Scinai Immunotherapeutics Ltd F-1, filed Oct 30, 2023
Scinai Immunotherapeutics Ltd. (SCNI)
As filed with the Securities and Exchange Commission on October 30, 2023.
Registration No. 333-_________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Scinai Immunotherapeutics
Ltd.
(Exact Name of Registrant as Specified in Its Charter)
Not Applicable
(Translation of Registrant’s name into English)
| State of Israel | 2836 | Not Applicable | ||
| (State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
Jerusalem BioPark, 2nd Floor
Kiryat Hadassah, Building 1, JBP
Jerusalem, Israel 9112001
Tel: +972-8-930-2529
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware
+1 (302) 738-6680
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
Copies to:
| Lawrence Metelitsa Steven Lipstein Lucosky Brookman LLP 101 Wood Avenue South Woodbridge, New Jersey 08830 Tel: 732 395 4400 |
Perry Wildes Goldfarb Gross Seligman & Co. One Azrieli Center Tel Aviv 6702100, Israel +972 (3) 607-4444 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.
The information in this registration statement is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
| PROSPECTUS | SUBJECT TO COMPLETION DATED OCTOBER 30, 2023 |
1,215,345 American Depositary Shares representing 486,138,000 Ordinary Shares
This prospectus relates to the resale, from time to time, by the selling shareholders identified in this prospectus under the section “Selling Shareholders,” (the “selling shareholders”) of Scinai Immunotherapeutics Ltd. (“Scinai,” “we,” “us”, “our” or the “Company”) of up to an aggregate of 1,215,345 American Depositary Shares (“ADSs”), each representing four hundred (400) of our ordinary shares, no par value, issuable upon exercise of warrants (“Warrants”) to purchase ADSs issued pursuant to (i) a securities purchase agreement (the “Purchase Agreement”), dated September 15, 2023, by and between the Company and the purchaser named on the signature page thereto, and (ii) an engagement letter dated as of September 18, 2023 (the “Engagement Letter”), by between us and H.C. Wainwright & Co., LLC (“Placement Agent”). The Warrants and the underlying ADSs issuable upon the exercise of the Warrants were offered and sold pursuant to the exemptions provided in Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder.
The selling shareholders will receive all of the proceeds from any sales of the ADSs offered hereby. We will not receive any of the proceeds, but we will incur expenses in connection with such offering. To the extent the Warrants are exercised for cash, if at all, we will receive the exercise price of the Warrants.
The selling shareholders may sell the ADSs covered by this prospectus through public or private transactions at market prices prevailing at the time of sale, at negotiated prices or such other prices as the selling shareholders may determine. The timing and amount of any sale are within the sole discretion of the selling shareholders. Our registration of the ADSs covered by this prospectus does not mean that the selling shareholders will offer or sell any of the ADSs. For further information regarding the possible methods by which the shares may be distributed, see “Plan of Distribution.”
The ADSs are listed on The Nasdaq Capital Market (“Nasdaq”) under the symbol “SCNI.” On October 27, 2023, the last reported sale price of the ADSs on Nasdaq was $ 0.62 per ADS.
Investing in these securities involves a high degree of risk. Please carefully consider the risks discussed in this prospectus under “Risk Factors” beginning on page 4 and the “Risk Factors” in “Item 1.A. Risk Factors” of our most recent Annual Report on Form 10-K incorporated by reference in this prospectus for a discussion of the factors you should consider carefully before deciding to purchase these securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities being offered by this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Prospectus dated , 2023
TABLE OF CONTENTS
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This prospectus is part of the registration statement on Form F-1 that we filed with the Securities and Exchange Commission (the “SEC”) for the offering of the ADSs by the selling shareholders.
Before investing in the ADSs, you should carefully read both this prospectus and the additional information in the documents we have incorporated by reference into this prospectus that are listed under the heading “Where You Can Find More Information.”
We have not authorized anyone to provide information different from that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. You should not assume that the information contained in this prospectus or any document incorporated by reference in this prospectus, is accurate as of any date other than the date on the front cover of the applicable document. Neither the delivery of this prospectus, nor the sale of our securities means that information contained in this prospectus is correct after their respective dates. Our business, financial condition, results of operations and prospects may have changed since that date. It is important for you to read and consider all information contained in this prospectus, including the information incorporated by reference into this prospectus before making your investment decision.
Before purchasing any securities, you should carefully read both this prospectus, together with the additional information described under the headings, “Where You Can Find More Information” and “Incorporation of Information by Reference,” on pages 26 and 26 of this prospectus.
The term “NIS” refers to New Israeli Shekels, the lawful currency of the State of Israel, and the terms “dollar,” “US$” or “$” refer to U.S. dollars, the lawful currency of the United States (“U.S.”). Our functional and presentation currency is the U.S. dollar. Foreign currency transactions in currencies other than the U.S. dollar are translated in this prospectus into U.S. dollars using exchange rates in effect at the date of the transactions.
Effective November 25, 2022, we effected a ratio change of the American Depositary Shares (ADSs) to our non-traded ordinary shares from the previous ratio of one (1) ADS representing forty (40) ordinary shares to a new ratio of one (1) ADS representing four hundred (400) ordinary shares. The ratio change had the same effect as a reverse split of the existing ADSs of one (1) new ADS for every ten (10) old ADSs. Unless otherwise indicated, ADSs and per ADS amount in this prospectus have been retroactively adjusted to reflect the changes in ratio for all periods presented.
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference herein were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties, and covenants should not be relied on as accurately representing the current state of our affairs.
This prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this prospectus in any jurisdiction where it is unlawful to make such offer or solicitation. The distribution of this prospectus and the offering of the securities in certain jurisdictions may be restricted by law. Persons outside the U.S. who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities and the distribution of this prospectus outside the U.S.
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TRADEMARKS, SERVICE MARKS AND TRADENAMES
Solely for convenience, the trademarks, service marks and trade names referred to or incorporated by reference in this prospectus are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This prospectus contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. Nanobody is a trademark registered by ABLYNX N.V., a wholly owned subsidiary of Sanofi. The Company has no affiliation with and is not endorsed by Sanofi. We do not intend our use or display of other companies’ trademarks, service marks or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
This prospectus includes or incorporates by reference estimates, projections and other information concerning our industry, our business, and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.
In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” in this prospectus. These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Note Regarding Forward-Looking Statements.”
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the information incorporated by reference into this prospectus, contains, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, but these are not the only ways these statements are identified. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. You should not put undue reliance on any forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements. Readers are encouraged to consult the Company’s filings made on Form 6-K, which are periodically filed with or furnished to the SEC.
The following is a summary of some of the principal risks we face. The list below is not exhaustive, and investors should read the “Risk Factors” section, including the “Item 3. Key Information - Risk Factors” in our Annual Report on Form 10-K for the year-ended December 31, 2022, in full.
| ● | We are a developmental stage biopharmaceutical company with a history of operating losses, with no product candidate that generates revenue and as such we are not currently profitable, do not expect to become profitable in the near future, may never become profitable and as a result may need to wind up our business and operation; |
| ● | We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts; |
| ● | Our business strategy may not be successful; |
| ● | If we breach certain provisions of our 24 million Euro finance agreement with the EIB it could result in the EIB accelerating the loans thereunder and exercising secured creditor remedies over collateral securing those loans, and that collateral consists of substantially all of our assets. The exercise of such remedies may have a material adverse effect on our company. We do not have control over certain events that constitute a breach of this finance documentation; |
| ● | We are highly dependent upon our ability to enter into agreements with partners to develop, commercialize, and market any current and future product candidate(s) or enter into other strategic partnerships; |
| ● | Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidate(s); |
| ● | Our novel nanosized antibodies, also known as VHH-antibodies, Nanobodies or NanoAbs, represent a relatively new approach to treating diseases, and we must overcome significant challenges in order to successfully develop, commercialize and manufacture product candidates based on this technology; |
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| ● | Clinical trials are very expensive, time-consuming and difficult to design and implement, and, as a result, we may suffer delays or suspensions in future trials which would have a material adverse effect on our ability to generate revenues; |
| ● | Positive results from any clinical trials we conduct may not be predictive of the results in later clinical trials of current and future product candidates, and the results of any clinical trials we conduct may not be replicated in additional clinical trials that we may be required to conduct, which could result in development delays or a failure to obtain marketing approval; |
| ● | We may be unsuccessful in adapting our Covid-19 NanoAbs to protect against variants of COVID-19. Furthermore, our ability to commercialize our Covid-19 NanoAbs may be adversely affected to the extent that the coronavirus disease evolves worldwide; |
| ● | We may not be successful in finding a partner to further develop our pre-clinical stage COVID19 program. Such partners may be commercial, pharmaceutical companies or governmental agencies. In such case, we may not have sufficient capital to take the COVID19 program to clinical trials; |
| ● | If we are not successful in discovering, developing and commercializing current and future product candidates, our ability to expand our business and achieve our strategic objectives may be impaired; |
| ● | Under the collaboration agreement with MPG, we have the option to in-license up to 9 total NanoAbs. To date, we have licensed anti-COVID-19 NanoAbs and anti-IL-17 NanoAbs. We may be unsuccessful in in-licensing, developing, and/or commercializing additional NanoAbs from MPG; |
| ● | We are a developmental stage biopharmaceutical company with no product candidate(s) in clinical development or approved, which makes it difficult to assess our future viability; |
| ● | We face significant competition. If we cannot successfully compete with new or existing product candidate(s), our marketing and sales will suffer, and we may never be profitable; |
| ● | Our NanoAbs program is based on an exclusive, worldwide license from the Max Planck Society, and we could lose our rights to this license if a dispute with MPG arises or if we fail to comply with the financial and other terms of the license; |
| ● | We recently announced our plans to utilize our manufacturing site and laboratories by launching a Contract Development and Manufacturing Organization business unit. There is no guarantee that our strategy will succeed, that we will be able to ramp up operations, that we will become profitable; and |
| ● | We are currently non-compliant with Nasdaq Listing Rule 5550(b) regarding minimum stockholders’ equity requirement for continued listing on Nasdaq. If we do not regain compliance, and if we become non-compliant with other Nasdaq Listing Rules, we may be delisted from the Nasdaq exchange. |
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This summary description of our business and this offering may not contain all of the information that may be important to you before making a decision to invest in the ADSs. For a more complete understanding of our business and this offering, we encourage you to read this entire prospectus and the documents incorporated by reference herein and therein. In particular, you should read the following summary together with the more detailed information and consolidated financial statements and the notes thereto included elsewhere in, or incorporated by reference into, this prospectus. You should review carefully the risks and uncertainties described under the heading “Risk Factors” included elsewhere in, or incorporated by reference into, this prospectus.
Our Business
We are a biopharmaceutical company focused on developing, manufacturing and commercializing innovative immunotherapeutic products primarily for the treatment of infectious and autoimmune diseases. Since its inception, the Company has executed eight clinical trials including a seven country, 12,400 participant phase 3 trial of its prior lead drug candidate, a universal influenza vaccine candidate (“M-001”) and has built a GMP biologics manufacturing facility for biopharmaceutical products. After receiving the phase 3 trial results in Q3 2020, indicating that M-001 did not meet its clinical endpoints, the Company performed a turnaround process that included raising fresh capital, hiring new talent (including a new CEO), signing a research collaboration agreement with and in-licensing new intellectual property from world leading academic research institutes. . Since then, the Company is in the process of developing a pipeline of diversified and commercially viable products built around the licensed innovative nanosized antibodies (NanoAb). NanoAbs are nanosized antibodies derived from camelid animals and are also known as VHH-antibodies or Nanobodies. “Nanobody” is a trademark registered by ABLYNX N.V., a wholly owned subsidiary of Sanofi. SCINAI has no affiliation with and is not endorsed by Sanofi.
As part of the abovementioned turnaround, on December 22, 2021, the Company signed a definitive exclusive, worldwide, License Agreement (“LA”) with the Max Planck Society (“MPG”), the parent organization of the Max Planck Institute for Multidisciplinary Sciences (“MPI”), and the University Medical Center Göttingen (“UMG”), both in Gottingen, Germany, for the development and commercialization of innovative NanoAbs for the treatment of COVID-19. The agreement provides for an upfront payment, development and sales milestones and royalties based on sales and sharing of sublicense revenues. In addition, the Company signed an accompanying Research Collaboration Agreement (“aRCA”) with MPG and UMG in support of the abovementioned development of a COVID-19 NanoAb by MPI and UMG. The aRCA provided for monthly payments to MPG and UMG and had a term until the earlier of two years or the date the Company enters into first in-human clinical trials with the COVID-19 NanoAb.
On March 23, 2022, we signed a five-year Research Collaboration Agreement (“RCA”; collectively, with the LA and aRCA, the “MPG/UMG Agreements”) with MPG and UMG covering the discovery, selection and characterization of NanoAbs for up to nine molecular targets that have the potential to be further developed into drug candidates for the treatment of disease indications such as psoriasis, psoriatic arthritis, asthma and wet macular degeneration. These are all large and growing markets with underserved medical needs. In each case, the molecular target has been validated as an appropriate target for therapeutic intervention through inhibition by an antibody, thereby significantly reducing the discovery work that typically entails many years of research, high cost and high risk of failure. We believe that we can leverage our NanoAbs’ unique and strong binding affinity, stability at high temperatures, and potential for more effective and convenient routes of administration towards competitive commercial viability. We believe that since these are clinical validated targets, we can develop NanoAb treatments with reduced risk and cost and accelerate the time from NanoAb selection to initiation of clinical development. Each NanoAb candidate is therefore positioned as a “biobetter” piggybacking on prior discoveries of others to mitigate risk but with significant potential advantages over existing therapeutics. In addition, while each NanoAb constitutes a novel molecule for which we file patent applications thereby creating a proprietary position, all of the developed NnoAbs when viewed together constitute a pipeline that is built around the same drug discovery, development and manufacturing platform allowing us to reduce risks and save costs. SCINAI has the exclusive option for an exclusive, pre-negotiated worldwide license agreement for the development and commercialization of each of the NanoAbs covered by the RCA with MPG and UMG.
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On June 5, 2023, we announced that as part of our ongoing broad-based collaboration with the Max Planck Society and the University Medical Center Gottingen (UMG), we signed an exclusive worldwide license agreement to develop and commercialize VHH antibodies (NanoAbs) targeting Interleukin-17 (IL-17) as treatments for all potential indications, starting with psoriasis and psoriatic arthritis.
In June 2023, we disclosed that we were pursuing a strategic partnership for its COVID-19 self-administered inhaled NanoAb therapeutic/prophylactic which demonstrated highly promising in vivo results in animals and that we will focus on developing the anti-IL-17 nanoAb.
During Q3 2023, we focused on implementing our revised corporate strategy to reflect recent market changes and trends in a fashion that would generate the most favorable value for its shareholders. The new strategy includes operating with two business units: an R&D business unit, and a Contract Development and Manufacturing Organization (CDMO) business unit. The R&D business unit is focused on the development of NanoAbs licensed from the Max Planck Society (MPG) and the University Medical Center Gottingen (UMG) and on management of the five-year Research Collaboration Agreement between the Company and MPI/UMG, which is expected to yield additional nanoAbs to be exclusively licensed to the Company. In particular, the R&D unit is focused on the development of a NanoAb for the treatment of psoriasis, which we expect to start in human clinical trials in 2024. The CDMO business unit has been marketing its services to Israeli biotech companies and has recently started targeting European and US based biotech companies. Our CDMO’s first contract was signed in October 2023, and we plan additional contracts to be signed in the coming months. As such, the CDMO business unit is expected to generate revenues, which would help us to absorb our fixed costs related to our manufacturing site, increase the cash available for our own R&D projects, and provide essential experience to our team. We plan to utilize the added financial flexibility and team experience to accelerate the development timelines for our own product
On November 2, 2022, we received a notice of non-compliance from Nasdaq that we were not in compliance with the Nasdaq listing rules regarding minimum bid price. To address the minimum bid price non-compliance, on November 25, 2022, we effected a change of the ADSs to our non-traded ordinary shares from the previous ratio of one (1) ADS representing forty (40) ordinary shares to a new ratio of one (1) ADS representing four hundred (400) ordinary shares. On December 12, 2022, we reported that we had received formal notifications from Nasdaq that we had regained compliance with these listing rules.
In addition, we received notification letters from Nasdaq dated September 28, 2022 and May 1, 2023 advising us that we are not in compliance with Listing Rule 5550(b)(1) requiring companies listed on Nasdaq to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing. On August 1, 2023, we announced that Nasdaq reviewed our plan to regain compliance with Nasdaq’s Listing Rule 5550(b) and provided us an extension until October 30, 2023, to demonstrate compliance.
Corporate Information
Our legal and commercial name is Scinai Immunotherapeutics Ltd. (formerly known as BiondVax Pharmaceuticals Ltd.). We are a company limited by shares organized under the laws of Israel. We were incorporated in Israel in 2003 as a privately held company and started operating in 2005. In February 2007, we completed an initial public offering of our ordinary shares on the Tel Aviv Stock Exchange (TASE), and we voluntarily delisted from the TASE in January 2018. In May 2015, we completed an initial public offering of ADSs and ADSs warrants (which have since expired) on Nasdaq.
Our principal executive offices are located at Kiryat Hadassah, Building 1, Jerusalem BioPark, 2nd Floor, Jerusalem, Israel 9112001, and our telephone number is 972-8-930-2529. Our website address is http://www.scinai.com. The information on our website does not constitute a part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware.
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| ADSs offered by the selling shareholders | Up to 1,215,345 ADSs, upon the exercise of the Warrants | |
| ADSs outstanding immediately after this offering (1) | 5,567,272 ADSs representing 2,226,908,800 ordinary shares assuming the exercise in full of the Warrants offered in this offering. | |
| Use of proceeds | All of the ADSs offered by the selling shareholders pursuant to this prospectus will be sold by the selling shareholders. We will not receive any proceeds from such sales. However, to the extent the Warrants are exercised for cash, if at all, we will receive the exercise price of the Warrants. The exercise price of the Warrants may exceed the trading price of the ADSs. If the price of the ADSs is below the exercise price of the Warrants, we believe that holder of the Warrants will be unlikely to exercise its warrants, resulting in little to no cash proceeds to us. If all the Warrants were exercised, we would receive gross proceeds of approximately $1.43 million. See the section titled “Use of Proceeds” in this prospectus for more information. | |
| Offering price | The Warrants will have a per ADS exercise price of $1.16. The ADSs offered by the selling shareholders under this prospectus may be offered and sold at prevailing market prices, negotiated prices or such other prices as the selling shareholders may determine. See the section titled “Plan of Distribution” in this prospectus for more information. | |
| Listing | Our ADSs trade on Nasdaq under the symbol “SCNI”. | |
| Risk factors | You should carefully read the section titled “Risk Factors” and other information included in this prospectus for a discussion of factors that you should consider before deciding to invest in our securities. | |
| (1) | The number of ADSs to be outstanding immediately after the offering, as shown above, is based on 4,351,927 ADSs (representing 2,226,908,800 Ordinary Shares) issued and outstanding as of September 30, 2023. |
As of September 30, 2023, we had issued and outstanding, warrants to purchase an aggregate of 2,726,252 ADSs with the latest expiration date of these warrants being between the years 2023 and 2025. As of September 30, 2023, we had issued and outstanding, pre-Funded warrants to purchase an aggregate of 746,552 ADSs at an exercise price of 0.001. We also have options to purchase an aggregate of 252,301 ADSs under the Employees Option Plan with the latest expiration date of the year 2033. In addition, as of September 30, 2023, we had an aggregate of 311,345 RSUs for ADSs.
Except as otherwise indicated, all information in this prospectus, including the number of Ordinary Shares that will be outstanding after this offering, excludes such outstanding securities and assumes full exercise of the Warrants offered in this offering.
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An investment in our securities involves a high degree of risk. Our business, financial condition or results of operations could be adversely affected by any of these risks. You should carefully consider the risk factors discussed under the caption “Item 1.A: Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and in any other filing we have made with the SEC, each of which are incorporated herein by reference, before making your investment decision. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. If any of these risks actually occurs, our business, business prospects, financial condition or results of operations could be seriously harmed. This could cause the trading price of our ADSs to decline, resulting in a loss of all or part of your investment. Please also read carefully the section below entitled “Forward-Looking Statements.”
Risks Related to Our Financial Position and Capital Requirements
Our financial statements include a going concern reference. We will need to raise significant additional capital to finance our losses and negative cash flows from operations, and if we were to fail to do so, or if the European Investment Bank, or EIB, accelerate their loans to us under our finance contract with EIB, we may need to cease operations. Management has substantial doubt about our ability to continue as a going concern.
