Hold Me Ltd 20-F for FY2023
Hold Me Ltd (HMELF)
About this 20-F
Hold Me Ltd filed this 20-F on May 15, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- 927K ILS
- up 753.0% from 108.67K ILS a year earlier
- Net income
- 197.23K ILS
- compared with a net loss of 711.89K ILS a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
OR
For the fiscal year ended
OR
For the transition period from _________ to _________
OR
Date of event requiring this shell company report: _________
Commission file number:
(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
972-50-222-2755
(Address of principal executive offices)
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: As of December 31, 2023, the registrant had outstanding Ordinary Shares, par value NIS 0.01 per share, and 10,000,000 shares of preferred stock, par value NIS 0.01 per share.
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 762(b)) by the registered public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
| International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ |
Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant elected to follow.
| Item 17 ☐ | Item 18 ☐ |
If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes ☐ |
(Applicable only to Issuers involved in bankruptcy proceedings during the past five years).
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
| Yes ☐ | No ☐ |
TABLE OF CONTENTS
i
INTRODUCTION
We define certain terms used in this annual report as follows:
“API” means Application Programming Interface, a computing interface that defines interactions between multiple software intermediaries.
“APP” means an Application, especially as downloaded by a user to a mobile device.
“Companies Law” means the Israeli Companies Law, 5759-1999.
“NIS” means New Israeli Shekel, the currency of the State of Israel.
“Platform” means our mobile digital payment platform, as discussed in greater detail in Item 4 of this annual report.
“VAT” means Value Added Tax.
Unless the context provides otherwise, “we,” “us,” “our company,” “our,” the “Company” and “Hold Me” is to Hold Me Ltd., an Israel company.
Presentation of Financial and Share Information
Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). We present our consolidated financial statements in New Israeli Shekel.
Industry and Market Data
This annual report contains information about our market share, market position and industry data. Unless otherwise indicated, this statistical and other market information is based on a variety of sources, information from independent analysts and publications, as well as our own estimates and research. Our estimates are derived from publicly available information released by third-party sources, as well as data from our internal research, which we believe to be reasonable. None of the independent industry publications used in this annual report were prepared on our behalf.
We have not independently verified the accuracy of market data and industry forecasts contained in this annual report that were taken or derived from these industry publications. We generally state that the information they contain has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed.
Special Note Regarding Forward-Looking Statements
We have made statements under the captions “Item 3. Key Information - D - Risk Factors,” “Item 4 – Information on the Company,” “Item 5. Operating and Financial Review and Prospects,” and in other sections of this annual report that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “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 entitled “Item 3. Key Information - D. Risk Factors.” You should specifically consider the numerous risks outlined under “Item 3. Key Information - D. Risk Factors.”
Although we believe the expectations reflected in the forward-looking statements contained in this annual report 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 assume no duty to update any of these forward-looking statements after the date of this annual report to conform our prior statements to actual results or revised expectations, except as otherwise required by law.
ii
PART I
| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS |
Not applicable.
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Not applicable.
| ITEM 3. | KEY INFORMATION |
A. Reserved.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the offer and use of proceeds
Not applicable.
D. Risk Factors
You should consider carefully the risks described below making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment. This annual report also contains forward-looking statements that involve risks and uncertain. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this annual report.
Risks Relating to our business and industry
Our financial situation creates doubt whether we will continue as a going concern.
There can be no assurances that we will ever be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain additional financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital and no assurance can be given that additional financing will be available, or if available, will be on acceptable terms. These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working capital is not available, we may be forced to discontinue operations, which would cause investors to lose their entire investment.
The Company has not generated significant revenues, has suffered recurring losses from operations, has incurred negative cash flows from operating activities and is dependent on external sources for financing its operations. As of December 31, 2023, the Company has an accumulated deficit of 3,034,241 NIS and a stockholders’ deficiency of 1,191,792 NIS. consolidated financial statements for the year ended December 31, 2023 were prepared assuming that we would continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
The report of our independent registered public accounting firm on our audited consolidated financial statements as of December 31, 2023 and 2022 includes an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern based upon our recurring losses, cash used in operations and accumulated deficit.
1
We currently do not have any customers for our digital payments business. If we fail to acquire customers, our business, financial condition and results of operations may be materially and adversely affected.
Our previous sole customer, Galileo Tech Ltd. (“Galileo”), is currently in financial difficulties. Following the licensing agreement with Galileo they have notified us they discontinue the agreement with us. For the year ended December 31, 2023, we generated USD 250,000 for a consulting project for a new customer. Although we are in discussions with potential customers with respect to additional revenue generating projects, there is no assurance that they will result in revenues for us.
If the market for digital payments does not continue to grow, our business will be adversely affected.
The market for digital payments may not continue to grow. Continued growth of this market will depend, in large part, upon:
| ● | the continued expansion of Internet usage and the number of organizations adopting or expanding intranets; | |
| ● | the continued adoption of “cloud” infrastructure by organizations; | |
| ● | the ability of the infrastructures implemented by organizations to support an increasing number of users and services; | |
| ● | the continued development of new and improved services for implementation across the Internet and between the Internet and intranets; | |
| ● | the adoption of data security measures as it pertains to data encryption and data loss prevention technologies; | |
| ● | continued access to mobile API’s, APPs and application stores with Apple, Google and Microsoft, etc.; | |
| ● | government regulation of the Internet and governmental and non-governmental requirements and standards with respect to data security and privacy; and | |
| ● | general economic conditions in the markets in which we, our customers and our suppliers operate. |
In 2022, global and regional economies around the world and financial markets remained volatile as a result of a multitude of factors, including COVID-19 pandemic, economic and political uncertainty, terrorism, governmental instability and other factors. During this period, many organizations limited their expenditures and a significant portion of such organizations have remained reluctant to increase expenditures. If challenging conditions continue or worsen, it may cause our customers to reduce or postpone their technology spending significantly, which could result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies and increased price competition.
Further, if the necessary infrastructure or complementary products and services are not developed in a timely manner and, consequently, the enterprise security, data security, Internet or intranet markets fail to grow or grow more slowly than we currently anticipate, our business, results of operations and financial condition may be materially adversely affected.
We may not be able to successfully compete, which could adversely affect our business and results of operations.
The digital payment market is profoundly shifting in the Covid-19 pandemic context. The crisis has affected the way people think about payments and financial services, with the use of cash declining and the rise of contactless encouraged by many countries. All the actors are being impacted by this move towards a cashless society, including retailers, merchants, consumers, governments, financial institutions, and service providers.
2
The market for digital payment is intensely competitive and we expect that competition will continue to increase in the future. Our competitors include big tech companies, such as Google, Apple and PayPal who are eagerly looking to grab an increasing share in the digital payment market. Apple launched its digital payment service, Apple Pay, in Israel on May 5, 2021, which may substantially impact our ability to compete for customers in our primary market. In addition, Google launched its digital payment service, Google Pay, in Israel on December 7, 2021, which may substantially impact our ability to compete for customers in our primary market. We also compete with several other companies, including wallet factory and dejamobile, with respect to digital wallets that we offer. In addition, there are hundreds of small and large companies that offer digital payment products that we may compete with from time to time.
Some of our current and potential competitors have various advantages over us, including longer operating histories; access to larger customer bases; significantly greater financial, technical and marketing resources; a broader portfolio of products, applications and services; and larger patent and intellectual property portfolios. As a result, they may be able to adapt better than we can to new or emerging technologies and changes in customer requirements, or to devote greater resources to the promotion and sale of their products. Furthermore, some of our competitors with more diversified product portfolios and larger customer bases may be better able to withstand a reduction in spending on digital payment solutions, as well as a general slowdown or recession in economic conditions in the markets in which they operate. In addition, some of our competitors have greater financial resources than we do, and they have offered, and in the future may offer, their products at lower prices than we do, or may bundle digital payment products with their other offerings, which may cause us to lose sales or to reduce our prices in response to competition.
In addition, consolidation in the markets in which we compete may affect our competitive position. This is particularly true in circumstances where customers are seeking to obtain a broader set of products and services than we are able to provide.
The markets in which we compete also include many niche competitors, generally smaller companies at a relatively early stage of operations, which are focused on specific digital payment needs. These companies’ specialized focus may enable them to adapt better than we can to new or emerging technologies and changes in customer requirements in their specific areas of focus. In addition, some of these companies can invest relatively large resources on very specific technologies or customer segments. The effect of these companies’ activities in the market may result in price reductions, reduced gross margins and loss of market share, any of which will materially adversely affect our business, results of operations and financial condition.
We may not be able to continue competing successfully against our current and future competitors, and increased competition within the market may result in price reductions, reduced gross margins and operating margins, reduced net income, and loss of market share, any or all of which may materially adversely affect our business, results of operations and financial condition.
We may not be able to maintain and improve the network effects of our digital economy, which could negatively affect our business and prospects.
Our ability to maintain a healthy and vibrant digital economy that creates strong network effects among financial institutions, consumers, merchants, brands, retailers and other participants is critical to our success. The extent to which we are able to maintain and strengthen these network effects depends on our ability to:
| ● | offer secure and open platforms for all participants and balance the interests of these participants; | |
| ● | provide a wide range of high-quality product, service and content offerings to consumers; | |
| ● | attract and retain consumers, merchants, brands and retailers of all sizes; | |
| ● | provide effective technologies, infrastructure and services that meet the evolving needs of financial institutions, consumers, merchants, brands, retailers and other businesses; |
3
| ● | secure and trusted digital payment services; | |
| ● | address user concerns with respect to data security and privacy measures; | |
| ● | attract and retain third-party service providers that are able to provide quality services on commercially reasonable terms to our customers; | |
| ● | maintain the quality of our customer service; and | |
| ● | continue adapting to the changing demands of the digital payment market. |
In addition, changes to current operations we may make to enhance and improve our digital economy or to comply with regulatory requirements may be viewed positively from one participant group’s perspective, such as our customers, but may have negative effects from another group’s perspective, such as the clients of our customers. If we fail to balance the interests of all participants in our digital economy, our customers may spend less time, mind-share and resources on our Platform and may conduct fewer transactions or use alternative platforms, any of which could result in a material decrease in our revenue and net income.
Raising additional capital and the conversion of our outstanding preferred shares owned by our majority controlling shareholder would cause significant dilution to our existing shareholders and may affect the rights of existing shareholders.
We will have to seek additional capital through a combination of private and public equity offerings, debt financing and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the issuance of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of our shares.
In addition, Mr. Shalom, our principal executive officer, a director and majority shareholder, owns 10,000,000 preferred shares, with each share being convertible at any time by Mr. Shalom to 100 ordinary shares. Accordingly, if Mr. Shalom would convert some or all his preferred shares, your ownership interest in the Company will be further diluted.
We may not be able to introduce products acceptable to customers and we may not be able to improve the technology used in our current systems in response to changing technology and end-user needs.
The markets in which we operate are subject to rapid and substantial innovation, regulation and technological change, mainly driven by technological advances and end-user requirements and preferences, as well as the emergence of new standards and practices. Even if we are able to complete the development of our products, our ability to compete in the digital market will depend, in large part, on our future success in enhancing our existing products and developing new systems that will address the varied needs of prospective end-users, and respond to technological advances and industry standards and practices on a cost-effective and timely basis to otherwise gain market acceptance.
Even if we successfully introduce our existing products in development, it is likely that new systems and technologies that we develop will eventually supplant our existing systems or that our competitors will create systems that will replace our systems. As a result, any of our products may be rendered obsolete or uneconomical by our or others’ technological advances.
We may need to change our pricing models to compete successfully.
The intense competition we face in the sales of our products and services and general economic and business conditions can put pressure on us to change our prices. If our competitors offer deep discounts on certain products or services or develop products that the marketplace considers more valuable, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes may reduce margins and could adversely affect results of operations.
4
If our products fail to protect against attacks and our customers experience security breaches, our reputation and business could be harmed.
Hackers and other malevolent actors are increasingly sophisticated, often affiliated with organized crime and operate large scale and complex attacks. In addition, their techniques change frequently and generally are not recognized until launched against a target. If we fail to identify and respond to new and increasingly complex methods of attack and to update our products to detect or prevent such threats in time to protect our customers’ high-value business data, our business and reputation will suffer.
In addition, an actual or perceived security breach or theft of the sensitive data of one of our customers, regardless of whether the breach is attributable to the failure of our products, could adversely affect the market’s perception of our products. Despite our best efforts, there is no guarantee that our products will be free of flaws or vulnerabilities, and even if we discover these weaknesses we may not be able to correct them promptly, if at all. Our customers may also misuse our products, which could result in a breach or theft of business data.
Defects in products could give rise to product returns or product liability, warranty or other claims that could result in material expenses, diversion of management time and attention, and damage to our reputation.
Even if we are successful in introducing our products to the market, our products may contain undetected defects or errors that, despite testing, are not discovered until after a product has been used. This could result in delayed market acceptance of those products, claims from distributors, end-users or others, increased end-user service and support costs and warranty claims, damage to our reputation and business, or significant costs to correct the defect or error. We may from time to time become subject to warranty or product liability claims that could lead to significant expenses as we need to compensate affected end-users for costs incurred related to product quality issues.
Any claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, and damage to our reputation, which could cause us to fail to retain or attract customers. Currently, we do not maintain product liability insurance, which will be necessary prior to the commercialization of our products. It is likely that any product liability insurance that we will have in the future will be subject to significant deductibles and there is no guarantee that such insurance will be available or adequate to protect against all such claims, or we may elect to self-insure with respect to certain matters. Costs or payments made in connection with warranty and product liability claims and product recalls or other claims could materially affect our financial condition and results of operations.
We expect that we will need to raise substantial additional capital before we can expect to become profitable from sales of our products. This additional capital may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.
We expect that we will require substantial additional capital to commercialize our products. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including but not limited to:
the scope, rate of progress, results and cost of product development, and other related activities;
the cost of establishing commercial supplies of our products;
the cost and timing of establishing sales, marketing, and distribution capabilities; and
the terms and timing of any collaborative, licensing, and other arrangements that we may establish.
5
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or products or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of our products or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
Since we are solely dependent on Amazon Cloud, our business, financial condition and results of operations may be materially and adversely affected if this agreement is terminated or if there are service issues with the cloud that affects our application and operations.
As of the date of this annual report, Amazon Cloud (also known as Amazon Web Services) is our sole cloud provider. Our entire technology was developed in Amazon’s cloud environment and is currently deployed on it. Our reliance on a single vendor for our business involves high risks. Our agreement with Amazon was not negotiated but the standard, boilerplate agreement which Amazon utilizes with all its customers. Amazon has the ability to terminate its services to us at any time. Accordingly, if Amazon terminates the agreement, our business may be severely interrupted, and our financial condition and results of operations may be materially and adversely affected. In addition, all our software and code are held in Amazon cloud and could be subject to attacks, deletion or other bad effects.
If our relationships with other suppliers for our products and services were to terminate or our software development arrangements were to be disrupted, our business could be interrupted.
Our products depend on certain third-party technology, and we purchase component parts that are used in our products from third-party suppliers, some of whom may compete with us. For example, we developed our products via a software company situated in India. Our reliance on a single or limited number of vendors involves several risks, including:
| ● | potential shortages of some key personnel or talented developers; |
| ● | developers performance shortfalls, if traceable to particular persons since the developers of our software cannot readily be replaced; |
| ● | discontinuation of service and talent-pool on which we rely; |
| ● | potential insolvency of these vendors; and |
| ● | reduced control over delivery schedules, quality and costs. |
If certain suppliers were to decide to discontinue their service with us, the unanticipated change in the availability of supplies, or unanticipated supply limitations, could cause delays in, or loss of, developments, integrations, sales, increased production or related costs and consequently reduced margins, and damage to our reputation. If we were unable to find a suitable supplier on time, we could be required to modify our existing development and production settings or the end-solution that we offer to our customers.
6
A significant interruption in the operations of our third-party suppliers could potentially disrupt our operations.
We have limited control over the operations of our third-party suppliers and other business partners and any significant interruption in their operations may have an adverse impact on our operations. For example, a significant interruption in the operations of the India software company, one of our suppliers, may cause interruption to our business. If we could not solve the impact of the interruptions of operations of our third-party suppliers, our business operations and financial results may be materially and adversely affected.
Mr. Menachem Shalom, our principal executive officer and a member of our board of directors, beneficially owns 100% of our outstanding preferred shares and his interests may differ from the interests of other shareholders, which could cause a material decline in the value of our shares.
Mr. Menachem Shalom, our principal officer and a member of our board of directors, currently beneficially owns 100% of our outstanding preferred shares and 87% of the outstanding ordinary shares. Accordingly, he has a significant influence on determining the outcome of any matters submitted to the shareholders for approval, including mergers, consolidations, the election of directors and other significant corporate actions. Without his consent, we may be prevented from entering into transactions that could be beneficial to us or our minority shareholders. His interest may differ from the interests of our other shareholders. The concentration in the ownership of our shares may cause a material decline in the value of our shares.
We cannot assure you that Mr. Shalom will act in the best interests of all of our shareholders given Mr. Shalom’s ability to control the Company. See “Related Party Transactions.”
We are dependent upon our Mr. Shalom and we cannot assure his retention.
Our success depends, in part, upon the continued services of Mr. Shalom, whose knowledge of the market, our business and our Company represents a key strength of our business, which cannot be easily replicated. The success of our business strategy and our future growth also depend on our ability to attract, train, retain and motivate skilled managerial, sales, administration, development and operating personnel. Even though we have a management agreement with Mr. Shalom, there is no required time period in which he needs to be employed by us.
There can be no assurance that our existing personnel will be adequate or qualified to carry out our strategy, or that we will be able to hire or retain experienced, qualified employees to carry out our strategy. The loss of Mr. Shalom or the failure to attract and retain additional key personnel, could have a material adverse effect on our business, financial condition and results of operations.
If we fail to adopt new technologies to evolving customer needs or emerging industry standards, our business may be materially and adversely affected.
To remain competitive, we must continue to stay abreast of the constantly evolving industry trends and to enhance and improve our technology accordingly. Our success will depend, in part, on our ability to identify, develop, acquire or license leading technologies useful in our business. There can be no assurance that we will be able to use new technologies effectively or meet customer’s requirements. If we are unable to adapt in a cost-effective and timely manner in response to changing market conditions or customer preferences, whether for technical, legal, financial or other reasons, our business may be materially and adversely affected.
We may experience significant liability claims or complaints from customers, or adverse publicity involving our products and our services.
We face an inherent risk of liability claims or complaints from our customers. We intend to take our customers’ complaints seriously and endeavor to reduce such complaints by implementing various remedial measures. Nevertheless, we cannot assure you that we can successfully prevent or address all customer complaints.
7
Any complaints or claims against us, even if meritless and unsuccessful, may divert management attention and other resources from our business and adversely affect our business and operations. Customers may lose confidence in us and our brand, which may adversely affect our business and results of operations. Furthermore, negative publicity including but not limited to negative online reviews on social media and crowd-sourced review platforms, industry findings or media reports related to safety and quality of our products, whether or not accurate, and whether or not concerning our products, can adversely affect our business, results of operations and reputation.
We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate intellectual property rights held by third parties. We have not but in the future may be, subject to legal proceedings and claims relating to the intellectual property rights of others. There could also be existing intellectual property of which we are not aware that our products may inadvertently infringe. We cannot assure you that holders of intellectual property purportedly relating to some aspect of our technology or business, if any such holders exist, would not seek to enforce such intellectual property against us in Israel, or any other jurisdictions. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against these infringement claims, regardless of their merits. Successful infringement or licensing claims made against us may result in significant monetary liabilities and may materially disrupt our business and operations by restricting or prohibiting our use of the intellectual property in question, and our business, financial position and results of operations could be materially and adversely affected.
Further, the application and interpretation of Israel’s patent laws and the procedures and standards for granting patents in Israel are still evolving and are uncertain, and we cannot assure you that the courts or regulatory authorities in Israel would agree with our analysis.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
Although we regard our know-how, proprietary technologies, and similar intellectual property as critical to our success, we have no patents or trademarks protecting our intellectual property. We may become an attractive target to intellectual property attacks in the future with the increasing recognition of our brand. Any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, there can be no assurance that (i) all of our intellectual property rights will be adequately protected, or (ii) our intellectual property rights will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable.
Because we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.”
We are an “emerging growth company” as defined under the Jumpstart our Business Startups Act (“JOBS Act”). We will remain an “emerging growth company” for up to five years, or until the earliest of:
| (i) | the last day of the first fiscal year in which our total annual gross revenues exceed $1.235 billion, |
| (ii) | the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or |
| (iii) | the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. |
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As an “emerging growth company”, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:
| ● | not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act (“Sarbanes Oxley”) (we also will not be subject to the auditor attestation requirements of section 404(b) as long as we are a “smaller reporting company”, which includes issuers that had a public float of less than $75 million as of the last business day of their most recently completed second fiscal quarter); |
| ● | reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and |
| ● | exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
In addition, section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in section 7(a)(2)(B) of the Securities Act of 1933 (the “Securities Act”) for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
The nature of our business requires the application of complex revenue recognition rules. Significant changes in U.S. generally accepted accounting principles, or GAAP, including the adoption of the new revenue recognition rules, could materially affect our financial position and results of operations.
We prepare our financial statements in accordance with GAAP, which is subject to interpretation or changes by the Financial Accounting Standards Board, or FASB, the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future, which may have a significant effect on our financial results. For example, pursuant to the new revenue recognition rules, effective as of January 1, 2018, an entity recognizes sales and usage-based royalties as revenue only when the later of the following events occurs: (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales-based or usage-based royalty allocated has been satisfied (or partially satisfied). Recognizing royalty revenue on a lag time basis is not permitted. As a result, the royalties we generate from customers is based on royalty of units shipped during the quarter as estimated by our customers, not a quarter in arrears that we previously report. Adoption of this standard and any difficulties in implementation of changes in accounting principles, including uncertainty associated with royalty revenues for the quarter based on estimates provided by our customer, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
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Risks Related to Our Proposed Non-Bank Loan Business Activity
Our credit standards and on-going credit assessment processes might not protect us from significant credit losses.
Having obtained a non-bank lending license, we intend to engage in the non-bank credit field by extending loans to consumers and/or other business. We envision managing credit risk in our loans through a program of underwriting standards, the review of certain credit decisions and an ongoing process of assessment of the quality of the credit already extended. While these procedures will be designed to provide us with the information needed to implement policy adjustments where necessary and to take appropriate corrective actions, there can be no assurance that such measures will be effective in avoiding future undue credit risk, and credit losses may occur in the future.
The amount of our future loan losses could be influenced by changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates. While the risk of nonpayment is inherent in providing financing, we could experience greater nonpayment levels than we anticipate. Deterioration in the quality of our loan portfolio could cause our interest income and net interest margin to decrease and our provisions for loan losses to increase further, which could adversely affect our results of operations and financial condition.
Our allowance for loan losses may not be adequate to cover actual losses, which could materially and adversely affect our operating results.
We intend to maintain an allowance for loan losses that is appropriate to provide for any potential losses in our loan portfolio. The allowance is based upon factors such as the credit risk of specific customers, historical trends and experience, ongoing review of the quality, size and diversity of our loan portfolio, the amount and quality of collateral securing the loans, current economic conditions, geographic and industry loan concentrations and other information which we believe adequately covers all anticipated losses in respect of trade receivables. There can be no assurance that this allowance will be adequate.
Our business will be subject to interest rate risk, and variations in interest rates may negatively affect financial performance.
