|
☐ |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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||
Ordinary Shares, NIS 0.03 Par Value
|
MTSL
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Nasdaq Capital Market
|
Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Emerging growth company ☐
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U.S. GAAP ☒
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International Financial Reporting Standards as issued by the International Accounting Standards Board ☐
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Other ☐
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Page
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4
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||
4
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||
4
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||
4
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||
A.
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Selected Financial Data
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4
|
B.
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Capitalization and Indebtedness
|
5
|
C.
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Reasons for the Offer and Use of Proceeds
|
5
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D.
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Risk Factors
|
5
|
18 | ||
A.
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History and Development of the Company
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18
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B.
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Business Overview
|
19 |
C.
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Organizational Structure
|
22 |
D.
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Property, Plants and Equipment
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22 |
22 | ||
22 | ||
A.
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Operating Results
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22 |
B.
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Liquidity and Capital Resources
|
28 |
C.
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Research and Development
|
33 |
D.
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Trend Information
|
34 |
E.
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Off-Balance Sheet Arrangements
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35 |
F.
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Tabular Disclosure of Contractual Obligations
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35 |
35 | ||
A.
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Directors and Senior Management
|
35 |
B.
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Compensation
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37 |
C.
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Board Practices
|
39 |
D.
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Employees
|
48 |
E.
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Share Ownership
|
49 |
51 | ||
A.
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Major Shareholders
|
51 |
B.
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Related Party Transactions
|
53 |
C.
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Interests of Experts and Counsel
|
54 |
54
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||
A.
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Consolidated Statements and Other Financial Information
|
54 |
B.
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Significant Changes
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54 |
55 | ||
A.
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Offer and Listing Details
|
55 |
B.
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Plan of Distribution
|
55 |
C.
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Markets
|
55 |
D.
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Selling Shareholders
|
55 |
E.
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Dilution
|
55 |
F.
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Expense of the Issue
|
55 |
56 | ||
A.
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Share Capital
|
56 |
B.
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Memorandum and Articles of Association
|
56 |
C.
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Material Contracts
|
57 |
D.
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Exchange Controls
|
57 |
E.
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Taxation
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57 |
F.
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Dividend and Paying Agents
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65 |
G.
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Statement by Experts
|
65 |
H.
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Documents on Display
|
65 |
I.
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Subsidiary Information
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65 |
65 | ||
66 |
66 | ||
66 | ||
66 | ||
66 | ||
67 | ||
67 | ||
67 | ||
68 | ||
68 | ||
68 | ||
68 | ||
68 | ||
69 | ||
69 | ||
69 | ||
69 | ||
70 | ||
71 |
Statement of Operations Data:
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||||||||||||||||||||
Year Ended December 31,
|
||||||||||||||||||||
2019
|
2018
|
2017
|
2016
|
2015
|
||||||||||||||||
(U.S. dollars in thousands, except share and per share data)
|
||||||||||||||||||||
Revenues
|
$
|
5,193
|
$
|
5,861
|
$
|
6,773
|
$
|
7,551
|
$
|
7,695
|
||||||||||
Cost of revenues
|
1,857
|
2,149
|
2,058
|
2,708
|
3,068
|
|||||||||||||||
Gross profit
|
3,336
|
3,712
|
4,715
|
4,843
|
4,627
|
|||||||||||||||
Research and development
|
545
|
825
|
1,645
|
1,754
|
1,278
|
|||||||||||||||
Selling and marketing
|
817
|
1,471
|
1,529
|
1,765
|
2,005
|
|||||||||||||||
General and administrative
|
2,144
|
2,239
|
1,966
|
2,207
|
2,583
|
|||||||||||||||
Operating loss
|
(170
|
)
|
(823
|
)
|
(425
|
)
|
(883
|
)
|
(1,239
|
)
|
||||||||||
Financial income (expenses), net
|
(18
|
)
|
(17
|
)
|
14
|
2
|
6
|
|||||||||||||
Loss before taxes on income
|
(188
|
)
|
(840
|
)
|
(411
|
)
|
(881
|
)
|
(1,233
|
)
|
||||||||||
Taxes on income (benefit), net
|
4
|
46
|
(9
|
)
|
63
|
66
|
||||||||||||||
Net loss from continuing operations
|
(192
|
)
|
(886
|
)
|
(402
|
)
|
(944
|
)
|
(1,299
|
)
|
||||||||||
Net income (loss) from discontinued operations
|
57
|
(284
|
)
|
(1,366
|
)
|
(4,277
|
)
|
(3,440
|
)
|
|||||||||||
Net loss
|
$
|
(135
|
)
|
$
|
(1,170
|
)
|
$
|
(1,768
|
)
|
$
|
(5,221
|
)
|
$
|
(4,739
|
)
|
|||||
Basic and diluted net loss per share from continuing operations
|
$
|
(0.04
|
)
|
$
|
(0.26
|
)
|
$
|
(0.13
|
)
|
$
|
(0.33
|
)
|
$
|
(0.54
|
)
|
|||||
Basic and diluted net loss per share from discontinued operations
|
$
|
0.01
|
$
|
(0.08
|
)
|
$
|
(0.46
|
)
|
$
|
(1.52
|
)
|
$
|
(1.44
|
)
|
||||||
Basic and diluted net loss per share
|
$
|
(0.03
|
)
|
$
|
(0.34
|
)
|
$
|
(0.59
|
)
|
$
|
(1.85
|
)
|
$
|
(1.98
|
)
|
|||||
Weighted average number of ordinary shares used in computing basic net loss per share
|
5,013,374
|
3,435,161
|
2,991,547
|
2,817,427
|
2,391,664
|
|||||||||||||||
Weighted average number of ordinary shares used in computing diluted net loss per share
|
5,013,374
|
3,435,161
|
2,991,547
|
2,817,427
|
2,391,664
|
As of December 31,
|
||||||||||||||||||||
2019
|
2018
|
2017
|
2016
|
2015
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Working capital (deficiency)*
|
$
|
503
|
$
|
(376
|
)
|
$
|
(1,474
|
)
|
$
|
(2,736
|
)
|
$
|
(737
|
)
|
||||||
Total assets
|
8,043
|
7,523
|
8,646
|
12,288
|
22,024
|
|||||||||||||||
Shareholders’ equity
|
3,105
|
2,403
|
1,712
|
1,860
|
6,149
|
|
• |
demand for our products;
|
|
• |
ability to retain existing customers;
|
|
• |
changes in our pricing policies or those of our competitors;
|
|
• |
new product announcements by us and our competitors;
|
|
• |
the number, timing and significance of product enhancements;
|
|
• |
product life cycles;
|
|
• |
our ability to develop, introduce and market new and enhanced products on a timely basis;
|
|
• |
changes in the level of our operating expenses;
|
|
• |
budgeting cycles of our customers;
|
|
• |
customer order deferrals in anticipation of enhancements or new products that we or our competitors offer;
|
|
• |
changes in our strategy;
|
|
• |
seasonal trends and general domestic and international economic and political conditions, among others; and
|
|
• |
currency exchange rate fluctuations and economic conditions in the geographic areas where we operate.