As of June 30, 2023, the Company’s cash and cash equivalents totaled $7,632. In the six months ended June 30, 2023, the Company had an operating loss of $7,277 and negative cash flows from operating activities of $5,935. The Company’s current cash and cash equivalents position is not sufficient to fund the Company’s planned operations for at least a year beyond the date of the filing date of the financial statements. Those factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. While the Company has successfully raised funds in the past, there is no guarantee that it will be able to do so in the future. The inability to borrow or raise sufficient funds on commercially reasonable terms, would have serious consequences on our financial condition and results of operations.
In addition, we borrowed 24 million Euro under a finance contact with (the “Finance Contract”) with EIB with a maturity date of December 31st 2027. Under the Finance Contract, the EIB may accelerate all loans extended thereunder if an event of default has occurred. If the EIB determines that an event of default has occurred, it could accelerate the amounts outstanding under the Finance Contract, making those amounts immediately due and payable. In such a case, we expect such events to adversely impact our ability to continue as a going concern. The Company has recently commenced negotiations with the EIB in order to extend the maturity date of the financial facility contract to a later date that would better align with the Company’s most recent corporate strategy. EIB informed the Company that it is considering favorably evaluating the request and final decision is expected before the end of the year although there is no guarantee that the EIB will approve the request.
The Company’s current operating budget includes various assumptions concerning the level and timing of cash receipts and cash outlays for operating expenses and capital expenditures, including a cost saving plan. The Company is planning to finance its operations from its existing working capital resources and additional sources of capital and financing that are in the advanced planning phase. However, there is no assurance that additional capital and/or financing will be available to the Company, and even if available, whether it will be on terms acceptable to the Company or in amounts required. Accordingly, the Company’s board of directors approved a cost saving plan, a portion of which has been implemented to date. Additional measures approved in the cost reduction plan could further be implemented at management discretion to allow the Company to continue its operations and meet its cash obligations. The cost saving plan consists of reducing expenditures by means of further efficiencies and synergies, which include mainly the following steps: reduction in headcount costs through non paid leave and lay-offs, and postponing and/or cancelling capital expenditures that would not be required for the implementation of the revised business plan.
The Company’s financial statements for the six-months ended June 30, 2023 were prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. Such financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.
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Risks Related to our Operations in Israel
We conduct some of our operations 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 affect our operations.
Because we are incorporated under the laws of the State of Israel and some of our operations are conducted in Israel, our business and operations are directly affected by economic, political, geopolitical and military conditions in 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 terrorist organizations active in the region. 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. Moreover, the clash between Israel and Hezbollah in Lebanon, may escalate in the future into a greater regional conflict.
Although we currently do not expect the ongoing conflict to affect our manufacturing, research and development and current studies, there can be no assurances that further unforeseen events will not have a material adverse effect on us or our operations in the future.
The Israel Defense Force (the “IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Since October 7, 2023, the IDF has called up more than 350,000 of its reserve forces to serve. Two members of our non-management employee are currently subject to military service in the IDF and have been called to serve. It is possible that there will be further military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labor and loss of institutional knowledge, and necessary mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, for example, may have unintended negative effects and adversely impact our results of operations, liquidity or cash flows.
Additionally, all members of our management team and all of our non-management employees reside in Israel. Shelter-in-place and work-from-home measures, government-imposed restrictions on movement and travel and other precautions taken to address the ongoing conflict may temporarily disrupt our management and employees’ ability to effectively perform their daily tasks.
It is currently not possible to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial conditions. The ongoing conflict is rapidly evolving and developing, and could disrupt our business and operations, interrupt our sources and availability of supply and hamper our ability to raise additional funds or sell our securities, among others.
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Risks Related to The ADSs
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of the ADSs. The delisting could adversely affect the market liquidity of our shares and the market price of our shares could decrease significantly.
If we fail to satisfy Nasdaq’s continued listing requirements, Nasdaq may take steps to delist the ADSs. On November 2, 2022, we received a notice of non-compliance from Nasdaq that we were not in compliance with the Nasdaq listing rule regarding minimum bid price. To address the minimum bid price non-compliance, on November 25, 2022, we effected a change of the ADSs to our non-traded ordinary shares from the previous ratio of one (1) ADS representing forty (40) ordinary shares to a new ratio of one (1) ADS representing four hundred (400) ordinary shares. On December 12, 2022, we reported that we had received formal notifications from Nasdaq that we had regained compliance with these listing rules.
In addition, we received notification letters from Nasdaq dated September 28, 2022 and May 1, 2023 advising us that we are not in compliance with Listing Rule 5550(b)(1) requiring companies listed on Nasdaq to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing. On August 1, 2023, we announced that Nasdaq reviewed our plan to regain compliance with Nasdaq’s Listing Rule 5550(b) and provided us with an extension until October 30, 2023 to demonstrate compliance.
Nasdaq requires that the closing bid price of the ADSs do not fall below $1.00 per share for 30 consecutive business days. If we are unable to maintain compliance with this closing bid price requirement, the ADSs could be delisted from Nasdaq. If this were to occur, trading of our securities would most likely take place in an over-the-counter market for unlisted securities. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our securities in an over-the-counter market, and many investors would likely not buy or sell our securities due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our securities would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our securities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our securities, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and raise capital.
A delisting from Nasdaq would likely have a negative effect on the price of the ADSs and would impair shareholders’ ability to sell or purchase their ADSs when they wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow the ADSs to become listed again, stabilize the market price or improve the liquidity of the ADSs, prevent the ADSs from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
U.S. holders of ADSs may suffer adverse tax consequences if we were characterized as a passive foreign investment company.
Based on the current composition of our gross income and assets and on reasonable assumptions and projections, we believe we should not be treated as a passive foreign investment company (a “PFIC”), for U.S. federal income tax purposes for 2023. However, there can be no assurance that this will be the case in 2023 or in future taxable years. If we were characterized as a PFIC, U.S. holders of the ADSs may suffer adverse tax consequences such as (i) having gains realized on the sale of the ADSs treated as ordinary income rather than capital gain, not qualifying for the preferential rate otherwise applicable to dividends received in respect of the ADSs by individuals who are U.S. holders, and (ii) having interest charges apply to certain distributions by us and upon certain sales of the ADSs.
Risks Related to the Offering
Future sales of the ADSs, including any ADSs issuable upon the exercise of the Warrants, or the perception that future sales may occur, may cause the market price of the ADSs to decline, even if our business is doing well.
Sales by the ADS holders of a substantial number of ADSs in the public market could occur in the future. These sales, or the perception in the market that the holders of a large number of ADSs intend to sell shares, may cause the market price of the ADSs to decline. To the extent that holders of the Warrants or other existing warrants sell the ADSs issued upon the exercise of such warrants, the market price of the ADSs may decrease due to the additional selling pressure in the market. Moreover, the risk of dilution from issuances of ADSs underlying the Warrants may cause shareholders to sell their ADSs, which could cause a further decline in the market price.
You may experience future dilution as a result of future equity offerings.
To raise additional capital, we may in the future offer additional ADSs, Ordinary Shares or other securities convertible into or exchangeable for the ADSs or Ordinary Shares at prices that may not be the same as the price per ADS in this offering. We may sell ADSs, Ordinary Shares or other securities in any other offering at a price per ADS or per Ordinary Share, as appliable, that is less than the price per ADS paid by the investor in this offering, and investors purchasing ADSs, Ordinary Shares or other securities in the future could have rights superior to the rights of ADSs holders. The price per ADS or per share at which we sell additional ADSs, Ordinary Shares, as applicable, or securities convertible or exchangeable into ADSs or Ordinary Shares, in future transactions, may be higher or lower than the price per ADS paid by the investor in this offering.
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Registered Direct and Concurrent Private Placement
On September 15, 2023, we agreed, pursuant to the Purchase Agreement, to issue to the purchaser named on the signature page thereto (i) in a registered direct offering, (A) 400,000 ADSs and pre-funded warrants (“Pre-Funded Warrants”) to purchase up to 746,552 ADSs, at an exercise price of $0.001 per ADS, at a purchase price of $1.16 per ADS and $1.159 per pre-funded warrant and (iii) in a concurrent private placement, unregistered Warrants exercisable for an aggregate of 1,215,345 ADSs at an exercise price of $1.16. Each Warrant became exercisable on the date of issuance and will remain exercisable until five and one-half (5.5) years from the initial exercise date. The Warrants and the ADSs issuable upon the exercise of the Warrants were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder.
Pursuant to the Securities Purchase Agreement, we agreed to file a registration statement on Form F-1, as soon as practicable and in any event within 45 calendar days from the execution of the Securities Purchase Agreement, and to use commercially reasonable efforts to cause a registration statement providing for the resale by holders of the Warrant ADSs, to become effective 181 days following the closing date, and to keep such registration statement effective until such time as no holder owns any Warrants or Warrant ADSs issuable upon exercise thereof.
The foregoing descriptions of the form of Purchase Agreement and the form of Warrant are not complete and are subject to and qualified in their entirety by reference to the form of Purchase Agreement and the form of Warrant, respectively, copies of which are attached as Exhibits 1.1 and 1.3 respectively, to the Current Report on Form 6-K dated September 19, 2023, and are incorporated herein by reference.
Placement Agent Warrants
As part of the compensation to the Placement Agent in connection with the above-described transaction, pursuant to an engagement agreement, dated as of September 15, 2023, by between us and the Placement Agent, we issued to Placement Agent designees unregistered Warrants to purchase up to an aggregate of 68,793 ADSs at an exercise price of $1.45 per ADS and a term of five years until September 18, 2028.
The resale of the ADSs issuable upon exercise of the Warrants issued to the Placement Agent is being registered in this registration statement.
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All of the ADSs offered by the selling shareholders pursuant to this prospectus will be sold by the selling shareholders. We will not receive any of the proceeds from such sales. The selling shareholders will receive all of the proceeds from any sales of the ADSs offered hereby. However, we will incur expenses in connection with the registration of the ADSs offered hereby.
We will receive the exercise price upon any exercise of the Warrants, to the extent exercised on a cash basis. If all the Warrants were exercised, we would receive gross proceeds of approximately $1.33 million. However, the holders of the Warrants are not obligated to exercise the Warrants, and we cannot predict whether or when, if ever, the holders of the Warrants will choose to exercise the Warrants, in whole or in part. The exercise price of the Warrants may exceed the trading price of our ADSs. If the price of the ADSs is below their exercise price, we believe that holder of the Warrants will be unlikely to exercise their warrants, resulting in little to no cash proceeds to us. Accordingly, we currently intend to use the proceeds received upon such exercise, if any, for general corporate purposes and working capital.
MARKET FOR ORDINARY SHARES AND DIVIDEND POLICY
The Ordinary Shares are traded on Nasdaq Capital Market under the symbol “SCNI.” The last reported sale price of the ADSs on October 27, 2023 on Nasdaq was $0.62 per ADS.
We have never declared or paid any cash dividends on the ADSs, and we anticipate that, for the foreseeable future, we will retain any future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends for at least the next several years.
The distribution of dividends may also be limited by the Israeli Companies Law, 5759-1999 (the “Companies Law”), which permits the distribution of dividends only out of retained earnings or earnings derived over the two most recent fiscal years, whichever is higher, provided that there is no reasonable concern that payment of a dividend will prevent a company from satisfying its existing and foreseeable obligations as they become due. As of December 31, 2022, we did not have distributable earnings pursuant to the Companies Law. Dividend distributions may be determined by our board of directors, as our amended and restated articles of association do not provide that such distributions require shareholder approval.
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The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2023 as follows:
| ● | on an actual basis; |
| ● | on a pro forma basis to give effect to the receipt of net proceeds of approximately $1.08 million from our issuance and sale in September 2023 of (i) 400,000 ADSs and (ii) Pre-funded Warrants to purchase up to 746,552 ADSs at the purchase price of $1.4999 per Pre-Funded Warrant, after deducting the Placement Agent fee and estimated offering expenses payable by us in connection therewith (the September 2023 Capital Raising”); and |
| ● | on a pro forma as adjusted basis to reflect (i) the September 2023 Capital Raising and (ii) the issuance by the Company of 1,215,345 ADSs offered pursuant to this prospectus, following an assumed exercise for cash of all of the Warrants for net proceeds of $1.18 million. |
The following table should be read in conjunction with “Use of Proceeds,” our financial statements and related notes that are incorporated by reference into this prospectus and the other financial information included or incorporated by reference into this prospectus. Our historical results do not necessarily indicate our expected results for any future periods.
| As of June 30, 2023 | ||||||||||||
| (In thousands, except share data) | Actual | Pro Forma | Pro Forma As Adjusted | |||||||||
| Ordinary Shares, no par value per share | - | - | ||||||||||
| Additional paid-in capital | 117,740 | 117,959 | 118,059 | |||||||||
| Accumulated deficit | (123,112 | ) | (123,112 | ) | (123,112 | ) | ||||||
| Accumulated other comprehensive loss | $ | (1,740 | ) | $ | (1,740 | ) | $ | (1,740 | ) | |||
| Total shareholders’ deficit | (7,112 | ) | (6,787 | ) | (6,787 | ) | ||||||
| Total capitalization | $ | 118,009 | 119,095 | 119,195 | ||||||||
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The ADSs being offered by the selling shareholders pursuant to this prospectus are those issuable to the selling shareholders upon exercise of the Warrants. For additional information regarding the issuance of the Warrants, see “The September 2023 Financing” above. We are registering the resale of the ADSs in order to permit the selling shareholder to offer the ADSs and Warrants for resale from time to time. To our knowledge, the selling shareholders have not had any material relationship with us or our affiliates within the past three years. Our knowledge is based on information provided by the selling shareholders in connection with the filing of this prospectus.
The table below lists the selling shareholders and other information regarding the beneficial ownership of the ADSs by the selling shareholders. The second column lists the number of ADSs beneficially owned by the selling shareholder, based on its ownership of ADSs and Warrants, as of September 30, 2023, and assuming exercise of all of the Warrants held by the selling shareholders on that date, without regard to any limitations on exercises. The fourth column lists the maximum number of ADSs that may be sold or otherwise disposed of by the selling shareholders pursuant to the registration statement of which this prospectus forms a part. The selling shareholders may sell or otherwise dispose of some, all or none of their ADSs in this offering. Pursuant to the rules of the SEC, beneficial ownership includes any of the Ordinary Shares as to which a shareholder has sole or shared voting power or investment power, as well as any Ordinary Shares that the selling shareholder has the right to acquire within 60 days of September 30, 2023. The percentage of beneficial ownership for the selling shareholder is based on 4,351,927 of the ADSs outstanding as of September 30, 2023 and the number of ADSs issuable upon exercise or conversion of convertible securities that are currently exercisable or convertible or are exercisable or convertible within 60 days of September 30, 2023 beneficially owned by the applicable selling shareholder. The fifth column assumes the sale of all of the ADSs offered by the selling shareholder pursuant to this prospectus.
Under the terms of the Warrants, the selling shareholder may not exercise the Warrants to the extent such exercise would cause the selling shareholder, together with its affiliates and attribution parties, to beneficially own a number of ADSs which would exceed 4.99% of our then outstanding ADSs immediately after giving effect to the issuance of ADS upon exercise of the Warrants held by the selling shareholders. Furthermore, under the terms of the Pre-Funded Warrants, the selling shareholder may not exercise the Pre-Funded Warrants to the extent such exercise would cause the selling shareholder, together with its affiliates and attribution parties, to beneficially own a number of Ordinary Shares which would exceed 9.99% of our then outstanding Ordinary Shares immediately after giving effect to the issuance of Ordinary Shares upon exercise of the Pre-Funded Warrants held by the selling shareholders. The number of ADSs in the second and fifth columns do not reflect these limitations. See “Plan of Distribution.”
| Name of Selling Shareholder | ADSs Beneficially Owned Prior to the Offering(1) | Percentage of Outstanding ADSs(1) | Maximum Number of ADSs To Be Sold Pursuant to this Prospectus | Number of ADSs Beneficially Owned After the Offering(2) | Percentage of Outstanding ADSs after the Offering(2) | |||||||||||||||
| Armistice Capital Master Fund LLC | 2,293,104 | (3) | 33.7 | % | 2,293,104 | 1,146,552 | 20.85 | % | ||||||||||||
| Michael Vasinkevich (4) | 44,113 | 1 | % | 44,113 | - | * | ||||||||||||||
| Noam Rubinstein (4) | 21,670 | * | 21,670 | - | * | |||||||||||||||
| Craig Schwabe (4) | 2,322 | * | 2,322 | - | * | |||||||||||||||
| Charles Worthman (4) | 688 | * | 688 | - | * | |||||||||||||||
| * | Less than 1%. |
| (1) | Assumes all Warrants held by the selling shareholders on September 30, 2023 are exercised. |
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| (2) | Assumes that (i) all of the ADSs covered by the registration statement of which this prospectus is a part are sold in this offering and (ii) the selling shareholders do not acquire additional ADSs after the date of this prospectus and prior to completion of this offering. The percentage of beneficial ownership after the offering is based on 5,567,272 ADSs outstanding as of September 30, 2023, consisting of (a) 4,351,927 ADSs outstanding September 30, 2023, and (b) the 1,215,345 ADSs underlying the Warrants offered under this prospectus. The number and percentage of ADSs listed do not take into account any limitations on exercise of Pre-Funded Warrants and Warrants preventing the selling shareholders from exercising any portion of such warrants if such exercise would result in the selling shareholder owning greater than 4.99% of the outstanding ADSs (9.99% of the outstanding ADSs in the case of Pre-Funded Warrants) following such exercise. |
| (3) | Consists of (i) 400,000 ADSs, (ii) 746,552 ADSs issuable upon exercise of the Pre-Funded Warrants and (iii) 1,146,552 ADSs issuable upon the exercise of the Warrants. The securities are directly held by Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”) and may be deemed to be beneficially owned by: (i) Armistice Capital, LLC (“Armistice Capital”), as the investment manager of the Master Fund; and (ii) Steven Boyd, as the Managing Member of Armistice Capital. The Ordinary Warrants are subject to a beneficial ownership limitation of 4.99%, which such limitation restricts the selling shareholder from exercising that portion of the warrants that would result in the Selling Stockholder and its affiliates owning, after exercise, a number of shares of common stock in excess of the beneficial ownership limitation. The number of Ordinary Shares set forth in the above table does not reflect the application of this limitation. The address of Armistice Capital Master Fund Ltd. is c/o Armistice Capital, LLC, 510 Madison Avenue, 7th Floor, New York, NY 10022. |
| (4) | Each of the selling shareholders is affiliated with the Placement Agent, a registered broker dealer with a registered address of H.C. Wainwright & Co., LLC, 430 Park Ave, 3rd Floor, New York, NY 10022, and has sole voting and dispositive power over the securities held. The number of shares beneficially owned prior to this offering consist of Ordinary Shares issuable upon exercise of placement agent warrants, which were received as compensation. The selling stockholder acquired the placement agent warrants in the ordinary course of business and, at the time the placement agent warrants were acquired, the selling shareholder had no agreement or understanding, directly or indirectly, with any person to distribute such securities. Each selling shareholder may not exercise the placement agent warrants to the extent such exercise would cause each selling shareholders, together with his affiliates and attribution parties, to beneficially own a number of ADSs which would exceed 4.99% of our then outstanding Ordinary Shares following such exercise, or, upon notice to us, 9.99% of our then outstanding Ordinary Shares following such exercise, excluding for purposes of such determination shares of Ordinary Shares issuable upon exercise of such securities which have not been so exercised. |
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The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our securities offered hereby. 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.
Material U.S. Federal Income Tax Considerations
The following is a summary of the material U.S. federal income tax consequences relating to the acquisition, ownership, and disposition of the Warrants and ADSs (collectively, the “Securities”) by U.S. Holders, as defined below. This summary addresses solely U.S. Holders who acquire the Securities pursuant to this offering and who hold the Securities as capital assets for tax purposes. This summary is based on current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), current and proposed U.S. Treasury regulations promulgated thereunder, and administrative and judicial decisions as of the date hereof, all of which are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon representations of the depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms. This summary does not address all U.S. federal income tax matters that may be relevant to a particular holder or all tax considerations that may be relevant with respect to an investment in the Securities.
