☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
20 Ben Zion Gelis Street, Sgoola Industrial Zone, Petach Tikva 4927920, Israel
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Ordinary Shares, NIS 3.00 Nominal Value | ELTK | NASDAQ Capital Market |
Large accelerated filer ☐ | Accelerated filer ☐ |
Emerging growth company ☐ | Non-accelerated filer ☒ |
U.S. GAAP ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
1 | ||
1 | ||
1 | ||
1 | ||
A. | [RESERVED] | 1 |
B. | Capitalization and Indebtedness | 1 |
C. | Reasons for the Offer and Use of Proceeds | 1 |
D. | Risk Factors | 1 |
22 | ||
A. | History and Development of the Company | 22 |
B. | Business Overview | 23 |
C. | Organizational Structure | 28 |
D. | Property, Plants and Equipment | 29 |
29 | ||
29 | ||
A. | Operating Results | 29 |
B. | Liquidity and Capital Resources | 32 |
C. | Research and Development, Patents and Licenses | 34 |
D. | Trend Information | 34 |
E. | Critical Accounting Estimates | 34 |
35 | ||
A. | Directors and Senior Management | 35 |
B. | Compensation | 38 |
C. | Board Practices | 39 |
D. | Employees | 48 |
E. | Share Ownership | 50 |
F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation | 51 |
51 | ||
A. | Major Shareholders | 51 |
B. | Related Party Transactions | 52 |
C. | Interests of Experts and Counsel | 54 |
55 | ||
A. | Consolidated Statements and Other Financial Information | 55 |
B. | Significant Changes | 56 |
56 | ||
A. | Offer and Listing Details | 56 |
B. | Plan of Distribution | 56 |
C. | MARKETS | 56 |
D. | Selling Shareholders | 56 |
E. | Dilution | 56 |
F. | Expense of the Issue | 56 |
56 | ||
A. | Share Capital | 56 |
B. | Memorandum and Articles of Association | 56 |
C. | Material Contracts | 57 |
D. | Exchange Controls | 57 |
E. | Taxation | 58 |
F. | Dividends and Paying Agents | 66 |
G. | Statement by Experts | 66 |
H. | Documents on Display | 66 |
I. | Subsidiary Information | 66 |
66 | ||
67 | ||
67 | ||
67 | ||
67 | ||
67 | ||
68 | ||
68 | ||
68 | ||
69 | ||
69 | ||
69 | ||
69 | ||
69 | ||
70 | ||
70 | ||
INSIDER TRADER POLICY | 70 | |
CYBERSECURITY | 70 | |
71 | ||
71 | ||
71 |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
• | We will likely require additional capital in the future, which may not be available to us. |
• | We are dependent on one-of-a-kind machinery that may malfunction and may not be easily replaced. |
• | Because competition in the PCB market is intense, our business, operating results and financial condition may be adversely affected. |
• | Rapid changes in the Israeli and international electronics industries and recessionary pressures may adversely affect our business. |
• | Our products and product components need to meet certain industry standards. |
• | Key customers account for a significant portion of our revenues. The loss of a key customer would have an adverse impact on our business results. |
• | We are dependent upon a select number of suppliers for timely delivery of key raw materials and the loss of one or more of these suppliers or delays in supply of these raw materials would adversely affect our manufacturing ability. If these suppliers delay or discontinue the manufacture or supply of these raw materials, we may experience delays in production and shipments, increased costs and cancellation of orders for our products. |
• | Our results of operations may be adversely affected by currency fluctuations. |
• | Unfavorable national and global economic conditions could adversely affect our business, operating results and financial condition. |
• | We expect that our business insurance policies will be more limited in scope and our premiums will be higher than in prior years, which could cause us to decrease our insurance coverage. As a result, we may incur uninsured losses. |
• | We are subject to environmental laws and regulations. Compliance with those laws and regulations requires us to incur costs and we are subject to fines or other sanctions for non-compliance. |
• | We have in the past been, and currently are, subject to claims and litigation relating to environmental matters. If we are found to be in violation of environmental laws, we could be liable for damages and costs of remediation and may be subject to a halt in production, which may adversely affect our business, operating results and financial condition. |
• | We may fail to be in compliance with financial covenants in our unutilized lines of credit. |
• | While we have been profitable in recent years, we may not be able to sustain long term profitable operations and may not have sufficient resources to fund our operations in the future, |
• | We may not succeed in our efforts to expand our activity in the U.S. and other foreign markets. If we are unsuccessful, our future revenues and profitability would be adversely affected. |
• | We may be subject to the requirements of the National Industrial Security Program Operating Manual for our facility security clearance, which is a prerequisite to our ability to work on classified contracts for the U.S. government. |
• | We may encounter difficulties with our international operations and sales that may have a material adverse effect on our sales and profitability. |
• | Compliance with the conditions of a new business permit issued to us in 2018, if required, may be costly. We may become subject to certain sanctions, including significant fines, criminal proceedings and in an unlikely event an order shutting down our factory. |
• | Damage to our manufacturing facilities due to fire, natural disaster, or other events could materially adversely affect our business, financial condition, insurance premiums and results of operations. |
• | We are vulnerable to the general economic effects of epidemics, pandemics and other public health crises, such as the COVID-19 pandemic which began in 2020. |
• | Our quarterly operating results fluctuate significantly. Results of operations in any period should not be considered indicative of the results to be expected for any future period. |
• | Our products and related manufacturing processes are often highly complex and therefore we may be delayed in product shipments. Our products may at times contain manufacturing defects, which may subject us to product liability and warranty claims. Our operating margins may be affected as a result of price increases for our principal raw materials. |
• | Increasing scrutiny and changing expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance policies may impose additional costs on us or expose us to additional risks. |
• | We compete with PCB manufacturers in Asia whose manufacturing costs are lower than ours. |
• | We may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which could have a material adverse effect on our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares. |
• | We are required to comply with “conflict minerals” rules which impose costs on us, may make our supply chain more complex, and could adversely impact our business. |
• | Increased regulation associated with climate change and greenhouse gas emissions could impose significant additional costs on operations. |
• | Obstacles in our transition to a new enterprise resource planning system may adversely affect our business and results of operations and the effectiveness of our internal control over financial reporting. |
• | Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business. |