Changes in the interest rate environment may reduce our profits. Loan volume and yields are affected by market interest rates on loans, and rising interest rates generally are associated with a lower volume of loan originations. We cannot ensure that we can minimize our interest rate risk. While an increase in the general level of interest rates may increase the loan yield and the net interest margin, it may adversely affect the ability of certain borrowers with variable rate loans to pay the interest and principal of their obligations. Accordingly, changes in levels of market interest rates could materially and adversely affect the net interest spread, asset quality, loan origination volume and our overall profitability.
Our proposed lending business will also subject us to specific Israeli laws and regulations.
If we commence operations to extend credit to consumers and businesses, there are numerous Israeli laws and regulations specifically affecting non-bank lenders. These requirements relate to, among other things:
| ● | Minimum shareholder equity; |
| ● | Annual and periodic reporting; |
| ● | Limitations on marketing and solicitation of customers; |
| ● | Prohibition on misleading or fraudulent communications with our current or prospective customers; |
| ● | Prohibition on false or misleading advertisements and solicitations; |
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| ● | Prohibition on linking the Company’s credit products with its other products; and |
| ● | Prohibition on extending credit to minors and other consumer-protection limitations. |
Failure to comply with any of these laws and regulations may expose us to fines, penalties, and enforcement actions which would materially and adversely impact our business.
Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.
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Risks relating to legal uncertainty and doing business in Israel
Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may adversely affect our operations and limit our ability to manage and market our products, which would lead to a decrease in revenues.
Because our offices and our operations are conducted in Israel and all members of our board of directors and management are located in Israel, our business and operations are directly affected by economic, political, geopolitical and military conditions affecting Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and other hostile non-state actors. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian targets in various parts of Israel, which have negatively affected business conditions in Israel.
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Furthermore, hostilities along Israel’s northern border with Hezbollah located in Lebanon have accelerated, and this clash may escalate in the future into a greater regional conflict.
The intensity and duration of Israel’s current war against Hamas is difficult to predict, as are such war’s economic implications on the Company’s business and operations and on Israel’s economy in general. These events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on the Company and its ability to effectively conduct its operations.
It is possible that other terrorist organizations will join the hostilities as well, including Hezbollah in Lebanon, and Palestinian military organizations in the West Bank, as well as other hostile countries, such as Iran, will join the hostilities. Our facilities are not only within the range of rockets from the Gaza Strip, but also within the range of rockets that can be fired from Lebanon, Syria or elsewhere in the Middle East. In the event that our facilities are damaged as a result of hostile action or hostilities otherwise disrupt the ongoing operation of our facilities, our ability to deliver products to customers in a timely manner to meet our contractual obligations with customers and vendors could be materially and adversely affected.
Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.
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In addition, popular uprisings in various countries in the Middle East and North Africa have affected the political stability of those countries. Such instability may lead to a deterioration in the political and trade relationships that exist between the State of Israel and these countries. Moreover, some countries around the world restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictions may limit materially our ability to obtain raw materials from these countries or sell our products to companies and customers in these countries. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods. Such efforts, particularly if they become more widespread, may materially and adversely impact our ability to sell our products outside of Israel.
Furthermore, following Hamas’ attack on Israel and Israel’s security cabinet declaration of war against Hamas, the Houthi movement, which controls parts of Yemen, launched a number of attacks on marine vessels traversing the Red Sea, which marine vessels were thought to either be in route towards Israel or to be partly owned by Israeli businessmen. The Red Sea is a vital maritime route for international trade traveling to or from Israel. As a result of such disruptions, we may experience in the future delays in supplier deliveries, extended lead times, and increased cost of freight, increased insurance costs, purchased materials and manufacturing labor costs. The risk of ongoing supply disruptions may further result in delayed deliveries of our products.
Prior to the Hamas attack in October 2023, the Israeli government pursued extensive changes to Israel’s judicial system, which sparked extensive political debate and unrest. In response to such initiative, many individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in security markets, and other changes in macroeconomic conditions. The risk of such negative developments has increased in light of the recent Hamas attacks and the war against Hamas declared by Israel. To the extent that any of these negative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise additional funds, if deemed necessary by our management and board of directors.
Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.
Many Israeli citizens are obligated to perform one month, and in some cases more, of annual military reserve duty until they reach the age of 45 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be additional military reserve duty call-ups in the future in connection with this conflict or otherwise. Some of our employees, consultants and employees of the manufacturer of our products, are required to perform annual military reserve duty in Israel and may be called to active duty at any time under emergency circumstances. Our operations could be disrupted by such call-ups.
Our sales may be adversely affected by boycotts of Israel.
Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies whether as a result of hostilities in the region or otherwise. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies. Such actions, particularly if they become more widespread, may adversely impact our ability to sell our products.
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We are subject to material risks related to foreign currency exchange rate fluctuations.
Currently, our revenues from Israeli customers are collected in NIS. Most of our customers are based outside of Israeli and they pay us mostly in USD and EUR. Some of our overhead expenses are paid in NIS and some are paid in USD and EUR. Cost of row materials purchased and used by us is paid in NIS, USD and EUR. We face foreign currency rate translation risks when our results are translated to U.S. dollars or to Euros.
The exchange rate between NIS and USD, and between NIS and EUR, has recently experience fluctuations as a result of political and economic developments in both Israel and internationally. As of December 31, 2023, the NIS was approximately 3.624 to the US$1.00 and approximately 4.00 to the EUR after having been stronger over a period of several years, which has materially and adversely affected our revenues in NIS. There can be no assurance that such exchange rate will stabilize in the future amongst the volatility of currencies, globalization and the unstable economies in recent years. Since our revenues and net income are denominated in NIS, any decrease in the value of NIS against U.S. dollars and/or the Euro would adversely affect our revenues.
It may be difficult to enforce a U.S. judgment against us, our officer and director or to assert U.S. securities laws claims in Israel or serve process on our officers and directors.
Since our directors and officers are not residents of the United States and all of our assets are located outside the United States, service of process upon us or our non-U.S. resident director and officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officer and director because Israel may not be the most appropriate forum 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. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Additionally, Israeli courts might not enforce judgments obtained in the United States against us or our non-U.S. directors and executive officers, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought. For more information, see “Enforceability of civil liabilities.”
Your rights and responsibilities as our shareholder are governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.
We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our articles of association and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has 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 amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and certain transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it 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 or has other powers toward the company has a duty of fairness toward the company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior.
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We are not in compliance with certain corporate governance requirements under the Companies Law.
The Companies Law imposes various corporate governance requirements upon public companies, including the requirement to establish an audit committee and compensation committee, appoint two external directors, and retain an internal auditor. As of the date of this Annual Report, we are not in compliance with these requirements. As a result of this non-compliance, we are at risk of fines, penalties, and enforcement actions by the Israel Securities Authority (ISA), which may materially and adversely affect our business. While we intend to remediate these corporate governance failures prior to being listed on any share exchange, there can be no guarantee that the ISA will not enforce these requirements before we achieve compliance, or that the ISA will penalize us for past non-compliance even after we achieve compliance.
Provisions of Israeli law and our articles of association may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.
Provisions of Israeli law and our articles of association 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 or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares. Among other things:
| ● | Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased; |
| ● | Israeli corporate law does not provide for shareholder action by written consent, thereby requiring all shareholder actions to be taken at a general meeting of shareholders; |
| ● | our articles of association divide our directors into three classes, each of which is elected once every three years; |
| ● | our articles of association generally require a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision dividing our directors into three classes, requires a vote of the holders of at least 65% of the total voting power of our shareholders; |
| ● | our articles of association do not permit a director to be removed except by a vote of the holders of at least 65% of the total voting power of our shareholders and any amendment to such provision requires the approval of at least 65% of the total voting power of our shareholders; and |
| ● | our articles of association provide that director vacancies may be filled by our board of directors. |
Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax.
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We may be exposed to liabilities under the U.S. Foreign Corrupt Practices Act and other U.S. and foreign anti-corruption anti-money laundering, export control, sanctions and other trade laws and regulations, and any determination that we violated these laws could have a material adverse effect on our business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. We are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 1977, the Israeli Prohibition on Money Laundering Law—2000 and possibly other anti-bribery and anti-money laundering laws in countries outside of the United States in which we conduct our activities. Compliance with these laws has been the subject of increasing focus and activity by regulatory authorities, both in the United States and elsewhere, in recent years. Anti-corruption laws are interpreted broadly and prohibit companies and their employees and third-party intermediaries from authorizing, promising, offering, providing, soliciting or accepting, directly or indirectly, improper payments or benefits to or from any person whether in the public or private sector.
Noncompliance with anti-corruption, anti-money laundering, export control, sanctions and other trade laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. Responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In addition, regulatory authorities may seek to hold us liable for successor liability for violations committed by companies in which we invest or that we acquire. As a general matter, enforcement actions and sanctions could harm our business, results of operations and financial condition.
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Risks relating to our ordinary shares
An active trading market for our ordinary shares may not develop and the trading price for our shares may fluctuate significantly.
There has not been an active public market for our ordinary shares, and we cannot assure you that a liquid public market for our shares will ever develop. If an active public market for our shares does not develop, the market price and liquidity of our shares may be materially and adversely affected.
Our Ordinary Shares are subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.
Rule 15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
The trading price of our shares is likely to be volatile, which could result in substantial losses to investors.
If we are successful at developing a market for our shares, the trading price of our shares is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in Israel that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for our shares may be highly volatile for factors specific to our own operations, including the following:
| ● | variations in our revenues, earnings and cash flow; |
| ● | announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; |
| ● | announcements of new offerings, solutions and expansions by us or our competitors; |
| ● | changes in financial estimates by securities analysts; |
| ● | detrimental adverse publicity about us, our services or our industry; |
| ● | additions or departures of key personnel; |
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| ● | sales of additional equity securities; and |
| ● | potential litigation or regulatory investigations. |
Any of these factors may result in large and sudden changes in the volume and price at which our shares will trade.
In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
Our majority shareholder and principal officer has substantial influence over our company and his interests may not be aligned with the interests of our shareholders.
Menachem Shalom, our majority shareholder and principal officer, currently owns all the total voting power of our outstanding preferred shares and 87% of the issued and outstanding ordinary shares. As a result, he maintains substantial influence over our business, including significant corporate actions such as mergers, consolidations, sales of all or substantially all of our assets, election of directors and other significant corporate actions.
Mr. Shalom may take actions that are not in the best interest of our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the shares. These actions may be taken even if they are opposed by our other shareholders. In addition, the significant concentration of share ownership may adversely affect the trading price of the shares due to investors’ perception that conflicts of interest may exist or arise. For more information regarding our principal shareholders and their affiliated entities, see “Principal Shareholders.”
If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our shares, the market price for our shares and trading volume could decline.
The trading market for our shares will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our shares, the market price for our shares would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our shares to decline.
If we are successful at creating a market for our shares, the sale or availability for sale of substantial amounts of our shares could adversely affect their market price.
Sales of substantial amounts of our shares in the public market, or the perception that these sales could occur, could adversely affect the market price of our shares and could materially impair our ability to raise capital through equity offerings in the future. Shares held by our existing shareholders may now or in the future be sold in the public market. There are 2,282,124 ordinary shares outstanding, of which 282,124 are freely tradeable without any restrictions. In addition, there are 10,000,000 preferred shares outstanding, all owned by Mr. Shalom, which are convertible into an aggregate of up to 1,000,000,000 of our ordinary shares at the option of the holder and may be resold as restricted shares in the future or be registered for resale without restriction. We cannot predict what effect, if any, market sales of securities held by Mr. Shalom or any other shareholder or the availability of these securities for future sale will have on the market price of our shares.
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Negative publicity may harm our brand and reputation and have a material adverse effect on our business.
Negative publicity about us, including our services, management, business model and practices, compliance with applicable rules, regulations and policies, or our network partners may materially and adversely harm our brand and reputation and have a material adverse effect on our business. We cannot assure you that we will be able to defuse any such negative publicity within a reasonable period of time, or at all. Additionally, allegations, directly or indirectly against us, may be posted on the internet by anyone on a named or anonymous basis, and can be quickly and widely disseminated. Information posted may be inaccurate, misleading and adverse to us, and it may harm our reputation, business or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative and potentially inaccurate or misleading information about our business and operations, which in turn may materially adversely affect our relationships with our customers, employees or business partners, and adversely affect the price of our shares.
Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our shares for return on your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. In addition, the Companies Law imposes restrictions on our ability to declare and pay dividends. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our shares as a source for any future dividend income.
Subject to applicable law and the provisions of our articles of association, our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment will likely depend entirely upon any future price appreciation of our shares. There is no guarantee that our shares will appreciate in value or even maintain the price at which you purchased the shares. You may not realize a return on your investment in our shares and you may even lose your entire investment in our shares.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.
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We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we are an emerging growth company until the earliest of (a) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of our public offering; (c) the date on which we have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which would occur if the market value of our Shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2023. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting, SEC reporting, and other expenses that we will not incur as a foreign private issuer.
If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.
As a small business company, we have limited accounting personnel and other resources with which to address our internal controls and procedures. Our management has not completed an assessment of the effectiveness of our internal controls over financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. In the course of auditing our consolidated financial statements for the years ended December 31, 2022 and 2023, we identified several material weaknesses in our internal control over financial reporting and other control deficiencies as of December 31, 2023. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified to date relate to (i) a lack of accounting staff and resources with appropriate knowledge of generally accepted accounting principles in the United States (“U.S. GAAP”) and SEC reporting and compliance requirements; (ii) a lack of sufficient documented financial closing policies and procedures; (iii) a lack of independent directors and an audit committee; (iv) lack of risk assessment in accordance with the requirement of COSO 2013 framework and (v) a lack of an effective review process by the accounting manager which led to material audit adjustments to the financial statements.
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Following the identification of the material weaknesses and control deficiencies, we plan to continue to take remedial measures including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) setting up an internal audit function as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control; and (iv) appointing independent directors, establishing an audit committee, and strengthening corporate governance.
We plan to take measures to remedy these material weaknesses. The implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct theses material weaknesses or our failure to discover and address any other material weaknesses could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our Ordinary shares, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud. We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404 requires that we include a report from management on our internal control over financial reporting in our annual report on Form 20-F beginning with this annual report. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude in future reports on the effectiveness of our internal control over financial reporting, as it has in the report for the year ending December 31, 2023, that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we cease to be an “emerging growth company”, our additional reporting obligations may place an added strain on our management, operational and financial resources and systems. We may be unable to timely complete our evaluation testing and any required remediation.
We do not expect to pay any dividends in the foreseeable future.
We have never declared or paid any dividends on our ordinary shares. We do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and expand our business. Subject to applicable law and our articles of association, our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. The Companies Law imposes restrictions on our ability to declare and pay dividends. Payment of dividends may also be subject to Israeli withholding taxes. See “Taxation and government programs” for more information.
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| ITEM 4. | INFORMATION ON THE COMPANY |
| A. | HISTORY AND DEVELOPMENT OF THE COMPANY |
We were originally incorporated under the name of P.M.E SAL Technologies Ltd. under the laws of the State of Israel on January 29, 2007. In September 2008, we changed our name to Hold Me Ltd. by filing a Certificate of Amendment with the Registrar of Companies in Israel to effect a name change. Initially we were engaged in providing website design and development services. We ceased conducting such business activity in 2011 and had no significant business activity until 2018.
At the beginning of 2018, we started to develop a mobile-wallet-as-a-service platform for organizations interested in launching mobile wallet applications for their brand.
At 2021 we have received a basic (limited) non-banking credit license allowing it to provide credit in Israel
At September 2023 we have signed an agreement to purchase from Yonatan Shachar, an Israeli citizen, 100% of the outstanding shares of S.Y. Calimero Entrepreneurship Ltd – an Israeli company that has a basic (limited) non-banking credit license allowing it to provide credit in Israel – for the total amount of NIS 125,000 (approximately USD 32,900). The purchase is subject to a condition that the controlling shareholder of the Company, Menachem Shalom, would be granted a permit to control the purchased company. That permit was granted By the Israeli Authority for Capital Markets, Insurance and Savings on March 31 2024 and the acquisition has closed.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will also be available to the public through the SEC’s website at https://www.sec.gov. The Crone Law Group, P.C. is our agent in the United States and its address is 420 Lexington Avenue, Suite 2446, New York, NY 10170.
| B. | BUSINESS OVERVIEW |
Our Platform
We started the research and development for the Platform in 2018 and offered its first commercial application in 2019. Due to inability to commercialize our Platform, our sole Customer – Galileo – has discontinued the licensed agreement with us and as a result we had no revenues generated from the Platform during the year of 2023.
Our Revenue Model
For the year ended December 31, 2023, we generated 927,000 NIS as a result of consulting fees from a new customer. We were engaged to conduct a market analysis of the lending market in Israel. For the year ended December 31, 2022, we generated NIS 174,884 revenues primarily through license fees from our sole customer, Galileo. The amount of the license fee was determined by the range and type of API services offered and consumed on our platform and by the usage volume of our customer on our API software – meaning number of end-users and transactions (API-calls) triggered on our platform. We are currently not owed any money from Galileo. During 2023 we have provided two loans to two businesses in Israel.
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Our products
Due to inability to commercialize our software platform through the license agreement with Galileo, we have discontinued our software business. For the year ended December 31, 2023 and 2022, the digital payment services generated no revenues and NIS175,884, respectively. We have never generated revenues from digital banking services.
Our customer
We anticipate that our future customers may include small businesses in Israel. We currently have two business customers we have provided loans to.
For the years ended December 31, 2023, we had no revenues from the Platform or any of our other products. For the year ended December 31, 2022, our sole customer accounted for 96% of our revenues and approximately 4% of our revenues were derived from other non-substantial sales.
On December 5, 2019, we entered into an Agreement for Operation and Sale of Digital Wallets, which was amended by an Addendum to Sales Agreement on December 27, 2020, with Galileo Tech Ltd. We granted Galileo an exclusive license to commercialize our technology in Israel. However, we are not bound to make any development, consultation, management and/or other service of our technology to Galileo or its customers.
In accordance with the terms of our agreement with Galileo, the licensing fee included an one-time establishment fee of approximately NIS800,000 (including the annual licensing fee for the first year of the agreement) and an annual licensing fee of NIS 100,000 for the second and third years (2021 and 2022), and NIS 150,000 per additional year commencing December 5, 2020. In addition, Hold Me is also entitled to 12% of all income generated by Galileo from using or sub-licensing the Company’s products licensed to Galileo.
Galileo was also given the right to use our technology for clearing payments between various digital wallets and the businesses registers in Israel. For such right we are to receive 10% of all gross profits generated by Galileo from their customers.
Galileo is entitled to market and commercialize in Israel the applications developed by Hold Me and to make changes and/or additions as it deems fit. For this right we were paid NIS100,000 and are entitled to 10% of all gross profits.
Pursuant to the terms of the agreement, we are obligated to fix or repair the failures and/or inadequacies, but not those developed or changed by Galileo.
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The agreement does not provide for a term. Each party has the right to terminate the agreement if the other party in breach fails to cure a breach within 30 days or conducts illegal activities or violates the laws.
As a result of Galileo not paying us the full NIS 800,000 owed to us for the year ended December 31, 2020 in accordance with the terms of the Agreement, we signed an Addendum with Galileo on December 27, 2020. According to the Addendum, Galileo undertook to pay us (1) NIS120,000 by December 31, 2020 (which was fully paid); (2) NIS150,000 by January 31, 2021 (which was fully paid) and (3) in exchange for NIS180,000 owed, Galileo issued us 128,571 shares of Galileo. In addition, the payment of the NIS100,000 annual registration fee was postponed until June 2021, when it was fully paid.
The shares we received in Galileo were assigned to Mr. Shalom, our sole officer and a member of our board of directors, in consideration for the reduction in the debt owed to him. See “Related Party Transactions”.
Due to inability to commercialize the platform, Galileo has discontinued our license agreement with them.
Non-Bank Lending License
On November, 2021, we were issued a limited license from the Israeli Authority regulating Capital Markets, Insurance and Savings to operate as a non-banking lender in Israel. This license enables us to lend up to NIS 25,000,000 as a non-bank.
At September 2023 we have signed an agreement to purchase from Yonatan Shachar, an Israeli citizen, 100% of the outstanding shares of S.Y. Calimero Entrepreneurship Ltd – an Israeli company that has a basic (limited) non-banking credit license allowing it to provide credit in Israel – for the total amount of NIS 125,000 (approximately USD 32,900). The purchase is subject to a condition that the controlling shareholder of the Company, Menachem Shalom, would be granted a permit to control the purchased company. That permit was granted by the Israeli Authority for Capital Markets, Insurance and Savings on March 31 2024 and the acquisition closed.
For the year ended December 31, 2023, the Company issued two separate revolving credit notes, one to an Israeli company and the other to an Israeli resident. The revolving credit facilities grant the borrowers the ability to borrow up to $500,000 from the Company upon 3 business days advance notice. The outstanding principal balance and all accrued interest is due December 31, 2024. The borrowers agreed to certain covenants, including not incurring additional debt in excess of $100,000, no change in control or the officers of the borrower, no sale of assets or investments.
As of December 31 2023 and as of the date of this report, the principal amount of these two credit lines, actually withdrawn by the borrowers is NIS 550,000 (approximately USD 151,640).
Our Suppliers
Our only relationship with vendors are with service providers for our corporate needs.
Intellectual Property
We do not have any intellectual property protection on our source code or any other aspect of the Platform.
Marketing and Competition
The Company does not currently have the resources to market its services.
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Leading Competitors
There are many companies, both large and small, which are our competitors in the credit industry.
Competitive Challenges and Advantages
Given the extremely fast changes that occur in the overall technology world, including in the payment and software sectors, management does not believe that the Platform has any competitive advantage.
Development and Expansion Strategy
The key components of our development and expansion strategy over the next two-to-five years are as follows:
| ● | ongoing continues development of the company’s products. |
| ● | marketing and sales efforts of the company’s products to potential customers. |
| ● | licensing or buying of additional technology, software or products that may increase the attractiveness or the price of the company’s products. |
| ● | the Company will be looking to form commercial partnerships with software distributors and integrators – to expand its market reach and sales. |
| ● | once substantial sales are achieved, the company is looking to expand its product offering by developing, acquiring or licensing additional products relevant for its customer-base. |
Government legislation and regulation
Actions of our users
In many jurisdictions, including the United States and countries in Europe, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, including actions based on defamation, breach of data protection and privacy rights and other torts, unfair competition, copyright and trademark infringement and other theories based on the nature and content of the materials searched, the ads posted, or the content uploaded by users. Any court ruling or other governmental action that imposes liability on providers of online services for the activities of their users and other third parties could harm our business. In addition, rising concern about the use of the Internet for illegal conduct, such as the unauthorized dissemination of national security information, money laundering or supporting terrorist activities may in the future produce legislation or other governmental action that could require changes to our products or services, restrict or impose additional costs upon the conduct of our business or cause users to abandon material aspects of our service.