|
|
• |
the impact of recessionary environments in multiple foreign markets;
|
|
• |
costs of localizing products for foreign markets;
|
|
• |
foreign currency exchange rate fluctuations
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|
• |
longer receivables collection periods and greater difficulty in accounts receivable collection;
|
|
• |
unexpected changes in regulatory requirements;
|
|
• |
difficulties and costs of staffing and managing foreign operations;
|
|
• |
reduced protection for intellectual property rights in some countries;
|
|
• |
potentially adverse tax consequences; and
|
|
• |
political and economic instability.
|
|
• |
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 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;
|
|
• |
announcements by third parties of significant claims or proceedings against us;
|
|
• |
changes in the status of our intellectual property rights;
|
|
• |
additions or departures of key personnel;
|
|
• |
future sales of our ordinary shares; and
|
|
• |
general stock market prices and volume fluctuations.
|
A. |
History and Development of the Company
|
|
• |
Invoice Management - Provides enterprises with a simplified and automated tool for monitoring, managing, verifying and routing invoices for payment or correction. Invoice items originate from
various sources, which include the telecommunication service provider, the devices used such as calling cards, mobile lines, landlines, circuits as well as services and equipment provided. Our solution provides an analysis of all
invoice data against the agreement between the enterprise and the service provider, real device usage, online inventory, as well as additional equipment or services. This reduces overhead costs caused by invoice and contract
discrepancies, disputes and errors.
|
|
• |
UC&C Analytics (eXsight) - Collection of call data records, Instant messaging, app sharing, video, presence information directly from the UC&C
provider, including rates and pricing of calls, serviceability, employee productivity, and generation of insights.
|
|
• |
Asset Management
|
|
• |
Cable Management
|
|
• |
Private Calls Management
|
|
• |
Quality of Service
|
|
• |
Contact Center Analysis
|
|
• |
Provision Engine
|
|
• |
VOIP Quality of Service
|
|
• |
Proactive Alerts
|
|
• |
Tenant Resale
|
|
• |
Work Order Management
|
|
• |
Procurement Management
|
|
• |
invoice and inventory audit and recovery;
|
|
• |
contract negotiations and strategic sourcing;
|
|
• |
discovery and road mapping services;
|
|
• |
process diagnosis and solution design;
|
|
• |
wireless optimization; and
|
|
• |
creation and implementation of IT governance, risk and compliance policies.
|
Year Ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Revenues:
|
||||||||||||
Telecom Product sales
|
17.8
|
%
|
17.4
|
%
|
19.3
|
%
|
||||||
Telecom Services
|
82.2
|
%
|
82.6
|
80.7
|
||||||||
Total revenues
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
Cost of revenues:
|
||||||||||||
Telecom Product sales
|
7.1
|
7.3
|
6.1
|
|||||||||
Telecom Services
|
28.6
|
29.3
|
24.3
|
|||||||||
Total cost of revenues
|
35.7
|
36.7
|
30.4
|
|||||||||
Gross profit
|
64.2
|
63.3
|
69.6
|
|||||||||
Selling and marketing
|
15.7
|
25.1
|
22.6
|
|||||||||
Research and development
|
10.5
|
14.1
|
24.3
|
|||||||||
General and administrative
|
41.3
|
38.2
|
29.0
|
|||||||||
Operating loss
|
(3.3
|
)
|
(14.0
|
)
|
(6.3
|
)
|
||||||
Financial income (expenses), net
|
(0.3
|
)
|
(0.3
|
)
|
0.2
|
|||||||
Loss before taxes on income
|
(3.6
|
)
|
(14.3
|
)
|
(6.1
|
)
|
||||||
Taxes on income (tax benefit)
|
0.08
|
0.8
|
(0.1
|
)
|
||||||||
Loss from continuing operations
|
(3.7
|
)
|
(15.1
|
)
|
(5.9
|
)
|
||||||
Net loss from discontinued operations
|
1.1
|
(4.8
|
)
|
(20.2
|
)
|
|||||||
Loss
|
(2.6
|
)
|
(20.0
|
)
|
(26.1
|
)
|
Year ended
December 31, |
Israeli inflation
rate % |
NIS devaluation (appreciation)
rate % |
Israeli inflation adjusted for devaluation (appreciation) %
|
|||||||||
2015
|
(1.0
|
)
|
0.3
|
(1.3
|
)
|
|||||||
2016
|
(0.2
|
)
|
(1.5
|
)
|
1.3
|
|||||||
2017
|
0.4
|
(9.0
|
)
|
9.4
|
||||||||
2018
|
0.8
|
8.1
|
(7.3
|
)
|
||||||||
2019
|
0.6
|
(7.7
|
)
|
7.1
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
(in US$ thousands)
|
||||||||||||
Net cash (used in) operating activities from continuing operations
|
(130
|
)
|
(1,598
|
)
|
(384
|
)
|
||||||
Net cash provided by (used in) investing activities
|
(60
|
)
|
(14
|
)
|
91
|
|||||||
Net cash provided by financing activities
|
790
|
1,541
|
400
|
|||||||||
Net increase (decrease) in cash and cash equivalents
|
582
|
(15
|
)
|
66
|
||||||||
Cash and cash equivalents at beginning of period
|
1,150
|
1,165
|
1,099
|
|||||||||
Cash and cash equivalents at end of period
|
1,732
|
1,150
|
1,165
|
Contractual Obligations
|
Payments due by period
|
|||||||||||||||||||
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
||||||||||||||||
(U.S. dollars in thousands)
|
||||||||||||||||||||
Accrued severance pay*
|
831
|
-
|
-
|
-
|
831
|
|||||||||||||||
Total
|
831
|
-
|
-
|
-
|
831
|
Name
|
Age
|
Position with the Company
|
||
Haim Mer
|
72
|
Chairman of the Board of Directors
|
||
Roy Hess
|
58
|
Chief Executive Officer
|
||
Ofira Bar
|
39
|
Chief Financial Officer
|
||
Oren Kaplan
|
46
|
VP Sales and Marketing
|
||
Scott Burell (1) (2)
|
55
|
Director
|
||
Isaac Onn
|
68
|
Director
|
||
Ronen Twito (1) (2)
|
45
|
Outside Director
|
||
Varda Trivaks (1) (2)
|
63
|
Outside Director
|
Name and Position
|
Salary & Social Benefits (1)
|
Bonus
|
Share-Based Payment (2)
|
Other Compensation (3)
|
Total
|
|||||||||||||||
|
(U.S. Dollars) (4)
|
|||||||||||||||||||
Roy Hess, Chief Executive Officer(5)
|
232,553
|
-
|
47,000
|
-
|
279,553
|
|||||||||||||||
Ofira Bar, Chief Financial Officer
|
148,238
|
-
|
-
|
-
|
148,238
|
|||||||||||||||
Haim Mer, Chairman of the board of directors (8)
|
84,073
|
-
|
-
|
-
|
84,073
|
|||||||||||||||
Oren Kaplan, VP Sales& Marketing
|
40,959
|
1,274
|
-
|
5,259
|
47,492
|
|||||||||||||||
Varda Trivaks, Chairwoman of the audit and compensation committees
|
15,165
|
-
|
-
|
-
|
15,165
|
(1) |
Represents the office holder’s gross salary or consulting fees plus payment of mandatory social benefits made by the company on behalf of such office holder, to the extent applicable. Such benefits may include, to the extent
applicable to the executive, payments, contributions and/or allocations for savings funds (e.g., Managers’ Life Insurance Policy), education funds (referred to in Hebrew as “keren hishtalmut”), pension, severance, risk insurances
(e.g., life, or work disability insurance), payments for social security, tax gross-up payments, vacation, car, phone, convalescence pay and other benefits and perquisites consistent with our policies.