• | Technological change may adversely affect the market acceptance of our products. |
• | The measures we take in order to protect our intellectual property may not be effective or sufficient. |
• | Claims that our products infringe upon the intellectual property of third parties may require us to incur significant costs. |
• | We are affected by increasing global inflation and higher interest rates which may increase our cost of goods and services and borrowing costs. |
• | If our workforce will be represented by a labor union we could incur additional costs or experience work stoppages as a result of the renegotiation of our labor contracts. |
• | From time to time, we may be named as a defendant in actions involving the alleged violation of labor laws related to employment practices, wages and benefits. |
• | Under current Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. |
• | We depend on key personnel for the success of our business. |
• | Our ability to have access to insurance programs for directors and officers may be curtailed, which may adversely affect our ability to retain and attract directors and officers. |
• | Our share price has been volatile in the past and may continue to be susceptible to significant market price and volume fluctuations in the future. |
• | The voting interest of Mr. Nissan, individually and through Nistec Golan, our controlling shareholder, may conflict with the interests of other shareholders. |
• | We may in the future be classified as a passive foreign investment company, or PFIC, which would subject our U.S. investors to adverse tax rules. |
• | We do not guarantee that dividends will continue to be distributed in the foreseeable future. |
• | Political, economic and military instability in Israel, including due to the recent attack by Hamas and other terrorist organizations and Israel’s war against them, may disrupt our operations and negatively affect our business condition, harm our results of operations and adversely affect our share price. |
• | Our results of operations may be negatively affected by the obligation of our personnel to perform military reserve service. |
• | Service and enforcement of legal process on us and our directors and officers may be difficult to obtain. |
• | Provisions of Israeli law may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore impact the price of our shares. |
• | The rights and responsibilities of our shareholders are governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law. |
• | The termination or reduction of tax and other incentives that the Israeli government provides to domestic companies may increase the costs involved in operating a company in Israel. |
• | the impact of possible recessionary environments or economic instability in multiple foreign markets; |
• | changes in regulatory requirements and complying with a wide variety of foreign laws; |
• | tariffs and other trade barriers; |
• | the imposition of exchange or price controls or other restrictions on the conversion of foreign currencies; and |
• | difficulties and costs of staffing and managing foreign operations. |
• | the size and timing of significant orders and their fulfillment; |
• | demand for our products and the mix of products purchased by our customers; |
• | competition from lower priced manufacturers; |
• | fluctuations in foreign currency exchange rates, primarily the NIS against the Dollar and the Euro; |
• | manufacturing yield; |
• | plant utilization; |
• | availability of raw materials; |
• | plant or line shutdowns to repair or replace malfunctioning manufacturing equipment; |
• | the length of our sales cycles; |
• | changes in our strategy; |
• | the number of working days in the quarter; |
• | changes in seasonal trends; and |
• | general domestic and international economic and political conditions. |
• | retain our executive officers and key technical personnel; |
• | attract and retain additional qualified personnel to provide technological depth and support to enhance existing products and develop new products; and |
• | attract and retain highly skilled operations, marketing and financial personnel. |
• | quarterly variations in our operating results; |
• | operating results that vary from the expectations of securities analysts and investors; |
• | changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors; |
• | announcements of technological innovations or new products by us or our competitors; |
• | announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; |
• | changes in the status of our intellectual property rights; |
• | announcements by third parties of significant claims or proceedings against us; |
• | announcements by governmental or regulatory authorities of significant investigations or proceedings against us; |
• | additions or departures of key personnel; |
• | changes in our cost structure due to factors beyond our control, such as new laws or regulations relating to environmental matters and employment; |
• | future sales of our ordinary shares; |
• | our involvement in litigation; |
• | general stock market price and volume fluctuations; |
• | changes in the prices of our products and services; and |
• | devaluation of the dollar against the NIS. |
ITEM 4. | INFORMATION ON THE COMPANY |
ITEM 4A. | UNRESOLVED STAFF COMMENTS |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
Year Ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Revenues | 100 | % | 100 | % | 100 | % | ||||||
Cost of revenues | (71.9 | ) | (79.1 | ) | (79.6 | ) | ||||||
Gross profit | 28.1 | 20.9 | 20.4 | |||||||||
Research and development expenses | (0.2 | ) | (0.2 | ) | (0.2 | ) | ||||||
Selling, general and administrative expenses | (12.3 | ) | (13.1 | ) | (14.4 | ) | ||||||
Operating profit | 15.6 | 7.6 | 5.8 | |||||||||
Financial income (expenses), net | 0.9 | 2.2 | (1.4 | ) | ||||||||
Other income (loss), net | - | - | 0.1 | |||||||||
Profit before income tax expense | 16.5 | 9.8 | 4.5 | |||||||||
Income tax benefit (expense) | (2.9 | ) | (1.7 | ) | 10.4 | |||||||
Net profit | 13.6 | 8.1 | 14.9 |
Year Ended December 31, | ||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||
Dollar | 3.1 | % | 13.15 | % | (3.27 | )% | (6.97 | )% | (7.79 | )% | ||||||||||
Euro | 6.9 | % | 6.62 | % | (10.76 | )% | (1.7 | )% | (9.63 | )% |
Year ended December 31, | 2023 | 2022 | 2021 | |||||||||
($ in thousands) | ||||||||||||
Net cash provided by operating activities | 8,862 | 3,829 | 3,875 | |||||||||
Net cash used in investing activities | (2,959 | ) | (3,029 | ) | (1,647 | ) | ||||||
Net cash provided by (used in) financing activities | (3,806 | ) | (1,638 | ) | 2,124 | |||||||
Effect of translation adjustments | (185 | ) | (1,079 | ) | 196 | |||||||
Net increase (decrease) in cash and cash equivalents | 1,912 | (1,917 | ) | 4,548 | ||||||||
Cash and cash equivalents at beginning of year | 7,366 | 9,283 | 4,735 | |||||||||
Cash and cash equivalents at end of year | 9,278 | 7,366 | 9,283 |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Name | Age | Position | ||
Yitzhak Nissan (3) | 74 | Chairman of the Board of Directors | ||
Mordechai Marmorstein (1)(2) | 77 | Director | ||
David Rubner(4) | 83 | Director | ||
Erez Meltzer(4) | 66 | Director | ||
Revital Cohen-Tzemach | 40 | Director | ||
Gad Dovev(1)(2)(3)(4) | 77 | External Director | ||
Ilana Lurie (1)(2)(3)(4) | 51 | External Director |