Data protection
We hold certain personal data of our users, including their username, email address, IP address, device identifiers, address, telephone number, photo, transactional data, consumption habits (such as purchase history), profession and education, location, social media account log in details and username and additional information regarding the use of our Marketplace (such as published portfolio, Gig information, purchases, ratings and additional information the user decides to upload and share with us or other users of our marketplace), and may hold certain personal data of the visitors to our users’ websites. In addition, we hold certain personal data of our employees and contractors. We operate in accordance with the terms of our privacy policies,
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which describe our practices concerning the collection, use, transmission and disclosure of personal data. As a “database owner” pursuant to the Privacy Law, we are subject to certain obligations and restrictions, such as the obligation to register databases containing personal data, the requirement to properly notify the data subjects regarding the nature of the collection and use of their personal data prior to their collection, the requirement to obtain valid informed consents from the data subjects prior to using their personal data, conditions with respect to transfer of personal data outside Israeli borders, conditions and restrictions regarding the use of any personal data for direct mailing, obligations to meet certain data subject rights (such as access, rectification and deletion rights) as well as data security obligations. In this respect, the new Israeli Privacy Protection Regulations (Data Security) 2017 (“Data Security Regulations”), which entered into effect in Israel in May 2018, impose obligations with respect to the manner personal data is processed, maintained, transferred, disclosed, accessed and secured. The Data Security Regulations may require us to adjust our data protection and data security practices, information security measures, certain organizational procedures, applicable positions (such as an information security manager) and other technical and organizational security measures. The Israeli Privacy Protection Authority may initiate administrative inspection proceedings, from time to time, without any suspicion of any particular breach of the Privacy Law, as the Authority has done in the past with respect to dozens of Israeli companies in various business sectors. In addition, to the extent that any administrative supervision procedure is initiated by the Israeli Privacy Protection Authority that reveals certain irregularities with respect to our compliance with the Privacy Law, in addition to our exposure to administrative fines, civil claims (including class actions) and in certain cases criminal liability, we may also need to take certain remedial actions to rectify such irregularities, which may increase our costs.
While it is generally the laws of the jurisdiction in which a business is located that apply, there is a risk that data protection regulators of other countries may seek jurisdiction over our activities in locations in which we process data or have users but do not have an operating entity. Where the local data protection and privacy laws of a jurisdiction apply, we may be required to register our operations in that jurisdiction or make changes to our business so that user data is only collected and processed in accordance with applicable local law. In addition, because our services are accessible worldwide, certain foreign jurisdictions may claim that we are required to comply with their privacy and data protection laws, including in jurisdictions where we have no local entity, employees, or infrastructure. In such cases, we may require additional legal review and resources to ensure compliance with any applicable privacy or data protections laws and regulations. In addition, in many jurisdictions there is new legislation that may affect our business and require additional legal review.
United States
A number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection could affect us. For example, in June 2018, California passed the California Consumer Privacy Act (“CCPA”), which entered into effect on January 1, 2020 and provides new data privacy rights for consumers and new operational requirements for companies. Additionally, some other states have passed proactive, rather than reactive, information security legislation. These state laws require that certain minimum protections and security measures be taken to protect personal data. The costs of compliance with these laws may increase in the future as a result of changes in interpretation.
Europe
European legislators adopted the GDPR, repealing the 1995 European Data Protection Directive (Directive 95/46/EC). We are defined as a “Data Controller” with respect to the personal data of our users that we collect and are therefore subject to a number of key legal obligations under the GDPR. In addition to reflecting existing requirements that already existed under the old data protection regime, such as, among other things, requirements to provide users with a “fair processing notice” if we process their data, ensure that inaccurate data is corrected, only retain data for so long as is necessary and not transfer data outside the European Economic Area to jurisdictions which do not ensure an adequate level of protection of personal data without taking certain safeguards, the GDPR also implemented new, more stringent operational and procedural requirements for our use of personal data. These include expanded prior information requirements in light of the transparency principle to tell our users how we may use their personal data, increased controls on profiling users, increased rights for users to access, control and delete their personal data and mandatory data breach notification requirements. In addition, there are significantly increased administrative fines of the greater of €20 million and 4% of global turnover (as well as the right to compensation for financial or non-financial damages claimed by any individuals under Article 82 of the GDPR).
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The European ePrivacy Directive (Directive 2002/58/EC as amended by Directive 2009/136/EC) obliges the EU member states to introduce certain national laws regulating privacy or data protection in the electronic communications sector. Pursuant to the requirements of the ePrivacy Directive, companies must, among other things, obtain consent to store information or access information already stored, on a user’s terminal equipment (e.g., computer or mobile device). These requirements predominantly regulate the use by companies of cookies and similar technologies. Prior to providing such consent, users must receive clear and comprehensive information, both in accordance with the more stringent requirements under the GDPR. Certain exemptions to these requirements on which we rely are available for technical storage or access for the sole purpose of carrying out the transmission of a communication over an electronic communications network or as strictly necessary to provide a service explicitly requested by the user.
In recent years, U.S. and European lawmakers and regulators have expressed concern over the use of third-party cookies and similar technologies for online behavioral advertising, and laws in this area are also under reform. In the European Union, current national laws that implement the ePrivacy Directive will soon be replaced by an EU regulation known as the ePrivacy Regulation. In the European Union, informed consent is required for the placement of a cookie on a user’s device and for direct electronic marketing, and the GDPR also imposes additional conditions in order to satisfy such consent, such as a prohibition on pre-checked consents and on bundled consents thereby requiring users to affirmatively consent for a given purpose through separate tick boxes. The draft ePrivacy Regulation retains these additional consent conditions and also imposes the strict opt-in marketing rules on direct marketing that is “presented” on a web page rather than sent by email, alters rules on third-party cookies and similar technology and significantly increases penalties for breach of the rules. Regulation of cookies and similar technologies may lead to broader restrictions on our marketing and personalization activities and may negatively impact our efforts to understand users’ internet usage, as well as the effectiveness of our marketing and our business generally. Such regulations may have a negative effect on businesses, including ours, that collect and use online usage information for consumer acquisition and marketing, it may increase the cost of operating a business that collects or uses such information and undertakes online marketing, it may also increase regulatory scrutiny and increase potential civil liability under data protection or consumer protection laws. In response to marketplace concerns about the usage of third-party cookies and web beacons to track user behaviors, providers of major browsers have included features that allow users to limit the collection of certain data generally or from specified websites, and the ePrivacy Regulation draft also advocates the development of browsers that block cookies by default. These developments could impair our ability to collect user information, including personal data and usage information, that helps us provide more targeted advertising to our current and prospective consumers, which could adversely affect our business, given our use of cookies and similar technologies to target our marketing and personalize the consumer experience.
As the text of the ePrivacy Regulation is still under development and currently in draft form, and as further guidance is issued and interpretation of both the ePrivacy Regulation and the GDPR develop, it is difficult to assess the impact of the ePrivacy Regulation on our business or operations, but it may require us to modify our data practices and policies and we could incur substantial costs as a result.
| C. | ORGANIZATIONAL STRUCTURE |
The Company currently has no subsidiaries and is not part of a group of companies.
| D. | PROPERTY, PLANT AND EQUIPMENT |
We currently have an office in the house of Menachem Shalom, our sole officer and a member of our board of directors. We consider our current office space sufficient to meet our anticipated needs for the foreseeable future and is suitable for the conduct of our business.
| ITEM 4A. | UNRESOLVED STAFF COMMENTS |
None.
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| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annual report on Form 20-F. This discussion and other parts of this annual report on Form 20-F contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20-F. We report financial information under US GAAP and our financial statements were prepared in accordance with generally accepted accounting principles in the United States.
| A. | OPERATING RESULTS |
Comparison of Results of Operations for the financial years ended December 31, 2023 and 2022
The following table shows information taken from our consolidated statements of profit and loss for the years ended December 31, 2023 and December 31, 2022:
| For the Year Ended December 31, |
||||||||
| 2023 | 2022 | |||||||
| NIS | ||||||||
| Revenue | 927,000 | 108,671 | ||||||
| Cost of projects | (213,344 | ) | (158,895 | ) | ||||
| Gross profit (loss) | 713,656 | (50,224 | ) | |||||
| Selling, administrative and general expenses | (432,088 | ) | (603,867 | ) | ||||
| Operating Profit (Loss) | 281,568 | (654,091 | ) | |||||
| Financing expenses, net | (84,337 | ) | (63,412 | ) | ||||
| Profit (Loss) for the year after financing | 197,231 | (717,503 | ) | |||||
| Other income | - | 5,613 | ||||||
| Net Profit (Loss) | 197,231 | (711,890 | ) | |||||
| Basic earnings (loss) per ordinary share | 0.02 | (0.31 | ) | |||||
| Diluted earnings (loss) per ordinary share | - | - | ||||||
| Weighted-average number of ordinary shares outstanding: | ||||||||
| Basic | 2,282,124 | 2,282,124 | ||||||
| Diluted | 1,002,282,124 | 2,282,124 | ||||||
Revenues
Revenues were NIS 927,000 for the year ended December 31, 2023, an increase of NIS 818,329, or approximately 753%%, as compared to NIS 108,671 for the year ended December 31, 2022.
The increase in revenues was attributed primarily to the consulting fees generated from a new client During 2023 we recognized no revenue from licensing fees.
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Cost of Revenues
Our cost of revenues for the year ended December 31, 2023 was NIS 213,344, as compared to our cost of revenues for the year ended December 31, 2022 of NIS 158,895, which primarily consisted of all direct and indirect software development expenses paid to service providers, contractors and freelancers. The increase in our cost of revenue was a result that for the year ended December 31, 2023 our CEO has spent time on generating the revenues and we incurred no similar costs for the year ended December 31, 2022.
Tabular Disclosure of Contractual Obligations
As of December 31, 2023, we had the following contractual obligations:
| Payments Due by Period | ||||||||||||||||||||
| Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
| Debt Obligations(1) | 16,360 | 16,360 | - | |||||||||||||||||
| Debt to Shareholder(2) | 1,217,768 | 1,217,768 | ||||||||||||||||||
| Debt to Related Parties(3) | 1,489,342 | 1,489,342 | ||||||||||||||||||
| Total | 2,723,470 | 2,723,470 | ||||||||||||||||||
| (1) | Owed to Bank Mizrachi | |
| (2) | Owed to Menachem Shalom, CEO and controlling shareholder. | |
| (3) | Owed to entities owned by Menachem Shalom, CEO and controlling shareholder |
Accumulated Deficit
Our accumulated deficit in fiscal year 2023 of NIS3,034,242 decreased by NIS197,231 from our negative accumulated deficit in fiscal year 2022 of NIS 3,231,473. The decrease was due to a profit in 2023.
General and administrative expenses
General and administrative expenses decreased by NIS 171,779, or approximately 28.44%, from NIS 603,867 in fiscal year end 2022 to NIS 432,088 of expenses in fiscal year end 2023. The change was primarily due to allocating part of the expenses to direct cost.
Research and development expenses
We do not have research and developments expenses itemized as specific line items as they are included in the cost of revenues.
Net income
As a result of the foregoing, our net income increased from a loss of NIS 711,890 in fiscal year 2022 to a net profit of NIS 197,231 in fiscal year 2023.
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| B. | LIQUIDITY AND CAPITAL RESOURCES |
As reflected in our financial statements, we had a cash balance of NIS 135,832, liabilities of NIS 826,959 and a net total stockholders’ deficit of NIS 1,861,718 as of December 31, 2023.
As of December 31, 2023, we borrowed a total of NIS 16,360 from a bank in Israel. The outstanding principal amount, plus accrued and unpaid interest, is due May 24, 2024. We are currently paying NIS 3,322 a month to the bank.
Management estimates that in order to continue operations we will need $90,000 for the next 12 months of operations. Using currently available capital resources, which consist of, we cannot continue operations, unless we raise money from our existing shareholder or from other resources.
We currently have no material commitments for capital expenditures. Accordingly, if we are not successful at raising additional funds, there is no assurance that we will have sufficient cash to remain in business. Even if we are successful at raising additional funds in the short term, we may be required to raise additional funds, particularly if we are unable to continue generating positive cash flow as a result of our operations. We estimate that based on current plans and assumptions, that our available cash will not be sufficient to satisfy our cash requirements under our present operating expectations, without further financing, for up to 12 months. In addition, our company may, from time to time, receive continued funding and capital resources from related parties. However, as of the date of this annual report, such related parties do not have any existing obligation to advance funds or working capital to support our business, nor can our company rely on any advance funds from such related parties. We may not have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations. We may need to raise significant additional capital to fund our operating expenses, pay our obligations, and grow our company. We do not anticipate we will be profitable in 2024. Therefore, our future operations may be dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, we have no current arrangements to issue any securities. Also, a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations.
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.
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The following table shows selected information taken from our consolidated cash flow statements for the years ended December 31, 2023 and 2022:
Statements of Cash Flows
For
the December 31, | ||||||||
| 2023 | 2022 | |||||||
| NIS | ||||||||
| Cash flows from operating activities: | ||||||||
| Net Profit (loss) | 197,231 | (711,890 | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 1,976 | 150,235 | ||||||
| Financing expenses, net | 79,492 | |||||||
| Decrease (Increase) in trade and other account receivable | 63,907 | (199,159 | ) | |||||
| Increase (decrease) in Trade payables | 11,901 | (2,862 | ) | |||||
| Increase (decrease) in other account payables | 532,437 | 412,176 | ||||||
| Net cash provided by (used in) operating activities | 886,944 | (351,500 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Sells (Purchase) of property and equipment | - | 47,103 | ||||||
| Advances in account of investments in shares | (205,000 | ) | - | |||||
| Increase (decrease) in Loans Granted | (595,000 | ) | - | |||||
| Net cash provided by (used in) investing activities | (800,000 | ) | 47,103 | |||||
| Cash flows from financing activities: | ||||||||
| short term loan from related parties and shareholders’ loan | (347,109 | ) | - | |||||
| Change in Loans from banking institutions | (46,214 | ) | (27,199 | ) | ||||
| Net cash provided by (used in) financing activities | (393,323 | ) | (27,199 | ) | ||||
| Foreign Exchange effect on cash and cash equivalent | (9,573 | ) | ||||||
| Increase (Decrease) in cash and cash equivalents | (315,952 | ) | (331,596 | ) | ||||
| Cash and cash equivalents at the beginning of the period | 451,784 | 783,380 | ||||||
| Cash and cash equivalents at the end of the period | 135,832 | 451,784 | ||||||
Cash flows from operating activities
The operating activity has provided a t net cash amount of NIS 886,944.
Cash flows used in investing activities
NIS 800,000 was used in the Company investing activity.
Cash flows used in financing activities
NIS 393,323 was used in financing activity.
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| C. | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC. |
The Company did not conduct any research or development efforts in the year ended December 31, 2023. The Company owns no patents.
| D. | TREND INFORMATION |
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events since December 31, 2023 that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
| E. | CRITICAL ACCOUNTING ESTIMATES |
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenues and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period. The most significant estimates and assumptions include the valuation of accounts receivable and inventories, useful lives of property, plant and equipment and intangible assets, the recoverability of long-lived assets, provision necessary for contingent liabilities, and revenue recognition. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe critical accounting policies as disclosed in this Annual Report reflect the more significant judgments and estimates used in preparation of our consolidated financial statements.
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| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
| A. | DIRECTORS AND SENIOR MANAGEMENT |
The following table sets forth information regarding our directors, executive officers and other key employees as of December 31, 2023:
| Name | Age | Position | ||
| Menachem Shalom | 49 | Chief Executive Officer, Chief Financial Officer and Director | ||
| Gad Zohar | 58 | Director | ||
| Igal Chemerinsky | 53 | Director |
Set forth below is a brief description of the background and business experience of our executive officers and directors:
Menachem Shalom, Chief Executive Officer, Chief Financial Officer and Director
Menachem Shalom has been our Chief Executive Officer, Chief Financial Officer and member of our Board of Directors since 2008. Mr. Shalom founded and served as the chief executive officer for Wayerz Solutions Ltd. from January 2015 to August 2017. From August 2013 to April 2014, Mr. Shalom served as vice president development, sales and marketing, of Dsnr Media Group Ltd. Mr. Shalom obtained a LLM with honors from Columbia University School of Law in 2000, a MBA from Hebrew University in 2003 and a LLB, magna cum laude, from Hebrew University of Jerusalem in 1998.
Gad Zohar, Director
Gad Zohar has been a director of the Company since July 28, 2021. Mr. Zohar manages Dag Networks Ltd., an Israeli private company that offers information technology, telecommunications and cloud services and solutions for businesses since 2011, when he founded the company.
Igal Chemerinsky, Director
Igal Chemerinsky has been a director of the Company since July 28, 2021. Since 2020, Mr. Chemerinsky has been the chief revenue officer of Parknav Ltd., a startup developing real-time on-street parking with a highly accurate and scalable solution. From 2019 to 2020, Mr. Chemerinsky served as the EVP of Global Sales of Enably Ltd.- a SaaS platform that utilizes Artificial Intelligence, Natural Language Processing (NLP) and advanced algorithms for Online Training, e-Learning, knowledge delivery, compliance, regulations, and content delivery. From 2017 to 2019, he served as the VP of EMEA Sales of Votiro Cybersec Ltd., a global leader in Email & File secure gateways & end-point solutions protecting organizations against zero-day exploits and other ongoing cyber threats.
Family Relationships
There are no family relationships between any of our executive officers and our directors.
| B. | COMPENSATION |
Set forth below is the compensation paid during the fiscal year ended December 31, 2023 for our sole executive officer.
| Name | 2023 Compensation | |
| Menachem Shalom | NIS 420,000 |
The amount invoiced by Mr. Shalom was pursuant to the terms of the Management Services Agreement, described below.
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Management Services Agreement
We entered into a written management services agreement with our sole executive officer and director as of December 30, 2017 to provide us services full time. Mr. Shalom shall be entitled to receive a monthly management fee of NIS35,000 (USD10,606) plus VAT, which shall increase to NIS45,000 (USD13,636) plus VAT upon completion of the development of the system and the commencement of the sales stage. Upon completion of fundraising in the sum of NIS5,000,000 (USD1,515,152) or more, Mr. Shalom shall be entitled to payment of monthly fee of NIS60,000 (USD18,181) plus VAT. Mr. Shalom is also entitled to reimbursement for travel expenses as well as all his expenses related to the execution of the agreement. We have the right to terminate the agreement with Mr. Shalom upon 6-months’ notice.
| C. | BOARD PRACTICES |
Pursuant to the Companies Law, the management of our business is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders. Our board of directors shall from time to time appoint one or more general managers, who are responsible for our day-to-day management and have individual responsibilities established by our board of directors. General managers are appointed by and serve at the discretion of our board of directors, subject to any applicable employment agreements we have entered into with the general managers. At present, our sole executive officer is Mr. Menachem Shalom.
Under the Companies Law, we are not required to have a majority of independent directors. We are required to appoint at least two external directors. According to our articles of association, our board of directors shall consist of up to 11 directors. Currently, our board of directors consists of three directors, and we have not appointed external directors as of the date of this Annual Report. Pursuant to our articles of association, other than the external directors, for whom special election requirements apply under the Companies Law, our directors are elected at an annual general meeting of our shareholders and serve on our board of directors until the next annual general meeting at which one or more directors are elected or until they are removed by the majority of our shareholders at an annual or special general meeting of our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and our articles of association. In addition, our articles of association allow our board of directors to appoint directors, other than external directors, to fill vacancies in the board of directors temporarily (provided, however, that if they number less than three directors, they may act only in an emergency or to fill the office of director that has become vacant up to the minimum number or in order to call a general meeting of the Company for the purpose of electing directors to fill any or all vacancies, so that there are at least three directors).
Our directors do not have written service contracts and are not required to have them under the Israel Companies Law.
Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have financial and accounting expertise. Under applicable regulations, a director with financial and accounting expertise is a director who, by reason of his or her education, professional experience and skill, has a high level of proficiency in and understanding of business accounting matters and financial statements. He or she must be able to thoroughly comprehend the financial statements of the listed company and initiate debate regarding the manner in which financial information is presented. In determining the number of directors required to have such expertise, a company’s board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that Mr. Shalom has such requisite financial and accounting expertise.
External Directors
Under the Companies Law, a public company is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards of independence and must be appointed by the non-controlling shareholders of the Company. We have not appointed external directors as of the date of this Annual Report.
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The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by a majority vote of the shares present and voting on the matter at a shareholders meeting, provided that either:
| ● | such majority includes at least a majority of the shares held by all shareholders who are non-controlling shareholders and shareholders who do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, which we refer to as a disinterested majority; or |
| ● | the total number of shares held by shareholders who are non-controlling shareholders and shareholders who do not have a personal interest in the election of the external director (other than a personal interest not derived from a relationship with a controlling shareholder) voted against the election of the external director does not exceed 2% of the aggregate voting rights in the company. |
Under the Companies Law, the term “controlling shareholder” means a shareholder with the ability to direct the activities of the company, other than by virtue of serving as an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint more than half of the directors of the company or its general manager. For the purpose of approving transactions with controlling shareholders, a controlling shareholder is deemed to include any shareholder that holds 25% or more of the voting rights in a public company if no other shareholder holds more than 50% of the voting rights in the company. For purposes of determining the holding percentage stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company’s approval are deemed as joint holders.
The term “personal interest” is defined in the Companies Law as a person’s or entity’s personal interest in an act or a transaction of a company, (i) including the personal interest of (a) any spouse, sibling, parent, grandparent or descendant of the persons, any descendant, sibling or parent of a spouse of the person and the spouse of any of the foregoing; and (b) an entity in which the person or entity or any of the foregoing relatives of the person serves as a director or the chief executive officer, owns at least 5% of its issued share capital or voting rights or has the right to appoint one or more directors or the chief executive officer, but (ii) excluding a personal interest arising solely from the ownership of shares. In the case of a person voting by proxy, “personal interest” includes the personal interest of the proxy holder or the shareholder granting the proxy (even if the proxy holder has no personal interest in the matter), whether or not the proxy holder has discretion how to vote.
The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to two additional three-year terms, provided that either:
| ● | his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company, and provided further that the external director is not an affiliated or competing shareholder, as defined in the Companies Law, or a relative of such a shareholder at the time of the appointment, and is not affiliated with such a shareholder at the time of appointment or within the two years preceding the date of appointment; or |
| ● | his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the same majority required for the initial election of an external director (as described above). |
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External directors may be removed only by a special general meeting of shareholders called by the board of directors after the board has determined that circumstances allow such dismissal, at the same special majority of shareholders required for their election or by a court, and in both cases only if the external directors cease to meet the statutory qualifications for their appointment or if they violate their duty of loyalty to our company. In the event of a vacancy created by an external director which causes the company to have fewer than two external directors, the board of directors is required under the Companies Law to call a shareholders meeting as soon as possible to appoint such number of new external directors in order that the company thereafter has two external directors.
Each committee of the board of directors that exercises the powers of the board of directors must include at least one external director, except that the audit committee and the compensation committee must include all external directors then serving on the board of directors. Under the Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation for their services as external directors other than pursuant to the Companies Law and the regulations promulgated thereunder. Compensation of an external director is determined prior to his or her appointment and may not be changed during any three-year term subject to certain exceptions.
The Companies Law provides that a person is not qualified to serve as an external director if (i) the person is a relative of a controlling shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she was directly or indirectly subordinate, or any entity under the person’s control, has or had, during the two years preceding the date of appointment as an external director: (a) any affiliation with the company, with any person or entity controlling the company or a relative of such person at the time of appointment, or with any entity controlled by or under common control with the company at the time of appointment or during the two years preceding the appointment; or (b) in the case of a company with no controlling shareholder or a shareholder holding 25% or more of its voting rights, had at the date of appointment as an external director, any affiliation with a person then serving as chairman of the board or chief executive officer, a holder of 5% or more of the issued share capital or voting power in the company or the most senior financial officer.