|
(2) |
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.
|
(3) |
Represents the other benefits to such officer, which includes car expenses, including lease costs, gas and maintenance, provided to the officers.
|
(4) |
Translated from NIS into U.S. dollars based on the average representative rate of exchange between the NIS and the U.S. dollar as reported by the Bank of Israel in the year ended December 31, 2019.
|
(5) |
The company and Mr. Hess agreed that effective July 1, 2019, he will devote 50% of his time to the affairs of our company.
|
(8) |
In 2019, we paid Mr. Mer a monthly fee of $7,000 for his services as the Chairman of the Board. Mr. Mer devotes 20% of his time to our company.
|
|
• |
Monthly Salary and Benefits: A base monthly salary of NIS 75,000 (approximately $21,500) In addition, Mr. Hess is entitled to twenty-four (24) vacation days per year and to sick leave and
recuperation pay in accordance with applicable law. Mr. Hess agreed to be subject to Section 14 of the Israeli Severance Pay Law and in connection with this arrangement we will contribute: (a) an amount equal to 8.33% of Mr. Hess’s
fixed monthly salary towards severance pay liability in lieu of paying the full amount of severance pay upon termination of employment, (b) an amount equal to 5% of Mr. Hess’s fixed monthly salary towards manager’s insurance, and (c)
the lower of: (i) up to 2.5% of Mr. Hess’s fixed monthly salary or (ii) an amount required in order to ensure 75% of Mr. Hess’s salary for disability insurance. MTS will also contribute 7.5% Mr. Hess’s fixed monthly salary, up to the
tax ceiling, to an education fund;
|
|
• |
Travel and other Expenses: Mr. Hess is entitled to reimbursement of travel and other business expenses based on our policies and to NIS 300 per month for travel expenses;
|
|
• |
Option Grant: Mr. Hess received a grant of options to acquire 116,667 ordinary shares under our 2003 Israeli Share Option Plan. These options vest over a period of four years (25% vesting on
October 1, 2018 and an additional 12.5% vesting every six months for the following three years), subject to the fulfillment of a condition to vesting. The condition to vesting will be fulfilled in the event the closing price
of our ordinary shares is equal to or higher than a price per share of $4.5 for a consecutive period of three months. The exercise price per share of the options is equal to $2.16 (the closing
price per share of our ordinary shares on the NASDAQ Capital Market on September 28, 2017, the date of our Board of Directors’ approval of the terms). In addition, in the event of an M&A or reverse merger transaction (where
current shareholders will hold less than 50% of the shares of the company) and if Mr. Hess will not continue to serve as the CEO of the company (or is released during the six month period following the closing of the transaction), 50%
of all of Mr. Hess’s unvested options will become vested. The options are due to expire on October 1, 2027, unless earlier terminated pursuant to the terms of our 2003 Israeli Share Option Plan.
|
|
• |
Term and Termination: During the first six months of employment, Mr. Hess is required to provide, and will be entitled to receive, a two-month prior resignation or termination notice, as the case may be; provided, however, that under
certain circumstances, including a material breach by Mr. Hess of his employment agreement, we may terminate the employment agreement without notice. Following the first six months of employment, such period will be extended to three
months; and
|
|
• |
Indemnification and Liability Insurance: Mr. Hess will be entitled to receive an indemnification letter in the form identical to the form provided to our other officers and directors, attached as Annex A to the proxy statement
distributed to our shareholders in connection with our 2011 annual general meeting of shareholders and to be included in our directors and officers liability insurance policy, whose terms were recently approved in connection with our
2014 annual general meeting of shareholders.
|
|
• |
an employment relationship;
|
|
• |
a business or professional relationship maintained on a regular basis;
|
|
• |
control; and
|
|
• |
service as an officer holder, excluding service as an outside director of a company that is offering its shares to the public for the first time.
|
|
• |
The interests of the directors and officers of our company will be as close as possible and in the closest possible conformity to the interests of our shareholders.
|
|
• |
We will be able to recruit and retain senior managers who have the ability to lead our company to business success and to confront the challenges we face.
|
|
• |
Our directors and officers will be motivated to achieve a high level of business performance without taking unreasonable risks;
|
|
• |
An appropriate balance will be created between the various components of compensation - fixed components vs. variable components, short-term vs. long-term, and compensation in cash vs. equity based compensation.
|
|
• |
The overall compensation of each employee and especially of our officers is based on a number of components, so that each component rewards the employee for a different aspect of his
contribution to the company.
|
|
• |
Fixed base salary - intended to compensate the employee for the time spent in carrying out his work for the company and for execution of the ongoing tasks of his position on a daily basis. The base salary represents the employees'
skills on one hand (such as: experience, job knowledge, expertise, education, professional qualifications, etc.) and on the other hand, the job requirements and the scope of authority and responsibilities of the employee.
|
|
• |
Social and Incidental Benefits - some of which are statutorily defined (pension savings, severance contributions, loss of work capacity insurance, vacation, sick leave, etc.), some of which reflect standard work market practice (such
as savings in education funds in Israel while maximizing the inherent advantages for the employee in the tax benefits offered by the State of Israel) and some of which are intended to supplement the fixed salary and to compensate the
employee for expenses incurred in the performance of his work (such as travel costs).
|
|
• |
Variable, Performance Based Rewards (Annual Bonus, Commissions and Grants) - Is intended to compensate the employee for his achievements and contribution to our company’s goals during the period for which the variable compensation is
paid. In general, the weight ascribed to this component as a part of the total compensation package increases as the employee is in a more senior position.
|
|
• |
Equity based compensation - is intended to tie between the maximization of shareholders’ value as expressed in the value of our shares in the long-term and the compensation given to managers and employees of our company. We believe
that this compensation creates proximity between the interests of our employees and managers and our shareholders, and thus assists in motivating and retaining the key positions holders in our company.
|
Name
|
Number of Ordinary Shares Beneficially
Owned (1)
|
Percentage of
Outstanding Ordinary
Shares (2)
|
||||||
Haim Mer and Dora Mer
|
540,641
|
(3)
|
14.16
|
%
|
||||
All directors and executive officers as a group (8 persons)
|
540,641
|
14.16
|
%
|
(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 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 3,612,408 ordinary shares (excluding 1,800 ordinary shares held as treasury stock) issued and outstanding as of March 25, 2020 and on 2,008,772
preferred shares held by Alpha Capital, which are currently convertible into ordinary shares, subject to a 9.99% ownership restriction currently included in our Articles. Pursuant to our Articles, Alpha may vote its preferred shares, on
an as converted basis, subject to such 9.99% restriction
|
(3) |
Based upon a Schedule 13D/A filed with the SEC on August 24, 2017 and other information available to us. Mr. Haim Mer and his wife, Mrs. Dora Mer, are the record holders of 247,960 ordinary
shares and the beneficial owners of 290,742 ordinary shares through their controlling interest in Mer Ofekim Ltd., 1,923 ordinary shares through their controlling interest in Mer Services Ltd. and 16 ordinary shares through their
controlling interest in Mer & Co. (1982) Ltd. Mer Ofekim Ltd. is a private holding company, incorporated under the laws of the State of Israel. The address of its principal office is 25 Yoav Street, Tel Aviv, Israel. .Mr. Mer's
business address is 5 Ha'tzoref Street, Holon, Israel.