This summary does not address tax considerations applicable to a holder of the Securities that may be subject to special tax rules including, without limitation, the following:
| ● | dealers or traders in securities, currencies, or notional principal contracts; |
| ● | banks, insurance companies, and other financial institutions; |
| ● | real estate investment trusts or regulated investment companies; |
| ● | persons or corporations subject to an alternative minimum tax; |
| ● | tax-exempt organizations; |
| ● | traders that have elected mark-to-market accounting; |
| ● | corporations that accumulate earnings to avoid U.S. tax; |
| ● | pension plans; |
| ● | investors that hold the Securities as part of a “straddle,” “hedge,” or “conversion transaction” with other investments; |
| ● | persons that actually or constructively own 10 percent or more of our Ordinary Shares outstanding by vote or by value; |
| ● | persons that are treated as partnerships or other pass-through entities for U.S. federal income purposes; and |
| ● | U.S. Holders whose functional currency is not the U.S. dollar. |
This summary does not address the effect of any U.S. federal taxation other than U.S. federal income taxation, and does not include any discussion of state, local, or foreign tax consequences to a holder of the Securities. In addition, this summary does not include any discussion of the U.S. federal income tax consequences to any holder of Securities that is not a U.S. Holder.
You are urged to consult your own tax advisor regarding the foreign and U.S. federal, state, and local income and other tax consequences of an investment in the Securities, including the potential effects of any proposed legislation, if enacted.
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For purposes of this summary, a “U.S. Holder” means a beneficial owner of a Security that is for U.S. federal income tax purposes:
| ● | an individual who is a citizen or resident of the U.S.; |
| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the U.S. or under the laws of the U.S., any state thereof, or the District of Columbia; |
| ● | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
| ● | a trust (1) if (a) a court within the U.S. is able to exercise primary supervision over the administration of the trust and (b) one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
If an entity or arrangement that is classified as a partnership for U.S. federal tax purposes holds any Securities, the U.S. federal tax treatment of its partners will generally depend upon the status of the partners and the activities of the partnership. Entities or arrangements that are classified as partnerships for U.S. federal tax purposes and persons holding any Securities through such entities should consult their own tax advisors.
In general, and assuming that all obligations under the Deposit Agreement will be satisfied in accordance with the terms of the Deposit Agreement, if you hold ADSs, you will be treated as the holder of the underlying Ordinary Shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, gain or loss generally will not be recognized if you exchange ADSs for the underlying Ordinary Shares represented by those ADSs.
Distributions
If we make any distribution with respect to the Securities, subject to the discussion under “– Passive Foreign Investment Companies” below, the gross amount of any distribution actually or constructively received by a U.S. Holder (through the Depositary) with respect to a Security will generally be taxable to the U.S. Holder as foreign-source dividend income to the extent of our current and accumulated earnings and profits as determined under U.S. federal income tax principles. The amount distributed will include the amount of any Israeli taxes withheld from such distribution, as described above under the caption “Material Tax Considerations-Israeli Tax Considerations.” A U.S. Holder will not be eligible for any dividends received deduction in respect of the dividends paid by us, which deduction is otherwise available to a corporate U.S. Holder in respect of dividends received from a domestic corporation. Distributions in excess of earnings and profits will be non-taxable to the U.S. Holder to the extent of the U.S. Holder’s adjusted tax basis in its Securities. Distributions in excess of such adjusted tax basis will generally be taxable to a U.S. Holder as capital gain from the sale or exchange of property as described below under “-Sale or Other Disposition of ADSs and Warrants.” If we do not report to a U.S. Holder the portion of a distribution that exceeds earnings and profits, then the distribution will generally be taxable as a dividend. The amount of any distribution of property other than cash will be the fair market value of that property on the date of distribution.
Under the Code, certain qualified dividends received by non-corporate U.S. Holders will be subject to U.S. federal income tax at the preferential long-term capital gains of, currently, a maximum of 20%. This preferential income tax rate is applicable only to dividends paid by a “qualified foreign corporation” that is not a PFIC (as defined below under “– Passive Foreign Investment Companies,”) for the year in which the dividend is paid or for the preceding taxable year, and only with respect to the Securities held by a qualified U.S. Holder (i.e., a non-corporate holder) for a minimum holding period (generally 61 days during the 121-day period beginning 60 days before the ex-dividend date) and certain other holding period requirements are met. If such holding period requirements are met, dividends we pay with respect to the Securities generally will be qualified dividend income. However, if we were a PFIC, dividends paid by us to individual U.S. Holders would not be eligible for the reduced income tax rate applicable to qualified dividends. As discussed below under “– Passive Foreign Investment Companies,” we do not anticipate being treated as a PFIC for this year; however, there can be no assurance that we will not be treated as a PFIC for our current taxable or future taxable years. You should consult your own tax advisor regarding the availability of this preferential tax rate under your particular circumstances.
The amount of any distribution paid in a currency other than U.S. dollars (a “foreign currency”), including the amount of any withholding tax thereon, will be included in the gross income of a U.S. Holder in an amount equal to the U.S. dollar value of the foreign currency calculated by reference to the exchange rate in effect on the date of the U.S. Holder’s (or, in the case of ADSs, the depositary’s) receipt of the dividend, actively or constructively, regardless of whether the foreign currency is converted into U.S. dollars. If the foreign currency is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize a foreign currency gain or loss in respect of the dividend. If the foreign currency received in the distribution is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or loss on a subsequent conversion or other disposition of the foreign currency will be treated as U.S. source ordinary income or loss and will not be eligible for the preferential rate applicable to qualified dividend income.
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Subject to certain conditions and limitations, any Israeli taxes withheld on dividends may be creditable against a U.S. Holder’s U.S. federal income tax liability, subject to generally applicable limitations. The rules relating to foreign tax credits and the timing thereof are complex. You should consult your own tax advisors regarding the availability of a foreign tax credit in your particular situation.
Sale, Exchange, or Other Disposition of ADSs and Warrants
Subject to the discussion under “– Passive Foreign Investment Companies” below, a U.S. Holder that sells or otherwise disposes of its Securities will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other disposition and such U.S. Holder’s adjusted basis in the Securities. Such gain or loss generally will be capital gain or loss and will be a long-term capital gain or loss if the U.S. Holder’s holding period of the Securities exceeds one year at the time of the sale or other disposition. Long-term capital gains realized by non-corporate U.S. Holders are generally subject to a preferential U.S. federal income tax rate. In general, gain or loss recognized by a U.S. Holder on the sale or other disposition of the Securities will be U.S. source gain or loss for purposes of the foreign tax credit limitation. However, if we are a PFIC, any such gain will be subject to the PFIC rules, as discussed below, rather than being taxed as a capital gain. As discussed below in “-Passive Foreign Investment Companies,” we do not anticipate being a PFIC for this year; however, there can be no assurance that we will not be treated as a PFIC for our current taxable year and future taxable years.
If a U.S. Holder receives foreign currency upon a sale or exchange of the Securities, gain or loss will be recognized in the manner described above under “– Distributions.” However, if such foreign currency is converted into U.S. dollars on the date received by the U.S. Holder, the U.S. Holder generally should not be required to recognize any foreign currency gain or loss on such conversion.
As discussed above under the heading “Material Tax Considerations-Israeli Tax Considerations-Taxation of Shareholders,” a U.S. Holder who holds Securities through an Israeli broker or other Israeli intermediary may be subject to Israeli withholding tax on any capital gains recognized on a sale or other disposition of the Securities. Any Israeli tax paid under circumstances in which an exemption from (or a refund of or a reduction in) such tax was available will not be creditable for U.S. federal income tax purposes. U.S. Holders are advised to consult their Israeli broker or intermediary regarding the procedures for obtaining an exemption or reduction.
Medicare Tax on Unearned Income
Non-corporate U.S. Holders whose income exceeds certain thresholds are required to pay an additional 3.8% tax on their net investment income, which includes dividends paid on the Securities and capital gains from the sale or other disposition of the Securities.
Passive Foreign Investment Companies
Although we do not anticipate being treated as a passive foreign investment company (“PFIC”) for this year, the treatment of the Company as a PFIC is based on the value and composition of our assets, and no assurance can be given that we will not be treated as a PFIC for U.S. federal income tax purposes for our current taxable year or future taxable years. We will be considered a PFIC for any taxable year if:
| ● | at least 75% of our gross income for such taxable year is passive income; or |
| ● | at least 50% of the value of our assets (based on an average of the fair market values of the assets determined at the end of each quarter during a taxable year) is attributable to assets that produce or are held for the production of passive income. |
For purposes of the above calculations, if we own, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, we will be treated as if we (a) held a proportionate share of the assets of such other corporation and (b) received a proportionate share of the income of such other corporation directly. Passive income generally includes, among other things, dividends, interest, rents, royalties and certain capital gain, but generally excludes rents and royalties that are derived in the active conduct of a trade or business and which are received from a person other than a related person.
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A separate determination must be made each taxable year as to whether we are a PFIC (after the close of each such taxable year). Because the value of our assets for purposes of the asset test will generally be determined by reference to the market price of the ADSs and Warrants, our PFIC status will also depend in large part on the market price of the Securities, which may fluctuate significantly.
If we are a PFIC for any year during which a U.S. Holder holds any Securities, we generally will be treated as a PFIC with respect to such U.S. Holder for all succeeding years during which such U.S. Holder holds the Securities, unless we cease to be a PFIC and such U.S. Holder makes a “deemed sale” election with respect to the Securities that such U.S. Holder holds. For this purpose, a U.S. Holder that acquired an ADS through the exercise of a Warrant will be treated as holding such ADS for the period during which such Warrant was held. A U.S. Holder that makes such an election will be deemed to have sold the Securities it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain from such deemed sale will be subject to the U.S. federal income tax treatment described below. After the deemed sale election, the Securities with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.
For each taxable year for which we are treated as a PFIC with respect to a U.S. Holder, such U.S. Holder will be subject to special tax rules with respect to any “excess distribution” it receives and any gain it realizes from a sale or other disposition (including a pledge) of the Securities, unless it makes a “mark-to-market” election or a “qualified electing fund” election discussed below. Distributions that a U.S. Holder receives in a taxable year that are greater than 125% of the average annual distributions it received during the shorter of the three preceding taxable years or its holding period for the Securities will be treated as an excess distribution. Under these special tax rules, if a U.S. Holder receives any excess distribution or realizes any gain from a sale or other disposition of the Securities:
| ● | the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the Securities; |
| ● | the amount of excess distribution or gain allocated to the current taxable year, and any taxable year before the first taxable year in which we were a PFIC, must be included in the U.S. Holder’s gross income (as ordinary income) for the tax year of the sale or disposition; and |
| ● | the amount allocated to each other year will be subject to the highest marginal tax rate in effect with respect to such U.S. Holder for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to such amounts allocated to each other year. |
The tax liability for amounts allocated to years before the year of disposition or “excess distribution” cannot be offset by any losses for such years. Additionally, any gains realized on the sale of the Securities cannot be treated as capital gains.
If we are treated as a PFIC with respect to a U.S. Holder for any taxable year, to the extent any of our subsidiaries are also PFICs, such U.S. Holder will be deemed to own its proportionate share of any such subsidiaries that are PFICs, and such U.S. Holder may be subject to the rules described in the preceding two paragraphs with respect to the shares of such subsidiaries that are PFICs it will be deemed to own. As a result, a U.S. Holder may incur liability for any “excess distribution” described above if we receive a distribution from such subsidiaries that are PFICs or if we dispose of, or are deemed to dispose of, any shares in such subsidiaries that are PFICs. You should consult your own tax advisor regarding the application of the PFIC rules to any of our subsidiaries.
Alternatively, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the general tax treatment for PFICs discussed above. If a U.S. Holder makes a mark-to-market election for the ADSs, such U.S. Holder will include in income for each year we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs as of the close of such U.S. Holder’s taxable year over such U.S. Holder’s adjusted basis in such ADSs. A U.S. Holder is allowed a deduction for the excess, if any, of the adjusted basis of the ADSs over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the ADSs included in a U.S. Holder’s income for prior taxable years. Amounts included in a U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ADSs, as well as to any loss realized on the actual sale or disposition of the ADSs to the extent the amount of such loss does not exceed the net mark-to-market gains previously included for the ADSs. A U.S. Holder’s basis in the ADSs will be adjusted to reflect any such income or loss amounts. If a U.S. Holder makes a valid mark-to-market election, the tax rules that apply to distributions by corporations that are not PFICs will apply to distributions by us, except the lower applicable tax rate for qualified dividend income will not apply. If we cease to be a PFIC when a U.S. Holder has a mark-to-market election in effect, gain or loss realized by such U.S. Holder on the sale of the ADSs will be a capital gain or loss and taxed in the manner described above under “– Sale, Exchange, or Other Disposition of ADSs and Warrants.”
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The mark-to-market election is available only for “marketable stock,” which is a stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter, or regularly traded, on a qualified exchange or another market, as defined in applicable U.S. Treasury regulations. Any trades that have as their principal purpose meeting this requirement will be disregarded. The ADSs are listed on Nasdaq and, accordingly, provided the ADSs are regularly traded, the mark-to-market election will be available to a U.S. Holder of ADSs if we are a PFIC. Once made, the election cannot be revoked without the consent of the IRS unless the ADSs cease to be marketable stock. If we are a PFIC for any year in which the U.S. Holder owns the ADSs but before a mark-to-market election is made, the interest charge rules described above will apply to any mark-to-market gain recognized in the year the election is made. If any of our subsidiaries are or become PFICs, the mark-to-market election will not be available with respect to the shares of such subsidiaries that are treated as owned by a U.S. Holder. Consequently, a U.S. Holder could be subject to the PFIC rules with respect to income of the lower-tier PFICs the value of which already had been taken into account indirectly via mark-to-market adjustments. You should consult your own tax advisors as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs.
In certain circumstances, a U.S. Holder of stock in a PFIC can make a “qualified electing fund” election to mitigate some of the adverse tax consequences of holding stock in a PFIC by including in income its share of the corporation’s income on a current basis. However, we do not currently intend to prepare or provide the information that would enable a U.S. Holder to make a qualified electing fund election.
Unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual information return on IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualifying Electing Fund) containing such information as the U.S. Treasury may require. A U.S. Holder’s failure to file such annual information return could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax. You should consult your own tax advisors regarding the requirements of filing such information returns under these rules, taking into account the uncertainty as to whether we are currently treated as or may become a PFIC.
YOU ARE STRONGLY URGED TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE IMPACT AND APPLICATION OF THE PFIC RULES ON YOUR INVESTMENT IN THE SECURITIES.
Backup Withholding and Information Reporting
Payments of dividends with respect to the Securities and the proceeds from the sale, retirement, or other disposition of the Securities made by a U.S. paying agent or other U.S. intermediary will generally be reported to the IRS and to the U.S. Holder as may be required under applicable U.S. Treasury regulations. We, or an agent, a broker, or any paying agent, as the case may be, may be required to withhold tax (backup withholding), currently at the rate of 24%, if a non-corporate U.S. Holder that is not otherwise exempt fails to provide an accurate taxpayer identification number and comply with other IRS requirements concerning information reporting. Certain U.S. Holders (including, among others, corporations and tax-exempt organizations) are not subject to backup withholding. Backup withholding is not an additional tax. Any amount of backup withholding withheld may be used as a credit against your U.S. federal income tax liability or may be refunded provided that the required information is timely furnished to the IRS. U.S. Holders should consult their own tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption.
You should consult your own tax advisors regarding the backup withholding tax and information reporting rules.
Foreign Asset Reporting
Certain U.S. Holders who are individuals are required to report information relating to an interest in the Securities, subject to certain exceptions (including an exception for shares held in accounts maintained by financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their federal income tax return. 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 the Securities.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE SECURITIES IN LIGHT OF SUCH INVESTOR’S PARTICULAR CIRCUMSTANCES.
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Israeli Tax Considerations
General
The following is a summary of the material tax consequences under Israeli law concerning the purchase, ownership and disposition of American Depositary Shares, representing Ordinary Shares, Pre-funded Warrants and Warrants (collectively, the “Shares”) by persons who acquired the Shares in this offering.
This discussion does not purport to constitute a complete analysis of all potential tax consequences applicable to investors upon purchasing, owning or disposing of our Shares. In particular, this discussion does not take into account the specific circumstances of any particular investor (such as tax-exempt entities, financial institutions, certain financial companies, broker-dealers, investors that own, directly or indirectly, 10% or more of our outstanding voting rights, all of whom are subject to special tax regimes not covered under this discussion). To the extent that issues discussed herein are based on legislation that has yet to be subject to judicial or administrative interpretation, there can be no assurance that the views expressed herein will accord with any such interpretation in the future.
Potential investors are urged to consult their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership, and disposition of the Shares, including, in particular, the effect of any foreign, state or local taxes.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to corporate tax on their taxable income at the rate of 23% for the 2023 tax year.
Taxation of Shareholders
Capital Gains
Capital gains tax is imposed on the disposition of capital assets by an Israeli resident and on the disposition of such assets by a non-Israeli resident if those assets are either (i) located in Israel; (ii) are shares or a right to a share in an Israeli resident corporation, or (iii) represent, directly or indirectly, rights to assets located in Israel, unless an exemption is available or unless an applicable double tax treaty between Israel and the seller’s country of residence provides otherwise. The Israeli Income Tax Ordinance distinguishes between “Real Gain” and the “Inflationary Surplus”. “Real Gain” is the excess of the total capital gain over Inflationary Surplus generally computed on the basis of the increase in the Israeli Consumer Price Index between the date of purchase and the date of disposition. Inflationary Surplus is not subject to tax.
Real Gain accrued by individuals on the sale of the Shares will be taxed at the rate of 25%. However, if the individual shareholder is a “Controlling Shareholder” (i.e., a person who holds, directly or indirectly, alone or together with another, 10% or more of one of the Israeli resident company’s means of control) at the time of sale or at any time during the preceding 12-month period, such gain will be taxed at the rate of 30%.
Corporate and individual shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income (23% in 2019 and thereafter), and a marginal tax rate of up to 50% in 2023 for individuals, including an excess tax (as discussed below).
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Notwithstanding the foregoing, capital gains generated from the sale of our Shares by a non-Israeli shareholder may be exempt from Israeli tax under the Israeli Income Tax Ordinance provided (among other conditions) that seller does not have a permanent establishment in Israel to which the generated capital gain is attributed. However, non-Israeli resident corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a 25% or more interest in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the income or profits of such non-Israeli corporation, whether directly or indirectly. In addition, such exemption would not be available to a person whose gains from selling or otherwise disposing of the securities are deemed to be business income.
In addition, the sale of the Shares may be exempt from Israeli capital gains tax under the provisions of an applicable double tax treaty. For example, the Convention Between the Government of the United States of America and the Government of the State of Israel with Respect to Taxes on Income, or the U.S.-Israel Double Tax Treaty, exempts a U.S. resident (for purposes of the U.S.-Israel Double Tax Treaty) from Israeli capital gain tax in connection with the sale of the Shares, provided (among other conditions) that: (i) the U.S. resident owned, directly or indirectly, less than 10% of the voting power of the company at any time within the 12-month period preceding such sale; (ii) the U.S. resident, being an individual, is present in Israel for a period or periods of less than 183 days during the taxable year; and (iii) the capital gain from the sale was not derived through a permanent establishment of the U.S. resident in Israel; however, under the U.S.-Israel Double Tax Treaty, the taxpayer should be permitted to claim a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations under U.S. law applicable to foreign tax credits. The U.S.-Israel Double Tax Treaty does not relate to U.S. state or local taxes.
Payers of consideration for the Ordinary Shares, including the purchaser, the Israeli stockbroker or the financial institution through which the Shares are held, are obligated, subject to certain exemptions, to withhold tax upon the sale of Shares at a rate of 25% of the consideration for individuals and corporations.
Upon the sale of traded securities, a detailed return, including a computation of the tax due, must be filed and an advance payment must be paid to the Israeli Tax Authority on January 31 and July 31 of every tax year in respect of sales of traded securities made within the previous six months. However, if all tax due was withheld at source according to applicable provisions of the Israeli Income Tax Ordinance and regulations promulgated thereunder, such return need not be filed, and no advance payment must be paid. Capital gains are also reportable on annual income tax returns.
Exercise of Warrants and Certain Adjustments to the Warrants
Investors will generally not recognize gain or loss for Israeli tax purposes on the exercise of a Warrant and related receipt of an ordinary share (unless, for instance, cash is received in lieu of the issuance of a fractional ordinary share). Nevertheless, the Israeli income tax treatment and the tax consequences of a cashless exercise of Warrants into Ordinary Shares is unclear. Furthermore, the exercise terms of the Warrants may be adjusted in certain circumstances. An adjustment to the number of Ordinary Shares that will be issued on the exercise of the Warrants or an adjustment to the exercise price of a Warrant may be treated as a taxable event under Israeli tax law even if such holder does not receive any cash or other property in connection with the adjustment. Investors should consult their tax advisors regarding the proper treatment of any exercise of and/or adjustments to the Warrants.