The term “relative” is defined as a spouse, sibling, parent, grandparent or descendant; spouse’s sibling, parent or descendant; and the spouse of each of the foregoing persons.
The term “affiliation” includes (subject to certain exceptions): an employment relationship; a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships); control; and service as an office holder, excluding service as a director in a private company prior to the initial public offering of its shares if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.
In addition, no person may serve as an external director if that person’s positions or professional or other activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as a director or if the person is an employee of the Israel Securities Authority or of an Israeli stock exchange. A person may furthermore not continue to serve as an external director if he or she received direct or indirect compensation other than as permitted by the Companies Law and the regulations promulgated thereunder.
Following the termination of an external director’s service on a board of directors, such former external director and his or her spouse and children and other relatives may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholder’s control. This includes engagement as an officer or director of the company or a company controlled by its controlling shareholder or employment by, or provision of services to, any such company for consideration, either directly or indirectly, including through a corporation controlled by such person. This restriction extends for a period of two years with regard to the former external director and his or her spouse or child and for one year with respect to other relatives of the former external director.
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If at the time at which an external director is appointed all members of the board of directors who are not controlling shareholders or relatives of controlling shareholders of the company are of the same gender, the external director to be appointed must be of the other gender. A director of one company may not be appointed as an external director of another company if a director of the other company is acting as an external director of the first company at such time.
According to the Companies Law and regulations promulgated under the Companies Law, a person may be appointed as an external director only if he or she has professional qualifications or if he or she has accounting and financial expertise (each, as defined below). At least one of the external directors must be determined by our board of directors to have accounting and financial expertise.
A director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses an expertise in, and an understanding of, financial and accounting matters and financial statements, such that he or she is able to understand the financial statements of the company and initiate a discussion about the presentation of financial data. A director is deemed to have professional qualifications if he or she has any of (i) an academic degree in economics, business management, accounting, law or public administration, (ii) an academic degree or has completed another form of higher education in the primary field of business of the company or in a field which is relevant to his/her position in the company, or (iii) at least five years of experience serving in one of the following capacities, or at least five years of cumulative experience serving in two or more of the following capacities: (a) a senior business management position in a company with a significant volume of business; (b) a senior position in the company’s primary field of business; or (c) a senior position in public administration or service. The board of directors is charged with determining whether a director possesses financial and accounting expertise or professional qualifications.
Audit Committee
Israeli Companies Law Requirements
Under the Companies Law, a public company is required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all of the external directors, one of whom must serve as chairman of the committee. The audit committee may not include the chairman of the board, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director who derives most of his or her income from a controlling shareholder.
In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors, within the meaning of the Companies Law. In general, an “unaffiliated director” under the Companies Law is defined as either an external director or a director who meets the following criteria:
| ● | the audit committee has determined that he or she meets the qualifications for being appointed as an external director, except for (i) the requirement that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed outside of Israel); and (ii) the requirement for accounting and financial expertise or professional qualifications; and |
| ● | he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of less than two years in the service shall not be deemed to interrupt the continuation of the service. |
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Audit Committee Role
Under the Companies Law, a company’s audit committee is responsible for:
| ● | determining whether there are deficiencies in the business management practices of our company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices; |
| ● | determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest) and whether such transaction is extraordinary or material under Companies Law (see “- Approval of Related Party Transactions under Israeli Law”); |
| ● | determining whether a competitive process must be implemented for the approval of certain transactions with controlling shareholders or its relative or in which a controlling shareholder has a personal interest (whether or not the transaction is an extraordinary transaction), under the supervision of the audit committee or other party determined by the audit committee and in accordance with standards determined by the audit committee, or whether a different process determined by the audit committee should be implemented for the approval of such transactions; |
| ● | determining the process for the approval of certain transactions with controlling shareholders or in which a controlling shareholder has a personal interest that the audit committee has determined are not extraordinary transactions but are not immaterial transactions; |
| ● | where the board approves the working plan of the internal auditor, to examine such working plan before its submission to the board and proposing amendments thereto; |
| ● | examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities; |
| ● | examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or shareholders, depending on which of them is considering the compensation of our auditor; and |
| ● | establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such employees. |
We have not yet established an audit committee. In lieu of an audit committee, our board of directors is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company’s financial statements and other services provided by the Company’s independent public accountants. The board of directors reviews the Company’s internal accounting controls, practices and policies.
Financial Statement Examination Committee
Under the Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists of members with accounting and financial expertise or the ability to read and understand financial statements. Our audit committee holds the responsibilities and duties of a financial statement examination committee, as permitted under the relevant regulations promulgated under the Companies Law. From time to time, as necessary and required in order to approve our financial statements, the audit committee will hold separate meetings prior to the scheduled meetings of the board in respect of the financial statements. The function of a financial statement examination committee is to discuss and provide recommendations to the board of directors (including reporting any deficiencies found) with respect to the following issues: (a) estimations and assessments made in connection with the preparation of financial statements; (b) internal controls related to the financial statements; (c) completeness and appropriateness of the disclosure in the financial statements; (d) the accounting policies adopted and the accounting treatment implemented in material matters of the Company; and (e) value evaluation, including the assumptions and assessments on which evaluations are based and the supporting data in the financial statements.
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Compensation Committee and Compensation Policy
A public company in Israel is required to have a compensation committee as required by the Companies Law. The compensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the compensation committee. Each compensation committee member that is not an external director must be a director whose compensation does not exceed an amount that may be paid to an external director under regulations promulgated under the Companies Law. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to who may not be a member of the committee. See “- Audit Committee - Israeli Companies Law Requirements.”
Compensation Committee Role
Our board of directors has not yet adopted a compensation committee charter. One adopted, the audit committee charter will set forth the responsibilities of the audit committee consistent with the regulations of the SEC, as well as the requirements for compensation committees under the Companies Law, including the following:
| ● | recommending to the board of directors for its approval (i) a compensation policy; (ii) whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years); and (iii) periodic updates to the compensation policy. See “- Compensation Policy.” In addition, the compensation committee is required to periodically examine the implementation of the compensation policy; |
| ● | the approval of the terms of employment and service of office holders (including determining whether the compensation terms of a candidate for chief executive officer of the company need not be brought to approval of the shareholders); and |
| ● | reviewing and approving grants of options and other incentive awards to persons other than office holders to the extent such authority is delegated by our Board of Directors, subject to the limitations on such delegation as provided in the Companies Law. |
We have not yet established a compensation committee.
Compensation Policy
Under the Companies Law, the duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement of office holders, as such term is defined in the Companies Law, to which we refer to as a compensation policy, and any extensions and updates thereto. The compensation policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a Special Approval for Compensation (as defined below under “- Approval of Related Party Transactions under Israeli Law - Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions”).
The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s business plan and its long-term strategy, and creation of appropriate incentives for office holders, and must consider (among other things) the company’s risk management, size and the nature of its operations. The compensation policy must also consider the following additional factors:
| ● | the knowledge, skills, expertise and accomplishments of the relevant office holder; |
| ● | the office holder’s roles and responsibilities and prior compensation agreements with him or her; |
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| ● | the relationship between the terms offered and the average compensation of the other employees of the company (including any employees employed through manpower companies); |
| ● | the impact of disparities in salary upon work relationships in the company; |
| ● | the possibility of reducing variable compensation at the discretion of the board of directors, and the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and |
| ● | as to severance compensation, the period of employment or service of the office holder, the terms of his or her compensation during such period, the company’s performance during such period, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company. |
The compensation policy must also include the following principles:
| ● | the link between variable compensation and long-term performance and measurable criteria; |
| ● | the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation; |
| ● | the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was required to be restated in the company’s financial statements; |
| ● | the minimum holding or vesting period for variable, equity-based compensation; and |
| ● | maximum limits for severance compensation. |
Internal Auditor
Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee. An internal auditor may not be:
| ● | a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights; |
| ● | a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; |
| ● | an office holder, within the meaning of the Companies Law (including a director and the general manager) of the company (or a relative thereof); or |
| ● | a member of the company’s independent accounting firm, or anyone on his or her behalf. |
The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan.
As of the date hereof, we have no internal auditor.
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Approval of related party transactions under Israeli law
Fiduciary duties of directors and officers
The Companies Law codifies the fiduciary duties that office holders owe to a company. An office holder is defined in the Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, executive Vice President, vice President, any other person assuming the responsibilities of any of these positions regardless of such person’s title, a director and any other manager directly subordinate to the general manager. Each person listed in the table under “Management—Executive officers and directors” is an office holder under the Companies Law.
An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in good faith and in the best interests of the company.
Disclosure of personal interests of an office holder and approval of certain transactions
The Companies Law requires that an office holder promptly disclose no later than the first Board Meeting in which such transaction is discussed, to the board of directors any personal interest that he or she may have and all related material information known to him or her concerning any existing or proposed transaction with the company. A personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of one’s relative or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, but excluding a personal interest stemming solely from one’s ownership of shares in the company. A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.
If it is determined that an office holder has a personal interest in a non-extraordinary transaction, meaning any transaction that is in the ordinary course of business, on market terms or that is not likely to have a material impact on the company’s profitability, assets or liabilities, approval by the board of directors is required for the transaction, unless the company’s articles of association provide for a different method of approval. Any such transaction that is not for the benefit of the company may not be approved by the board of directors.
In addition to any approval required by the articles of association, approval first by the company’s audit committee and subsequently by the board of directors, and, under specified circumstances, by a meeting of the shareholders, as well, is required for an extraordinary transaction (meaning, any transaction that is not in the ordinary course of business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities) in which an office holder has a personal interest.
A director and any other office holder who has a personal interest in a transaction which is considered at a meeting of the board of directors or the audit committee may generally (unless it is with respect to a transaction which is not an extraordinary transaction) not be present at such a meeting or vote on that matter however, with respect to an office holder, he/she may be present at the meeting discussions if the chairman determines that the presence of the office holder is necessary in order to present the matter. However, if a majority of the members of the audit committee or the board of directors has a personal interest in the approval of such a transaction then all of the directors may participate in the meeting with respect to such transaction and vote on the approval thereof and, in such case, shareholder approval is also required.
Certain disclosure and approval requirements apply under Israeli law to certain transactions with controlling shareholders, certain transactions in which a controlling shareholder has a personal interest and certain arrangements regarding the terms of service or employment of a controlling shareholder.
For a description of the approvals required under Israeli law for compensation arrangements of officers and directors, see above under “—Compensation of directors and executive officers.”
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Shareholder duties
Pursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power with respect to the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following matters:
| ● | an amendment to the company’s articles of association; |
| ● | an increase of the company’s authorized share capital; |
| ● | a merger; or |
| ● | interested party transactions that require shareholder approval. |
In addition, a shareholder has a general duty to refrain from discriminating against other shareholders.
Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it has the power pursuant to the provisions of a company’s articles of association, to determine the outcome of a shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company. The Companies Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract adjusted according to the circumstances, and taking into account the status within the company of such shareholder, will also apply in the event of a breach of the duty of fairness.
Exculpation, insurance and indemnification of office holders
We entered into an indemnification agreement with Menachem Shalom as of April 22, 2021 to indemnify Mr. Shalom to the fullest extent permitted under Israeli law. We are not contractually obligated to indemnify Mr. Shalom for, among others, (i) a breach of duty of loyalty, unless such breach was done in good faith and having reasonable cause to assume that such act would not prejudice the interests of the Company and (ii) a willful or reckless breach of his duty of care, unless such breach was done solely in negligence.
Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.
An Israeli company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:
| ● | financial liability imposed on him or her in favor of another person pursuant to a judgment, settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria; |
| ● | reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent and (2) in connection with a monetary sanction; |
42
| ● | reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third-party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent; and |
| ● | expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law, 1968 (the “Israeli Securities Law”). |
An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association:
| ● | a breach of the duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
| ● | a breach of the duty of care to the company or to a third-party, including a breach arising out of the negligent conduct of the office holder; |
| ● | a financial liability imposed on the office holder in favor of a third-party; |
| ● | a financial liability imposed on the office holder in favor of a third-party harmed by a breach in an administrative proceeding; and |
| ● | expenses, including reasonable litigation expenses and legal fees, incurred by the office holder as a result of an administrative proceeding instituted against him or her pursuant to certain provisions of the Israeli Securities Law. |
An Israeli company may not indemnify or insure an office holder against any of the following:
| ● | a breach of the duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
| ● | a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
| ● | an act or omission committed with intent to derive illegal personal benefit; or |
| ● | a fine, monetary sanction or forfeit levied against the office holder. |
Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the board of directors (and, with respect to directors and the Chief Executive Officer, by shareholders).
Our articles of association allow us to indemnify and insure our office holders for any liability imposed on them as a consequence of an act (including any omission) which was performed by virtue of being an office holder.
In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.
Remuneration of Directors
Under the Companies Law, remuneration of directors is subject to the approval of the compensation committee (until recently of the audit committee), thereafter by the board of directors and thereafter by the general meeting of the shareholders. In case the remuneration of the directors is in accordance with regulation applicable to remuneration of the external directors then such remuneration shall be exempt from the approval of the general meeting.
43
| D. | EMPLOYEES |
Other than Mr. Shalom, our sole officer and a member of our board of directors, we have no employees.
| E. | SHARE OWNERSHIP |
The following table sets forth, as of the date of this annual report, the beneficial ownership of our ordinary shares by each executive officer and director, by each person known by us to beneficially own more than 5% of our ordinary shares and by the executive officers and directors as a group. As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have “beneficial ownership” of any security that such person has the right to acquire within 60 days after such date.
The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the SEC, a person (or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our ordinary shares.
The percentage of shares beneficially owned has been computed on the basis of 2,282,124 ordinary shares outstanding as of May 10, 2024.
All of our shareholders, including the shareholders listed below, have the same voting rights attached to their ordinary shares. See “Description of share capital and articles of association”. None of our principal shareholders or our directors and executive officers have different or special voting rights with respect to their ordinary shares. Unless otherwise noted below, each shareholder’s address is 30 Golomb Street, Nes Ziyona, Israel.
| Title of class | Name of beneficial owner |
Amount of beneficial |
Percent of |
|||||||
| Ordinary Shares | Menachem Shalom | 2,000,000 | (1)(2) | 87.64 | % | |||||
| Gad Zohar* | - | - | % | |||||||
| Igal Chemerinsky* | - | - | % | |||||||
| Total of All Current Officers and Directors (3 persons): | 2,000,000 | (1) | 87.64 | % | ||||||
| (1) | Includes 2,000,000 ordinary shares and 10,000,000 preferred shares owned by Mr. Shalom. The amount reflected does not include the 10,000,000 preferred shares which are also owned by Mr. Shalom. Each preferred share is convertible at any time by the holder thereof to 100 ordinary shares. |
| (2) | The percentage indicated below refers only to the ordinary shares and does not include the percentage of class of the preferred shares, which are 100% owned by Mr. Shalom. |
| * | Beneficially owns less than one percent of the class |
Share Incentive Plan
We currently do not have any stock incentive plans.
44
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
| A. | MAJOR SHAREHOLDERS |
The following table sets forth, as of the date of this annual report, the beneficial ownership of our ordinary shares by all persons known by us to beneficially own more than 5% of our ordinary shares and by the executive officers and directors as a group. As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have “beneficial ownership” of any security that such person has the right to acquire within 60 days after such date.
The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the SEC, a person (or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our ordinary shares.
The percentage of shares beneficially owned has been computed on the basis of 2,282,424 ordinary shares outstanding as of May 10, 2024.
All of our shareholders, including the shareholders listed below, have the same voting rights attached to their ordinary shares. See “Description of share capital and articles of association”. None of our principal shareholders or our directors and executive officers have different or special voting rights with respect to their ordinary shares. Unless otherwise noted below, each shareholder’s address is 30 Golomb Street, Nes Ziyona, Israel.
| Title of class | Name of beneficial owner | Amount of beneficial ownership |
Percent of class(2) |
|||||||
| Ordinary Shares | Menachem Shalom | 2,000,000 | (1) | 87.64 | % | |||||
| (1) | Includes 2,000,000 ordinary shares. Does not include the 10,000,000 preferred shares owned by Mr. Shalom. Each preferred share is convertible at any time by the holder thereof to 100 ordinary shares. |
| (2) | The percentage indicated below refers only to the ordinary shares and does not include the percentage of class of the preferred shares, which are 100% owned by Mr. Shalom. |
| B. | RELATED PARTY TRANSACTIONS |
Agreements among our Shareholders
See “Management Services Agreement” under “Compensation” for the terms of Mr. Shalom’s management services agreement with the Company.
| C. | INTERESTS OF EXPERTS AND COUNSEL |
Not applicable.
| ITEM 8. | FINANCIAL INFORMATION |
| A. | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION |
45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Hold Me Ltd.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Hold Me Ltd. (“the Company”) as of December 31, 2023, the related statements of comprehensive income (loss), changes in stockholders’ deficit and cash flows, for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations, changes in shareholders’ deficit and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going concern
The accompanying financial statements are presented on a going-concern basis. As discussed in Note 1 to the financial statements, the Company has suffered losses from operations, has a stockholders’ deficiency and a working capital deficiency. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding to these matters are also described in Note 1. The financial statements do not include any adjustments for the values of assets and liabilities and their classification that may be necessary in the event that the Company is no longer able to continue its operations as a going concern.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
We have served as the Company’s auditor since 2024.
| /s/ Barzily and Co. CPA’s | |
| May 15, 2024 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Hold Me Ltd.
Opinion on the Financial Statements
We have audited the accompanying the balance sheets of Hold Me Ltd. (“the Company”) as of December 31, 2022 and the related statements of operations, changes in stockholders’ deficit and cash flows, for the year then ended, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with generally accepted accounting principles in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Going Concern
The accompanying financial statements are presented on a going-concern basis. As discussed in Note 2 to the financial statements, as of December 31, 2022, the Company suffered losses from operations in all years since inception, except for the year ended December 31, 2022. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. This matter is also described in the “Critical Audit Matters” section of our report.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Going Concern- Refer to Note 2 to the financial statements
Critical Audit Matter Description
The Company raised substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time. The financial statements for the years under audit have been prepared to assume that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have identified the Going Concern as a critical audit matter because of the significant estimates and assumptions made by management. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of the Company’s assessment of Going Concern. See the explanatory paragraph of the opinion paragraph.
How the Critical Audit Matter Was Addressed in the Audit
(i) We evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time. (ii) We obtained information about management’s plans that are intended to mitigate the effect of such conditions or events, and assess the likelihood that such plans can be effectively implemented. (iii) We added an explanatory paragraph to the audit report.
| /s/ Elkana Amitai CPA |
We have served as the Company's auditor since 2023.
Mitzpe Netofa, Israel
May 1, 2023
F-2
Hold Me Ltd
Balance Sheets
| As at December 31 | |||||||||||
| 2023 | 2022 | ||||||||||
| Notes | New Israeli Shekels (“NIS”) | ||||||||||
| Current Assets | |||||||||||
| Cash and Cash Equivalents | 3 | ||||||||||
| Short term Investments | |||||||||||
| Trade and Other Account Receivables | 4 | ||||||||||
| Loans Granted | 5 | ||||||||||
| Total Current Assets | |||||||||||
| Intangible Assets and Fixed Assets | 6 | ||||||||||
| Investment and advances in account of Investment | 7 | ||||||||||
| Long Term Loans Granted | 5 | ||||||||||
| Total non-current assets | |||||||||||
| Total Assets | |||||||||||
| Current Liabilities | |||||||||||
| Short term loans from Banking Institutions | 8 | ||||||||||
| Trade payables | |||||||||||
| Other accounts payables (Including related parties, See Note 15) | 9 | ||||||||||
| Total Current Liabilities | |||||||||||
| Long-Term Liabilities | |||||||||||
| Loans from Banking Institutions | 10 | ||||||||||
| Shareholders’ Deficit | |||||||||||
| Convertible preferred stock, NIS par value shares authorized, issued and outstanding as of December 31, 2023 and 2022. | 11 | ||||||||||
| Common stock, NIS par value share authorized; issued and outstanding shares as of December 31, 2023 and 2022. | 11 | ||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated Deficit | ( |
) | ( |
) | |||||||
| Total Shareholders’ Deficit | ( |
) | ( |
) | |||||||
| Total Liabilities and Shareholders’ Deficit | |||||||||||
See Accompanying Notes to Financial Statements.
F-3
Hold Me Ltd
Statements of Comprehensive Income (Loss)
| For the Year Ended December 31, |
|||||||||||
| 2023 | 2022 | ||||||||||
| Notes | NIS | ||||||||||
| Revenues | 12 | ||||||||||
| Cost of revenues | 15(1) | ( |
) | ( |
) | ||||||
| Gross profit (loss) | ( |
) | |||||||||
| Selling, administrative and general expenses (Including to related parties, See Note 15) | 13 | ( |
) | ( |
) | ||||||
| Operating Profit (Loss) | ( |
) | |||||||||
| Financial expenses, net (Including to related parties, See Note 15) | 14 | ( |
) | ( |
) | ||||||
| Income (Loss) for the year after financing | ( |
) | |||||||||
| Other income | |||||||||||
| Net Income (Loss) | ( |
) | |||||||||
| Basic earnings (loss) per ordinary share | ( |
) | |||||||||
| Diluted earnings (loss) per ordinary share | |||||||||||
| Weighted-average number of ordinary shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See Accompanying Notes to Financial Statements.
F-4
Hold Me Ltd
Statements of Changes in Shareholders’ Deficit
| NIS | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid in |
Accumulated | Total | ||||||||||||||||||||||||
| Number* | Amount | Number* | Amount | Capital | Deficit | Deficiency | ||||||||||||||||||||||
| Balance as of January 1, 2022 | ( |
) | ( |
) | ||||||||||||||||||||||||
| Total comprehensive loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at December 31, 2022 | ( |
) | ( |
) | ||||||||||||||||||||||||
| Total comprehensive income | - | - | ||||||||||||||||||||||||||
| Balance as of December 31, 2023 | ( |
) | ( |
) | ||||||||||||||||||||||||
| *) |
See Accompanying Notes to Financial Statements.
F-5
Hold Me Ltd
Statements of Cash Flows
|
For the Year Ended December 31, |
||||||||
| 2023 | 2022 | |||||||
| NIS | ||||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | ( |
) | ||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Financing expenses, net | ||||||||
| Decrease (Increase) in trade and other account receivable | ( |
) | ||||||
| Increase (decrease) in Trade payables | ( |
) | ||||||
| Increase (decrease) in other account payables | ||||||||
| Net cash provided by (used in) operating activities | ( |
) | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sales of property and equipment | ||||||||
| Investment and advances in account of investment | ( |
) | ||||||
| Loans granted | ( |
) | ||||||
| Net cash provided by (used in) investing activities | ( |
) | ||||||
| Cash flows from financing activities: | ||||||||
| Short term loans from related parties and shareholders’ | ( |
) | ||||||
| Repayment of Loans from banking institutions | ( |
) | ( |
) | ||||
| Short Term Credit from banking institutions | ||||||||
| Net cash provided by (used in) financing activities | ( |
) | ( |
) | ||||
| Foreign Exchange effect on cash and cash equivalent | ( |
) | ||||||
| Decrease in cash and cash equivalents | ( |
) | ( |
) | ||||
| Cash and cash equivalents at the beginning of the year | ||||||||
| Cash and cash equivalents at the end of the year | ||||||||
See Accompanying Notes to Financial Statements.
F-6
Hold Me Ltd.
Notes to Financial Statements
Note 1 - General
| A. |
Hold me Ltd. (“The Company”) was incorporated under the laws of the state of Israel and commenced operations as a private company in January 2007, under Companies Registrar number 513933218.
