercise after the rights offering expires, regardless of when you transmitted the documents.
If you are a beneficial owner of our ordinary shares and hold them through a broker, dealer, bank or other nominee (including a member of the DTC),
rather than in your own name, and you wish to exercise your subscription rights, you should contact your nominee to exercise your subscription rights sufficiently in advance of the expiration of the subscription period in order to ensure
timely delivery of a subscription rights certificate reflecting your exercise. Your nominee will instruct you as to the proper time and payment of the subscription price. See also “The Rights Offering –
Methods for Exercising Rights.”
Q: Am I required to subscribe in the rights offering?
A: No. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights at all.
Q: What happens if I choose not to exercise my subscription rights?
A: You will retain your current number of ordinary shares even if you do not exercise your basic subscription rights. However, if you do not exercise your basic subscription right in full, the
percentage of our ordinary shares that you own will decrease, and your voting and other rights will be diluted to the extent that other shareholders exercise their basic and over-subscription rights.
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Q: When will the subscription rights expire?
A: The subscription rights will expire, if not exercised, at [5:00] p.m., New York City time on [____ __], 2020, unless we decide to terminate the rights offering earlier or to extend this date. We or
the subscription agent must actually receive all required documents and payments before that time and date. Any rights not exercised at or before the applicable time will expire without any payment to the holders for those unexercised
rights. See “The Rights Offering – Expiration of the Rights Offering.”
If you hold your shares through a broker, dealer or other nominee, you will be required to comply with the procedural requirements of such nominee,
including the procedures relating to the last time by which you may be required to provide notice of your intention to exercise your rights. For further information see “The Rights Offering – Methods for
Exercising Rights.”
If you do not timely exercise your rights in accordance with the procedures applicable to you, your ability to exercise the rights and purchase the
ordinary shares will expire.
Q: Will Eltek be requiring a minimum dollar amount of subscriptions to consummate the rights offering?
A: No. There is no minimum subscription requirement to consummate the rights offering.
Q: Is exercising my subscription rights risky?
A: The exercise of your subscription rights and over-subscription rights (and the resulting ownership of our ordinary shares) involves a high degree of risk. Exercising your subscription rights means
buying ordinary shares and should be considered as carefully as you would consider any other equity investment. You should carefully consider the information under the heading “Risk Factors” and all other information included in this
prospectus before deciding to exercise your subscription rights.
Q: After I exercise my subscription rights, can I change my mind and cancel my purchase?
A: No. Once you send in your subscription rights certificate and payment, you cannot revoke the exercise of either your basic or over-subscription rights, even if the market price of our ordinary
shares is below the $[__] per share subscription price. You should not exercise your subscription rights unless you are certain that you wish to purchase additional ordinary shares at the proposed subscription price. Any rights not
exercised at or before the expiration date will expire worthless without any payment to the holders for those unexercised rights.
Q: Can the board of directors cancel, terminate or amend the rights offering?
A: Our board of directors may decide to cancel or terminate the rights offering at any time and for any reason prior to [5:00] p.m. New York City time on [____ __], 2020. If our board of directors
cancels or terminates the rights offering, we will issue a press release notifying shareholders of the cancellation or termination, and any money received from subscribing shareholders will be promptly returned, without interest or
deduction.
We may amend or modify the terms of the rights offering, including the extension of the expiration date of the rights offering.
Q: What should I do if I want to participate in the rights offering but my ordinary shares are held in the name of my broker,
dealer, bank or other nominee and not in my name?
A: Beneficial owners of our ordinary shares whose shares are held by a nominee, such as a broker, dealer, bank or trustee, rather than in their own name, must contact that nominee to exercise their
rights. In that case, the nominee will complete the subscription rights certificate on behalf of the beneficial owner and arrange for proper payment by one of the methods described above. For further information see “The Rights Offering – Methods for Exercising Rights.”
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Q: Will I be charged a sales commission or a fee if I exercise my subscription rights?
A: We will not charge a brokerage commission or a fee to subscription rights holders for exercising their subscription rights. However, if you exercise your subscription rights and/or sell any
underlying ordinary shares through a broker, dealer, bank or other nominee, you will be responsible for any fees charged by your broker, dealer, bank or other nominee.
Q: What is the recommendation of the board of directors regarding the rights offering?
A: None of Eltek, our board of directors or the subscription agent is making any recommendation as to whether or not you should exercise your subscription rights. You are urged to make your decision in
consultation with your own advisors as to whether or not you should participate in the rights offering or otherwise invest in our securities and only after considering all of the information included in this prospectus, including the “Risk
Factors” section that follows.
Q: How were the terms of the rights offering established?
A: Our board of directors appointed a special committee to oversee the rights offering and make a recommendation to the board of directors with respect to the terms of the rights offering. The special
committee is composed of three members of our board of directors, who are not affiliated with our controlling shareholders. The special committee recommended the subscription price to our board of directors, which in turn considered the
terms of the rights offering. In determining the pricing of the rights offering, the special committee and our board of directors considered, among other things, the need to offer the shares at a price that would be attractive to investors
relative to the then current trading price for our ordinary shares, historical and current trading prices and volumes for our ordinary shares, the need for capital and alternatives available to us for raising capital, potential market
conditions, the desire to provide an opportunity to our shareholders to participate in the rights offering on a pro rata basis, and the fact that Nistec’s intention to exercise the rights offered to it under this Prospectus was subject to a
minimum discount to market price of 10%. In conjunction with its review of these factors, the special committee and our board of directors
reviewed, with the assistance of financial advisors, our history and prospects, including our past and present earnings, our prospects for future earnings, and the outlook for our industry, our current financial condition and a range of
subscription prices compared to market prices in various prior rights offerings.
The subscription price does not necessarily bear any relationship to any other established criteria for value. You should not consider the
subscription price as an indication of value of our company or our ordinary shares. You should not assume or expect that, after the rights offering, our ordinary shares will trade at or above the subscription price in any given time period.
The market price of our ordinary shares may decline during or after the rights offering, and you may not be able to sell the shares of our ordinary shares purchased during the rights offering at a price equal to or greater than the
subscription price. You should obtain a current quote for our ordinary shares before exercising your subscription rights and make your own assessment of our business and financial condition, our prospects for the future, and the terms of
this rights offering. On October 12, 2020, the last reported sale price of our ordinary shares on the NASDAQ Capital Market was $4.97 per share.
Q: What are the U.S. federal income tax consequences of receiving or exercising my subscription rights?
A: A U.S. holder of ordinary shares likely will not recognize any income, gain or loss for U.S. federal income tax purposes in connection with the receipt or exercise of subscription rights. You
should consult your own tax advisor as to the particular consequences to you of the rights offering. See “Material U.S. Federal Income Tax Considerations.”
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Q: What are the Israeli income tax consequences of receiving or exercising my subscription rights?
A: Since the rights are issued to all the holders of our shares, on a pro rata basis, a U.S. holder of ordinary shares likely will not recognize any income, gain or loss for Israeli income tax purposes in connection with the receipt or exercise of subscription rights. However, no
tax ruling from the Israeli Income Tax Authority will be sought for the rights offering. You should consult your own tax advisor as to the particular consequences to you of the rights offering. See “Certain
Israeli Tax Considerations.”
Q: How many ordinary shares will be outstanding after the rights offering?
A: The number of ordinary shares that will be outstanding immediately after the completion of the rights offering will be [______] ordinary shares, assuming full participation in the rights offering
of [______] ordinary shares. This amount excludes 133,519 ordinary shares issuable upon the exercise of outstanding exercisable options.
Q: If I exercise my subscription rights, how will I
receive ordinary shares in the rights offering?
A: The issuance of ordinary shares purchased in the rights offering will be made on or about [____ __], 2020. American Stock Transfer & Trust Company, LLC will credit your account for the number of
ordinary shares purchased in the rights offering on our shareholder register maintained by it promptly after such date. Beneficial owners of our ordinary shares whose shares are held by a nominee, such as a broker, dealer or bank, rather
than in their own name, will have any ordinary shares acquired in the rights offering credited to the account of such nominee on such date.
Q: Who is the subscription agent for the rights
offering?
A: The subscription agent is American Stock Transfer & Trust Company, LLC. The address for delivery to the subscription agent is as follows:
By Hand, Mail or Overnight Courier:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Attention: Reorganization Department
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Attention: Reorganization Department
Your delivery to the subscription agent to an address other than the address set forth above will not constitute valid delivery and, accordingly,
may be rejected by us.
Q: What should I do if I have other questions?
A: If you have any questions or need further information about the rights offering, please contact D.F. King at eltek@dfking.com,
or at toll free at (800)-283-2170, or our Chief Financial Officer, Alon Mualem, at Alonm@nisteceltek.com, or at +972-3- 9395023, during normal business hours in Israel. For a more complete description of the rights offering, see “The Rights Offering.”
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This prospectus, including the documents incorporated by reference herein, contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may.” “might.”
“will.” “should.” “expects.” “plans.” “anticipates.” “believes.” “estimates.” “predicts.” “potential” or “continue.” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks,
uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current
expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or
achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption “Risk Factors” and under similar headings in the other documents that are incorporated by reference into this prospectus.
You should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future
results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these
forward-looking statements after the date of this prospectus to conform our prior statements to actual results or revised expectations, except as otherwise required by law.
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This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before deciding to invest in our
ordinary shares. You should read the entire prospectus carefully, including “Risk Factors” and our consolidated financial statements and notes to those consolidated financial statements, before making an investment decision.
Eltek Ltd.
We are a global manufacturer and supplier of technologically advanced solutions in the field of printed circuit boards (PCBs) and are the Israeli leader in this industry. PCBs are the core circuitry of most
electronic devices. Eltek specializes in the manufacture and supply of complex and high quality PCBs, HDI, multilayered and flex-rigid boards for the high-end market. Eltek is ITAR compliant and has AS-9100 and NADCAP Electronics certifications.
Its customers include leading companies in the defense, aerospace and medical industries in Israel, the United States, Europe and Asia.
We were founded in 1970 and are incorporated under the laws of the State of Israel. Our headquarters, R&D, production and marketing center are located in Israel. We also operate through subsidiaries in North
America and in Europe and by agents and distributors in Europe, India and South Africa. Our principal executive offices are located at 20 Ben Zion Gelis Street, Sgoola Industrial Zone, Petach Tikva 4927920, Israel, and our telephone number is
+972-3-9395025. Our agent for service of process in the United States is Eltek USA, Inc., located at 250 Commercial Street, Suite 2022, Manchester, NH 03101, USA, and its telephone number is +1 603 421 0020. Our website address is http://www.nisteceltek.com/.
Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. We have included our website address in this prospectus solely for informational
purposes.
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Securities Offered
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We are distributing at no charge to the holders of our ordinary shares on [_______ __], 2020, which we refer to as the record date, subscription rights to purchase up to an aggregate of [______] of our
ordinary shares. We will distribute one subscription right to the holder of record of every [__] ordinary shares that is held by the holder of record on the record date. Based on [______] share outstanding on the date hereof, we will
issue approximately [______] subscription rights in the rights offering. The total subscription price for the subscription rights offered in the rights offering will be at maximum $[__] million, assuming full participation in the rights
offering (and full exercise of the over-subscription right, to the extent applicable), of which no assurance can be given.
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Basic Subscription Right
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Each subscription right, which we refer to as the basic subscription right, entitles the holder to purchase, for the subscription price of $[__], one ordinary share. Rights will be rounded down to the
nearest whole number and accordingly, no fractional rights will be issued in the rights offering. With respect to ordinary shares registered on our shareholder register maintained by our transfer agent, including those held in the
name of DTC, such rounding will be made with respect to each record and beneficial shareholder.
Subscription rights may only be exercised for whole numbers of ordinary shares; no fractional ordinary shares will be issued in the rights offering.
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Over-Subscription Right
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If you elect to purchase all of the ordinary shares available to you pursuant to your basic subscription right, you may also elect to subscribe for additional ordinary shares that remain unsubscribed as a
result of any other shareholders not exercising their basic subscription rights. In honoring over-subscription rights, we will allocate the available shares proportionately by calculating the number of rights a subscriber properly
exercised using its basic subscription rights, relative to the number of rights properly exercised using the basic subscription rights by all subscribers who have over-subscribed. We will allocate to you an equivalent proportion of the
shares available for over-subscription. We will seek to honor your over-subscription in full, subject to the limitations set forth herein. The exercise of your over-subscription privilege may be limited, however, if there are
insufficient shares available, so you may be allocated fewer shares than you subscribed for using your over-subscription privilege. If the proportionate allocation results in you being allocated a greater number of shares than you
subscribed for, then we will allocate to you only that number of shares for which you subscribed. We will allocate the remaining shares, on the basis described above, among all holders exercising the over-subscription privilege whose
over-subscription was not satisfied in the first allocation. This allocation process will be repeated until all over-subscriptions have been satisfied. Fractional shares resulting from the exercise of the over-subscription privilege
will be eliminated by rounding down to the nearest whole share. Payments in respect of over-subscription rights are due at the time payment is made for the basic subscription right. Any excess subscription price payments will be
returned, without interest or deduction, promptly after the expiration of the rights offering.
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Record Date
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Close of business on [_________ __], 2020.
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Commencement Date of Subscription Period
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After 5:00 p.m., New York City time on [_________ __], 2020.
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Expiration Date of Subscription Period
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5:00 p.m., New York City time on [_________ __], 2020, unless we decide to terminate the rights offering earlier. We or the subscription agent must actually receive all required documents and payments
before that time and date.
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Use of Proceeds
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We intend to use the net proceeds we receive (if any) from this offering for the repayment of up to $2.9 million of the Nistec Loans, and for working capital and other general corporate purposes. See “Use of Proceeds.”
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Transferability of Subscription Rights
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The subscription rights may not be sold or transferred except for being transferable by operation of law.
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No Board Recommendation
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Our board of directors makes no recommendation to you about whether you should exercise any subscription rights. You are urged to consult your own financial advisors in order to make an independent
investment decision about whether to exercise your subscription rights. Please see the section of this prospectus entitled “Risk Factors” for a discussion of some of the risks involved in
investing in our securities.
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No Minimum Subscription Requirement
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There is no minimum subscription requirement. We will consummate the rights offering regardless of the amount raised from the exercise of rights by the expiration date.
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No Revocation
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If you exercise any of your basic or over-subscription rights, you will not be permitted to revoke or change the exercise or request a refund of monies paid.
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Taxation
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For a discussion of material U.S. federal income tax and Israeli tax considerations of the receipt and exercise of the rights and the ownership and disposition of new ordinary shares, please refer to
“Material U.S. Federal Income Tax Considerations” and “Certain Israeli Tax Considerations” in this prospectus.
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Termination, Cancellation and Amendment
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We may terminate or cancel the offering in our sole discretion at any time on or before [_____ __], 2020 for any reason (including, without limitation, a change in the market price of our ordinary
shares). If the offering is terminated, all rights will expire without value and we will promptly arrange for the refund, without interest or deduction, of all funds received from holders of subscription rights. Any termination or
cancellation of the rights offering will be followed as promptly as practicable by an announcement.
We may amend or modify the terms of the rights offering, and may extend the expiration date of the rights offering.
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Procedure for Exercising Rights
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If you are the record holder of our ordinary shares registered on our shareholder register maintained by American Stock Transfer & Trust Company, LLC, our transfer agent, not including those ordinary
shares held in the name of DTC, to exercise your subscription rights you must complete the subscription rights certificate and deliver it to the subscription agent, American Stock Transfer & Trust Company, LLC, together with full
payment for all the subscription rights you elect to exercise. The subscription agent must receive the proper forms and payments on or before the expiration date. You may deliver the documents and payments by mail or commercial
courier. If regular mail is used for this purpose, we recommend using registered mail, properly insured, with return receipt requested.
If you are a beneficial owner of our ordinary shares and/or hold them through a broker, dealer, bank or other nominee (including a participant of DTC), you should instruct your broker, dealer, bank or
other nominee in accordance with the procedures described in the section of this prospectus entitled “The Rights Offering – Methods for Exercising Rights” and “The Rights Offering – Payment of Subscription Price.”
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Subscription Agent
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American Stock Transfer & Trust Company, LLC
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Information Agent
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D.F. King & Co., Inc.
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Questions
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If you have any questions or need further information about the rights offering, please contact our Information Agent at (800)-283-2170 or our Chief Financial Officer at Alonm@nisteceltek.com, or
+972-3- 9395023, during normal business hours in Israel.
at +972-3-9395023, during his normal business hours.
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Shares Outstanding on the Date of this Prospectus
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4,380,268 ordinary shares are outstanding on the date of this prospectus. This amount excludes 133,519 ordinary shares issuable upon the exercise of outstanding exercisable options.
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| Shares Outstanding after Completion of the Rights Offering |
[_________] of our ordinary shares will be outstanding immediately after the completion of the rights offering, assuming full participation in the rights offering. This amount excludes 133,519 ordinary
shares issuable upon the exercise of outstanding exercisable options.
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Issuance of Our Ordinary Shares
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The issuance of ordinary shares purchased in the rights offering will be made on or about [____ __], 2020.
American Stock Transfer & Trust Company, LLC will issue electronic certificates representing ordinary shares purchased in the rights to record holders registered on our shareholder register maintained
by it promptly after such date. Beneficial owners of our ordinary shares whose shares are held by a nominee will have any ordinary shares acquired in the rights offering credited to the account of such nominee on such date.
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Risk Factors
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See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our
ordinary shares.
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Fees and Expenses
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We will bear the fees and expenses incurred by us relating to the rights offering.
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Trading
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Our ordinary shares are listed on the NASDAQ Capital Market under the symbol “ELTK.” The ordinary shares issued in the rights offering will also be listed for trading on the NASDAQ Capital Market. The
subscriptions rights will not be listed for trading on any trading exchange.
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This offering and an investment in our ordinary shares involve a high degree of risk. You should consider carefully the risks described below and all other information contained in this prospectus,
including our financial statements and related notes thereto, before you decide to buy our ordinary shares. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely
affected. In that event, the trading price of our ordinary shares would likely decline and you might lose all or part of your investment.
Risks Related to Our Business and Our Industry
We have a history of operating losses and may not be able to achieve and sustain long term profitable operations. We may not have sufficient resources to fund our operations in the
future.
While we achieved a net profit of $1.8 million in the year ended December 31, 2019 and a net profit of $1.2 million for the six (6) month period ended June 30, 2020, we incurred net losses of $2.6 million, $3.8 million
and $3.6 million in the three years ended December 31, 2018 and have not maintained consistent profitable operations in the past. We have incurred an accumulated deficit of approximately $18.5 million since inception and our working capital amounted
to $1.7 million as of June 30, 2020. There can be no assurance that we will be able to operate profitably in the future. To the extent that we incur operating losses in the future, we may have insufficient working capital to fund our operations. If
we do not generate sufficient cash from operations, we will be required to obtain additional financing or reduce our level of expenditure. Such financing may not be available in the future, or, if available, may not be on terms favorable to us. If
adequate funds are not available to us, our business, and results of operations and financial condition will be materially and adversely affected.
We will require additional capital in the future, which may not be available to us.
As of June 30, 2020, we had $5.7 million of outstanding loans from our banks, from a non-banking financial institution and from our controlling shareholder, $3.4 million in cash and cash equivalents and working capital
of $1.7 million. The lack of sufficient working capital could negatively impact our ability to compete effectively in the future. To the extent that we incur operating losses in the future or are unable to generate free cash flows from our business,
we may not have sufficient working capital to fund our operations and will be required to obtain additional financing. Our working capital requirements and cash flow provided by our operating and financing activities are likely to vary greatly 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; and (vii) ability to maintain our current,or obtain additional, lines of credit and long-term loans from banks and other lenders.
As of June 30, 2020, we had revolving lines of credit aggregating NIS 11.6 million (approximately $3.3 million) with our banks and from a non-banking financial institution, of which $1.3 million was utilized as of such
date, and $1.8 million of long-term loans (including current maturities) from banks and fixed assets suppliers. In addition, we had loans of NIS 10.0 million ($2.9 million) not including accrued interest from Nistec Golan (“Nistec's Loan”). As of
December 31, 2019, we were in compliance with our banks’ loan covenants. These credit facilities may not remain available to us in the future. Furthermore, under certain circumstances the banks may require us to accelerate or make immediate payment
in full of our credit facilities. All of our assets are pledged as security for our liabilities to our banks, whose consents are required for any future pledge of such assets
In addition to Nistec’s Loans of NIS 10 million ($2.9 million) not including accrued interest, Nistec has also provided a guarantee on our behalf for an existing bank line of credit of NIS 4.5 million (approximately
$1.3 million) received from Bank Hapoalim, a guarantee for a loan of NIS 4.0 million (approximately $1.3 million) received from Mizrahi-Tefahot Bank and provided a guarantee for a credit line from a non-banking financial institution of NIS 1.0
million loan (approximately $ 290,000) as of June 30, 2020.
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The lack of sufficient working capital could negatively impact our ability to compete effectively in the future. To the extent that we incur operating losses in the future or are unable to generate free cash flows from
our business, we may not have sufficient working capital to fund our operations and will be required to obtain additional financing.
We may fail to be in compliance with financial covenants in our loan agreements.
We are subject to financial covenants in our loan agreements with the banks that provide us with our credit facilities and long-term loans. Our compliance with the financial covenants is measured annually based on our
annual audited financial statements. As of December 31 of each of the three years ended December 31, 2018, we were not in compliance with these covenants. On February 2019, the banks granted us a waiver from such non-compliance. We were compliant
with our covenants to the banks with respect to our financial statements for December 31, 2019. These credit facilities may not remain available to us in the future. Furthermore, under certain circumstances the banks may require us to accelerate or
make immediate payment in full of our credit facilities. All of our assets are encumbered as security for our liabilities to our banks, whose consents are required for any future pledge of such assets. The borrowings from our banks are secured by
specific liens on certain assets, by a first priority charge on the rest of our now-owned or after-acquired assets and by a fixed lien on goodwill (intangible assets) and insurance rights (rights to proceeds on insured assets in the event of damage).
In addition, the agreements prohibit us from selling or otherwise transferring any assets except in the ordinary course of business or from placing a lien on our assets without the banks’ consent.
Both of the banks have the right to demand immediate repayment of the loans and lines of credit in the event of non-compliance with the financial covenants or a change of control in our company, if such a change occurred
without their prior approval. Our failure to remain in compliance with each of the banks’ covenants, obtain waivers, negotiate agreements with new covenant terms, or obtain additional financing, if required, may adversely affect our business, results
of operations and financial position.
The spread of novel strain of coronavirus, COVID-19, may adversely affect our business operations and financial condition.
In December 2019, an outbreak of COVID-19 was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This highly contagious disease has spread to over 180
countries in the world and throughout both Israel and the United States, creating a serious impact on our customers, workforces, and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn.
It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and the imposition of either quarantine or remote work or meeting requirements for employees, either by
government order or on a voluntary basis. The pandemic may adversely affect our customers’ ability to perform their missions and is in many cases disrupting their operations. It may also impact the ability of our subcontractors, partners, and
suppliers to operate and fulfill their contractual obligations, and result in an increase in their costs and cause delays in performance. These supply chain effects, and the direct effect of the virus and the disruption on our operations, may
negatively impact both our ability to meet customer demand and our revenue and profit margins. Both Israel and the United States have imposed quarantines and restrictions on travel and mass gatherings and curtailed and limited non-essential works
in an attempt to slow the spread of the virus. Some of our employees are quarantined and in some cases, are working remotely and using various technologies to perform their functions. We may encounter delays or changes in customer demand,
particularly if government funding priorities change. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. While the ultimate impact of the
spread of COVID-19 is highly uncertain and subject to change, if protective or preventative measures expand, we may experience a material adverse effect on our business operations, revenues and financial condition.
We are dependent on one-of-a-kind machinery that may malfunction and may not be easily replaced.
The proper function of our manufacturing equipment is an important element in our effectively operating our business. We own and use several unique manufacturing machines, some of which are aging and sometimes
malfunction, causing disruptions and occasionally even cessation of our manufacturing activities, which adversely affects our business. It is possible that substantial funds may be required to repair or replace our unique machinery, which may not be
available to us. Further, the repair or replacement of certain machinery could be a long process. In some cases, machinery suppliers stop supporting and repairing such manufacturing equipment. Machinery failure could cause a cessation of our
manufacturing activities for a significant period of time, which may have a material adverse effect on our business, financial condition, results of operations and cash flows.
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Key customers account for a significant portion of our revenues. The loss of a key customer would have an adverse impact on our business results.
In the years ended December 31, 2019, 2018 and 2017, a group of affiliated companies accounted for 19.5%, 12.0% and 14.6% of our total revenues, respectively, and another group of affiliated companies accounted for
11.5%, 9.3% and 10.2% of our total revenues, respectively. We expect that a significant portion of our future revenues will continue to be dependent on a small number of customers. If we are unable to retain our key customers, or maintain our level
of business with such customers, or, if we are unable to attract sufficient new business to compensate for the loss of or reduction in business from any of our key customers, our results of operations and financial condition would be adversely
affected.
Our results of operations may be adversely affected by currency fluctuations.
Our revenues and expenses are denominated in NIS, dollars and euros. Due to the different proportions of currencies our revenues and expenses are denominated in, fluctuations in rates of exchange between NIS and other
currencies may affect our operating results and financial condition. The NIS value of our dollar and euro denominated revenues are negatively impacted by the depreciation of the dollar and the Euro against the NIS. The average exchange rate for the
NIS against the dollar was approximately 0.8% lower in 2019 than in 2018, which had a negative impact on our operating results in 2019. In the past, the NIS exchange rate against the dollar and other foreign currencies fluctuated, generally
reflecting inflation rate differentials. We cannot predict any future trends in the rate of inflation in Israel or the rate of depreciation or appreciation of the NIS against the dollar. If NIS value of our dollar or Euro denominated revenues
decreases, our results of operations will be adversely affected.