Dividends
Dividends distributed by a company to a shareholder who is an Israeli resident individual will generally be subject to income tax at a rate of 25%. However, a 30% tax rate will apply if the dividend recipient is a Controlling Shareholder, as defined above, at the time of distribution or at any time during the preceding 12-month period. If the recipient of the dividend is an Israeli resident corporation, such dividend will generally be exempt from Israeli income tax provided that the income from which such dividend is distributed, derived or accrued within Israel.
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Dividends distributed by an Israeli resident company to a non-Israeli resident (either an individual or a corporation) are generally subject to Israeli withholding tax on the receipt of such dividends at the rate of 25% (30% if the dividend recipient is a Controlling Shareholder at the time of distribution or at any time during the preceding 12-month period). These rates may be reduced under the provisions of an applicable double tax treaty. For example, under the U.S.-Israel Double Tax Treaty, the following tax rates will apply in respect of dividends distributed by an Israeli resident company to a U.S. resident: (i) if the U.S. resident is a corporation that holds during that portion of the taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting stock of the Israeli resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation for such prior taxable year (if any) consists of certain types of interest or dividends the tax rate is 12.5%; (ii) if both the conditions mentioned in clause (i) above are met and the dividend is paid from an Israeli resident company’s income which was entitled to a reduced tax rate under The Law for the Encouragement of Capital Investments, 1959, the tax rate is 15%; and (iii) in all other cases, the tax rate is 25%. The aforementioned rates under the U.S.-Israel Double Tax Treaty will not apply if the dividend income is attributed to a permanent establishment of the U.S. resident in Israel.
Excess Tax
Individual holders who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) and who have taxable income that exceeds a certain threshold in a tax year (NIS 698,280 for 2023, linked to the Israeli Consumer Price Index) will be subject to an additional tax at the rate of 3% on his or her taxable income for such tax year that is in excess of such amount. For this purpose, taxable income includes taxable capital gains from the sale of securities and taxable income from interest and dividends, subject to the provisions of an applicable double tax treaty.
Estate and Gift Tax
Israel does not currently impose estate or gift taxes if the Israeli Tax Authority is satisfied that the gift was made in good faith and on condition that the recipient of the gift is not a non-Israeli resident.
Foreign Exchange Regulations
Non-residents of Israel who hold our Shares are able to receive any dividends, and any amounts payable upon the dissolution, liquidation and winding up of our affairs, repayable in non-Israeli currency at the rate of exchange prevailing at the time of conversion. However, Israeli income tax is generally required to have been paid or withheld on these amounts. In addition, the statutory framework for the potential imposition of currency exchange control has not been eliminated and may be restored at any time by administrative action.
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The selling shareholders and any of their respective pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on Nasdaq or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. Selling shareholders may use any one or more of the following methods when selling securities:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and the subsequent resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | an over-the-counter distribution in accordance with the rules of Nasdaq; |
| ● | through trading plans entered into by the selling shareholders pursuant to Rule 10b5-1 under the Exchange Act that are in place at the time of an offering pursuant to this prospectus and any applicable prospectus supplement hereto that provide for periodic sales of their securities on the basis of parameters described in such trading plans; |
| ● | transactions other than on such exchanges or in the over-the-counter market; |
| ● | directly to purchasers, including through a specific bidding, auction or other process or in privately negotiated transactions; |
| ● | settlement of short sales; |
| ● | in transactions through broker-dealers that agree with the selling shareholders to sell a specified number of such securities at a stipulated price per security; |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| ● | a combination of any such methods of sale; or |
| ● | any other method permitted pursuant to applicable law. |
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The selling shareholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction a markup or markdown in compliance with FINRA Rule 2121.
In connection with the sale of the securities or interests therein, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The selling shareholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The selling shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The selling shareholders have informed the Company that they do not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the ADSs issuable upon exercise of Warrants covered by this prospectus. The Company has agreed to indemnify the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
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The securities to be registered on this registration statement on Form F-1 of which this prospectus forms a part are f up to an aggregate amount of 1,215,345 ADSs offered for resale by the selling shareholders issuable upon (i) exercise of Warrants to purchase 1,146,552 ADSs at an exercise price of $1.16 per ADS granted pursuant to the Purchase Agreement and (ii) Warrants to purchase up to 68,793 ADSs at an exercise Price of $1.45 per ADS granted pursuant to the Engagement Letter.
History of Share Capital
Since September 30, 2020, our issued share capital has changed as provided below.
On February 2, 2021, we closed an underwritten offering in which we sold 243,478 ADSs at a public offering price of $49.5 per ADS. On February 10, 2021, Aegis Capital Corp., the sole bookrunning manager for the underwritten offering, fully exercised its over-allotment option to purchase an additional 36,521 ADSs bringing total gross proceeds to the Company from the offering including exercise of the over-allotment option of approximately $13,800. The Company received a net amount of $12,480 after deduction of issuance expenses of $360
On December 27, 2021, we closed an underwritten offering in which we sold 381,356 ADSs at a public offering price of $23.6 per ADS. On December 27, 2021, Aegis Capital Corp., the sole bookrunning manager for the underwritten offering, fully exercised its over-allotment option to purchase an additional 33,058 ADSs bringing total gross proceeds to the Company from the offering including exercise of the over-allotment option of approximately $9,780. The Company received a net sum of $8,956 (after deduction of issuance expenses of $63)
On February 2, 2022, we issued to Max Planck Society (“MPG”) 15,000 ADSs at no cost as an upfront payment for the license under the License Agreement, dated December 11, 2021, between us and Max-Planck-Innovation GmbH.
We also issued on April 12, 2022, we issued 4,316 ADSs to Mr. Ron Babecoff, the former CEO of the Company, upon vesting of RSUs granted to him as part of his service to the Company.
On April 12, 2022, we issued 944 ADSs in the aggregate to the non-executive directors of the Company, including Mr. Isaac Devash a former director of the Company, upon the vesting of RSUs granted to directors in consideration for their service to the Company.
On November 9, 2022, we issued 17,694 ADSs to Hybrid Financial Ltd. as consideration for investor relations services.
On December 20, 2022, we closed an underwritten public offering with gross proceeds to us of $8 million, before deducting underwriting discounts and other expenses payable by the Company. The offering consisted of 1,600,000 units and pre-funded units. Each unit consisted of one ADSs and two warrants, each to purchase one ADS, and each pre-funded unit consists of one pre-funded warrant to purchase one ADS and two warrants each to purchase one ADS. One of the warrants will expire three years from the date of issuance, and the other warrant will expire one year from the date of issuance and may be exercised for half an ADS on or prior to six (6) months following the original issuance for no additional consideration. Each ADS (or pre-funded warrant) was sold together with two warrants at a combined purchase price of $5.00 per unit (or $4.99 per pre-funded unit after reducing $0.01 attributable to the exercise price of the pre-funded warrants). The Company received a net sum of $7,231 after deduction of underwriter discount and issuance expenses of $769
On April 12, 2022, we issued 944 ADSs in the aggregate to the non-executive directors of the Company, including Mr. Isaac Devash a former director of the Company, upon the vesting of RSUs granted to directors in consideration for their service to the Company.
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From February 1, 2023 until August 23, 2023, we issued 1,662 ADSs to Prof. Matthias Dobbelstein as consideration for scientific advisory board services.
On June 12, 2023, we issued (i) 1,038 ADSs in aggregate upon the vesting of RSUs granted to non-executive directors as part of their service to the Company and (ii) 24,000 ADSs upon the vesting of RSUs granted to Mr. Amir Reichman, the Company’s CEO, in consideration for his service to the Company.
On July 31, 2023, we issued 15,852 ADSs to MPG and 1,148 ADSs to MBM Science Bridge GmbH pursuant to the License Agreement, dated June 4, 2023, by and among the Company, Max Planck Innovation GmbH and Georg-August-Universität Göttingen Stiftung Öffentlichen Rechts Universitätsmedizin Göttingen. On September 19, 2023, we issued (i) in a registered direct offering 400,000 ADSs and pre-funded warrants to purchase up to 746,552 ADSs, at an exercise price of $0.001 per ADS, at a purchase price of $1.16 per ADS and $1.159 per pre-funded warrant, and (ii) in concurrent private placement unregistered warrants to purchase up to 1,146,552 ADSs. The warrants have an exercise price of $1.16 per ADS and are immediately exercisable upon issuance for a period of five and one-half years. The Company received a net sum of $1,151 after deduction of underwriter discount and issuance expenses of $165.
During the period beginning September 30, 2020 through September 30, 2023, we issued 311,345 RSUs ADSs to our officers, directors and employees.
American Depositary Shares
The material terms and provisions of the ADSs and the ordinary shares represented thereby are described in Exhibit 4.1, Description of Securities, to our annual report on Form 10-K for the year ended December 31, 2022, which is incorporated by reference into this prospectus.
Warrants
Duration and Exercise Price
The exercise price per ADS under this Warrant shall be $1.16, subject to adjustment. Each Warrant became exercisable on the date of issuance and will remain exercisable until five and one-half (5.5) years from the initial exercise date
Exercisability
The Warrants are exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of ADSs purchased upon such exercise (except in the case of a cashless exercise as discussed below). Purchasers of the Warrants in this offering may elect to deliver their exercise notice following the pricing of the offering and prior to the issuance of the Warrants at closing to have their Warrants exercised immediately upon issuance and receive ADSs underlying the Warrants upon closing of this offering. A holder (together with its affiliates) may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the outstanding ADSs (or, at the election of the purchaser, 9.99%), except that upon at least 61 days’ prior notice from the holder to us, a holder with a 4.99% ownership blocker may increase the amount of ownership of outstanding shares after exercising the holder’s Warrants up to 9.99% of our outstanding ADSs. No fractional ADSs will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, we may, at our election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price of the Warrant or round up to the next whole ADS.
Cashless Exercise
In lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of ADSs determined according to a formula set forth in the Warrants.
Transferability
Subject to applicable laws, a Warrant may be transferred at the option of the holder upon surrender of the Warrant to us together with the appropriate instruments of transfer.
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Exchange Listing
There is no trading market available for the Warrants on any securities exchange or nationally recognized trading system. We do not intend to list the Warrants on any securities exchange or nationally recognized trading system, nor do we have any obligation to do so.
Right as a Shareholder
Except as otherwise provided in the Warrants or by virtue of such holder’s ownership of the ADSs or Ordinary Shares, the holders of the Warrants do not have the rights or privileges of holders of the ADSs or Ordinary Shares, including any voting rights, until they exercise their Warrants.
Fundamental Transaction
If, at any time while the Warrants are outstanding, (1) we, directly or indirectly, consolidate or merge with or into another person, (2) we, directly or indirectly, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of our assets, (3) any direct or indirect purchase offer, tender offer or exchange offer (whether by us or another person) is completed pursuant to which holders of the Ordinary Shares and/or ADSs are permitted to sell, tender or exchange their Ordinary Shares for other securities, cash or property and has been accepted by the holders of more than 50% of our outstanding Ordinary Shares and/or ADSs, or more than 50% of the voting power of our common equity, (4) we, directly or indirectly, effect any reclassification, reorganization or recapitalization of the Ordinary Shares and/or ADSs or any compulsory share exchange pursuant to which the Ordinary Shares and/or ADSs are converted into or exchanged for other securities, cash or property, or (5) we, directly or indirectly, consummate a stock or share purchase agreement or other business combination with another person whereby such other person acquires more than 50% of our outstanding Ordinary Shares and/or ADSs or 50% or more of the voting power of the common equity of the Company, each, a “Fundamental Transaction”, then upon any subsequent exercise of the Warrants, a holder thereof will have the right to receive the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of ADSs then issuable upon exercise of the Warrant, and any additional consideration payable as part of the Fundamental Transaction.
The following are the estimated expenses of this offering payable by us with respect to the issuance and distribution of the securities covered by the registration statement of which this prospectus forms a part. With the exception of the SEC registration fee, all amounts are estimates and may change:
| SEC registration fee | $ | 115.52 | ||
| Legal fees and expenses | 7,020 | |||
| Accountants’ fees and expenses | 8,000 | |||
| Miscellaneous | 5,000 | |||
| Total | $ | 20,135.52 |
Certain matters concerning this offering will be passed upon for us by Lucosky Brookman, LLP, New York, New York. The validity of the securities being offered by this prospectus will be passed upon for us by Goldfarb Gross Seligman & Co., Tel-Aviv, Israel.
The financial statements incorporated in this prospectus by reference to the annual report on Form 10-K for the year ended December 31, 2022 have been so incorporated in reliance on the report of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
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SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts named in this prospectus, substantially all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, because substantially all of our assets and substantially all of our directors and officers are located outside the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United States.
We have irrevocably appointed Puglisi & Associates as our agent to receive service of process in any action against us in any U.S. federal or state court arising out of this offering or any purchase or sale of securities in connection with this offering. The address of our agent is 850 Library Avenue, Suite 204, Newark, Delaware.
We have been informed by our legal counsel in Israel, Goldfarb Gross Seligman & Co., that it may be difficult to initiate an action with respect to U.S. securities law in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum to hear 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 by expert witnesses which can be a time-consuming and costly process. Certain matters of procedure may also be governed by Israeli law.
Subject to certain time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter which, subject to certain exceptions, is non-appealable, including judgments based upon the civil liability provisions of the Securities Act and the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that:
| ● | the judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment; |
| ● | the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and |
| ● | the judgment is executory in the state in which it was given. |
Even if these conditions are met, an Israeli court will not declare a foreign civil judgment enforceable if:
| ● | the judgment was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases); |
| ● | the enforcement of the judgment is likely to prejudice the sovereignty or security of the State of Israel; |
| ● | the judgment was obtained by fraud; |
| ● | the opportunity given to the defendant to bring its arguments and evidence before the court was not reasonable in the opinion of the Israeli court; |
| ● | the judgment was rendered by a court not competent to render it according to the laws of private international law as they apply in Israel; |
| ● | the judgment is contradictory to another judgment that was given in the same matter between the same parties and that is still valid; or |
| ● | at the time the action was brought in the foreign court, a lawsuit in the same matter and between the same parties was pending before a court or tribunal in Israel. |
If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form F-1 under the Securities Act, with respect to the securities offered by this prospectus. However, as is permitted by the rules and regulations of the SEC, this prospectus, which is part of our registration statement on Form F-1, omits certain non-material information, exhibits, schedules and undertakings set forth in the registration statement. For further information about us, and the securities offered by this prospectus, please refer to the registration statement.
We are subject to the reporting requirements of the Exchange Act that are applicable to a foreign private issuer. In accordance with the Exchange Act, we file reports, including annual reports on Form 10-K filed this year and an annual report on Form 20-F to be filed in 2024. We also furnish to the SEC under cover of Form 6-K material information required to be made public in Israel, filed with and made public by any stock exchange or distributed by us to our shareholders.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the SEC (http://www.sec.gov).
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders and our officers, directors and principal shareholders are exempt from the “short-swing profits” reporting and liability provisions contained in Section 16 of the Exchange Act and related Exchange Act rules.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual and special reports and other information with the SEC (File Number 001-37353). These filings contain important information which does not appear in this prospectus. The SEC allows us to “incorporate by reference” information into this prospectus, which means that we can disclose important information to you by referring you to other documents which we have filed with the SEC. We are incorporating by reference in this prospectus the documents listed below:
| ● | our Annual Report on Form 10-K for the fiscal year ended on December 31, 2022, filed with the SEC on April 17, 2023. |
| ● | our Quarterly Report on Form 10-Q for the period ended on March 31, 2023, filed with the SEC on May 15, 2023. |
| ● | our Current Reports on Form 8-K, filed with the SEC on May 4, 2023 (Item 3.01), May 11, 2023, and June 8, 2023. |
| ● | Our reports on Form 6-K furnished to the Commission on July 3, 2023 (two reports), July 5, 2023 (relating to our Annual General Meeting of Shareholders), July 12, 2023, August 1, 2023, August 11, 2023 (the text under “Second Quarter 2022 Financial Summary” in Exhibit 99.1), August 24, 2023, September 6, 2023 (the report regarding new corporate name only), September 19, 2023, September 20, 2023, and reports on Form 6-K/A furnished to the Commission on August 14, 2023 and August 18, 2023. |
| ● | the description of our ordinary shares contained under the heading “Item 1. Description of Registrant’s Securities to be Registered” in our registration statement on Form 8-A, as filed with the SEC on April 20, 2015, including any subsequent amendment or any report filed for the purpose of updating such description. |
Certain statements in and portions of this prospectus update and replace information in the above listed documents incorporated by reference.
We will provide you without charge, upon your written or oral request, a copy of any of the documents incorporated by reference in this prospectus, other than exhibits to such documents which are not specifically incorporated by reference into such documents. Please direct your written or telephone requests to Scinai Immunotherapeutics Ltd., Jerusalem BioPark, 2nd Floor, Hadassah Ein Kerem Campus, Jerusalem, Israel, Attn: Uri Ben Or, telephone number +972 8-930-2529. You may also obtain information about us by visiting our website at www.scinai.com. Information contained on our website is not part of this prospectus.
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1,215,345 American Depositary Shares representing 486,138,000 Ordinary Shares
Prospectus
October , 2023
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 6. Indemnification of Directors and Officers
Exculpation, Insurance and Indemnification of Directors and Officers
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. The company may not exculpate in advance a director from liability arising out of a prohibited dividend or distribution to shareholders.
Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification:
| ● | financial liability imposed on him or her in favor of another person pursuant to a judgment, including a 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 reasonably 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 foreseen events and amount or criteria;; |
| ● | reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (i) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (A) no indictment was filed against such office holder as a result of such investigation or proceeding; and (B) no financial liability, 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 (ii) in connection with a monetary sanction; and; |
| ● | 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. |
Under the Companies Law and the Israeli Securities Law 5728-1968 (the “Israeli Securities Law”), a company may insure an office holder against the following liabilities incurred for acts performed by him or her 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, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the compan; |
| ● | a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and |
| ● | a financial liability imposed on the office holder in favor of a third party. |
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Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:
| ● | any other action against which we are permitted and/or will be permitted by law to insure an office holder; |
| ● | expenses paid by the office holder or which he was ordered to pay, in connection with an administrative enforcement proceeding held in his case, including reasonable litigation expenses, and including legal fees; and |
| ● | a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law. |
Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:
| ● | a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company; |
| ● | a breach of 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 or forfeit levied against the office holder. |
Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.
Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Companies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative Enforcement Procedure.
We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articles of association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification is limited to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.
The maximum indemnification amount set forth in such agreements is limited to an amount which shall not exceed 25% of our net assets based on our most recently audited or reviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.
In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act of 1933, however, is against public policy and therefore unenforceable.
We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by the Companies Law. In addition, we entered into agreements with each of our office holders undertaking to indemnify them to the fullest extent permitted by the Companies Law, including with respect to liabilities resulting from the initial public offering in the U.S., to the extent that these liabilities are not covered by insurance.
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Item 7. Recent Sales of Unregistered Securities
On December 22, 2021, the Company signed a definitive exclusive license agreement with MPG and UMG for the development and commercialization of innovative Covid-19 NanoAbs. Pursuant to the agreement, on February 2, 2022, the Company issued 150,000 ADSs to MPG, in reliance on the exemption from registration under Regulation S under the under the Securities Act of the 1933, as amended, regarding sales by an issuer in offshore transaction.
On November 9, 2022, we issued 17,694 ADSs to Hybrid Financial Ltd. as consideration for investor relations services.
From February 1, 2023 until August 23, 2023, we issued 1,662 ADSs to Prof. Matthias Dobbelstein as consideration for scientific advisory board services.
On June 12, 2023, we issued (i) 1,038 ADSs in aggregate upon the vesting of RSUs granted to non-executive directors as part of their service to the Company and (ii) 24,000 ADSs upon the vesting of RSUs granted to Mr. Amir Reichman, the Company’s CEO, in consideration for his service to the Company.
On July 31, 2023, we issued 15,852 ADSs to MPG and 1,148 ADSs to MBM Science Bridge GmbH pursuant to the License Agreement, dated June 4, 2023, by and among the Company, Max Planck Innovation GmbH and Georg-August-Universität Göttingen Stiftung Öffentlichen Rechts Universitätsmedizin Göttingen.