From 2021, The Company’s common stock is traded on the OTC Markets, OTCQB tier, under the symbol “HMELF”. |
| B. | The Company developed a software-based platform that enables its customers to enhance their brand and loyalty plans with digital payments and reward programs through the creation and offering of branded mobile applications (the “Development”). The Development was done with a collaboration with a third-party service provider Galileo Tech Ltd. During 2023 the collaboration with Galileo had been terminated. See also Note 4. |
| C. | On October 7th, 2023, “Iron Swords” war broke out in Israel (“The war”). As a result, the scope of economic and business activity in the country decreased. The war may have a material adverse effect on the Company and its ability to effectively conduct its operations. |
| D. | Strategic Developments: |
On November, 2021 the Company was issued a limited license from the Israeli Authority regulating Capital Markets, Insurance and Savings to operate as a non-banking lender in Israel. This license enables the Company to lend up to NIS
| E. | Going Concern: |
The
financial statements are presented on a going-concern basis. The Company has suffered recurring losses from operations, and is
dependent upon external sources for financing its operations. As of December 31, 2023, the Company has an accumulated deficit
of NIS
The financial statements do not include any adjustments for the values of assets and liabilities and their classification that may be necessary in the event that the Company is no longer able to continue its operations as a “going concern”.
F-7
Note 2 - Summary of Significant Accounting Policies
The principal accounting policies, consistently applied in the preparation of the financial statements, are as follows:
| A. | Financial Statements Reporting Basis |
The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"), and are expressed in New Israeli Shekel (“NIS”) based on historical values, and provide no information on changes in the general purchasing power of the Israeli currency on the business results.
This report is are filed as part of Form 20-F. Since the Company was incorporated in Israel and is considered a Foreign Issuer and as such is allowed to file the statement and the financial reports in its home country currency, New Israeli Shekel (NIS).
| B. | Cash and Cash Equivalents |
The Company considers high-liquidity investments, including short-term cash deposits in banks (up to three months), as cash equivalents.
| C. | Fixed Assets |
Property and equipment are stated at cost. Major improvements and betterments are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful life. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statements of operations as other gain or loss, net.
Annual depreciation rates are as follows:
| Schedule of property and equipment annual depreciation rates | ||||
| % | ||||
| Office furniture and equipment | ||||
| Computers | ||||
| D. | Use of Estimates |
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. These assumptions and estimates could have a material effect on our consolidated financial statements. Actual results may differ materially from those estimates. We review our estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause us to revise these estimates.
F-8
| E. | Fair value of financial instruments |
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
| - | Level 1: | Quoted prices in active markets for identical instruments; | |
| - | Level 2: | Other significant observable inputs (including quoted prices in active markets for similar instruments); | |
| - | Level 3: | Significant unobservable inputs (including assumptions in determining the fair value of certain investments). |
The carrying values for cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, and deferred revenue approximate their fair value due to their short maturities.
| F. | Foreign Currency Translation |
The functional currency of the Company is the U.S. dollar, which is the currency of the primary economic environment in which it operates. monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the exchange rates used in the translation of such transactions and from the remeasurement of monetary balance sheet items are carried as financing income or expenses.
| G. | Income Tax |
The Company accounts for income taxes in accordance with ASC 740, “Accounting for Income Taxes” (“ASC 740”), using the liability method whereby deferred tax assets and liability are determined based on the differences between financial reporting and the tax basis for assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company accounts for uncertain tax provisions in accordance with ASC 740. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
| H. | Revenue Recognition |
Significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period. Material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management’s estimates change on the basis of development of business or market conditions.
The Company accounts for revenue under the provisions of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The guidance provides a unified model to determine how revenue is recognized. Revenues are recognized when control of the promised goods or services are transferred to the customers in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.
The Company determined revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.
F-9
The Company entered into contracts that can include various combinations of products and services, as detailed below, which are generally capable of being distinct and accounted for as separate performance obligations.
The Company generate our revenues from (1) licensing intellectual properties, which in certain circumstances are modified for customer-specific requirements, (2) royalty revenues and (3) other revenues, which include revenues from support, training and sale of development systems and chips. We license our assets IP to other companies who can then resell, develop or market otherwise in variety of business models.
The Company account for license revenues and related services, which provide the Company’s customers with rights to use the Company’s platform. In accordance with ASC 606, The Company recognize revenue from platform license at the time of delivery when the customer accepts control of the platform.
| I. | Investments in Shares |
The Company accounts for an equity security without a readily determinable fair value at cost less impairment (if any) plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company did not record an impairment on such investment during the year ended December 31, 2023.
| J. | Basic and Diluted Net Income (Loss) per Share |
The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator). Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and Convertible preferred stock, using the if-converted method: In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excluded all dilutive potential common shares if their effect is anti-dilutive. For 2022, the convertible preferred shares were not included as the Company incurred a loss.
| K. | Concentrations of credit risks |
The financial instruments include cash, accounts receivable, accounts payable, accrued expenses and loans. Balances in various cash accounts may at times exceed insured limits. We have not experienced any losses in such accounts. Cash and cash equivalents are invested in major banks in Israel and United States. Generally, these deposits may be redeemed upon demand and therefore, management believes there is minimal risk, management believes the carrying values of the financial instruments approximate their fair values because they are short term in nature or payable on demand. The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
| L. | Recent Accounting Pronouncements |
Effective January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326),” referred to herein as ASU 2016-13, which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaced the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under current generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. The Company determined the adoption of this new accounting guidance and the effect on its financial statements throughout the period until implementation, and have no impact on the financial statement.
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. The adoption of this pronouncement is not expected to have a material impact on the Company's financial statements.
The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
F-10
Note 3 - Cash and Cash Equivalents
| Schedule of cash and cash equivalents | ||||||||
| As at December 31, | ||||||||
| 2023 | 2022 | |||||||
| New Israeli Shekels | ||||||||
| NIS | ||||||||
| USD | ||||||||
Note 4 - Trade and Other Accounts Receivables
| Schedule of trade and other account receivable | ||||||||
| As at December 31, | ||||||||
| 2023 | 2022 | |||||||
| New Israeli Shekels | ||||||||
| Trade receivables*) | ||||||||
| Governmental Institutions | ||||||||
| Other accounts receivables | ||||||||
| *) |
Note 5 - Loans Granted
| 1. | During
2023, the Company entered into a loan agreement with Amir Adibi, under which Amir Adibi borrowed from the Company an amount of NIS |
| 2. | During
2023, the Company entered into a loan agreement with Anna Shochat (“Anna”), an Israeli citizen, under which Anna will
borrow up to |
| 3. | During
2023, the Company entered into a loan agreement with Integrity Group Pension Insurance Agency (“Integrity”), an Israeli
company number 516687860, under which Integrity will borrow an amount of up to |
Note 6 - Intangible Assets and Fixed Assets
| Schedule of fixed assets | ||||||||||||||||
| As at December 31, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Cost | Accumulated Depreciation | Depreciated Cost | Depreciated Cost | |||||||||||||
| New Israeli Shekels | ||||||||||||||||
| R&D expenses | ||||||||||||||||
| Computers | ||||||||||||||||
F-11
| 1. | During
August 2023, The Company, has signed an agreement to purchase from Yonatan Shachar, an Israeli citizen, 100% of the outstanding
shares of S.Y. Calimero Entrepreneurship Ltd, an Israeli company that has a basic (limited) non-banking credit license allowing it
to provide credit in Israel – for the total amount of NIS |
| 2. | On
June 2023, the company entered into a loan agreement with related parties, Mea Testing Systems Ltd (“Mea”) and it's
parent company, Motomova Inc. (“Motomova”), in which the Company loaned Mea an amount of NIS |
Note 8 - Short term loans from banking institutions
| Schedule of short term loan | ||||||||
| As at December 31, | ||||||||
| 2023 | 2022 | |||||||
| New Israeli Shekels | ||||||||
| Overdraft | ||||||||
| Current maturities from long term loans | ||||||||
Note 9 - Other Accounts Payables
| Schedule of other accounts payable | ||||||||
| As at December 31, | ||||||||
| 2023 | 2022 | |||||||
| New Israeli Shekels | ||||||||
| Accounts payables and accrued expenses (Including NIS 420,000 to a shareholder) | ||||||||
| Prepaid Revenue | ||||||||
| Credit balances to related parties (see Note 15) | ||||||||
| Shareholders (see Note 15) | ||||||||
Note 10 - Loans from Banking Corporations
| Schedule of loans from banking corporations and other credit providers | ||||||||
| As at December 31, | ||||||||
| 2023 | 2022 | |||||||
| New Israeli Shekels | ||||||||
| Loan from Mizrahi Bank A/c 73959 | ||||||||
| Less - current maturities | ( |
) | ( |
) | ||||
F-12
Note 11 - Share Capital
| Schedule of share capital | ||||||||
|
December 31, 2023 and 2022 |
||||||||
| Registered | Issued and Outstanding | |||||||
| Number of Shares | ||||||||
| Ordinary shares of ILS 0.01 par value each | ||||||||
| Preferred shares of ILS 0.01 par value each | ||||||||
On April 12, 2021, the Company issued Ordinary shares and Preferred shares for an aggregate purchase price of NIS to Menachem Shalom. The purchase amount was not paid in cash but by deducting the amount from the Company’s debt owed to Menachem Shalom.
During 2021 the Company raised NIS
Each Preferred Share shall be convertible into one hundred () Ordinary Shares (the “Conversion Ratio”) upon the election of the holder of such Preferred Shares.
The Preferred Shares shall not confer upon the holders thereof any voting rights or any right to appoint directors or any other right with respect to general meetings, including without limitation, attending, voting at or requesting to convene, such general meetings or proposing matters for the agenda of such general meetings.
Each Preferred Share in the Company’s capital shall be entitled to receive upon distribution, and in preference to the Ordinary Shares of the Company, (i) dividends in excess of the general dividends issued to all shareholders including holders of Ordinary Shares, and/or (ii) amounts paid in a distribution of the Company’s surplus assets on winding up, in an amount equal to the original issue price for such Preferred Shares as set forth in the Company’s share registrar (adjusted for share combinations or subdivisions or other recapitalizations of the Company’s shares), and less the amount of any dividend previously paid in preference, all pro rata to the number of the Company’s Preferred Shares of each specific class of Preferred Shares issued and outstanding at such time, without having regard to any premium paid or discount thereon, and all subject to the provisions hereof.
Furthermore, and after payment of the Preferred Shares’ dividend preferences or liquidation preferences as aforesaid, each Preferred Share in the Company’s capital shall be entitled to receive upon distribution, (i) a general dividend issued to all Shareholders, (ii) bonus shares, and (iii) amounts paid in a distribution of the Company’s surplus assets on winding up, all pro rata to the number of the Company’s Shares (Ordinary Shares and Preferred Shares) issued and outstanding at such time, without having regard to any premium paid thereon or discount, and all subject to the provisions hereof.
Note 12 - Revenues
| Schedule of revenue | ||||||||
| For the Year Ended on December 31, |
||||||||
| 2023 | 2022 | |||||||
| New Israeli Shekels | ||||||||
| Revenues *) | ||||||||
| *) |
F-13
Note 13 - Selling, Administrative and General Expenses
| Schedule of components of selling, administrative and general expenses | ||||||||
| For the Year Ended on December 31, |
||||||||
| 2023 | 2022 | |||||||
| New Israeli Shekels | ||||||||
| Management fees (see also Note 15(1)) | ||||||||
| Communication | ||||||||
| Professional services | ||||||||
| Maintenance and electricity | ||||||||
| Office expenses | ||||||||
| Other expenses | ||||||||
| Taxes and fees | ||||||||
| Travel and parking | ||||||||
| Depreciation expenses | ||||||||
Note 14 - Financial Expenses, net
| Schedule of financial expenses , net | ||||||||
For
the | ||||||||
| 2023 | 2022 | |||||||
| New Israeli Shekels | ||||||||
| Interest expenses to related parties | ||||||||
| Interest income from loans granted | ( | ) | ||||||
| Foreign exchange differences | ( | ) | ||||||
| Others and banks fees | ||||||||
| Total | ||||||||
Note 15 - Related Parties Transactions
The following related partied transactions has occurred:
| 1) | During 2023 and 2022, Payment of management fees to
Menachem Shalom – a controlling shareholder and director of the Company. Menachem is entitled to receive NIS |
| 2) | For the year ended
December 31, 2022, the sale of computer equipment to Billio Ltd in the total amount of NIS |
As of December 31, 2022:
| a. | The Company owes Menachem
Shalom NIS |
| b. | The
Company owes Billio Ltd NIS |
| c. | The
Company owes Tamarindi Ltd NIS |
As of December 31, 2023:
| a. | The
Company owes Menachem Shalom NIS |
| b. | The Company owes Billio Ltd NIS |
| c. | The Company owes Tamarindi
Ltd NIS |
| d. | Amir Adibi owes the Company NIS |
F-14
Note 16 - Income Taxes
| A. | The Company has received final tax assessments for income tax until 2018. |
| B. | There was no provision for current income taxes for both of the years ended December 31, 2023 and 2022. The Company incurred a taxable loss in 2022 and used in net operating loss carryforward to reduce its taxable income to $0 in 2023. |
| C. | The provision/benefit for income taxes for the year ended December 31, 2023 differs from the amount which would be expected as a result of applying the statutory tax rates to the losses before income taxes due primarily to changes in the valuation allowance to fully reserve net deferred tax assets. |
Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income.
| Schedule of realization of deferred tax assets | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| NIS | NIS | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforward | ( |
) | ( |
) | ||||
| Israeli statutory tax rate | % | % | ||||||
| Expected tax benefit | ||||||||
| Total deferred tax assets | ||||||||
| Less: Valuation allowance | ( |
) | ( |
) | ||||
| Net deferred tax assets | ||||||||
The
Company has provided a valuation allowance against the full amount of the deferred tax asset due to management’s uncertainty
about its realization. As of December 31, 2023, the Company had NIS
Note 17 - Subsequent Events
In accordance with ASC 855-10, Company management reviewed all material events through the date of the filing of this report and determined that there are no additional material subsequent events to report.
F-15
| ITEM 9. | THE OFFER AND LISTING |
| A. | OFFER AND LISTING DETAILS |
See “C – Markets” below.
| B. | PLAN OF DISTRIBUTION |
Not applicable.
| C. | MARKETS |
Our ordinary shares trade on the Pink Markets under the symbol “HMELF”.
| D. | SELLING SHAREHOLDERS |
Not applicable.
| E. | DILUTION |
Not applicable.
| F. | EXPENSES OF THE ISSUE |
Not applicable.
| ITEM 10. | ADDITIONAL INFORMATION |
| A. | SHARE CAPITAL |
As of May10, 2024, our authorized share capital consists of 990,000,000 ordinary shares, par value NIS 0.01 per share, and 10,000,000 shares of Preferred Shares, par value NIS 0.01 per share. Currently there are 2,282,424 ordinary shares and 10,000,000 shares of Preferred Shares, par value NIS 0.01 per share, issued and outstanding, all of which Preferred Shares are owned by Menachem Shalom.
All of our outstanding ordinary shares are validly issued, fully paid and non-assessable. Our ordinary shares are not redeemable and do not have any preemptive rights.
Our board of directors may determine the issue prices and terms for such shares or other securities and may further determine any other provision relating to such issue of shares or securities. We may also issue and redeem redeemable securities on such terms and in such manner as our board of directors shall determine.
| B. | MEMORANDUM AND ARTICLES OF ASSOCIATION |
The following is a description of the material terms of our articles of association. The following description may not contain all of the information that is important to you, and we therefore refer you to our articles of association, a copy of which is filed with the SEC as Exhibit 3.1 to Amendment No. 3 to our Registration Statement on Form F-1 filed with the SEC on June 29, 2021 and is incorporated herein by reference.
46
Registration number and purposes of the company
We are registered with the Israeli Registrar of Companies. Our registration number is 51-3933218. Our purpose as set forth in our articles of association is to engage in any lawful act or activity.
The Powers of the Directors
Pursuant to our articles of association and subject to the Companies Law, the determination of the policy of the business of the Company and the supervision on the performance of the General Manager of the Company (who may be a director or non-director and who shall have the authority with respect to the day to day management of the Company in the ordinary course of business, in the framework of, and subject to, the policy, guidelines and instructions of the board of directors from time to time) shall be vested in the board of directors (the “Board”). The Board may exercise all such powers and do all such acts and things as the Company is authorized to exercise and do and which are not required by law or our articles of association to be done by the Company by action of our shareholders at a General Meeting.
Borrowing Powers
Pursuant to the Companies Law and our articles of association, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised or taken by our shareholders, including the power to borrow money for company purposes.
Rights Attached to Shares
Our Ordinary Shares shall confer upon the holders thereof:
| ● | equal right to attend and to vote at all of our general meetings, whether regular or special, with each Ordinary Share entitling the holder thereof, which attend the meeting and participate at the voting, either in person or by a proxy or by a written ballot, to one vote; |
| ● | equal right to participate in distribution of dividends, if any, whether payable in cash or in bonus shares, in distribution of assets or in any other distribution, on a per share pro rata basis; and |
| ● | equal right to participate, upon our dissolution, in the distribution of our assets legally available for distribution, on a per share pro rata basis. |
Election of Directors
Under our articles of association, our board of directors shall have up to 11 directors. Pursuant to our articles of association, each of our directors will be appointed by a simple majority vote of holders of our ordinary shares, participating and voting at an annual general meeting of our shareholders, In addition, other than in certain circumstances our articles of association allow our board of directors only to appoint new directors to fill vacancies on the board of directors temporarily up to the maximum number of directors permitted under articles of association. Any director so appointed serves for a term of office equal to the remaining period of the term of office of the director whose office has been vacated (or in the case of any new director, for a term of office according to the class to which such director was assigned upon appointment).
Annual and Special Meetings
Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be held no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to in our articles of association as special general meetings. Our board of directors may call special general meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides that our board of directors is required to convene a special general meeting upon the written request of (i) any two or more of our directors or one-quarter or more of the serving members of our board of directors or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of our outstanding issued shares and 1% or more of our outstanding voting power or (b) 5% or more of our outstanding voting power.
47
Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which, as a company listed on an exchange outside Israel, may be between four and 40 days prior to the date of the meeting. Furthermore, the Companies Law requires that resolutions regarding the following matters must be passed at a general meeting of our shareholders:
| ● | amendments to our articles of association; |
| ● | appointment, termination or the terms of service of our auditors; |
| ● | appointment of external directors (if applicable); |
| ● | approval of certain related party transactions; |
| ● | increases or reductions of our authorized share capital; |
| ● | a merger; and |
| ● | the exercise of our board of director’s powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management. |
Notices
The Companies Law requires that a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes, among other things, the appointment or removal of directors, the approval of transactions with office holders or interested or related parties or the approval of a merger, notice must be provided at least 35 days prior to the meeting.
Quorum
Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the shareholders at a general meeting. The quorum required for our general meetings of shareholders consists of at least two shareholders present in person, by proxy or written ballot who hold or represent between them at least 33.3% of the total outstanding voting rights, within half an hour of the time fixed for the commencement of the meeting. A meeting adjourned for lack of a quorum shall be adjourned to the same day in the next week, at the same time and place, to such day and at such time and place as indicated in the notice to such meeting, or to such day and at such time and place as the Board may determine in a notice to the Shareholders. If within half an hour from the time scheduled for the adjourned meeting a legal quorum is not present, then any two Shareholders entitled to vote, present in person or by proxy, shall constitute a legal quorum for such adjourned meeting and shall be entitled to resolve any matters on the agenda of the meeting. unless a meeting was called pursuant to a request by our shareholders, in which case the quorum required is one or more shareholders present in person or by proxy and holding the number of shares required to call the meeting as described above under “Annual and Special Meetings.”
Adoption of Resolutions
Our articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by the Companies Law or by our articles of association. Under the Companies Law, certain actions require a special majority, including: (i) the approval of an extraordinary transaction with a controlling shareholder or in which the controlling shareholder has a personal interest, (ii) the terms of employment or other engagement of a controlling shareholder of the company or a controlling shareholder’s relative (even if such terms are not extraordinary) and (iii) approval of certain compensation-related matters require the approval described above under “—Board of directors and officers—Compensation committee.” Under our articles of association, the alteration of the rights, privileges, preferences or obligations of any class of our shares (to the extent there are classes other than ordinary shares) may require a simple majority of the class so affected (or such other percentage of the relevant class that may be set forth in the governing documents relevant to such class), in addition to the ordinary majority vote of all classes of shares voting together as a single class at a shareholder meeting.
48
Changing Rights Attached to Shares
Our articles of association provide that the Company shall not amend the articles of association in a manner that adversely affects the rights of a shareholder without obtaining the consent of the majority of the shareholders that are adversely affected by such modification. An amendment that affects all the Shareholders in the same manner is not be deemed to constitute a modification of rights associated with specific shares. Any amendment affecting the rights of the holders of our preferred shares requires the approval of at least a majority of the preferred shares present and entitled to vote at a meeting called to discuss such amendment.
Limitations on the Right to Own Securities in Our Company
There are no limitations on the right to own our securities.
Provisions Restricting Change in Control of Our Company
There are no specific provisions of our Articles that would have an effect of delaying, deferring or preventing a change in control of the Company or that would operate only with respect to a merger, acquisition or corporate restructuring involving us (or our Subsidiary). However, as described below, certain provisions of the Companies Law may have such effect. The Companies Law includes provisions that allow a merger transaction and requires that each company that is a party to the merger have the transaction approved by its board of directors and a vote of the majority of its shares. For purposes of the shareholder vote of each party, unless a court rules otherwise, the merger will not be deemed approved if shares representing a majority of the voting power present at the shareholders meeting and which are not held by the other party to the merger (or by any person who holds 25% or more of the voting power or the right to appoint 25% or more of the directors of the other party) vote against the merger. 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. In addition, a merger may not be completed unless at least (1) 50 days have passed from the time that the requisite proposals for approval of the merger were filed with the Israeli Registrar of Companies by each merging company and (2) 30 days have passed since the merger was approved by the shareholders of each merging company.
The Companies Law also provides that an acquisition of shares in a public company must be made by means of a “special” tender offer if as a result of the acquisition (1) the purchaser would become a 25% or greater shareholder of the company, unless there is already another 25% or greater shareholder of the company or (2) the purchaser would become a 45% or greater shareholder of the company, unless there is already a 45% or greater shareholder of the company. These requirements do not apply if, in general, the acquisition (1) was made in a private placement that received shareholder approval, (2) was from a 25% or greater shareholder of the company which resulted in the acquirer becoming a 25% or greater shareholder of the company, or (3) was from a 45% or greater shareholder of the company which resulted in the acquirer becoming a 45% or greater shareholder of the company. A “special” tender offer must be extended to all shareholders, but the offeror is not required to purchase more than 5% of the company’s outstanding shares, regardless of how many shares are tendered by shareholders. In general, the tender offer may be consummated only if (1) at least 5% of 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.
If, as a result of an acquisition of shares, the acquirer will hold more than 90% of a company’s outstanding shares, the acquisition must be made by means of a tender offer for all of the outstanding shares. In general, if less than 5% of the outstanding shares are not tendered in the tender offer and more than half of the offerees who have no personal interest in the offer tendered their shares, all the shares that the acquirer offered to purchase will be transferred to it. Shareholders may request appraisal rights in connection with a full tender offer for a period of six months following the consummation of the tender offer, but the acquirer is entitled to stipulate that tendering shareholders will forfeit such appraisal rights.