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We are currently not engaged in hedging transactions. If we were to decide to enter into any hedging transactions in the future in order to protect ourselves in part from currency fluctuations, we may not be successful
in our hedging efforts, or such transactions, if entered into, may not materially reduce the effect of fluctuations in foreign currency exchange rates on our results of operations. Such hedging transactions may not necessarily mitigate the
longer-term impact of currency fluctuations on the operating costs of our business operations, and may result in additional expenses.
Unfavorable national and global economic conditions could adversely affect our business, operating results and financial condition.
During periods of slowing economic activity, our customers may reduce their demand for our products, technology and professional services, which would reduce our sales, and our business, operating results and financial
condition may be adversely affected. The global and domestic economies continue to face a number of economic challenges, including threatened sovereign defaults, credit downgrades, restricted credit for businesses and consumers and potentially
falling demand for a variety of products and services. These developments, or the perception that any of them could occur, could result in longer sales cycles, slower adoption of new technologies and increased price competition for our products and
services. We could also be exposed to credit risk and payment delinquencies on our accounts receivable, which are not covered by collateral.
Significant portions of our business are conducted outside the markets in which our products and solutions are manufactured or generally sold, and accordingly, we often export a substantial number of products into such
markets. We maybe denied access to potential customers or suppliers or denied the ability to ship products from any of our subsidiaries into the countries in which we currently operate or wish to operate, as a result of economic, legislative,
political and military conditions, including hostilities and acts of terrorism, in such countries.
In particular, there is currently significant uncertainty about the future relationship between the U.S. and various other countries, with respect to trade policies, treaties, government regulations, and tariffs. For
example, the recent imposition of tariffs and/or changes in tariffs on various products by the U.S. and other countries, including China and Canada, have introduced greater uncertainty with respect to trade policies and government regulations
affecting trade between the U.S. and other countries, and new and/or increased tariffs have subjected, and may in the future subject, us to additional costs and expenditure of resources. Major developments in trade relations, including the imposition
of new or increased tariffs by the U.S. and/or other countries, and any emerging nationalist trends in specific countries could alter the trade environment and consumer purchasing behavior which, in turn, could have a material effect on our financial
condition and results of operations. While the U.S. and China recently signed a “phase one” trade deal on January 15, 2020 to reduce planned increases to tariffs, concerns over the stability of bilateral trade relations remain. In addition, the UK’s
exit from the European Union on January 31, 2020, known as Brexit, and the ongoing negotiations of the future trading relationship between the UK and the European Union during the transition period set to end December 31, 2020 have yet to provide
clarity on what the outcome will be for the UK or Europe. Changes related to Brexit could subject us to heightened risks in that region, including disruptions to trade and free movement of goods, services and people to and from the UK, disruptions to
the workforce of our business partners, increased foreign exchange volatility with respect to the British pound and additional legal, political and economic uncertainty. If these actions impacting our international distribution and sales channels
result in increased costs for us or our international partners, such changes could result in higher costs to us, adversely affecting our operations, particularly as we expand our international presence.
We may also be required in the future to increase our reserves for doubtful accounts. In addition, the fair value of some of our assets may decrease as a result of an uncertain economy and as a result, we may be
required to record impairment charges in the future. If global economic and market conditions or economic conditions in key markets remain uncertain or weaken further, our financial condition and operating results may be materially adversely
affected.
We are subject to environmental laws and regulations. Compliance with those laws and regulations requires us to incur costs and we are subject to fines or other sanctions for
non-compliance.
Our operations are regulated under various environmental laws and regulations that govern, among other things, the discharge of hazardous materials into the air and water, as well as the handling, storage and disposal of
such materials. Compliance with these laws and regulations is a major consideration for PCB manufacturers because metals and chemicals classified as hazardous substances are used in the manufacturing process. Since May 2003, our environmental
management system has been ISO 14001 certified. This certification was based on successful implementation of environmental management requirements and includes ongoing monitoring of our processes, raw materials and products. The certification is
subject to periodic compliance audits conducted by the Standards Institution of Israel. If, in the future, we are found to be in violation of environmental laws or regulations, we could be liable for damages, costs of remedial actions, may be subject
to criminal prosecution including a range of potential penalties, and could also be subject to revocation of permits necessary to conduct our business or any part thereof. Any such liability or revocation could have a material adverse effect on our
business, financial condition and results of operations. Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with a violation. A shortage of water in Israel may
reduce the allocation of water available to manufacturing plants, including ours, which could affect the concentrations of pollutants in our wastewater, making it harder to comply with the foregoing regulations, in which event we would be required to
invest additional funds to improve our wastewater treatment systems.
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The cost of compliance with environmental laws and regulations depends in part on the requirements in such laws and regulations and on the method selected to implement them. If new or more restrictive standards are
imposed, the cost of compliance could be very high and have an adverse impact on our revenues and results of operations if we cannot recover those costs through the rates that we charge our customers.
Our customers are also required to comply with various government regulations, legal requirements and industry standards, including many of the industry-specific regulations discussed above. Our customers’ failure to
comply could affect their businesses, which in turn would affect our sales to them. In addition, if our customers are required by regulation or other requirements to make changes in their product lines, these changes could significantly disrupt
particular programs for these customers and create inefficiencies in our business.
We have in the past been, and currently are, subject to claims and litigation relating to environmental matters. If we are found to be in violation of environmental laws, we could
be liable for damages and costs of remediation and may be subject to a halt in production, which may adversely affect our business, operating results and financial condition.
We have in the past been, and currently are, subject to claims and litigation relating to environmental matters. We may be subject to further environmental claims alleging that we are in violation of environmental laws.
If we are unsuccessful in such claims and other future claims and litigations or if actual results are not consistent with our assumptions and judgments, we may be exposed to losses that could be material to our company.
During 2014, 2015 and 2016, we received notices from Meitav, the water company of the Petach Tikva municipality, requiring payment of fees totaling NIS 3.8 million ($980,000) excluding VAT, for discharges of industrial
wastewater allegedly not meeting the applicable standards into the municipal sewage system. The payment demands were made on the basis of several samplings conducted by Meitav during 2013-2015. In December 2015, we completed the construction of a
new wastewater treatment facility. In 2016, six wastewater samples were inspected by Meitav and were found to be in compliance with applicable standards. We reached a settlement with Meitav in July 2016. During 2020 our permit providing for
deviations from the standards for dicharges into the municipal sewage system expired and we are presently working the with Petach Tikva municipality to extend the permit permitting such deviations, , but there can be no assurance that such
extension will be granted.
In October 2015, we filed an application for an emissions permit with the Israeli Ministry of Environmental Protection, or the Ministry. In January 2016, we received a notice of non-compliance from the Ministry stating
that the application was incomplete and that we are in breach of the Clean Air Law, 5768-2008, or the Clean Air Law, and the Licensing of Businesses Law, 5728-1968, or the Licensing of Businesses Law. We submitted amended applications and conducted
several discussions with the Ministry in 2016 and 2017 and received the emissions permit in July 2017.
In March 2019, representatives of the Ministry inspected our premises and issued a warning related to an alleged breach of the Clean Air Law and a warning related to the Hazardous Materials Law (1993). Management
believes that our company is not in violation of these laws. Following a hearing at the Ministry in August 2019, the Ministry conducted two additional tests after which we were asked to take corrective actions. During May 2020 and July 2020,
representatives of the Ministry inspected our premises again. In September 2020 the Ministry issued a warning related to an alleged breach of the Clean Air Law, the Hazardous Materials Law (1993), the Water Law and Business Permit Law. We may be
subject to fines and sanctions as stated in such laws. According to this letter, we were invited to a hearing at the Ministry on November 5, 2020. We are working diligently to prepare our response to the allegations raised by the Ministry. For some
breaches, we believe that we are not in violation of these laws. For other breaches, we are in the process of taking corrective actions to remediate any existing breach. At this point, we cannot estimate the outcome of the hearing and there can be no
assurance that our position will be accepted by the Ministry.
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If we are found to be in violation of environmental laws, then in addition to fines, we could be liable for damages, costs of remedial actions and a range of potential penalties, and could also be subject to a shutdown
of our factory. Such sanctions could have a material adverse effect on our business, financial condition and results of operations.
Rapid changes in the Israeli and international electronics industries and recessionary pressures may adversely affect our business.
Our principal customers include manufacturers of defense and aerospace, medical, industrial, telecom and networking equipment, as well as contract electronic manufacturers. The electronics industry is subject to rapid
technological changes and products obsolescence. Discontinuance or modification of products containing PCBs manufactured by our company could have a material adverse effect on us. In addition, the electronics industry is subject to sharp economic
cycles. Increased or excess production capacity by our competitors in the PCB industry and recessionary pressure in major electronics industry segments may result in intensified price competition and reduced margins. As a result, our financial
condition and results of operations may be adversely affected. A decline in the Israeli and international electronic markets may cause a decline in our revenues and adversely affect our operating results and financial condition in the future.
Because competition in the PCB market is intense, our business, operating results and financial condition may be adversely affected.
The global PCB industry is highly fragmented and intensely competitive. It is characterized by rapidly changing technology, frequent new product introductions and rapidly changing customer requirements. We compete
principally in the market for complex, flex-rigid and rigid multi-layer PCBs. In the Israeli market we mainly compete with PCB Technologies Ltd. and major international PCB exporters, mainly from South East Asia, Europe and North America. In March
2018 it was published that PCB Technologies signed an agreement for a significant investment of NIS 124.2 million (approximately $35 million) investment in the company, which could improve its competitiveness.
In the European market we mainly compete with Advanced Circuit Boards NV (Belgium), AT&S Austria Technologie & Systemtechnik AG (Austria), Dyconex and Cicor (Switzerland), Graphics, Exception PCB and Invotec
(United Kingdom), Cistelaier and Somacis (Italy), Schoeller-Electronics GmbH (formerly Ruwel Werke GmbH) (Germany) and certain other German companies. In the North American market we mainly compete with TTM, Inc. (previously known as DDi Corp. and
Viasystems), KCA Electronics Inc., Lenthor Engineering, Printed Circuits, Inc., Teledyne and certain other American companies. Many of these competitors have significantly greater financial and marketing resources than us. Our current competition
in the rigid PCB segment is mainly from PCB manufacturers in Southeast Asia (mainly in China), which have substantially lower production costs than us. Continued competitive pressures could cause us to lose significant market share.
In addition, these competitors may respond more quickly to new or emerging technologies or adapt more quickly to changes in customer requirements than we do. We must continually develop improved manufacturing processes
to meet our customers’ needs for complex products, and our manufacturing process technology is generally not subject to significant proprietary protection. During recessionary periods in the electronics industry, our strategy of providing quick-turn
services, an integrated manufacturing solution, and responsive customer service may take on reduced importance to our customers. As a result, we may need to compete more on the basis of price, which would cause our gross margins to decline.
We are dependent upon a select number of suppliers for timely delivery of key raw materials and the loss of one or more of these suppliers would adversely affect our manufacturing
ability. If these suppliers delay or discontinue the manufacture or supply of these raw materials, we may experience delays in production and shipments, increased costs and cancellation of orders for our products.
We currently obtain our key raw materials from a select number of suppliers. We do not have long-term supply contracts with our suppliers and our principal suppliers may not continue to supply raw materials to us at
current levels or at all. Any delays in delivery of or shortages in these raw materials could interrupt and delay manufacturing of our products and may result in the cancellation of orders for our products.
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As the majority of PCB manufacturing is centered in South East Asia, raw material suppliers may focus their attention and give higher priority to manufacturers in those areas, which may interrupt the supply of raw
materials to us. In addition, these suppliers could discontinue the manufacture or supply of these raw materials at any time. During the year ended December 31, 2019, our purchases from two (2) suppliers accounted for 26.5% and 23.5% of our total of
consolidated raw material costs, respectively. We may not be able to identify and integrate alternative sources of supply in a timely fashion. Any transition to alternate suppliers may result in delays in production and shipment and increased
expenses and may limit our ability to deliver products to our customers.
If a raw material or component supplier fails to satisfy our product quality standards, including standards relating to “conflict minerals” it could harm our customer relationships. Furthermore, if we are unable to
identify an alternative source of supply, we may have to modify our products or a large portion of our production process to use a substitute raw material, which may cause delays in production and shipments, increased design and manufacturing costs
and increased prices for our products.
We may not succeed in our efforts to expand our activity in the U.S. market. If we are unsuccessful, our future revenues and profitability would be adversely affected.
Our business plan assumes an increase in revenues from the U.S. market. However, our efforts to increase sales to the U.S. market may not succeed and sales to the medical, defense and aerospace industries may be
affected by several factors, including cutbacks in U.S. government spending, and this may not become a substantial market for us. If we are unsuccessful in such efforts, our future revenues and profitability would be adversely affected. In order to
sell PCBs to the U.S. defense market we were required to obtain International Traffic in Arms Regulations (ITAR) registration from the U.S. Department of State, which is subject to periodic extension. There can be no assurance that we will be able to
retain our ITAR certification. In the event of a change in control of our company, the U.S. Department of State may investigate the transfer of control and oppose the transaction. The loss of our ITAR certification could adversely affect our future
revenues and profitability.
While prior government shutdowns did not have a significant impact on our business, a future government shutdown could result in the suspension of work on contracts in progress or in payment delays which would adversely
affect our future revenue and cash flow.
We may be subject to the requirements of the National Industrial Security Program Operating Manual for our facility security clearance, which is a prerequisite to our ability to
work on classified contracts for the U.S. government.
A facility security clearance is required in order to be awarded and perform classified contracts for the U.S. Department of Defense, or the DoD, and certain other agencies of the U.S. government. To become a cleared
entity, we must comply with the requirements of the National Industrial Security Program Operating Manual, or the NISPOM, and any other applicable U.S. government industrial security regulations. Further, due to the fact that a significant portion of
our voting equity is owned by a non-U.S. entity, we are required to be governed by and operate in accordance with the terms and requirements of a Special Security Agreement, or the SSA.
If we were to violate the terms and requirements of the SSA, the NISPOM, or any other applicable U.S. government industrial security regulations (which may apply to us under the terms of classified contracts), we could
lose our security clearance. We cannot be certain that we will be able to maintain our security clearance. If for some reason our security clearance is invalidated or terminated, we may not be able to continue to perform on classified contracts and
would not be able to enter into new classified contracts, which could materially adversely affect our business, financial condition, and results of operations.
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We may encounter difficulties with our international operations and sales that may have a material adverse effect on our sales and profitability.
Contracts with U.S. military agencies, as well as military equipment manufacturers in Europe, are subject to certain regulatory restrictions and approvals, which we may not be able to comply with or obtain. We may not
be able to maintain or increase international market demand for our products. To the extent that we cannot do so, our business, operating results and financial condition may be adversely affected.
International operations are subject to inherent risks, including the following:
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the impact of possible recessionary environments or economic instability in multiple foreign markets;
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changes in regulatory requirements and complying with a wide variety of foreign laws;
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tariffs and other trade barriers;
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the imposition of exchange or price controls or other restrictions on the conversion of foreign currencies; and
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difficulties and costs of staffing and managing foreign operations.
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Significant political developments could also have a materially adverse effect on us. In the United States, potential or actual changes in fiscal, defense appropriations, tax and labor policies could have uncertain and
unexpected consequences that materially impact our business, results of operations and financial condition.
Compliance with the conditions of a new business permit issued in 2018 or a new business permit, if required, may be costly. We may become subject to certain sanctions, including
significant fines, criminal proceedings and in an unlikely event an order shutting down our factory.
Israeli law required us to obtain a business permit in order to continue operating our business. Obtaining such business permit is a long and expensive process. We received a new permit in 2018 for the period ending
December 31, 2099. However, as a result of a new regulation, we expect to receive a notice that the term of the new permit will be for only 10 years. The permit contains certain conditions, including conditions imposed by the Israeli Ministry for
Environmental Protection, and a building permit, which includes additional conditions, which we are required to comply with. According to applicable regulation, the authorities may impose new conditions to our existing permit. Compliance with the
present and future conditions, if any, may be costly. If we are unable to comply with such requirements, certain sanctions may be imposed, including significant fines, criminal proceedings and in an unlikely event an order shutting down our factory.
We entered into discussions with the municipality in which our plant is located to review the necessity of obtaining a new business permit as a result of the transfer of shares from Nistec Ltd. to Nistec Golan in
December 2018. The municipality believes that we should obtain a new business permit. Based on the opinion of our legal advisors, we believe that we are not required to obtain a new business permit as a result of the transfer of shares. In the event
we will be required to obtain a new business permit, we may be required to comply with new conditions imposed by the authorities, and our compliance with all the existing conditions in the permit may be reexamined. Obtaining a new business permit, if
required, will expose us to the above risks and substantial costs.
Damage to our manufacturing facilities due to fire, natural disaster, or other events could materially adversely affect our business, financial condition, and
results of operations.
The destruction or closure of our facility for a significant period of time as a result of fire, explosion, act of war or terrorism, flood, tornado, earthquake, lightning, other natural disasters,
required maintenance, or other events could harm us financially, increasing our costs of doing business and limiting our ability to deliver our manufacturing services on a timely basis.
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Our insurance coverage with respect to damage to our facility or our customers’ products caused by natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may
not be adequate or continue to be available at commercially reasonable rates and terms.
In the event our facility is closed on a temporary or permanent basis as a result of a natural disaster, required maintenance or other event, our operations could be significantly disrupted. Such
events could delay or prevent product manufacturing and shipment for the time required to transfer production or repair, rebuild or replace the affected manufacturing facilities. This time frame could be lengthy and result in significant expenses
for repair and related costs. While we have disaster recovery plans in place, there can be no assurance that such plans will be sufficient to allow our operations to continue in the event of disaster, required repair or other extraordinary event.
Any extended inability to continue our operations at unaffected facilities following such an event would reduce our revenue and potentially damage our reputation as a reliable supplier.
Our quarterly operating results fluctuate significantly. Results of operations in any period should not be considered indicative of the results to be expected for any future period.
Our quarterly operating results have fluctuated significantly in the past and are likely to fluctuate significantly in the future. Our future operating results will depend on many factors, including (but not limited to)
the following:
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the size and timing of significant orders and their fulfillment;
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demand for our products and the mix of products purchased by our customers;
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competition from lower priced manufacturers;
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fluctuations in foreign currency exchange rates, primarily the NIS against the Dollar and the Euro;
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manufacturing yield;
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plant utilization;
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availability of raw materials;
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plant or line shutdowns to repair or replace malfunctioning manufacturing equipment;
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the length of our sales cycles;
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changes in our strategy;
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the number of working days in the quarter;
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changes in seasonal trends; and
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general domestic and international economic and political conditions.
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Due to the foregoing factors, quarterly revenues and operating results are difficult to forecast, and it is likely that there will be significant differences between the results of one quarter to another.
Quarterly sales and operating results are also difficult to forecast because they are dependent almost exclusively on the volume and timing of orders during the quarter and our customers generally operate with a short
delivery cycle and expect delivery of a significant portion of the order within 30 working days. The delivery of such orders is subject to the number of available working days during the quarter, which can fluctuate significantly from quarter to
quarter due to holidays and vacations. Certain prototype and pre-production runs require even shorter turn-around times stemming from customers’ product launches and design changes. In addition, there might be sudden increases, decreases or
cancellations of orders for which there are commitments, which further characterize the electronics industry and the companies that operate in it. The industry practice is to make such changes without any penalties, except for the time and materials
expended on the order.
Our expenses are, in significant part, relatively fixed. If revenue levels fall below expectations, our net income is likely to be disproportionately adversely affected because a proportionately smaller amount of the
expenses varies with our revenues. We may not be able to be profitable on a quarterly or annual basis in the future. An ongoing pattern of cancellations, reductions in orders and delays could have a material adverse effect on our results of
operations. Due to all of the foregoing, it is very difficult to predict revenues for any future quarter with any significant degree of accuracy. Accordingly, we believe that period-to-period comparisons of our operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
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Our products and related manufacturing processes are often highly complex and therefore we may be delayed in product shipment. Also our products may at times contain manufacturing
defects, which may subject us to product liability and warranty claims.
Our business involves highly complex manufacturing processes that are subject to periodic failure. Process failures have occurred in the past and have resulted in delays in product shipments, and process failures may
occur in the future. Furthermore, we face an inherent business risk of exposure to warranty and product liability claims, which are likely to be substantial in light of the use of our products in business-critical applications. Our products may
fail to perform as expected or may be alleged to result in bodily injury or property damage. If we were to manufacture and deliver products to our customers that contain defects, whether caused by a design, manufacturing or component failure, or by
deficiencies in the manufacturing processes, it may result in delayed shipments to customers and reduced or cancelled customer orders. In addition, if any of our products are or are alleged to be defective, we may be required to participate in a
recall of such products. Over the years we have been involved in claims or litigation relating to allegedly defective products. A successful warranty or product liability claim against us in excess of our established warranty and legal reserves or
available insurance coverage, or a requirement that we participate in a product recall may have a material adverse effect on our business, financial condition, results of operations or cash flows and may harm our business reputation, which could lead
to customer cancellations or non-renewals.
Our operating margins may be affected as a result of price increases for our principal raw materials.
In recent years, our suppliers have increased their prices for most of our principal raw materials. We have faced pressure to raise our prices for our products to compensate for supplier price increases in order to
maintain our operating margins, which we may not be able to achieve due to the competitive market. Furthermore, our existing suppliers or new suppliers or sources of materials may pass the increase in sourcing costs due to the coronavirus outbreak to
us through price increases, thereby impacting our margins. Material changes in the pricing practices of our suppliers could negatively impact our profitability. We have been taking steps to increase our prices since the third quarter of 2018,
however, such price increases may result in reduced orders for our products. Additional price increases for our principal raw materials may materially affect our operating margins and future profitability.
We compete with PCB manufacturers in Asia whose manufacturing costs are lower than ours.
In recent years, many electronics manufacturers have moved their commercial production to Asia to take advantage of its exceptionally large, relatively low-cost labor pool. The continued outsourcing of production to
Asia is likely to result in additional commercial market share potential for PCB manufacturers with a strong presence and reputation in such markets. Accordingly, we will need to compete with PCB manufacturers whose costs of production may be
substantially lower than ours. This competition may limit our ability to price our products profitably, which could significantly harm our financial condition and results of operations. In addition, we distinguish ourselves by focusing on developing
cutting edge technologies for high-end products, in order to serve our sophisticated defense, aerospace and medical customers. This may limit our ability to reach certain clientele that demand lower-end products in order to reduce their costs.
Our ability to have access to insurance programs for directors & officers may be curtailed, which may adversely affect our ability to retain and attract directors
and officers.
In recent years we have experienced difficulties in obtaining obtaining directors & officers' insurance on reasonable terms as result of a tightening insurance market. If we are unable to continue to obtain directors & officers’ insurance or in limits of coverage sufficient to satisfy our
indemnification obligations to our directors and officers, we may be unable to retain such directors and officers and have limited ability to attract replacements.
Obstacles in our transition to a new enterprise resource planning system may adversely affect our business and results of operations and the effectiveness of our internal control
over financial reporting.
We have engaged in a multi-year process of conforming the majority of our operations onto one global enterprise resource planning system, or ERP. The ERP is designed to improve the efficiency of our supply chain and
financial transaction processes, accurately maintain our books and records, and provide information important to the operation of the business to our management team. In the third quarter of 2017 we decided, due to lack of human and financial
resources and unfavorable cost-benefits, to withhold implementation of our ERP system. The ERP system was then fully amortized and is not fully supported. In addition, we were notified that the hardware that the ERP runs on and the operating system
of the hardware are at high risk of not being supported in the near future. The implementation of the ERP may continue in the future, which will require significant investment of human and financial resources, and we may experience significant
delays, increased costs and other difficulties as a result. Any significant disruption or deficiency in the design and implementation of the ERP could have a material adverse effect on our ability to fulfill and invoice customer orders, apply
receipts, place purchase orders with suppliers, and make disbursements, and could negatively impact data processing and electronic communications among business locations, which may have a material adverse effect on our business, consolidated
financial condition or results of operations. While we have invested significant resources in planning and project management, significant implementation issues may arise.
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Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business.
Breaches of network or information technology (IT) security, natural disasters, pandemics, terrorist acts or acts of war may cause equipment failures or disrupt our systems and operations. Although we have not become
aware of any of these events as of the date of this annual report, we expect that our inability to operate our facilities as a result of such events, even for a limited period of time, may result in significant expenses and/or loss of market share to
other competitors in the global PCB industry. While we maintain insurance coverage for some of these events, the potential liabilities associated with these events could exceed the insurance coverage we maintain. In addition, a failure to protect
the privacy of customer and employee confidential data against breaches of network or IT security could result in damage to our reputation. Any of these occurrences could adversely affect our results of operations and financial condition.
In particular, both unsuccessful and successful cyber-attacks on companies have increased in frequency, scope and potential harm in recent years. We have been subject, and will likely continue to be subject, to attempts
to breach the security of our networks and IT infrastructure through cyber-attack, malware, computer viruses and other means of unauthorized access. However, to date, we have not been become aware that we were subject to cyber-attacks or other cyber
incidents which, individually or in the aggregate, resulted in a material impact to our operations or financial condition. While we use firewall and anti-virus systems, there is no assurance that cyber-attacks will always be blocked or discovered,
and as a result, we may encounter damages to our computer network servers, manipulation of our data (including production, financial and other information).
If our workforce will be represented by a labor union we could incur additional costs or experience work stoppages as a result of the renegotiation of our labor contracts.
In November 2011, we were notified by the General Federation of Labor in Israel, or the Histadrut, that more than one-third of our employees in Israel had decided to join the Histadrut and that they established an
employees’ union committee. In 2012, a significant portion of our employees decided to resign their membership in the Histadrut, which then ceased to represent our employees. If our employees are represented by a union in the future, we could incur
additional costs, experience work stoppages, either of which could adversely affect our business operations, including through a loss of revenue and strained relationships with customers.
We are required to comply with “conflict minerals” rules which impose costs on us, may make our supply chain more complex, and could adversely impact our business.