Name | Age | Position | ||
Eli Yaffe | 69 | Chief Executive Officer | ||
Ron Freund | 59 | Chief Financial Officer | ||
Yitzhak Zemach | 48 | Director of Operations | ||
Oriel Sallary | 61 | VP Sales and Marketing | ||
Sagi Balter | 43 | VP Process Engineering | ||
Shlomi Kisluk | 49 | VP Quality Assurance |
Salaries, fees, commissions and bonuses | Pension, retirement and similar benefits | ||
All directors and executive officers as a group (consisting of 13 persons) | $2.1 million (1) | $0.4 million (2) |
(1) | During the year ended December 31, 2023, we paid each of our directors an annual fee of approximately $8,000 and an attendance fee of $255 per meeting. These fees are included in the above amount. |
(2) | The benefits amount includes expenses for automobiles and other benefits that we provide to certain of our executive officers. |
Name of Officer | Position of Officer | Compensation for services (USD)(1) | ||||||||||||||||
Base salary | Benefits and Perquisites (2) | Equity- Based (3) | Total compensation | |||||||||||||||
Yitzhak Nissan (4) | Chairman of the Board | 292,937 | - | - | 292,937 | |||||||||||||
Eli Yaffe | Chief Executive Officer | 278,128 | 311,045 | 96,691 | 685,864 | |||||||||||||
Ron Freund | Chief Financial Officer | 160,119 | 120,914 | 23,188 | 304,222 | |||||||||||||
Yitzhak Zemach | VP Operations | 149,606 | 135,119 | 26,728 | 311,453 | |||||||||||||
Oriel Sallary | Vice President of Worldwide Sales and Marketing | 113,793 | 109,038 | 6,609 | 229,440 |
(1) | Cash compensation amounts denominated in NIS were converted into U.S. dollars at the rate of NIS 3.69 per $1.00 (the average exchange rate in 2023). | ||||||||||||||||||||||||
(2) | Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable, bonuses, car related expenses, managers’ insurance and pension funds, payments to the National Insurance Institute, advanced education funds, medical insurance, vacation allowance and other customary benefits. Bonuses represent accrued but not yet paid bonus payments for 2023, based on several criteria, including revenues, profit, employees’ safety, yield and on time deliveries. | ||||||||||||||||||||||||
(3) | Represents the equity-based compensation expenses recorded in the company’s consolidated financial statements for the year ended December 31, 2023 based on the options’ grant date fair value in accordance with accounting guidance for equity-based compensation. | ||||||||||||||||||||||||
(4) | Paid to Nistec as management fees. |
Country of Principal Executive Offices | Israel | |||
Foreign Private Issuer | Yes | |||
Disclosure Prohibited under Home Country Law | No | |||
Total Number of Directors | 7 | |||
Part I: Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender |
Directors | 2 | 5 | 0 | 0 |
Part II: Demographic Background | ||||
Underrepresented Individual in Home Country Jurisdiction | 0 | |||
LGBTQ+ | 0 | |||
Did Not Disclose Demographic Background | 7 |
(i) | the board of directors proposed the nominee and his appointment was approved by the shareholders in the manner required to appoint external directors for their initial term; |
(ii) | a shareholder holding 1% or more of the voting rights proposed the nominee, and the nominee is approved by a majority of the votes cast by the shareholders of the company on the matter, excluding the votes of controlling shareholders and those who have a personal interest in the matter as a result of their relationship with any controlling shareholder and excluding abstentions, provided that the aggregate votes cast by shareholders who are not controlling shareholders and do not have a personal interest in the matter as a result of their relationship with the controlling shareholders voted in favor of the reelection of the nominee constitute more than 2% of the voting rights in the company, and provided further that at the time of such nomination or in the two years preceding such nomination, such external director or his relative are neither the shareholder who proposed such nomination, or a shareholder holding 5% or more of the company's issued share capital or voting power, in each case who, or whose controlling shareholder or any entity controlled by them (i) has business relations with the company, or (ii) is a competitor of the company; or |
(iii) | such external director nominates himself or herself for each such additional term and his or her election is approved at a shareholders meeting by the same disinterested majority as required for the election of an external director nominated by a 1% or more shareholder (as described above). |
i. | a monetary obligation imposed on the office holder in favor of another person pursuant to a judgment, including a judgment given in settlement or an arbitrator's award that has been approved by a court; |
ii. | reasonable litigation expenses, including advocates’ professional fees, incurred by the office holder pursuant to an investigation or a proceeding commenced against the office holder by a competent authority and that was terminated without an indictment and without having a monetary charge imposed on the office holder in exchange for a criminal procedure (as such terms are defined in the Israeli Companies Law), or that was terminated without an indictment but with a monetary charge imposed on the office holder in exchange for a criminal procedure in a crime that does not require proof of criminal intent or in connection with a financial sanction; |
iii. | reasonable litigation expenses, including advocates’ professional fees, incurred by the office holder or which the office holder is ordered to pay by a court, in proceedings filed against the office holder by the company or on its behalf or by another person, or in a criminal indictment in which the office holder is acquitted, or in a criminal indictment in which the office holder is convicted of an offence that does not require proof of criminal intent; |
iv. | expenses, including reasonable litigation expenses and legal fees, incurred by an office holder as a result of a proceeding instituted against such office holder in relation to (A) infringements that may result in imposition of financial sanction pursuant to the provisions of Chapter H'3 under the Israeli Securities Law or (B) administrative infringements pursuant to the provisions of Chapter H'4 under the Israeli Securities Law or (C) infringements pursuant to the provisions of Chapter I'1 under the Israeli Securities Law; and |
v. | payments to an injured party of infringement under Section 52ND(a)(1)(a) of the Israeli Securities Law. |
Name | Number of Ordinary Shares Beneficially Owned | Percentage of Outstanding Ordinary Shares (1) | ||||||
Principal Shareholders | ||||||||
Yitzhak Nissan (2) | 3,456,820 | 51.6 | % | |||||
jhhsSenior Management and Directors | ||||||||
Eli Yaffe (1), (3) | 62,730 | * | ||||||
Ron Freund (4) | 36,000 | * | ||||||
Yitzhak Zemach (5) | 15,500 | * | ||||||
Oriel Sallary (6) | 9,309 | * | ||||||
Sagi Balter (7) | 12,084 | * | ||||||
Shlomi Kisluk (8) | 8,000 | * | ||||||
Mordechai Marmorstein (9) | 20,000 | * | ||||||
David Rubner (10) | 20,000 | * | ||||||
Erez Meltzer (11) | 30,000 | * | ||||||
Revital Cohen-Tzemach (12) | 11,750 | * | ||||||
Gad Dovev (13) | 30,000 | * | ||||||
Ilana Lurie (14) | 20,000 | * | ||||||
All executive officers and directors as a group (13 persons) (15) | 3,732,193 | 55.7 | % |