Lastly, Israeli tax law treats some acquisitions, such as stock-for-stock exchanges between an Israeli company and a foreign company, less favorably than U.S. tax laws. For example, Israeli tax law may, under certain circumstances, subject a shareholder who exchanges his Ordinary Shares for shares in another corporation to taxation prior to the sale of the shares received in such stock-for-stock swap.
49
Changes in Our Capital
Our articles of association enable us to increase or reduce our share capital. Any such changes are subject to Israeli law and must be approved by a resolution duly passed by our shareholders at a general meeting by voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings or profits, require the approval of both our board of directors and an Israeli court.
Access to Corporate Records
Under the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholders register and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the Israeli Registrar of Companies and the Israeli Securities Authority. Furthermore, any of our shareholders may request access to review any document in our possession that relates to any action or transaction with a related party, interested party or office holder that requires shareholder approval under the Companies Law. However, we may deny such a request to review a document if we determine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwise prejudice our interests.
| C. | MATERIAL CONTRACTS. |
For a description of the Company’s material contracts not entered into in the ordinary course of business, please refer to “Item 7.B. Related Party Transactions.”
| D. | EXCHANGE CONTROLS. |
There are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the ordinary shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.
| E. | TAXATION |
The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
Israeli tax considerations and government programs
The following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that benefit us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our ordinary shares purchased by investors in this offering. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below.
50
General corporate tax structure in Israel
Israeli companies are generally subject to corporate tax. The corporate tax rate for 2017 was 24%, and in 2018 and thereafter the corporate tax rate is 23% of their taxable income. However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a Preferred Enterprise, a Benefited Enterprise or a Technology Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to the prevailing corporate tax rate.
Law for the Encouragement of Industry (Taxes), 5729-1969
The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies.” We believe that we currently qualify as an Industrial Company within the meaning of the Industry Encouragement Law.
The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company, of which 90% or more of its income in any tax year, other than income from certain government loans, is derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area”, in accordance with the definition under section 3A of the Israeli Income Tax Ordinance (New Version) 1961, or the Ordinance. An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.
The following corporate tax benefits, among others, are available to Industrial Companies:
| ● | amortization of the cost of purchased patent, rights to use a patent, and know-how, which are used for the development or advancement of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised; |
| ● | under limited conditions, an election to file consolidated tax returns with controlled Israeli Industrial Companies; and |
| ● | expenses related to a public offering are deductible in equal amounts over three years commencing on the year of the offering. |
Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.
Tax benefits and grants for research and development
Israeli tax law allows, under certain conditions, a tax deduction for expenditures, including capital expenditures, for the year in which they are incurred. Expenditures are deemed related to scientific research and development projects, if:
| ● | The expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
| ● | The research and development must be for the promotion of the company; and |
| ● | The research and development is carried out by or on behalf of the company seeking such tax deduction. |
The amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable under the general depreciation rules of the Ordinance. Expenditures that are unqualified under the conditions above are deductible in equal amounts over three years.
From time to time we may apply to the Israel Innovation Authority for approval to allow a tax deduction for all or most of research and development expenses during the year incurred. There can be no assurance that such application will be accepted.
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Law for the Encouragement of Capital Investments, 5719-1959
The Law for the Encouragement of Capital Investments, 5719 1959, generally referred to as the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible assets).
The Investment Law was significantly amended effective as of April 1, 2005 (the “2005 Amendment”), as of January 1, 2011 (the “2011 Amendment”) and as of January 1, 2017 (the “2017 Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the amended Investment Law. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. The 2017 Amendment introduces new benefits for Technological Enterprises, alongside the existing tax benefits.
Tax benefits subsequent to the 2005 amendment
The 2005 Amendment applies to new investment programs and investment programs commencing after 2004, but does not apply to investment programs approved prior to April 1, 2005. The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions of the Investment Law as in effect on the date of such approval. Pursuant to the 2005 Amendment, the Investment Center will continue to grant Approved Enterprise status to qualifying investments. The 2005 Amendment, however, limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise, such as provisions generally requiring that at least 25% of the Approved Enterprise’s income be derived from exports.
In order to receive the tax benefits, a company must make an investment which meets all of the conditions, including exceeding a minimum entitling investment amount, set forth in the Investment Law. Such investment allows a company to receive “Benefited Enterprise” status, and may be made over a period of no more than three years ending at the end of the year in which the company chose to have the tax benefits apply to its Benefited Enterprise, referred to as the “Year of Election.”
The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Benefited Enterprise depend on, among other things, the geographic location in Israel of the Benefited Enterprise. The location will also determine the period for which tax benefits are available. In the event that the Company is profitable for tax purposes, such tax benefits include an exemption from corporate tax on undistributed income for a period of between two to ten years, depending on the geographic location of the Benefited Enterprise in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year. A company qualifying for tax benefits under the 2005 Amendment which pays a dividend out of income derived by its Benefited Enterprise during the tax exemption period will be subject to corporate tax in respect of the gross amount of the dividend (to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) which would have otherwise been applicable, or a lower rate in the case of a qualified foreign investment company which is at least 49% owned by non-Israeli residents. In addition dividends paid out of income attributed to a Benefited Enterprise are generally subject to withholding tax at source at the rate of 15% or such lower rate as may be provided under any applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate).
The benefits available to a Benefited Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations. If a company does not meet these conditions, it may be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest, or other monetary penalties.
The Company has not applied for “Benefited Enterprise” status.
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Tax benefits under the 2011 amendment
The 2011 Amendment canceled the availability of the benefits granted to Industrial Companies under the Investment Law prior to 2011 and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 15% with respect to its income derived by its Preferred Enterprise in 2011 and 2012, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 10%. Under the 2011 Amendment, such corporate tax rate was reduced from 15% and 10%, respectively, to 12.5% and 7%, respectively, in 2013, 16% and 9% respectively, in 2014, 2015 and 2016, and 16% and 7.5%, respectively, in 2017 and thereafter. Income derived by a Preferred Company from a “Special Preferred Enterprise” (as such term is defined in the Investment Law) would be entitled, during a benefits period of 10 years, to further reduced tax rates of 8%, or 5% if the Special Preferred Enterprise is located in a certain development zone.
Dividends distributed from income which is attributed to a “Preferred Enterprise” will be subject to withholding tax at source at the following rates: (i) Israeli resident corporations–0%, (although, if such dividends are subsequently distributed to individuals or a non-Israeli company the below rates detailed in sub sections (ii) and (iii) shall apply) (ii) Israeli resident individuals–20% (iii) non-Israeli residents (individuals and corporations)–20%, subject to a reduced tax rate under the provisions of any applicable double tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate).
The 2011 Amendment also provided transitional provisions to address companies already enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things, that unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January 1, 2011, a Benefited Enterprise can elect to continue to benefit from the benefits provided to it before the 2011 Amendment came into effect, provided that certain conditions are met.
We currently do not intend to implement the 2011 Amendment.
New tax benefits under the 2017 amendment that became effective on January 1, 2017
The 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on December 29, 2016, and is effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for two types of “Technology Enterprises,” as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.
The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a “Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technology Income”, as defined in the Investment Law. The tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in development zone “A”. In addition, a Preferred Technology Company will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the National Authority for Technological Innovation (“NATI”).
The 2017 Amendment further provides that a technology company satisfying certain conditions (group turnover of at least NIS 10 billion) will qualify as a “Special Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technology Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by the Special Preferred Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from NATI. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law.
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Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are generally subject to withholding tax at source at the rate of 20% or such lower rate as may be provided in an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). However, if such dividends are paid to an Israeli company, no tax is required to be withheld. If such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4%.
We are examining the impact of the 2017 Amendment and the degree to which we will qualify as a Preferred Technology Enterprise, the amount of Preferred Technology Income that we may have and other benefits that we may receive from the 2017 Amendment.
Taxation of our shareholders
Capital gains taxes applicable to non-Israeli resident shareholders. A non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company that were purchased after the company was listed for trading on a stock exchange outside of Israel, will be exempt from Israeli tax so long as the shares were not held through a permanent establishment that the non-resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest more than 25% in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. In addition, such exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.
Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under Convention Between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended (the “United States Israel Tax Treaty”), the sale, exchange or other disposition of shares by a shareholder who is a United States resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the U.S. Israel Tax Treaty (a “Treaty U.S. Resident”) is generally exempt from Israeli capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition is attributed to a permanent establishment in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12 month period preceding the disposition, subject to certain conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year.
In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale (i.e., resident certificate or other documentation).
Taxation of non-Israeli shareholders on receipt of dividends. Non-Israeli residents (either individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s country of residence. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. Such dividends are generally subject to Israeli withholding tax at a rate of 25% so long as the shares are registered with a nominee company
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(whether the recipient is a substantial shareholder or not) and 20% if the dividend is distributed from income attributed to an Approved Enterprise, a Benefited Enterprise or a Preferred Enterprise, unless a reduced rate is provided under an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). For example, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by a Preferred Enterprise or Benefited Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed from income attributed to an Approved Enterprise, Benefited Enterprise or Preferred Enterprise are not entitled to such reduction under the tax treaty but are subject to a withholding tax rate of 15% for a shareholder that is a U.S. corporation, provided that the conditions related to holding 10% or more from the outstanding voting capital and our gross income for the previous year (as set forth in the previous sentence) are met. If the dividend is attributable partly to income derived from an Approved Enterprise, Benefited Enterprise or Preferred Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of the two types of income. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.
Surtax. Subject to the provisions of an applicable tax treaty, individuals who are subject to tax in Israel are also subject to an additional tax at a rate of 3% on annual income (including, but not limited to, dividends, interest and capital gain) exceeding NIS 647,640 for 2021, which amount is linked to the annual change in the Israeli consumer price index.
Estate and Gift Tax. Israeli law presently does not impose estate or gift taxes.
United States federal income taxation
United States federal income taxation
The following is a description of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares. This description addresses only the U.S. federal income tax consequences to U.S. Holders (as defined below) that are initial purchasers of our ordinary shares pursuant to the offering and that will hold such ordinary shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”), and that have the U.S. dollar as their functional currency. This discussion is based upon the Code, applicable U.S. Treasury regulations, administrative pronouncements and judicial decisions, in each case as in effect on the date hereof, all of which are subject to change (possibly with retroactive effect). No ruling will be requested from the Internal Revenue Service (the “IRS”) regarding the tax consequences of the acquisition, ownership or disposition of the ordinary shares, and there can be no assurance that the IRS will agree with the discussion set out below. This summary does not address any U.S. tax consequences other than U.S. federal income tax consequences (e.g., the estate and gift tax or the Medicare tax on net investment income) and does not address any state, local or non-U.S. tax consequences.
This description does not address tax considerations applicable to holders that may be subject to special tax rules, including, without limitation:
| ● | banks, financial institutions or insurance companies; |
| ● | real estate investment trusts or regulated investment companies; |
| ● | dealers or brokers; |
| ● | traders that elect to mark-to-market; |
| ● | tax exempt entities or organizations; |
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| ● | “individual retirement accounts” and other tax deferred accounts; |
| ● | certain former citizens or long-term residents of the United States; |
| ● | persons that are resident or ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States; |
| ● | persons that acquired our ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation for the performance of services; |
| ● | persons holding our ordinary shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for U.S. federal income tax purposes; |
| ● | persons subject to special tax accounting as a result of any item of gross income with respect to the ordinary shares being taken into account in an applicable financial statement; |
| ● | partnerships or other pass through entities and persons holding the ordinary shares through partnerships or other pass through entities; or |
| ● | holders that own directly, indirectly or through attribution 10% or more of the total voting power or value of all of our outstanding shares. |
For purposes of this description, a “U.S. Holder” is a beneficial owner of our ordinary shares that, for U.S. federal income tax purposes, is:
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof, including the District of Columbia; |
| ● | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
| ● | a trust if such trust has validly elected to be treated as a United States person for U.S. federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust. |
If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor as to the particular U.S. federal income tax consequences of acquiring, owning and disposing of our ordinary shares in its particular circumstance.
You should consult your tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of acquiring, owning and disposing of our ordinary shares.
Distributions
Subject to the discussion under “—Passive Foreign Investment Company considerations” below, the gross amount of any distribution made to you with respect to our ordinary shares, before reduction for any Israeli taxes withheld therefrom, generally will be includible in your income as dividend income on the date on which the dividends are actually or constructively received, to the extent such distribution is paid out of our current or
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accumulated earnings and profits as determined under U.S. federal income tax principles. To the extent that the amount of any distribution by us exceeds our current and accumulated earnings and profits as determined under U.S. federal income tax principles, it will be treated first as a tax-free return of your adjusted tax basis in our ordinary shares and thereafter as capital gain. However, we do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles and, therefore, you should expect that the entire amount of any distribution generally will be reported as dividend income to you. If you are a non-corporate U.S. Holder you may qualify for the lower rates of taxation with respect to dividends on ordinary shares applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year), provided that we are not a PFIC (as discussed below under “—Passive Foreign Investment Company considerations”) with respect to you in our taxable year in which the dividend was paid or in the prior taxable year and certain other conditions are met, including certain holding period requirements and the absence of certain risk reduction transactions. However, such dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. Holders.
Dividends paid to you with respect to our ordinary shares generally will be treated as foreign source income, which may be relevant in calculating your foreign tax credit limitation. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be credited against your U.S. federal income tax liability or, at your election, be deducted from your U.S. federal taxable income. Dividends that we distribute generally should constitute “passive category income” for purposes of the foreign tax credit. A foreign tax credit for foreign taxes imposed on distributions may be denied if you do not satisfy certain minimum holding period requirements. The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisor to determine whether and to what extent you will be entitled to this credit.
Sale, exchange or other disposition of ordinary shares
Subject to the discussion under “Passive Foreign Investment Company considerations” below, you generally will recognize gain or loss on the sale, exchange or other disposition of our ordinary shares equal to the difference between the amount realized on such sale, exchange or other disposition and your adjusted tax basis in our ordinary shares, and such gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, capital gain from the sale, exchange or other disposition of ordinary shares is generally eligible for a preferential rate of taxation applicable to capital gains, if your holding period for such ordinary shares exceeds one year (i.e., such gain is long-term capital gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. Holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.
Passive foreign investment company considerations
If a non-U.S. company is classified as a PFIC in any taxable year, a U.S. Holder of such passive foreign investment company (“PFIC”)’s shares will be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that such U.S. Holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis.
In general, a non-U.S. corporation will be classified as a PFIC for any taxable year if at least (i) 75% of its gross income is classified as “passive income” or (ii) 50% of its gross assets (generally determined on the basis of a quarterly average) produce or are held for the production of passive income (the “asset test”). Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions and the excess of gains over losses from the disposition of assets which produce passive income. For these purposes, cash and other assets readily convertible into cash are considered passive assets, and goodwill and other unbooked intangibles are generally taken into account. In making this determination, the non-U.S. corporation is treated as earning its proportionate share of any income and owning its proportionate share of any assets of any corporation in which it directly or indirectly holds 25% or more (by value) of the stock.
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We will not be classified as a controlled foreign corporation (“CFC”) for our 2020 taxable year. In general, we will be classified as a CFC for a taxable year if more than 50% of the total combined voting power or the total value of our ordinary shares is owned by “United States shareholders” (generally, United States persons who are treated as owning (directly, indirectly, or constructively, using certain attribution rules) at least 10% of the total combined voting power or the total value of our ordinary shares). The PFIC asset test for a CFC is applied based on the adjusted tax bases of its assets as determined for the purposes of computing earnings and profits under U.S. federal income tax principles, unless it is a “publicly traded corporation” for the taxable year, in which case the PFIC asset test is based on the fair market value of its assets. The determination is generally made on the basis of a quarterly average. Recently proposed U.S. Treasury regulations provide relief from the application of the aforementioned attribution rules enacted in December 2017 for the purpose of determining a foreign corporation’s PFIC status, and clarify the application of the asset test to CFCs in the year in which such CFC becomes publicly traded. Under the rules set forth in these proposed Treasury regulations, we believe that we would not be classified as a PFIC in respect of our 2020 taxable year. However, it is not clear to what extent we or our shareholders can rely on these proposed Treasury regulations. U.S. Holders should consult their own tax advisors regarding the application of these rules and the potential applicability of these proposed Treasury regulations.
Based on the current and anticipated composition of our income and assets, operations and the value of our assets (including the value of our goodwill, going-concern value or any other unbooked intangibles which may be determined based on the price of the ordinary shares), we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. Because PFIC status is based on our income, assets and activities for the entire taxable year, it is not possible to determine whether we will be characterized as a PFIC for our current taxable year or future taxable years until after the close of the applicable taxable year. Moreover, we must determine our PFIC status annually based on tests that are factual in nature, and our status in the current year and future years will depend on our income, assets and activities in each of those years and, as a result, cannot be predicted with certainty as of the date hereof. Furthermore, fluctuations in the market price of our ordinary shares may cause our classification as a PFIC for the current or future taxable years to change because the value of our assets for purposes of the asset test, including the value of our goodwill and unbooked intangibles, generally will be determined by reference to the market price of our shares from time to time (which may be volatile). Accordingly, if our market capitalization declines significantly, it may make our classification as a PFIC more likely for the current or future taxable years. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in any equity offering. The IRS or a court may disagree with our determinations, including the manner in which we determine the value of our assets and the percentage of our assets that are passive assets under the PFIC rules. Therefore there can be no assurance that we will not be a PFIC for the current taxable year or for any future taxable year.
Under the PFIC rules, if we were considered a PFIC at any time that you hold our ordinary shares, we would continue to be treated as a PFIC with respect to your investment in all succeeding years during which you own our ordinary shares (regardless of whether we continue to meet the tests described above) unless (i) we have ceased to be a PFIC and (ii) you have made a “deemed sale” election under the PFIC rules. If such election is made, you will be deemed to have sold your ordinary shares at their fair market value on the last day of the last taxable year in which we were a PFIC, and any gain from the deemed sale would be subject to the rules described in the following paragraph. After the deemed sale election, so long as we do not become a PFIC in a subsequent taxable year, the ordinary shares with respect to which such election was made will not be treated as shares in a PFIC. You should consult your own tax advisor as to the possibility and consequences of making a deemed sale election.
If we are considered a PFIC at any time that you hold ordinary shares, unless (i) we have ceased to be a PFIC and you have previously made the deemed sale election described above or (ii) you make one of the elections described below, any gain recognized by you on a sale or other disposition of the ordinary shares, as well as the amount of any “excess distribution” (defined below) received by you, would be allocated ratably over your holding period for the ordinary shares. The amounts allocated to the taxable year of the sale or other disposition (or the taxable year of receipt, in the case of an excess distribution) 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,
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for that taxable year, and an interest charge would be imposed. For purposes of these rules, an excess distribution is the amount by which any distribution received by you on your ordinary shares in a taxable year exceeds 125% of the average of the annual distributions on the ordinary shares during the preceding three taxable years or your holding period, whichever is shorter. Distributions below the 125% threshold are treated as dividends taxable in the year of receipt and are not subject to prior highest tax rates or the interest charge.
If we are treated as a PFIC with respect to you for any taxable year, you will be deemed to own shares in any of our subsidiaries that are also PFICs, and you may be subject to the tax consequences described above with respect to the shares of such lower-tier PFIC you would be deemed to own.
Mark-to-market elections
If we are a PFIC for any taxable year during which you hold ordinary shares, then in lieu of being subject to the tax and interest charge rules discussed above, you may make an election to include gain on the ordinary shares as ordinary income under a mark-to-market method, provided that such ordinary shares are “marketable.” The ordinary shares will be marketable if they are “regularly traded” on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations, such as the New York Stock Exchange (or on a foreign stock exchange that meets certain conditions). For these purposes, the ordinary shares will be considered regularly traded during any calendar year during which they are traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Any trades that have as their principal purpose meeting this requirement will be disregarded. However, because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, you will generally continue to be subject to the PFIC rules discussed above with respect to your indirect interest in any investments we hold that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. As a result, it is possible that any mark-to-market election will be of limited benefit.
If you make an effective mark-to-market election, in each year that we are a PFIC, you will include in ordinary income the excess of the fair market value of your ordinary shares at the end of the year over your adjusted tax basis in the ordinary shares. You will be entitled to deduct as an ordinary loss in each such year the excess of your adjusted tax basis in the ordinary shares over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If you make an effective mark-to-market election, in each year that we are a PFIC, any gain that you recognize upon the sale or other disposition of your ordinary shares will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount of previously included income as a result of the mark-to-market election.
Your adjusted tax basis in the ordinary shares will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules discussed above. If you make an effective mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. You should consult your tax advisor about the availability of the mark-to-market election, and whether making the election would be advisable in your particular circumstances.
Qualified electing fund elections
In certain circumstances, a U.S. equity holder in a PFIC may avoid the adverse tax and interest-charge regime described above by making a “qualified electing fund” election to include in income its share of the corporation’s income on a current basis. However, you may make a qualified electing fund election with respect to the ordinary shares only if we agree to furnish you annually with a PFIC annual information statement as specified in the applicable U.S. Treasury regulations. We do not intend to provide the information necessary for you to make a qualified electing fund election if we are classified as a PFIC. Therefore, you should assume that you will not receive such information from us and would therefore be unable to make a qualified electing fund election with respect to any of our ordinary shares were we to be or become a PFIC.
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Tax reporting
If you own ordinary shares during any year in which we are a PFIC and you recognize gain on a disposition of such ordinary shares or receive distributions with respect to such ordinary shares, you generally will be required to file an IRS Form 8621 with respect to us, generally with your federal income tax return for that year. If we are a PFIC for a given taxable year, then you should consult your tax advisor concerning your annual filing requirements.
You should consult your tax advisor regarding whether we are a PFIC as well as the potential U.S. federal income tax consequences of holding and disposing of our ordinary shares if we are or become classified as a PFIC, including the possibility of making a mark-to-market election in your particular circumstances.
Backup withholding tax and information reporting requirements
Dividend payments on and proceeds paid from the sale or other taxable disposition of the ordinary shares may be subject to information reporting to the IRS. In addition, a U.S. Holder may be subject to backup withholding on cash payments received in connection with dividend payments and proceeds from the sale or other taxable disposition of ordinary shares made within the United States or through certain U.S. related financial intermediaries.
Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number, provides other required certification and otherwise complies with the applicable requirements of the backup withholding rules or who is otherwise exempt from backup withholding (and, when required, demonstrates such exemption). Backup withholding is not an additional tax. Rather, any amount withheld under the backup withholding rules will be creditable or refundable against the U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Foreign asset reporting
Certain U.S. Holders are required to report their holdings of certain foreign financial assets, including equity of foreign entities, if the aggregate value of all of these assets exceeds certain threshold amounts, by filing IRS Form 8938 with their federal income tax return. Our ordinary shares are expected to constitute foreign financial assets subject to these requirements unless the ordinary shares are held in an account at certain financial institutions. U.S. Holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition of our ordinary shares and the significant penalties for non-compliance.
The above description is not intended to constitute a complete analysis of all tax consequences relating to acquisition, ownership and disposition of our ordinary shares. You should consult your tax advisor concerning the tax consequences of your particular situation.
| F. | DIVIDENDS AND PAYING AGENTS |
Not applicable.
| G. | STATEMENT BY EXPERTS |
Not applicable.