We are subject to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, that will require us to perform due diligence, disclose and report whether our products
contain conflict minerals. President Trump’s administration has indicated that the Dodd-Frank Act will be under further scrutiny and some of the provisions of the Dodd-Frank Act may be revised, repealed or amended. In April 2017, the U.S. Securities
and Exchange Commission, or the SEC, announced that it was suspending enforcement of portions of the conflict minerals regulations enacted under the Dodd-Frank Act following a ruling by the U.S. Court of Appeals for the District of Columbia Circuit.
The implementation of these requirements and any changes effected by the Trump administration could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products. In addition, we
will likely incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in or necessary to the production of our products
and, if applicable, potential changes to our products, processes or sources of supply as a consequence of such verification activities. It is also possible that we may face reputational harm if we determine that certain of our products contain
minerals not determined to be conflict-free or if we are unable to alter our products, processes or sources of supply to avoid use of such materials. Furthermore, we may encounter challenges in satisfying those customers that require that all of the
components of our products be certified as conflict free, and if we cannot satisfy these customers, they may choose a competitor’s products.
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Increased regulation associated with climate change and greenhouse gas emissions could impose significant additional costs on operations.
Various governments and governmental agencies have adopted or are contemplating statutory and regulatory changes in response to the potential impacts of climate change and emissions of greenhouse gases. International
treaties or agreements may also result in increasing regulation of climate change and greenhouse gas emissions, including the introduction of greenhouse gas emissions trading mechanisms. Any such law or regulation regarding climate change and
greenhouse gas emissions could impose significant costs on our operations and on the operations of our customers and suppliers, including increased energy, capital equipment, environmental monitoring, reporting and other compliance costs. The
potential costs of “allowances,” “offsets” or “credits” that may be part of potential cap-and-trade programs or similar proposed regulatory measures are still uncertain. Any adopted future climate change and greenhouse gas laws or regulations could
negatively impact our ability, and that of our customers and suppliers, to compete with companies situated in areas not subject to such laws or regulations. These statutory and regulatory initiatives, if enacted, may impact our operations directly or
indirectly through our suppliers or customers. Until the timing, scope and extent of any future law or regulation becomes known, we cannot predict the effect on our business, financial condition, results of operations or cash flows.
We depend on key personnel for the success of our business.
Our success depends, to a significant extent, on the continued active participation of our executive officers and other key personnel. In addition, there is significant competition for employees with technical expertise
in our industry. In order to succeed we would need to be able to:
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retain our executive officers and key technical personnel;
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attract and retain additional qualified personnel to provide technological depth and support to enhance existing products and develop new products; and
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attract and retain highly skilled operations, marketing and financial personnel.
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We cannot make assurances that we will be successful in attracting, integrating, motivating and retaining key personnel. If we are unable to retain our key personnel and attract additional qualified personnel as and
when needed, our business may be adversely affected.
We may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which could have a material adverse
effect on our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares.
Our efforts to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, governing internal control and procedures for financial reporting have resulted in increased general and administrative
expenses and a diversion of management time and attention, and we expect these efforts to require the continued commitment of significant resources. We may identify material weaknesses or significant deficiencies in our assessments of our internal
control over financial reporting. Failure to maintain effective internal control over financial reporting could result in investigations or sanctions by regulatory authorities, and could have a material adverse effect on our operating results,
investor confidence in our reported financial information, and the market price of our ordinary shares.
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Technological change may adversely affect the market acceptance of our products.
Technological change in the PCB industry is rapid and continual. To satisfy customers’ needs for increasingly complex products, PCB manufacturers must continue to develop improved manufacturing processes, provide
innovative solutions and invest in new facilities and equipment. To the extent we determine that new technologies and equipment are required to remain competitive, the acquisition and implementation of such technologies and equipment are likely to
require significant capital investment. We expect that we will need to invest large amounts in the next few years to replace or refurbish old equipment and to remain competitive in the market. This capital may not be available to us in the future
for such purposes and any new manufacturing processes developed by us may not become or remain commercially viable. As a result, we may not be able to maintain our current technological position. Furthermore, the PCB industry may in the future
encounter competition from new technologies that may reduce demand for PCBs or may render existing technology less competitive or obsolete. Our future process development efforts may not be successful or the emergence of new technologies, industry
standards or customer requirements may render our technology, equipment or processes obsolete or uncompetitive.
The measures we take in order to protect our intellectual property may not be effective or sufficient.
Our success depends in part on our proprietary techniques and manufacturing expertise, particularly in the area of complex multi-layer and flex-rigid PCBs. We currently rely on a combination of trade secrets, copyright
and trademark law, together with non-disclosure and invention assignment agreements, to establish and protect the proprietary rights and technology used in our products. Like many companies in the PCB industry, we do not hold any patents. We
believe that, because of the rapid pace of technological change in the electronics industry, the legal protections for our products are less significant factors in our success than the knowledge, ability and experience of our employees, the frequency
of product enhancements and the timeliness and quality of support services that we provide.
We generally enter into confidentiality agreements with our employees, consultants, customers and potential customers and limit the access to and the distribution of our proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain and use our technology without authorization, or to develop similar technology independently. Further, the laws of certain countries in which we sell our products do not
protect our intellectual property rights to the same extent as do the laws of the United States. Substantial unauthorized use of our products could have a material adverse effect on our business. We cannot make assurances that our means of
protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology.
Claims that our products infringe upon the intellectual property of third parties may require us to incur significant costs.
While we do not believe that our products and proprietary rights infringe upon the proprietary rights of others, third parties may assert infringement claims against us or claims that we have violated a patent or
infringed on a copyright, trademark or other proprietary right belonging to them. Any infringement claim, even one without merit, could result in the expenditure of significant financial and managerial resources to defend against the claim.
Moreover, a successful claim of product infringement against us or a settlement could require us to pay substantial amounts or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our
use of the technology. We might not be able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all. We also may not be able to obtain a license from another provider of suitable alternative
technology to permit us to continue offering the product. Infringement claims asserted against us could have a material adverse effect on our business, operating results and financial condition.
During the last several years, a supplier of one of our software packages has requested to conduct an audit of our operations to verify that we do not breach any intellectual property rights it allegedly owns. We
believe that we have fully, diligently and timely complied with our obligation toward the supplier. We also believe that the supplier has no right to conduct any audit of our products or services and such audit may cause us to breach confidentiality
obligations to other entities, and therefore replied that there were no grounds for his request. If we are found to be in violation of such supplier’s intellectual property rights, we could be liable for compensation and costs of an unknown amount.
Such liability could have a material adverse effect on our business, financial condition and results of operations.
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Our products and product components need to meet certain industry standards.
Our products and product components need to meet certain standards for the aerospace, defense, and other industries to which we market our products. In addition, new industry standards in the aviation and defense
industries could cause some or all of our products and services to become obsolete and unmarketable, which would adversely affect our results of operations. Noncompliance with any of these standards could limit our sales and adversely affect our
business, financial condition, and results of operations.
We may be required to make payments to satisfy our indemnification obligations.
We have agreements with our directors and senior officers which may require us, subject to Israeli law and certain limitations in the agreements, to indemnify our directors and senior officers for certain liabilities and
expenses that may be imposed on them due to acts performed, or failures to act, in their capacity as office holders as defined in the Israeli Companies Law, 5759-1999, or the Israeli Companies Law. These liabilities may include financial
liabilities imposed by judgments or settlements in favor of third parties, and reasonable litigation expenses imposed by a court in relation to criminal charges from which the indemnitee was acquitted or criminal proceedings in which the indemnitee
was convicted of an offense that does not require proof of criminal intent. Furthermore, we agreed to exculpate our directors and officers with respect to a breach of their duty of care towards our company. On October 17, 2017, our shareholders
approved an updated indemnification agreement to be entered to with our directors and officers, and our shareholders approved an amendment thereto on December 5, 2019.
Risks Related to Our Ordinary Shares
Our share price has been volatile in the past and may continue to be susceptible to significant market price and volume fluctuations in the future.
Our ordinary shares have experienced significant market price and volume fluctuations in the past and may experience significant market price and volume fluctuations in the future in response to factors such as the
following, some of which are beyond our control:
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quarterly variations in our operating results;
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operating results that vary from the expectations of securities analysts and investors;
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changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
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announcements of technological innovations or new products by us or our competitors;
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announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
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changes in the status of our intellectual property rights;
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announcements by third parties of significant claims or proceedings against us;
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announcements by governmental or regulatory authorities of significant investigations or proceedings against us;
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additions or departures of key personnel;
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changes in our cost structure due to factors beyond our control, such as new laws or regulations relating to environmental matters and employment;
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future sales of our ordinary shares;
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our involvement in litigation;
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general stock market price and volume fluctuations;
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changes in the prices of our products and services; and
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devaluation of the dollar against the NIS.
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Domestic and international stock markets often experience extreme price and volume fluctuations. Market fluctuations, as well as general political and economic conditions, such as a recession, interest rate or currency
rate fluctuations or political events or hostilities in or surrounding Israel, could adversely affect the market price of our ordinary shares.
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Low trading volume may also increase the price volatility of our ordinary shares. A thin trading market could cause the price of our ordinary shares to fluctuate significantly more than the stock market as a whole.
The voting interest of Mr. Nissan, individually and through Nistec Golan, our controlling shareholder, may conflict with the interests of other shareholders.
Mr. Yitzhak Nissan, our Chairman of the Board, beneficially owns 65.4% of our outstanding ordinary shares. Accordingly, Mr. Nissan and Nistec Golan have the ability to exercise a significant influence over our business
and affairs and generally have the power to determine all matters submitted to a vote of our shareholders where our shares vote together as a single class, including the election of directors and approval of significant corporate transactions. Mr.
Nissan and Nistec Golan may make decisions regarding Eltek and our business that are opposed to other shareholders’ interests or with which other shareholders may disagree. Nistec Golan’s and Mr. Nissan’s voting power could have the effect of
deterring or preventing a change in control of our Company that might otherwise be beneficial to our other shareholders.
If we fail to maintain compliance with NASDAQ’s continued listing requirements our shares may be delisted from the NASDAQ Capital Market.
Our ordinary shares are listed on the NASDAQ Capital Market under the symbol “ELTK.” To continue to be listed on NASDAQ, we need to satisfy a number of requirements, including a minimum bid price for our ordinary shares
of $1.00 per share for 30 consecutive business days and shareholders’ equity of at least $2.5 million, or $35 million market value of listed securities or $500,000 of net income from continuing operations for the most recently completed fiscal year
or two of the three most recently completed fiscal years.
Our ordinary shares have experienced significant market price and volume fluctuations in the past and for certain periods have traded below the $1.00 threshold requirement for continued trading. On June 23, 2015 we
received notification from Nasdaq advising us that we were not in compliance with the $1.00 threshold requirement for continued trading. On August 26, 2015, we regained compliance with the listing rules, and the matter was then closed. On December
28, 2016, for the second time, we received notification from Nasdaq advising us that we were not in compliance with the $1.00 threshold requirement for continued trading. Following a reverse split of our ordinary shares, on November 22, 2017, we
regained compliance with Listing Rule 5550(a)(2) and our shares continue to be listed on the NASDAQ Capital Market.
On October 2, 2018, we received notification from Nasdaq advising us that as of October 1, 2018, we did not maintain stockholders’ equity of $2.5 million, nor did we meet the
alternatives of market value of listed securities or net income from continuing operations, and therefore were not in compliance with the stockholders’ equity listing rule. On December 7, 2018, we received a notice from Nasdaq advising that we were
granted an extension of time to regain compliance with the shareholders’ equity requirement until March 31, 2019. With the proceeds of approximately $3.4 million from our rights offering in March 2019, we regained compliance with Listing Rule
5550(b)(1) and our shares continue to be listed on the NASDAQ Capital Market. Nasdaq has advised us that it will continue to monitor our ongoing compliance with the shareholders’ equity requirement and, if at the time of our next periodic report we
do not evidence compliance, we may be subject to delisting. If we are ultimately delisted from NASDAQ, trading in our ordinary shares would be conducted on a market where an investor would likely find it significantly more difficult to dispose of, or
to obtain accurate quotations as to the value of, our ordinary shares.
Penny stock rules may limit the ability of our stockholders to sell their stock.
The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. If we lose our listing on NASDAQ Capital Market our securities will be covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers
and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about
penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the
transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally
or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that
the penny stock rules discourage investor interest in and limit the marketability of our common stock.
29
The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a shareholder’s ability to buy and sell our stock.
In addition to the penny stock rules described above, FINRA has adopted rules that require that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status,
investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our ordinary shares, which may limit their ability to buy and sell our shares and have an adverse effect on the market for our shares.
We may in the future be classified as a passive foreign investment company, or PFIC, which would subject our U.S. investors to adverse tax rules.
U.S. holders of our ordinary shares may face income tax risks. There is a risk that we will be treated as a “passive foreign investment company” (“PFIC”). Our treatment as a PFIC could result in a reduction in the
after-tax return to U.S. Holders (as defined below in “Material U.S. Federal Income Tax Considerations”) of our ordinary shares and would likely cause a reduction in the value of such shares. A foreign corporation will be treated as a PFIC for U.S.
federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income,” or (2) at least 50% of the average value of the corporation’s gross assets produce, or are held for the
production of, such “passive income.” For purposes of these tests, “passive income” includes dividends, interest, gains from the sale or exchange of investment property and rents and royalties other than rents and royalties that are received from
unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.” If we are treated as a PFIC, U.S. Holders of ordinary
shares would be subject to a special adverse U.S. federal income tax regime with respect to the income derived by us, the distributions they receive from us, and the gain, if any, they derive from the sale or other disposition of their ordinary
shares. In particular, dividends paid by us, if any, would not be treated as “qualified dividend income,” eligible for preferential tax rates in the hands of non-corporate U.S. shareholders. We believe that we were not a PFIC for the 2019 tax year.
However, since PFIC status depends upon the composition of our income and the market value of our assets from time to time, there can be no assurance that we will not become a PFIC in any future taxable year. U.S. Holders should carefully read
“Material U.S. Federal Income Tax Considerations” for a more complete discussion of the U.S. federal income tax risks related to owning and disposing of our ordinary shares.
We do not expect to distribute dividends in the foreseeable future.
We have never declared or paid any cash dividends on our ordinary shares. We currently intend to retain our current and any future earnings to finance operations and expand our business and, therefore, do not expect to
pay any dividends in the foreseeable future. According to the Israeli Companies Law, a company may distribute dividends out of its profits, provided that there is no reasonable concern that such dividend distribution will prevent the company from
paying all its current and foreseeable obligations, as they become due, or otherwise upon the permission of the court. In the event cash dividends are declared, such dividends will be paid in NIS. The declaration of dividends is subject to the
discretion of our board of directors and would depend on various factors, including our operating results, financial condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment in
our company if you require dividend income from your investment.
30
Risks Related to Our Incorporation and Location in Israel
Political, economic and military instability in Israel may disrupt our operations and negatively affect our business condition, harm our results of operations and adversely affect
our share price.
We are incorporated under the laws of, and our principal executive offices, production, manufacturing and research and development facilities are located in, the State of Israel. As a result, political, economic and
military conditions affecting Israel directly influence us. Conflicts in North Africa and the Middle East, including Syria which borders Israel, have resulted in continued political uncertainty and violence in the region. Efforts to improve Israel’s
relationship with the Palestinian Authority have failed to result in a permanent solution, and there have been numerous periods of hostility in recent years. In addition, relations between Israel and Iran continue to be seriously strained, especially
with regard to Iran’s nuclear program. Such instability may affect the local and global economy, could negatively affect business conditions and, therefore, could adversely affect our operations. To date, these matters have not had any material
effect on our business and results of operations; however, the regional security situation and worldwide perceptions of it are outside our control and there can be no assurance that these matters will not negatively affect us in the future.
Our 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 has in the past covered the reinstatement
value of certain damages that were caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or
damages incurred by us could have a material adverse effect on our operations.
Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business
partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those
agreements pursuant to force majeure provisions in such agreements. Furthermore, several countries and companies restrict business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and
Israeli companies. Restrictive laws or policies directed towards Israel or Israeli businesses may have an adverse impact on our operations, our financial results or the expansion of our business.
In addition, Israel faces political instability and a period of political deadlock which led to three elections during the last 18 months. There can be no assurance that continuing political instability will not lead to
another election within the next 12 months.
To date, these matters have not had any material effect on our business and results of operations; however, the internal political situation, the regional security situation and worldwide perceptions of it are outside
our control and there can be no assurance that these matters will not negatively affect us in the future.
Our results of operations may be negatively affected by the obligation of our personnel to perform military reserve service.
Some of our employees, directors and officers in Israel are obligated to perform annual reserve duty in the Israeli Defense Forces and may be called for active duty under emergency circumstances at any time. If a
military conflict or war arises, these individuals could be required to serve in the military for extended periods of time. Our operations could be disrupted by the absence for a significant period of one or more of our executive officers or key
employees or a significant number of other employees due to military service. Any disruption in our operations could adversely affect our business.
31
From time to time, we may be named as a defendant in actions involving the alleged violation of labor laws related to employment practices, wages and benefits.
From time to time we are involved in labor related legal proceedings arising from the operation of our business. During the last year we recruited a new management team and reduced our overall headcount, which actions
may expose our company to increased labor related legal proceedings.
Our operations may be affected by negative labor conditions in Israel.
Strikes and work stoppages occur relatively frequently in Israel. If Israeli trade unions threaten additional strikes or work stoppages and such strikes or work stoppages occur, these may, if prolonged, have a material
adverse effect on the Israeli economy and on our business, including our ability to deliver products to our customers in a timely manner.
Service and enforcement of legal process on us and our directors and officers may be difficult to obtain.
Service of process upon our directors and officers and the Israeli experts named herein, all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, since
substantially all of our assets, all of our directors and officers and the Israeli experts named in this annual report are located outside the United States, any judgment obtained in the United States against us or these individuals or entities may
not be collectible within the United States.
There is doubt as to the enforceability of civil liabilities under the Securities Act and the Exchange Act in original actions instituted in Israel. However, subject to certain time limitations and other conditions,
Israeli courts may enforce final judgments of United States courts for liquidated amounts in civil matters, including judgments based upon the civil liability provisions of those and similar acts.
Under current Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some
of our former employees.
We currently have non-competition clauses in the employment agreements of most of our employees. The provisions of such clauses prohibit our employees, if they cease working for us, from directly competing with us or
working for our competitors. Recently, Israeli labor courts have required employers, seeking to enforce non-compete undertakings against former employees, to demonstrate that the competitive activities of the former employee will cause harm to one
of a limited number of material interests of the employer recognized by the courts (for example, the confidentiality of certain commercial information or a company’s intellectual property). In the event that any of our employees chooses to leave and
work for one of our competitors, we may be unable to prevent our competitors from benefiting from the expertise our former employee obtained from us, if we cannot demonstrate to the court that we would be harmed.
Provisions of Israeli law may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore impact the price of our shares.
Provisions of Israeli corporate and tax laws may have the effect of delaying, preventing or making more difficult a merger with, or other acquisition of, us or all or a significant portion of our assets. Israeli
corporate law regulates acquisitions of shares through tender offers and mergers, requires special approvals for transactions involving significant shareholders and regulates other matters that may be relevant to these types of transactions. These
provisions of Israeli law could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders. These provisions may limit the
price that investors may be willing to pay in the future for our ordinary shares. Furthermore, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders.
These laws may have the effect of delaying or deterring a change in control of our company, thereby limiting the opportunity for shareholders to receive a premium for their shares and possibly affecting the price that
some investors are willing to pay for our company’s securities. This could cause our ordinary shares to trade at prices below the price for which third parties might be willing to pay to gain control of us. Third parties who are otherwise willing
to pay a premium over prevailing market prices to gain control of us may be unable or unwilling to do so because of these provisions of Israeli law.
32
The rights and responsibilities of our shareholders are governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law.
We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our memorandum of association, articles of association and by Israeli law. These rights and
responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, each shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising
his or her rights and fulfilling his or her obligations toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at the general meeting of shareholders on certain
matters. Israeli law provides that these duties are applicable in shareholder votes on, among other things, amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and interested party
transactions requiring shareholder approval. In addition, a controlling shareholder of an Israeli company, or a shareholder who knows that he or she possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or
prevent the appointment of a director or officer in the company, has a duty of fairness toward the company. Currently there is not a clear definition of the duty of fairness under Israeli law. There is limited case law available to assist us in
understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of
U.S. corporations.
As a foreign private issuer whose shares are listed on the NASDAQ Capital Market, we may follow certain home country corporate governance practices instead of certain NASDAQ
requirements. We follow Israeli law and practice instead of NASDAQ rules regarding the composition of the board of directors, director nomination process and quorum at shareholders’ meetings.
As a foreign private issuer whose shares are listed on the NASDAQ Capital Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of the NASDAQ Stock Market
Rules. We follow Israeli law and practice instead of the NASDAQ Stock Market Rules regarding the composition of the board of directors, director nomination process and quorum at shareholders’ meetings. As a foreign private issuer listed on the
NASDAQ Capital Market, we may also follow home country practice regarding, for example, the requirement to obtain shareholder approval for certain dilutive events (such as for the establishment or amendment of certain equity based compensation plans,
an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company). A
foreign private issuer that elects to follow a home country practice instead of NASDAQ requirements must submit to NASDAQ in advance a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices
are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the SEC, or on its website, each such requirement that it does not follow and describe the home country practice
followed by the issuer instead of any such requirement. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s corporate governance rules.
The termination or reduction of tax and other incentives that the Israeli government provides to domestic companies may increase the costs involved in operating a company in Israel.
The Israeli government currently provides tax and capital investment incentives to domestic companies, as well as grant and loan programs relating to research and development and marketing and export activities. In
recent years, the Israeli government has reduced the benefits available under these programs and the Israeli governmental authorities have indicated that the government may in the future further reduce or eliminate the benefits of those programs. We
have taken in the past and may take advantage of these benefits and programs again in the future, however, there is no assurance that such benefits and programs will continue to be available to us in the future. If such benefits and programs were
terminated or further reduced, it could have an adverse effect on our business, operating results and financial condition. The government tax benefits that we currently are entitled to receive require us to meet several conditions and may be
terminated or reduced in the future.
33
Some of our operations in Israel may entitle us to certain tax benefits under the Law for the Encouragement of Capital Investments, 5719-1959, or the Investment Law, once we are profitable. If we do not meet the
requirements for maintaining these benefits, they may be reduced or canceled and the relevant operations would be subject to Israeli corporate tax at the standard rate, which is set at 23% in 2018 and thereafter. In addition to being subject to the
standard corporate tax rate, we could be required to refund any tax benefits that we have already received, plus interest and penalties thereon. Even if we continue to meet the relevant requirements, the tax benefits that our current “Benefited
Enterprise” is entitled to may not be continued in the future at their current levels or at all. If these tax benefits were reduced or eliminated, the amount of taxes that we pay would likely increase, as all of our operations would consequently be
subject to corporate tax at the standard rate, which could adversely affect our results of operations. Additionally, if we increase our activities outside of Israel, for example, by way of acquisitions, our increased activities may not be eligible
for inclusion in Israeli tax benefits programs.
Risks Relating to the Rights Offering
Because the market prices for our ordinary shares may decline below the share subscription price, you could be committed to buying ordinary shares at a price above the prevailing
market price. In addition, we cannot assure you that the listing and admission to trading of the offered shares on NASDAQ, and thus the offered shares becoming fungible with our existing ordinary shares, will occur when we expect.
Once you exercise your subscription rights, you may not revoke such exercise even if you later learn information that you consider unfavorable to the exercise of your rights. Should the public trading market prices of
ordinary shares decline below the share subscription price after you exercise your rights, you will suffer an immediate unrealized loss as a result and you may not be able to sell ordinary shares purchased in the rights offering at a price equal to
or greater than the subscription price.
We cannot assure you that the listing and trading of the offered shares on NASDAQ will take place when anticipated. Until the offered shares are admitted to listing and trading on NASDAQ, they will not be fungible with
our existing ordinary shares currently traded on NASDAQ.
Nistec Golan may participate in the rights offering, subject to repayment of Nistec’s Loans according to certain terms, and
thereforet, the remaining of proceeds available to the the Company after repayment of such loans, if any, will be limited.
Mr. Nissan, our controlling shareholder who beneficially owns Nistec Golan, has indicated his interest in participating in the contemplated rights offering, subject to our share
price at the time of offering, , provided, that a portion of the amount raised in such offering will be used to repay Nistec’s Loans. In the event rights offering is completed, the amount of early repayment of Nistec's Loans will be the lower of:
| • |
83.33% of the total proceeds of the offering; or
|
| • |
The amount paid by the controlling shareholder (including any of its affiliates) to the Company in such rights offering.
|
If the rights offering is not successful, and only a small portion (or none) of the shareholders participate in the rights offering, the cash left for us after repayment of Nistec Loans will be
limited.
Subscription rights that are not exercised prior to the end of the share subscription period will expire valueless without any compensation.
The share subscription period is scheduled to commence on [______ __], 2020 and is to expire at 5:00 p.m. (New York City time) on [______ __], 2020. Any subscription rights unexercised at the end of the applicable
subscription period will expire valueless without any compensation.
34
Your interest may be diluted as a result of the rights offering.
Holders of ordinary shares who do not fully exercise their respective subscription rights should expect that they will, at the completion of the rights offering, own a smaller proportional interest, or be entitled to own
a smaller proportional interest, in our company than would otherwise be the case had they fully exercised their subscription rights.
Certain of our shareholders beneficially own a substantial percentage of our ordinary shares, which may increase if the offering is completed.
As of the date hereof, Mr. Yitzhak Nissan, our Chairman of the Board, beneficially owns 65.4% of our outstanding ordinary shares. Mr. Nissan has indicated his interest in participating in the contemplated rights
offering, subject to our share price at the time of offering, provided that a portion of the amount raised in such offering will be used to repay Nistec’s Loans. This concentration of ownership of our ordinary shares could delay or prevent mergers,
tender offers, or other purchases of our ordinary shares that might otherwise give our shareholders the opportunity to realize a premium over the then-prevailing market price for our ordinary shares. This concentration could also accelerate these
same transactions in lieu of others depriving shareholders of opportunities. This concentration of ownership may also cause a decrease in the volume of trading or otherwise adversely affect our share price.
