☐
|
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
|
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 ☐
|
Page No.
|
|||
1
|
|||
1
|
|||
1
|
|||
1
|
|||
A.
|
Selected Financial Data
|
1
|
|
B.
|
Capitalization and Indebtedness
|
3
|
|
C.
|
Reasons for the Offer and Use of Proceeds
|
3
|
|
D.
|
Risk Factors
|
3
|
|
23 | |||
A.
|
History and Development of the Company
|
23
|
|
B.
|
Business Overview
|
24 | |
C.
|
Organizational Structure
|
29 | |
D.
|
Property, Plants and Equipment
|
30 | |
30 | |||
30
|
|||
A.
|
Operating Results
|
30 | |
B.
|
Liquidity and Capital Resources
|
36 | |
C.
|
Research and Development, Patents and Licenses
|
40
|
|
D.
|
Trend Information
|
41 | |
E.
|
Off-Balance Sheet Arrangements
|
41 | |
F.
|
Tabular Disclosure of Contractual Obligations
|
41 | |
42 | |||
A.
|
Directors and Senior Management
|
42
|
|
B.
|
Compensation
|
44 | |
C.
|
Board Practices
|
46 | |
D.
|
Employees
|
53 | |
E.
|
Share Ownership
|
55 | |
55 | |||
A.
|
Major Shareholders
|
55 | |
B.
|
Related Party Transactions
|
56 | |
C.
|
Interests of Experts and Counsel
|
59 | |
59 | |||
A.
|
Consolidated Statements and Other Financial Information
|
59 | |
B.
|
Significant Changes
|
60 | |
60 | |||
A.
|
Offer and Listing Details
|
60 |
Page No.
|
|||
B.
|
Plan of Distribution
|
60 | |
C.
|
Markets
|
60 | |
D.
|
Selling Shareholders
|
60 | |
E.
|
Dilution
|
60 | |
F.
|
Expense of the Issue
|
60 | |
60 | |||
A.
|
Share Capital
|
60 | |
B.
|
Memorandum and Articles of Association
|
61 | |
C.
|
Material Contracts
|
62 | |
D.
|
Exchange Controls
|
62 | |
E.
|
Taxation
|
62
|
|
F.
|
Dividends and Paying Agents
|
71 | |
G.
|
Statement by Experts
|
71
|
|
H.
|
Documents on Display
|
72 | |
I.
|
Subsidiary Information
|
72 | |
72 | |||
73 | |||
73 | |||
73
|
|||
73 | |||
73 | |||
74 | |||
74
|
|||
74
|
|||
74
|
|||
75
|
|||
75 | |||
75 | |||
75
|
|||
76 | |||
76 | |||
76 | |||
77 |
A.
|
Selected Financial Data
|
Year ended December 31,
|
2019
|
2018
|
2017
|
2016
|
2015
|
|||||||||||||||
($ and share data in thousands, except per share data)
|
||||||||||||||||||||
Revenues
|
34,794
|
33,939
|
32,754
|
37,065
|
41,350
|
|||||||||||||||
Cost of revenues
|
(28,787
|
)
|
(31,342
|
)
|
(31,427
|
)
|
(34,248
|
)
|
(34,802
|
)
|
||||||||||
Gross profit
|
6,007
|
2,597
|
1,327
|
2,817
|
6,548
|
|||||||||||||||
R&D expenses
|
(16
|
)
|
-
|
(41
|
)
|
(117
|
)
|
(90
|
)
|
|||||||||||
Selling, general and administrative expenses
|
(4,604
|
)
|
(4,669
|
)
|
(4,704
|
)
|
(4,699
|
)
|
(4,961
|
)
|
||||||||||
Total operating expenses
|
(4,620
|
)
|
(4,669
|
)
|
(4,744
|
)
|
(4,816
|
)
|
(5,051
|
)
|
||||||||||
Operating profit (loss)
|
1,387
|
(2,072
|
)
|
(3,418
|
)
|
(1,999
|
)
|
1,497
|
||||||||||||
Financial expenses, net
|
(440
|
)
|
(475
|
)
|
(298
|
)
|
(309
|
)
|
(259
|
)
|
||||||||||
Other income (loss), net
|
923
|
3
|
15
|
(259
|
)
|
6
|
||||||||||||||
Profit (loss) before income tax expense
|
1,870
|
(2,544
|
)
|
(3,701
|
)
|
(2,567
|
)
|
1,244
|
||||||||||||
Income tax (expense) benefit
|
(77
|
)
|
(63
|
)
|
(74
|
)
|
(1,158
|
)
|
(218
|
)
|
||||||||||
Net profit (loss)
|
1,793
|
(2,607
|
)
|
(3,775
|
)
|
(3,725
|
)
|
1,026
|
||||||||||||
Net profit (loss) attributable to non-controlling interest
|
-
|
-
|
-
|
101
|
17
|
|||||||||||||||
Net profit (loss) attributable to Eltek Ltd. shareholders
|
1,793
|
(2,607
|
)
|
(3,775
|
)
|
(3,624
|
)
|
1,043
|
||||||||||||
Basic and diluted net profit (loss) per ordinary share attributable to Eltek Ltd.
|
0.48
|
(1.28
|
)
|
(1.58
|
)
|
(1.82
|
)
|
0.51
|
||||||||||||
Weighted average number of ordinary shares used to compute basic and diluted net profit (loss) per ordinary share
|
3,734
|
2,029
|
2,029
|
2,029
|
2,029
|
|
As at December 31,
|
|||||||||||||||||||
|
2019
|
2018
|
2017
|
2016
|
2015
|
|||||||||||||||
($ and share data in thousands)
|
||||||||||||||||||||
Working capital (deficit)
|
(1,248
|
)
|
(5,314
|
)
|
(4,565
|
)
|
(93
|
)
|
1,982
|
|||||||||||
Total assets
|
22,829
|
18,160
|
22,145
|
20,145
|
25,419
|
|||||||||||||||
Long-term liabilities
|
1,794
|
519
|
911
|
2,098
|
3,194
|
|||||||||||||||
Total shareholders’ equity
|
6,269
|
882
|
3,459
|
6,634
|
10,335
|
|||||||||||||||
Number of issued and outstanding shares
|
4,380
|
2,029
|
2,029
|
2,029
|
2,029
|
• |
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.