60
| H. | DOCUMENTS ON DISPLAY |
We are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act, applicable to foreign private issuers. As a foreign private issuer, we are exempt from certain rules and regulations under the Exchange Act prescribing the content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act, with respect to their purchase and sale of our ordinary shares. In addition, we are not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we file annual reports with the SEC on Form 20-F containing financial statements audited by an independent accounting firm. Substantially all of our SEC filings are available to the public at the SEC’s website at http://www.sec.gov.
We no longer maintain a corporate website
| I. | SUBSIDIARY INFORMATION |
We currently have no subsidiaries.
| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Foreign Exchange Risk
Foreign Currency Exchange Rates
Currently, our revenues from Israeli customers are collected in NIS. Some of our expenses are paid in NIS and some are paid in USD. We face foreign currency rate translation risks when our results are translated to U.S. dollars.
The NIS was relatively stable against the U.S. dollar at approximately NIS 3.627 to the US$1.00. There can be no assurance that such exchange rate will continue to remain stable in the future amongst the volatility of currencies, globalization and the unstable economies in recent years. Since our revenues and net income are denominated in NIS, any decrease in the value of NIS against U.S. dollars would adversely affect our revenues.
Interest Rate Risk
We are not currently exposed to interest rate risk. We do not own any interest-bearing instruments and our interest-bearing debt carries a fixed rate.
Market Price Risk
We are not currently exposed to commodity price risk or market price risk.
| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Not applicable.
61
PART II
| ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
None.
| ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
Not applicable.
| ITEM 15. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
In the course of auditing our consolidated financial statements for the years ended December 31, 2023 and 2022, we identified several material weaknesses in our internal control over financial reporting and other control deficiencies as of December 31, 2023. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified to date relate to (i) a lack of accounting staff and resources with appropriate knowledge of generally accepted accounting principles in the United States (“U.S. GAAP”) and SEC reporting and compliance requirements; (ii) a lack of sufficient documented financial closing policies and procedures; (iii) a lack of independent directors and an audit committee; (iv) lack of risk assessment in accordance with the requirement of COSO 2013 framework and (v) a lack of an effective review process by the accounting manager which led to material audit adjustments to the financial statements.
Following the identification of the material weaknesses and control deficiencies, we plan to continue to take remedial measures including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) setting up an internal audit function as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control; and (iv) appointing independent directors, establishing an audit committee, and strengthening corporate governance. We did not take any of the foregoing measures during the year ended December 31, 2023.
Management Annual Report on Internal Control over Financial Reporting
This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
This Annual Report does not include an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Additionally, our independent registered public accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting until we are no longer an emerging growth company.
62
| ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
Our board has determined that Menachem Shalom is an audit committee financial expert as defined by Item 407(d)(5) of Regulation S-K.
| ITEM 16B. | CODE OF ETHICS |
We have not formally adopted a code of ethics.
| ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
These accountants billed the following fees to us for professional services in each of those fiscal years:
| 2022 | 2023 | |||||||
| (USD) | ||||||||
| Audit Fees | 11,000 | 23,500 | ||||||
| Tax Fees and other | ||||||||
| Total | 11,000 | 23,500 | ||||||
“Audit Fees” are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC. These fees also include accounting consultations regarding the accounting treatment of matters that occur in the regular course of business, implications of new accounting pronouncements and other accounting issues that occur from time to time. “Tax Fees” are the aggregate fees billed for professional services rendered for tax compliance, tax advice, other than in connection with the audit. Tax compliance involves audit of original and amended tax returns, tax planning and tax advice.
| ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
None.
| ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
None.
| ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
Not applicable.
| ITEM 16G. | CORPORATE GOVERNANCE |
Not applicable.
| ITEM 16H. | MINE SAFETY DISCLOSURE |
Not applicable.
| ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. |
Not applicable.
63
PART III
| ITEM 17. | FINANCIAL STATEMENTS |
See Item 18.
| ITEM 18. | FINANCIAL STATEMENTS |
The financial statements and the related notes required by this Item are included in this annual report on Form 20-F beginning on page F-1.
64
| ITEM 19. | EXHIBITS INDEX |
| * | Previously filed with the Company’s Registration Statement on Form F-1 (Registration No. 333-255462). |
| ** | Previously filed with the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 29, 2023 |
| *** | Furnished herewith |
65
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| HOLD ME LTD. | |||
| By: | /s/ Menachem Shalom | ||
| Name: | Menachem Shalom | ||
| Title: | Chief Executive Officer | ||
May 15, 2024
66
Exhibit 10.6
Share Sale Agreement
Drawn and executed on the 27th of August 2023
| Between | Hold Me Ltd., PCN 513933218 | |
| Through its signatory: Shalom Menachem, I.D. no. 31912595 | ||
| Of 30 Golomb St., Nes Ziona | ||
| (Hereinafter: “Purchaser”) |
The 1st party;
| And | Yehonatan Shmuel Shahar, I.D. no. 305749806 | |
| C\o adv. Itay Ram and\or Shay Butbul Gilboa | ||
| Of 40 Tuval St., Ramat Gan | ||
| (Hereinafter: “Seller”) |
The 2nd party;
| And | S.Y Calimero Entrepreneurship Ltd., PCN 515892628 | |
| Through its signatory: Yehonatan Shmuel Shahar, I.D. no. 305749806 | ||
| C\o adv. Itay Ram and\or Shay Butbul Gilboa | ||
| Of 40 Tuval St., Ramat Gan | ||
| (Hereinafter: “Company”) |
The 3rd party;
| Whereas | the Seller holds 300 ordinary shares of NIS 1.00 each, forming 100% of Company allocated share capital; and |
| Whereas | the Company holds license number 67041 for the provision of basic credit; and |
| Whereas | the Purchaser holds license number 56095 for the provision of basic credit; and |
| Whereas | the Seller wishes to sell the Purchaser and the Purchaser wishes to purchase from the Seller all the Purchased Shares (as defined hereinafter), Free and Clear (as defined hereinafter) and all Seller rights in the Company and\or shares, according to the provisions hereof; and |
| Whereas | the validity hereof is contingent upon meeting the Pending Warranty, as defined hereinafter; and |
| Whereas | the parties wish to regulate in writing their entire legal relationship in anything concerning the transaction for the sale of the Purchased Shares under the provisions hereof. |
It was therefore agreed, stipulated, and warranted as follows:
| 1. | Recitals and Appendixes |
| 1.1 | The recitals and appendixes hereto form an integral part and provision hereof. |
| 1.2 | Section titles herein are meant for convenience only and shall not be used in the construction hereof. |
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 1.3 | As used herein, the following terms shall bear the meanings appearing next to them, unless otherwise required by contents and context: |
| 1.3.1 | “Purchased Shares” – 300 ordinary Company shares of NIS 1 each, held by the Seller, which after their transfer shall award the Purchaser ownership of 100% of Company allocated share capital. |
| 1.3.2 | “Free and Clear” – free and clear of any debt, pledge, foreclosure, lien, claim and\or encumbrance and\or any other right and\or obligation towards third parties, except the need to obtain the consent of the Capital Market Authority to their transfer. |
| 1.3.3 | “Supervision Law” – the Supervision of Financial Services (Regulated Financial Services) Law of 5776-2016. |
| 1.3.4 | “Trustee” - adv. Itay Ram and\or adv. Shay Butbul Gilboa. |
| 2. | Pending Warranty |
This agreement is contingent upon meeting the Pending Warranty by Closure Date, as defined hereinafter. The Pending Warranty is as follows:
| 2.1 | Obtainment of a permit to hold control means by Shalom Menachem, I.D. no. 31912595 as Company controlling shareholder, from the Capital Market Authority, Insurance and Savings (hereinafter: “Authority”), according to the provisions of the Supervision Law and the Regulated Financial Services Licensing Procedure published by the Authority (hereinafter: “Pending Warranty”). |
| 2.2 | The parties warrant that they are not aware of any hindrance that may prevent the obtainment of said regulatory permit, and undertake to collaborate in any reasonable manner and take any reasonably necessary action to ensure the meeting of the Pending Warranty, as part of which the Purchaser shall formulate any documents necessary from the controlling shareholder to meet the Pending Warranty according to the Supervision Law and abovementioned Authority procedure, within 10 days of the execution hereof at the latest and provide them to the Company. The Company shall file said necessary documents with the Authority online, shortly following their receipt from the Purchaser. |
| 2.3 | Should the Pending Warranty not be met within 120 days of Seller execution hereof (“Pending Warranty Meeting Date”), any party shall be authorized to provide the other with a written notice of the termination hereof and the transaction contemplated herein, and should any party provide said written notice no party shall have any argument and\or demand from the other due to the termination hereof. |
| 2.4 | The parties shall be authorized to extend the Pending Warranty Meeting Date consensually, in writing or email, by an additional 90-days term. |
| 2.5 | The parties hereby instruct the Trustee that should the Pending Warranty not be met by Pending Warranty Meeting Date, and should the parties not agree to extend the Pending Warranty Meeting Date as abovementioned, the Trustee shall return Consideration balance to the Purchaser within 7 business days of Pending Warranty Meeting Date. |
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 3. | Transaction and Purchased Shares Consideration |
| 3.1 | Subject to the meeting of the Pending Warranties (as defined hereinafter), the Purchaser hereby buys from the Seller and the Seller hereby sells the Purchaser all the Purchased Shares Free and Clear (at their status and that of the Company As Is, with no displays and\or obligations beyond those explicitly mentioned in section 3 hereinafter). |
| 3.2 | The total consideration for the Purchased Shares shall be NIS 125,000 (two hundred and twenty five thousand NIS) (hereinafter: “Purchased Shares Consideration”), to be paid as follows: |
| 3.2.1 | The sum of NIS 40,000 shall be paid by the Buyer upon the execution hereof through a cashier cheque or wire transfer directly to Seller account, on account of Purchased Shares Consideration (hereinafter: “First Instalment”). |
| 3.2.2 | It is clarified that should the Buyer terminate this agreement following its execution and\or should Authority permit for the transfer of rights in the Purchased Shares to the Purchaser’s name not be obtain, including failure to meet the Pending Warranty, the Purchaser shall not be entitled to a refund of the First Instalment paid to the Seller. |
| 3.2.3 | Consideration balance, in the sum of NIS 85,000 shall be paid to the Seller on Closure Date (hereinafter: “Consideration Balance”), according to the provisions of section 6 hereinafter. |
| 4. | Seller and Company Warranties and Undertakings |
Without derogating from the generality of the above, the Seller and Company hereby acknowledge and undertake, knowing that the Purchaser engages them herein based on the following acknowledgments, warranties, and undertakings, and subject to the provisions hereof, as at the execution hereof and Closure Date subject to display update, if necessary, on Closure Date:
| 4.1 | A Registrar of Companies printout concerning the Company attached herewith as Appendix A accurately describes the capital, shareholders, and board composition. |
| 4.2 | The Seller is the sole holder of the Purchased Shares and any rights related to and stemming from such exclusive ownership, and there is no other entity entitled to claim any rights in the Purchased Shares. |
| 4.3 | The Purchased Shares are Free and Clear of any third party rights and\or arguments and shall remain so up to Closure Date. The Seller and\or Company have not and shall not engage in any agreements with any third party for the grant of any right concerning the Company and\or its shares – including encumbrance, sale, option, and suchlike. |
| 4.4 | Subject to meeting the Pending Warranty, Seller engagement herein and the performance hereof do not contradict or contravene Seller and\or Company charter instruments or the resolutions of their qualified organs, and to the best of Seller knowledge they do not contradict any law or agreement applicable to any of them; |
| 4.5 | Subject to meeting the Pending Warranty (as defined hereinabove), to the best of Seller and Company knowledge, the is no limitation, prohibition, hindrance, permit and\or consent requirement, whether by law, by agreement or otherwise, concerning or for, as applicable, the engagement hereunder and performance hereof, including the transfer of the Purchased Shares, except the need to obtain Authority consent to the transfer of Purchased Shares to Purchaser’s name, to change Company control permit to Purchaser’s name; |
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 4.6 | That the Seller has a permit to hold controlling means in the Company as Authority licensee, and no one else but him has a permit to hold controlling means in the Company, as Controlling Shareholders or Stakeholders, as defined in the Supervision Law; |
| 4.7 | Company allocated share capital is comprised of 300 ordinary shares of NIS 1 each, held, upon the execution hereof, by the Seller alone. |
| 4.8 | Without derogating from the above, subject to meeting the Pending Warranty, it is clarified that immediately prior to the transaction’s closure, the Seller is and shall be the owner of all rights in the Purchased Shares and to the best of his knowledge there is no other entity but him holding, directly or indirectly, any other shares, options, securities, debentures, or loans convertible into shares, options, or securities, or any other rights of any kind for the purchase or receipt of Company share capital (from the Company or any other entity). |
| 4.9 | Up to the execution hereof, no business activities were carried out in the Company and the Company does not maintain an Income Tax or VAT file and\or bank account. |
| 4.10 | The Company has not borrowed funds or accumulated any debts or financial obligations and the Seller and any other third party has not provided the Company with any loan [Registrar of Company fee debt – shall be handled by execution date]. It is clarified that should such debts and\or obligations be discovered – the Seller alone shall bear them. |
| 4.11 | The Company has not waived or released any fundamental debt or obligation owed to it by a third party and has no bad debts. |
| 4.12 | The Company has not granted any guarantee or indemnification undertaking of any kind. |
| 4.13 | No pledge, encumbrance, foreclosure, or guarantee were initiated or realized against the Company. |
| 4.14 | No shares were redeemed, no owners loan was repaid, no dividend was declared or distributed, no profits were capitalized, and no surplus profits or other assets were distributed, as defined in the Companies Law. |
| 4.15 | The Company has not engaged in any transaction with a stakeholder therein or in any transaction in which a stakeholder has a personal interest; |
| 4.16 | The Company obtained from the Authority a license to provide basic credit numbered 67041 attached herewith as Appendix B (“License”), as part of the terms of which the Company undertook to present the Authority with an equity provision certificate in the sum of NIS 500,000. |
The Company and Seller undertake and warrant that they have received no enquiry, written and\or oral, by any authority, entity, organ, factor and\or person that could attest to any investigative and\or administrative and\or criminal and\or other proceedings against the Company and\or concerning the License or any possibility of the License lacking force. The Company and Seller further warrant that to the best of their knowledge there is no reason and\or circumstance due to which the License may be revoked and\or suspended and\or any administrative and\or enforcement proceedings shall be taken regarding it – whether by the Capital Market Authority or any other authority.
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 4.17 | That by Closure Date, as defined hereinafter, the Company and Seller shall meet any legal requirement, including the Supervision Law provisions, and Authority procedures and publications. |
| 4.18 | The displays detailed in this section 4, with its subsections, are fundamentally correct and complete as at the execution hereof and shall remain so up to Closure Date in any fundamental aspect and they lack no fundamental factual display necessary for the displays included therein not to be misleading, given their inclusion circumstances. |
| 5. | Purchaser Warranties, Undertakings, and Displays |
The Purchaser hereby warrants and undertakes towards the Seller that its following displays are correct as at the execution hereof and shall remain correct as at the closure hereof:
| 5.1 | It is not hindered and\or limited in executing this agreement and performing it in its entirety. |
| 5.2 | Purchaser execution and\or performance hereof shall not form or cause a breach of any Purchaser obligation towards third parties. |
| 5.3 | Subject to meeting the Pending Warranty, it obtained every permit required by law to carry out the transaction contemplated herein. |
| 5.4 | It has the financial means necessary to meet its obligations hereunder, including NIS 500,000 equity it has to present to the Authority to obtain Authority consent to the transfer of rights in the Purchased Shares to the Purchaser’s name. |
| 5.5 | That, without derogating from its reliance on Company and Seller warranties, the Purchaser was awarded every option to perform a due diligence concerning the Company and related to it, including the complete, thorough examination of all facts, details, and documents concerning the engagement hereunder, including those provided to it by the Seller and\or anyone on his behalf, including Company legal and financial status and\or concerning it; and in addition, it received any information it required for its engagement hereunder and for meeting all its obligations hereunder. |
Without derogating from the above, the Purchaser acknowledges that every necessary examination was carried out, using professionals on its behalf concerning its meeting of Authority requirements to obtain a “control permit”. The Purchaser acknowledges that there is no hindrance to the receipt of a control permit in its name, and that it shall have no argument against the Seller should the control permit application be denied.
| 5.6 | Except the need to obtain Authority acknowledgment of the meeting of the Pending Warranty, Purchaser engagement under this agreement with all its appendixes, meeting all its obligations thereunder, and taking any actions mentioned therein are not conditioned on obtaining any certification, consent of additional permit from any entity and there is no need to report to or notify any third party, including any qualified authority acting under the law in Israel or outside it, except the Registrar of Companies. |
| 5.7 | In its engagement hereunder, the Purchaser does not rely on, and there shall be no force to, any displays, promises, statements, information and\or warranties by the Company and\or Seller and\or management and\or other shareholders and\or anyone on their behalf, whether written or oral, that were not explicitly included herein; and except Seller warranties, it purchases the Purchased Shares at their state and that of the Company and its assets (“As Is”). |
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 5.8 | That it is aware that the License given to the Company based on Company warranties, displays, and undertakings towards the Authority in proceedings leading up to the License and\or upon License update following its receipt, and that as of Closure date, as defined hereinafter, all those shall apply to it, including the consent to only engage in the credit activity the Authority allowed the Company to engage in. Should the Purchaser wish to expand the above, it is aware that as of Closure Date it shall have to enquire with the Authority and obtain its consent, including for an activity expansion, officer appointments, and suchlike. |
| 6. | Transaction Closure |
| 6.1 | Transaction Closure shall occur within 3 business days (hereinabove and hereinafter: “Closure Date”) of Pending Warranty meeting date. |
| 6.2 | Trust |
| 6.2.1 | Upon the execution hereof, the Purchaser shall entrust Seller counsel, adv. Itay Ram and\or adv. Shay Butbul Gilboa (hereinafter: “Trustee”) with a cashier cheque for NIS 85,000 plus VAT which forms Consideration Balance as mentioned in section 3.2.3 hereinabove (“Trust Funds”). |
| 6.2.2 | The cheque shall be deposited by the Trustee in a trust account in Trustee name or held by the Trustee until Closure Date. |
| 6.2.3 | Against the entrustment with the Trustee, the Seller shall entrust the Trustee with a share transfer deed for the Purchased Shares, executed by the Seller and duly verified, a letter of resignation from his position as Company board member, an instrument assigning Seller rights and obligations to the Purchaser according to the capital deed, and signed undated notices to the Registrar of Companies for the report of Purchased Shares transfer and board composition modification (all the abovementioned documents, hereinafter jointly: “Closure Documents”), all in the form attached herewith as Appendix C. |
| 6.2.4 | The parties hereby instruct the Trustee to transfer the funds to the Seller and the Closure Documents to the Purchaser on Closure Date. |
| 6.3 | On Closure Date, the following actions shall be taken simultaneously and interchangeably and no action shall be deemed taken and no document shall be deemed delivered until all the following actions shall be taken and all the following documents shall be delivered, and all the following payments shall be repaid as ordered, and should any action not be taken or any condition not be met, which the party benefited thereby has not waived, as applicable, in writing, any other actions shall also be deemed untaken: |
| 6.3.1 | An amended control permit duly signed by the Authority wad obtained, stating that holder of the control permit in the basic credit provision license is the Purchaser. |
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 6.3.2 | The Seller and Purchaser shall execute an assignment instrument, stating that all Seller rights according to the owners loan and Seller undertaking to provide it as mentioned in the capital deed shall be assigned to the Purchaser. As part of said assignment, the Seller shall execute a waiver of any rights to receive funds from the Company under the owners loan. |
| 6.3.3 | The Seller shall provide the Purchaser all the Purchased Shares, Free and Clear (and collaborate with the Purchaser, shortly following transaction Closure, in reporting the transfer of Purchased Shares to the Purchaser’s name to the Registrar of Companies); |
| 6.3.4 | Against the delivery of the Purchased Shares and Closure Documents to the Purchaser, the Purchaser shall pay the Seller the Consideration for the Purchased Shares and the Trustee shall provide the Purchaser with the Closure Documents and deliver the funds to the Seller. |
| 6.3.5 | The Seller, as sole Company shareholder, and the Company shall provide the Purchaser with the following documents: |
| 6.3.5.1 | Copies of Company updated shareholder registry, confirmed by the Seller who serves as Company sole director. |
| 6.3.5.2 | A certificate, in the form attached herewith as Appendix D, attesting that as at Closure Date the Purchased Shares are Free and Clear, and that all Seller displays and warranties herein are complete, correct, and accurate. |
| 6.3.5.3 | Copies of minutes of board meetings and the general meeting of Company shareholders, in the forms attached herewith as Appendix E, approving Purchased Shares transfer (including attorney confirmations of their validity). |
| 6.3.5.4 | A confirmation by Company attorneys, that Company qualified organs adopted every resolution required by the charter instruments for Company engagement hereunder and performance hereof. |
| 6.3.5.5 | A copy of signed notices, ready for filing with the Registrar of Companies regarding Purchased Shares transfer, Seller removal from Company board, and the appointment of` Menachem Shalom as Company director on behalf of the Purchaser. |
| 6.3.5.6 | A copy of all the documents, forms, and statements filed by the Company and Seller to the Capital Market Authority as part of their License application, as well as a copy of all Company, Seller and\or their counsel’s correspondences with the Capital Market Authority as part of obtaining said License. |
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 7. | Transition Term |
| 7.1 | Subject to any law and\or hereto, the Seller shall act and wield his influence as Company shareholder as of the execution hereof up to Closure Date (hereinafter: “Transition Term”) as follows: |
| 7.1.1 | The Seller shall neither take nor omit an action which shall prevent the continued management of the Company as managed thus far, and (b) without derogating from the generality of the above, the Seller shall wield his power as a shareholder so that the Company shall avoid taking the following actions, unless such action is required by law: (a) creating pledges, encumbrances and\or granting rights to third parties concerning Company activities; (b) providing and\or undertaking to provide guarantees and\or any proprietary assurance of any kind; (c) employing Company employees. |
| 7.1.2 | The Seller undertakes that during the Transition Term he shall not negotiate with any third party regarding any transaction which contradicts and\or contravenes the transaction contemplated herein or undertake any engagement which could prevent the closure of the transaction contemplated herein. |
| 7.2 | Should during Transition Term any fundamental change occur in any of the displays by the Seller and\or Company in section 3 hereinabove which could have a negative impact on the Company, the Seller shall notify the Purchaser thereof in writing shortly following such change and within a reasonable time prior to the closure of the transaction contemplated herein. |
| 8. | Trust |
| 8.1 | The abovementioned trust by the Trustee is meant only for the holding of the cashier cheque and Closure Documents in trust, according to the provisions hereof. Holding the cashier cheque and Closure Documents in trust according to the provisions hereof is subject to the Trust Law of 5739-1979 and an applicable law. |
| 8.2 | The parties hereby give their express consent that despite the Trust hereunder, the Trustee and\or any of the attorneys at his firm shall be authorized to continue providing legal services to the Seller, both concerning this agreement (including representation in legal proceedings related hereto or arising hereof) and any other issue with no exceptions, and hereby waive any argument in that regard, subject to Trustee action as provided herein. |
| 8.3 | The Trustee is hereby irrevocably instructed to act according to the explicit instructions given to him by the parties herein, and in the absence of an explicit instruction according to any other instruction given to him with the written consent of all the parties or according to a court order\resolution\ruling. |
| 8.4 | Subject to the Trustee acting according and subject to the provisions hereof, the parties release the Trustee of any liability and\or responsibility towards them according hereto unless he knowingly and intentionally acted in contravention hereof, and warrant and acknowledge that subject to the Trustee acting according and subject to the provisions hereof, they do not and shall not have any arguments, claims, and demands towards the Trustee in anything related to his actions as a their trustee hereunder and they are aware that Trustee consent to act for them as such was based on their statement hereinabove. |
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 9. | Miscellaneous |
| 9.1 | This agreement contains, embodies, and expresses all the conditions agreed by the parties concerning the issues detailed herein, and any promises, previous drafts hereof, or of its appendixes, written or oral agreements, if any, obligations or displays given or made y the parties prior to the execution hereof, if any, and not explicitly manifested herein shall not bind the parties or add to the obligations, undertakings, and rights provided herein or arising hereof, derogate from or modify them, and shall not be used in the construction hereof, so that the provisions hereof alone shall bind the parties hereto. |
| 9.2 | Any amendment hereof or addition hereto shall be made in writing and signed by the parties, otherwise they shall have no force. |
| 9.3 | The parties undertake to collaborate fully for the performance hereof. The parties further undertake to take any action and execute any document, if reasonably necessary, to realize the provisions hereof. |
| 9.4 | Waiver; Grace; Relief; Delay; Remedies; Illegality |
Any waiver, grace, or relief granted by one of the parties hereto to the other in a certain case shall not form precedence to another case, nor shall any waiver, grace, or relief made related hereto have any force unless made in writing and signed by the parties’ qualified representatives.