If we terminate the rights offering for any reason, we will have no obligation other than to return subscription monies promptly.
We may decide, in our discretion and for any reason, to cancel or terminate the rights offering at any time prior to [______ __], 2020. If the rights offering is terminated, we will have no obligation with respect to
rights that have been exercised except to return promptly, without interest or deduction, the subscription monies deposited with the subscription agent or us. If we terminate the rights offering, all rights will expire worthless.
The subscription price determined for the rights offering is not an indication of the value of our ordinary shares.
The subscription price for the ordinary shares in the rights offering was set by our board of directors and does not necessarily bear any relationship to the book value of our assets, results of operations, cash flows,
losses, financial condition or any other established criteria for value. You should not consider the subscription price as an indication of the value of our ordinary shares. After the date of this prospectus, our ordinary shares may trade at prices
above or below the subscription price.
We will have broad discretion in the use of the net proceeds from the rights offering and may not use the proceeds effectively.
As set forth in the section entitled “Use of Proceeds” of this prospectus, we intend to use the net proceeds from this offering (if any) for repayment of up to $2.9 million of the Nistec’s Loans, for working capital and
other general corporate purposes. Other than the repayment of Nistec’s Loans, we do not currently have specific plans or commitments with respect to the net proceeds from this offering and, accordingly, are unable to quantify the allocation of such
proceeds among potential uses. We will have broad discretion in the way that we use the net proceeds of this offering. While our board of directors believes the flexibility in application of the net proceeds is prudent, the broad discretion it
affords entails increased risks to the investors in the rights offering. Investors in the rights offering have no current basis to evaluate the possible merits or risks of any application of the net proceeds of the rights offering. Our shareholders
may not agree with the manner in which we choose to allocate and spend the net proceeds.
If you do not act on a timely basis and follow subscription instructions, your exercise of rights may be rejected.
Holders of record of our ordinary shares who desire to purchase our ordinary shares in the rights offering must act on a timely basis to ensure that all required forms and payments are actually received by the
subscription agent or us prior to 5:00 p.m., New York City time, on the expiration date, unless extended. If you are a beneficial owner of ordinary shares and you wish to exercise your subscription rights, you must act promptly to ensure that your
broker, dealer, bank or other nominee acts for you and that all required forms and payments (to the extent payment is then required by your nominee) are actually received by your broker, dealer, bank or other nominee in sufficient time to exercise
the rights granted in the rights offering that you beneficially own on the expiration date, as may be extended. We will not be responsible if your broker, dealer, bank, or other nominee fails to meet this deadline.
35
For the subscription procedures that apply to your exercise in the rights offering, see “The Rights Offering – Methods for Exercising Rights.” If you fail to follow these
subscription procedures, we may, depending on the circumstances, reject your subscription or accept it only partially. Neither we nor the subscription agent undertakes to contact you concerning an incomplete or incorrect subscription form or
payment, nor are we under any obligation to correct such forms or payment. We have the sole discretion to determine whether a subscription exercise properly follows the subscription procedures.
If, as a result of the exercise of your subscription rights, you reach certain holding thresholds in our ordinary shares, you may be subject to certain regulatory requirements,
including disclosure of your shareholdings.
You may be subject to certain regulatory requirements if, as a result of the exercise of your subscription or over subscription rights, you reach certain holding thresholds of beneficial ownership of our ordinary
shares. For example, if your exercise of subscription rights results in you beneficially owning more than 5% of our ordinary shares, you may be required to file a Schedule 13D or Schedule 13G with the SEC.
You may not receive all of the amount of rights for which you over-subscribed.
Holders who fully exercise their basic subscription rights will be entitled to subscribe for additional rights that remain unsubscribed as a result of any unexercised basic subscription rights. We will allocate the
available shares proportionately by calculating the number of rights you properly exercised using your basic subscription rights relative to the number of rights properly exercised using the basic subscription rights by all subscribers who have
over-subscribed. If this allocation results in you being allocated a greater number of shares than you subscribed for, then you will be allocated only that number of shares for which you subscribed, and the remaining shares will be allocated among
all other holders exercising the over-subscription privilege on the same basis described above. This allocation process will be repeated until all shares subscribed for have been allocated. As a result, you may not receive all of the shares for
which you over-subscribed if there are insufficient shares available. If the prorated amount of rights allocated to you in connection with your over-subscription right is less than your over-subscription request, then the excess funds held by the
subscription agent or us on your behalf will be returned to you promptly without interest or deduction and we will have no further obligations to you.
We estimate that the net proceeds from the rights offering will be approximately $[___] million, assuming full participation in the rights offering and after deducting expenses related to the rights offering payable by
us estimated at approximately $[_____]. Due to repayment of up to $2.9 million of the Nistec’s Loan , only approximately $[___] million of the net proceeds will be left for for working capital and other general corporate purposes, assuming full
participation in the rights offering.
The amount of early repayment of the Loans will be the lower of:
| • |
83.33% of the total proceeds of the offering; or
|
| • |
The amount paid by the controlling shareholder (including any of its affiliates) to the Company in such rights offering.
|
We anticipate that we will use the net proceeds we receive from this offering to repay our existing indebtedness to Nistec, for working capital and other general corporate purposes and any excess may be used for
investment in fixed assets. We will have broad discretion in the way that we use the net proceeds of this offering.
36
The following table sets forth our capitalization as of June 30, 2020 (i) on an actual basis and (ii) on an as adjusted basis to give effect to the issuance of [____] ordinary shares in the rights offering, assuming the
exercise of all of the subscription rights at an assumed subscription price of $[____] per ordinary share with aggregate net proceeds of $[____] million, after deducting our payment of estimated offering expenses, and the application of the net
proceeds therefrom as described under the heading “Use of Proceeds.”
The following table should be read in conjunction with our financial statements and related notes, which are incorporated by reference into this prospectus.
|
As of June 30, 2020
|
||||||||
|
Actual
|
As Adjusted
|
|||||||
|
(U.S. dollars in thousands)
|
||||||||
| Unaudited | ||||||||
|
Current:
|
||||||||
|
Cash and cash equivalents
|
$ |
3,407
|
$ |
|
||||
|
Liabilities:
|
||||||||
|
Total current liabilities
|
$
|
12,965
|
$ |
[_____]
|
||||
|
Total long-term liabilities
|
2,704
|
[_____]
|
||||||
| Total liabilities |
$
|
15,669
|
$ |
[_____]
|
||||
|
Shareholder’s Equity:
|
||||||||
|
Share capital:
|
||||||||
|
Ordinary shares of NIS 3.00 par value; 10,000,000 shares authorized; 4,380,268 shares issued and outstanding
|
3,964
|
[_____]
|
||||||
|
Additional paid-in capital
|
18,583
|
[_____]
|
||||||
|
Capital reserve
|
1,006
|
[_____]
|
||||||
|
Foreign currency translation adjustments
|
2,479
|
[_____]
|
||||||
|
Retained earnings (accumulated deficit)
|
(18,476
|
)
|
[_____]
|
|||||
|
Total shareholders’ equity
|
$ |
|
|
|||||
|
Total liabilities and shareholders’ equity
|
$ |
7,556
|
$ |
[_____]
|
||||
We currently intend to retain future earnings for use in our business and do not anticipate paying cash dividends on our ordinary shares in the foreseeable future. Dividend distributions are subject to the discretion of
our board of directors and will depend on a number of factors, including our operating results, future capital resources available for distribution, capital requirements, financial condition, the tax implications of dividend distributions on our
income, future prospects and any other factors our board of directors may deem relevant. However, we have never declared or paid any cash dividends on our ordinary shares and we do not anticipate paying any cash dividends in the foreseeable future.
We currently intend to retain future earnings to finance operations and expand our business.
37
The distribution of dividends may also be limited by the Israeli Companies Law, or the Israeli Companies Law, which permits the distribution of dividends only out of “profits,” as such term is defined in the Israeli
Companies Law. Our board of directors is authorized to declare dividends, provided that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. For
purposes of the Israeli Companies Law, profits means the greater of retained earnings or earnings derived over the two most recent fiscal years, whichever is higher, after deduction of previous distributions that were not already deducted from the
surpluses, as evidenced by financial statements prepared for periods no more than six months prior to the date of distribution. In addition, dividends may be paid with the permission of an Israeli court, provided that there is no reasonable concern
that payment of the dividend will prevent a company from satisfying its existing and foreseeable obligations as they become due. Under the Israeli Companies Law, dividend distributions are determined by the board of directors and do not require the
approval of the shareholders of a company unless the company’s articles of association provide otherwise. Our amended and restated articles of association do not require shareholder approval of a dividend distribution and provide that dividend
distributions may be determined by our board of directors, subject to the provisions of the Israeli Companies Law.
Purchasers of our ordinary shares in the rights offering will experience an immediate dilution of the net tangible book value per ordinary share. Our net tangible book value as of June 30, 2020 was approximately $[__]
million, or $[__] per ordinary share (based upon [__] of our ordinary shares outstanding as of such date). Net tangible book value per share is equal to our total net tangible book value, which is our total tangible assets less our total
liabilities, divided by the number of our ordinary shares outstanding. Dilution per share equals the difference between the amount per share paid by purchasers of ordinary shares in the rights offering and the net tangible book value per ordinary
share immediately after the rights offering.
Based on an assumed offering of a maximum of [__] ordinary shares at an assumed offering price of $[__] per share and after deducting estimated offering expenses payable by us of approximately $[__], and the application
of the estimated $[__] million of net proceeds from the rights offering, our pro forma net tangible book value as of June 30, 2020 would have been approximately $[__], or $[__] per share. This represents an immediate increase in pro forma net
tangible book value to existing shareholders of $[__] per ordinary share and an immediate dilution to purchasers in the rights offering of $[__] per ordinary share.
The following table illustrates this per share dilution assuming a fully subscribed rights offering of [__] ordinary shares at the assumed subscription price of $[__] per share:
|
Subscription price
|
$
|
$
|
||||||
|
Subscription price per share
|
$
|
$
|
||||||
|
Net tangible book value per ordinary share prior to the rights offering
|
$
|
$
|
||||||
|
Increase per ordinary share attributable to this offering
|
$
|
$
|
||||||
|
Pro forma net tangible book value per share after the rights offering
|
$
|
$
|
||||||
|
Dilution in net tangible book value per share to purchasers
|
$
|
$
|
38
The following table sets forth certain information as of October 12, 2020 regarding the beneficial ownership by all shareholders known to us to own beneficially 5% or more of our ordinary shares:
|
Name
|
Number of Ordinary Shares
Beneficially Owned (1)
|
Percentage
of Ownership (2)
|
||||||
|
Nistec Golan Ltd. (3)
|
2,731,783
|
62.4
|
%
|
|||||
|
Yitzhak Nissan (3)
|
130,740
|
3.0
|
%
|
|||||
|
XDOOD LLC (4)
|
228,230
|
5.21
|
%
|
|||||
___________
| (1) |
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options or convertible notes currently exercisable or
exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as
indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
|
| (2) |
The percentages shown are based on 4,380,268 ordinary shares issued and outstanding as of October 12, 2020.
|
| (3) |
Nistec Golan is an Israeli private company controlled by Yitzhak Nissan. Accordingly, Mr. Nissan may be deemed to be the beneficial owner of the ordinary shares held directly by Nistec.
|
| (4) |
Based on a Schedule 13D filed on December 6, 2019. The filer reported that XDOOD LLC is a Single Member LLC with Michael McGauley as its Single Member. According to the filing, Michael McGauley controls 100% of XDOOD LLC and its assets.
The principal business address of the shareholder is 1400 Hancock Street Fl 9, Quincy, MA.
|
39
Terms of the Offer
We are distributing at no charge to the holders of our ordinary shares on [_________ __], 2020, which we refer to as the record date, subscription rights to purchase up to an aggregate of [______] of our ordinary
shares. We expect the total subscription price for the rights offered in the rights offering to be at maximum $[___ million], assuming full exercise of all the subscription rights. See below for additional information regarding subscription by DTC.
Each shareholder is being issued one subscription right for every [__] ordinary shares owned on the record date. Each subscription right carries with it a basic subscription right and an over-subscription right.
Each subscription right entitles the holder to purchase, at the subscription price of $[___], one ordinary share.
Subscription right holders who fully exercise their basic subscription rights will be entitled to subscribe for additional ordinary shares that remain unsubscribed as a result of any unexercised basic subscription
rights. We refer to this as the over-subscription right. You must exercise your rights with respect to the basic subscription right and the over-subscription right at the same time. We will allocate the available shares proportionately by calculating
the number of rights you properly exercised using your basic subscription rights relative to the number of rights properly exercised using the basic subscription rights by all subscribers who have over-subscribed. If this allocation results in you
being allocated a greater number of shares than you subscribed for, then you will be allocated only that number of shares for which you subscribed, and the remaining shares will be allocated among all other holders exercising the over-subscription
privilege on the same basis described above. This allocation process will be repeated until all shares subscribed for have been allocated.
Your subscription rights may only be exercised for whole numbers of ordinary shares; no fractional ordinary shares will be issued in the rights offering. See below “Fractional
Securities.”
The subscription rights are not transferable (except by operation of law), and will not be tradable on any trading market.
40
You may be subject to certain regulatory requirements if, as a result of the exercise of your subscription rights, you reach certain holding thresholds of beneficial ownership of our ordinary shares. For example, if
your exercise of subscription rights results in you beneficially owning more than 5% of our ordinary shares, you may be required to file a Schedule 13D or Schedule 13G with the SEC.
Subscription rights may be exercised at any time during the subscription period, which commences on [_________ __], 2020 and ends at 5:00 p.m., New York City time, on [_________ __], 2020, the expiration date, unless we
decide to terminate the rights offering earlier. If you are a beneficial owner of our ordinary shares and hold them through a broker, dealer, bank or other nominee (including a member of DTC), rather than in your own name, and you wish to exercise
your subscription rights, you should contact your nominee to exercise your subscription rights sufficiently in advance of the expiration of the subscription period in order to ensure timely delivery of a subscription rights certificate reflecting
your exercise. Your nominee will instruct you as to the proper time and form of payment of the subscription price. Any rights not exercised at or before the applicable time will expire without any payment to the holders for those unexercised
rights. See “Methods for Exercising Rights.”
The subscription rights will be evidenced by subscription rights certificates that will be sent to shareholders. The subscription rights will not be tradable on any stock exchange or market.
There is no minimum subscription amount required for consummation of the rights offering.
Allocation and Exercise of Over-Subscription Rights
In order to properly exercise an over-subscription right, a rights holder must: (i) exercise its basic subscription right in full; (ii) indicate on its subscription rights certificate that it submits with respect to the
exercise of the rights issued to it how many additional ordinary shares it is willing to acquire pursuant to its over-subscription right; and (iii) concurrently deliver the subscription payment related to its over-subscription right at the time it
makes payment for its basic subscription right in accordance with the procedures described in this prospectus.
We will allocate the available whole shares proportionately by calculating the number of subscription rights you properly exercised using your basic subscription rights relative to the number of basic subscription rights
properly exercised by all subscribers who have over-subscribed. We will seek to honor your over-subscription in full, subject to the limitations set forth herein. The exercise of your over-subscription privilege may be limited, however, if there are
insufficient shares available, so you may receive fewer shares than you subscribed for pursuant to your over-subscription privilege. If this allocation results in you being allocated a greater number of shares than you subscribed for, then you will
be allocated only that number of shares for which you subscribed, and the remaining shares will be allocated among all other holders exercising the over-subscription privilege on the same basis. This allocation process will be repeated until all
shares subscribed for have been allocated. Fractional shares resulting from the exercise of the over-subscription privilege will be eliminated by rounding down to the nearest whole share.
Subscription rights payments for basic subscriptions and over-subscriptions will be deposited upon receipt by the subscription agent or us and held in a segregated account with the subscription agent pending a final
determination of the number of ordinary shares to be issued pursuant to the over-subscription right. If the prorated amount of rights allocated to you in connection with your over-subscription right is less than your over-subscription request, then
the excess funds held by the subscription agent or us on your behalf will be returned to you promptly without interest or deduction.
Brokers, dealers, banks and other nominee holders of rights, including DTC members, will be required to certify to the subscription agent before any over-subscription right may be exercised with respect to any particular
beneficial owner as to (i) the number of rights exercised pursuant to its basic subscription right; and (ii) the number of rights subscribed for pursuant to the over-subscription right of such beneficial owner.
We will not offer or sell in connection with the rights offering any ordinary shares that are not subscribed for pursuant to the basic subscription right or the over-subscription right.
41
Fractional Securities
We will issue only whole numbers of securities in the rights offering. Accordingly, if you are entitled to receive a fraction of a subscriptions right in the rights offering, we will round down to the nearest whole
number. With respect to ordinary shares registered on our shareholder register maintained by our transfer agent, including those held in the name of DTC, such rounding will be made with respect to each record and beneficial shareholder.
Subscription rights may only be exercised for whole numbers of ordinary shares; no fractional ordinary shares will be issued in the rights offering.
Subscription Intentions of Our Controlling Shareholders
In December 2018, Nistec Ltd. transferred its ownership interest inEltek to Nistec Golan. Nistec Golan our controlling shareholder, holds 62.4% of our voting rights. Our controlling shareholder, Mr. Nissan who
beneficially owns Nistec Golan, has indicated his interest in participating in the contemplated rights offering, subject our share price at the time of offering, provided that a portion of the amount raised offering will be used to repay the Nistec
Loans. The loan repayment, which was approved by our audit committee and board of directors, is subject to shareholder approval at the Annual General Meeting to be held on October 29, 2020.
Expiration of the Rights Offering
You may exercise your subscription rights at any time before 5:00 p.m., New York City time on [______ __], 2020, the expiration date of the rights offering, unless we decide to terminate the rights offering earlier. We
may not extend the expiration date of the rights offering.
If you are a beneficial owner of our ordinary shares and/or hold them through a broker, dealer, bank or other nominee (including a member of DTC), rather than in your own name,
and you wish to exercise your subscription rights, you should contact your nominee to exercise your subscription rights sufficiently in advance of the expiration of the subscription period in order to ensure timely delivery of a subscription rights
certificate reflecting your exercise. Your nominee will instruct you as to exercising your basic and over-subscription rights and as to the proper time and form of payment of the subscription price. See “Methods for Exercising Rights” for the
deadlines and other details regarding exercising subscription rights.
42
Any rights not exercised at or before the applicable time will have no value and expire without any payment to the holders of those unexercised rights. We will not be obligated to honor your exercise of subscription
rights if the subscription agent or Eltek receives the documents relating to your exercise after the rights offering expires, regardless of when you transmitted the documents.
Revocation, Termination and Amendment of the Rights Offering
No Revocation. Once you send in your subscription rights certificate and payment, you cannot revoke the exercise of either your basic or over-subscription rights, even if the
market price of our ordinary shares is below the $[__] per share subscription price. You should not exercise your subscription rights unless you are certain that you wish to purchase additional ordinary shares at the proposed subscription price.
Termination; Cancellation. We may cancel or terminate the rights offering in our sole discretion at any time prior to 5:00 p.m. New York City time on [______ __], 2020, for any
reason (including, without limitation, a change in the market price of our ordinary shares). If the offering is terminated, all rights will expire and we will promptly arrange for the refund, without interest or deduction, of any funds received from
holders of subscription rights. Any cancellation or termination of the rights offering will be followed as promptly as practicable by an announcement.
Amendments. We may amend or modify the terms of the rights offering, including the extension of the expiration date of the rights offering.
Reasons for the Rights Offering; Determination of the Offering Price
We are undertaking this rights offering in order to improve our cash position and grow our business, increase our shareholders equity and extinguish our debt to Nistec Golan. We estimate that the net proceeds from the
rights offering will be approximately $[___] million, assuming full participation in the rights offering and after deducting expenses related to the rights offering payable by us estimated at approximately $[_____]. Due to Nistec’s Loan repayment
soon after the closing of the rights offering, only approximately $[___] million of the net proceeds will be left for working capital and general purposes, assuming full participation in the rights offering.
We believe that that early repayment of the Loans through a rights offering would be to our benefit due to the following reasons:
| • |
Improvement of our balance sheet and financial ratios: the exercise of subscription rights by the Controlling shareholder will result in a decrease in our debt, an increase its shareholders’ equity and improved financial ratios.
|
| • |
Decreased likelihood of bankruptcy: the Loans are classified as short-term debt, which puts us at risk. We intend to use the cash flow to be generated during the course of the next year in order to repay the Loans, but there is no
certainty that we will achieve such repayment or that it will be able to raise the required amounts from external investors. In addition, the Controlling shareholder might not agree to delay repayment any further.
|
| • |
If fully subscribed the Rights Offering will provide additional benefits: the participation of additional shareholders (other than the controlling shareholder) in such offering will improve our financial position, increase our cash
reserves and will allow us to make additional investments in our business.
|
| • |
The offering will increaseour ability to finance capital improvements: A successful offering willenable us to allocate resources to improvement to and expansion of our manufacturing facility.
|
Other than repayment of Nistec’s Loan, we do not currently have specific plans or commitments with respect to the net proceeds from this offering and, accordingly, are unable to quantify the allocation of such proceeds
among potential uses. We will have broad discretion in the way that we use the net proceeds of this offering. Although we believe that the rights offering will allow for continued listing, and strengthen our financial condition, our board of
directors is not making any recommendation as to whether you should exercise your subscription rights.
43
Our board of directors appointed a special committee to oversee the rights offering and make a recommendation to the board of directors with respect to the terms of the rights offering. The special committee is composed
of three independent member of our board of directors: Erez Meltzer, Gad Dovev and Ilana Lurie. The special committee recommended the subscription price to our board of directors, which in turn considered the terms of the rights offering. In
determining the pricing of the rights offering, the special committee and our board of directors considered, among other things, the need to offer the shares at a price that would be attractive to investors relative to the then current trading price
for our ordinary shares, historical and current trading prices for our ordinary shares, the need for capital and alternatives available to us for raising capital, the need to increase our shareholders' equity, potential market conditions and the
desire to provide an opportunity to our shareholders to participate in the rights offering on a pro rata basis. In conjunction with its review of these factors, the special committee and our board of directors reviewed, with the assistance of
management and financial and legal advisors, our history and prospects, including our past and present earnings, our prospects for future earnings, and the outlook for our industry, our current financial condition and a range of subscription prices
compared to market prices in various prior rights offerings. The subscription price does not necessarily bear any relationship to any other established criteria for value. You should not consider the subscription price as an indication of value of
our company or our ordinary shares. You should not assume or expect that, after the rights offering, our ordinary shares will trade at or above the subscription price in any given time period. The market price of our ordinary shares may decline
during or after the rights offering, and you may not be able to sell the shares of our ordinary shares purchased during the rights offering at a price equal to or greater than the subscription price. You should obtain a current quote for our
ordinary shares before exercising your subscription rights and make your own assessment of our business and financial condition, our prospects for the future, and the terms of this rights offering.
Subscription Agent
American Stock Transfer & Trust Company, LLC will act as the subscription agent in connection with the rights offering with respect to holders of our ordinary shares. for the benefit of brokers, dealers, banks and
other nominees. The subscription agent will receive for its administrative, processing, invoicing and other services a fee estimated to be approximately one-time administration fee of $16,000 and $20 per exercise, plus reimbursement for all
reasonable out-of-pocket expenses related to the rights offering.
Completed subscription rights certificates of such holders must be sent together with full payment of the subscription price for all shares subscribed for through the exercise of the subscription right (including
over-subscription rights) to the subscription agent by one of the methods described below:
By Hand, Mail or Overnight Courier:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue, Brooklyn, NY 11219
Attn: Reorganization Department
Delivery to an address other than the address listed above will not constitute valid delivery and, accordingly, may be rejected by us.
If you use the mail, we recommend that you use insured, registered mail, return receipt requested. We will not be obligated to honor your exercise of subscription rights if the subscription agent receives the documents
relating to your exercise after the rights offering expires, regardless of when you transmitted the documents. We will accept only properly completed and duly executed subscription rights certificates actually received at the address listed above, at
or prior to 5:00 p.m., New York City time, on [______ __], 2020. See “Payment of Subscription Price” below.
44
If you are a beneficial owner of our ordinary shares and/or hold them through a broker, dealer, bank or other nominee (including a participant of DTC), rather than in your own name and you wish to exercise your
subscription rights, you should contact your nominee to exercise your subscription rights sufficiently in advance of the expiration date of the rights offering in order to ensure timely delivery of a subscription rights certificate reflecting your
exercise. Your nominee will instruct you as to the proper time and form of payment of the subscription price.
Information Agent
If you have any questions or need further information about the rights offering, or for additional copies of this prospectus, please contact D.F. King, our Information Agent for the rights offering, toll free at
(800)-283-2170.
Methods for Exercising Rights
Rights are evidenced by subscription rights certificates that will be sent to record date shareholders registered on our shareholder register maintained at American Stock Transfer & Trust Company, LLC or, if a record
date shareholder’s ordinary shares are held by a depository or nominee on his, her or its behalf, to such depository or nominee.
Record date shareholders registered on our shareholder register maintained by the subscription agent
Rights of record date shareholders registered on our shareholder register maintained at the subscription agent may be exercised by record holders or such depositories or nominees by completing and signing the
subscription rights certificate that accompanies this prospectus and mailing it in the envelope provided, or otherwise delivering the completed and duly executed subscription rights certificate to the subscription agent, together with payment in full
(including for over-subscription rights) for the ordinary shares at the subscription price by the expiration date of the rights offering. Completed subscription rights certificates and related payments must be received by the subscription agent
prior to 5:00 p.m., New York City time, on or before [______ __], 2020, at the offices of the subscription agent at the address set forth above.
Shareholders whose ordinary shares are held as of the record date by a nominee, such as a broker, dealer, bank or other nominee rather than in their own name, must contact that nominee to exercise their rights
sufficiently in advance of the expiration date of the rights offering in order to ensure timely delivery of a subscription rights certificate reflecting their exercise. In that case, the nominee will complete the subscription rights certificate on
behalf of the record date shareholder and arrange for proper payment by one of the methods set forth under “Payment of Subscription Price” below.