Item 8. Exhibits and Financial Statement Schedules
| (a) | The following documents are filed as part of this registration statement: |
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| # | In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not deemed filed for purposes of Section 18 of the Exchange Act. |
| ** | Indicates a management contract or compensatory plan or arrangement. |
| + | Certain confidential portions of this exhibit have been redacted from the publicly filed document because such portions are (i) not material and (ii) would be competitively harmful if publicly disclosed. |
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Item 9. Undertaking
| (a) | The undersigned Registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| i. | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
| ii. | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. |
| iii. | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell securities to such purchaser: |
| i. | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| ii. | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| iii. | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| iv. | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (b) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 6 hereof, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
| (c) | The undersigned registrant hereby undertakes: |
| (1) | That for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
| (2) | That for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Herzliya, Israel on October 30, 2023.
| SCINAI IMMUNOTHERAPEUTICS LTD. | ||
| By: | /s/ Amir Reichman | |
| Name: | Amir Reichman | |
| Title: | Chief Executive Officer | |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Amir Reichman and Uri Ben-Or and each of them, individually, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, in connection with this registration statement, including to sign in the name and on behalf of the undersigned, this registration statement and any and all amendments thereto, including post-effective amendments and registrations filed pursuant to Rule 462 under the U.S. Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons on the dates and in the capacities indicated.
| Name | Title | Date | ||
| /s/ Mark Germain | Chairman of the Board of Directors | October 30, 2023 | ||
| Mark Germain | ||||
| /s/ Amir Reichman | Chief Executive Officer and Director | October 30, 2023 | ||
| Amir Reichman | (Principal Executive Officer and Director) | |||
| /s/ Uri Ben Or | Chief Financial Officer | October 30, 2023 | ||
| Uri Ben Or | (Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ Avner Rotman | Director | October 30, 2023 | ||
| Avner Rotman | ||||
| /s/ Yael Margolin | Director | October 30, 2023 | ||
| Yael Margolin | ||||
| /s/ Morris Laster | Director | October 30, 2023 | ||
| Morris Laster | ||||
| /s/ Adi Ravid | Director | October 30, 2023 | ||
Adi Raviv |
||||
| /s/ Samuel Moed | Director | October 30, 2023 | ||
| Samuel Moed | ||||
| /s/ Jay Green | Director | October 30, 2023 | ||
| Jay Green |
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SIGNATURE OF AUTHORIZED U.S. REPRESENTATIVE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Scinai Immunotherapeutics Ltd. has signed this Registration Statement on Form F-1 on October 30, 2023.
| By: | /s/ Donald J, Puglisi | |
| Name: | Donald J. Puglisi | |
| Title: | Donald J. Puglisi |
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Exhibit 3.1
COMPANIES LAW, 5759 – 1999
LIMITED SHARES COMPANY
Articles of Association
of
SCINAI IMMUNOTHERAPEUTICS LTD.
| 1. | In these articles, except where the written content requires a different interpretation: |
“Law” As defined in the Interpretation Law, 5741 – 1981;
“The Company” The abovementioned Company;
“The Law” or the “Companies Law” The Companies Law, 5759 – 1999, as it shall be from time to time;
“Administrative Enforcement Proceeding” An administrative enforcement proceeding in accordance with the provisions of any law, including the Improvement of Enforcement Proceedings Law and the Securities Law, including an administrative petition or appeal in connection with the aforementioned proceeding;
“Securities Law” The Securities Law, 5728 – 1968, as it is updated from time to time;
“The Office” or the “Registered Office” The Company’s office, the address of which is registered with the Registrar, as it shall be from time to time;
“The Ordinance” or the “Companies Ordinance” The Companies Ordinance (new version), 5743 – 1983, as it is updated from time to time, and the regulations subject thereto;
“Ordinary Majority” An ordinary majority of the total votes of shareholders attending a general meeting or class meetings, as the case may be, who are entitled to vote and have voted therein, without taking into account the abstaining votes;
“Year” or “Month” According to the Gregorian calendar;
“Corporation” A company, partnership, cooperative society, association, and any other incorporated or unincorporated body of persons;
“These Articles of Association” or the “Articles of Association”” The Articles of Association drafted in this document, as they may change from time to time;
| 1.1. | Any term in these Articles of Association not defined in the abovementioned article shall bear the meaning prescribed thereto in the Companies Law, unless the aforesaid constitutes a contradiction to the written subject or its content; words stated in the singular shall be construed as well in the plural, and vice versa, words stated in the male gender shall be construed in the female gender as well. |
| 1.2. | The headings in these Articles of Association are for convenience purposes only and shall not be used to construe these Articles of Association. |
| 1.3. | Anywhere in the Articles of Association where it is determined that its provisions shall be subject to the provisions of the Ordinance and/or subject to the provisions of the Companies Law and/or subject to the provisions of any law, this means the provisions of the Ordinance and/or the provisions of the Companies Law and/or the provisions of any law, which may not be subjected to conditions, unless the context requires otherwise. |
| 1.4. | The provisions which may be subject to conditions in the Companies Law shall apply to the Company wherever it is not stated to the contrary in these Articles of Association and as long as there is no contradiction between them and the provisions of these Articles of Association. |
COMPANY NAME
| 2. | The Company’s name is as follows: |
| 2.1. | In Hebrew - סאינאי אימונותרפאוטיקה בע”מ |
| 2.2. | In English – Scinai Immunotherapeutics Ltd. |
LIMITATION OF LIABILITY
| 3. | The liability of the shareholders is limited to repayment to the Company of the par value of the shares they own, if said sum has not yet been paid to the Company. In the event that the Company allots shares for consideration lower than their par value as stated in section 304 to the Law (the “Reduced Consideration”), the liability of each shareholder shall be limited to the repayment of the Reduced Consideration sum for each share allotted thereto as aforementioned. |
COMPANY’S OBJECTIVES
| 4. | The objectives of the Company are to engage in any lawful activity in the field of biotechnology. |
BUSINESS
| 5. | The Company may, at any time, engage in any branch or type of by which it is authorized, explicitly or implicitly, to engage subject to Article 4 above. In addition the Company may cease from engaging in such businesses, whether it has begun said branch or type of business, or otherwise. |
DONATIONS
| 6. | The Company may donate reasonable amounts to worthy causes, even if said donation is not within the framework of the Company’s business considerations. The Board of Directors is authorized to determine, subject to its discretion, the sums of the donations, the purposes for which they are executed, the identity of the receiver of the donation, and any other condition in connection therewith. |
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REGISTERED OFFICE
| 7. | The Company’s registered office will be at the address determined by the Board of Directors, as it changes from time to time. |
The Articles of Association
| 8. | The Company may amend these Articles of Association upon a resolution passed by the General Meeting with a majority of at least 75% of the voting rights at the meeting. |
| 9. | A resolution passed by the General Meeting with the required majority to amend the Articles of Association, as stated in article 8 above, which amends any of the provisions of these Articles of Association, will be deemed a resolution to amend these Articles of Association, even if this was not explicitly stated in the resolution. |
| 10. | Subject to the provisions of the Companies Law, amendments to these Articles of Association will be valid as of the date of passing the resolution in this matter by the Company or on a later date determined in the resolution. |
REGISTERED SHARE CAPITAL
| 11. | The Company’s registered share capital is 20,000,000,000 Ordinary Shares, no par value (the “Shares” or the “Ordinary Shares”). |
Each Ordinary Share grants its owner the following rights:
| a) | Receiving an invitation and participation in the Company’s General Meetings and voting thereat; |
| b) | One vote at the General Meeting votes; |
| c) | Participation in the distributed profit of the Company pro rata to the sum paid on account of the share’s par value; |
| d) | In the event of distribution of surpluses of the Company’s assets (after payment of its debt) to the shareholders as part of dissolution or capital recovery in any form – participation in the distribution of the surplus pro rata to the sum paid on account of the share’s par value. |
THE SHARES
| 12. | Each Ordinary Share in the Company’s equity bears equal rights, for all intents and purposes, compared to any other Ordinary Share, including the right to a dividend, bonus shares, and participation in the distribution of surplus Company assets during dissolution, pro rata to the par value of each share, without taking into account any premium paid therefor, and all subject to the provisions of these Articles of Association. |
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| 13. | Each of the Ordinary Shares entitles its owner to the right to participate in the Company’s General Meeting and to one vote. |
| 14. |
| 14.1. |
| 14.1.1. | A Company shareholder is anyone registered as a shareholder in the shareholders ledger, and anyone who owns a share registered with a stock exchange member and the same share is included among the shares registered in the Company’s shareholders ledger in the name of the registration company. |
| 14.1.2. | A shareholder who is a trustee will be registered in the shareholders ledger while stating his trusteeship, and he shall be deemed for the purpose of the Companies Law a shareholder. Without derogating from the aforementioned, the Company will recognize the trustee, as aforesaid, as the shareholder, for all intents and purposes, and will not recognize any other person, including the beneficiary, as having any right whatsoever in the share. |
| 14.2. | Without derogating from the abovementioned, and subject to the provisions of these Articles of Association, apart from Company shareholders, as stated in Article 14.1 above, no person shall be recognized by the Company as having any right whatsoever in a share and the Company will not be bound by and will not acknowledge any benefit subject to equity laws or fiduciary relations or chose in action, future or partial in any share or benefit whatsoever in a share fraction or any other right pertaining to a share except only the right of a shareholder as stated in article 14.1 above, in an entire share, and all, except if an authorized court has instructed to the contrary. |
SHARE CERTIFICATES
| 15. | The certificates attesting to the proprietary right in the shares shall bear the Company seal and the signatures of one director jointly with the Company CEO or jointly with the Company secretary or the signatures of any two people appointed for this purpose by the Board of Directors. |
The Board of Directors may decide that a signature or signatures as abovementioned shall be done in any mechanical way, as determined by the Board of Directors.
| 16. | Except in the event that the terms of issue of shares determine otherwise: |
| 16.1. | Each registered shareholder is entitled to receive from the Company, as per his request, within a period of two months after the allotment or registration of transfer, as the case may be, one certificate attesting to his ownership in the shares registered in his name, or, with the Company’s consent, a number of aforesaid certificates. |
| 16.2. | The registration company is entitled to receive from the Company, as per its request, within a period of two months after the allotment or registration of transfer, as the case may be, one certificate attesting to the number of shares and class of shares registered in its name in the shareholder ledger. |
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| 17. | Subject to the provisions of the Companies Law, each certificate shall specify the amount of shares for which it was issued, their serial numbers and par value. |
| 18. | A certificate referring to a share registered to two persons or more, shall be delivered to anyone whose name appears first in the shareholder ledger, with regard to the same share, unless all registered owners of the same share, instruct the Company in writing to deliver it to another registered owner. |
| 19. | In the event that a share certificate is destroyed, damaged, lost, or impaired, the Board of Directors may order the cancellation thereof and issue a new certificate in lieu thereof, provided that the share certificate was delivered to the Company and destroyed thereby, or it was proven to the satisfaction of the Board of Directors that the certificate was lost or destroyed and the Company received guarantees to the Board of Directors’ satisfaction for any damage which may occur thereto. For each share certificate issued subject to this article a reasonable sum shall be paid therefor as determined by the Board of Directors from time to time. |
PAYMENTS FOR SHARES
| 20. | All of the shares in the Company’s issued capital will be fully paid-up shares. |
FORFEITURE OF SHARES
| 21. | Without derogating from article 20 above, the Board of Directors may forfeit a share allotted by the Company and sell it, if the consideration payable by the shareholder, all or some, was not paid to the Company, and the provisions of the Companies Law in this matter shall apply. |
TRANSFER AND DELIVERY OF SHARES
| 22. | Any transfer of shares registered in the name of the registration company shall be performed through the registration company. Any transfer of shares registered in the shareholder ledger in the name of a registered shareholder, including a transfer by the registration company or thereto, shall be done in writing, provided that the deed of transfer is signed by hand only, by the transferor or the transferee, themselves or by proxy, and by witnesses to the signing, and delivered to the registered office or any other place determined for this purpose by the Board of Directors. Subject to the provisions of the Companies Law, transfer of shares will not be registered in the shareholder ledger, except after a transfer deed as abovementioned is delivered to the Company; the transferor will continue to be considered the owner of the transferred shares until the transferee is registered in the shareholder ledger as the owner of the transferred shares. |
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| 23. | The share transfer deed will be in writing, in the format acceptable in Israel or in any other format approved by the Board of Directors. If the transferor or transferee are a corporation, confirmation will be provided by an attorney or accountant or another person the identity of whom is acceptable to the Board of Directors, regarding the authority of those signing on behalf of the corporation to execute or receive the transfer, as the case may be. |
| 24. | The Company may close the shareholder ledger for a duration determined by the Board of Directors provided that it does not exceed, in total, thirty days each year. While the ledger is closed, no transfer of shares will be registered in the ledger. Without derogating from the aforementioned, the Board of Directors may determine an effective date for the question of entitlement to vote at the General Meeting, or receive a dividend payment or allotment of any rights whatsoever or for any other legal purpose. |
| 25. | Subject to the provisions of these Articles of Association or the terms of issue of shares of any class, the shares will be transferable without requiring the approval of the Board of Directors. |
| 26. | Each transfer deed will be submitted to the office or any other place determined by the Board of Directors, for the purpose of registration, together with the share certificate about to be transferred, if such was issued, and any other proof required by the Board of Directors regarding the proprietary right of the transferor or his right to transfer the shares. The deeds of transfer registered will remain in the Company’s possession however any deed of transfer which the Board of Directors refuses to register will be returned to the submitter, as per his request. |
| 27. | If the Board of Directors refuses to approve a transfer of shares due to failure to fulfill any of the terms specified in article 26 above, it shall notify the transferor of this no later than one month from the date of receiving the deed of transfer. |
| 28. | The Company will be entitled to charge payment for the registration of the transfer, at a sum determined by the Board of Directors, from time to time, and which will be reasonable under the circumstances. |
| 29. |
| 29.1. | Subject to the provisions of the Companies Law and the provisions of these Articles of Association, if it is proven to the Company to the Board of Directors’ satisfaction and by means determined thereby, that the legal requirements were upheld to endorse a right in the shares registered in the ledger in the name of a registered shareholder, the Company will recognize the endorsee, and him alone, as the owner of the right in the aforementioned shares. |
| 29.2. | Notwithstanding the abovementioned, in the event of death of one or more of the joint owners of shares registered in their name in the ledger, the Company will recognize the remaining registered owners, and them alone, as having a proprietary right in those shares |
| 30. |
| 30.1. | Subject to the provisions of these Articles of Association, the Company will change the registration of ownership in shares in the shareholders ledger if the Company receives a court order to amend the ledger or if it was proven to the Company, to the Board of Directors’ satisfaction and by methods determined thereby, that the legal requirements were upheld to endorse the right in the shares, and the Company will not recognize any other right of a person in the shares, prior to proving his right as abovementioned. |
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| 30.2. | Without derogating from the abovementioned, the Board of Directors may refuse to perform the registration or may delay it, as it would be entitled to do, had the registered owner himself transferred the share prior to the endorsement of the right. |
| 31. | Subject to the provisions of the Companies Law and the provisions of these Articles of Association, a person who becomes entitled to a share as stated in article 29 above, will be entitled to perform a transfer of the shares as the registered owner of the shares would have been entitled to himself prior to the endorsement of the right. |
| 32. | The Company may destroy the share transfer deeds after seven years have passed from the date of registration in the ledger; in addition the Company may destroy revoked share certificates, after seven years have passed from their date of revocation, and a prima facie presumption shall apply that all of the transfer deeds and certificates destroyed, as aforementioned, were fully valid and that the transfers, revocations, and registrations, as the case may be, were duly executed. |
CHANGES IN CAPITAL
| 33. | Subject to the provisions of any law, the Company may, with a resolution passed at the General Meeting by ordinary majority, increase the Company’s registered share capital, with types of shares, as it shall determine. |
| 34. | Subject to the provisions of the Companies Law, the Company may, with a resolution passed at the General Meeting by ordinary majority: |
| 34.1. | Consolidate its shares, all or some, and divide them into shares of par values greater than the par value of its existing shares. |
| 34.2. | Divide its shares, all or some, by secondary division, into shares of par values smaller than the par value of its existing shares. |
| 34.3. | Reduce the Company’s capital and any capital redemption reserve fund. |
In order to execute any resolution as abovementioned, the Board of Directors may settle, subject to its discretion, any difficult arising therefrom.
| 35. | Without derogating from the generality of the Board of Directors’ authority, as abovementioned, if as a result of the consolidation or division, as abovementioned, the shareholders will remain with share fractions, the Board of Directors may subject to its discretion act as follows: |
| 35.1. | Determine that the share fractions that do not entitle their owners to a whole share, will be sold by the Company and the consideration of the sale will be paid to those entitled, subject to the conditions and in the manner determined. |
| 35.2. | Allot to each shareholder which the consolidation and/or division leave in their hands a share fraction, shares of the type of shares existing in the Company capital prior to the consolidation and/or division, of such a number so that their consolidation with the fraction creates one whole share, and an allotment as aforementioned will be deemed in effect near before the consolidation or division, as the case may be. |
| 35.3. | Determine the manner in which the sums owed for the shares allotted as stated in article 35.2 will be redeemed, including the manner in which the sums can be redeemed on account of bonus shares. |
| 35.4. | Determine that the owners of share fractions will not be entitled to receive a whole share for a share fraction. |
| 35.5. | Determine that shareholders will not be entitled to receive a whole share for a fraction of a whole share at a certain par value or less and will be entitled to receive a whole share for a fraction of a whole share the par value of which is higher than the aforementioned par value. |
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| 36. | The Company may, with a resolution passed by the General Meeting by ordinary majority, revoke registered share capital that has not yet been allotted, provided that there is no undertaking by the Company, including a contingent undertaking, to allot the shares. |
CHANGE OF RIGHTS
| 37. | At any time in which the share capital is divided into different classes, the Company will be entitled by ordinary resolution passed at the General Meeting by ordinary majority, except if the terms of issue of the same class of shares stipulate otherwise, to revoke, convert, expand, add, reduce, amend, or change in any other way the rights of a class of the Company shares, provided that consent was granted thereto in writing by all shareholders of the same class or that the resolution was passed at a General Meeting of the shareholders of the same class by ordinary majority, or in the event that the terms of issue of a certain class of Company shares stipulate otherwise, as was stipulated in the terms of issue of the same class. |
| 38. | The provisions set in the Articles of Association regarding General Meetings shall apply, mutatis mutandis, to any class meeting provided that a legal quorum at a class meeting is created when at the opening of the meeting, at least two shareholders owning at least twenty five percent of the number of shares issued of the same class are in attendance, themselves or by proxy. However if no such legal quorum is created, the class meeting will be deferred to another date and at the deferred meeting any number of participants will constitute a legal quorum, regardless of the number of shares they own. |
| 39. | The rights of the shareholders or the owners of a class of shares, issued whether as ordinary rights or preferred rights or other extraordinary rights, shall not be considered as if they were converted, reduced, derogated, or changed in any other manner by the creation or issue of additional shares of any type whatsoever, whether at an equal level or a different or preferred level thereto, and they will not be considered as if they were converted, reduced, derogated, or changed in any other way, by changing the rights attached to shares of any other class whatsoever, and all, unless otherwise explicitly stipulated in the terms of issue of the same shares. |
ISSUE OF SHARES AND OTHER SECURITIES
| 40. | The Board of Directors may issues shares and other securities, convertible or exercisable into shares, up to the limit of the Company’s registered share capital; in this matter convertible securities that are convertible or exercisable into shares shall be considered as if they were converted or exercised on the date of the issue. Without derogating from the generality of the aforementioned, the Board of Directors will be entitled to issue the shares and other securities, as abovementioned, grant choice rights to purchase them including options or to grant them in another way, and all to the people determined thereby and on the dates, at the prices and subject to the terms determined thereby, and to determine any other instruction related thereto, including provisions regarding the methods of distributing the shares and securities issued by the Company, among their buyers, including in the event of oversubscription, and all subject to the discretion of the Board of Directors. |
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| 41. | Without derogating from the generality of the aforementioned, and subject to the provisions of the Companies Law and the Articles of Association, the Board of Directors may determine that the consideration for the shares will be paid in cash or with assets in kind, and thus including with securities or any other manner, subject to its discretion, or that the shares will be allotted as bonus shares or that the shares will be allotted for consideration equal to their par value or higher therefrom, whether in unit or in series, and all subject to the conditions and on the dates determined by the Board of Directors, subject to its discretion. |
| 42. | In a resolution to increase the Company’s registered capital the General Meeting may determine that the new shares included in the sum with which the registered share capital is increased as aforementioned (hereinafter referred to as the “New Shares”), or any part thereof, will be first offered, for their par value or a premium, to all of the shareholders holding shares at that time, at a proportionate rate to the par value of their shares in the Company or determine other provisions regarding the issue and allotment of the New Shares. However, if the General Meeting did not determine as aforementioned in a resolution to increase the Company’s registered share capital, the Board of Directors may offer them, as stated in article 40 above. |
| 43. | The Board of Directors may decide to pay commission or underwriting fees to any person, upon signing or agreement to sign or obtaining signatures or guaranteeing signatures for shares, or debentures or other Company securities. In addition the Board of Directors is entitled, in any event of issuing securities of the Company, to decide to pay brokerage fees, and all, in cash, in Company shares, or other securities issued by the Company, or in any other way, or partly in one way and partly in another way, all subject to the provisions of any law. |
REDEEMABLE SECURITIES
| 44. | Subject to the provisions of any law, the Company may issue redeemable securities subject to the terms and in the manner determined by the Board of Directors, subject to its discretion. |
REGISTRIES
| 45. |
| 45.1. | The Company will keep a shareholder ledger and register therein the names of the shareholders and other details required subject to the Companies Law, near after the issue of any shares of the Company. Subject to the provisions of the Law, upon his registration in the ledger the registered shareholder will be deemed the owner of the shares registered in his name, and thus even if share certificates for said shares were not issued. |
| 45.2. | The Company will keep a ledger of material shareholders, as is required subject to the Companies Law. |
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| 46. | The Company may keep an additional shareholders ledger outside of Israel subject to the conditions determined for this matter in the Companies Law. |
| 47. | The Company will keep a ledger of the holders of debentures and securities convertible into Company shares, and all of the provisions of the Articles of Association in connection with shares shall apply to said convertible securities, with regard to registration in the ledger, issue of certificates, replacement of certificates, transfer and endorsement, mutatis mutandis as the case may be, and all subject to the terms of the allotment of the securities. |
GENERAL MEETING
| 48. | The Company’s decisions in the following matters shall be approved at the General Meeting: |
| 48.1. | Articles of Association amendments; |
| 48.2. | Exercising the Board of Directors’ authority by the General Meeting, if the Board of Directors is unable to exercise its authorities and the exercise of an authority of its authorities is vital for the orderly management of the Company, as stated in section 52(a) to the Companies Law; |
| 48.3. | Appointing the Company’s auditor and termination of his employment; |
| 48.4. | Appointing the Company directors and their dismissal; |
| 48.5. | Approving actions and transactions that require the approval of the General Meeting subject to the provisions in sections 255 and 268 to 275 to the Companies Law; |
| 48.6. | Increasing the registered share capital and decreasing it in accordance with the provisions of sections 286 and 287 to the Companies Law as well as changes in capital as specified in article 34 above; |
| 48.7. | Subject to the provisions of section 320(a1) to the Companies Law, merger as stated in section 320(a) to the Companies Law; |
| 48.8. | Any resolution which must be passed according to the Articles of Association by a resolution of the General Meeting. |
| 48.9. | Authorizing the chairperson of the Board of Directors or his relative to fulfill the duty of CEO or exercise his authorities and authorizing the CEO or his relative to fulfill the duty of chairperson of the Board of Directors or exercise his authorities, as stated in section 121(c) to the Companies Law. |
| 49. | The Company will hold an annual General Meeting each year and no later than fifteen months after the last annual General Meeting, on the date and at the place determined by the Board of Directors. |
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| 50. | The agenda of the annual General Meeting will include the following subjects: |
| 50.1. | Discussion regarding the Company financial statements and the Board of Directors report regarding the state of the Company’s affairs, submitted to the General Meeting; |
| 50.2. | Appointing directors and determining their salary; |
| 50.3. | Appointing the auditor; |
| 50.4. | Board of Directors report regarding the salary of the auditor for auditing activity and for additional services, if any; |
| 50.5. | In addition to the abovementioned, any other subject put on the agenda as stated in article 53 below may be included on the agenda of the annual General Meeting. |
A General Meeting as abovementioned will be referred to as an “annual meeting” and any other meeting will be referred to as an “extraordinary meeting”.