Subject to legal provisions concerning the statute of limitations and\or expiry of any rights, any delay and\or arrears in realizing and\or acting on any right available to any party shall not be deemed waiver of its rights, or any part thereof, hereunder and\or under any law, and that party shall be entitled to realize and\or act on them at any time it shall deem fit.
Should any date determined herein for any action or payment not be a business day, that date shall be postponed to the next business day.
“Business day” as used herein means – Sunday to Friday, except Saturdays, holiday eves, and holidays.
The remedies and reliefs hereunder are, unless explicitly stated otherwise, in addition to and without derogating from any other remedy or relief under any law.
| 9.5 | Should it be determined that any provision hereof is illegal or unenforceable, then unless such illegality or unenforceability goes to the root hereof, that shall not derogate from any other provision hereof, which shall remain in force. |
| 9.6 | No party hereto shall be authorized to transfer and\or assign to another and\or others, in any manner, this agreement and\or its rights and\or obligations hereunder, or any part thereof, nor shall they be authorized to pledge and\or encumber said rights, or any part thereof, except with the prior written consent of the other party and subject to the conditions determined (if any) by the other party. For the avoidance of doubt, the abovementioned shall not impose any limitations on the Purchaser concerning the Purchased Shares and the transactions contemplated herein following Closure Date. |
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
| 9.7 | The parties hereto and anyone on their behalf shall maintain confidentiality regarding the very existence hereof, the conditions hereof and\or the negotiations for the execution hereof and\or the information disclosed concerning herewith, and without derogating from the generality of the above, including information concerning the Company. Concerning the above, the parties shall not reveal such contents to any third party or avail it to the public, nor shall they be authorized to make any use thereof, including in any legal proceedings, except as required for the enforcement and\or maintenance of their rights hereunder and\or as obligated by any law. |
| 9.8 | This agreement and\or any of its conditions (including any statement, confirmation, declaration, display and\or undertaking) shall not form any undertaking towards and\or in favor of any third party and\or grant any such third party any rights, and as part of that this agreement and\or any of its conditions (including any statement, confirmation, declaration, display and\or undertaking) shall not be deemed an undertaking and\or contract in favor of any third party, including Purchaser employees, suppliers and\or clients. |
| 9.9 | Each party shall bear the taxes applicable thereto under any law due to the agreement, and its other expenses due hereto, including expenses related to a legal proceeding between the parties. |
| 9.10 | Any dispute between the parties hereto that shall not be resolved in negotiations between the Seller and the Purchaser within 10 business days of the approach by any party, shall be referred to mediation before a mediator agreed by the parties, provided that such mediation shall be held and concluded within 30 days of the approach by any party to the other requesting such mediation. Should such mediation not be possible within said term and\or should the parties fail to agree on the mediator, any party could refer the dispute to a judicial resolution before the qualified court as provided in section 10.12 hereinafter. |
| 9.11 | Exclusive jurisdiction in any conflict and\or dispute between the parties in anything related hereto and\or arising hereof, including the validity, construction, performance and\or breach hereof, shall be awarded to the Tel Aviv-Yaffo courts, and them alone, according to their material jurisdiction. |
| 9.12 | Any notice sent by one of the parties to the other shall be sent to the address listed in the recitals hereof, unless a party informed the other of a change therein and deemed received at the lapse of 72 hours of its mailing via registered mail or in case of a personal delivery – upon its delivery. |
In witness thereof the parties have set their hands:
| [Signed] | [Signed] | [Signed and stamped] | ||
| Hold Me Ltd. PCN 513933218 | Yehonatan Shmuel Shahar I.D. no. 305749806 | S.Y Calimero Entrepreneurship Ltd. PCN 515892628 |
Exhibit 10.7
REVOLVING CREDIT NOTE
August 01, 2023
Integrity Group Pension Insurance Agency (2022) Ltd), an Israeli Company number 516687860, having its registered address at Hamelacha 4 Natanya, Israel (hereinafter: “Maker”), hereby undertakes to pay to the order of Hold Me Ltd., a company established in the State of Israel, Reg. No. 513933218, having its registered address at 30 Golomb St, Ness Ziyona Israel (hereinafter: “Holder”), at the address listed below, or such address as Holder may from time to time designate in writing to Maker, the principal sum of up to Five Hundred Thousand USD ($500,000, “Stated Principal Balance”), or such other amount as may be reflected from time to time on the books and records of the Holder, evidencing the aggregate of the Advance(s) (as defined herein) requested by and made to Maker (the “Outstanding Principal Balance”), in such currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, in accordance with the terms and conditions of this promissory note (“Note”). Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day that is a Business Day (as defined herein).
1. Maturity Date; Interest. The Outstanding Principal Balance and all accrued interest thereon shall be due and payable on or before December 31st, 2024 (the “Maturity Date”) or any date thereafter as to be agreed or extended by the parties. All sums advanced pursuant to this Note shall bear interest from the date of each Advance is actually made until paid in full at the rate of six percent (6%) per annum. Maker shall pay accrued interest on the Outstanding Principal Balance on an annual basis commencing on 31.12.2024 and continuing on the last Business Day of each year thereafter. The Interest shall be computed on the basis of a year of 365 days, for the actual number of days elapsed.
2. Advances. Maker may give Holder written notice (each, a “Written Request”) requesting an advance (each, an “Advance” and, collectively, the “Advances”), by delivering to Holder not later than 11:00 a.m. (New York City time) at least three (3) Business Days before the proposed borrowing date (in each case, the “Borrowing Date”) of such requested Advance, which Written Request shall specify (i) the principal amount of such requested Advance; (ii) the purpose to which the funds from the proposed Advance will be used; (iii) the party or parties to whom funds will be paid on behalf of Maker; and (iv) the proposed Borrowing Date of such Advance, which shall be a Business Day. The Advance shall be transferred to the Maker’s or Payee’s bank account, whose particulars shall be provided to the Holder by the Maker upon the Written Request. As used herein, “Business Day” shall mean any day other than a Saturday, Sunday, Good Friday or other a day on which the Federal Reserve is closed. Holder shall notify Maker in writing if Holder declines to fund the requested Advance; provided, however, that requests for Advances will not be unreasonably withheld and will be timely granted. On each Borrowing Date, Maker authorizes Holder to disburse the proceeds of the requested Advance to the designated payee(s), as set forth in the applicable Written Request. It is understood and agreed that Holder shall have no responsibility for the application of proceeds except to disburse proceeds to the designated payee(s) and such proceeds so disbursed shall be deemed to have been disbursed to the Maker. The outstanding amount of all Advances made by the Holder to the Maker and/or to a Payee/s on behalf of the Holder, under this Note, shall not exceed the Stated Principal Amount.
The Maker shall have the right, by prior written notice of 14 (fourteen) days, to repay the Advances paid by the Holder, plus the Interest accrued as of the date of such prepayment. It is Agreed that such prepayment shall be without any penalty or premium whatsoever and shall not constitute a breach of this Revolving Credit Agreement.
The Maker shall bear any and all costs and expenses arising from or in connection with the execution of this Agreement, including, inter alia, any taxes, charges, levies or duties in connection with the grant of the Advances and payments (the “Expenses”).
Should the Maker fail to pay any of the Expenses (or any part thereof), the Holder shall be entitled to pay such Expenses instead of the Maker’s, and in such event the amounts actually paid by the Holder shall be added to the Principal Amount/Major Amount and shall be considered as an integral part thereof for all means and purposes.
3. Affirmative Covenants. Maker covenants and agrees that at all times prior to the Maturity Date, Maker shall:
3.1. Use of Loan Proceeds. Use all proceeds of Advances only for its working capital and ordinary business expenses and in accordance with the Written Request.
3.2. Compliance with Laws. Comply in all respects with all rules applicable to Maker and its business.
3.3. Business Records. Keep adequate records and books of account with respect to Maker’s business activities in accordance with sound bookkeeping practices reflecting all transactions of Maker, and permit Holder at any time to copy and inspect such books and records and make copies thereof.
3.4. Notice. Provide Holder with immediate telephonic notice (followed by notice in an email or letter) after becoming aware of any of the following:
| (a) | the happening of any event, occurrence or condition, or series of events, occurrences or conditions, that would cause any representation contained in this Note, t to be untrue, inaccurate or misleading; |
| (b) | the existence of a default or an event of default hereunder or under any agreement to which Maker is a party; |
| (c) | the happening of any event, occurrence or condition, or series of events, occurrences or conditions, that has resulted in, or that may reasonably be expected to result in, a material adverse change in the business of the Maker; |
| (d) | any dispute that may arise between Maker and any governmental unit, including without limitation any violation or alleged violation of any governmental rule; and |
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| (e) | the commencement of any proceeding by a governmental unit or litigation, suit, action or proceeding, at law or in equity against Maker as defendant, co-defendant, third party defendant or otherwise, or by Maker as plaintiff, as counter-claimant or otherwise. |
4. Negative Covenants. Maker covenants and agrees that at all times prior to the Maturity Date, Maker shall not, directly or indirectly:
4.1. Indebtedness. Create, incur, assume or suffer to exist, voluntarily or involuntarily, any indebtedness or liability, other than trade indebtedness not in excess of $100,000.
4.2. Mergers; Consolidations; Acquisitions. Enter into any transaction or series of transactions that directly or indirectly would constitute a merger, consolidation, reorganization or recapitalization; take any action in contemplation of dissolution or liquidation; conduct any part of its business through any affiliate or other person; or acquire the equity interests or assets of any person, whether by merger, consolidation, purchase of equity interests or otherwise.
4.3. Change of Management; Change of Control. (a) Allow a change in the ownership structure of Maker, whether by the issuance, sale, transfer, exchange, assignment or other direct or indirect hypothecation of its equity interests, or by the issuance of subscriptions, warrants, options, convertible securities, or other rights (fixed, contingent or otherwise) to purchase or otherwise acquire equity interests, or (b) permit any person other than the current officers to hold their respective offices, in each case unless a replacement reasonably acceptable to Holder is appointed.
4.4. Sale or Disposition. Sell or otherwise dispose of all or any asset or other property or grant any person an option to acquire any asset of Maker or other property.
4.5. Liens and Encumbrances. Grant, permit or suffer to exist the imposition of any lien, mortgage, hypothecation, encumbrance or any other adverse claim or interest on any asset of the Maker, the Maker or any part of its business.
4.6. Dividends. Pay any dividends or profits, make any distribution or return of capital, directly or indirectly purchase, retire or redeem any of its equity interests, or take any action which would have an effect equivalent to any of the foregoing.
4.7. Guaranties. Assume, guarantee, endorse, contingently agree to purchase, assume or otherwise become liable for the indebtedness of any person.
4.8. Loan or Advances. Make any loans or advances to any person, or make any payments or pay any liabilities, costs or expenses, of or on behalf of any other person.
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4.9. Investments. Make any investment in any person, whether in the form of equity interests (including, but not limited to, subscriptions, warrants, options or other rights convertible into equity interests), indebtedness (including indebtedness that is convertible into equity interests), any combination of equity interests and indebtedness, or otherwise.
4.10. Bank Accounts. Open or maintain any deposit, checking, operating or other bank account, or similar money handling account, with any bank or other financial institution except for those accounts previously approved by Holder.
4.11. Compensation. Pay compensation to its officers, directors, employees, agents and all others, including salaries, withdrawals, fees, bonuses, commissions, drawing accounts and other payments, whether directly or indirectly, in money or otherwise, without the prior written approval of Holder.
4.12. Transactions with Affiliates. Make, enter into or otherwise undertake any transaction with any affiliate, unless such transaction has been approved or otherwise consented to pursuant to the applicable terms of Maker’s charter documents and is at least as favorable to Maker as a similar transaction entered into at arms’ length with an unrelated third party.
4A. The Maker’s Representations and Warranties
| (1) | The Maker represents and warrants that the execution, delivery and performance of this Agreement and the fulfillment of the undertakings assumed hereunder do not conflict with or result in any breach or default of any terms and/or provisions prescribed by law, regulation, agreement, commitment, obligation, ruling, judgement or order, to which she is a party or by which she is bound. |
| (2) | As a material precondition to the granting of the Stated Principal Balance and/or any Advances by the Holder to the Maker and/or Payee, the Maker hereby undertakes to furnish the Holder with the following securities for the purpose of securing the full and timely repayment of the Advances (the “Securities”): |
| a. | The Maker warrants to register a lien and/or pledge and/or mortgage in favor of the Holder on the company’s assets and/or in the company house and/or any other real estate property that the parties may agree, in order to guarantee and secure the Holder’s funds and to guarantee the reimbursement of the Payments, which guarantees: (i) the full and timely repayment of the Advances; and (ii) the mentioned above securities come to guarantee the fulfillment of the Maker’s undertakings assumed in this Agreement. |
| b. | In addition to the above, the Maker hereby gives irrevocable instructions to any Payee on behalf of the Maker, to transfer to the Holder all the repayments regarding to the Advances including Interest thereof, unless the Maker repays The Loan from other sources. |
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5. Holder’s Investment Representations.
(a) The Holder is acquiring this Note for investment for its own account and not with the view to, or for resale in connection with, any distribution thereof. The Holder understands and acknowledges that the Note has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or foreign securities laws, by reason of a specific exemption from the registration provisions of the Securities Act and applicable state and foreign securities laws, which depends upon, among other things, the bona fide nature of the investment intent as expressed herein. The Holder further represents that it does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to any third person with respect to the Note.
(b) The Holder understands that an active public market for the Maker’s securities may not now exist and that there will never be an active public market for the Note.
(c) The Holder is an “accredited investor” as defined in Rule 501 of Regulation D as promulgated by the Securities and Exchange Commission under the Securities Act and shall submit to the Maker such further assurances of such status as may be reasonably requested by the Maker.
(d) Neither the Holder nor, to its knowledge, any person or entity controlling, controlled by or under common control with it, nor any person or entity having a beneficial interest in it, nor any person on whose behalf the Holder is acting: (i) is a person listed in the Annex to Executive Order No. 13224 (2001) issued by the President of the United States (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism); (ii) is named on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control; (iii) is a non-U.S. shell bank or is providing banking services indirectly to a non-U.S. shell bank; (iv) is a senior non-U.S. political figure or an immediate family member or close associate of such figure; or (v) is otherwise prohibited from investing in the Maker pursuant to applicable U.S. anti-money laundering, anti-terrorist and asset control laws, regulations, rules or orders (categories (i) through (v), each a “Prohibited Seller”). The Holder agrees to provide the Maker, promptly upon request, all information that is reasonably necessary or appropriate to comply with applicable U.S. anti-money laundering, anti-terrorist and asset control laws, regulations, rules and orders. The Holder consents to the disclosure to U.S. regulators and law enforcement authorities by the Maker and its affiliates and agents of such information about such member as is reasonably necessary or appropriate to comply with applicable U.S. anti-money-laundering, anti-terrorist and asset control laws, regulations, rules and orders. The Holder acknowledges that if, following its investment in the Note, the Maker reasonably believes that such member is a Prohibited Seller or is otherwise engaged in suspicious activity or refuses to promptly provide information that the Maker requests, the Maker has the right or may be obligated to prohibit additional investments, segregate the assets constituting the investment in accordance with applicable regulations or immediately require such member to transfer the Note. The Holder further acknowledges that such member will have no claim against the Maker or any of its affiliates or agents for any form of damages as a result of any of the foregoing actions.
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(e) The Holder or its duly authorized representative realizes that because of the inherently speculative nature of business activities of the kind contemplated by the Holder, the Holder’s financial position and results of operations may be expected to fluctuate from period to period and will, generally, involve a high degree of financial and market risk that can result in substantial or, at times, even total loss of the value of the Note.
5A. Events of Default. In case one or more of the following events (each, an “Event of Default”) (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall have occurred and be continuing:
a. Default in the payment, when due or declared due, of the Outstanding Principal Amount and accrued interest on the Maturity Date;
b. Default in the payment, when due or declared due, of accrued interest hereunder;
c. Any representation or warranty made by Maker in this Note or in connection with any borrowing or request for an Advance hereunder is untrue in any material respect at the time when made; or
d. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Maker and, in the case of involuntary proceedings, have not been dismissed within 61 days,
then, in each case where an Event of Default occurs, Holder, by notice in writing to Maker shall inform Maker of such Event of Default and if such default is not cured within five business days from the date such notice is received by Maker, then Holder, may, at its option, declare the Outstanding Principal Amount and all accrued interest due thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. Following the occurrence and during the continuance of an Event of Default, which, if susceptible to cure is not cured as provided above, otherwise then from the first date of such occurrence, the annual interest rate on this Note shall be the higher of fifteen percent (15%) or the highest rate permitted by law.
6. Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Maker, which is absolute and unconditional, to pay the Outstanding Principal Balance of this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Maker.
The parties undertake to perform any action and to execute any document and/or form that is necessary and requested for the performance and implementation of this Agreement.
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7. Costs of Collection. Maker and Holder agree that if, and as often as, this Note is placed in the hands of an attorney for collection, or to defend or enforce any of Holder’s rights hereunder, or under any instrument securing payment of this Note, Maker shall pay to Holder its attorney’s fees and all court costs and other expenses incurred in connection therewith, regardless of whether a lawsuit is ever commenced or whether, if commenced, the same proceeds to judgement or not. Such costs and expenses shall include, without limitation, all costs, reasonable attorneys’ fees and expenses incurred by Holder in connection with any insolvency, bankruptcy, reorganization, foreclosure, deed in lieu of foreclosure or similar proceeding involving Maker or which in any way affect the exercise by Holder of its rights and remedies under this Note, or any other document or instrument securing, evidencing or relating to the indebtedness evidenced by this Note.
8. Non-Waiver. No delay or omission on the part of Holder in exercising any of the rights or remedies hereunder shall operate as a waiver of such right or of any other right or remedy under this Note. A waiver of any one or more occasions shall not be construed as a bar to or waiver of any such right and/or remedy on any future occasion.
9. Purpose of Loan. Maker certifies that the loan evidenced by this Note is obtained for business or commercial purposes, and that in any event the proceeds thereof will not be used primarily for personal, family, household or agricultural purposes.
10. Waiver of Presentment. Maker and the endorsers, sureties, guarantors and all persons who may become liable for all or any part of this obligation shall be jointly and severally liable for such obligation and hereby jointly and severally waive presentment and demand for payment, notice of dishonor, protest and notice of protest, and any and all lack of diligence or delays in collection or enforcement hereof. Said parties consent to any modification or extension of time (whether one or more) of payment hereof, the release of all or any part of security for the payment hereof, and the release of any party liable for payment of this obligation. Any modification, extension, or release may be without notice to any such party and shall not discharge said party’s liability hereunder.
11. Partial Enforcement. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note.
12. Notice. All notices, consents, waivers, and other communications under this Note must be in writing and will be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, if to the registered Holder hereof; or (d) seven days after the placement of the notice into the mails (first class postage prepaid), to the Holder at the address above or, if to the Maker, to the address above (or to such other address, facsimile number, or e-mail address as the Holder or the Maker as a party may designate by notice to the other party in accordance with this Section 12).
13. Governing Law. The parties agree that the loan evidenced by this Note is made in the State of Israel and the provisions hereof will be construed in accordance with the laws of the State Israel. The parties further agree that in the event of default, this Note may be enforced in any court of competent jurisdiction in the State of Israel, and they do hereby submit to the jurisdiction of such court regardless of their residence or where this Note.
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14. Severability. Invalidation of any of the provisions of this Note or of any section, paragraph, sentence, clause, phrase, or word herein, or the application thereof in any given circumstance, shall not affect the validity of the remainder of this Note.
15. Amendment. This may not be amended, modified, or changed, except only by an instrument in writing, signed by both the parties.
16. Time of the Essence. Time is of the essence for the performance of each and every obligation of Maker hereunder.
17. Complete Agreement. This Note is a complete statement of the agreement between the parties and supersedes and merges all prior proposals, understandings, all other agreements, oral and written, including oral representations and warranties, between the parties relating to this Note.
18. Independent Representation. The Maker hereto acknowledges and agrees that it has received or has had the opportunity to receive independent legal counsel of its own choice and that it has been sufficiently apprised of its rights and responsibilities with regard to the substance of this Note, particularly in light of the fact that an affiliate of Holder is the principal of Maker’s counsel and therefore not independent. This Note shall be construed to effectuate the mutual intent of the parties. The parties and their counsel have cooperated in the drafting and preparation of this Note, and this Note therefore shall not be construed against any party by virtue of its role as the drafter thereof. No drafts of this Note shall be offered by any party, nor shall any draft be admissible in any proceeding, to explain or construe this Note.
19. Electronic and Counterpart Signatures. All parties (a) agree that each may use electronic signatures, and (b) agree that an electronic or facsimile copy of the executed Note or counterpart shall be deemed, and shall have the same legal force and effect as, an original document.
IN WITNESS WHEREOF, the Maker and Holder have duly executed and delivered this Note, or caused this Note to be duly executed and delivered, all as of the date first written above.
| Hold Me LTD. | Interity Group | ||||||
| By: | By: | ||||||
| Name: | Menny Shalom | Name: | |||||
| Title: | CEO | Title: | |||||
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Exhibit 12.1
| 1. |
I have reviewed this Form-20-F of Hold Me Ltd.;
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| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
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| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the company as of, and for, the periods presented in this report;
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| 4. |
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
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| a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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| b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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| c. |
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
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| d. |
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely
to materially affect, the company’s internal control over financial reporting; and
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| 5. |
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s
board of directors (or persons performing the equivalent functions):
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| a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information; and
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| b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
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Date: May 15, 2024
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/s/ Menachem Shalom
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|
Menachem Shalom
Chief Executive Officer
(Principal Executive Officer and Principal Financial and Accounting Officer)
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Exhibit 13.1
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
| 1. |
The Company’s annual report on Form 20-F for the fiscal year ended December 31, 2023, to which this statement is filed as an exhibit (the “Report”), fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
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| 2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 15, 2024
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/s/ Menachem Shalom
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|
Menachem Shalom
Chief Executive Officer
(Principal Executive Officer and Principal Financial and Accounting Officer)
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