Nominee Holders
If you are a broker, a trustee or a depositary for securities that holds our ordinary shares for the account of others as a nominee holder, you should notify the respective beneficial owners of such shares as soon as
possible of the issuance of the rights to find out such beneficial owners’ intentions. You should obtain instructions from the beneficial owner with respect to the rights, as set forth in the instructions we have provided to you for your
distribution to beneficial owners. If the beneficial owner so instructs, you should complete the appropriate subscription certificates. A nominee holder that holds shares for the account(s) of more than one beneficial owner may exercise the number
of rights to which all such beneficial owners in the aggregate otherwise would have been entitled if they had been direct record holders of our ordinary shares on the record date, so long as the nominee submits the appropriate subscription
certificates and certifications and proper payment to us.
General
All questions as to the timeliness, validity, form, eligibility (including times of receipt and matters pertaining to beneficial ownership) and the acceptance of subscription forms and the subscription price will be
determined by us, which determinations will be final and binding. No alternative, conditional or contingent subscriptions will be accepted.
45
We reserve the right to reject any exercise if such exercise is not in accordance with the terms of the rights offering or not in proper form or if the acceptance thereof or the issuance of our ordinary shares thereto
could be deemed unlawful. We reserve the right to waive any deficiency or irregularity with respect to any subscription rights certificate. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived
or cured within such time as we determine in our sole discretion. We will not be under any duty to give notification of any defect or irregularity in connection with the submission of subscription rights certificates or incur any liability for
failure to give such notification.
Payment of Subscription Price
Record Holders registered on our shareholder register maintained by the subscription agent
If you are a holder of our ordinary shares that is registered on our shareholder register maintained at American Stock Transfer & Trust Company, LLC, you may send the subscription rights certificate together with
payment for the rights exercised based on the subscription price of $[__]. To be accepted, the payment, together with a properly completed and executed subscription rights certificate, must be received by the subscription agent at the subscription
agent’s office set forth above (see “Subscription Agent”), at or prior to 5:00 p.m., New York City time, on [______ __], 2020.
All payments to the subscription agent must be in U.S. dollars by check made payable to American Stock Transfer and Trust Company, LLC or bank wire to:
JPMorgan Chase Bank
55 Water Street,
New York, New York 10005
ABA #021000021, Account # 530-354616
American Stock Transfer FBO Eltek Ltd., with reference to the rights holder's name.
The subscription agent will deposit all funds received prior to the final payment date into a segregated account pending pro-ration and distribution of the ordinary shares.
The method of delivery of subscription rights certificates and payment of the subscription price to the subscription agent will be at the election and risk of the participating
rights holders, but if sent by mail it is recommended that such certificates and payments be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the
subscription agent and clearance of payment prior to 5:00 p.m., New York City time, on [______ __], 2020. Because uncertified personal checks may take at least five business days to clear, you are strongly urged to pay, or arrange for payment, by
means of certified or cashier’s check or money order.
Whichever of the methods described above is used, issuance of the ordinary shares is subject to collection of checks and actual payment.
If a participating rights holder who subscribes for shares as part of the subscription right or the over-subscription right does not make payment of any amounts due by the expiration date, the subscription agent
reserves the right to take any or all of the following actions: (i) reallocate the ordinary shares to other participating rights holders in accordance with the over-subscription right; (ii) apply any payment actually received by it from the
participating rights holder toward the purchase of the greatest whole number of ordinary shares which could be acquired by such participating rights holder upon exercise of the basic subscription right and any over-subscription right; and/or (iii)
exercise any and all other rights or remedies to which it may be entitled, including the right to set off against payments actually received by it with respect to such subscribed for ordinary shares.
46
Delivery of Share Certificates
Share certificates for ordinary shares will be sent promptly after the expiration of the rights offering and payment of the subscription price by the individual holder has cleared.
If You Have Questions
If you have any questions or need further information about the rights offering, or for additional copies of this prospectus or subscription rights certificates, please call D.F. King, our Information Agent, toll free at
(800)-283-2170, or, if you are located in Israel, you may also contact our Chief Financial Officer, at +972-3- 9395023, during his normal business hours.
Immediately following the effective date of this prospectus, we will distribute, at no cost, the subscription rights certificates and copies of this prospectus to all holders of record of our ordinary shares on [______
__], 2020. If you wish to exercise your subscription rights and purchase our ordinary shares, you should complete the subscription rights certificate and return it, with payment of the subscription price, or follow the procedure for subscription by
shareholders whose ordinary shares are held by a nominee, as set forth in “The Rights Offering.”
The following descriptions of our share capital and provisions of our articles of association are summaries and are qualified by reference to the articles of association to be effective immediately prior to the closing
of this offering
Rights Attached to Shares
Our authorized share capital consists of NIS 30,000,000 divided into 10,000,000 ordinary shares, nominal value of NIS 3.00 each. All outstanding ordinary shares are validly issued, fully paid and non-assessable. The
rights attached to the ordinary shares are as follows:
Dividend rights. Holders of our ordinary shares are entitled to the full amount of any cash or share dividend
subsequently declared. The board of directors may declare interim dividends and propose the final dividend with respect to any fiscal year only out of its profits. If after 30 days a dividend has been declared and it is still unclaimed, the
dividend may be invested or otherwise used by us for our own account, as we deem fit, until such dividend is claimed; and we will not be deemed a trustee in respect thereof. We are not obliged to pay, and may not pay interest on declared but unpaid
dividends if the shareholders entitled to such dividends fail to collect the same or to provide us the necessary information for the payment thereof, or if we are for any other reason unable to pay the dividend to such shareholder.
Voting rights. Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a
vote of shareholders. Such voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future. Unless otherwise required by law or our articles
of association, all resolutions require approval of no less than a majority of the voting rights represented at the meeting in person or by proxy and voting thereon.
47
Generally, at each annual meeting of shareholders, directors are elected by a vote of the holders of a majority of the voting power represented and voting on the matter. All the members of our board of directors (except
our external directors) may be reelected upon completion of their term of office.
Rights to share in our profits. Our shareholders have the right to share in our profits distributed as a dividend and any other permitted distribution.
Rights to share in surplus in the event of liquidation. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be
distributed to the holders of ordinary shares in proportion to the nominal value of their holdings. This right may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights
that may be authorized in the future.
Changing Rights Attached to Shares
According to our articles of association, in order to change the rights attached to any class of shares, such change must be adopted by a resolution in writing by the holders of the majority of the issued shares of such
class or by an ordinary resolution at a separate general meeting of the holders of the affected class.
Annual and Extraordinary Meetings of Shareholders
The board of directors must convene an annual general meeting of shareholders at least once every calendar year, within 15 months of the last annual meeting. Depending on the matter to be voted upon, notice of at least
21 days or 35 days prior to the date of the meeting is required. In addition, the board of directors must convene a special general meeting of the shareholders upon the demand of any of: (1) two of the directors; (ii) 25% of the nominated directors;
(iii) one or more shareholders holding at least 5% of our company’s issued and outstanding share capital and at least 1% of the voting power in the company; or (iv) one or more shareholders holding at least 5% of the voting power in our company.
The quorum required for a shareholders meeting consists of at least two shareholders present in person or represented by proxy who hold or represent, in the aggregate, at least one third of the voting rights of the
issued share capital. A meeting adjourned for lack of a quorum is adjourned by seven business days, at the same time and place, or any later time and place as the board of directors designate in a notice to the shareholders. The requisite quorum at
an adjourned general meeting will be: (i) if the original meeting was convened upon requisition by shareholders pursuant to the Israeli Companies Law - the number of shareholders holding the minimum number of voting shares necessary to make such
requisition, present in person or by proxy; and (ii) in any other event - one or more shareholders, present in person or by proxy, holding at least one share. We do not follow the requirements of the NASDAQ Stock Market Rules regarding the quorum at
shareholder meetings.
Limitations on the Rights to Own Securities in Our Company
Neither our memorandum of association nor our articles of association nor the laws of the State of Israel restrict in any way the ownership or voting of shares by non-residents, except with respect to subjects of
countries that are in a state of war with Israel.
Provisions Restricting Change in Control of Our Company
Full Tender Offer. A person wishing to acquire shares of a publicly traded Israeli company who would as a result hold
over 90% of the company’s issued and outstanding share capital, or of a certain class of shares, is required by the Israeli Companies Law to make a full tender offer to all of the company’s shareholders for the purchase of all of the remaining issued
and outstanding shares of the company, or the class of shares, as the case may be. If: (i) the shareholders who do not accept the offer hold less than 5% of the issued share capital of the company, or of the relevant class of shares, and the
majority of shareholders having no personal interest in the offer accepted it; or (ii) shareholders who do not accept the offer hold less than 2% of the issued share capital of the company; then all of the shares that the acquirer offered to purchase
will be transferred to the acquirer by operation of law. However, the shareholders may petition the court to determine the consideration for the acquisition if the consideration is less than the shares’ fair value (unless the acquirer has specified
in the tender offer that any shareholder tendering his shares will not be entitled to such appraisal rights). If the dissenting shareholders hold more than 5% of the issued and outstanding share capital of the company, or of the relevant class of
shares, as the case may be, the acquirer may not acquire additional shares of the company from shareholders who accepted the tender offer if following such acquisition the acquirer would own over 90% of the company’s issued and outstanding share
capital, or of the relevant class of shares.
48
Special Tender Offer. An acquisition of control bloc of shares in a public Israeli company must be made by means of a
special tender offer if as a result of the transaction the acquirer could become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Israeli Companies Law is met. This rule does not apply if there is
already another holder of at least 25% of the voting rights in the company. Similarly, an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser could become a holder of more
than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company, unless one of the exemptions is met. Such exemptions include: (a) acquisition of shares issued
pursuant to a private placement approved by a general meeting of the company as a private placement intended to provide the purchaser with holdings of 25% or more of the voting rights in the company, if there is no other shareholder of the company
who holds more than 25% of the voting rights in the company, or with holdings of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company, (b)
acquisition of shares from a holder of 25% or more of the voting rights in the company following which the purchaser will hold 25% or more of the voting rights in the company, or (c) acquisition of shares from a holder of 45% or more of the voting
rights in the company following which the purchaser will hold 45% or more of the voting rights in the company.
A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares,
regardless of how many shares are tendered by shareholders. A special tender offer may be consummated only if (1) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (2) the number of
shares tendered in the offer exceeds the number of shares whose holders objected to the offer (disregarding holders who control the offeror or have a personal interest in the acceptance of the offer or holders of 25% or more of the voting rights of
the company, any of their relatives, or corporations controlled by any of the above).
If a special tender offer is accepted, then the purchaser, any corporation controlled by it, or any person or entity controlling it or under common control with the purchaser may not make a subsequent tender offer for
the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the
initial special tender offer.
Merger. The Companies Law permits merger transactions between Israeli companies, if approved by each party’s board of
directors and, unless certain requirements are met, the majority of each party’s shares voted on the proposed merger at a shareholders meeting convened with prior notice of at least 35 days. A merger is defined as the transfer of all assets and
liabilities, including conditional, future, known and unknown debts of the target company to the surviving company, as a result of which the target company is liquidated, and stricken out of the Companies Register.
Since our company was incorporated prior to the entry into effect of the Israeli Companies Law, a merger transaction requires the approval of a special majority of 75% or more of the shareholders voting on the matter
(disregarding abstentions) for purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the votes of shares represented at the shareholders meeting (disregarding abstentions) that are
held by any of: (1) parties other than the other party to the merger; (2) parties who hold 25% or more of the voting rights or any means of control or the right to appoint 25% or more of the directors of the other party; or (3) anyone on such
parties’ behalf, including relatives of such parties and corporations controlled them, vote against the merger. If, however, the merger involves a merger with a company’s own controlling party or if the controlling party has a personal interest in
the merger, then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling parties.
If the transaction would have been approved by the shareholders of a merging company but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still
approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the appraisal of the value of the parties to the merger and the
consideration offered to the shareholders of the company.
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Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving
company will be unable to satisfy the obligations of any of the parties to the merger, and may further give instructions to secure the rights of creditors.
In addition, a merger may not be consummated until at least 50 days have passed from the date on which a proposal for approval of the merger was filed by each party with the Israeli Registrar of
Companies and at least 30 days have passed from the date on which the merger was approved by the shareholders of each party.
Notwithstanding the foregoing, a merger is not subject to the approval of the shareholders of the target company if the target company is a wholly-owned subsidiary of the acquiring
company. A merger is not subject to the approval of the shareholders of the acquiring company in any of the following events:
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the merger does not require the alteration of the memorandum or articles of association of the acquiring company;
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the acquiring company would not issue more than 20% of the voting rights thereof to the shareholders of the target company in the course of the merger and no person will become, as a result of the merger, a controlling shareholder of the
acquiring company, on a fully diluted basis;
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neither the target company, nor any shareholder that holds 25% of the means of control of the target company is a shareholder of the acquiring company and there is no person that holds 25% or more of the means of control in both companies.
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Disclosure of Shareholders Ownership
The Israeli Securities Law and regulations promulgated thereunder do not require a company whose shares are publicly traded solely on a stock exchange outside of Israel, as in the case of our company, to disclose its
share ownership in the records of the Israeli Companies Registrar.
Changes in Our Capital
Changes in our capital are subject to the approval of a simple majority of shareholders present and voting at any shareholders meeting.
The following summary describes certain material U.S. federal income tax consequences to U.S. Holders of the receipt, exercise and disposition of rights, and of owning and disposing of ordinary shares issued upon the
exercise of the rights (“new ordinary shares”), but it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular investor. This discussion applies only to U.S. Holders that hold our existing
ordinary shares and will hold the rights and the new ordinary shares as capital assets for U.S. federal income tax purposes. The consequences of holding and disposing of new ordinary shares will generally be the same as holding and disposing of
existing ordinary shares. When it is not necessary to distinguish between new and existing ordinary shares, this summary will refer to “ordinary shares”. In addition, this summary does not describe all of the tax consequences that may be relevant
in light of the U.S. Holder’s particular circumstances, including alternative minimum tax consequences and tax consequences applicable to U.S. Holders subject to special rules, such as:
| • |
certain financial institutions;
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dealers or traders in securities that use a mark-to-market method of accounting;
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persons holding rights or ordinary shares as part of a hedge, straddle, conversion transaction or integrated transaction;
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persons whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar;
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tax-exempt entities, “individual retirement accounts” or “Roth IRAs”;
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entities classified as partnerships for U.S. federal income tax purposes;
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persons who own or are deemed to own 10% or more of our voting shares; or
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persons holding rights or ordinary shares in connection with a trade or business conducted outside the United States.
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If a partnership holds rights or ordinary shares, the U.S. federal income tax treatment of a partner will generally depend upon the status of the partner and the tax treatment of the partnership. Partnerships holding
rights or ordinary shares and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences to them of the receipt, exercise and disposition of the rights and of owning and disposing of
ordinary shares.
This summary is based upon the tax laws of the United States including the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions, final, temporary and proposed Treasury
regulations, and the income tax treaty between Israel and the United States (the “Treaty”), all as of the date hereof, and any of which could be subject to change, possibly with retroactive effect.
A “U.S. Holder” is a person that is eligible for the benefits of the Treaty and is, for U.S. federal income tax purposes, a beneficial owner of existing ordinary shares that is one of the following:
| • |
a citizen or individual resident of the United States;
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| • |
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust if (i) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has validly
elected to be treated as a U.S. person for U.S. federal income tax purposes.
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U.S. Holders are urged to consult their tax advisors as to the U.S. federal, state, local and non-U.S. tax consequences of the receipt of rights, the exercise or disposition of rights and of owning and disposing of new
ordinary shares in their particular circumstances.
Except as described below, this discussion assumes that we are not, and will not become, a PFIC for any taxable year.
Taxation of the Rights
Receipt of the Rights
The receipt of the rights by a U.S. Holder of existing ordinary shares pursuant to the rights offering will be treated as a non-taxable distribution with respect to the existing ordinary shares for U.S. federal income
tax purposes.
If on the date of distribution, the fair market value of the rights is less than 15% of the fair market value of the existing ordinary shares with respect to which the rights were distributed, the rights will be
allocated a zero basis for U.S. federal income tax purposes, unless the U.S. Holder affirmatively elects to allocate basis in proportion to the relative fair market values of its existing ordinary shares and the rights received (determined on the
date of distribution). This irrevocable election must be made in a U.S. Holder’s U.S. federal income tax return for the taxable year in which the rights are received, and will apply to all rights received by the U.S. Holder pursuant to the rights
offering.
If on the date of distribution the fair market value of the rights is at least 15% of the fair market value of the existing ordinary shares with respect to which the rights are distributed, the basis of the U.S. Holder’s
ordinary shares must be allocated between its existing ordinary shares and the rights in proportion to their fair market values (determined on the date of distribution).
51
Exercise of the Rights
The exercise of a right by a U.S. Holder should not be a taxable transaction for U.S. federal income tax purposes. The U.S. Holder’s tax basis in new ordinary shares received upon exercise of the rights should equal the
subscription price and the U.S. Holder’s tax basis, if any, in the exercised rights. The holding period for the new ordinary shares received will begin on the day the underlying rights are exercised.
Sale or Other Taxable Disposition of the Rights
For U.S. federal income tax purposes, gain or loss realized on a sale or other taxable disposition of rights by the U.S. Holder will be capital gain or loss, and will be long-term capital gain or loss if the holding
period for the rights is more than one year. For these purposes, the holding period for the rights will include the holding period of the existing ordinary shares with respect to which the rights were distributed. The amount of the gain or loss will
equal the difference between the U.S. Holder’s tax basis in the rights disposed of and the U.S. Holder’s amount realized on the disposition. Such gain or loss will generally be U.S. source gain or loss for foreign tax credit purposes.
Expiration of the Rights
If a U.S. Holder allows rights to expire without exercising them, the rights will be deemed to have a zero basis and, therefore, the U.S. Holder will not recognize any loss upon the expiration of the rights. Any tax
basis from existing ordinary shares that was allocated to the lapsed rights will be reallocated back to such existing ordinary shares.
Taxation of the New Ordinary Shares
Taxation of Distributions
Distributions paid on ordinary shares, other than certain pro rata distributions of ordinary shares, or rights to purchase ordinary shares will generally be treated as dividends to the extent paid out of current or
accumulated earnings and profits (as determined under U.S. federal income tax principles). Since we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, U.S. Holders will generally be required to treat
all distributions made with respect to ordinary shares as taxable dividends and include them in income on the date of receipt. Subject to applicable limitations, dividends paid to certain non-corporate U.S. Holders will be taxable at favorable rates
applicable to long-term capital gains (currently 20%). The dividend income will include any amounts withheld by us or our paying agent in respect of Israeli taxes. The dividend will be treated as foreign-source income and will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations under the Code.
Dividends paid in NIS will be included in a U.S. Holder’s income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt of the dividend, regardless of whether the payment is
in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.
Subject to applicable limitations that vary depending upon a U.S. Holder’s particular circumstances, Israeli taxes withheld from dividends at a rate not exceeding the applicable rate provided by the Treaty may be
creditable against the U.S. Holder’s U.S. federal income tax liability. Israeli taxes withheld in excess of the applicable rate allowed by the Treaty will not be eligible for credit against a U.S. Holder’s federal income tax liability. The
limitations on foreign tax credits are calculated separately with respect to specific classes of income. Instead of claiming a credit, a U.S. Holder may, at the U.S. Holder’s election, deduct the otherwise creditable foreign taxes in computing
taxable income for the year, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year. The rules governing
foreign tax credits are complex and U.S. Holders should consult their tax advisors regarding the availability of foreign tax credits and the deductibility of foreign taxes in their particular circumstances.
Sale and Other Disposition of the New Ordinary Shares
Gain or loss realized on the sale or other disposition of the new ordinary shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the new ordinary shares for more than one
year. The amount of gain or loss will equal the difference between the U.S. Holder’s tax basis in the new ordinary shares disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. Such gain or loss will
generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations.
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Passive Foreign Investment Company Rules
We believe that we were not a PFIC for U.S. federal income tax purposes for the taxable year of 2019 and do not expect to be a PFIC in 2020. However, since PFIC status depends upon the composition of our income and
assets and the market value of our assets from time to time, there can be no assurance that we have not been a PFIC in prior taxable years or that we will not be considered a PFIC for any future taxable year. If we were a PFIC for any taxable year
during which a U.S. Holder owned an ordinary share (and under proposed Treasury regulations, a right), certain adverse consequences could apply to the U.S. Holder. Specifically, gain recognized by a U.S. Holder on a sale or other disposition of such
ordinary share (or right) would be allocated ratably over the U.S. Holder’s holding period for the ordinary share (or right). The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be
taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the
resulting tax liability. Further, any distribution in excess of 125% of the average of the annual distributions received by the U.S. Holder on our ordinary shares during the preceding three years or the U.S. Holder’s holding period, whichever is
shorter, would be subject to taxation as described immediately above. In addition, if we were a PFIC for a taxable year in which we pay a dividend (or the prior taxable year), the favorable dividend rates discussed above with respect to dividends
paid to certain non-corporate U.S. Holders would not apply. Certain elections (such as a mark-to-market election) may be available to U.S. Holders and may result in alternative tax treatment. If we were a PFIC for any taxable year in which a U.S.
Holder owned our shares, the U.S. Holder would generally be required to file annual returns with the Internal Revenue Service, or the IRS, on IRS Form 8621.
Transfer Reporting Requirements
A U.S. Holder that subscribes for new ordinary shares may be required to file IRS Form 926 with the IRS if the aggregate subscription price paid by the U.S. Holder, when aggregated with all transfers of cash made by the
U.S. Holder (or any related person) to us within the preceding twelve-month period, exceeds 100,000 U.S. dollars (or its foreign currency equivalent) and certain other conditions are met. U.S. Holders that are required to file Form 926, but fail to
do so, could be subject to substantial penalties. U.S. Holders should consult their tax advisors to determine whether they are subject to any Form 926 filing requirements.
Net Investment Income Surtax
Individuals, trusts and estates that have income exceeding certain thresholds are subject to a 3.8% surtax on their net investment income, which would include dividends on and any gain from the disposition of ordinary
shares.
Information Reporting and Backup Withholding
Payment of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding unless (i) the U.S.
Holder is a corporation or other exempt recipient and certifies its status as such, or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that the U.S. Holder is not subject to
backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required
information is timely furnished to the IRS.
Certain U.S. Holders may be required to report on IRS Form 8983 information relating to their holdings of our securities, subject to certain exceptions (including an exception for securities held in accounts maintained
by U.S. financial institutions). U.S. Holders should consult their tax advisers regarding the application of these rules in the U.S. Holders’ particular circumstances.
| • |
The following summary describes certain material U.S. federal income tax consequences to U.S. Holders of the receipt, exercise and disposition of rights, and of owning and disposing of ordinary shares issued upon the exercise of the
rights (“new ordinary shares”), but it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular investor. This discussion applies only to U.S. Holders that hold our existing ordinary
shares and will hold the rights and the new ordinary shares as capital assets for U.S. federal income tax purposes. The consequences of holding and disposing of new ordinary shares will generally be the same as holding and disposing of
existing ordinary shares. When it is not necessary to distinguish between new and existing ordinary shares, this summary will refer to “ordinary shares”. In addition, this summary does not describe all of the tax consequences that may be
relevant in light of the U.S. Holder’s particular circumstances, including alternative minimum tax consequences and tax consequences applicable to U.S. Holders subject to special rules, such as:
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53
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certain financial institutions;
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dealers or traders in securities that use a mark-to-market method of accounting;
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persons holding rights or ordinary shares as part of a hedge, straddle, conversion transaction or integrated transaction;
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persons whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar;
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tax-exempt entities, “individual retirement accounts” or “Roth IRAs”;
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entities classified as partnerships for U.S. federal income tax purposes;
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persons who own or are deemed to own 10% or more of our voting shares; or
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persons holding, rights or ordinary shares in connection with a trade or business conducted outside the United States.
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If a partnership holds the existing ordinary shares, rights or new ordinary shares, the U.S. federal income tax treatment of a partner will generally depend upon the status of the partner and the tax treatment of the
partnership. Partnerships holding rights or ordinary shares and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences to them of the receipt, exercise and disposition of the rights
and of owning and disposing of ordinary shares. This summary is based upon the tax laws of the United States including the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions, final, temporary and
proposed Treasury regulations, and the income tax treaty between Israel and the United States (the “Treaty”), all as of the date hereof, and any of which could be subject to change, possibly with retroactive effect.
A “U.S. Holder” is a person that is eligible for the benefits of the Treaty and is, for U.S. federal income tax purposes, a beneficial owner of existing ordinary shares that is one of the following:
| • |
a citizen or individual resident of the United States;
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| • |
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust if (i) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has validly
elected to be treated as a U.S. person for U.S. federal income tax purposes.
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U.S. Holders are urged to consult their tax advisors as to the U.S. federal, state, local and non-U.S. tax consequences of the receipt of rights, the exercise or disposition of rights and of owning and disposing of new
ordinary shares in their particular circumstances.
Except as described below, this discussion assumes that we are not, and will not become, a PFIC for any taxable year.
Taxation of the Rights
Receipt of the Rights
The receipt of the rights by a U.S. Holder of existing ordinary shares pursuant to the rights offering will be treated as a non-taxable distribution with respect to the existing ordinary shares for U.S. federal income
tax purposes.
If on the date of distribution, the fair market value of the rights is less than 15% of the fair market value of the existing ordinary shares with respect to which the rights were distributed, the rights will be
allocated a zero basis for U.S. federal income tax purposes, unless the U.S. Holder affirmatively elects to allocate basis in proportion to the relative fair market values of its existing ordinary shares and the rights received (determined on the
date of distribution). This irrevocable election must be made in a U.S. Holder’s U.S. federal income tax return for the taxable year in which the rights are received, and will apply to all rights received by the U.S. Holder pursuant to the rights
offering.