F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation. |
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
Name | Number of Ordinary Shares Beneficially Owned (1) | Percentage of Ownership (2) | ||||||
Nistec Golan Ltd. (3) | 3,291,596 | 49.1 | % | |||||
Yitzhak Nissan (3) | 165,224 | 2.5 | % |
(1) | Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options or convertible notes currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. |
(2) | The percentages shown are based on 6,704,830 ordinary shares issued and outstanding as of March 12, 2024 |
(3) | Based on a Schedule 13D/A filed on January 4, 2024. Nistec Golan is an Israeli private company controlled by Yitzhak Nissan. Accordingly, Mr. Nissan may be deemed to be the beneficial owner of the ordinary shares held directly by Nistec Golan. |
• | Reimbursement of travel expenses (other than food and beverage expenses) while traveling internationally on behalf of our company, provided that such reimbursement shall not exceed an aggregate amount of NIS 10,000 per calendar quarter. |
• | Reimbursement of food and beverage expenses while traveling internationally on behalf of our company, against receipts, in accordance with the Israeli Income Tax Regulations (Deduction of Certain Expenses), 5732-1972. |
i. | The extension of the Amended PCB Purchase Procedure with Nistec Ltd.; |
ii. | The extension of the amended general engagement terms, processes and restrictions of the Soldering and Assembly Services Procedure with Nistec Ltd.; |
iii. | The extension of the procedure under which we and Nistec Ltd. may jointly acquire certain services related to employees social activities, marketing services and insurance. |
ITEM 8. | FINANCIAL INFORMATION |
ITEM 9. | THE OFFER AND LISTING |
ITEM 10. | ADDITIONAL INFORMATION |
• | broker-dealers; |
• | financial institutions or financial services entities; |
• | certain insurance companies; |
• | investors liable for alternative minimum tax; |
• | regulated investment companies, real estate investment trusts, or grantor trusts; |
• | dealers or traders in securities, commodities or currencies; |
• | tax-exempt organizations; |
• | retirement plans; |
• | S corporations: |
• | pension funds; |
• | certain former citizens or long-term residents of the United States; |
• | non-resident aliens of the United States or taxpayers whose functional currency is not the U.S. dollar; |
• | persons who hold ordinary shares through partnerships or other pass-through entities; |
• | persons who acquire their ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation for services; |
• | direct, indirect or constructive owners of investors that actually or constructively own at least 10% of the total combined voting power of our shares or at least 10% of our shares by value; or |
• | investors holding ordinary shares as part of a straddle, appreciated financial position, a hedging transaction or conversion transaction. |
• | an individual who is a citizen or a resident of the United States; |
• | a corporation or other entity taxable as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision thereof; |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust if the trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over the trust’s administration and (2) one or more U.S. persons have the authority to control all of the substantial decisions of the trust. |
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15. | CONTROLS AND PROCEDURES |
• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company; |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of our company; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our company’s assets that could have a material effect on our financial statements. |
ITEM 16. | [RESERVED] |
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16B. | CODE OF ETHICS |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Services Rendered. | 2023 | 2022 | ||||||
Audit (1) | $ | 102,000 | $ | 98,000 | ||||
Audit Related Fees | $ | 13,500 | - | |||||
Tax (2) | $ | 6,000 | $ | 6,000 | ||||
All other Fees (3) | $ | 5,000 | - | |||||
Total | $ | 126,500 | $ | 104,000 |
(1) | Audit fees relate to audit services provided for each of the years shown in the table, including fees associated with the annual audit, consultations on various accounting issues and audit services provided in connection with statutory or regulatory filings. |
(2) | Tax fees relate to services performed regarding tax compliance. |
(3) | Other fees are fees for professional services other than audit or tax related fees. |
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
ITEM 16F. | CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT |
ITEM 16G. | CORPORATE GOVERNANCE |
• | The requirement to maintain a majority of independent directors, as defined under the NASDAQ Stock Market Rules. Instead, we follow Israeli law and practice which requires that we appoint at least two external directors, within the meaning of the Israeli Companies Law, to our board of directors. We have the mandated three independent directors, within the meaning of the rules of the SEC and NASDAQ, on our audit committee. See Item 6C. “Directors, Senior Management and Employees - Board Practices - External and Independent Directors.” |
• | The requirements regarding the directors’ nominations process. Under Israeli law and practice, our board of directors is authorized to recommend to our shareholders director nominees for election. See Item 6C. – “Directors, Senior Management and Employees - Board Practices - Election of Directors.” |
• | The requirement regarding the quorum for any meeting of shareholders. Instead, we follow Israeli law and practice which provides that, unless otherwise provided by a company’s articles of association, the quorum required for a general meeting of shareholders is at least two shareholders present who hold, in the aggregate, 25% of the company’s voting rights. Our articles of association provide that the quorum required for a shareholder meeting consists of at least two shareholders present in person or represented by proxy who hold or represent, in the aggregate, at least 33% of the voting rights of the issued share capital. See Item 10B. “Additional Information - Memorandum and Articles of Association- Annual and Extraordinary Meetings of Shareholders.” |
ITEM 16H. | MINE SAFETY DISCLOSURE |
ITEM 16I. | DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
ITEM16J. | INSIDER TRADING POICIES |
ITEM16K. | CYBERSECURITY |
ITEM 17. | FINANCIAL STATEMENTS |
ITEM 18. | FINANCIAL STATEMENTS |
Reports of Independent Registered Public Accounting Firms | F - 2 | |
Consolidated Balance Sheets | F - 4-F - 5 | |
Consolidated Statements of Comprehensive Income (loss) | F - 6 | |
Consolidated Statements of Changes in Shareholders’ Equity | F - 7 | |
Consolidated Statements of Cash Flows | F - 8-F - 9 | |
Notes to the Consolidated Financial Statements | F - 10-F - 36 |
ITEM 19. | EXHIBITS |
(1) | Filed as Exhibit 1.1 to our registration statement on Form F-1, registration number 333-229740, as amended, and incorporated herein by reference. |
(2) | Included in Exhibit 99.1 to our Report of Foreign Issuer on Form 6-K filed on September 12, 2013 and incorporated herein by reference. |
(3) | Filed as Exhibit 2.1 to our registration statement on Form F-1, registration number 333-229740, as amended, and incorporated herein by reference. |