| 51. | The Company Board of Directors will convene an extraordinary meeting subject to its discretion, and upon the demand of any of the following: |
| 51.1. | Two directors or a quarter of the serving directors. |
| 51.2. | A shareholder, one or more, who holds at least five percent of the issued capital and one percent of the Company’s voting rights, or a shareholder, one or more, than has at least five percent of the voting rights in the Company. |
If the Board of Directors is required to summon an extraordinary meeting, as abovementioned, it will summon it within twenty one days from the date the demand was submitted thereto, for the date determined in the notice regarding the extraordinary meeting, as stated in article 55.1 below, provided that the date on which it is convened is no later than thirty five days from the date of publishing the notice, all subject to the Companies Law.
| 52. | If the Board of Directors failed to summon an extraordinary meeting demanded subject to article 51 above, the demander may, and when concerning shareholders – even some of those who have more than half of their voting rights, convene the meeting himself, provided that it is not held after three months have passed from the date on which the aforementioned demand was submitted, and it will be convened, as much as possible, in the same manner in which meetings are convened by the Board of Directors. |
| 53. |
| 53.1. | The agenda of a General Meeting will be determined by the Board of Directors and will include as well subjects for which the convening of an extraordinary meeting was demanded subject to article 51 above and a subject requested as stated in article 53.2 below. |
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| 53.2. | A shareholder, one or more, with at least one percent of the voting rights at the General Meeting, may request that the Board of Directors include a subject on the agenda of a future General Meeting, provided that the subject is appropriate for discussion at a General Meeting. |
| 53.3. | A request as specified in article 53.2 above will be submitted to the Company in writing at least seven days prior to the delivery of notice regarding the convening of a General Meeting, and the draft of the resolution proposed by the shareholder will be attached thereto. |
| 54. |
| 54.1. | A notice regarding a General Meeting will be published in at least two daily newspapers, with wide circulation, published in the Hebrew language; subject to the provisions of the Companies Law, the notice will be published at least 21 days prior to the convening of the General Meeting. |
| 54.2. | Apart from the notice regarding a General Meeting as stated in article 54.1 above, the Company will not deliver notice regarding a General Meeting, both to the registered and non-registered shareholders, subject to the provisions of the Law. |
| 55. |
| 55.1. | The notice regarding the General Meeting will specify the location, date and time of the convening of the meeting and it will include the agenda as well as a summary of the proposed resolutions and any other specification required by law. |
| 55.2. | In its decision to summon a meeting, the Board of Directors may determine the manner of specification of the subjects on the agenda of the meeting, which will be delivered to the shareholders entitled to participate in the meeting, and all subject to the discretion of the Board of Directors and subject to the provisions of the Companies Law. |
| 55.3. | Without derogating from the authority of the Board of Directors as stated in this article 55 above and without derogating from the generality of the provisions of the Articles of Association regarding transfer of authorities by the Board of Directors, the Board of Directors will be entitled to transfer its authorities as stated in this article 55 above to the Board of Directors committee and/or Company officer, whether for the purpose of a certain General Meeting or for a period. |
| 56. | A bona fide fault in the convening of the General Meeting or the convening thereof, including a fault arising from the failure to comply with an instruction or the conditions of the law or the Articles of Association, including with regard to the manner of convening or managing the General Meeting, will not invalidate any resolution passed at the General Meeting and will not derogate from the discussions held therein, subject to the provisions of any law. |
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DELIBERATIONS AT THE GENERAL MEETING
| 57. | A deliberation at the General Meeting shall not be started unless a legal quorum is present upon opening the meeting. A legal quorum will be created with the attendance, themselves or by proxy, of shareholder/s holding, alone or accumulatively, at least 10% of the Company’s voting rights (or, for so long as the Company does not qualify as a foreign private issuer under the rules of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and for only so long as required by the Nasdaq Stock Market, 331/3% of the Company’s outstanding ordinary shares) within half an hour from the time set for opening the meeting, unless otherwise stipulated in the Articles of Association. |
| 58. | If a legal quorum is not in attendance at the General Meeting after half an hour from the time set for the opening of the meeting, the meeting will be deferred for one week, to the same date, same time and same location, without the requirement of notifying the shareholders of this, or another date is such was stated in the a notice regarding the meeting, or to a different date, hour and location, as shall be determined by the Board of Directors in a notice to the shareholders. |
| 59. | A deferred meeting will be held with any number of participants (unless the Company does not qualify as a foreign private issuer under the rules of the Exchange Act). |
| 60. | The chairperson of the Board of Directors, or, in the absence thereof, any director appointed for this purpose by the Board of Directors, will head each General Meeting of the Company. In the absence of a chairperson, as stated or if at any meeting whatsoever none of them are present fifteen minutes after the time set for the opening of the meeting or if they refuse to serve as chairperson of the meeting, the present directors, by a majority of votes among them, may choose a chairperson among them or among the Company officers attending the meeting, and if they fail to do so – the present shareholders themselves or by proxy will choose one of the present directors or officers to head the meeting. If no directors or officers are present or if the directors or officers all refuse to head the meeting, they will choose one of the shareholders or the proxy of an aforementioned shareholder to head the meeting. |
| 61. | The Company will take minutes of the proceeding at the General Meeting which will include the following details: |
| 61.1. | The names of the shareholders participating at the General Meeting and the number of shares held thereby; |
| 61.2. | The matters deliberated at the General Meeting and the passed resolutions. |
| 62. | Minutes signed by the chairperson of the General Meeting constitutes prima facie evidence to its contents. |
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VOTING AND PASSING RESOLUTIONS AT THE GENERAL MEETINGS
| 63. | A shareholder who wishes to vote at the General Meeting, will prove to the Company his ownership of a share, as required subject to the Companies Law. Without derogating from the aforementioned, the Board of Directors may determine provisions and procedures for proving the ownership of Company shares. |
| 64. | A shareholder may vote at a General Meeting or class meeting, himself or by proxy, all subject to the provisions of the Articles of Association and subject to the provisions of the Companies Law. A proxy at a vote does not have to be a Company shareholder. |
| 65. | Subject to the provisions of any law, in the event of joint ownership in a share, each of them may vote at any meeting, whether himself or by proxy, with regard to such share, as if he were the sole person entitled thereto. If more than one of the joint owners of a share attend the meeting, themselves or by proxy, the one whose name is listed first in the shareholder ledger with regard to the share, or in the approval of the Tel Aviv Stock Exchange member regarding his ownership of the share (“Ownership Confirmation”), or in another document determined by the Board of Directors for this purpose, shall vote, as the case may be. A number of legal guardians or a number of estate executers of a deceased registered shareholder shall be considered for the purpose of this section as joint owners of these shares. |
| 66. | Any person entitled to a share subject to article 29 above may vote subject thereto at any General Meeting in the same manner as if he were the registered owner of those shares provided that he proves to the Board of Directors’ satisfaction his right to the share at least forty-eight hours prior to the date of the General Meeting or the deferred meeting, as the case may be, where he intends to vote, unless the Company has previously recognized his right to vote subject to those shares at such meeting. |
| 67. | The document appointing a proxy for a vote (“Letter of Proxy”) will be drafted in writing and signed by the appointer, and if the appointer is a corporation, the Letter of Proxy will be drafted in writing and signed in the manner obligating the corporation; the Board of Directors may demand that the Company receive prior to the convening of the meeting, confirmation in writing, to the Board of Directors’ satisfaction, regarding the signatories’ authority to obligate the corporation. In addition the Board of Directors is entitled to determine instructions and procedures in connection therewith. |
The Letter of Proxy or an appropriate copy thereof, to the Board of Directors’ satisfaction, will be deposited at the registered office or another place or places, in Israel or abroad – as shall be determined by the Board of Directors from time to time, in general or with regard to a special case – at least forty-eight hours prior to the beginning of the meeting or the deferred meeting, as the case may be, when the proxy intends to vote based on said Letter of Proxy. Notwithstanding the abovementioned, the chairperson of the meeting may, subject to his discretion, receive a Letter of Proxy as aforementioned, even after the aforesaid date, if he deemed this appropriate, subject to his discretion. If no Letter of Proxy was received as stated in this section above, it will be invalid at that meeting.
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| 68. | A proxy at a vote may participate in the deliberations at the General Meeting and be chosen as chairperson of the meeting as the appointing shareholder would have been entitled provided that nothing to the contrary was stated in the Letter of Proxy. |
| 68.1. | The Letter of Proxy appointing a proxy to participate in a vote will be in the form acceptable in Israel or any other form approved by the Board of Directors. |
| 68.2. | The Letter of Proxy will note the class and number of shares for which it was granted, If no number of shares for which it was granted are stated in the Letter of Proxy or if it states a number of shares higher than the number of shares registered to the name of the shareholder or stated in the Ownership Confirmation, as the case may be, the Letter of Proxy will be deemed as given for the shares of the shareholder. |
| 68.3. | If the Letter of Proxy is given for a number of shares lower than the number of shares registered to the name of the shareholder or stated in the Ownership Confirmation, as the case may be, the shareholder will be deemed as if he avoided attending the vote for the balance of his shares and the Letter of Proxy will be valid for the number of shares stated therein. |
| 69. | Without derogating from the provisions of the Articles of Association regarding appointment of a proxy to a vote, a shareholder holding more than one share will be entitled to appoint more than one proxy, subject to these instructions: |
| 69.1. | Each Letter of Proxy will note the class on number of shares for which it was granted. |
| 69.2. | If the total number of shares of any class stated in the Letter of Proxy given by one shareholder exceeds the number of shares of the same class registered in his name or stated in the Ownership Confirmation, as the case may be, all Letters of Proxy granted by the same shareholder shall be null and void. |
| 70. | A shareholder or proxy at a vote may vote subject to some of the shares he owns or for which he serves as a proxy, and may vote subject to some of the shares in one manner and subject to some of them in another manner. |
| 71. | A vote subject to a Letter of Proxy will be valid even if there was a flaw in the Letter of Proxy and even if prior to the vote the appointer died or was declared incompetent or if the Letter of Proxy was revoked or the share for which the Letter of Proxy was granted was transferred, unless prior to the meeting notice was received at the office, in writing, regarding the flaw, death, incompetency, revocation, or transfer, as the case may be. Notwithstanding the abovementioned, the meeting chairperson may, subject to his discretion, accept notice as aforementioned even during the meeting, if he decides that this is appropriate, subject to his discretion. |
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| 72. | A Letter of Proxy will be valid as well with regard to any deferred meeting of a meeting to which the Letter of Proxy refers, provided that nothing to the contrary was stated in the Letter of Proxy. |
| 73. | Each of the Ordinary Shares entitles its owner to the right to participate in the Company’s General Meetings and to one vote. |
| 74. | A resolution put up for a vote at a General Meeting will be decided by a vote of the number of votes; the vote will be performed in the manner determined by the chairperson of the meeting. In the event of a dispute regarding whether to accept any vote or disqualify it the chairperson of the meeting will resolve the matter and his bona fide decision will be final and decisive. |
| 75. | The announcement of the chairperson that the resolution at the General Meeting was passed or rejected, whether unanimously or by any majority and a note stated in this matter in the minutes of the meeting will constitute prima facie evidence to that which was stated therein, and there will be no further necessity to prove the number of votes (or their relative portion) given for or against the resolution. |
| 76. | Subject to the provisions of the Companies Law or the provisions of the Articles of Association regarding another majority, the resolutions of the General Meeting will be passed by ordinary majority. In the event that the number of votes for and against are equal, the chairperson of the meeting will not have and additional or decisive vote. |
| 77. | The chairperson of the General Meeting may, with the consent of a meeting that has a legal quorum, defer it or defer the deliberation or defer passing a resolution in a certain subject which is on that day’s agenda, to another date and place determined, and he must do so subject to the meeting’s demand. At a deferred meeting as aforementioned, no subject shall be discussed except that which was on the agenda and for which no resolution was made at the meeting where the deferral was decided upon. If the General Meeting is deferred to a date that exceeds twenty-one days, notices and invitations to the deferred meeting will be given as stated in articles 54 and 55 above. If the General Meeting is deferred without changing its agenda, to a date that does not exceed 21 days, notices and invitations regarding the new date will be given as soon as possible, and no later than 72 hours before the General Meeting; the notices and invitations as aforementioned shall be given subject to sections 54 and 55, mutatis mutandis. |
| 77a. | Subject to the provisions of the Companies Law and its regulations, votes at a General Meeting in the subjects mentioned below can be performed as well by means of a voting ballot: (a) appointment and dismissal of directors; (b) approval of actions or transactions that require the General Meeting’s approval subject to the provisions of sections 255 and 268 to 275 to the Companies Law; (c) approval of a merger subject to section 320 to the Companies Law; (date) subjects determined by the Minister in the regulations instated or that will be instated subject to section 89 to the Companies Law. |
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THE BOARD OF DIRECTORS
| 78. | The number of directors, including any external directors required by Israeli law, shall be no less than three and no more than eleven. |
| 79. | The directors will be appointed at the annual meeting. The directors, excluding the external directors, shall be classified into three groups (A, B and C) as nearly equal in number as practicable. Subject to the foregoing, the duration of their service, except for the external directors, shall be as follows: |
One-third of the directors will belong to group A, and the duration of their service shall be from the time of their appointment until the third annual meeting held after the date of their appointment.
One-third of the directors will be appointed to group B, and the duration of their service shall be from the time of their appointment until the third annual meeting held after the date of their appointment.
One-third of the directors will be appointed to group C, and the duration of their service shall be from the time of their appointment until the third annual meeting held after the date of their appointment.
At each annual meeting, the three-year duration of service of one group of directors shall expire, and the directors of such group will stand for election. Each of the directors or the successors elected to replace the directors of a group whose term shall have expired at such annual meeting shall be elected to hold office until the third annual meeting held after the date of his or her election and until his or her respective successor is elected. If no directors are appointed at the annual meeting, the directors appointed at the previous annual meeting will continue their service. Directors whose service period has ended may be appointed again.