54
If on the date of distribution the fair market value of the rights is at least 15% of the fair market value of the existing ordinary shares with respect to which the rights are distributed, the basis of the U.S. Holder’s
ordinary shares must be allocated between its existing ordinary shares and the rights in proportion to their fair market values (determined on the date of distribution).
Exercise of the Rights
The exercise of a right by a U.S. Holder should not be a taxable transaction for U.S. federal income tax purposes. The U.S. Holder’s tax basis in new ordinary shares received upon exercise of the rights should equal the
subscription price and the U.S. Holder’s tax basis, if any, in the exercised rights. The holding period for the new ordinary shares received will begin on the day the underlying rights are exercised.
Sale or Other Taxable Disposition of the Rights
For U.S. federal income tax purposes, gain or loss realized on a sale or other taxable disposition of rights by the U.S. Holder will be capital gain or loss, and will be long-term capital gain or loss if the holding
period for the rights is more than one year. For these purposes, the holding period for the rights will include the holding period of the existing ordinary shares with respect to which the rights were distributed. The amount of the gain or loss will
equal the difference between the U.S. Holder’s tax basis in the rights disposed of and the U.S. Holder’s amount realized on the disposition. Such gain or loss will generally be U.S. source gain or loss for foreign tax credit purposes.
Expiration of the Rights
If a U.S. Holder allows rights to expire without exercising them, the rights will be deemed to have a zero basis and, therefore, the U.S. Holder will not recognize any loss upon the expiration of the rights. Any tax
basis from existing ordinary shares that was allocated to the lapsed rights will be reallocated back to such existing ordinary shares.
Taxation of the New Ordinary Shares
Taxation of Distributions
Distributions paid on ordinary shares, other than certain pro rata distributions of ordinary shares, or rights to purchase ordinary shares will generally be treated as dividends to the extent paid out of current or
accumulated earnings and profits (as determined under U.S. federal income tax principles). Since we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, U.S. Holders will generally be required to treat
all distributions made with respect to ordinary shares as taxable dividends and include them in income on the date of receipt. Subject to applicable limitations, dividends paid to certain non-corporate U.S. Holders will be taxable at favorable rates
applicable to long-term capital gains (currently 20%). The dividend income will include any amounts withheld by us or our paying agent in respect of Israeli taxes. The dividend will be treated as foreign-source income and will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations under the Code.
Dividends paid in NIS will be included in a U.S. Holder’s income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt of the dividend, regardless of whether the payment is
in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.
Subject to applicable limitations that vary depending upon a U.S. Holder’s particular circumstances, Israeli taxes withheld from dividends at a rate not exceeding the applicable rate provided by the Treaty may be
creditable against the U.S. Holder’s U.S. federal income tax liability. Israeli taxes withheld in excess of the applicable rate allowed by the Treaty will not be eligible for credit against a U.S. Holder’s federal income tax liability. The
limitations on foreign tax credits are calculated separately with respect to specific classes of income. Instead of claiming a credit, a U.S. Holder may, at the U.S. Holder’s election, deduct the otherwise creditable foreign taxes in computing
taxable income for the year, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year. The rules governing
foreign tax credits are complex and U.S. Holders should consult their tax advisors regarding the availability of foreign tax credits and the deductibility of foreign taxes in their particular circumstances.
Sale and Other Disposition of the New Ordinary Shares
Gain or loss realized on the sale or other disposition of the new ordinary shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the new ordinary shares for more than one
year. The amount of gain or loss will equal the difference between the U.S. Holder’s tax basis in the new ordinary shares disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. Such gain or loss will
generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations.
55
Passive Foreign Investment Company Rules
We believe that we were not a PFIC for U.S. federal income tax purposes for the 2019 taxable year and do not expect to be a PFIC in 2020. However, since PFIC status depends upon the composition of our income and assets
and the market value of our assets from time to time, there can be no assurance that we have not been a PFIC in prior taxable years or that we will not be considered a PFIC for any future taxable year. If we were a PFIC for any taxable year during
which a U.S. Holder owned an ordinary share (and under proposed Treasury regulations, a right), certain adverse consequences could apply to the U.S. Holder. Specifically, gain recognized by a U.S. Holder on a sale or other disposition of such
ordinary share (or right) would be allocated ratably over the U.S. Holder’s holding period for the ordinary share (or right). The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be
taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the
resulting tax liability. Further, any distribution in excess of 125% of the average of the annual distributions received by the U.S. Holder on our ordinary shares during the preceding three years or the U.S. Holder’s holding period, whichever is
shorter, would be subject to taxation as described immediately above. In addition, if we were a PFIC for a taxable year in which we pay a dividend (or the prior taxable year), the favorable dividend rates discussed above with respect to dividends
paid to certain non-corporate U.S. Holders would not apply. Certain elections (such as a mark-to-market election) may be available to U.S. Holders and may result in alternative tax treatment. If we were a PFIC for any taxable year in which a U.S.
Holder owned our shares, the U.S. Holder would generally be required to file annual returns with the Internal Revenue Service, or the IRS, on IRS Form 8621.
Transfer Reporting Requirements
A U.S. Holder that subscribes for new ordinary shares may be required to file IRS Form 926 with the IRS if the aggregate subscription price paid by the U.S. Holder, when aggregated with all transfers of cash made by the
U.S. Holder (or any related person) to us within the preceding twelve-month period, exceeds 100,000 U.S. dollars (or its foreign currency equivalent) and certain other conditions are met. U.S. Holders that are required to file Form 926, but fail to
do so, could be subject to substantial penalties. U.S. Holders should consult their tax advisors to determine whether they are subject to any Form 926 filing requirements.
Net Investment Income Surtax
Individuals, trusts and estates that have income exceeding certain thresholds are subject to a 3.8% surtax on their net investment income, which would include dividends on and any gain from the
disposition of ordinary shares.
Information Reporting and Backup Withholding
Payment of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding unless (i) the U.S.
Holder is a corporation or other exempt recipient and certifies its status as such, or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that the U.S. Holder is not subject to
backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required
information is timely furnished to the IRS.
Certain U.S. Holders may be required to report on IRS Form 8983 information relating to their holdings of our securities, subject to certain exceptions (including an exception for securities held in accounts maintained
by U.S. financial institutions). U.S. Holders should consult their tax advisers regarding the application of these rules in the U.S. Holders’ particular circumstances.
56
The following are the material Israeli income tax consequences to the holders described below of the receipt and exercise and disposition of rights, and of owning and disposing of ordinary shares
issued upon the exercise of the rights (“new ordinary shares”), but it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular person’s investment decision. This discussion applies only to
holders that hold our existing ordinary shares and will hold the rights and the new ordinary shares as capital assets for Israeli income tax purposes. In addition, it does not describe all of the tax consequences that may be relevant in light of the
holder’s particular circumstances. To the extent that the discussion is based on new tax legislation that has not been subject to judicial or administrative interpretation, we cannot assure you that the tax authorities will accept the views
expressed in the discussion in question. Please see also the Israeli Tax Consideration in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019 (“Form 20-F”).
The Distribution and Exercise of the Subscription Rights
Since the rights are issued to all the holders of our shares, on a pro rata basis, we do not believe that the receipt and exercise of your subscription rights will be taxable in Israel; however, no
tax ruling from the Israeli Income Tax Authority will be sought for the rights offering.
General Corporate Tax Structure
Israeli companies are generally subject to income tax on their taxable income. The regular corporate tax rate in Israel for 2019 and 2020 is 23%. However, the effective rate of tax payable by a
company which is qualified under Israeli law as an “Industrial Company” and/or which derives income from an “approved enterprise,” “benefited enterprise,” or “preferred enterprise” may be lower. For further information regarding our (or our
enterprise’s) eligibility, or potential eligibility, to the status of “Industrial Company.” “approved enterprise,” “benefited enterprise,” or “preferred enterprise.” and the respective Israeli tax benefits, see Item 10E of Form 20-F: “Israeli Tax
Considerations.”
Capital Gains Tax
General
Israeli law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel for Israeli tax purposes, and on the sale of capital assets (or rights to capital assets)
located in Israel, including shares of Israeli companies by non-residents of Israel and disposition of subscription rights, unless a specific exemption is available under Israeli domestic law or unless a tax treaty between Israel and the
shareholder’s country of residence provides otherwise. The law distinguishes between real gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain that is equivalent to the increase of the relevant asset’s
purchase price which is attributable to the increase in the Israeli consumer price index, or a foreign currency exchange rate, between the date of purchase and the date of sale. The real gain is the excess of the total capital gain over the
inflationary surplus. The inflationary surplus accumulated from and after December 31, 1993 is exempt from any capital gains tax in Israel, while the real gain is taxed at the applicable rate discussed below.
Israeli Residents
Subject to certain provisions relating to the linear calculation method applicable to the determination of the capital gain tax pertaining to capital gains derived from the sale of assets, purchased
prior to January 1, 2003, or prior to January 1, 2012 (with respect to sale of assets or securities not listed in a stock exchange prior to 1.1.2012), the tax rate on capital gains, including capital gain from the sale of securities listed on a stock
exchange, is generally, for individuals, 25%, or 30% for substantial individual shareholders (that are, generally, holders of 10% or more of the shares of the company on the date of the sale of the shares or at any date during the 12 months
period preceding such sale). The tax rate for capital gains generated by corporations is 23% (in 2019 and 2020).
If the shares are sold by Israeli residents, then: (i) for the period ending December 31, 2002 their sale would generally be tax exempt so long as, (1) the shares were listed on a stock exchange,
such as, in our case, the NASDAQ Capital Market, which was recognized by the Israeli Ministry of Finance on December 31, 2002, and (2) we qualified as an Industrial Company or Industrial Holding Company under the law for Industry Encouragement Law,
at the relevant times as provided by the Income Tax Ordinance [New Version], 5721-1961, which we believe we so qualified; and (ii) for the period commencing January 1, 2003, the sale of the shares would be, generally, subject to a 25% tax if sold by
non-substantial individual shareholders and 30% tax if sold by a substantial individual shareholders. The tax rate for corporate shareholders for the sale of the shares is 23% (from 2018 onwards).We cannot provide any assurance that the Israeli tax
authorities will agree with the determination that we qualified as an Industrial Company at the relevant times.
57
Dealers in securities in Israel are taxed at regular tax rates applicable to business income.
Non-Israeli Residents
Non-Israeli residents are generally exempt from Israeli capital gains tax on any gains derived from the sale of securities of Israeli companies publicly traded on the Tel Aviv Stock Exchange or on a
recognized stock exchange outside of Israel, such as NASDAQ, provided however that such shareholders acquired their securities following an initial public offering and that the gains did not derive from a permanent establishment of such shareholders
in Israel. However, non-Israeli corporations will not be entitled to such exemption if Israeli residents (i) have a controlling interest of more than 25% in such non-Israeli corporation, or (ii) are the beneficiaries or are entitled to 25% or more
of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In certain instances where our shareholders will be liable for Israeli tax on the sale of their securities, the payment of the consideration may be subject to the withholding of Israeli tax at the
source.
Notwithstanding the above, pursuant to the Convention between the Government of the United States of America and the Government of Israel with respect to Taxes on Income, as amended, or the
U.S.-Israel Tax Treaty, the sale, exchange or disposition of ordinary shares by a person who qualifies as a resident of the United States within the meaning of the U.S.-Israel Tax Treaty and who is entitled to claim the benefits afforded to such
person by the U.S.-Israel Tax Treaty generally will not be subject to Israeli capital gains tax. However, this exemption will not apply, if, among other circumstances, the Treaty U.S. Resident holds, directly or indirectly, shares representing 10%
or more of our voting power during any part of the 12-month period preceding such sale, exchange or disposition, subject to particular conditions, or if the capital gains from such sale, exchange or disposition can be allocated to a permanent
establishment in Israel. In such event, the Treaty U.S. Resident would be subject to Israeli tax, to the extent applicable under Israeli domestic law; In the event that the Treaty U.S. Resident is not eligible for Israeli tax exemption under the
U.S.-Israel Tax Treaty (or under Israeli domestic law), such Treaty U.S. Resident may be permitted to claim, under the U.S.-Israel Tax Treaty, a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange
or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate to U.S. state or local taxes.
Dealers in securities may be taxed in Israel at regular tax rates applicable to business income in Israel.
Taxation of Dividend Distributions
Israeli Residents
Dividends other than bonus shares (stock dividends) paid to Israeli individual shareholders by an Israeli company are generally subject to Israeli tax at a rate of 25%, or 30% for substantial individual
shareholders. However, the tax rate for dividends distributed from profits generated from a “preferred enterprise” would generally be 20%, and the tax rate which applies to “approved enterprise.” or to our “benefited enterprise” is generally 15%, as
provided in Item 10E of Form 20-F: “Israeli Tax Consideration.”
Dividends (other than bonus shares (stock dividends)) paid to an Israeli company by another Israeli company are not subject to tax, unless received out of income derived from a benefited enterprise,
or an approved enterprise, or stems from income derived or accrued outside of Israel.
58
Non-Israeli Residents
Non-residents of Israel are subject to income tax on income accrued or derived from sources in Israel. Israeli source of income includes passive income such as dividends. Distributions of dividends
other than bonus shares (stock rights distributions), are subject to income tax at the rate of 25% or 30% (for individuals), or 23% (for corporations in 2019 and 2020) pursuant to Israeli domestic law. However, pursuant to Israeli tax regulations,
the withholding tax rate with respect to the above dividends is generally 25%.
Notwithstanding the above, dividends generated by an approved enterprise or by our benefited enterprise are, generally, taxed at the rate of 15%, and dividends distributed out of income which is
attributed to a preferred enterprise are generally subject to tax at the rate of 20% (however, upon distribution of a dividend attributed to income generated by a preferred enterprise in Israel, to an Israeli company, no withholding tax should
apply). In addition, a reduced tax rate may apply, if provided in a treaty between Israel and the shareholder’s country of residence.
Pursuant to the Convention between the State of Israel and the Government of the United States relating to relief from double taxation, the maximum tax rate on dividends paid to a holder of ordinary
shares who is a Treaty U.S. Resident will be 25%. However, dividends which are not generated by an approved enterprise will generally be subject to Israeli tax at a rate of 12.5% if the shareholder is a U.S. corporation and holds at least 10% of our
issued voting power during the part of the tax year that precedes the date of payment of the dividend and during all of its prior tax year, and provided that not more than 25% of our gross income (during the tax year preceding the year in which the
dividend is paid) consists of interest or dividends, other than, among others, dividends or interest received from subsidiary corporations that 50% or more of the outstanding shares of the voting stock of which is owned by us on the date of payment
of the dividend. Notwithstanding the foregoing, dividends distributed from income attributed to an approved enterprise are generally subject to a withholding tax rate of 15% for such a U.S. corporation shareholder (which meets both conditions set
forth above).
Since we have carried forward losses, we have not needed to utilize such benefits.
Excess Tax
In addition to the tax rates set forth above in connection with income generated by individual holders of our shares, or rights, an additional tax at a rate of 3% may be imposed if the taxable
income of such individual in Israel exceeds a certain amount.
59
We have agreed to pay all of the expenses incidental to the rights offering, including, without limitation, all registration and filing fees, fees and expenses of our counsel and accountants and transfer agent and
subscription agent fees. We estimate that the expenses for the rights offering will be approximately $[___]. The following table sets forth the various expenses expected to be incurred by us in connection with the rights offering. All amounts shown
are estimates, except the SEC registration fee.
|
Expenses
|
Amount
|
|||
|
SEC registration fee
|
655
|
|||
|
Printing, EDGAR and mailing fees
|
8,000
|
|||
|
Legal fees and expenses
|
30,000
|
|||
|
Accounting fees and expenses
|
5,000
|
|||
|
Subscription agent fees and expenses
|
17,000
|
|||
|
Information agent fees and expenses
|
9,000
|
|||
|
Miscellaneous costs
|
40,000
|
|||
|
Total
|
$
|
109,655
|
||
Non-residents of Israel who purchase our ordinary shares may freely convert all amounts received in Israeli currency in respect of such ordinary shares, whether as a dividend, liquidation distribution or as proceeds from
the sale of the ordinary shares, into freely-reparable non-Israeli currencies at the rate of exchange prevailing at the time of conversion (provided in each case that the applicable Israeli income tax, if any, is paid or withheld).
Until May 1998, Israel imposed extensive restrictions on transactions in foreign currency. These restrictions were largely lifted in May 1998. Since January 1, 2003, all exchange control restrictions have been
eliminated (although there are still reporting requirements for foreign currency transactions). Legislation remains in effect, however, pursuant to which currency controls can be imposed by administrative action at any time.
The State of Israel does not restrict in any way the ownership or voting of our ordinary shares by non-residents of Israel, except with respect to subjects of countries that are in a state of war with Israel.
The validity of the ordinary shares being offered by this prospectus and other legal matters concerning this offering relating to Israeli law will be passed upon for us by Amit, Pollak, Matalon & Co., Tel Aviv,
Israel. Certain legal matters in connection with this offering relating to U.S. law will be passed upon for us by Carter Ledyard & Milburn LLP, New York, New York.
60
The consolidated financial statements incorporated in this prospectus by reference from Eltek’s December 31, 2019 Annual Report on Form 20-F have been audited by Kost, Forer, Gabbay & Kasierer, an independent
registered public accounting firm and a member of Ernst & Young Global, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated by reference in
reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
Except as otherwise described in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019, in our Reports on Form 6-K filed or submitted under the Exchange Act and incorporated by reference herein and
as disclosed in this prospectus, no reportable material changes have occurred since December 31, 2019.
We are subject to the information requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which means that we are required to file annual and periodic reports and other information with
the SEC. The SEC maintains an Internet website at http://www.sec.gov where you can access reports, proxy, information and registration statements, and other information regarding us that we file electronically with the SEC. In addition, we make
available, without charge, through our website, http://www.nisteceltek.com/, electronic copies of various filings with the SEC, including copies of our Annual Report on Form 20-F. The information on our website is not and should not be
considered part of this prospectus and is not incorporated into this prospectus by reference. The SEC allows us to “incorporate by reference” the information we file with the SEC, which means that we can disclose important information to you by
referring to those documents filed separately with the SEC. The information we incorporate by reference is an important part of this prospectus. We are incorporating by reference in this prospectus the documents listed below, all of which we have
previously filed with the SEC.
| • |
Our Annual Report on Form 20-F for the fiscal year ended December 31, 2019;
|
| • |
Our Reports on Form 6-K furnished to the SEC on April 27, 2020 (two reports), May 21, 2020, May 26, 2020, June 2, 2020, August 5, 2020, August 12, 2020, August 13, 2020 and September 23, 2020; and
|
| • |
The description of our ordinary shares contained in our Annual Report on Form 20-F for the year ended December 31, 2019.
|
Any statement contained in a document that is incorporated by reference into this prospectus will be modified or superseded for all purposes to the extent that a statement contained in this prospectus modifies or is
contrary to that previous statement. Any statement so modified or superseded will not be deemed a part of this prospectus except as so modified or superseded.
We will provide a copy of any or all of the reports or filings that we have incorporated in this prospectus at no cost, by writing or telephoning us at the following address or telephone number:
Eltek Ltd.
20 Ben Zion Gelis Street,
Sgoola Industrial Zone,
Petach Tikva 4927920, Israel
Tel: +972-3-9395025
Fax: +972-3- 9342584
Attention: Alon Mualem, CFO
61
We are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and any Israeli experts named in this registration statement, most of whom reside outside of the
United States, may be difficult to obtain within the United States. Furthermore, because a majority of our assets and most of our directors, officers and such Israeli experts are located outside of the United States, any judgment obtained in the
United States against us or any of them may be difficult to collect within the United States.
We have irrevocably appointed Eltek USA Inc. as our agent to receive service of process in any action against us in any United States federal or state court arising out of this offering or any purchase or sale of
securities in connection with this offering.
We have been informed by our legal counsel in Israel, Amit, Pollak, Matalon & Co., that it may be difficult to assert U.S. securities laws claims in original actions instituted in Israel. Israeli courts may refuse to
hear a claim based on an alleged violation of U.S. securities laws on the basis that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli
law and not U.S. law is applicable to the claim. There is little binding case law in Israel addressing these matters. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact which can be a time-consuming and
costly process. Certain matters of procedure will also be governed by Israeli law.
Subject to specified time limitations and legal procedures, under the rules of private international law currently prevailing in Israel, Israeli courts may enforce a U.S. judgment in a civil matter which, subject to
certain exceptions, is non-appealable, including a judgment based upon the civil liability provisions of the Securities Act or the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that, among other
things, the following key conditions are met:
| • |
the judgment is obtained after due process before a court of competent jurisdiction, according to the laws of the state in which the judgment is given and the judgment is enforceable according to the law of the foreign state in which the
relief was granted;
|
| • |
the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel; and
|
| • |
the substance of the judgment and its enforcement is not contrary to the law, public policy, security or sovereignty of the State of Israel.
|
Even if the above conditions are met, an Israeli court will not enforce a U.S. judgment in a civil matter if:
| • |
the judgment was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases);
|
| • |
the judgment was obtained by fraud;
|
| • |
the opportunity given to the defendant to bring its arguments and evidence before the court was not reasonable in the opinion of the Israeli court;
|
| • |
the judgment was rendered by a court not competent to render it according to the laws of private international law as they apply in Israel;
|
| • |
the judgment is contradictory to another judgment that was given in the same matter between the same parties and that is still valid; or
|
| • |
at the time the action was brought in the foreign court, a lawsuit in the same matter and between the same parties was pending before a court or tribunal in Israel.
|
If a foreign judgment is enforced by an Israeli court, it generally will be payable in NIS, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an
action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in NIS at the rate of exchange in force on the date of the judgment, but the judgment debtor may make
payment in non-Israeli currency. Pending collection, the amount of the judgment of an Israeli court stated in NIS ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations
prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.
62
SUBSCRIPTION RIGHTS TO PURCHASE UP TO _________ ORDINARY SHARES
____________________________
PROSPECTUS
____________________________
You should rely only on the information incorporated by reference or provided in this prospectus. We have not authorized anyone to provide you with different information. We are not making any
offer to sell or buy any of the securities in any state where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date that appears below.
, 2020
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 6. Indemnification of Directors and Officers
Exculpation of Office Holders
The Israeli Companies Law provides that an Israeli company cannot exculpate an office 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 office holder 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.
Our articles of association allow us to exculpate any office holder from his or her liability to us for breach of duty of care, to the maximum extent permitted by law, before or after the occurrence giving rise to such
liability. We provided an exemption letter to each of our directors and officers, and agreed to provide the same to our future office holders.
Insurance of Office Holders
The Israeli Companies Law provides that a company may, if permitted by its articles of association, enter into a contract to insure office holders in respect of liabilities incurred by the office holder with respect to
an act or omission performed in his or her capacity as an office holder, as a result of: (i) a breach of the office holder’s duty of care to the company or to another person; (ii) a breach of the office holder’s duty of loyalty to the company,
provided that the office holder acted in good faith and had reasonable grounds to assume that his or her act would not prejudice the company’s interests; and (iii) a monetary liability imposed upon the office holder in favor of another person.
II - 1
Our articles of association provide that, subject to any restrictions imposed by applicable law, we may procure, and/or undertake to procure, insurance covering any past or present or future office holder against any
liability which he or she may incur in such capacity, including insurance covering us for indemnifying such office holder, to the maximum extent permitted by law.
Without derogating from the above, we may enter into a contract to insure the liability of an office holder for an obligation imposed on such office holder in consequence of an act or omission done in such office
holder’s capacity as an office holder, in the following case: (i) expenses, including reasonable litigation expenses and legal fees, incurred by the office holder as a result of a proceeding instituted against such office holder in relation to (A)
infringements that may result in imposition of financial sanction pursuant to the provisions of Chapter H'3 under the Israeli Securities Law, 5728-1968 (as amended), or the “Israeli Securities Law.” or (B) administrative infringements pursuant to the
provisions of Chapter H'4 under the Israeli Securities Law or (C) infringements pursuant to the provisions of Chapter I'1 under the Israeli Securities Law; and (ii) payments made to the injured parties of such infringement under Section 52ND(a)(1)(a)
of the Israeli Securities Law.
Indemnification of Office Holders
The Israeli Companies Law provides that a company may, if permitted by its articles of association, indemnify an office holder for liabilities or expenses imposed on him or her, or incurred by him or her concerning acts
or omissions performed by the office holder in such capacity for: (i) a monetary liability imposed on the office holder in favor of another person by any judgment, including a settlement or an arbitrator’s award approved by a court; (ii) reasonable
litigation expenses, including attorney’s fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding concluded without the
filing of an indictment against the office holder or the imposition of any monetary liability in lieu of criminal proceedings, or concluded without an indictment against the office holder but with the imposition of a monetary liability on the office
holder in lieu of criminal proceedings with respect to a criminal offense that does not require proof of criminal intent; and (iii) reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or which were imposed on him
or her by a court, in an action instituted by the company or on the company’s behalf, or by another person, against the office holder, or in a criminal charge from which the office holder was acquitted, or in a criminal proceeding in which the office
holder was convicted of a criminal offense which does not require proof of criminal intent.
The Israeli Companies Law provides that a company’s articles of association may permit the company to indemnify an office holder following a determination to this effect made by the company after the occurrence of the
event in respect of which the office holder will be indemnified. It also provides that a company’s articles of association may permit the company to undertake in advance to indemnify an office holder, except that with respect to a monetary liability
imposed on the office holder by any judgment, settlement or court-approved arbitration award, the undertaking must be limited to types of events which the company’s board of directors deems foreseeable considering the company’s actual operations at
the time of the undertaking, and to an amount or standard that the board of directors has determined as reasonable under the circumstances.