|
Year Ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Revenues
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
Cost of revenues
|
(82.7
|
)
|
(92.3
|
)
|
(95.9
|
)
|
||||||
Gross profit
|
17.3
|
7.7
|
4.1
|
|||||||||
R&D expenses
|
*
|
-
|
(0.1
|
)
|
||||||||
Selling, general and administrative expenses
|
(13.3
|
)
|
(13.8
|
)
|
(14.4
|
)
|
||||||
Operating profit (loss)
|
4.0
|
(6.1
|
)
|
(10.4
|
)
|
|||||||
Financial expenses, net
|
(1.3
|
)
|
(1.4
|
)
|
(0.1
|
)
|
||||||
Other income (loss), net
|
2.7
|
*
|
*
|
|||||||||
Profit (loss) before income tax expense
|
5.4
|
(7.5
|
)
|
(11.3
|
)
|
|||||||
Income tax (expense)
|
(0.2
|
)
|
(0.2
|
)
|
(0.2
|
)
|
||||||
Net profit (loss)
|
5.2
|
(7.7
|
)
|
(11.5
|
)
|
Year Ended December 31,
|
||||||||||||||||||||
2019
|
2018
|
2017
|
2016
|
2015
|
||||||||||||||||
Dollar
|
(7.8
|
)%
|
8.1
|
%
|
(9.8
|
)%
|
(1.5
|
)%
|
0.3
|
%
|
||||||||||
Euro
|
(9.6
|
)%
|
3.3
|
%
|
2.7
|
%
|
(4.8
|
)%
|
(10.1
|
)%
|
||||||||||
Israeli CPI
|
0.6
|
%
|
0.8
|
%
|
0.4
|
%
|
(0.2
|
)%
|
(1.0
|
)%
|
Year ended December 31,
|
2019
|
2018
|
2017
|
|||||||||
($ in thousands)
|
||||||||||||
Net cash provided by (used in) operating activities
|
2,578
|
(813
|
)
|
(3,444
|
)
|
|||||||
Net cash used in investing activities
|
(806
|
)
|
(619
|
)
|
(275
|
)
|
||||||
Net cash provided by financing activities
|
(1,132
|
)
|
1,527
|
3,244
|
||||||||
Effect of translation adjustments
|
(4
|
)
|
10
|
128
|
||||||||
Net increase (decrease) in cash and cash equivalents
|
636
|
105
|
(347
|
)
|
||||||||
Cash and cash equivalents at beginning of year
|
992
|
887
|
1,234
|
|||||||||
Cash and cash equivalents at end of year
|
1,628
|
992
|
887
|
• |
linked to the dollar - from 3.5% to 5.0%.
|
• |
NIS not linked 2.6% to 5.5%.
|
• |
A loan amount of NIS 5 million bears interest at a rate of Prime + 1%, as of September 26, 2019 and until January 7, 2020.
|
• |
A second loan amount of NIS 5 million bears interest at an annual interest of Prime + 1.75%, as of January 1, 2019, and until repaid in full.
|
• |
The interest is paid on the 10th day of each quarter, for the interest accumulated in the three (3) months prior to such payment date (except with respect to the first interest payment). The first interest payment was paid during the
first quarter of 2020.
|
• |
Any amount not paid by the company when due bears an annual interest of Prime + 3%, unless the company has not paid the applicable interest amount due to its requirement to avoid any going concern qualifications, in which event the
applicable interest (i.e., Prime+ 1.75%) continues to apply.
|
Contractual Obligations
|
Payments due by period
($ in thousands) |
|||||||||||||||||||
Total
|
less than 1 year
|
2-3 years
|
4-5 years
|
more than 5 years
|
||||||||||||||||
Short-term bank credit (1)
|
2,120
|
2,120
|
-
|
-
|
-
|
|||||||||||||||
Long-term debt obligations (1)
|
863
|
477
|
290
|
96
|
-
|
|||||||||||||||
Operating lease
|
2,060
|
953
|
1,079
|
28
|
-
|
|||||||||||||||
Other contractual obligations
|
1,233
|
616
|
480
|
137
|
-
|
|||||||||||||||
Purchase obligations
|
264
|
264
|
-
|
-
|
-
|
|||||||||||||||
Other short-term liabilities reflected on the company’s balance sheet)
|
3,118
|
3,118
|
-
|
-
|
-
|
|||||||||||||||
Other long-term liabilities reflected on the company’s balance sheet
|
313
|
-
|
-
|
-
|
313
|
|||||||||||||||
Estimate of interest payments on long-term debt obligations (2)
|
33
|
15
|
11
|
6
|
1
|
|||||||||||||||
Total
|
10,004
|
7,563
|
1,860
|
267
|
314
|
(1) |
For information on the interest rates of our short-term bank credit and long-term debt obligations, see Item 5B. “Operating and Financial Review and Prospects - Liquidity and Capital Resources.”
|
(2) |
The estimate of interest payments on long-term debt obligations is based on current interest rates as of December 31, 2019 (including current variable rates on the existing long-term debt obligations) and on the current volume of debt
obligations, assuming loan repayment in future years as disclosed in Note 8 to the consolidated financial statements.
|
Name
|
Age
|
Position
|
Yitzhak Nissan (3)
|
70
|
Chairman of the Board of Directors
|
Mordechai Marmorstein (1)(2)
|
73
|
Director
|
David Rubner(4)
|
80
|
Director
|
Erez Meltzer(4)
|
62
|
Director
|
Gad Dovev(1)(2)(3)(4)
|
73
|
External Director
|
Ilana Lurie (1)(2)(3)(4)
|
47
|
External Director
|
Name
|
Age
|
Position
|
Eli Yaffe
|
65
|
Chief Executive Officer
|
Alon Mualem
|
52
|
Chief Financial Officer
|
Yitzhak Zemach
|
44 |
Director of Operations
|
Assaf Bachar
|
52
|
Procurement and Chief Information Officer
|
Sagi Balter
|
39
|
VP Process Engineering
|
Shmuel Meidan
|
59
|
VP Quality Assurance
|
Axel Herrmann
|
61
|
General Manager, Eltek Europe GmbH
|
Salaries, fees,
commissions and bonuses
|
Pension, retirement
and similar benefits
|
||
All directors and executive officers as a group (then consisting of 14 persons)
|
$1.5 million (1)
|
$347,000(2)
|
(1) |
During the year ended December 31, 2019, we paid each of our directors an annual fee of approximately $8,100 and an attendance fee of $260 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
|
Holdings
|
Compensation for services (USD)(1)
|
|||||||||||||||||||
Base salary
|
Benefits and
Perquisites (2)
|
Equity-
Based (3)
|
Total
compensation
|
|||||||||||||||||||
Yitzhak Nissan (4)
|
Chairman of the Board
|
65.4
|
%
|
302,988
|
-
|
-
|
302,988
|
|||||||||||||||
Eli Yaffe
|
Chief Executive Officer
|
-
|
237,645
|
241,905
|
98,492
|
578,042
|
||||||||||||||||
Alon Mualem
|
Chief Financial Officer
|
-
|
139,937
|
93,091
|
11,445
|
244,473
|
||||||||||||||||
Yitzhak Zemach
|
VP Operations
|
-
|
110,738
|
73,466
|
4,381
|
188,585
|
||||||||||||||||
Shmuel Wider
|
Former VP Sales and Marketing
|
-
|
110,898
|
47,956
|
-
|
158,854
|
|
(1)
|
Cash compensation amounts denominated in NIS were converted into U.S. dollars at the rate of NIS 3.5645 per $1.00 (the average exchange rate in 2019).