Directors may be elected for a term of less than three years in order to enable that the three groups of directors have as equal number of directors as possible as provided in this Article 79.
| 80. | Apart from anyone who served as director until the date of the annual meeting, no director shall be appointed at the annual meeting, unless the Board of Directors recommended the appointment thereof, or if a Company shareholder wishing to suggest him had submitted to the office, no later than seven days from the date of publishing the notice regarding the meeting, a document in writing signed by the shareholder, announcing the intention of same shareholder to suggest that this candidate be appointed as director, while the written consent of the candidate to serve as director is attached to the document. |
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| 81. | The Board of Directors may, from time to time, appoint an additional director or directors to the Company, whether for the purpose of filling the position of a director vacated for any reason whatsoever or as an additional director or directors, provided that the total amount of directors does not exceed the maximum number stated in article 78 above. The office of a director that was appointed by the Board to fill any vacancy shall only be for the remaining period of time during which the director whose service has ended was filled would have held office, or in case of a vacancy due to the number of directors serving being less than the maximum number stated in article 78 above, the Board shall determine at the time of appointment the class pursuant to Article 79 above, to which the additional director shall be assigned |
| 82. | The shareholders may, at an extraordinary meeting, appoint an additional director or directors to the Company, whether for the purpose of filling a position that was vacated for any reason whatsoever or as an additional director or directors. Directors appointed as abovementioned to fill a vacated position, except for external directors, will finish their service in accordance with the group to which the director whose position was vacated belonged, subject to the provisions of article 79 above. |
| 83. | Article revoked. |
| 84. | Notwithstanding the abovementioned, the Company Board of Directors and General Meeting may at any time, upon a resolution with a majority of at least 75% of the voting rights at the Board of Directors or General Meeting, as the case may be, remove from office any director, except for an external director, prior to the end of his service period, provided that the director is granted the reasonable opportunity to present his case before the General Meeting. In addition any General Meeting, with an ordinary majority resolution, may appoint in lieu of the director removed from office as abovementioned another person as director. A director appointed as abovementioned will serve in his position only for the period of service which the director whom he had replaced would have served. |
| 85. | Article revoked. |
| 86. | If the position of a director is vacated, the Board of Directors shall be entitled to continue to act with regard to any matter as long as the number of directors is no less than the minimum number of directors stated in article 78 above. If the number of directors is less than this number, the Board of Directors will not be entitled to act except for the purpose of convening a General Meeting in order to appoint additional director, however not for any other purpose. |
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| 87. | A director may resign by delivering notice to the Board of Directors, to the chairperson of the Board of Directors or the office, as is required subject to the Companies Law, and his resignation shall take effect on the date on which the notice was delivered, unless the notice states a later date. The director will disclose the reasons for his resignation. |
| 88. | Subject to the provisions of the Companies Law, the Company may pay the directors compensation for fulfilling their duty as directors. |
| 89. |
| 89.1. | A director is entitled to appoint a substitute and thus subject to approving him as alternate director by the Board of Directors (hereinafter referred to as the “Alternate Director”). Notwithstanding the abovementioned, anyone unsuitable to be appointed as director shall not be appointed and shall not serve as Alternate Director, and as well anyone serving as Company director or as Alternate Director for a Company director or as the representative of a corporation. |
| 89.2. | The Alternate Director is equal to the director for whom he serves as a substitute, and he will be entitled to attend the meetings of the Board of Directors and/or Board of Directors committees, participate and vote therein, same as the eligibility of the appointing director. |
| 89.3. | A director who had appointed an Alternate Director may, subject to the provisions of the law, revoke the appointment at any time. In addition, the position of Alternate Director will be vacated whenever the position of the director who had appointed the Alternate Director is vacated in any manner whatsoever. |
| 89.4. | Any appointment or revocation of the appointment of Alternate Director, as abovementioned, will be done by written notice delivered to the Alternate Director and to the Company, and shall take effect after the delivery of the letter of appointment, as abovementioned or on the date stated in the letter of appointment, according to the later date. |
| 89.5. | Subject to the provisions of the Companies Law, the Company may pay to the Alternate Director compensation for his participation in Board of Directors meetings. |
EXTERNAL DIRECTORS
| 90. | To the extent required by the Companies Law and the regulations thereunder, the Company will have at least two external directors, and the provisions of the Companies Law in this matter shall apply. |
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BOARD OF DIRECTORS AUTHORITY AND FUNCTIONS
| 91. | The Board of Directors will have all authorities and powers vested therein subject to the Company Articles of Association, the Companies Law and any law. |
| 92. | Without derogating from the provisions of these Articles of Association, the Board of Directors will outline the Company’s policy and oversee the performance of the CEO’s duties and actions, including – |
| 92.1. | Determine the Company’s action plans, the principles for financing them and their order of priority; |
| 92.2. | Examine the Company’s financial situation and determine its approved line of credit; |
| 92.3. | Determine the organizational structure and the remuneration policy; |
| 92.4. | Entitled to determine the issue of a series of debentures; |
| 92.5. | Responsible for preparing and approving the financial statements, as stated in section 171 to the Companies Law; |
| 92.6. | Report to the annual meeting regarding the state of the Company’s affairs and its business results, as stated in section 173 to the Companies Law; |
| 92.7. | Appoint and dismiss the CEO; |
| 92.8. | Decide regarding actions and transactions that require its approval subject to the Company Articles of Association or the provisions of sections 255 and 268 to 275 to the Companies Law; |
| 92.9. | May allot shares and securities convertible into shares up to the limit of the Company’s registered share capital; |
| 92.10. | May decide to distribute a dividend or bonus shares, as the case may be; |
| 92.11. | May decide upon an acquisition as this term is defined in section 1 to the Companies Law, from all of the Company’s shareholders or part of them or any of them, subject to its discretion; |
| 92.12. | Offer an opinion regarding a special tender offer, as stated in section 329 to the Companies Law; |
| 92.13. | Determine the minimum required number of directors on the Board of Directors, who must have accounting and financial expertise, as this is defined in section 240 to the Companies Law; the Board of Directors will determine the aforementioned minimum number based, inter alia, on the Company’s nature, size, scope of the Company’s activity and the complexity thereof, and subject to the number of directors stipulated in the Articles of Association subject to section 219 to the Companies Law. |
The Board of Directors’ authorities subject to this section may not be delegated to the CEO, expect as specified in the Companies Law.
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| 93. | A power of the Company, not granted by law or the Company’s Articles of Association to another organ, may be executed by the Board of Directors. |
| 94. |
| 94.1. | The Board of Directors may resolve that the authorities vested in the CEO will be transferred to its authority, all in connection with a specific matter, or a specific timeframe, which shall not exceed the timeframe required under the circumstances. |
| 94.2. | Without derogating from the aforementioned, the Board of Directors may instruct the CEO on how to act with regard to a specific matter. If the CEO fails to comply with the instruction, the Board of Directors may exercise the required authority in order to execute the instruction in lieu thereof. |
| 94.3. | If the CEO is barred from exercising his authorities, the Board of Directors may exercise them in lieu thereof. |
| 95. | Subject to the provisions of the Companies Law, the Board of Directors may delegate from its authorities to the CEO, a Company officer or another person. Delegating an authority of the Board of Directors may be for a certain matter or for a certain timeframe, all subject to the Board of Directors’ discretion. |
RECEIVING CREDIT AND GRANTING GUARANTEES AND COLLATERAL
| 96. | Without derogating from any authority vested in the Board of Directors subject to these Articles of Association, the Board of Directors may, from time to time, subject to its discretion, resolve upon: |
| 96.1. | Receiving credit by the Company at any sum and securing its discharge, in the manner it deems fit; |
| 96.2. | Granting guarantees, collateral, and warranties of any kind; |
| 96.3. | Issuing a series of debentures, including capital notes or bonds, and including debentures, capital notes or bonds convertible or exercisable into shares, and to determine their terms, and pledge its property, all or some, whether in the present or in the future, whether by a floating or fixed charge. Debentures, capital notes, bonds, or other guarantees, as abovementioned, may be issued at a discount, with a premium or in any other manner, whether with deferred rights and/or special rights and/or privileges and/or other rights, all as determined by the Board of Directors subject to its discretion. |
| 97. | The abovementioned in article 96 does not negate the authority of the CEO or anyone authorized thereby for this purpose, to decide upon accepting credit by the Company, within the framework of the credit line and the guarantees determined by the Board of Directors. |
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BOARD OF DIRECTORS COMMITTEES
| 98. |
| (a) | Subject to the Companies Law, the Board of Directors may, as it deems fit, create Board of Directors committees, consisting of two members or more, and delegate from its authorities thereto. Notwithstanding the abovementioned, the Board of Directors may not delegate from its authorities to a Board of Directors committee with regard to the following subjects: |
| (1) | Determining general policy for the Company; |
| (2) | Distribution, unless pertaining to the purchase of Company shares in accordance with a framework outlined in advance by the Board of Directors; |
| (3) | Determining the position of the Board of Directors in a matter that requires the approval of the General Meeting or granting an opinion as stated in section 329 to the Companies Law; |
| (4) | Appointing directors, if the Board of Directors is entitled to appoint them; |
| (5) | Issue or allotment of shares or securities convertible into shares or exercisable into shares, or a series of debentures, except for that which is specified in section 288(b) to the Companies Law; |
| (6) | Approving financial statements; |
| (7) | Board of Directors approval for transactions and actions that require the Board of Directors’ approval subject to sections 255 and 268 to 275 to the Companies Law. |
| (b) | The Board of Directors may create committees for the subjects specified in subsections (a) (1) – (7) above, for recommendation only. |
| (c) | There shall be no person on a Board of Directors committee to which the Board of Directors has delegated authorities who is not a Board of Directors member. |
| (d) | Those who are not Board of Directors members may serve on a Board of Directors committee where its sole function is to advise or offer a recommendation to the Board of Directors. |
| 99. | A resolution passed or action taken on a Board of Directors committee subject to the authority delegated thereto from the authorities of the Board of Directors, constitutes a resolution passed or action taken by the Board of Directors, unless otherwise explicitly determined by the Board of Directors with regard to a certain matter or certain committee. The Board of Directors may from time to time extend, reduce or revoke the delegation of powers to a Board of Directors committee, however a reduction or revocation of powers as aforementioned shall not derogate from the validity of a committee’s resolution which the Company acted pursuant thereto towards another person, where it was unaware of the revocation thereof. |
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| 100. |
| 100.1. | The legal quorum for opening a meeting of a Board of Directors committee will be two committee members serving on the date of the meeting, or their substitutes, as long as the Board of Directors had not determined otherwise. |
| 100.2. | The provisions included in these Articles of Association regarding the actions of the Board of Directors shall apply, mutatis mutandis, to the Board of Directors committees as well, as long as no replacement provisions were given in this matter by the Board of Directors, and all subject to the provisions of the Companies Law. |
| 100.3. | The Board of Directors committee will regularly report to the Board of Directors regarding its resolutions or recommendations. |
| 101. |
| 101.1. | The Board of Directors will appoint among its members an audit committee. The number of members of the audit committee shall be no less than three and all of the external directors shall be its members. The following will not be members of the audit committee: the chairperson of the Board of Directors, any director employed by the Company or who routinely provides services thereto, and the Company’s controlling shareholder or his relative. |
| 101.2. | The functions of the audit committee will be as prescribed by the Companies Law including any other function instructed by the Board of Directors. |
FUNCTIONS OF THE BOARD OF DIRECTORS
| 102. | Subject to the provisions of the Company Articles of Association, the Board of Directors may convene to execute its duties, defer its meetings and regulate its actions and deliberations as it deems fit. |
| 103. | The Board of Directors will appoint one of its members to serve as the chairperson of the Board of Directors and it may appoint more than one Board of Directors chairperson (each of them shall be hereinafter referred to as the “Board of Directors Chairperson”). In addition, the Board of Directors may remove the Board of Directors Chairperson from office and appoint another in lieu thereof. The Board of Directors may appoint from among its members one or more as the vice chairperson of the Board of Directors, who will serve as his replacement when absent. The Board of Directors may determine the timeframe for the Board of Directors Chairperson and his vice chairpersons’ service. If such period is not determined as aforesaid, the Board of Directors Chairperson and vice chairpersons will serve as long as they serve as directors. |
| 104. | The Board of Directors Chairperson will head the Board of Directors meetings and manage them. If the Board of Directors Chairperson is absent from a Board of Directors meeting, following a notice he had delivered in advance, or if he does not appear at the Board of Directors meeting within 15 minutes from the time scheduled for holding the meeting, then the vice chairperson (if such was appointed) shall head the meeting. If both the Board of Directors Chairperson and the vice chairperson are absent from the meeting the attending Board of Directors members will choose one of those among them to be the chairperson of the meeting. |
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| 105. | The Board of Directors will convene for its meeting according to the Company’s needs and at least once every three months. |
| 106. | The Board of Directors Chairperson may convene the Board of Directors at any time, and determine the place and time for holding the Board of Directors meeting. |
| 107. | Without derogating from the aforementioned, the Board of Directors Chairperson is obligated to convene the Board of Directors upon the occurrence of each of the following: |
| 107.1. | Receiving a demand to convene the Board of Directors from at least two directors, in order to deliberate the subject specified in their demand; |
| 107.2. | Receiving notice or a report from the CEO which require the Board of Directors’ action; |
| 107.3. | Receiving notice from the auditor regarding material flaws in the Company’s auditing; |
| 107.4. | Receiving notice from a director regarding the Company which prima facie contains an illegality or disruption of the regular course of business. |
Upon receiving notice or a report as abovementioned, the Board of Directors Chairperson will convene the Board of Directors, immediately, and no later than 14 days after the date of the demand, the notice or the report, as the case may be.
| 108. |
| 108.1. | Early notice regarding the convening of the Board of Directors will be given to all members of the Board of Directors a reasonable time before the date of the meeting. |
| 108.2. | Notwithstanding the abovementioned, the Board of Directors may, with the consent of all of the directors, convene a meeting without notice. |
| 109. | The agenda of the Board of Directors meetings will be determined by the Board of Directors Chairperson, and it will include: |
| 109.1. | Subjects determined by the Board of Directors Chairperson; |
| 109.2. | Subjects determined as stated in article 107 above; |
| 109.3. | Any subject which a director or the CEO requested that the Board of Directors Chairperson, a reasonable time before convening the Board of Directors meeting, include on the agenda (hereinafter referred to as the “Agenda”). |
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| 110. | The notice regarding the convening of the Board of Directors will state the time and location of the meeting as well as a reasonable specification of the matters that will be discussed at the meeting, according to the Agenda. |
| 111. | Notice regarding a Board of Directors meeting will be delivered to the address of the director given in advance to the Company, unless the director requests that the notice be delivered elsewhere. |
| 112. | The legal quorum for opening a Board of Directors meeting is half of the Board of Directors members serving at the time of the meeting, themselves or their proxies, or three members, according to the lower number. |
| 113. |
| 113.1. | At a Board of Directors vote each director will have one vote. Board of Directors resolutions will be passed by a majority of votes of the directors attending the meeting and voting therein, without taking into account the abstaining votes. The Board of Directors Chairperson will not have an additional or deciding vote. |
| 113.2. | If the opinions are tied, the proposed resolution on which the Board of Directors members have voted will be deemed to have been rejected. |
| 114. | The Board of Directors may hold meetings with the use of any means of communication provided that each of the participating directors can hear each other simultaneously. The Board of Directors may regulate the manner and methods of holding a meeting through the use of means of communication. |
| 115. | The Board of Directors may pass resolutions even without convening in practice, provided that all of the directors entitled to participate in the deliberation and vote in the subject of the resolution have agreed not to convene for a meeting regarding said subject. The resolutions passed subject to this section, including the resolution not to convene, will be signed by the Board of Directors Chairperson and will be valid, for all intents and purposes, as if passed in a duly convened and conducted Board of Directors meeting. |
MINUTES
| 116. | The Board of Directors will ensure that minutes will be recorded of the proceedings at the Board of Directors meetings; the minutes will be recorded in books designated for this purpose, and will include, inter alia, the following details: |
| 116.1. | The names of the participating directors and other persons in attendance at each Board of Directors meeting; |
| 116.2. | The matters discussed at the Board of Directors meetings and the resolution that were passed. The minutes will be signed by the Board of Directors Chairperson or the chairperson of the meeting, as the case may be; approved and signed minutes, as aforementioned, will serve as prima facie evidence to its content. |
| 117. | The provisions of article 116 above, shall apply as well to the meetings of each Board of Directors committee and the passing of Board of Directors resolutions without convening, as stated in article 115 above. |
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THE CEO
| 118. | The Board of Directors may, from time to time, appoint a CEO to the Company, and it may appoint more than one CEO (each of them hereinafter referred to as the “CEO”). In addition, the Board of Directors is entitled to dismiss the CEO or replace him, as it deems fit, subject to the provisions of aby contract between the CEO and the Company. |
| 119. | The CEO is not required to be a Company shareholder or a director. |
| 120. | The CEO is responsible for the regular management of the Company affairs, within the framework of the policy determined by the Board of Directors and subject to its instructions. |
| 121. | The CEO will have all administrative and executive powers not granted by law or by these Articles of Association or subject thereto to a different organ of the Company except for powers as aforementioned transferred therefrom to the Board of Directors, subject to the provisions of article 94.1 above, if transferred; the CEO will be subject to the Board of Directors’ supervision. |
| 122. | Subject to the provisions of the Companies Law and the provisions of these Articles of Association, the Board of Directors may, from time to time, deliver and grant to the CEO powers vested in the Board of Directors subject to these Articles of Association, as it deems fit, and it may grant from these powers for such period, purposes, and subject to the same conditions and with the same restrictions as the Board of Directors shall deem fit, and the Board of Directors may grant these powers, both without waiving its own powers in the matter and instead or in lieu thereof, all or some, and it may from time to time cancel, revoke and amend these powers, all or some. |
| 123. | The CEO may, with the Board of Directors’ approval, delegate its powers, to another or to others, subordinate thereto; such approval may be given whether as a general approval or ad hoc. |
| 124. | Without derogating form the provisions of the Companies Law or any law, the CEO will submit to the Board of Directors reports in the subject, on the dates and at the scope determined by the Board of Directors, whether in a specific resolution or as part of the Board of Directors protocols. |
| 125. | The CEO’s fee may be paid by paying a salary or commission fees or profit participation or by granting securities or the right to purchase securities, or in any other way. |
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VALIDITY OF ACTIONS AND APPROVAL OF TRANSACTIONS
| 126. | Subject to the provisions of any law, all actions taken by the Board of Directors or a Board of Directors committee or any person acting as director or as member of a Board of Directors committee or by the CEO, as the case may be – will be valid even if at a later time any flaw is discovered in the appointment of the Board of Directors, the Board of Directors committee, the director, committee member or CEO, as the case may be, or if any of the aforementioned officers was barred from serving in his position. |
| 127. |
| 127.1. | A position at any other corporation, including a corporation which the Company is an interested party therein or which is a shareholder in the Company, will not disqualify the officer from being an officer of the Company. In addition, no officer shall be disqualified from being an officer of the Company due to his entering into an agreement or the entering into an agreement of any corporation as abovementioned, with the Company in any matter whatsoever and by any means whatsoever. |
| 127.2. | Subject to the provisions of the Companies Law, the fact that a person is an officer of the Company shall not disqualify him and/or his relative and/or another corporation which he is an interested party therein from executing transactions with the Company in which the officer has a personal interest in any way. |
| 127.3. | Subject to the provisions of the Companies Law, an officer will be entitled to participate and vote in deliberations regarding the approval of transactions or actions in which he has a personal interest. |
| 128. | Subject to the provisions of the Companies Law, a transaction between the Company and its officer or controlling shareholder or a transaction between the Company and another person in which a Company officer or its controlling shareholder have a personal interest therein, and which are not extraordinary transactions, shall be approved as follows: |
| 128.1. | An agreement as abovementioned, in a transaction that is not extraordinary, will be approved by the Board of Directors, unless it was determined by the Board of Directors that the agreement will be approved by the audit committee, whether in a specific resolution or as part of the Board of Directors proceedings, whether by general authorization or authorization for a specific type of transaction, or whether by authorization for a specific transaction. |
| 128.2. | Approval of transactions which are not extraordinary as abovementioned can be done by granting general approval for a certain type of transactions or by approving a certain transaction. |
| 129. | Subject to the provisions of the Companies Law, general notice given to the Board of Directors by an officer or controlling shareholder of the Company, regarding his personal interest in a certain entity, while specifying his personal interest, shall constitute disclosure of the officer or controlling shareholder to the Company regarding his aforesaid personal interest, for the purpose of any agreement with an entity as abovementioned, in a transaction that is not extraordinary. |
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SIGNING ON BEHALF OF THE COMPANY
| 130. | Subject to the provisions of the Companies Law and the provisions of these Articles of Association, the Board of Directors may authorize any person to act and sign on behalf of the Company, whether alone or jointly with another person, whether as a general matter or for specific matters. |
| 131. | The Company will have a seal bearing the Company name. Signing a document will not bind the Company unless those authorized to sign on behalf of the Company have signed it together with the Company seal or its printed name. |
APPOINTING A LEGAL REPRESENTATIVE
| 132. | Subject to the provisions of the Companies Law, the Board of Directors may, at any time, grant Power of Attorney to any person to be the Company’s legal representative for such purposes and with such powers and discretion, for the period and subject to the terms, all as the Board of Directors shall deem fit. |
The Board of Directors is entitled to grant to said person, inter alia, the power to transfer to another, fully or partially, the powers, authorizations and discretion granted thereto.