Our articles of association provide that we may indemnify an office holder retroactively for certain obligations or expenses imposed on such office holder in consequence of an act or omission done in such office holder’s
capacity as an officer in our company. These obligations and expenses include:
| • |
a monetary obligation imposed on the office holder in favor of another person pursuant to a judgment, including a judgment given in settlement or an arbitrator's award that has been approved by a court;
|
| • |
reasonable litigation expenses, including advocates’ professional fees, incurred by the office holder pursuant to an investigation or a proceeding commenced against the office holder by a competent authority and that was terminated without
an indictment and without having a monetary charge imposed on the office holder in exchange for a criminal procedure (as such terms are defined in the Israeli Companies Law), or that was terminated without an indictment but with a monetary
charge imposed on the office holder in exchange for a criminal procedure in a crime that does not require proof of criminal intent or in connection with a financial sanction;
|
| • |
reasonable litigation expenses, including advocates’ professional fees, incurred by the office holder or which the office holder is ordered to pay by a court, in proceedings filed against the office holder by the company or on its behalf
or by another person, or in a criminal indictment in which the office holder is acquitted, or in a criminal indictment in which the office holder is convicted of an offence that does not require proof of criminal intent;
|
| • |
expenses, including reasonable litigation expenses and legal fees, incurred by an office holder as a result of a proceeding instituted against such office holder in relation to (A) infringements that may result in imposition of financial
sanction pursuant to the provisions of Chapter H'3 under the Israeli Securities Law or (B) administrative infringements pursuant to the provisions of Chapter H'4 under the Israeli Securities Law or (C) infringements pursuant to the provisions
of Chapter I'1 under the Israeli Securities Law; and
|
| • |
payments to an injured party of infringement under Section 52ND(a)(1)(a) of the Israeli Securities Law.
|
Our articles of association also provide that we may undertake to indemnify in advance an office holder, in accordance with the conditions set under applicable law, in respect of the obligations or expenses specified in
(i)-(v) above, provided that such undertaking is limited to types of events which in the board of directors’ opinion may be anticipated, in light of our company’s activities, at the time of granting the indemnity undertaking, and to an amount or
criteria which the board of directors determines is reasonable in the circumstances of the case, both of which are to be specified in the indemnification undertaking.
According to our compensation policy, the total amount of indemnification that our company undertakes towards all persons whom it has resolved to indemnify, jointly and in the aggregate, shall not exceed an amount
equal (i) 25% of the net equity of our company according to the audited or reviewed financial statement known at the time the request for indemnification was submitted; or (ii) US$3,000,000, whichever is greater.
II - 2
On December 5, 2019, our shareholders approved an updated indemnification agreement to be entered into with our directors and officers.
Limitations on Exculpation, Insurance and Indemnification
The Israeli Companies Law provides that neither a provision of the articles of association permitting the company to enter into a contract to insure the liability of an office holder, nor a provision in the articles of
association or a resolution of the board of directors permitting the indemnification of an office holder, nor a provision in the articles of association exempting an office holder from duty to the company shall be valid, where such insurance,
indemnification or exemption relates to any of the following: (i) a breach by the office holder of his duty of loyalty, except with respect to insurance coverage or indemnification if the office holder acted in good faith and had reasonable grounds
to assume that the act would not prejudice the company; (ii) a breach by the office holder of his duty of care if such breach was committed intentionally or recklessly, unless the breach was committed only negligently; (iii) any act or omission
committed with intent to derive an unlawful personal gain; and (iv) any fine or forfeiture imposed on the office holder.
Under the Israeli Companies Law, exculpation of, procurement of insurance coverage for, and an undertaking to indemnify or indemnification of, an office holder (other than the chief executive officer) must be approved by
the company’s compensation committee and board of directors and, if such office holder is a director, also by the company’s shareholders. Exculpation of, procurement of insurance coverage for, and an undertaking to indemnify or indemnification of,
the chief executive officer must be approved by the company’s compensation committee, board of directors and by a special majority of the shareholders.
We have agreed to indemnify our office holders for certain liabilities and expenses that may be imposed on them due to acts performed, or failures to act, in their capacity as office holders, including financial
liabilities imposed by judgments or settlements in favor of third parties, and reasonable litigation expenses imposed by a court in relation to criminal charges from which the indemnitee was acquitted or criminal proceedings in which the indemnitee
was convicted of an offense that does not require proof of criminal intent, all subject to Israeli law and certain limitations in the agreements. The aggregate amount we may pay our office holders pursuant to our indemnification undertaking may not
exceed, jointly and in the aggregate, $2 million but in any event not more than 25% of our company’s net equity. We currently maintain directors and officers liability insurance with a per claim and aggregate coverage limit of $8 million. Under our
current directors and officers liability insurance policy, losses will be paid in accordance with the following order of priority: first, on behalf of officers and directors, for all loss that they will be obligated to pay as a result of a claim made
against them; thereafter, on our behalf, for all loss that an officer or director will be obligated to pay as a result of a claim made against them, to the extent that we are required or permitted by law to indemnify our officers and directors; and
thereafter, on our behalf, for all loss that we will be obligated to pay as a result of a securities claim made against us.
Item 7. Recent Sales of Unregistered Securities
During the preceding three years prior to the date of this prospectus, we have not offered and sold securities without registration under the Securities Act of 1933, as amended, or the Securities Act.
II - 3
Item 8. Exhibits and Financial Statement Schedules
Index to Exhibits
|
(1)
|
Filed as Exhibit 1.1 to our registration statement on Form F-1, registration number 333-229740, as amended, and incorporated herein by reference.
|
|
(2)
|
Included in Exhibit 99.1 to our Report of Foreign Issuer on Form 6-K filed on September 12, 2013 and incorporated herein by reference.
|
|
(3)
|
Filed as Exhibit 2.1 to our registration statement on Form F-1, registration number 333-229740, as amended, and incorporated herein by reference.
|
Item 9. Undertakings.
The undersigned Registrant hereby undertakes as follows:
| (1) |
To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
|
| i. |
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the “Securities Act”);
|
| ii. |
To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
|
| iii. |
To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in this Registration Statement.
|
Provided, however, that paragraphs (i), (ii) and (iii) above do not apply if the registration statement is on Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement or is contained
in a form of prospectus filed pursuant to Rule 424(b) that is part of the Registration Statement.
II - 4
| (2) |
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
|
| (3) |
To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.
|
| (4) |
To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Securities Act need not be furnished, provided that the Registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this
paragraph and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form
F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or Rule 3-19 of Regulation S-K if such financial statements and information are contained in periodic
reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3.
|
| (5) |
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed
to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or
made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
|
| (6) |
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the
undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
| i. |
Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;
|
| ii. |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned registrant;
|
| iii. |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned registrant; and
|
| iv. |
Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
|
| (7) |
Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers and controlling persons of the Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
|
II - 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F‑1 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Petach Tikva, Israel on this 14th day of October, 2020.
|
ELTEK LTD.
|
|||
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By:
|
/s/ Eli Yaffe
|
||
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Name: Eli Yaffe
|
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Title: Chief Executive Officer
|
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KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below hereby constitutes and appoints Eli Yaffe and Alon Mualem, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power to act separately and full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement and all additional registration statements pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them or his or her or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.
II - 6
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons on October 14, 2020 in the capacities indicated:
|
Signatures
|
Title
|
|
|
/s/ Eli Yaffe
|
Chief Executive Officer
(Principal Executive Officer) |
|
|
Eli Yaffe
|
||
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/s/ Alon Mualem
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
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Alon Mualem
|
||
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/s/ Yitzhak Nissan
|
Chairman of the Board
|
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Yitzhak Nissan
|
||
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/s/ Mordechai Marmorstein
|
Director
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Mordechai Marmorstein
|
||
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/s/ David Rubner
|
Director
|
|
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David Rubner
|
||
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/s/ Erez Meltzer
|
Director
|
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Erez Meltzer
|
||
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/s/ Gad Dovev
|
External Director
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Gad Dovev
|
||
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/s/ Ilana Lurie
|
External Director
|
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Ilana Lurie
|
|
ELTEK USA, INC.
|
Authorized Representative in the United States
|
||
|
By:
|
/s/ Eli Yaffe
|
||
|
Name: Eli Yaffe
|
|||
|
Title: Authorized Signatory
|
|||
II - 7
Exhibit 4.1
| RIGHTS CERTIFICATE #: ____ |
|
NUMBER OF RIGHTS |
||
|
|
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE COMPANY'S PROSPECTUS
DATED [ ], 2020 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN BY REFERENCE. COPIES OF
THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM D.F. KING & CO., INC., THE INFORMATION AGENT.
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|
||
|
Eltek Ltd.
Incorporated under the laws of the State of Israel
NON-TRANSFERABLE SUBSCRIPTION RIGHTS CERTIFICATE
Evidencing Non-Transferable Subscription Rights to Purchase Ordinary Shares of Eltek Ltd.
Subscription Price: [$ ______ per Share]
THE SUBSCRIPTION RIGHTS WILL EXPIRE IF NOT EXERCISED ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME,
ON [ ], 2020, UNLESS EXTENDED BY THE COMPANY
|
||||
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|
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|
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REGISTERED
OWNER:
|
|
|
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|
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THIS CERTIFIES THAT the registered owner whose name is inscribed hereon is the owner of the number of non-transferable subscription rights
(“Rights”) set forth above. [Each whole Right entitles the holder thereof to subscribe for and purchase one Ordinary Share, with a par value of NIS 3.00 per share, of Eltek Ltd., an Israeli corporation, at a subscription price of
$[______] per share (the “Basic Subscription Privilege”), pursuant to a rights offering (the “Rights Offering”), on the terms and subject to the conditions set forth in the Prospectus and the “Instructions as to Use of Eltek
Ltd., Subscription Rights Certificates” accompanying this Subscription Rights Certificate. If any Ordinary Shares available for purchase in the Rights Offering are not purchased by other holders of Rights pursuant to the exercise of their
Basic Subscription Privilege (the “Excess Shares”),
|
|
any Rights holder that exercises its Basic Subscription Privilege in full may subscribe for a number of Excess Shares
pursuant to the terms and conditions of the Rights Offering, subject to proration, as described in the Prospectus (the “Over-Subscription Privilege”). The Rights represented by this Subscription Rights Certificate may be exercised by
completing Form 1 and any other appropriate forms on the reverse side hereof and by returning the full payment of the subscription price for Ordinary Share in accordance with the “Instructions as to Use of Eltek Ltd., Subscription Rights
Certificates” that accompany this Subscription Rights Certificate.
|
 |
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|
|
This Subscription Rights Certificate is not valid unless countersigned by the subscription agent
and registered by the registrar.
Witness the seal of Eltek Ltd. and the signatures of its duly authorized officers.
Dated: [ ], 2020
|
||||
|
|
 |
|
 |
|
|
|
Chief Executive Officer
|
|
Chief Financial Officer
|
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|
DELIVERY OPTIONS FOR SUBSCRIPTION RIGHTS CERTIFICATE
Delivery other than in the manner or to the address listed below will not constitute valid delivery.
|
If delivering by mail, hand or overnight courier:
American Stock Transfer & Trust Company, LLC
Operations Center
Attn: Reorganization Department
6201 15th Avenue
Brooklyn, New York 11219
|
PLEASE PRINT ALL
INFORMATION CLEARLY AND LEGIBLY.
|
FORM 1-EXERCISE OF SUBSCRIPTION RIGHTS
To subscribe for shares pursuant to your Basic Subscription Right, please complete lines (a) and (c) and sign under
Form 3 below. To subscribe for shares pursuant to your Over-Subscription Right, please also complete line (b) and sign under Form 3 below. To the extent you subscribe for more Shares than you are entitled under either the Basic
Subscription Right or the Over-Subscription Right, you will be deemed to have elected to purchase the maximum number of shares for which you are entitled to subscribe under the Basic Subscription Right or Over-Subscription Right, as
applicable.
(a) EXERCISE OF BASIC SUBSCRIPTION RIGHT:
I apply for ______________ shares x $ [_____] = $_______________
(no. of new shares) (subscription price) (amount enclosed)
(b) EXERCISE OF OVER-SUBSCRIPTION RIGHT
If you have exercised your Basic Subscription Right in full and wish to subscribe for additional shares for which you are otherwise entitled to subscribe pursuant to your Over-Subscription Right:
I apply for ______________ shares x $ [_____] = $_______________
(no. of new shares) (subscription price) (amount enclosed)
(c) Total Amount of Payment Enclosed = $__________________
METHOD OF PAYMENT (CHECK ONE)
☐ Check or bank draft payable to “American Stock Transfer & Trust Company, LLC as
Subscription Agent.”
☐ Wire transfer of immediately available funds directly to the account maintained by
American Stock Transfer & Trust Company, LLC, as Subscription Agent, for purposes of accepting subscriptions in this Rights Offering at JPMorgan Chase Bank, 55 Water Street, New York, New York 10005, ABA #021000021, Account #
530-354616 American Stock Transfer FBO Eltek Ltd., with reference to the rights holder's name.
|
|
FORM 2-DELIVERY TO DIFFERENT ADDRESS
If you wish for the Ordinary Shares underlying your subscription rights or a certificate representing unexercised subscription rights to be delivered to an address different from that shown on the face of this Subscription
Rights Certificate, please enter the alternate address below, sign under Form 3 and have your signature guaranteed under Form 4.
________________________________________________________________
________________________________________________________________
________________________________________________________________
FORM 3-SIGNATURE
TO SUBSCRIBE: I acknowledge that I have received the Prospectus for this Rights Offering and I hereby irrevocably
subscribe for the number of shares indicated above on the terms and conditions specified in the Prospectus. By signing below I confirm that (1) after giving effect to the exercise of my Rights, I will not beneficially own, as determined
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, more than 14.99% of the Company’s outstanding shares of Ordinary Shares (calculated immediately upon the closing of the rights offering after giving
effect to the Backstop Commitment, as described in the Prospectus) and (2), if I already beneficially own, as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, in excess of 14.99% of the
Company’s outstanding shares of Ordinary Shares I will not, via the exercise of the Rights, increase my proportionate interest in the Company’s Ordinary Shares (with respect to (1) or (2), any such excess shares, the “Excess Shares”).
With respect to any such Excess Shares, I hereby (1) irrevocably appoint and constitute the Company, each of its authorized officers and their designees, and each of them, with full power of substitution, as my proxy and attorney in fact
with full authority to vote and act by written consent with respect to any such Excess Shares on any matter submitted to shareholders for a vote or action by written consent, in the discretion of such proxy, to the same extent I would
have the power to vote or act by written consent and (2) grant the Company a right for 90 days from the closing of the rights offering to repurchase such Excess Shares at the lesser of the $ [_____] per share subscription price and the
closing price of the Company’s Ordinary Shares on the New York Stock Exchange on the trading day immediately prior to the date on which notice is sent to the holder of the Company’s intent to exercise such right, which notice must be sent
prior to the expiration of such 90 day period. I agree to cooperate with the Company and provide to the Company any and all information requested by the Company in connection with the exercise of the rights granted in the previous
sentence.
Signature(s): ______________________________________________________
IMPORTANT: The signature(s) must correspond with the name(s) as printed on the reverse of this Subscription Rights
Certificate in every particular, without alteration or enlargement, or any other change whatsoever.
FORM 4-SIGNATURE GUARANTEE
This form must be completed if you have completed any portion of Form 2.
Signature Guaranteed: _______________________________________________
(Name of Bank or Firm)
By:_______________________________________________________________
(Signature of Officer)
IMPORTANT: The signature(s) should be guaranteed by an eligible guarantor institution (bank, stock broker, savings
& loan association or credit union) with membership in an approved signature guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15.
|
FOR INSTRUCTIONS ON THE USE OF ELTEK LTD. SUBSCRIPTION RIGHTS CERTIFICATES, CONSULT D.F. KING & CO., INC., THE
INFORMATION AGENT, AT (800)-283-2170
Exhibit 4.2
ELTEK LTD.
INSTRUCTIONS AS TO USE OF
SUBSCRIPTION RIGHTS CERTIFICATES
The following instructions relate to a rights offering (the “Rights Offering”) by Eltek Ltd., an Israeli company
(“Eltek”), to the holders of its ordinary shares, as described in Eltek’s prospectus dated [___________], 2020 (the “Prospectus”). Each holder of record of ordinary shares at the close of business on [___________], 2020 (the “Record Date”) will
receive one subscription right (the “Subscription Right”) for every [___________] ordinary shares held by it at the Record Date. Subscription Rights to purchase up to an aggregate of [___________] ordinary shares of Eltek, par value NIS 3.00 per
share (“Ordinary Shares”), are being distributed in connection with the Rights Offering. Each whole Subscription Right entitles the holder, upon payment of $[__] in cash (the “Subscription Price”), to purchase one Ordinary Shares (the “Subscription
Right”). In addition, each Subscription Right also carries the right to subscribe at the Subscription Price for additional unsubscribed Ordinary Shares (to the extent available and subject to proration) (the “Over-Subscription Right”). See “The
Rights Offering” in the Prospectus supplement.
No fractional Subscription Rights or cash in lieu thereof will be issued or paid. Fractional Subscription Rights
will be rounded down to the nearest whole number, with such adjustments as may be determined at the sole discretion of Eltek which are necessary to ensure that it offers [___] Ordinary Shares in the Rights Offering.
The Subscription Rights will expire at 5:00 p.m., New York City Time (midnight, Israeli time), on [___________],
2020 (the “Expiration Date”). Any rights not exercised at or before that time will expire worthless without any payment to the holders of those unexercised rights.
The number of Subscription Rights to which you are entitled is printed on the face of your Subscription
Certificate. You should indicate your wishes with regard to the exercise of your Subscription Rights by completing the appropriate section on the back of your Subscription Certificate and returning the Subscription Certificate to the Subscription
Agent in the envelope provided.
Your Subscription Certificate must be received by the Subscription Agent on or before the
Expiration Date. Payment of the Subscription Price of all Subscription Rights exercised, including Subscription Rights pursuant to the Over-Subscription Right, must be received by the Subscription Agent on or before the Expiration Date. You cannot
revoke your exercise of either your Subscription Right or Over-Subscription Right at any time prior to the expiration of the Rights Offering. In case you hold Subscription Rights through a broker or other nominee, you should verify with your broker
or nominee by when you must deliver your instruction. See also Section 6 below.
| 1. |
Subscription Rights.
|
If you are a record owner of our Ordinary Shares, you may exercise your rights by delivering a signed exercise form
on the back of your Subscription Certificate to American Stock Transfer & Trust Company, LLC, our Subscription Agent, at the address noted below together with payment in full of the subscription price for each right being exercised, by 5:00
p.m., New York City time (midnight, Israel time), on [___________], 2020.
We and American Stock Transfer & Trust Company, LLC, our Subscription Agent, as applicable, may refuse to
accept improperly completed or delivered or unexecuted Subscription Certificates. We and American Stock Transfer & Trust Company, LLC, our Subscription Agent, as applicable, must receive payment in full of the Subscription Price for each Right
being exercised together with the exercise form.
If you are delivering your completed Subscription Certificate and payment for the exercise of your Rights to American Stock Transfer
& Trust Company, LLC, our Subscription Agent, please do so by mail, overnight or hand delivery to one of the following addresses:
Hand delivery, Mail and Overnight Courier
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
Attention: Reorganization Department
Record owners who reside in Israel, and who wish to deliver their completed Subscription Certificates and subscription
payment for the exercise of their rights directly to us, should do so by mail, overnight or hand delivery to the following address:
Eltek Ltd.
20 Ben Zion Gelis Street,
Sgoola Industrial Zone,
Petach Tikva 4927920, Israel
Tel: +972-3-9395025
Fax: +972-3- 9342584
Attention: Alon Mualem, CFO
American Stock Transfer & Trust Company, LLC, our Subscription Agent, will only accept payment in U.S. dollars.
Any payments to American Stock Transfer & Trust Company, LLC, as Subscription Agent, must be made in U.S. dollars by a bank check drawn on a United States or foreign bank or branch and payable to “American Stock Transfer & Trust Company,
LLC, as Subscription Agent,” or by wire transfer of funds to the account maintained by American Stock Transfer & Trust Company, LLC, our Subscription Agent, for this rights offering at JPMorgan Chase Bank, 55 Water Street, New York, New York 10005, ABA #021000021, Account # 530-354616 American Stock
Transfer FBO Eltek Ltd., with reference to the rights holder’s name.
THE METHOD OF DELIVERY OF THE SUBSCRIPTION CERTIFICATE AND THE PAYMENT OF THE SUBSCRIPTION PRICE TO THE
SUBSCRIPTION AGENT IS AT YOUR ELECTION AND RISK. IF YOU SEND YOUR SUBSCRIPTION CERTIFICATE AND PAYMENT BY MAIL, THEN THEY SHOULD BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. A SUFFICIENT NUMBER OF DAYS SHOULD BE
ALLOWED TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT PRIOR TO THE EXPIRATION DATE.
2. Acceptance of Payments. Payments will be deemed to have been received by the Subscription Agent only upon the (i) receipt by the
Subscription Agent of a bank check payable in U.S. dollars drawn upon a United States of foreign bank or branch; or (ii) receipt by the Subscription Agent of confirmation from its bank that a wire transfer has been received.
3. Effect of Over - and Underpayments. If you do not indicate the number of Ordinary Shares to be subscribed for on your
Subscription Certificate or if you indicate a number of Ordinary Shares that does not correspond with the aggregate Subscription Price payment you delivered, you will be deemed to have subscribed for the maximum number of Ordinary Shares that may
be subscribed for, under both the Subscription Right and the Over-Subscription Right, for the aggregate Subscription Price you delivered. If we do not apply your full Subscription Price payment to your purchase of Ordinary Shares, then we will
return the excess amount to you by mail, without interest or deduction, as soon as practicable after the Expiration Date. If you subscribe for fewer than all of the Ordinary Shares represented by your Subscription Certificate, then the
unexercised Subscription Rights will become null and void on the Expiration Date.
2
4. Execution.
| a) |
Execution By Registered Holder. The signature on the
Subscription Certificate must correspond with the name of the registered holder exactly as it appears on the face of the Subscription Certificate without any alteration or change whatsoever. Persons who sign the Subscription Certificate in
a representative or other fiduciary capacity must indicate their capacity when signing and, unless waived by the Subscription Agent in its sole and absolute discretion, must present to the Subscription Agent satisfactory evidence of their
authority so to act.
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| b) |
Execution By Person Other Than Registered Holder. If the
Subscription Certificate is executed by a person other than the holder named on the face of the Subscription Certificate, proper evidence of authority of the person executing the Subscription Certificate must accompany the same unless the
Subscription Agent, in its discretion, dispenses with proof of authority.
|
5. Delivery of Share Certificates, Etc. The issuance of Ordinary Shares purchased in the rights offering will be made not later
than [___________], 2020 (the “Issuance Date”). The following deliveries and payments to you will be made to the address shown on the face of your Subscription Certificate unless you provide instructions to the contrary on the back of your
Subscription Certificate:
| a) |
Share Certificates. The Subscription Agent will mail to each
validly-exercising Subscription Rights holder who is a record holder certificates representing Ordinary Shares purchased pursuant to the Subscription Right and the Over-Subscription Right.
|
| b) |
Excess Payments. If you exercised your Over-Subscription Right
and are allocated less than all of the Ordinary Shares for which you wished to over-subscribe, then your excess Subscription Price payment for Ordinary Shares that were not allocated to you will be returned to you by mail, without interest
or deduction, as soon as practicable after the Issuance Date.
|
6. To Exercise Subscription Rights through a Bank or Broker. If you are a beneficial owner of our Ordinary Shares and hold them
through a broker, dealer, bank or other nominee (including a member of The Depository Trust Company (“DTC”), rather than in your own name, you should expect your broker, dealer or other nominee to notify you of this Rights Offering and the
procedures for exercising or transferring your Subscription Rights. If you wish to exercise your Subscription Rights, you should contact your nominee to exercise your Subscription Rights sufficiently in advance of the expiration date of the
Rights Offering in order to ensure timely delivery of a Subscription Certificate reflecting your exercise. Your nominee will instruct you as to the proper time and form of payment of the Subscription Price. In that case, the nominee will complete
the Subscription Certificate on behalf of the record date shareholder and arrange for proper payment.
7. Procedures for DTC (The Depository Trust Company) Participants. In the case of holders of Subscription Rights that are held of
record through DTC, exercises of the Subscription Right and the Over-Subscription Right may be effected by instructing DTC to transfer Subscription Rights from the DTC account of such holder to the DTC account of the Subscription Agent, together
with certification as to the aggregate number of Subscription Rights you are exercising and the number of Ordinary Shares you are subscribing for under your Subscription Right and your Over-Subscription Right, if any, and your Subscription Price
payment for each Ordinary Share that you subscribed for pursuant to your Subscription Right and your Over-Subscription Right.
8. Substitute Form W-9. Each Rights holder who elects to exercise the Subscription Rights through the Subscription Agent and who is
a U.S. person should provide the Subscription Agent with a correct Taxpayer Identification Number (“TIN”) and, where applicable, certification of such Rights holder’s exemption from backup withholding on Substitute Form W-9, which is included in
this package of subscription materials. Each Rights holder who elects to exercise the Subscription Rights through the Subscription Agent and who is not a U.S. person should provide the Subscription Agent with certification of such Rights holder’s
foreign status on a Form W-8. Additional copies of the Substitute Form W-9 and copies of Form W-8 may be obtained upon request from the Subscription Agent at the address indicated above. Failure to provide the information on the form may subject
such holder to federal income tax withholding with respect to any proceeds received by such Rights holder.
3
MUST BE COMPLETED BY TENDERING HOLDER(S) WHO ARE U.S. PERSONS
PAYER’S NAME: Eltek Ltd.
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SUBSTITUTE
|
Part 1 - PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND
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TIN:
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|
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Form W-9
|
CERTIFY BY SIGNING AND DATING BELOW
|
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Social Security Number or
|
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Department of the Treasury
|
|
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Employer Identification Number
|
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Internal Revenue Service
|
|||
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Payer’s Request for Taxpayer
|
Part 2 - TIN Applied
for ☐
|
||
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Identification Number (“TIN”)
|
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Certification: Under penalties
of perjury, I certify that:
|
(1)
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the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued
to me);
|
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(2)
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I am not subject to backup withholding either because (a) I am exempt from backup withholding or (b) I have not been notified
by the Internal Revenue Service (the “IRS”) that I am subject to backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding; and
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(3)
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I am a U.S. person (including a U.S. resident alien).
|
Certification Instructions -You
must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return. However, if after being notified by the IRS that you were subject
to backup withholding, you received another notification from the IRS that you were no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the attached Guidelines.)