|
|
(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 2019, 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, 2019 based on the options’ grant date fair value in accordance with accounting guidance for equity-based compensation.
|
|
(4)
|
Paid to Nistec as management fees.
|
(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 (2)
|
||||||
Yitzhak Nissan (1)
|
2,862,523
|
65.4
|
%
|
|||||
All executive officers and directors as a group (14 persons) (3)
|
2,899,413
|
65.6
|
%
|
Name
|
Number of Ordinary Shares
Beneficially
Owned (1)
|
Percentage
of Ownership (2)
|
||||||
Nistec Golan Ltd. (3)
|
2,731,783
|
62.4
|
%
|
|||||
Yitzhak Nissan (3)
|
130,740
|
3.0
|
%
|
|||||
XDOOD LLC (4)
|
228,230
|
5.21
|
%
|
(1) |
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options or convertible notes currently exercisable or
exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as
indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
|
(2) |
The percentages shown are based on 4,380,268 ordinary shares issued and outstanding as of April 24, 2020.
|
(3) |
Nistec Ltd. transferred it shares to Nistec Golan in December 2018. Nistec Golan is an Israeli private company controlled by Yitzhak Nissan. Accordingly, Mr. Nissan may be deemed to be the
beneficial owner of the ordinary shares held directly by Nistec.
|
(4) |
Based on a Schedule 13D filed on December 6, 2019. The filer reported that XDOOD LLC is a Single Member LLC with Michael McGauley as its Single Member. According to the filing, Michael McGauley controls 100% of XDOOD LLC and its assets.
The principal business address of the shareholder is 1400 Hancock Street Fl 9, Quincy MA.
|
i. |
A registration rights agreement with Nistec;
|
ii. |
A management agreement with Nistec;
|
iii. |
A finder’s fee paid to Merhav M.N.F. Ltd.; and
|
iv. |
Approvals of compensation, indemnification, exculpation, waiver and release, run-off insurance, and directors’ and officers’ insurance policies, related to directors and officers of our company.
|
v. |
The extension of the Directors and Officers Indemnity Agreement with Mr. Yitzhak Nissan.
|
• |
Mr. Nissan shall receive reimbursement of travel expenses (other than food and beverage expenses) while traveling internationally on behalf of the Company, provided that such reimbursement shall not exceed an aggregate amount of NIS
10,000 per calendar quarter.
|
• |
Mr. Nissan shall receive reimbursement of food and beverage expenses while traveling internationally on behalf of the 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 the Company may jointly acquire certain services together with Nistec Ltd. related to employees social activities, marketing services and insurance;
and
|
iv. |
The amendment to the terms of and the extension of Ms. Revital Cohen-Tzemach’s employment who is the daughter of our Chairman and Controlling shareholder, Mr. Yitzhak Nissan;
|
v. |
The amended general engagement terms, processes and restrictions of the Soldering and Assembly Services Procedure with Nistec Ltd.; and
|
vi. |
The amended general engagement terms, processes and restrictions of the PCB Purchase Procedure with Nistec Ltd.
|
• |
A loan amount of NIS 5 million bears interest at a rate of Prime + 1%, as of September 26, 2019 and until January 7, 2020.
|
• |
A second loan amount of NIS 5 million bears interest at an annual interest of Prime + 1.75%, as of January 1, 2019, and until repaid in full.
|
• |
The interest is paid on the 10th day of each quarter, for the interest accumulated in the three (3) months prior to such payment date (except with respect to the first interest payment). The first interest payment for 2019 was paid
during the first quarter of 2020.
|
• |
Any amount not paid by the company when due bears an annual interest of Prime + 3%, unless the company has not paid the applicable interest amount due to its requirement to avoid any going concern qualifications, in which event the
applicable interest (i.e., Prime+ 1.75%) continues to apply.
|
• |
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.
|
• |
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.
|
Services Rendered.
|
2019
|
2018
|
2017
|
|||||||||
Audit (1)
|
$
|
85,000
|
$
|
85,000
|
$
|
82,000
|
||||||
Audit Related Fees
|
33,700
|
55,000
|
-
|
|||||||||
Tax (2)
|
-
|
-
|
3,000
|
|||||||||
All other Fees (3)
|
7,620
|
6,700
|
13,500
|
|||||||||
Total
|
$
|
126,320
|
$
|
146,700
|
$
|
98,500
|
(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.
|
• |
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 10A. “Additional Information - Share Capital - Annual and Extraordinary
Meetings of Shareholders.”
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated Balance Sheets
|
F-3
|
Consolidated Statements of Comprehensive Income (loss)
|
F-5
|
Consolidated Statements of Changes in Shareholders’ Equity
|
F-6
|
Consolidated Statements of Cash Flows
|
F-7
|
Notes to the Consolidated Financial Statements
|
F-9
|
Exhibit
|
|
Description
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.PRE
|
|
XBRL Taxonomy Presentation Linkbase Document.