(4) | Filed as Exhibit 2.2 to our Annual Report on Form 20-F for the year ended December 31, 2019, and incorporated herein by reference. |
(5) | Included as Exhibit A to Exhibit 99.1 to our Report of Foreign Issuer on Form 6-K filed on September 6, 2017 and incorporated herein by reference. |
(6) | Included as Exhibit A to Exhibit 99.1 to our Report of Foreign Issuer on Form 6-K filed on August 8, 2023 and incorporated herein by reference |
(7) | Filed as Exhibit 4.13 to our Annual Report on Form 20-F for the year ended December 31, 2014, and incorporated herein by reference. |
(8) | Included as Exhibit A to Exhibit 99.1 to our Report of Foreign Issuer on Form 6-K filed on August 8, 2023 and incorporated herein by reference |
(9) | Filed as Exhibit 8.1 to our Annual Report on Form 20-F for the year ended December 31, 2021, and incorporated herein by reference. |
* | Filed herewith. |
Page | ||
F - 2 | ||
(Firm Name: Brightman Almagor Zohar & Co / PCAOB ID No. 1197) | ||
F - 4-F - 5 | ||
F - 6 | ||
F - 7 | ||
F - 8-F - 9 | ||
F - 10-F - 36 |
• | We obtained an understanding of the process and assumptions used by management to develop the inventory excess and obsolete write offs, through inquiries of the Company's personnel and evaluation of the Company's methodology for determining inventory that is excess or obsolete. |
• | For a sample of inventory items with an associated write off for excess and obsolescence, we evaluated whether the write-off for each selection was reasonable by obtaining and evaluating evidence of past usage and aging of the inventory item. |
• | We tested the accuracy of the Company’s inventory valuation calculations utilizing its defined methodology and evaluated the completeness, accuracy, and relevance of the underlying data used in management's estimate. |
• | We compared management’s prior-year inventory reserve estimate to the amount of inventory written off or otherwise disposed of during the current year to consider potential bias in the determination of the inventory reserves. |
December 31, | ||||||||||||
Note | 2023 | 2022 | ||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash and cash equivalents | 3 | 9,278 | 7,366 | |||||||||
Short-term bank deposits | 4 | 2,862 | - | |||||||||
Trade receivables (net of allowance for credit losses of $264 and $162 on December 31, 2023 and December 31, 2022, respectively) | 2f | 10,898 | 10,116 | |||||||||
Inventories | 5 | 6,135 | 5,130 | |||||||||
Other accounts receivable and prepaid expenses | 6 | 934 | 786 | |||||||||
Total current assets | 30,107 | 23,398 | ||||||||||
LONG-TERM ASSETS: | ||||||||||||
Severance pay fund | 11 | 57 | 59 | |||||||||
Restricted deposit | - | 202 | ||||||||||
Long-term tax receivables | 18 | 874 | 899 | |||||||||
Deferred tax asset, net | 18 | 224 | 1,597 | |||||||||
Operating lease right-of-use assets | 12 | 6,555 | 7,156 | |||||||||
7,710 | 9,913 | |||||||||||
Property and equipment, net | 7 | 9,354 | 7,674 | |||||||||
Total long-term assets | 17,064 | 17,587 | ||||||||||
Total assets | 47,171 | 40,985 |
F - 4
December 31, | ||||||||||||
Note | 2023 | 2022 | ||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Current maturities of long-term debt | 8 | - | 702 | |||||||||
Trade payables | 7,503 | 4,793 | ||||||||||
Other accounts payable and accrued expenses | 9 | 5,689 | 4,133 | |||||||||
Short-term operating lease liabilities | 12 | 789 | 846 | |||||||||
Total current liabilities | 13,981 | 10,474 | ||||||||||
LONG-TERM LIABILITIES: | ||||||||||||
Long-term debt, excluding current maturities | 10 | - | 2,768 | |||||||||
Accrued severance pay | 11 | 447 | 280 | |||||||||
Long-term operating lease liabilities | 12 | 5,871 | 6,443 | |||||||||
Total long-term liabilities | 6,318 | 9,491 | ||||||||||
COMMITMENTS AND CONTINGENT LIABILITIES | 13 | - | - | |||||||||
SHAREHOLDERS' EQUITY: | ||||||||||||
Share capital - | ||||||||||||
Ordinary shares of NIS 3.0 par value – Authorized: 10,000,000 shares at December 31, 2023 and December 31, 2022; Issued and outstanding: 6,020,693 shares at December 31, 2023 and 5,849,678 shares at December 31, 2022 | 5,443 | 5,305 | ||||||||||
Additional paid-in capital | 23,587 | 22,862 | ||||||||||
Foreign currency translation adjustments | 783 | 1,189 | ||||||||||
Capital reserves | 1,900 | 1,537 | ||||||||||
Accumulated deficit | (4,841 | ) | (9,873 | ) | ||||||||
Total shareholders' equity | 14 | 26,872 | 21,020 | |||||||||
Total liabilities and shareholders' equity | 47,171 | 40,985 |
F - 5
ELTEK LTD. AND ITS SUBSIDIARIES
Year ended December 31, | ||||||||||||||||
Note | 2023 | 2022 | 2021 | |||||||||||||
Revenues | 16b | 46,695 | 39,650 | 33,823 | ||||||||||||
Cost of revenues | (33,593 | ) | (31,380 | ) | (26,926 | ) | ||||||||||
Gross profit | 13,102 | 8,270 | 6,897 | |||||||||||||
Operating expenses: | ||||||||||||||||
Research and development, net | (85 | ) | (92 | ) | (78 | ) | ||||||||||
Selling, general and administrative | (5,722 | ) | (5,207 | ) | (4,870 | ) | ||||||||||
Operating income | 7,295 | 2,971 | 1,949 | |||||||||||||
Financial income (expenses), net | 17 | 422 | 887 | (488 | ) | |||||||||||
Other income, net | - | - | 41 | |||||||||||||
Income before income taxes | 7,717 | 3,858 | 1,502 | |||||||||||||
Income tax benefit (expenses), net | 18 | (1,364 | ) | (664 | ) | 3,537 | ||||||||||
Net income | 6,353 | 3,194 | 5,039 | |||||||||||||
Other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustments | (406 | ) | (2,527 | ) | 563 | |||||||||||
Total comprehensive income | 5,947 | 667 | 5,602 | |||||||||||||
Basic income per ordinary share attributable to Eltek Ltd. shareholders | 15 | 1.08 | 0.55 | 0.86 | ||||||||||||
Diluted income per ordinary share attributable to Eltek Ltd. shareholders | 15 | 1.07 | 0.55 | 0.86 |
F - 6
Company's shareholders | ||||||||||||||||||||||||||||
Ordinary shares | Amount | Additional paid-in capital | Accumulated other comprehensive income | Capital reserves | Accumulated deficit | Total | ||||||||||||||||||||||
Balance as of January 1, 2021 | 5,840,357 | 5,296 | 22,846 | 3,153 | 1,084 | (17,112 | ) | 15,267 | ||||||||||||||||||||
Share-based compensation | - | - | - | - | 203 | - | 203 | |||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Foreign currency translation adjustments | - | - | - | 563 | - | - | 563 | |||||||||||||||||||||
Net income | - | - | - | - | - | 5,039 | 5,039 | |||||||||||||||||||||
Balance as of December 31, 2021 | 5,840,357 | 5,296 | 22,846 | 3,716 | 1,287 | (12,073 | ) | 21,072 | ||||||||||||||||||||
Share-based compensation | - | - | - | - | 250 | - | 250 | |||||||||||||||||||||
Dividend distribution | - | - | - | - | - | (994 | ) | (994 | ) | |||||||||||||||||||
Exercise of stock options | 9,321 | 9 | 16 | - | - | - | 25 | |||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Foreign currency translation adjustments | - | - | - | (2,527 | ) | - | - | (2,527 | ) | |||||||||||||||||||
Net income | - | - | - | - | - | 3,194 | 3,194 | |||||||||||||||||||||
Balance as of December 31, 2022 | 5,849,678 | 5,305 | 22,862 | 1,189 | 1,537 | (9,873 | ) | 21,020 | ||||||||||||||||||||
Share-based compensation | - | - | - | - | 363 | - | 363 | |||||||||||||||||||||
Dividend distribution | - | - | - | - | - | (1,321 | ) | (1,321 | ) | |||||||||||||||||||
Exercise of stock options | 171,015 | 138 | 725 | - | - | - | 863 | |||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Foreign currency translation adjustments | - | - | - | (406 | ) | - | - | (406 | ) | |||||||||||||||||||