|
Name
|
Number of
Ordinary Shares Beneficially
Owned(1)
|
Percentage of
Outstanding
Ordinary Shares(2)
|
||||||
Haim Mer and Dora Mer
|
540,641
|
(3)
|
14.16
|
%
|
||||
Roger Challen
|
437,068
|
(4)
|
11.45
|
%
|
||||
Alpha Capital
|
381,461
|
(5)
|
9.99
|
%
|
|
(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 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 3,612,408 ordinary shares (excluding 1,800 ordinary shares held as treasury stock) issued and outstanding as of April 8, 2019 and on 2,008,772
preferred shares held by Alpha Capital, which are currently convertible into ordinary shares, subject to a 9.99% ownership restriction currently included in our Articles. Pursuant to our Articles, Alpha may vote its preferred shares, on
an as converted basis, subject to such 9.99% restriction.
|
|
(3) |
Based upon a Schedule 13D/A filed with the SEC on August 24, 2017 and other information available to us. Mr. Haim Mer and his wife, Mrs. Dora Mer, are the record holders of 247,960 ordinary
shares and the beneficial owners of 290,742 ordinary shares through their controlling interest in Mer Ofekim Ltd., 1,923 ordinary shares through their controlling interest in Mer Services Ltd. and 16 ordinary shares through their
controlling interest in Mer & Co. (1982) Ltd. Mer Ofekim Ltd. is a private holding company, incorporated under the laws of the State of Israel. The address of its principal office is 25 Yoav Street, Tel Aviv, Israel. .Mr. Mer's
business address is 5 Ha'tzoref Street, Holon, Israel.
|
|
(4) |
Based upon a Schedule 13D/A filed with the SEC on August 24, 2017. Mr. Challen is the beneficial owner of 437,068 ordinary shares through his controlling interest in the Info Group, Inc., a
Massachusetts corporation. The Info Group changed its name from AnchorPoint, Inc. to The Info Group, Inc. on December 31, 2008. The principal business address of Mr. Challen is 46 Park Street, Framingham, Massachusetts.
|
|
(5) |
Based upon a Schedule 13D filed with the SEC on November 21, 2019 and following the partially exercise of its greenshoe option in December 2019, Alpha Capital has the right to acquire
up to a further 622,807 shares of convertible preferred shares at a price of $1.14 per share, for a period ending April 30, 2020. The number of ordinary shares set forth in the table: (i) includes 175,439 Ordinary shares held by Alpha
Capital, (ii) includes 206,022 ordinary share Alpha Capital Anstalt is entitled to receive upon conversion of a portion of its Preferred Shares and (iii) does not include 416,785 Ordinary share Alpha Capital Anstalt is currently
prohibited from acquiring upon conversion of the remainder of its Preferred shares, due to the 9.99% blocker included in our Articles. The principal business address of Alpha Capital
Anstalt is Lettstrasse 32 9490 Vaduz, Liechtenstein.
|
B. |
Significant Changes
|
|
• |
deduction, under certain conditions, of purchases of know-how and patents over an eight-year period for tax purposes;
|
|
• |
right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli Industrial Companies; and
|
|
• |
deductions over a three-year period of expenses involved with the issuance and listing of shares on the Tel Aviv Stock Exchange or, on or after January 1, 2003, on a recognized stock market outside of Israel.
|
|
• |
broker-dealers,
|
|
• |
financial institutions,
|
|
• |
certain insurance companies,
|
|
• |
investors liable for alternative minimum tax,
|
|
• |
tax-exempt organizations,
|
|
• |
non-resident aliens of the United States or taxpayers whose functional currency is not the U.S. dollar,
|
|
• |
persons who hold the 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,
|
|
• |
investors that actually or constructively own 10% or more of our shares by vote or value, and
|
|
• |
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, for U.S. federal income tax purposes, a resident of the United States;
|
|
• |
a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any political subdivision thereof;
|
|
• |
an estate whose income is subject to U.S. federal income tax regardless of its source; or
|
|
• |
a trust that (a) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons or (b) has a valid election in effect under applicable U.S. Treasury regulations to be treated as
a U.S. person.
|
|
• |
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transaction and dispositions of the assets of the 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 the company are
being made only in accordance with authorizations of management and directors of the company; and
|
|
• |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
|
Year Ended December 31,
|
||||||||
Services Rendered
|
2019
|
2018
|
||||||
Audit (1)
|
$
|
75,000
|
$
|
65,000
|
||||
Audit Related
|
0
|
0
|
||||||
Tax
|
10,000
|
10,000
|
|
(1) |
Audit fees relate to audit services provided for each of the years shown in the table, including fees associated with the annual audit and reviews of our interim financial results, consultations on various accounting issues and audit
services provided in connection with other statutory or regulatory filings.
|
|
• |
The requirement to maintain a majority of independent directors, as defined under the NASDAQ Marketplace Rules. Instead, under Israeli law and practice, we are required to appoint at least two outside directors, within the meaning
of the Israeli Companies Law, to our board of directors. In addition, in accordance with the rules of the SEC and NASDAQ, we have the mandated three independent directors, as defined by the rules of the SEC and NASDAQ, on our audit
committee. See Item 6C. “Directors, Senior Management and Employees - Board Practices - Outside and Independent Directors.”
|
|
• |
The requirements regarding the directors’ nominations process. Instead, we follow Israeli law and practice in accordance with which our directors are recommended by our board of directors for election by our shareholders. See Item
6C. “Directors, Senior Management and Employees - Board Practices - Election of Directors.
|
|
• |
The requirement to obtain shareholder approval for the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a
public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company. Under Israeli law and practice, the approval of the board of directors is required for the
establishment or amendment of equity based compensation plans and private placements. Under Israeli regulations, Israeli companies whose shares have been publicly offered only outside of Israel or are listed for trade only on an
exchange outside of Israel, such as our company, are exempt from the Israeli law requirement to obtain shareholder approval for private placements of a 20% or more interest in the company. For the approvals and procedures required
under Israeli law and practice for an issuance that will result in a change of control of the company and acquisitions of the stock or assets of another company, see Item 6C. “Directors, Senior Management and Employee - Board Practices
- Approval of Related Party Transactions Under Israeli Law-Disclosure of Personal Interests of a Controlling Shareholder; Approval of Transactions with Controlling Shareholders” and Exhibit 2,2 to this Form 20-F.
|
Consolidated Financial Statements
|
|
Index to Consolidated Financial Statements
|
F-1
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated Balance Sheets
|
F-3 -F-4
|
Consolidated Statements of Operations
|
F-5
|
Consolidated Statements of Comprehensive Income
|
F-6
|
Consolidated Statements of Changes in Shareholders’ Equity
|
F-7 - F-8
|
Consolidated Statements of Cash Flows
|
F-9 - F-10
|
Notes to Consolidated Financial Statements
|
F-11 - F-33
|
(1)
|
Filed as Exhibit 2.1 to the Form 20-F for the Year Ended December 31, 2017, and incorporated herein by reference.
|
(2)
|
Filed as Exhibit B to Item IV of Exhibit 99.1 of the Registrant’s Report on Form 6-K for the month of July 2013 submitted on July 2, 2013, and incorporated herein by reference.