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Label Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
(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)
|
Included as Exhibit B to Exhibit 99.1 to our Report of Foreign Issuer on Form 6-K filed on October 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 October 31, 2019 and incorporated herein by reference.
|
|
(6)
|
Filed as Exhibit 4.11 to our Annual Report on Form 20-F for the year ended December 31, 2014, and incorporated herein by reference.
|
(7)
|
Filed as Exhibit 4.12 to our Annual Report on Form 20-F for the year ended December 31, 2014, and incorporated herein by reference.
|
|
|
(8)
|
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.
|
(9)
|
Filed herewith.
|
Page
|
||
F-2
|
||
F-3 – F-4
|
||
F-5
|
||
F-6
|
||
F-7 – F-8
|
||
F-9 – F-42
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
/s/ Kost Forer Gabbay & Kasierer
|
KOST FORER GABBAY & KASIERER
|
A Member of Ernst & Young Global
|
Tel-Aviv, Israel
|
April 27, 2020
|
December 31,
|
||||||||||||
Note
|
2019
|
2018
|
||||||||||
ASSETS
|
||||||||||||
CURRENT ASSETS:
|
||||||||||||
Cash and cash equivalents
|
2
|
1,628
|
992
|
|||||||||
Trade receivables (net of allowance for doubtful accounts of $227 and $170 at December 31, 2019 and December 31, 2018, respectively)
|
1h
|
|
7,480
|
5,682
|
||||||||
Inventories
|
3
|
3,735
|
3,611
|
|||||||||
Other accounts receivable and prepaid expenses
|
4
|
675
|
1,160
|
|||||||||
Total current assets
|
13,518
|
11,445
|
||||||||||
LONG-TERM ASSETS:
|
||||||||||||
Severance pay fund
|
9
|
60
|
53
|
|||||||||
Long term prepaid expenses
|
-
|
39
|
||||||||||
Operating lease right-of-use assets
|
10
|
2,490
|
-
|
|||||||||
Total long-term assets
|
2,550
|
92
|
||||||||||
PROPERTY AND EQUIPMENT, NET
|
5
|
6,761
|
6,623
|
|||||||||
Total assets
|
22,829
|
18,160
|
December 31,
|
||||||||||||
Note
|
2019
|
2018
|
||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||||||
CURRENT LIABILITIES:
|
||||||||||||
Short-term credit and current maturities of long-term debt
|
6
|
2,120
|
6,606
|
|||||||||
Short-term credit from related party
|
19a
|
3,472
|
2,668
|
|||||||||
Trade payables
|
4,673
|
4,108
|
||||||||||
Other accounts payable and accrued expenses
|
7
|
3,118
|
3,377
|
|||||||||
Short-term operating lease liabilities
|
10
|
1,383
|
-
|
|||||||||
Total current liabilities
|
14,766
|
16,759
|
||||||||||
LONG-TERM LIABILITIES:
|
||||||||||||
Long-term debt, excluding current maturities
|
8
|
387
|
308
|
|||||||||
Accrued severance pay
|
9
|
268
|
211
|
|||||||||
Deferred tax liabilities
|
17
|
45
|
-
|
|||||||||
Long-term operating lease liabilities
|
10
|
1,094
|
-
|
|||||||||
Total long-term liabilities
|
1,794
|
519
|
||||||||||
COMMITMENTS AND CONTINGENT LIABILITIES
|
11
|
-
|
-
|
|||||||||
SHAREHOLDERS' EQUITY:
|
||||||||||||
Share capital -
|
||||||||||||
Ordinary shares of NIS 3.0 par value –
Authorized: 10,000,000 shares at December 31, 2019 and December 31, 2018; Issued and outstanding: 4,380,268 and 2,028,552 shares at December 31, 2019 and
December 31, 2018, respectively
|
3,964
|
1,985
|
||||||||||
Additional paid-in capital
|
18,583
|
17,270
|
||||||||||
Foreign currency translation adjustments
|
2,479
|
2,340
|
||||||||||
Capital reserves
|
963
|
800
|
||||||||||
Accumulated deficit
|
(19,720
|
)
|
(21,513
|
)
|
||||||||
Total shareholders' equity
|
12
|
6,269
|
882
|
|||||||||
Total liabilities and shareholders' equity
|
22,829
|
18,160
|
Year ended
December 31,
|
||||||||||||||||
Note
|
2019
|
2018
|
2017
|
|||||||||||||
Revenues
|
14b
|
|
34,794
|
33,939
|
32,754
|
|||||||||||
Cost of revenues
|
(28,787
|
)
|
(31,342
|
)
|
(31,427
|
)
|
||||||||||
Gross profit
|
6,007
|
2,597
|
1,327
|
|||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development, net
|
(16
|
)
|
-
|
(41
|
)
|
|||||||||||
Selling, general and administrative
|
(4,604
|
)
|
(4,669
|
)
|
(4,704
|
)
|
||||||||||
Operating income (loss)
|
1,387
|
(2,072
|
)
|
(3,418
|
)
|
|||||||||||
Financial expenses, net
|
15
|
(440
|
)
|
(475
|
)
|
(298
|
)
|
|||||||||
Other income, net
|
16
|
923
|
3
|
15
|
||||||||||||
Income (loss) before income taxes
|
1,870
|
(2,544
|
)
|
(3,701
|
)
|
|||||||||||
Taxes on income
|
17
|
(77
|
)
|
(63
|
)
|
(74
|
)
|
|||||||||
Net income (loss)
|
1,793
|
(2,607
|
)
|
(3,775
|
)
|
|||||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Foreign currency translation adjustments
|
139
|
(75
|
)
|
600
|
||||||||||||
Total comprehensive income (loss)
|
1,932
|
(2,682
|
)
|
(3,175
|
)
|
|||||||||||
Basic and diluted income (loss) per ordinary share attributable to Eltek Ltd. shareholders
|
13
|
0.48
|
(1.28
|
)
|
*) (1.58)
|
|
Company's shareholders
|
||||||||||||||||||||||||||||
Ordinary shares
|
Amount
|
Additional paid-in capital
|
Accumulated other comprehensive income (loss)
|
Capital reserves
|
Accumulated deficit
|
Total
|
||||||||||||||||||||||
Balance as of January 1, 2017
|
*) 2,028,552
|
|
1,985
|
17,270
|
1,815
|
695
|
(15,131
|
)
|
6,634
|
|||||||||||||||||||
Comprehensive income (loss):
|
||||||||||||||||||||||||||||
Foreign currency translation adjustments
|
-
|
-
|
-
|
600
|
-
|
-
|
600
|
|||||||||||||||||||||
Loss
|
-
|
-
|
-
|
-
|
-
|
(3,775
|
)
|
(3,775
|
)
|
|||||||||||||||||||
Balance as of December 31, 2017
|
*) 2,028,552
|
|
1,985
|
17,270
|
2,415
|
695
|
(18,906
|
)
|
3,459
|
|||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
56
|
-
|
56
|
|||||||||||||||||||||
Transaction with controlling shareholder
|
-
|
-
|
-
|
-
|
49
|
-
|
49
|
|||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||
Foreign currency translation adjustments
|
-
|
-
|
-
|
(75
|
)
|
-
|
-
|
(75
|
)
|
|||||||||||||||||||
Loss
|
-
|
-
|
-
|
-
|
-
|
(2,607
|
)
|
(2,607
|
)
|
|||||||||||||||||||
Balance as of December 31, 2018
|
2,028,552
|
1,985