Net income | - | - | - | - | - | 6,353 | 6,353 | |||||||||||||||||||||
Balance as of December 31, 2023 | 6,020,693 | 5,443 | 23,587 | 783 | 1,900 | (4,841 | ) | 26,872 |
F - 7
ELTEK LTD. AND ITS SUBSIDIARIES
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | 6,353 | 3,194 | 5,039 | |||||||||
Adjustments required to reconcile net income to net cash flows provided by operating activities: | ||||||||||||
Depreciation | 1,317 | 1,541 | 1,781 | |||||||||
Share-based compensation | 363 | 250 | 203 | |||||||||
Changes in deferred income tax assets, net | 1,327 | 583 | (2,550 | ) | ||||||||
Decrease (increase) in long-term tax receivables | (25 | ) | 70 | (1,013 | ) | |||||||
Increase (decrease) in employee severance benefits, net | 172 | (25 | ) | (5 | ) | |||||||
Decrease (increase) in trade receivables, net | (1,010 | ) | (3,941 | ) | 2,260 | |||||||
Decrease in operating lease right-of-use assets | 888 | 779 | 261 | |||||||||
Decrease in operating lease liabilities | (911 | ) | (768 | ) | (195 | ) | ||||||
Decrease (increase) in other receivables and prepaid expenses | (169 | ) | 437 | (18 | ) | |||||||
Increase in inventories | (1,139 | ) | (806 | ) | (1,023 | ) | ||||||
Increase (decrease) in trade payables | 989 | 1,543 | (451 | ) | ||||||||
Increase (decrease) in other liabilities and accrued expenses | 707 | 972 | (414 | ) | ||||||||
Net cash provided by operating activities | 8,862 | 3,829 | 3,875 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Purchase of property and equipment | (2,432 | ) | (3,027 | ) | (1,535 | ) | ||||||
Investment in short-term bank deposits | (2,719 | ) | - | - | ||||||||
Restricted deposit | 192 | (2 | ) | (156 | ) | |||||||
Proceeds from disposals of property and equipment and repayment from insurance | 2,000 | - | 44 | |||||||||
Net cash used in investing activities | (2,959 | ) | (3,029 | ) | (1,647 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Short-term bank credit, net | - | - | (377 | ) | ||||||||
Exercise of options | 863 | 25 | - | |||||||||
Dividend distribution | (1,321 | ) | (994 | ) | - | |||||||
Repayment of property and equipment payables | - | - | (261 | ) | ||||||||
Proceeds from long-term loans | - | - | 3,063 | |||||||||
Repayment of long-term loans | (3,348 | ) | (669 | ) | (301 | ) | ||||||
Net cash provided by (used in) financing activities | (3,806 | ) | (1,638 | ) | 2,124 |
F - 8
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Effect of exchange rate on cash and cash equivalents | (185 | ) | (1,079 | ) | 196 | |||||||
Increase in cash and cash equivalents | 1,912 | (1,917 | ) | 4,548 | ||||||||
Cash and cash equivalents at the beginning of the year | 7,366 | 9,283 | 4,735 | |||||||||
Cash and cash equivalents at end of the year | 9,278 | 7,366 | 9,283 | |||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES: | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest | 84 | 129 | 29 | |||||||||
Income taxes | 37 | 38 | 57 | |||||||||
Supplemental Disclosures of non-cash activity: | ||||||||||||
Purchase of property and equipment in credit | 2,125 | 324 | 221 | |||||||||
Right-of-use assets recognized with corresponding lease liabilities | 506 | - | - |
F - 9
NOTE 1:- | DESCRIPTION OF BUSINESS AND GENERAL |
a. | General: |
- | Eltek Ltd. ("the Company") was established in Israel in 1970, and its ordinary shares have been publicly traded on the NASDAQ Capital Market ("NASDAQ") since 1997. Eltek Ltd. and its subsidiaries (Eltek USA Inc. and Eltek Europe GmbH) are collectively referred to as "the Company". As of December 31, 2023, Eltek Europe GmbH is inactive. |
- | The Company manufactures, markets and sells custom made printed circuit boards ("PCBs"), including high density interconnect, flex-rigid and multi-layered boards. The principal markets of the Company are in Israel, Europe, India and North America. |
- | The Company markets its products mainly to the medical technology, defense and aerospace, industrial, telecom and networking equipment industries, as well as to contract electronic manufacturers. |
- | The Company is controlled by Nistec Golan Ltd ("Nistec Golan"). Nistec Golan is controlled indirectly by Mr. Yitzhak Nissan, who owns, indirectly through Nistec Holdings Ltd., all of the shares of Nistec Ltd and Nistec Golan (Nistec Holdings Ltd. and/or any of its subsidiaries are referred to as "Nistec"). |
b. | Financial covenants: |
c. | Business risks and condition: |
- | The Company’s business is subject to numerous risks including, but not limited to, the impact of currency exchange rates (mainly NIS/US$), the Company's ability to implement its sales and manufacturing plans, the impact of competition from other companies, the Company's ability to receive regulatory clearance or approval to market its products, changes in regulatory environment, domestic and global economic conditions and industry conditions, and compliance with environmental laws and regulations. |
- | As of December 31, 2023, the Company's working capital amounted to $16.9 million and its accumulated deficit amounted to approximately $4.8 million. The Company's liquidity position, as well as its operating performance, may be negatively affected by other financial and business factors, many of which are beyond its control. |
F - 10
U.S. dollars in thousands (except share and per share data)
NOTE 1:- | DESCRIPTION OF BUSINESS AND GENERAL (CONT.) |
- | On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas and the Israeli military began to call-up reservists for active duty. At the same time, and because of the declaration of war against Hamas, the clash between Israel and Hezbollah in Lebanon has escalated and there is a possibility that it will turn into a greater regional conflict in the future. As of March 2024, these events have had no material impact on the Company's operations. |
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
A. | Basis of presentation: |
B. | Functional and reporting currency: |
F - 11
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
C. | Exchange rates and linkage bases: |
1. | Balances linked to the Israeli Consumer Price Index ("CPI"), are recorded pursuant to contractual linkage terms of the specific assets and liabilities. |
2. | Details of the CPI (2016 base) and the representative exchange rates are as follows: |
Exchange rate | Exchange rate | |||||||||||
Israeli CPI | of one US dollar | of one Euro | ||||||||||
Points | NIS | NIS | ||||||||||
December 31, 2023 | 112.6 | 3.627 | 4.012 | |||||||||
December 31, 2022 | 109.4 | 3.519 | 3.753 | |||||||||
December 31, 2021 | 103.9 | 3.110 | 3.520 | |||||||||
% | ||||||||||||
December 31, 2023 | 3.0 | 3.1 | 6.9 | |||||||||
December 31, 2022 | 5.3 | 13.2 | 6.6 | |||||||||
December 31, 2021 | 2.8 | (3.3 | ) | (10.8 | ) |
D. | Use of estimates: |
E. | Cash and cash equivalents: |
F - 12
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
F. | Trade accounts receivable: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Opening balance | 162 | 173 | 214 | |||||||||
Provision for credit losses | 100 | - | 3 | |||||||||
Customers write-offs/collection during the year | - | - | (52 | ) | ||||||||
Foreign currency translation adjustments | 2 | (9 | ) | 8 | ||||||||
Closing balance | 264 | 162 | 173 |
G. | Inventories: |
H. | Severance pay: |
F - 13