|
|
|
(3)
|
Filed as Appendix B to Item 1 of the Registrant’s Report on Form 6-K for the month of June 2006 submitted on June 23, 2006, and incorporated herein by reference
|
|
|
(4)
|
Filed as Exhibit 4.7 to the Form 20-F for the Year Ended December 31, 2017, and incorporated herein by reference.
|
|
|
(5)
|
Filed as Exhibit 4.8 to the Form 20-F for the Year Ended December 31, 2017, and incorporated herein by reference.
|
|
|
(6)
|
Filed as Exhibit 99.2 to the Registrant’s Report on Form 6-K for the month of September 2018 and submitted on September 7, 2018, and incorporated herein by reference.
|
|
|
(7)
|
Filed as Exhibit A to Exhibit 99.2 the Registrant’s Report on Form 6-K for the month of November 2019 submitted on November 20, 2019, and incorporated herein by reference.
|
|
* |
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not
filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
Page
|
|
F - 2
|
|
F - 3 - F - 4
|
|
F - 5
|
|
F - 6
|
|
F - 7 - F - 8
|
|
F - 9 - F - 10
|
|
F - 11 - F - 33
|
|
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
|
We have served as the Company's auditor since 1995.
|
Tel-Aviv, Israel
|
March 26, 2020
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
1,732
|
$
|
1,150
|
||||
Restricted cash
|
1,464
|
1,380
|
||||||
Trade receivables (net of allowance for doubtful accounts of $65 at December 31, 2019 and 2018)
|
499
|
604
|
||||||
Other accounts receivable and prepaid expenses (Note 3)
|
236
|
101
|
||||||
Assets of discontinued operations (Note 1b)
|
172
|
187
|
||||||
Total current assets
|
4,103
|
3,422
|
||||||
SEVERANCE PAY FUND
|
653
|
541
|
||||||
PROPERTY AND EQUIPMENT, NET (Note 4)
|
62
|
60
|
||||||
OTHER ASSETS:
|
||||||||
Intangible assets, net (Note 2i)
|
-
|
21
|
||||||
Goodwill
|
3,225
|
3,479
|
||||||
Total other assets
|
3,225
|
3,500
|
||||||
Total assets
|
$
|
8,043
|
$
|
7,523
|
March 26, 2020
|
/s/ Chaim Mer
|
/s/ Roy Hess
|
/s/ Ofira Bar
|
|||
Date of approval of the
|
Chaim Mer
|
Roy Hess
|
Ofira Bar
|
|||
financial statements
|
Chairman of the board
|
Chief Executive Officer
|
Chief Financial Officer and Interim
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Revenues
|
||||||||||||
Telecom services
|
$
|
4,273
|
$
|
4,843
|
$
|
5,467
|
||||||
Telecom product sales
|
920
|
1,018
|
1,306
|
|||||||||
Total revenues
|
5,193
|
5,861
|
6,773
|
|||||||||
Cost of revenues
|
||||||||||||
Telecom services
|
1,486
|
1,719
|
1,646
|
|||||||||
Telecom product sales
|
371
|
430
|
412
|
|||||||||
Total cost of revenues
|
1,857
|
2,149
|
2,058
|
|||||||||
Gross profit
|
3,336
|
3,712
|
4,715
|
|||||||||
Operating expenses
|
||||||||||||
Research and development
|
545
|
825
|
1,645
|
|||||||||
Selling and marketing
|
817
|
1,471
|
1,529
|
|||||||||
General and administrative
|
2,144
|
2,239
|
1,966
|
|||||||||
Total operating expenses
|
3,506
|
4,535
|
5,140
|
|||||||||
Operating loss
|
(170
|
)
|
(823
|
)
|
(425
|
)
|
||||||
Financial income (expense), net
|
(18
|
)
|
(17
|
)
|
14
|
|||||||
Loss before taxes on income
|
(188
|
)
|
(840
|
)
|
(411
|
)
|
||||||
Taxes on income (tax benefit), net (Note 7)
|
4
|
46
|
(9
|
)
|
||||||||
Net loss from continuing operations
|
(192
|
)
|
(886
|
)
|
(402
|
)
|
||||||
Income (loss) from discontinued operations
|
57
|
(284
|
)
|
(1,366
|
)
|
|||||||
Net loss
|
$
|
(135
|
)
|
$
|
(1,170
|
)
|
$
|
(1,768
|
)
|
|||
Net loss per share:
|
||||||||||||
Basic and diluted net loss per share from continuing operations
|
$
|
(0.04
|
)
|
$
|
(0.26
|
)
|
$
|
(0.13
|
)
|
|||
Basic and diluted net earnings per share from discontinued operations
|
0.01
|
(0.08
|
)
|
(0.46
|
)
|
|||||||
Basic and diluted net loss per share
|
$
|
(0.03
|
)
|
$
|
(0.34
|
)
|
$
|
(0.59
|
)
|
|||
Weighted average number of shares used in computing basic and diluted net loss per share
|
5,013,374
|
3,435,161
|
2,991,547
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Net loss
|
$
|
(135
|
)
|
$
|
(1,170
|
)
|
$
|
(1,768
|
)
|
|||
Other comprehensive income (loss):
|
||||||||||||
Available-for-sale investments:
|
||||||||||||
Change in net unrealized gains (loss)
|
-
|
-
|
(1
|
)
|
||||||||
Other comprehensive income (loss)
|
-
|
-
|
(1
|
)
|
||||||||
Comprehensive loss
|
$
|
(135
|
)
|
$
|
(1,170
|
)
|
$
|
(1,769
|
)
|
Share capital
|
Preferred shares
|
Additional
paid-in
|
Treasury |
Accumulated other
Comprehensive
|
Accumulated
|
||||||||||||||||||||||||||||||
Number **
|
Amount
|
Number
|
Amount
|
capital
|
shares
|
income (loss)
|
deficit
|
Total
|
|||||||||||||||||||||||||||
Balance as of January 1, 2017
|
2,897,314
|
23
|
-
|
-
|
26,569
|
(29
|
)
|
1
|
(24,704
|
)
|
1,860
|
||||||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
1
|
-
|
-
|
-
|
1
|
|||||||||||||||||||||||||||
Issuance of shares
|
200,803
|
2
|
-
|
-
|
398
|
-
|
-
|
-
|
400
|
||||||||||||||||||||||||||
Other comprehensive income (loss):
|
|||||||||||||||||||||||||||||||||||
Shareholders debt conversion into warrants
|
1,220
|
||||||||||||||||||||||||||||||||||
Exercise of stock options
|
20,767
|
*
|
)
|
||||||||||||||||||||||||||||||||
Unrealized gain of available-for-sale marketable securities, net
|
-
|
-
|
-
|
-
|
-
|
(1
|
)
|
-
|
(1
|
)
|
|||||||||||||||||||||||||
Foreign currency translation adjustments
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,768
|
)
|
(1,768
|
)
|
||||||||||||||||||||||||
Balance as of December 31, 2017
|
3,118,884
|
25
|
-
|
-
|
28,188
|
(29
|
)
|
-
|
(26,472
|
)
|
1,712
|
||||||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
90
|
-
|
-
|
-
|
90
|
||||||||||||||||||||||||||
Issuance of ordinary shares
|
175,439
|
2
|
-
|
-
|
186
|
-
|
-
|
-
|
188
|
||||||||||||||||||||||||||
Issuance of preferred shares
|
-
|
-
|
1,315,789
|
10
|
1,343
|
-
|
-
|
-
|
1,353
|
||||||||||||||||||||||||||
Effect of adoption of ASC 606
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
230
|
230
|
||||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,170
|
)
|
(1,170
|
)
|
||||||||||||||||||||||||
Balance as of December 31, 2018
|
3,294,323
|
27
|
1,315,789
|
10
|
29,807
|
(29
|
)
|
-
|
(27,412
|
)
|
2,403
|
Share capital
|
Preferred shares
|
Additional
|
Treasury |
Accumulated
|
||||||||||||||||||||||||||||
Number
|
Amount
|
Number
|
Amount
|
paid-in capital
|
shares
|
deficit
|
Total
|
|||||||||||||||||||||||||
Balance as of January 1, 2019
|
3,294,323
|
27
|
1,315,789
|
10
|
29,807
|
(29
|
)
|
(27,412
|
)
|
2,403
|
||||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
47
|
-
|
-
|
47
|
||||||||||||||||||||||||
Issuance of ordinary shares to Vexigo’s former shareholders- warrants exercise.