|
17,270
|
2,340
|
800
|
(21,513
|
)
|
882
|
||||||||||||||||||||
Issuance of shares in rights offering, net
|
2,351,701
|
1,979
|
1,313
|
-
|
-
|
-
|
3,292
|
|||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
141
|
-
|
141
|
|||||||||||||||||||||
Transaction with controlling shareholder
|
-
|
-
|
-
|
-
|
22
|
-
|
22
|
|||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Foreign currency translation adjustments
|
-
|
-
|
-
|
139
|
-
|
-
|
139
|
|||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
1,793
|
1,793
|
|||||||||||||||||||||
Balance as of December 31, 2019
|
4,380,253
|
3,964
|
18,583
|
2,479
|
963
|
(19,720
|
)
|
6,269
|
Year ended
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net Income (loss)
|
1,793
|
(2,607
|
)
|
(3,775
|
)
|
|||||||
Adjustments required to reconcile loss to net cash flows provided by (used in) operating activities:
|
||||||||||||
Depreciation
|
1,508
|
1,649
|
1,722
|
|||||||||
Loss (gain) on sale of property and equipment
|
-
|
101
|
(13
|
)
|
||||||||
Revaluation of long term loans
|
(38
|
)
|
29
|
17
|
||||||||
Amortization of Intangible asset
|
-
|
-
|
348
|
|||||||||
Stock based compensation
|
141
|
56
|
-
|
|||||||||
Transaction with controlling shareholder
|
22
|
49
|
-
|
|||||||||
Increase (decrease) in employee severance benefits, net
|
36
|
(3
|
)
|
69
|
||||||||
Decrease (increase) in trade receivables, net
|
(1,277
|
)
|
790
|
(597
|
)
|
|||||||
Decrease in operating lease right-of-use assets
|
1,385
|
-
|
-
|
|||||||||
Decrease in operating lease liabilities
|
(1,388
|
)
|
-
|
-
|
||||||||
Decrease (increase) in other receivables and prepaid expenses
|
598
|
467
|
(1,249
|
)
|
||||||||
Increase (decrease) in inventories
|
175
|
(30
|
)
|
471
|
||||||||
Increase (decrease) in trade payables
|
107
|
(871
|
)
|
(330
|
)
|
|||||||
Increase (decrease) in deferred tax liabilities
|
45
|
-
|
-
|
|||||||||
Decrease in other liabilities and accrued expenses
|
(529
|
)
|
(443
|
)
|
(107
|
)
|
||||||
Net cash provided by (used in) operating activities
|
2,578
|
(813
|
)
|
(3,444
|
)
|
|||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Purchase of property and equipment
|
(931
|
)
|
(619
|
)
|
(275
|
)
|
||||||
Proceeds from disposals of property and equipment and repayment from insurance
|
125
|
-
|
-
|
|||||||||
Net cash used in investing activities
|
(806
|
)
|
(619
|
)
|
(275
|
)
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Short-term bank credit, net
|
(4,181
|
)
|
986
|
2,756
|
||||||||
Short-term shareholder loan
|
561
|
1,390
|
1,430
|
|||||||||
Issuance of shares in rights offering, net
|
3,298
|
-
|
-
|
|||||||||
Repayment of long-term loans
|
(891
|
)
|
(910
|
)
|
(870
|
)
|
||||||
Proceeds from long-term loans
|
558
|
378
|
167
|
|||||||||
Repayment of property and equipment payables
|
(477
|
)
|
(317
|
)
|
(239
|
)
|
||||||
Net cash provided by (used in) financing activities
|
(1,132
|
)
|
1,527
|
3,244
|
Year ended
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Effect of exchange rate on cash and cash equivalents
|
(4
|
)
|
10
|
128
|
||||||||
Increase (decrease) in cash and cash equivalents
|
636
|
105
|
(347
|
)
|
||||||||
Cash and cash equivalents at the beginning of the year
|
992
|
887
|
1,234
|
|||||||||
Cash and cash equivalents at end of the year
|
1,628
|
992
|
887
|
|||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
|
||||||||||||
Cash paid during the year for:
|
||||||||||||
Interest
|
232
|
212
|
185
|
|||||||||
Non-cash activities:
|
||||||||||||
Purchase of property and equipment
|
350
|
118
|
340
|
|||||||||
Right-of-use asset recognized with corresponding lease liability
|
$
|
377
|
$
|
-
|
$
|
-
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES
|
a. |
General:
|
- |
Eltek Ltd. ("the Company") was organized in Israel in 1970, and its 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".
|
- |
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 and North
America.
|
- |
The Company markets its product mainly to the medical technology, defense and aerospace, industrial, telecom and networking equipment, as well as to contract electronic manufacturers, among other industries.
|
- |
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. Due to these conditions and other financial and business factors, the Company's liquidity position, as well as its operating performance, was negatively affected. As a result, during
the last years, including the year ended December 31, 2018, the Company incurred net losses and suffered negative cash flows from its operating activities. In the year ended December 31, 2019 the Company had a net income of $1.8 million
(compared to a loss of $2.6 million in the year ended December 31, 2018). As of December 31, 2019, the Company's working capital deficiency amounted to $1.3 million and its accumulated deficit amounted to approximately $19.7 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.
|
- |
An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now spread globally. This outbreak has resulted in travel restrictions, closed
international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower
consumer demand, layoffs, defaults and other significant economic impacts, as well as general concern and uncertainty. The impact of this outbreak has adversely affected the economies of many nations and the entire global economy and
may impact the company in ways that cannot necessarily be foreseen.
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
- |
In June 2017, due to continued losses and the Company's limited ability to obtain additional loans from the banks at that time, the Company obtained a loan of NIS 5.0 million (approximately $ 1.4 million) from Nistec (the “First
Loan”). The terms of the loan were amended in April 2018, with retroactive effect as of June 2017.