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
I. | Property and equipment: |
% | ||
Machinery and equipment | 5-33 | |
Leasehold improvements | 6-33 | |
Motor vehicles | 10-15 | |
Office furniture and equipment | 6-15 |
J. | Impairment of long-lived assets: |
F - 14
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
K. | Income taxes: |
L. | Accounting for share-based compensation: |
F - 15
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
2023 | 2022 | 2021 | ||||||||||
Dividend yield | 0% | 0% | 0% | |||||||||
Expected volatility | 79%-80% | 77%-78% | 76%-79% | |||||||||
Risk-free interest | 4.2%-4.8% | 1.4%-4.0% | 0.7%-1.3% | |||||||||
Expected term | 6.25 years | 6.25 years | 6.25 years | |||||||||
Forfeiture rate | 0% | 0% | 0% |
M. | Revenue recognition: |
F - 16
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
N. | Earnings per ordinary share: |
O. | Concentration of credit risk: |
P. | Research and development costs: |
Q. | Commitments and contingencies: |
F - 17
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
R. | Fair value measurements: |
Level 1 | - | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
Level 2 | - | Significant other observable inputs based on market data obtained from sources independent of the reporting entity. |
Level 3 | - | Unobservable inputs which are supported by little or no market activity. |
S. | Comprehensive income (loss): |
F - 18
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
T. | Leases: |
U. | Impact of recently issued and adopted accounting standards: |
V. | New accounting pronouncements not yet effective: |
F - 19
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
W. | Reclassifications: |
NOTE 3:- | CASH AND CASH EQUIVALENTS |
December 31, | ||||||||
2023 | 2022 | |||||||
Denominated in U.S. dollars | 1,218 | 2,334 | ||||||
Denominated in NIS | 6,270 | 2,620 | ||||||
Denominated in Euro | 1,790 | 2,412 | ||||||
9,278 | 7,366 |
NOTE 4:- | SHORT-TERM BANK DEPOSITS |
NOTE 5:- | INVENTORIES |
December 31, | ||||||||
2023 | 2022 | |||||||
Raw materials | 3,064 | 2,201 | ||||||
Work-in-progress | 2,537 | 2,468 | ||||||
Finished goods | 534 | 461 | ||||||
6,135 | 5,130 |
F - 20
U.S. dollars in thousands (except share and per share data)
NOTE 6:- | OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES |
December 31, | ||||||||
2023 | 2022 | |||||||
Prepaid expenses | 245 | 504 | ||||||
Receivables from government authorities | 387 | 94 | ||||||
Others | 302 | 188 | ||||||
934 | 786 |
NOTE 7:- | PROPERTY AND EQUIPMENT, NET |
December 31, | ||||||||
2023 | 2022 | |||||||
Cost: | ||||||||
Machinery and equipment | 37,147 | 39,303 | ||||||
Equipment advanced payments | 751 | - | ||||||
Leasehold improvements | 9,251 | 9,117 | ||||||
Motor vehicles | 72 | 74 | ||||||
Office furniture and equipment | 790 | 777 | ||||||
48,011 | 49,271 | |||||||
Accumulated depreciation: | ||||||||
Machinery and equipment | (29,367 | ) | (32,131 | ) | ||||
Leasehold improvements | (8,624 | ) | (8,806 | ) | ||||
Motor vehicles | (57 | ) | (56 | ) | ||||
Office furniture and equipment | (609 | ) | (604 | ) | ||||
(38,657 | ) | (41,597 | ) | |||||
Depreciated cost | 9,354 | 7,674 |
NOTE 8:- | CURRENT MATURITIES OF LONG-TERM DEBT |
Annual interest rate at | ||||||||||||
December 31, | December 31, | |||||||||||
2022 | 2023 | 2022 | ||||||||||
Long-term debt from banks in NIS bears interest of Prime+1.5% to Prime+1.75% | 6.25% - 6.5% | - | 702 | |||||||||
- | 702 |
F - 21
U.S. dollars in thousands (except share and per share data)
NOTE 9:- | OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
December 31, | ||||||||
2023 | 2022 | |||||||
Accrued payroll including amounts due to government authorities | 1,090 | 1,029 | ||||||
Provision for vacation and other employee benefits | 1,921 | 1,742 | ||||||
Accrued expenses | 631 | 401 | ||||||
Provision for contingent liabilities (Note 13c) | - | 297 | ||||||
Other liabilities | 2,047 | 664 | ||||||
5,689 | 4,133 |
NOTE 10:- | LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES |
Annual interest | ||||||||||||
rate at | ||||||||||||
December 31 | December 31, | |||||||||||
2022 | 2023 | 2022 | ||||||||||
Linkage terms: | ||||||||||||
NIS | 6.25% - 6.5% | - | 3,470 | |||||||||
Euro | - | - | ||||||||||
- | 3,470 | |||||||||||
Less - current maturities | - | (702 | ) | |||||||||
- | 2,768 |
NOTE 11:- | EMPLOYEE SEVERANCE BENEFITS |
a. | The Company has an approval from the Israeli Ministry of Labor and Social Welfare, pursuant to the terms of Section 14 of the Israeli Severance Pay Law, 1963, according to which the Company's current deposits in the pension fund and/or with the insurance company exempt it from any additional severance obligations to the employees for whom such depository payments were made. |
b. | The Company's employees participate in a pension plan or individual insurance policies that are purchased by them. The Company's liability for severance obligations for the employees employed for one year or more is discharged by making regular deposits with a pension fund or the insurance policies. Under Israeli law, there is no liability for severance pay in respect of employees who have not completed one year of employment. The amount deposited with the pension fund or the insurance policies is based on salary components as prescribed in the employment agreement. The custody and management of the amounts so deposited are independent of the Company and accordingly, such amounts funded and related liabilities are not reflected in the balance sheet. |
F - 22
U.S. dollars in thousands (except share and per share data)
NOTE 11:- | EMPLOYEE SEVERANCE BENEFITS (CONT.) |
c. | Expenses (income) recorded in respect of the unfunded liability for employee severance payments for the years ended December 31, 2023, 2022, and 2021 were $3, $2 and $5, respectively. |
NOTE 12:- | LEASES |
a. | The components of operating lease costs were as follows: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Operating lease cost | 1,188 | 1,340 | 1,397 | |||||||||
Total net lease costs | 1,188 | 1,340 | 1,397 |
F - 23
U.S. dollars in thousands (except share and per share data)
NOTE 12:- | LEASES (CONT.) |
b. | Supplemental balance sheet information related to operating leases is as follows: |
As of December 31, | ||||||||
2023 | 2022 | |||||||
Operating lease ROU assets | 6,555 | 7,156 | ||||||
Operating lease liabilities, current | 789 | 846 | ||||||
Operating lease liabilities, long-term | 5,871 | 6,443 | ||||||
Weighted average remaining lease term (in years) | 7.92 | 4.21 | ||||||
Weighted average discount rate | 6.16 | % | 5.58 | % |
c. | Future lease payments under operating leases as of December 31, 2023, are as follows: |
As of December 31, 2023 | ||||
2024 | 1,133 | |||
2025 | 1,082 | |||
2026 | 1,000 | |||
2027 | 984 | |||
2028 - 2032 | 4,149 | |||
Total undiscounted lease payments | 8,348 | |||
Less: imputed interest | (1,688 | ) | ||
Present value of lease liabilities | 6,660 |
NOTE 13:- | COMMITMENTS AND CONTINGENT LIABILITIES |
a. | Pledges: |
1. | The Company has pledged certain items of its equipment and the rights to any insurance claims on such items to secure its debts to banks, as well as placed floating liens on all of its remaining assets in favor of the banks. |
2. | The Company has also pledged machines to secure its indebtedness to certain suppliers that provided financing for such equipment. |