EXEMPTION, INDEMNITY AND INSURANCE
| 133. | Subject to the provisions of the Companies Law, the Company may exempt its officer from his liability, all or some, due to damage following the breach of his duty of care towards the Company. |
| 134. | Subject to the provisions of the Companies Law, the Company may enter into a contract to insure the liability of its officer, due to the liability imposed thereon following an action which he performed while serving as its officer, in each of the following: |
| 134.1. | Breach of his duty of care towards the Company or towards another person; |
| 134.2. | Breach of his fiduciary duty towards the Company, provided that the officer acted bona fide and he had reasonable grounds to assume that the action will not harm the Company’s interests; |
| 134.3. | A monetary obligation imposed thereon in favor of another person; |
| 134.4. | Another action permitted to be insured by the Companies Law; |
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| 134.5. | Expenses paid by the officer or which he was ordered to pay, in connection with an administrative enforcement proceeding held in his case, including reasonable litigation expenses, and including legal fees; |
| 134.6. | Payment to the person injured by the breach as stated in section 52ND to the Securities Law, as it was amended in the Improvement of Enforcement Proceedings Law (hereinafter referred to as the “Payment to the Person Injured by the Breach”); |
| 134.7. | Any other event for which it is permitted and/or will be permitted to insure the liability of an officer. |
| 135. | Subject to the provisions of the Companies Law – |
| 135.1. | The Company may grant an undertaking in advance to indemnify its officer, due to liability or an expense imposed thereon or which he will pay due to an action which he performed as a result of him being its officer, in each of the following (hereinafter referred to as the “Indemnity Undertaking”) – |
| (a) | As specified in article 136.1 below, and provided that the Indemnity Undertaking is limited to events which in the opinion of the Board of Directors are expected in light of the Company’s activity de facto at the time of granting the Indemnity Undertaking and to a sum or standard which the Board of Directors determined to be reasonable under the circumstances, and that the Indemnity Undertaking states the events which in the Board of Directors’ opinion are expected in light of the Company’s activity de facto at the time of granting the undertaking and the sum or standard which the Board of Directors deemed reasonable under the circumstances. The indemnity sum will be limited only to sums not covered by the insurance and which were not paid de facto. |
| (b) | As specified in articles 136.2 or 136.3 or 136.4 or 136.5 below. The indemnity sum will be limited only to sums not covered by the insurance and not paid de facto. |
| 135.2. | Without derogating from the content of article 135.1 above, the Company may indemnify its officer retroactively, due to liability or an expense as specified in article 136 below, imposed thereon as a result of on action which he performed as a Company officer. The indemnity sum will be limited only to sums not covered by the insurance and not paid de facto. |
| 136. | An Indemnity Undertaking or indemnity, as stated in article above, may be given due to liability or an expense as specified in subsections 136.1 to 136.6 below, imposed on the officer due to an action which he performed as a Company officer, as follows: |
| 136.1. | Monetary obligation imposed thereon in favor of another person pursuant to a legal judgment, including a judgment rendered by settlement or an arbitration award approved by the court. |
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| 136.2. | Reasonable litigation expenses, including legal fees, paid by the officer due to an investigation or proceeding held against him by an entity authorized to hold an investigation or proceeding, and which ended without an indictment thereagainst and without imposing a monetary obligation thereupon as an alternative for a criminal proceeding, or which ended without an indictment thereagainst but with the imposing of a monetary obligation thereupon as an alternative to a criminal proceeding in an offense that does not require proving mens rea; in this section – “proceeding ending without an indictment in a matter in which a criminal investigation was held” – meaning the closing of the case subject to section 62 to the Rules of Criminal Procedure [combined version], 5742 – 1982 (in this subsection – “Criminal Procedure Law”) or a stay of proceedings by the Attorney General subject to section 231 to the Criminal Procedure Law. |
“Monetary obligation as an alternative to a criminal proceeding” – monetary obligation imposed by law as an alternative to the criminal process, including an administrative fine subject to the Administrative Offenses Law, 5745- 1985, a fine for an offense determined as a fineable offense subject to the Criminal Procedure Law, financial sanction or forfeit.
| 136.3. | Reasonable litigation expenses, including legal fees, which the officer paid or was ordered to pay by the court, in a process submitted thereagainst by the Company or on its behalf or by another person, or in a criminal indictment from which he was acquitted, or in a criminal indictment where he was convicted of an offense that does not require proof of mens rea. |
| 136.4. | Expenses paid by the officer or which he was ordered to pay, in connection with an administrative enforcement proceeding held in his case, including reasonable litigation expenses, and thus including legal fees. |
| 136.5. | Payment to the Person Injured by the Breach. |
| 136.6. | Any liability or other expense for which it is permitted and/or will be permitted to indemnify the officer. |
| 137. | Subject to the provisions of the Companies Law – |
| 137.1. | The Company is entitled to grant an undertaking in advance to indemnify any person including a Company officer, who serves or has served the Company or as per its request as a director in another company which the Company has shares therein, directly or indirectly, or which the Company has any interest whatsoever therein (hereinafter referred to as the “Director in Another Company”), subject to the provisions of article 135 above, which shall apply mutatis mutandis. |
| 137.2. | Without derogating from article 137.1 above, the Company may indemnify the Director in Another Company retroactively, due to liability or expense as specified in article 136 above, imposed thereon due to an action he performed pursuant to his being a Director in Another Company. |
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| 138. | Subject to the provisions of the Companies Law, the Company may grant an undertaking in advance to indemnify an employee or clerk of the Company who is not a Company officer or indemnify him retroactively for any monetary liability imposed thereon in favor of another person due to an action performed bona fide within his capacity as Company employee or clerk. |
| 139. | Subject to the provisions of the Companies Law, the provisions of the Company’s Articles of Association do not limit the Company, in any manner whatsoever, with regard to its entering into an insurance contract, or with regard to the granting of exemption or indemnity: |
| 139.1. | In connection with a Company officer or Director in Another Company, if the insurance, exemption or indemnity are not prohibited subject to any law. |
| 139.2. | In connection with a person who is not a Company officer or Director in Another Company, including however without derogating from the generality of the aforementioned, employees, contractors or consultants. |
DIVIDENDS, FUNDS AND CAPITALIZATION OF FUNDS AND PROFITS
| 140. | The Board of Directors may, prior to deciding upon dividend distribution, as stated in article 142 below, to contribute out of the profits any sums, subject to its discretion, to a general or reserve fund for the distribution of a dividend, bonus shares, or any other purpose, as the Board of Directors shall determine subject to its discretion. |
| 141. | Until utilizing the aforementioned funds, the Board of Directors may invest the sums contributed as aforementioned and the monies of the funds, in any investment whatsoever, to manage these investments, change them or make any other use thereof, and it is entitled to divide the reserve fund into special funds, and use any fund or part thereof for the purpose of the Company’s business, without holding it separate from the rest of the Company’s assets, all subject to the Board of Directors’ discretion and the terms it shall determine. |
| 142. | Subject to the provisions of the Companies Law, the Board of Directors may pass a resolution regarding the distribution of a dividend. The Board of Directors deciding upon the distribution of a dividend may decide that the dividend will be paid, all or some, in cash or by distribution of assets in kind, and thus including securities or by any other means, as it deems fit. |
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| 143. |
| 143.1. |
| (a) | Subject to the provisions of the Companies Law, the Board of Directors may decide upon the allotment of bonus shares, and turn into share capital some of the Company profits, as this is construed in section 302(b) to the Companies Law, from share premium or any other source included in its equity, stated in its most recent financial statements, at the sum determined by the Board of Directors and which shall be no less than the par value of the bonus shares. |
| (b) | The Board of Directors deciding upon the allotment of bonus shares, will determine whether they will be of one class only for all shareholders without taking into account the classes of shares held thereby or that each shareholder as aforementioned will be distributed bonus shares of the same class for all classes of shares held thereby. |
| (c) | Bonus shares allotted subject to this section will be deemed fully paid-up. |
| 143.2. | The Board of Directors deciding upon the allotment of bonus shares may decide that the Company will transfer to a special fund designated for the future distribution of bonus shares, such an amount which the conversion thereof into share capital will suffice in order to allot to anyone who at the time will have, for any reason whatsoever, the right to purchase Company shares (including a right which can only be activated on a later date), bonus shares which would have been owed thereto, had he exercised the right to purchase the shares prior to the effective date for the right to receive bonus shares (in this section the “Effective Date”). If after the Effective Date the owner of the aforementioned right will exercise his right to purchase the shares or part thereof the Company will allot thereto bonus shares of par value and which have been owed thereto had he exercised prior to the Effective Date the right to purchase the shares which he had purchased de facto, and thus by converting into share capital the proper amount out of the aforementioned special fund. The bonus shares will entitle their owners to participate in the dividend distribution in cash or the bonus shares as of the Effective Date determined by the Board of Directors. For the purpose of determining the amount that should be transferred to the aforementioned special fund, any amount transferred to this fund due to previous distributions of bonus shares shall be deemed as if it were already capitalized and that shares entitling the owners of the right to purchase shares, to bonus shares, were already allotted therefrom. |
| 144. | Subject to the rights attached to the classes of shares issued by the Company and the provisions of the Articles of Association, a dividend or bonus shares will be distributed to the shareholders pro rata to the par value of each share, without taking into account any premium paid therefor. |
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| 145. | In order to implement a resolution regarding the distribution of a dividend or allotment of bonus shares the Board of Directors may: |
| 145.1. | Settle as it deems fit any difficulty arising in connection therewith and take any action it chooses in order to overcome such difficulty. |
| 145.2. | Decide that fractions or fractions at a sum lower than a certain sum determined by the Board of Directors, will not be taken into account in order to adjust the right of shareholders or sell share fractions and pay the (net) consideration to those entitled. |
| 145.3. | Authorize to sign on behalf of the shareholders any contract or other document required in order to validate the allotment and/or distribution, and especially, authorize to sign and submit for registration a document as stated in section 291 to the Companies Law. |
| 145.4. | Determine the value of certain assets for distribution and decide that payments in cash will be paid to the shareholders based on the determined value. |
| 145.5. | Grant cash or certain assets to trustees in favor of those entitled thereto, as the Board of Directors deems advantageous. |
| 145.6. | Make any arrangement or other settlement required in the Board of Directors’ opinion in order to enable the allotment, or distribution, as the case may be. |
| 146. | Dividend or other benefits due to shares shall not bear interest. |
| 147. | The Board of Directors may withhold any dividend or bonus share or other benefits due to a share which the consideration determined therefor, all or some, was not paid to the Company, and collect any sum as aforementioned or consideration received from the sale of any bonus share or other benefit, on account of the debts or undertakings due to the aforementioned share, thus, whether the aforesaid share is exclusively owned by the indebted shareholder or jointly with other shareholders. |
| 148. | The Board of Directors may withhold any dividend or bonus share or other benefits due to a share for which a person is entitled to be registered as its owner in the ledger or is entitled to transfer it, subject to articles 29 or 31 above, as the case may be, until the same person is registered as the owner of the share or until he duly transfers it, as the case may be. |
| 149. | The Board of Directors may determine, from time to time, the methods of payment of the dividends or allotment of bonus shares or their transfer to those entitled thereto and as well the instructions, procedures, and arrangements in connection therewith, both with regard to the registered shareholders and as well with regard to the non-registered shareholders. Without derogating from the generality of the aforementioned, the Board of Directors may determine as follows: |
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| 149.1. |
| (a) | Subject to the content of subsection (b) below, a dividend or monies distributed to registered shareholders will be paid to a registered shareholder by mailing a check to his address, as it is registered in the shareholder ledger, or in the event of joint registered owners of a share, to the person whose name appears first in the shareholder ledger with respect to said share. Any delivery of a check as aforementioned will be done at the risk of the registered shareholder; without derogating from the aforementioned, the Board of Directors may determine that a dividend sum lower than a certain sum determined by the Board of Directors will not be delivered by check as abovementioned and the provisions of subsection (b) below shall apply in connection therewith. |
| (b) | The Board of Directors may determine that the payment of a dividend or monies distributed to registered shareholders shall be done at the office or any other place determined by the Board of Directors. |
| (c) | A dividend the payment of which was not demanded within a period of seven (7) years from the date on which its distribution was decided upon, the person entitled thereto will be deemed to have waived it and it will return to the ownership of the Company. |
| 149.2. | A dividend distributed to non-registered shareholders will be transferred to the aforementioned shareholders through the Registration Company or by any other means determined by the Board of Directors. |
| 150. | If two or more are registered in the ledger as the joint owners of a share, each of them is entitled to provide a valid receipt against any dividend, share or other security, or other monies or benefits owing on account of the share. |
COMPANY DOCUMENTS
| 151. |
| 151.1. | The shareholders will have the right to review the Company documents specified in section 184 to the Companies Law, upon the fulfillment of the conditions determined for this purpose. |
| 151.2. | Without derogating from the content of article 151.1 above, the Board of Directors may, subject to its discretion, decide to grant a reviewing right of the Company documents, or any part thereof, including to the shareholders, all or some, as it deems fit, subject to its discretion. |
| 151.3. | The shareholders will not have the right to review the Company documents or part thereof, unless such right was awarded thereto by law or subject to these Articles of Association or if they were permitted to do so by the Board of Directors, as stated in article 151.2 above. |
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| 152. | Subject to the provisions of any law, any book, ledger or other registry which the Company must keep, subject to any law or these Articles of Association, will be kept using technical, mechanical, or other means, as shall be decided by the Board of Directors. |
FINANCIAL STATEMENTS
| 153. | The Company’s financial statements will be approved by the Board of Directors, signed on its behalf by anyone authorized to do so by the Board of Directors, and presented before the annual meeting. |
AUDITOR
| 154. | The auditor or auditors will be appointed at each annual meeting, and serve until the end of the following annual meeting. |
| 155. |
| 155.1. | If an auditor is appointed to the Company, the Board of Directors will determine his fee for the auditing activity, subject to the discretion of the Board of Directors. |
| 155.2. | The fee of the auditor for additional services to the Company which are not auditing activities, will be determined by the Board of Directors, subject to its discretion. |
The Board of Directors will report to the annual meeting the terms of the agreement with the auditor for additional services including payments and undertakings of the Company towards the auditor; for the purpose of this article, an “auditor” – including a partner, employee or relative of the auditor and including a corporation controlled thereby.
THE INTERNAL AUDITOR
155a.
| (a) | The Company Board of Directors will appoint an internal auditor for the Company, subject to the suggestion of the audit committee. |
| (b) | The organizational supervisor of the internal auditor will be the chairperson of the Board of Directors. |
| (c) | The internal auditor will submit to the Board of Directors for its approval, or, subject to the Board of Directors’ determination from time to time, to the audit committee, a proposal for an annual or periodic work plan, and the Board of Directors or audit committee, as the case may be, will approve it with the changes they deem fit. |
| (d) | The internal auditor will act in accordance with the provisions of the Companies Law. |
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NOTICES
| 156. | Providing notices or delivering documents to the shareholders and the Registration Company, subject to the provisions of the Law or subject to the Articles of Association, will be done in one of the ways mentioned below in this chapter. |
| 157. | Notice regarding a General Meeting will be delivered as stated in article 54 above. |
| 158. |
| 158.1. | Without derogating from the aforementioned, the Company may deliver notice or a document to a shareholder, by delivering it in person or by facsimile or by post or by e-mail; delivery by post shall be done in accordance with the address of the shareholder registered in the ledger, or if no such address is registered, in accordance with the address given to the Company thereby for the purpose of delivering notices thereto. A notice delivered by facsimile transmission will be sent to the shareholder in accordance with the facsimile number given thereby to the Company. A notice delivering by e-mail will be sent to the shareholder in accordance with the e-mail address given thereby to the Company. |
| a. | A notice or document delivered personally to a shareholder will be deemed delivered on the date they were delivered thereto. |
| b. | A notice or document delivered by post will be deemed duly delivered if submitted to a post office bearing the correct address and duly stamped. The delivery will be deemed as if performed at the time when the letter would have been regularly delivered by the postal service, and no more than two days from the date on which the letter containing the aforesaid notice was delivered to the post office. |
| c. | A notice sent by facsimile or e-mail will be deemed delivered twenty four hours after their transmission. |
| 159. | Without derogating from the abovementioned, the Company may deliver a notice to the shareholders by publishing the notice once in two daily newspapers published in Israel, in the Hebrew language, both in addition and in lieu of delivering the notice as stated in article 158 above. The date of publication in the newspaper shall be deemed the date on which the notice was received by the shareholders. |
| 160. | The Company may announce the delivery of a document at the office or any other place determined by the Board of Directors or by any other means, including through the internet. |
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| 161. | The Company is entitled to deliver notice or a document to joint owners of a share by sending them to the shareholder whose name is mentioned first in the shareholder ledger, with regard to that share. |
| 162. | Delivery of notice or a document to one of the family members living with the person for whom they are designated will be deemed personal delivery to the same person. |
| 163. | Any person who received the right to any share, by law, by transfer or by any other means, any notice with regard to that share, duly delivered to the person from whom the right to the same share originated, prior to the registration of his details in the ledger shall obligate him. |
| 164. | Any document or notice delivered to a Company shareholder, in accordance with the provisions of the Articles of Association, will be deemed duly delivered despite the event of death, insolvency or dissolution of the same shareholder or endorsement of the right to his shares, by law (whether if the Company was aware of this or otherwise), as long as no one was registered in lieu thereof as shareholder, and delivery or shipment as aforementioned will be deemed for any purpose as sufficient with regard to any person interested in the same shares and/or entitled thereto subject to the endorsement of the right, by law, whether jointly with the same shareholder or as a result thereof or in lieu thereof. |
| 165. | Subject to the provisions of any law, a shareholder, director or any other person, entitled to receive notice subject to the Articles of Association or by law, may waive the right to receive it, whether in advance or in retrospect, whether for a specific event or in general, and once he does so this will be considered as if the notice was duly delivered, and any proceeding or action for which notice should have been given will be deemed valid and in force. |
| 166. | Written confirmation signed by a director or by the Company secretary regarding the delivery of a document or notice by any of the method specified in the Articles of Association, will be deemed decisive proof regarding any detail included therein. |
| 167. | Whenever early notice of a number of days must be granted or when a notice is valid during a certain period, the date of delivery will be included among the count of the number of days or the period, except if otherwise determined. If notice is given in more than one of the methods specified above, it will be deemed delivered on the earliest date for which it would be deemed delivered, as abovementioned. |
MERGER
| 168. | The approval of a merger as stated in section 327 to the Companies Law requires an ordinary majority at the General Meeting or a class meeting, as the case may be, and all subject to the provisions of any law. |
LIQUIDATION
| 169. | Subject to the provisions of any law, the liquidator may, whether by voluntary liquidation or otherwise, subject to the resolution of a General Meeting passed by ordinary majority, to distribute in kind among the shareholders the surplus of assets, all or some, and as well the liquidator may subject to the resolution of the General Meeting passed by ordinary majority, to deposit any part of the assets surplus with trustees who will hold it in trust on behalf of the shareholders, as the liquidator shall deem fit. For the purpose of distributing the assets in kind, the liquidator may determine the proper value of the assets intended for distribution and determine how the distribution will be performed among the shareholders while taking into consideration the rights attached to the various classes of the Company shares which they own. |
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Exhibit 5.1
Tel-Aviv, October 30, 2023
Scinai Immunotherapeutics Ltd.
Jerusalem BioPark
Hadassah Ein Kerem Campus, 2nd floor
Jerusalem 9112001
Israel
Re: Registration on Form F-1
Ladies and Gentlemen:
We have acted as Israeli counsel to Scinai Immunotherapeutics Ltd., an Israeli company organized under the laws of the State of Israel (the “Company”), in connection with the preparation and filing of a Registration Statement on Form F-1 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Act”), to be filed with the Securities and Exchange Commission. The Registration Statement relates to the proposed resale by the selling shareholders named in the Registration Statement of up to an aggregate of 1,215,345 American Depositary Shares (the “ADSs”) each representing 400 ordinary shares, no par value per share (the “Ordinary Shares”), issuable upon exercise of warrants to purchase ADSs (“Warrants”) issued by the Company to the selling shareholders as described in the Registration Statement and the prospectus contained therein. The ADSs may be sold from time to time as set forth in the Registration Statement and the prospectus contained therein.
In connection with this opinion, we have examined and relied upon the Registration Statement, the Company’s Articles of Association, and such statutes, regulations, corporate records, documents, certificates and such other instruments that we have deemed relevant and necessary for the basis of our opinions hereinafter expressed. In such examination, we have assumed: (i) the authenticity of original documents and the genuineness of all signatures; (ii) the conformity to the originals of all documents submitted to us as copies; (iii) the truth, accuracy and completeness of the information, representations and warranties contained in the corporate records, documents, certificates and instruments we have reviewed; (iv) the due execution and delivery of all documents where due execution and delivery are a prerequisite to the effectiveness thereof; and (v) the legal capacity of all natural persons.
We are members of the Israel Bar, and we express no opinion as to any matter relating to the laws of any jurisdiction other than the laws of the State of Israel and have not, for the purpose of giving this opinion, made any investigation of the laws of any other jurisdiction than the State of Israel. The opinions set forth herein are made as of the date hereof. We assume no obligation to revise or supplement any of these opinions to reflect any changes of law or fact that may occur after the date hereof. This opinion is expressly limited to the matters set forth above, and we render no opinion, whether by implication or otherwise, as to any other matters.
On the basis of the foregoing, and in reliance thereon, we are of the opinion that the ordinary shares underlying the ADSs being registered pursuant to the Registration Statement have been duly authorized by the Company and, when issued upon exercise of the Warrants in accordance with their terms and payment of the exercise price for the ADSs thereunder, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not admit that we are “experts” within the meaning of such term as used in the Securities Act, or the rules and regulations of the Commission issued thereunder with respect to any part of the Registration Statement, including this opinion as an exhibit or otherwise.
Very truly yours, | |
| /s/ Goldfarb Gross Seligman & Co. |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement (Form F-1) and related prospectus of Scinai Immunotherapeutics Ltd. of our report dated April 17, 2023, with respect to the financial statements of Scinai Immunotherapeutics Ltd. included in its Annual Report (Form 10-K) for the year ended December 31, 2022, filed with the Securities and Exchange Commission.
| /s/ Kost Forer Gabbay & Kasierer |
| Kost Forer Gabbay & Kasierer |
A member firm of Ernst & Young Global
Tel Aviv, Israel
October 30, 2023