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
1. |
Interest Amount:
|
a. |
A total aggregate principal loan amount of NIS 5 million (the “First Half of the Loans”) shall bear interest of Prime + 1%, as of September 26, 2019 and until January 7, 2020. As of January 8, 2020, and until repaid, the First Half
of the Loans shall bear the interest set forth below.
|
b. |
A total aggregate principal loan amount of NIS 5 million (the “Second Half of the Loans”) shall bear annual interest of Prime + 1.75%, as of January 1, 2019, and until repaid in full.
|
2. |
Payment Schedule: the interest shall be paid on the 10th day of each quarter, for the interest accumulated in the three (3) months prior to such payment date (except with respect to the first interest payment). The first interest
payment shall be paid on January 10, 2020, for 2019.
|
3. |
Late Fees: Any amount not paid by the Company when due, shall bear an annual interest of Prime + 3%, unless the Company has not paid the applicable interest amount due to its requirement to avoid any going concern qualifications, in
which event the applicable interest (i.e., Prime+ 1.75) shall continue to apply.
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
- |
In February 2019, Nistec Golan informed the Company that it was committed to exercise its subscription rights by converting approximately $2.5 million of debt owed to it by the Company into the Company’s ordinary shares. In March
2019, Nistec informed the Company that instead of converting the debt owed to it, it would participate in the rights offering by means of a cash investment in an amount of at least $2.5 million.
|
- |
In March 2019, the Company's prospectus for the rights offering became effective. The subscription period ended on April 9, 2019 and 69.6% of the Company’s shareholders participated in the rights offering, which provided gross
proceeds of $3.4 million (before deducting expenses related to the offering). The Company used the net proceeds from this offering to repay a NIS 3.0 million (approximately $870) loan from Mizrahi Bank (guaranteed by Nistec), repay a
NIS 2.0 million (approximately $580) line of credit from Bank Leumi (for which Nistec provided a guarantee) and a NIS 1.0 million (approximately $290) line of credit from Bank Hapoalim. The remainder of the proceeds was used for working
capital and other general corporate purposes, including investment in plant and equipment.
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
b. |
Sale of a wholly owned subsidiary - Kubatronik Leiterplatten GmbH:
|
c. |
Basis of presentation:
|
d. |
Functional and reporting currency:
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
1. |
Assets and liabilities are translated according to the exchange rate on the consolidated balance sheet date including goodwill arising from the acquisition of the subsidiary.
|
2. |
Income and expense items are translated according to the weighted average exchange rate on a quarterly basis.
|
1. |
Assets and liabilities are translated according to the exchange rate on the consolidated balance sheet date including goodwill arising from the acquisition of the subsidiary.
|
2. |
Income and expense items are translated according to the weighted average exchange rate on a quarterly basis.
|
3. |
The resulting exchange rate differences are classified as a separate item in shareholders' equity.
|
e. |
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 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, 2019
|
101.8
|
3.456
|
3.878
|
|||||||||
December 31, 2018
|
101.2
|
3.748
|
4.292
|
|||||||||
December 31, 2017
|
100.4
|
3.467
|
4.153
|
|||||||||
%
|
||||||||||||
December 31, 2019
|
0.6
|
(7.8
|
)
|
(10.0
|
)
|
|||||||
December 31, 2018
|
0.8
|
8.1
|
3.3
|
|||||||||
December 31, 2017
|
1.5
|
(0.1
|
)
|
2.7
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
f. |
Use of estimates:
|
g. |
Cash and cash equivalents:
|
h. |
Trade accounts receivable:
|
Year ended
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Opening balance
|
170
|
234
|
160
|
|||||||||
Doubtful debt expenses during the year
|
71
|
86
|
147
|
|||||||||
Customers write-offs/collection during the year
|
(31
|
)
|
(134
|
)
|
(91
|
)
|
||||||
Foreign currency translation adjustments
|
17
|
(16
|
)
|
18
|
||||||||
Closing balance
|
227
|
170
|
234
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
i. |
Inventories:
|
j. |
Severance pay:
|
k. |
Property and equipment:
|
%
|
||
Machinery and equipment
|
5-33
|
|
Leasehold improvements
|
6-14
|
|
Motor vehicles
|
15
|
|
Office furniture and equipment
|
6-33
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
l. |
Intangible assets:
|
m. |
Income taxes:
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
2019
|
2018
|
|||
Dividend yield
|
0%
|
0%
|
||
Expected volatility
|
76%
|
71%
|
||
Risk-free interest
|
1.47%
|
2.89%
|
||
Contractual term
|
10 years
|
10 years
|
||
Forfeiture rate
|
0%
|
0%
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
p. |
Earnings per ordinary share:
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
q. |
Concentration of credit risk:
|
r. |
Research and development costs:
|
s. |
Commitments and contingencies:
|
t. |
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. |
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
u. |
Comprehensive income (loss):
|
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Foreign currency translation adjustments
|
139
|
(75
|
)
|
600
|
||||||||
Total accumulated other comprehensive income (loss)
|
139
|
(75
|
)
|
600
|
v. |
Leases:
|
NOTE 1:- |
GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
w. |
Impact of recently issued and adopted accounting standards:
|
x. |
New accounting pronouncements not yet effective:
|
y. |
Reclassifications:
|
NOTE 2:- |
CASH AND CASH EQUIVALENTS
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Denominated in U.S. dollars
|
1,034
|
315
|
||||||
Denominated in NIS
|
129
|
280
|
||||||
Denominated in Euro
|
465
|
397
|
||||||
1,628
|
992
|
NOTE 3:- |
INVENTORIES
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Raw materials
|
1,860
|
1,436
|
||||||
Work-in-progress
|
1,607
|
1,283
|
||||||
Finished goods
|
268
|
892
|
||||||
3,735
|
3,611
|
NOTE 4:- |
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Prepaid expenses
|
530
|
292
|
||||||
Government authorities
|
2
|
68
|
||||||
Employees
|
8
|
21
|
||||||
Others
|
135
|
779
|
||||||
675
|
1,160
|
NOTE 5:- |
PROPERTY AND EQUIPMENT, NET
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Cost:
|
||||||||
Machinery and equipment
|
35,999
|
33,048
|
||||||
Leasehold improvements
|
8,917
|
8,169
|
||||||
Motor vehicles
|
77
|
68
|
||||||
Office furniture and equipment
|
799
|
704
|
||||||
45,792
|
41,989
|
|||||||
Accumulated depreciation:
|
||||||||
Machinery and equipment
|
(30,349
|
)
|
(27,689
|
)
|
||||
Leasehold improvements
|
(8,019
|
)
|
(7,089
|
)
|
||||
Motor vehicles
|
(59
|
)
|
(49
|
)
|
||||
Office furniture and equipment
|
(604
|
)
|
(539
|
)
|
||||
(39,031
|
)
|
(35,366
|
)
|
|||||
Depreciated cost
|
6,761
|
6,623
|
NOTE 6:- |
SHORT-TERM CREDIT AND CURRENT MATURITIES OF LONG-TERM DEBT
|
Annual interest rate at
|
||||||||||||
December 31,
|
December 31,
|
|||||||||||
2019
|
2019
|
2018
|
||||||||||
In NIS bears interest rate of Prime+0.85% to Prime+2.7%
|
2.6% - 4.45%
|
|
1,326
|
4,229
|
||||||||
Short term credit from others
|
4.15%
|
|
612
|
1,534
|
||||||||
Long-term debt from banks in NIS bears interest of Prime rate *)
|
2.75%
|
|
182
|
843
|
||||||||
2,120
|
6,606
|
*) |
The amount of $34 has been classified from long term debt as of December 31, 2018 since the Company was not in compliance with its banks covenants as of this date.