|
318,085
|
3
|
-
|
-
|
(3
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||||
Issuance of preferred shares
|
-
|
-
|
692,983
|
6
|
784
|
-
|
-
|
790
|
||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(135
|
)
|
(135
|
)
|
||||||||||||||||||||||
Balance as of December 31, 2019
|
3,612,408
|
30
|
2,008,772
|
16
|
30,635
|
(29
|
)
|
(27,547
|
)
|
3,105
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Cash flows from operating activities
|
||||||||||||
Net loss
|
$
|
(135
|
)
|
$
|
(1,170
|
)
|
$
|
(1,768
|
)
|
|||
Income (loss) from discontinued operations
|
57
|
(284
|
)
|
(1,366
|
)
|
|||||||
Net loss from continuing operations
|
(192
|
)
|
(886
|
)
|
(402
|
)
|
||||||
Adjustments required to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:
|
||||||||||||
Loss (gain) on sale of available-for-sale marketable securities
|
-
|
-
|
(5
|
)
|
||||||||
Depreciation and amortization
|
79
|
82
|
98
|
|||||||||
Impairment of goodwill
|
254
|
-
|
-
|
|||||||||
Increase (decrease) in deferred tax, net
|
(18
|
)
|
35
|
(20
|
)
|
|||||||
Stock-based compensation
|
47
|
90
|
1
|
|||||||||
Increase (decrease) in accrued severance pay, net
|
(3
|
)
|
(36
|
)
|
55
|
|||||||
Decrease (increase) in trade receivables, net
|
105
|
(40
|
)
|
60
|
||||||||
Increase in other accounts receivable and prepaid expenses
|
(135
|
)
|
(27
|
)
|
(18
|
)
|
||||||
Decrease in trade payables
|
(15
|
)
|
(144
|
)
|
(77
|
)
|
||||||
Increase (decrease) in accrued expenses and other liabilities
|
(77
|
)
|
111
|
125
|
||||||||
Increase (decrease) in deferred revenues
|
(91
|
)
|
(461
|
)
|
370
|
|||||||
Increase in restricted cash
|
(84
|
)
|
(322
|
)
|
(571
|
)
|
||||||
Net cash used in operating activities from continuing operations
|
(130
|
)
|
(1,598
|
)
|
(384
|
)
|
||||||
Net cash provided by (used in) operating activities from discontinued operations
|
(18
|
)
|
57
|
(38
|
)
|
|||||||
Net cash used in operating activity
|
(148
|
)
|
(1,541
|
)
|
(422
|
)
|
||||||
Cash flows from investing activities
|
||||||||||||
Purchase of property and equipment
|
(60
|
)
|
(14
|
)
|
(50
|
)
|
||||||
Investment in available-for-sale marketable securities
|
-
|
-
|
(56
|
)
|
||||||||
Proceeds from sale of available-for-sale marketable securities
|
-
|
-
|
197
|
|||||||||
Net cash provided by (used in) investing activities from continuing operations
|
(60
|
)
|
(14
|
)
|
91
|
|||||||
Net cash used in investing activities from discontinued operations
|
-
|
(1
|
)
|
(3
|
)
|
|||||||
(60
|
)
|
(15
|
)
|
88
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Cash flows from financing activities
|
||||||||||||
Proceeds from issuance of shares
|
790
|
1,541
|
400
|
|||||||||
Net cash provided by financing activities from continuing operations
|
790
|
1,541
|
400
|
|||||||||
Increase (decrease) in cash and cash equivalents
|
582
|
(15
|
)
|
66
|
||||||||
Cash and cash equivalents at the beginning of the year
|
1,150
|
1,165
|
1,099
|
|||||||||
Cash and cash equivalents at the end of the year
|
$
|
1, 732
|
$
|
1,150
|
$
|
1,165
|
||||||
Supplemental disclosure of cash flows activities
|
||||||||||||
Cash paid during the year for income taxes
|
$
|
1
|
$
|
1
|
$
|
9
|
||||||
Non-cash activities:
|
||||||||||||
Shareholders debt conversion into warrants
|
$
|
-
|
$
|
-
|
$
|
1,220
|
|
a. |
Mer Telemanagement Solutions Ltd. (the "Company" or "MTS") was incorporated on December 27, 1995. MTS and its subsidiaries (the "Group") is a worldwide provider of telecom expense management (“TEM”), billing solutions and online
video advertising solutions and services.
|
|
b. |
Discontinued operations:
|
|
1. |
In March 2009, the Company discontinued the operations of TABS Brazil Ltda. its wholly owned subsidiary in Brazil.
|
|
2. |
In June 2018, the Company discontinued the operations of Vexigo ltd. a wholly owned subsidiary in Israel. Which was then sold to a third party.
|
Year ended December 31,
|
||||||||||||
2019
|
*)2018
|
|
2017
|
|||||||||
Revenue
|
$
|
301
|
$
|
794
|
$
|
1,853
|
||||||
Cost of revenues
|
255
|
1,034
|
1,453
|
|||||||||
Gross profit (loss)
|
46
|
(240
|
)
|
400
|
||||||||
Operating expenses (income)
|
(9
|
)
|
310
|
1,896
|
||||||||
Operating loss (income)
|
(55
|
)
|
550
|
1,496
|
||||||||
Financial income (expense), net
|
2
|
16
|
130
|
|||||||||
Gain on disposal of the discontinued operations
|
-
|
250
|
-
|
|||||||||
Total net loss (income) from discontinued operations
|
$
|
(57
|
)
|
$
|
284
|
$
|
1,366
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Cash and cash equivalents
|
$
|
170
|
$
|
146
|
||||
Trade receivables
|
-
|
37
|
||||||
Property and equipment, net
|
2
|
4
|
||||||
Total assets of discontinued operations
|
172
|
187
|
||||||
Trade payables
|
337
|
302
|
||||||
Accrued expenses and other liabilities
|
179
|
304
|
||||||
Total liabilities of discontinued operations
|
$
|
516
|
$
|
606
|
|
c. |
The Company has historically suffered recurring losses from its operating activities.