b. | Indemnification agreement: |
F - 24
U.S. dollars in thousands (except share and per share data)
NOTE 13:- | COMMITMENTS AND CONTINGENT LIABILITIES (CONT.) |
c. | Contingent Liabilities: |
F - 25
U.S. dollars in thousands (except share and per share data)
NOTE 13:- | COMMITMENTS AND CONTINGENT LIABILITIES (CONT.) |
F - 26
U.S. dollars in thousands (except share and per share data)
NOTE 14:- | SHAREHOLDERS' EQUITY |
Number of options | Weighted-average exercise price | Weighted- average remaining contractual life (in years) | Aggregate intrinsic value (in thousands) | |||||||||||||
Outstanding at January 1, 2023 | 395,171 | 5.25 | 7.9 | 1 | ||||||||||||
Granted | 151,000 | 8.88 | 9.7 | - | ||||||||||||
Exercised | 171,015 | 4.84 | 5.5 | - | ||||||||||||
Forfeited | - | - | - | - | ||||||||||||
Outstanding at December 31, 2023 | 375,156 | 6.49 | 8.1 | 2,799 | ||||||||||||
Exercisable at December 31, 2023 | 119,625 | 4.68 | 6.6 | 1,108 |
F - 27
U.S. dollars in thousands (except share and per share data)
NOTE 14:- | SHAREHOLDERS' EQUITY (CONT.) |
NOTE 15:- | BASIC AND DILUTED NET EARNINGS PER SHARE |
Year ended December 31, | ||||||||||||
2023 | 2023 | 2022 | ||||||||||
Numerator: | ||||||||||||
Profit attributable to Eltek Ltd shareholders | 6,353 | 3,194 | 5,039 | |||||||||
Denominator: | ||||||||||||
Denominator for basic profit per share weighted-average number of shares outstanding | 5,902,447 | 5,847,911 | 5,840,357 | |||||||||
Effect of diluting securities: | ||||||||||||
Employee share options | 54,041 | - | 28,205 | |||||||||
Denominator for diluted profit per share - adjusted weighted average shares and assumed exercises | 5,956,488 | 5,847,911 | 5,868,562 |
F - 28
U.S. dollars in thousands (except share and per share data)
NOTE 16:- | ENTITY WIDE DISCLOSURES |
a. | Customers who accounted for over 10% of the total consolidated revenues: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Customer A - Sales of manufactured products | 13.7 | % | 18.7 | % | 21.2 | % | ||||||
Customer B - Sales of manufactured products | 14.0 | % | 9.2 | % | 7.9 | % |
b. | Revenues by geographic areas: |
Israel | 26,735 | 21,980 | 18,965 | |||||||||
North America | 5,198 | 6,081 | 6,686 | |||||||||
Netherlands | 5,673 | 3,417 | 4,198 | |||||||||
India | 6,480 | 5,925 | 1,825 | |||||||||
Others | 2,609 | 2,247 | 2,149 | |||||||||
46,695 | 39,650 | 33,823 |
NOTE 17:- | FINANCIAL EXPENSES (INCOME), NET |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Interest on long-term bank loans | 84 | 129 | 30 | |||||||||
Interest on bank deposits | (148 | ) | - | - | ||||||||
Bank charges | 38 | 53 | 45 | |||||||||
Foreign exchange loss (gain), net | (375 | ) | (1,024 | ) | 413 | |||||||
Other financing expenses (income), net | (21 | ) | (45 | ) | - | |||||||
(422 | ) | (887 | ) | 488 |
F - 29
U.S. dollars in thousands (except share and per share data)
NOTE 18:- | TAXES ON INCOME |
a. | Tax laws applicable to the Company: |
F - 30
U.S. dollars in thousands (except share and per share data)
NOTE 18:- | TAXES ON INCOME (CONT.) |
b. | Tax rates applicable to the Company: |
1. | The Israeli corporate income tax rate is 23%. |
2. | The tax rates of the Company's non-Israeli subsidiaries is 21%. |
c. | Carryforward losses for tax purposes: |
d. | Income tax assessments: |
F - 31
U.S. dollars in thousands (except share and per share data)
NOTE 18:- | TAXES ON INCOME (CONT.) |
e. | Profit before tax and taxes on income included in the consolidated statements of comprehensive income: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Income before income tax expense: | ||||||||||||
Israel | 7,557 | 3,682 | 1,330 | |||||||||
Foreign jurisdictions | 160 | 176 | 172 | |||||||||
7,717 | 3,858 | 1,502 | ||||||||||
Current tax expense: | ||||||||||||
Israel | - | - | - | |||||||||
Foreign jurisdictions | 41 | 35 | 57 | |||||||||
41 | 35 | 57 | ||||||||||
Deferred taxes (income) expenses: | ||||||||||||
Israel | 1,323 | 629 | (3,594 | ) | ||||||||
1,323 | 629 | (3,594 | ) | |||||||||
Income tax (benefit) expense, net | 1,364 | 664 | (3,537 | ) |
f. | Reconciliation of the theoretical income tax benefit to the actual income tax expense: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Income before income tax expense as reported in the consolidated statements of comprehensive income | 7,717 | 3,858 | 1,502 | |||||||||
Statutory tax rates | 23 | % | 23 | % | 23 | % | ||||||
Theoretical tax expense calculated | 1,775 | 887 | 345 | |||||||||
Losses and other items for which a valuation allowance was provided (released) | - | - | (3,563 | ) | ||||||||
Realization of carryforward tax losses for which valuation allowance was provided | - | - | (261 | ) | ||||||||
Tax benefit arising from "Preferred enterprises" | (532 | ) | (262 | ) | (93 | ) | ||||||
Foreign tax rate differential in subsidiaries | (3 | ) | (4 | ) | 17 | |||||||
Non-deductible items and others | 124 | 43 | 18 | |||||||||
Total | (411 | ) | (223 | ) | (3,882 | ) | ||||||
Income tax (benefit) expense | 1,364 | 664 | (3,537 | ) |
F - 32
U.S. dollars in thousands (except share and per share data)
NOTE 18:- | TAXES ON INCOME (CONT.) |
g. | Deferred tax assets and liabilities: |
December 31, | ||||||||
2023 | 2022 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryforwards (in Israel) | 849 | 2,284 | ||||||
Capital loss carryforwards (in Israel) | 2,190 | 2,258 | ||||||
Reserves and other | 99 | 274 | ||||||
Total gross deferred taxes | 3,138 | 4,816 |
Less valuation allowance | (2,190 | ) | (2,258 | ) | ||||
Deferred tax assets, net | 948 | 2,558 | ||||||
Deferred tax liabilities: | ||||||||
Undistributed income of subsidiaries | (76 | ) | (326 | ) | ||||
Property and equipment | (648 | ) | (635 | ) | ||||
Total deferred tax liabilities | (724 | ) | (961 | ) | ||||
Net deferred tax assets (liabilities) | 224 | 1,597 |
F - 33
U.S. dollars in thousands (except share and per share data)
NOTE 18:- | TAXES ON INCOME (CONT.) |
h. | Accounting for uncertainty in income taxes: |
NOTE 19:- | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
NOTE 20:- | RELATED PARTY BALANCES AND TRANSACTIONS |
a. | Balances with related parties: |
December 31, | ||||||||
2023 | 2022 | |||||||
Trade accounts receivable | 139 | 151 | ||||||
Trade accounts payable | 48 | 30 |
b. | Transactions with related parties: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Revenues | 769 | 618 | 682 | |||||||||
Purchases, general and administrative expenses | 550 | 433 | 334 |
F - 34
U.S. dollars in thousands (except share and per share data)
NOTE 20:- | RELATED PARTY BALANCES AND TRANSACTIONS (CONT.) |
F - 35
U.S. dollars in thousands (except share and per share data)
NOTE 20:- | RELATED PARTY BALANCES AND TRANSACTIONS (CONT.) |
a. | The extension of the Directors and Officers' Indemnity Agreement with Mr. Yitzhak Nissan. |
b. | The extension of the Exculpation Letter with respect to Mr. Nissan for an additional three (3) year period |
c. | The application of the Company’s directors and officers' liability insurance policy with respect to Mr. Nissan |
d. | The revised terms of employment of Mr. Nissan's daughter who is employed by the Company as a special project manager. |
NOTE 21:- | SUBSEQUENT EVENTS |
ELTEK LTD. | |||
By: | /s/ Eli Yaffe | ||
Name: | Eli Yaffe | ||
Title: | Chief Executive Officer | ||
By: | /s/ Ron Freund | ||
Name: | Ron Freund | ||
Title: | Chief Financial Officer |