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SIGNATURE
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DATE
|
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NOTE:
|
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING ON ANY PAYMENTS MADE TO YOU IN
CONNECTION WITH THE RIGHTS OFFERING. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
|
4
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON APPLY
FOR) A TAXPAYER IDENTIFICATION NUMBER
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either
(a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near
future. I understand that if I do not provide a taxpayer identification number before reportable payments are made, all reportable payments made to me will be subject to backup withholding until I provide such number.
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SIGNATURE
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DATE
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5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number for the Payee (You) to Give the Payer.
Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. All “Section” references are to the Internal Revenue Code of 1986, as amended. “IRS” is the Internal Revenue Service.
The table below will help determine the taxpayer identification number to give the payer.
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For this type of account
|
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Give the SOCIAL SECURITY number of -
|
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For this type of account
|
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Give the EMPLOYER IDENTIFICATION number of -
|
|
1. Individual
|
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The individual
|
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6. Sole proprietorship
|
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The owner3
|
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2. Two or more individuals (joint account)
|
|
The actual owner of the account, or if combined funds, the first individual on the account1
|
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7. A valid trust, estate, or pension trust
|
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The legal entity4
|
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3. Custodian account of a minor (Uniform Gift to Minors Act)
|
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The minor2
|
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8. Corporate
|
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The corporation
|
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4. a. The usual revocable savings trust account (grantor is also trustee)
|
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The grantor-trustee1
|
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9. Association, club, religious, charitable, educational, or other tax-exempt
organization
|
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The organization
|
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b. So-called trust account that is not a legal or valid trust under state law
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The actual owner1
|
|||||
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5. Sole proprietorship
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The owner3
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10. Partnership
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The partnership
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|
|
11. A broker or registered nominee
|
|
The broker or nominee
|
|
|
|
|
|
12. Account with the Department of Agriculture in the name of a public entity
(such as a state or local government, school district, or prison) that receives agricultural program payments
|
|
The public entity
|
6
|
(1)
|
List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social
security number, that person’s number must be furnished.
|
|
(2)
|
Circle the minor’s name and furnish the minor’s social security number.
|
|
(3)
|
You must show your individual name, but you may also enter your business or “doing business as” name. You may use either your
social security number or your employer identification number (if you have one).
|
|
(4)
|
List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number
of the personal representative or trustee unless the legal entity itself is not designated in the account title).
|
Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed.
7
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Obtaining a Number
If you don’t have a taxpayer identification number or you don’t know your number, obtain Form SS-5, Application for a Social Security
Card, at the local Social Security Administration office, or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM, and apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempt from backup withholding include:
|
☐
|
An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under
Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2).
|
|
☐
|
The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision
or wholly-owned agency or instrumentality of any one or more of the foregoing.
|
|
☐
|
An international organization or any agency or instrumentality thereof.
|
Payees that may be exempt from backup withholding include:
|
☐
|
A corporation.
|
|
☐
|
A financial institution.
|
|
☐
|
A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of
the United States.
|
|
☐
|
A real estate investment trust.
|
|
☐
|
A common trust fund operated by a bank under Section 584(a).
|
|
☐
|
An entity registered at all times during the tax year under the Investment Company Act of 1940.
|
|
☐
|
A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American
Society of Corporate Secretaries, Inc., Nominee List.
|
|
☐
|
A futures commission merchant registered with the Commodity Futures Trading Commission.
|
|
☐
|
A foreign central bank of issue.
|
Payments of dividends and patronage dividends generally exempt from backup withholding include:
|
☐
|
Payments to nonresident aliens subject to withholding under Section 1441.
|
|
☐
|
Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien
partner.
|
|
☐
|
Payments of patronage dividends not paid in money.
|
8
|
☐
|
Payments made by certain foreign organizations.
|
|
☐
|
Section 404(k) payments made by an ESOP.
|
Payments of interest generally exempt from backup withholding include:
|
☐
|
Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is
$600 or more and you have not provided your correct taxpayer identification number to the payer.
|
|
☐
|
Payments of tax-exempt interest (including exempt- interest dividends under Section 852).
|
|
☐
|
Payments described in Section 6049(b)(5) to nonresident aliens.
|
|
☐
|
Payments on tax-free covenant bonds under Section 1451.
|
|
☐
|
Payments made by certain foreign organizations.
|
|
☐
|
Mortgage interest paid to you.
|
Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are
also exempt from backup withholding. For details, see the regulations under Sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N.
Exempt payees
described above must file Form W-9 or a substitute Form W-9 to avoid possible erroneous backup withholding. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE “EXEMPT” ON THE FACE THEREOF, SIGN AND DATE THE FORM, AND RETURN IT TO THE
PAYER.
Privacy Act Notice
Section 6109 requires you to provide your correct taxpayer identification number to payers, who must report the payments to the IRS.
The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax
returns. Payers must generally backup withhold on taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
|
(1)
|
Failure to Furnish Taxpayer Identification Number - If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each
such failure unless your failure is due to reasonable cause and not to willful neglect.
|
|
(2)
|
Civil Penalty for False
Information With Respect to Withholding - If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.
|
|
(3)
|
Criminal Penalty for
Falsifying Information - Willfully falsifying certificates or affirmations may subject you to criminal penalties including fines and/or imprisonment.
|
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT
OR THE INTERNAL REVENUE SERVICE
9
Exhibit 4.3
Eltek Ltd.
20 Ben Zion Gelis Street, Sgoola Industrial Zone,
Petach Tikva 4927920, Israel
________, 2020
To holders of ordinary shares of Eltek Ltd.:
Enclosed are the prospectus supplement and other materials relating to a Rights Offering by Eltek Ltd. Please
carefully review the prospectus, which describes how you can participate in the Rights Offering. You will be able to exercise your subscription rights to purchase Ordinary Shares (as defined below) only during a limited period. You should also
refer to the detailed Instructions as to Use of Subscription Certificates, which is attached to this letter. All exercises of subscription rights are irrevocable.
The following is a summary of the terms of the Rights Offering:
|
|
☐
|
You will receive one non-transferable subscription right for every [___] Ordinary Share you hold of record at the close of
business on [______], 2020. We will not issue fractional subscription rights or cash in lieu of fractional subscription rights. Fractional subscription rights will be rounded down to the nearest whole number.
|
|
|
☐
|
You may purchase one ordinary share, par value NIS 3.00 of Eltek Ltd. (“Ordinary Share”) for each whole subscription right
you receive at a subscription price of $[__] per share.
|
|
|
☐
|
If you exercise in full the subscription rights issued to you, you may subscribe for additional ordinary shares through the
Over-Subscription right, as more fully described in the prospectus supplement.
|
|
|
☐
|
The Rights Offering will expire at 5:00 p.m., New York City Time (midnight, Israel time), on [______], 2020. We may not extend
the expiration date of the Rights Offering. If you do not exercise your subscription rights before that time, they will expire and will have no monetary value.
|
|
|
☐
|
You cannot revoke or change the exercise of either your Subscription Rights or Over-Subscription Rights.
|
|
|
☐
|
If your Ordinary Shares are held in the name of a bank, dealer or other nominee, you must contact your bank, dealer or other
nominee if you wish to participate in the Rights Offering.
|
If you have any questions concerning the Rights Offering, please feel free to contact us at (972) 3-9395025 or the Information Agent
for the Rights Offering, D.F. King, toll free at: (800)-283-2170.
|
|
Very truly yours,
ELTEK LTD.
|
Exhibit 4.4
Eltek Ltd.
20 Ben Zion Gelis Street, Sgoola Industrial Zone,
Petach Tikva 4927920, Israel
________, 2020
To Securities Dealers, Commercial Banks, Trust Companies, and Other Nominees:
This letter is being distributed to securities dealers, commercial banks, trust companies and other nominees in
connection with the Rights Offering by Eltek Ltd. (“Eltek”) of an aggregate of [________] ordinary shares, par value NIS 3.00, of Eltek (“Ordinary Shares”) at a subscription price of $[__] per Ordinary Share (the “Subscription Price”), pursuant to
the exercise of non-transferable subscription rights (“Subscription Rights”) distributed to all holders of record of Ordinary Shares of Eltek as of the close of business on [________], 2020 (the “Record Date”). The Subscription Rights are described
in the enclosed prospectus and evidenced by a Subscription Certificate registered in your name or in the name of your nominee.
Each beneficial owner of Ordinary Shares registered in your name or the name of your nominee is entitled to one
Subscription Right for every [______] Ordinary Shares owned by such beneficial owner on the Record Date (the “Subscription Rights”). Each Subscription Right also carries the right to over-subscribe at the Subscription Price for additional Ordinary
Shares (subject to proration if necessary) up to the total amount of Ordinary Shares remaining upon completion of the Subscription Rights. Holders of Ordinary Shares will not receive fractional Subscription Rights, but instead Subscription Rights
will be rounded down to the nearest whole number.
We are asking you to contact your clients for whom you hold Ordinary Shares registered in your name or in the name
of your nominee as of the Record Date to obtain instructions with respect to the Subscription Rights.
Enclosed are copies of the following documents:
|
|
1.
|
Prospectus;
|
|
|
2.
|
Subscription Rights Certificate;
|
|
|
3.
|
Instructions as to Use of Subscription Certificates;
|
|
|
4.
|
Form of Letter to Clients of Nominee Holders;
|
|
|
5.
|
Form of Beneficial Owner Election Form; and
|
|
|
6.
|
Form of Nominee Holder Certification.
|
Your prompt action is requested. The Subscription Rights will expire at 5:00 P.M., New York City Time, on
[________], 2020 (the “Expiration Date”).
To exercise Subscription Rights, properly completed and executed Subscription Certificates and payment in full for
all Subscription Rights exercised must be delivered to the Subscription Agent as indicated in the prospectus supplement prior to the Expiration Date.
Additional copies of the enclosed materials may be obtained by contacting us at (972) 3-9395025 or the Information
Agent for the Rights Offering, [______], toll free at: [______].
|
|
Very truly yours,
ELTEK LTD.
|
Exhibit 4.5
[Letterhead of Dealer, Bank, Trust
Company or Nominee]
_______________, 2020
To our clients:
Enclosed are the prospectus supplement and other materials relating to a Rights Offering by Eltek Ltd. (“Eltek”).
Please carefully review the prospectus supplement, which describes how you can participate in the Rights Offering. You will be able to exercise your subscription rights to purchase additional Ordinary Shares (as defined below) only during a limited
period. You should also refer to the detailed Instructions as to Use of Subscription Rights Certificates, which is attached to this letter. All exercises of the Rights are irrevocable.
The following is a summary of the terms of the Rights Offering:
|
|
☐
|
You will receive one non-transferable subscription right for every four Ordinary Shares you hold of record at the close of
business on [____________], 2020. Fractional subscription rights will be rounded down to the nearest whole number.
|
|
|
☐
|
You may purchase one ordinary share, par value NIS 3.00 of Eltek (“Ordinary Share”) for each whole subscription right you
receive at a subscription price of $[__] per share.
|
|
|
☐
|
The Rights Offering will expire at 5:00 p.m., New York City Time (midnight, Israeli time), on [____________], 2020 (the
“Expiration Date”). If you do not exercise your subscription rights before that time, they will expire and will have no monetary value.
|
|
|
☐
|
You cannot revoke your exercise of your subscription rights at any time prior to the expiration of the Rights Offering.
|
THE MATERIALS ENCLOSED ARE BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF ORDINARY SHARES HELD BY US IN YOUR
ACCOUNT BUT NOT REGISTERED IN YOUR NAME. EXERCISES OF SUBSCRIPTION RIGHTS MAY BE MADE ONLY BY US AS THE RECORD OWNER AND PURSUANT TO YOUR INSTRUCTIONS. Accordingly, we request instructions as to whether you wish us to elect to subscribe for any
Ordinary Shares to which you are entitled pursuant to the terms and subject to the conditions set forth in the enclosed prospectus supplement and other materials. We urge you to read the prospectus supplement and other enclosed materials carefully
before instructing us to exercise your subscription rights.
Your instructions to us should be forwarded as promptly as possible in order to permit us to exercise subscription rights on your behalf in accordance with the provisions of the Rights Offering. The Rights Offering will expire at 5:00 p.m., New York City Time (midnight, Israel time), on the Expiration Date, so you are encouraged to forward your instructions to us before the Expiration Date to allow us ample
time to act upon your instructions.
If you wish to have us, on your behalf, exercise the subscription rights, please so instruct us by timely
completing, executing, and returning to us the Beneficial Owner Election Form attached to this letter.
With respect to any
instructions to exercise (or not to exercise) subscription rights, the enclosed Beneficial Owner Election Form must be completed and returned such that it will be actually received by us by 5:00 p.m., New York City Time (midnight, Israel time),
on [____________], 2020.
Please indicate whether you wish to receive a separate subscription rights certificate issued to you by checking
the appropriate box.
☐ Yes ☐ No
If you have any questions concerning the Rights Offering, please feel free to contact us at [ ].
|
|
Very truly yours,
[ ]
|
Exhibit 4.6
BENEFICIAL OWNER ELECTION FORM
INSTRUCTIONS
To [____________]:
The undersigned acknowledge(s) receipt of your letter and the enclosed materials referred to therein relating to
the offering of ordinary shares, par value NIS 3.00 (the “Ordinary Shares”), of Eltek Ltd. (the “Company”).
With respect to any
instructions to exercise (or not to exercise) Subscription Rights, the undersigned acknowledges that this form must be completed and returned such that it will actually be received by you by 5:00 p.m., New York City Time (midnight, Israeli time),
on [____________], 2020.
This will instruct you whether to exercise Subscription Rights to purchase Ordinary Shares distributed with respect
to the Ordinary Shares held by you for the account of the undersigned, pursuant to the terms and subject to the conditions set forth in the prospectus supplement and the related “Instructions as to Use of Subscription Rights Certificates.”
Box 1. ☐ Please DO NOT EXERCISE SUBSCRIPTION
RIGHTS for Ordinary Shares.
Box 2. ☐ Please EXERCISE SUBSCRIPTION RIGHTS for
Ordinary Shares as set forth below.
The number of Subscription Rights for which the undersigned gives instructions for exercise under the Basic
Subscription Right should not exceed the number of Subscription Rights that the undersigned is entitled to exercise.
|
|
Number of Ordinary Shares
|
|
|
Per Share Subscription Price
|
|
Payment
|
|
|
|
Subscription Right:
|
|
x
|
$
|
[___]
|
=
|
$
|
|
|
|
|
|
|
|
|||||
|
Over-Subscription Right:
|
|
x
|
$
|
[___]
|
=
|
$
|
|
|
|
|
|
|
|
|||||
|
Total Payment Required:
|
|
$
|
|
|
||||
Box 3. ☐ Payment in the following amount is enclosed
$_____________ .
Box 4. ☐ Please deduct payment from the following
account maintained by you as follows:
|
|
|
|
|
|
Type of Account
|
|
Account No.
|
|
|
|
|
|
|
|
Amount to be deducted:
|
$
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
Signature(s)
|
|
|
|
|
||
|
|
|
Please type or print name(s) below
|
|
|
|
|
|
|
Exhibit 4.7
FORM OF NOMINEE HOLDER CERTIFICATION
ELTEK LTD.
The undersigned, a bank, broker, trustee, depositary, or other nominee of non-transferable subscription rights (the
“Subscription Rights”) to purchase ordinary shares, par value NIS 3.00 per share (the “Ordinary Shares”), of Eltek Ltd. (the “Company”) pursuant to the Subscription Rights Offering described and provided for in the Company’s Prospectus dated
[____________], 2020, hereby certifies to the Company and to American Stock Transfer & Trust Company, LLC, as Subscription Agent for such Subscription Rights Offering, that (1) the undersigned has exercised, on behalf of the beneficial owners
thereof (which may include the undersigned), the number of Subscription Rights specified below pursuant to the Subscription Right (as defined in the “Instructions as to Use of Subscription Rights Certificates”) and, on behalf of beneficial owners
of Subscription Rights who have subscribed for the purchase of additional Ordinary Shares pursuant to the Over-Subscription Right, the number of shares specified below pursuant to the Over-Subscription Right (as defined in the “Instructions as to
Use of Subscription Rights Certificates”), listing separately below each such exercised Subscription Right and the corresponding Over-Subscription Right (without identifying any such beneficial owner), and (2) to the extent a beneficial owner has
elected to subscribe for shares pursuant to the Over-Subscription Right, each such beneficial owner’s Subscription Right has been exercised in full:
|
|
Number of Shares Owned on the
Record Date
|
|
Number of Shares Subscribed for
Pursuant to Subscription Right
|
|
Number of Shares Subscribed for
Pursuant to Over-Subscription Right
|
|
1.
|
|
|
|
|
|
|
2.
|
|
|
|
|
|
|
3.
|
|
|
|
|
|
|
4.
|
|
|
|
|
|
|
|
Name of Nominee Holder
|
|
DTC Participant Number
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
DTC Basic Subscription Confirmation Numbers
|
|||
|
Title:
|
||||
|
Phone Number:
|
||||
|
Fax Number:
|
|
|
Dated:
|
|
Exhibit 5.1
 |
Aharon Pollak
|
Amir Fish
|
Roy Niron
|
Julia Vainshenker
|
Shahak Davidson
|
|||||
|
Moshe Matalon
|
Nadia Davidzon
|
Liron Usherovich
|
Lital Efrati
|
Ravid Amikam
|
||||||
|
Arie Neiger *
|
Shalom Simon**
|
Ido Hazan
|
Amir Barel
|
Roi Amos
|
||||||
|
Doron Levy
|
Moran Mordechay
|
Yana Yavnitzki Dror
|
Amit Shilton
|
Ron Raziel
|
||||||
|
Eldad Koresh
|
Jonathan Tessone
|
Mor Gazit
|
Masha Kaminsky
|
Coral Rejwan
|
||||||
|
Yonatan Altman
|
Avishai Sahar
|
Tal Sasson-Ferdman
|
Tal Zaid Rozen
|
Karin Lichterman
|
||||||
|
Ian Rostowsky
|
Shahar Haron
|
Efrat Shpizaizen
|
Natalie Nahum
|
Bar Levi
|
||||||
|
Established 1956
|
Anat Sterenlib-Molkho
|
Ephraim Ofek Aharon
|
Elinor Polak
|
Shmuel Birbir
|
Carolina Labaton
|
|||||
|
Asaf Biger
|
Omer Ben Matityahu
|
Eran Buvilski
|
Yaniv Holzman
|
|||||||
|
Maya Issacharov *
|
Adi El Rom
|
Shiran Geva
|
Bar Farkash
|
|||||||
|
Orit Israeli
|
Hilla Shribman
|
Arik Ben Simchon
|
Sapir Almog
|
|||||||
|
Erez Haver
|
Shani Ashkenasi
|
Shira Danziger-Mualam
|
Noy Rimer
|
|||||||
|
Aya Reich Mina
|
Gal Omer
|
Racheli Vardi
|
Noa Kay
|
|||||||
|
Racheli Guz-Lavi (CPA)
|
Liron-Levy Lev
|
Avishay Sadeh
|
Guy Grinfeld
|
|||||||
|
Ayelet Torem
|
Ruth Amit-Fogel
|
Yoav Sherman
|
Netanel Nwhemya
|
|||||||
|
Yoav Etzyon*
|
Ovad Kedmi
|
Amir Dar
|
Sivan Rozenberg
|
|||||||
|
Sharon Lubezky Hess
|
Yair Avraham
|
Lior Mozes Goldenberg
|
Ido Maron
|
|||||||
|
Dr. Tal Tirosh*
|
Joseph Z. Hellerstein
|
Eliad Farjoon
|
Kobi Kimchi
|
|||||||
|
Ariel Frank
|
Ran Cohen
|
Yulia Kniazev*
|
Hen Agranov
|
|||||||
|
Amichay Finkelstein
|
Itai Nachtomy
|
Lihi Godes
|
Yarden Ofra
|
|||||||
|
Chagit Pedael Levin
|
Yifat Weiss
|
Tal Tsarfaty-Doron
|
Sapir Bittan
|
|||||||
|
apm@apm.law
|
Benjamin Grossman
|
Limor Segman
|
Dana Shwartz
|
Dana Gordon
|
Nahum Amit
|
|||||
|
www.apm.law
|
Stephen Barak Rozen
|
Shalev Brants
|
Yinon Himi
|
Kobi Winekrantz
|
[1923-2007]
|
|||||
|
Office. 972-3-5689022
|
Ravit Arbel
|
Helen Marshanski
|
Ariella Magid
|
Natalia Zeron
|
Etty Avni-Borowits
|
|||||
|
Fax. 972-3-5689023
|
Galit Shitzer
|
Yahel Porat
|
Harel Afargan
|
Tal Horovicz
|
[1945-2005]
|
|||||
|
APM House, 18 Raoul Wallenberg
|
Michael Yavin
|
Tzipi Kolp Frieder
|
Roy Duvshani
|
Linor Argentaro
|
* Also a member of
|
|||||
|
St, Building D, 7st Floor, Ramat
|
Efraim Levy
|
Eitan Leder
|
Naor Traitel
|
Sapir Palas-Sarussy
|
the New-York
Bar
|
|||||
|
Hachayal,Tel Aviv 6971915, Israel
|
Ranit Kessous-Katz
|
Lilach Horesh
|
Hen Yannay
|
Rotem Raz
|
** Notary
|
October 14, 2020
Eltek Ltd.
20 Ben Zion Gellis Street
Sgoola Industrial Zone
Petah Tikva 4927920, Israel
Re: Registration Statement on Form F-1
This opinion is furnished to you in
connection with the registration statement on Form F-1 (the “Registration Statement”) to be filed on the date hereof by Eltek Ltd., a company organized under the laws of the State of Israel (the “Company”), with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”). The Registration Statement relates to the proposed registration for sale by the Company of up to $6,000,000 aggregate amount of the Company's ordinary shares, nominal value NIS 3.00 per share ( the “Shares”), by way of grant of nontransferable subscription right to the Company's shareholders (the “Rights”). The Rights
will be evidenced by subscription rights certificates. The Registration Statement relates to the Rights and to the Shares that may be issued and sold by the Company upon exercise of the Rights.
As Israeli counsel to the Company in
connection with the filing of the Registration Statement, we have examined such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purpose of our opinion. In
our examination of such legal documents, we have assumed the genuineness of all signatures, the legal capacity of all signatories who are natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, the authenticity of the originals of such documents and the due execution and delivery of all
documents. Insofar as this opinion relates to factual matters, we have assumed with your permission and without independent investigation, that the statements of the Company contained in the Registration Statement (including any exhibits thereto)
and such other documents, certificates, records, statements and representations as we have deemed necessary or appropriate as a basis for the opinions set forth below are true, correct and complete as to all factual matters stated therein. In
addition, as to questions of fact material to this opinion, we have, when relevant facts were not independently established, relied upon certificates of, and information received from, the Company and/or representatives of the Company. We have
made no independent investigation of the facts stated in such certificates or as to any information received from the Company and/or representatives of the Company and do not opine as to the accuracy of such factual matters. We also have relied
as to certain matters on information obtained from public officials, officers of the Company, and other sources believed by us to be reliable. We also have assumed that the Registration Statement will remain effective pursuant to the Securities
Act at the time of issuance of the Shares and Rights, and the Company will have received the required consideration for the issuance of the Shares at or prior to the issuance thereof.
Our opinions below are qualified to the extent that they may be subject to or affected by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, receivership, conservatorship, arrangement, usury, fraudulent conveyance or similar laws affecting the rights of creditors generally, and (ii) by general equitable principles and public policy
considerations, whether such principles and considerations are considered in a proceeding at law or at equity. Furthermore, we express no opinion as to the availability of any equitable or specific remedy, or as to the successful assertion of any
equitable defense, upon any breach of any agreements or obligations referred to therein, or any other matters, inasmuch as the availability of such remedies or defenses may be subject to the discretion of a court. We express no opinion as to the
enforceability of any indemnification provision, or as to the enforceability of any provision that may be deemed to constitute liquidated damages.
Based upon and subject to the foregoing and the other assumptions, limitations and exceptions set forth herein, we
are of the opinion that:
| 1. |
Subject to the resolution of the Board of Directors, the Rights have been authorized by all necessary corporate action of the Company and, when issued and delivered
as contemplated in the Registration Statement, will be validly issued and binding obligations of the Company.
|
| 2. |
Assuming the taking of all necessary corporate action to authorize and approve the
issuance of the Shares, the terms of the offering thereof and related matters, and, when issued in accordance with the terms set forth in the applicable subscription documents, and as contemplated in the Registration Statement,
such Shares will be validly authorized, validly issued, fully paid and nonassessable..
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The opinion expressed herein is limited to Israeli law, and we do not express any opinion as to the
laws of any other jurisdiction and expressly disclaim responsibility for advising you as to the effect, if any, that the laws of any other jurisdiction may have on the opinions set forth herein.
We consent to the filing of this opinion as an exhibit to the Registration Statement and to the
references to us under the headings “Legal Matters” and “Enforceability of Civil Liabilities” in the Prospectus which is a part of the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.
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Very truly yours,
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/s/Amit, Pollak, Matalon & Co.
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Amit, Pollak, Matalon & Co.
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2
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the caption “Experts” in this Registration Statement on Form F-1 and related Prospectus
of Eltek Ltd. for the registration of Subscription Rights and Ordinary Shares and to the incorporation by reference therein of our report dated April 27, 2020, with respect to the consolidated financial statements of Eltek Ltd. included in its
Annual Report (Form 20-F) for the year ended December 31, 2019, filed with the Securities and Exchange Commission.
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Tel-Aviv, Israel
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/s/Kost Forer Gabbay & Kasierer
KOST FORER GABBAY & KASIERER |
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October 14, 2020
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A Member of Ernst & Young Global
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