|
|
a. |
Use of estimates
|
|
b. |
Financial statements in United States dollars
|
|
c. |
Principles of consolidation
|
|
d. |
Cash equivalents
|
|
e. |
Restricted cash
|
|
f. |
Marketable securities
|
|
g. |
Property and equipment, net
|
%
|
|
Computers and peripheral equipment
|
33
|
Office furniture and equipment
|
3 - 20 (mainly 7)
|
Leasehold improvements
|
Over the shorter of the lease term or useful economic life
|
|
h. |
Impairment of long-lived assets
|
|
i. |
Intangible assets:
|
|
j. |
Goodwill
|
|
k. |
Severance pay:
|
|
l. |
Revenue recognition:
|
|
m. |
Research and development expenses:
|
|
n. |
Income taxes:
|
|
o. |
Accounting for share-based compensation:
|
Year ended December 31,
|
||||
Stock options
|
2017
|
|||
Expected volatility (1)
|
87.7
|
%
|
||
Risk-free interest (2)
|
2.435
|
%
|
||
Dividend yield (3)
|
0
|
%
|
||
Expected life (years) (4)
|
6.25
|
|
(1) |
The computation of expected volatility is based on realized historical share price volatility of the Company's stock.
|
|
(2) |
The risk-free interest rate is based on the yield from U.S. Treasury Bonds with an equivalent term;
|
|
(3) |
The dividend yield assumption is based on the Company's historical experience and expectation of future dividend payouts. The Company has historically not paid dividends and has no foreseeable plans to pay cash dividends in the
future.
|
|
(4) |
Expected term of options granted represents the period of time that options granted are expected to be outstanding and is estimated based on the Company's history.
|
|
p. |
Concentrations of credit risk:
|
|
q. |
Basic and diluted net earnings (loss) per share:
|
|
r. |
Derivatives instruments:
|
|
s. |
Comprehensive income (loss):
|
|
t. |
Treasury shares:
|
|
u. |
Impact of recently adopted accounting standards:
|
|
v. |
Impact of recently issued accounting standards:
|
|
1. |
In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU
2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill
allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after
December 15, 2019; early adoption is permitted. The Company does not expect that adoption of this standard will have a material impact on its consolidated financial statements.
|
|
2. |
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which requires the measurement and
recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of
credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019. The Company does not expect that adoption of this standard will have a material
impact on its consolidated financial statements.
|
NOTE 3: |
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Government authorities
|
$
|
27
|
$
|
32
|
||||
Prepaid expenses
|
175
|
27
|
||||||
Lease deposits
|
-
|
29
|
||||||
Others
|
34
|
13
|
||||||
$
|
236
|
$
|
101
|
NOTE 4: |
PROPERTY AND EQUIPMENT
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Cost:
|
||||||||
Computers and peripheral equipment
|
$
|
627
|
$
|
1,048
|
||||
Office furniture and equipment
|
66
|
190
|
||||||
Leasehold improvements
|
-
|
31
|
||||||
693
|
1,269
|
|||||||
Accumulated depreciation:
|
||||||||
Computers and peripheral equipment
|
567
|
1,021
|
||||||
Office furniture and equipment
|
64
|
172
|
||||||
Leasehold improvements
|
-
|
16
|
||||||
Accumulated depreciation
|
631
|
1,209
|
||||||
Depreciated cost
|
$
|
62
|
$
|
60
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Employees and payroll accruals
|
$
|
307
|
$
|
304
|
||||
Institutions and income tax payable
|
143
|
130
|
||||||
Accrued expenses
|
1,857
|
1,950
|
||||||
Related parties
|
10
|
10
|
||||||
$
|
2,317
|
$
|
2,394
|
NOTE 6: |
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
a. |
Lease commitments:
|
|
b. |
Royalty commitments:
|
|
c. |
Claims and demands:
|
|
1. |
Claims related to discontinued operations:
|
|
2. |
The Israeli Government, through the Fund for Encouragement of Marketing Activities, awarded C. Mer Industries Ltd. ("C. Mer"), the former parent of the Company grants for participation in foreign marketing expenses, partially
related to the Company's marketing activities for the years 1996 - 1998. As of December 31, 2019, a provision which was recorded in prior years with respect to this demand was reversed since based on a legal opinion the statute of
limitation of this demand expired in 2019.
|
|
a. |
Israeli taxation:
|
|
1. |
Corporate tax rates:
|
|
2. |
Tax Benefits for Research and Development:
|
|
3. |
Tax assessments:
|
|
b. |
Income taxes on non-Israeli subsidiaries:
|
|
c. |
Tax Reform in the U.S:
|
|
d. |
Net operating loss carry-forwards:
|
|
e. |
Deferred income taxes:
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Deferred tax asset (liability):
|
||||||||
Tax loss carry-forwards
|
$
|
6,089
|
$
|
6,681
|
||||
Accruals for interest
|
283
|
283
|
||||||
R&D expenses
|
148
|
253
|
||||||
Allowances for doubtful accounts and accruals for employee benefits
|
76
|
74
|
||||||
Depreciation and amortization
|
16
|
25
|
||||||
Deferred tax asset before valuation allowance
|
6,612
|
7,316
|
||||||
Goodwill
|
(746
|
)
|
(791
|
)
|
||||
Valuation allowance
|
(6,029
|
)
|
(6,706
|
)
|
||||
Deferred tax liability, net
|
$
|
(163
|
)
|
$
|
(181
|
)
|
|
f. |
A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company and the actual tax expense as reported in the statements of operations is as
follows:
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Loss before taxes on income, net, as reported in the statements of operations from continuing operations
|
$
|
(188
|
)
|
$
|
(840
|
)
|
$
|
(411
|
)
|
|||
Tax rates
|
23
|
%
|
23
|
%
|
24
|
%
|
||||||
Theoretical tax benefit
|
$
|
(43
|
)
|
$
|
(193
|
)
|
$
|
(99
|
)
|
|||
Decrease in taxes resulting from:
|
||||||||||||
Non– deductible expenses
|
38
|
37
|
24
|
|||||||||
Loss and timing differences for which no deferred tax was provided
|
(2
|
)
|
187
|
50
|
||||||||
Tax adjustment in respect of different tax rate of subsidiaries
|
3
|
6
|
12
|
|||||||||
Changes in provision for uncertain tax positions
|
8
|
9
|
4
|
|||||||||
Taxes on income, net, as reported in the statements of operations
|
$
|
4
|
$
|
46
|
$
|
(9
|
)
|
|
g. |
Loss before income (expense) taxes is comprised as follows:
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Domestic
|
$
|
(217
|
)
|
$
|
(803
|
)
|
$
|
(351
|
)
|
|||
Foreign
|
29
|
(37
|
)
|
(60
|
)
|
|||||||
$
|
(188
|
)
|
$
|
(840
|
)
|
$
|
(411
|
)
|
|
h. |
Taxes on income are comprised as follows:
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Current
|
$
|
22
|
$
|
11
|
$
|
11
|
||||||
Deferred
|
(18
|
)
|
35
|
(20
|
)
|
|||||||
$
|
4
|
$
|
46
|
$
|
(9
|
)
|
||||||
Foreign
|
$
|
4
|
$
|
46
|
$
|
(12
|
)
|
|||||
Domestic
|
-
|
-
|
3
|
|||||||||
$
|
4
|
$
|
46
|
$
|
(9
|
)
|
|
i. |
As of December 31, 2019, the Company recorded a liability for unrecognized tax benefits of $156. A reconciliation of the opening and closing amounts of unrecognized tax benefits is as follows:
|
2019
|
2018
|
|||||||
Balance as of beginning of the year
|
$
|
148
|
$
|
139
|
||||
Cumulative translation adjustments and other
|
8
|
9
|
||||||
Balance at the end of the year
|
$
|
156
|
$
|
148
|
|
a. |
The Company receives certain services from C. Mer, a publicly traded company. Mr. Chaim Mer, the Company's chairman of the board and Mr. Isaac Ben Bassat, a former director of the Company, are members of the controlling group of