|
NOTE 7:- |
OTHER PAYABLE AND ACCRUED EXPENSES
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Accrued payroll including amounts due to government authorities
|
968
|
938
|
||||||
Provision for vacation and other employee benefits
|
1,524
|
1,315
|
||||||
Accrued expenses
|
378
|
458
|
||||||
Provision for contingent liabilities (Note 11d)
|
42
|
191
|
||||||
Other liabilities
|
206
|
475
|
||||||
3,118
|
3,377
|
NOTE 8:- |
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES
|
Annual interest
|
||||||||||||
rate at
|
||||||||||||
December 31
|
December 31,
|
|||||||||||
2019
|
2019
|
2018
|
||||||||||
Linkage terms:
|
||||||||||||
U.S. dollar
|
3.5% - 5%
|
|
381
|
503
|
||||||||
NIS - Fix interest rate
|
5% - 5.5%
|
|
664
|
221
|
||||||||
1,045
|
724
|
|||||||||||
Less - current maturities
|
(658
|
)
|
(416
|
)
|
||||||||
387
|
308
|
Long-term loan
|
||||
2020
|
658
|
|||
2021
|
145
|
|||
2022
|
145
|
|||
2023
|
97
|
|||
1,045
|
NOTE 9:- |
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.
|
c. |
Expenses (income) recorded in respect of the unfunded liability for employee severance payments for the years ended December 31, 2019, 2018, and 2017 were $57, $(20) and $87, respectively.
|
NOTE 10:-
|
LEASES
|
a. |
The components of operating lease costs were as follows:
|
Year ended December 31, 2019
|
||||
Operating lease cost
|
$
|
12,462
|
||
Sublease income
|
(17
|
)
|
||
Total net lease costs
|
$
|
12,445
|
b. |
Supplemental balance sheet information related to operating leases is as follows:
|
As of December 31, 2019
|
||||
Operating lease ROU assets
|
$
|
2,490
|
||
Operating lease liabilities, current
|
$
|
1,383
|
||
Operating lease liabilities, long-term
|
$
|
1,094
|
||
Weighted average remaining lease term (in years)
|
1.49
|
|||
Weighted average discount rate
|
3.72
|
%
|
c. |
Future lease payments under operating leases as of December 31, 2019, are as follows:
|
As of December 31, 2019
|
||||
|
||||
2020
|
$
|
1,203
|
||
2021
|
1,102
|
|||
2022
|
242
|
|||
2023
|
14
|
|||
2024
|
2
|
|||
|
||||
Total undiscounted lease payments
|
$
|
2,563
|
||
Less: imputed interest
|
(86
|
)
|
||
|
||||
Present value of lease liabilities
|
$
|
2,477
|
NOTE 11:- |
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.
|
c. |
Indemnification agreement:
|
d. |
Contingent Liabilities:
|
NOTE 12:- |
SHAREHOLDERS' EQUITY
|
a. |
Authorized, issued and outstanding share capital in historical terms is as follows:
|
Authorized
|
Issued and outstanding
|
|||||||||||
December 31
|
December 31,
|
|||||||||||
2019 and 2018
|
2019
|
2018
|
||||||||||
Number of shares
|
||||||||||||
Ordinary shares of par value NIS 3.0 each
|
10,000,000
|
4,380,268
|
2,028,552
|
b. |
Stock Option Plan:
|
Number of options
|
Weighted-average exercise
price
|
Weighted- average remaining contractual life
(in months)
|
Aggregate intrinsic
value
(in thousands)
|
|||||||||||||
Outstanding at January 1, 2019
|
60,857
|
4.17
|
102
|
-
|
||||||||||||
Granted
|
62,662
|
5.12
|
111
|
12
|
||||||||||||
Outstanding at December 31, 2019
|
123,519
|
4.65
|
107
|
12
|
||||||||||||
Exercisable at December 31, 2019
|
25,022
|
4.17
|
102
|
-
|
NOTE 12:- |
SHAREHOLDERS' EQUITY (Cont.)
|
NOTE 13:- |
BASIC AND DILUTED NET EARNINGS PER SHARE
|
Year ended
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Numerator:
|
||||||||||||
Loss attributable to Eltek Ltd shareholders'
|
1,793
|
(2,607
|
)
|
(3,775
|
)
|
|||||||
Denominator:
|
||||||||||||
Denominator for basic profit (loss) per share weighted-average number of shares outstanding
|
3,734,189
|
2,028,552
|
2,028,552
|
|||||||||
Effect of diluting securities:
|
||||||||||||
Employee stock options
|
128
|
-
|
-
|
|||||||||
Denominator for diluted profit (loss) per share - adjusted weighted average shares and assumed exercises
|
3,734,317
|
2,028,552
|
2,028,552
|
a. |
Customers who accounted for over 10% of the total consolidated revenues:
|
Year ended
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Customer A - Sales of manufactured products
|
19.5
|
%
|
12.0
|
%
|
14.6
|
%
|
||||||
Customer B - Sales of manufactured products
|
11.5
|
%
|
9.3
|
%
|
10.2
|
%
|
b. |
Revenues by geographic areas:
|
Israel
|
19,659
|
18,940
|
19,730
|
|||||||||
North America
|
6,434
|
6,973
|
5,219
|
|||||||||
Netherlands
|
2,898
|
3,302
|
2,407
|
|||||||||
Europe
|
1,129
|
1,997
|
2,016
|
|||||||||
India
|
3,809
|
2,239
|
2,362
|
|||||||||
Others
|
865
|
488
|
1,020
|
|||||||||
34,794
|
33,939
|
32,754
|
NOTE 15:- |
FINANCIAL EXPENSES, NET
|
Year ended
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Interest on long-term banks
|
19
|
152
|
54
|
|||||||||
Bank charges and short-term credit
|
287
|
232
|
118
|
|||||||||
Foreign exchange loss, net
|
105
|
24
|
75
|
|||||||||
Other financing expenses, net
|
29 |
67
|
51
|
|||||||||
440
|
475
|
298
|
NOTE 16:- |
OTHER INCOME (LOSS), NET
|
NOTE 17:- |
TAXES ON INCOME
|
a. |
Tax laws applicable to the Company:
|
NOTE 17:- |
TAXES ON INCOME (Cont.)
|
NOTE 17:- |
TAXES ON INCOME (Cont.)
|
b. |
Tax rates applicable to the Group:
|
1. |
In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24%
(instead of 25%) effective from January 1, 2017 and to 23% effective from January 1, 2018.
|
2. |
The tax rates of the Company's non-Israeli subsidiaries range between 28% - 30%.
|
3. |
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the "Act"), which among other provisions, reduced the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018.
|
c. |
Carryforward losses for tax purposes and tax credits carryforwards:
|
d. |
Income tax assessments:
|
e. |
Profit before tax and income tax expense included in the consolidated statements of comprehensive income:
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Income (loss) before income tax expense:
|
||||||||||||
Israel
|
1,741
|
(2,663
|
)
|
(3,701
|
)
|
|||||||
Foreign jurisdictions
|
129
|
119
|
-
|
|||||||||
1,870
|
(2,544
|
)
|
(3,701
|
)
|
||||||||
Current tax expense:
|
||||||||||||
Israel
|
-
|
14
|
-
|
|||||||||
Foreign jurisdictions
|
32
|
49
|
74
|
|||||||||
32
|
63
|
74
|
||||||||||
Deferred taxes:
|
||||||||||||
Israel
|
45
|
-
|
-
|
|||||||||
45
|
-
|
-
|
||||||||||
Income tax expense
|
77
|
63
|
74
|
NOTE 17:- |
TAXES ON INCOME (Cont.)
|
f. |
Reconciliation of the theoretical income tax benefit to the actual income tax expense:
|
Year ended
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Income (loss) before income tax expense as reported in the consolidated statements of comprehensive income
|
1,870
|
(2,544
|
)
|
(3,701
|
)
|
|||||||
Statutory tax rates
|
23
|
%
|
23
|
%
|
24
|
%
|
||||||
Theoretical tax expense (benefit) calculated
|
430
|
(585
|
)
|
(888
|
)
|
|||||||
Losses and other items for which a valuation allowance was provided
|
(38
|
) |
271
|
1,218
|
||||||||
Change in effective on corporate tax rate
|
-
|
-
|
(49
|
)
|
||||||||
Realization of carryforward tax losses for which valuation allowance was provided
|
(250
|
)
|
-
|
-
|
||||||||
Tax benefit arising from "Preferred enterprises"
|
(109
|
)
|
189
|
296
|
||||||||
Foreign tax rate differential in subsidiaries
|
22
|
22
|
44
|
|||||||||
Non-deductible items and others
|
22
|
166
|
(547
|
)
|
||||||||
Total
|
(353
|
)
|
648
|
962
|
||||||||
Income tax expense
|
77
|
63
|
74
|
NOTE 17:- |
TAXES ON INCOME (Cont.)
|
g. |
Deferred tax assets and liabilities:
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards (in Israel)
|
3,851
|
3,892
|
||||||
Capital loss carryforwards (in Israel)
|
2,073
|
2,137
|
||||||
Reserves, operating lease and others
|
637
|
228
|
||||||
Tax credit carryforward
|
1,085
|
992
|
||||||
Total gross deferred taxes
|
7,646
|
7,249
|
Less valuation allowance
|
(6,298
|
)
|
(6,160
|
)
|
||||
Deferred tax assets, net
|
1,348
|
1,089
|
||||||
Deferred tax liabilities:
|
||||||||
Undistributed income of subsidiaries
|
(232
|
)
|
(212
|
)
|
||||
Property and equipment, and operating lease
|
(1,161
|
)
|
(877
|
)
|
||||
Total deferred tax liabilities
|
(1,393
|
)
|
(1,089
|
)
|
||||
Net deferred tax liabilities
|
(45
|
)
|
-
|
NOTE 17:- |
TAXES ON INCOME (Cont.)
|
h. |
Accounting for uncertainty in income taxes:
|
NOTE 18:- |
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
|
NOTE 19:- |
RELATED PARTY BALANCES AND TRANSACTIONS
|
a. |
Balances with related parties:
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Trade accounts receivable
|
47
|
158
|
||||||
Trade accounts payable
|
115
|
170
|
||||||
Controlling shareholder loans
|
3,472
|
2,668
|
b. |
Transactions with related parties:
|
Year ended
December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Revenues
|
226
|
821
|
604
|
|||||||||
Purchases, general and administrative expenses
|
323
|
313
|
469
|
|||||||||
Interest from Loans from controlling shareholder
|
121
|
113
|
-
|
NOTE 19:- |
RELATED PARTY BALANCES AND TRANSACTIONS (Cont.)
|
NOTE 19:- |
RELATED PARTY BALANCES AND TRANSACTIONS (Cont.)
|
a. |
Eltek pays Nistec monthly managements fees of NIS 90 ($26).
|
b. |
Subject to Company’s reimbursement policy approved by the Audit Committee on May 15, 2016, Mr. Nissan shall receive reimbursement of travel expenses (other than food and beverage expenses) while traveling internationally on behalf of
the Company, provided that such reimbursement shall not exceed an aggregate amount of NIS 10 per calendar quarter.
|
c. |
Mr. Nissan shall receive reimbursement of food and beverage expenses while traveling internationally on behalf of the Company, against receipts, in accordance with the Israeli Income Tax Regulations (Deduction of Certain Expenses)
1972.
|
a. |
The extension of the Directors and Officers Indemnity Agreement with Mr. Yitzhak Nissan.
|
b. |
The extension of the Exculpation Letter for an additional three (3) year period
|
c. |
The application of the Company’s directors and officers liability insurance policy with respect to Mr. Yitzhak Nissan
|
d. |
The revised terms of employment of Yitzhak Nissan's daughter who is employed by the Company as special project manager.
|
ELTEK LTD.
|
|||
By:
|
/s/ Eli Yaffe
|
||
Name:
|
Eli Yaffe
|
||
Title:
|
Chief Executive Officer
|
||
By:
|
/s/ Alon Mualem
|
||
Name:
|
Alon Mualem
|
||
Title:
|
Chief Financial Officer
|