C. Mer. These services include reimbursement for shared expenses related to a commercial insurance policy.
|
|
b. |
From January 1, 2009 until September 2011, as part of the acquisition of certain assets and liabilities of AnchorPoint, Inc., the Company received certain services from Data Distributors Inc., a company controlled by Mr. Roger
Challen, a former director of the Company and the controlling shareholder of the Info Group Inc., a beneficial owner of 11.45% of the Company's Ordinary shares as of December 31, 2019. These services include reimbursement for shared
expenses, development and IT services, other administrative services. Expenses recognized with respect to the above-mentioned services were approximately $0, $10 and $2 for the years ended December 31, 2019, 2018 and 2017,
respectively. In addition, the Company rents an office in Powder Springs, Georgia, from Mr. Challen, under a month-to-month lease. In each of the years ended December 31, 2019, 2018 and 2017, the Company paid or accrued $56 with
respect to the above-mentioned rent expenses.
|
|
c. |
Balances and transactions with related parties were as follows:
|
|
1. |
Balances with related parties:
|
December 31,
|
||||||||
2019
|
2018
|
|||||||
Other accounts payable and accrued expenses (Note 5)
|
$
|
10
|
$
|
10
|
||||
|
2. |
Transactions with related parties:
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Amounts charged by related parties:
|
||||||||||||
Cost of revenues
|
$
|
44
|
$
|
37
|
$
|
33
|
||||||
Operating expenses
|
125
|
148
|
197
|
|||||||||
$
|
169
|
$
|
185
|
$
|
230
|
|
a. |
Share capital:
|
|
b. |
Share options:
|
|
c. |
A summary of option activity under the Company's stock option plans to its employees as of December 31, 2019, and changes during the year ended December 31, 2019, are as follows:
|
Number of options
|
Weighted-average exercise price
|
Weighted- average remaining contractual term (in years)
|
Aggregate intrinsic value
|
|||||||||||||
Outstanding at January 1, 2019
|
128,334
|
$
|
2.34
|
8.01
|
$
|
-
|
||||||||||
Granted
|
-
|
$
|
-
|
-
|
$
|
-
|
||||||||||
Exercised
|
-
|
$
|
-
|
-
|
$
|
-
|
||||||||||
Expired and forfeited
|
11,667
|
$
|
4.14
|
-
|
$
|
-
|
||||||||||
Outstanding at December 31, 2019
|
116,667
|
$
|
2.16
|
7.76
|
$
|
-
|
||||||||||
Exercisable at December 31, 2019
|
58,334
|
$
|
2.16
|
3.88
|
$
|
-
|
|
d. |
Total stock-based compensation expenses recognized during the period:
|
Year ended December 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Cost of revenues
|
$
|
-
|
$
|
-
|
$
|
4
|
||||||
Research and development
|
-
|
1
|
5
|
|||||||||
Selling and marketing
|
-
|
-
|
5
|
|||||||||
General and administrative
|
47
|
89
|
(13
|
)
|
||||||||
$
|
47
|
$
|
90
|
$
|
1
|
|
e. |
Options to non-employees:
|
Issuance date
|
In connection with
|
Number of options granted
|
Options exercisable
|
Exercise price per share
|
Exercisable through
|
|||||
April 1, 2015
|
consultant
|
26,667
|
-
|
2.64
|
April 2020
|
|
1. |
The ongoing Coronavirus outbreak that has surfaced in China and is spreading throughout the world may affect the Company due to the general economic effects of epidemics and other public health crises. Such a pandemic or a
similar public health threat could adversely impact the Company by causing operating and project development delays and disruptions, labor shortages, travel disruption and shutdowns (including as a result of government regulation
and prevention measures). Further, the virus could have a negative impact on the Company's ability to generate revenues causing order cancellations, delays and the inability of certain of its sales and support teams to travel and/or
meet with customers or provide on-site services.
|
|
2. |
During February 2020, a legal action was filed against the Company’s US subsidiary in the New York Supreme Court in the amount of $32. The plaintiff has alleged that the Company has not paid certain alleged outstanding bills. If
the plaintiff insists on continuing the litigation, the Company will seek to dismiss the lawsuit base on the lack of service process. According to the Company’s legal advisors there is a good basis for such a motion to be granted.
In any event, all filings incases before the court, except for certain essential filings, have been currently suspended due to the COVID-19 crisis.
|
MER TELEMANAGEMENT SOLUTIONS LTD.
|
|||
By:
|
/s/ Roy Hess
|
||
Roy Hess
|
|||
Chief Executive Officer
|
1.
|
The name of the Company is:
|
2.
|
The objects for which the Company is formed are:
|
|
A.
|
To be of a capacity to exercise all legal acts which are legitimate according to the law in connection with any right or obligation of arty kind and nature.
|
|
B.
|
To found, establish, hold, Initiate, buy, sell, supervise, participate in, represent and manage any organization, economic activity and/or financial, business, agency, service„ real estate, property, rights and
undertakings of any person of arty kind and nature and to provide consulting services, management, business and administrative planning, financial and organizational services and any service of any kind and nature, to any person in and out of
Israel.
|
|
C.
|
Especially and notwithstanding the generality of that set forth in Sections A and B above, to be involved in the development and marketing of software products, distribution of equipment end/or rights and/or
products of any kind and nature, and also to deal with, to found, establish, fulfill and manage any commercial business related directly and/or Indirectly with them and to provide any service directly and/or indirectly related thereto.
|
3.
|
[AMENDED] The share capital of the Company is: NIS 600,000 (600,000 New Israeli Shekels) divided into: (a) 17,000,000 ordinary shares, NIS 0.03 par value per share; and
(b) 3,000,000 preferred shares, NIS 0.03 par value per share.
|
4.
|
The liability of the members of the Company is limited.
|
5.
|
We, the undersigned, whose names and addresses appear below, desire to become incorporated in accordance with this Memorandum of Association, and agree to take the number of shares in the share capital of the
Company as follows:
|
Name and I.D.
|
Address
|
No. of Shares
|
|
Signature
|
|
|
|
|
|
1.C. Mer Industries Ltd
52-003780-5
|
Hastat 18
Holon
|
99 Ordinary Shares
|
|
/s/ C. Mer Industries Ltd.
|
|
|
|
|
|
2.Mer & Company
|
Hastat 18
Holon
|
1 Ordinary Share
|
|
/s/ Mer & Company
(1982) Ltd.
|
Total shares allotted:
|
100 Ordinary Shares
|
|
|
|
1. |
Interpretation
|
|
1.1. |
In these Articles the following terms shall bear the meaning ascribed to them below:
|
|
1.2. |
Sections 2, 3, 4, 5, 6, 7, 8 and 10 of the Interpretation Law, 5741-1981, shall apply, mutatis mutandis, to the interpretation of the Articles.
|
|
1.3. |
Save as stated in this paragraph, unless contradictory to or inconsistent with the context or the content, words and expressions defined in the Companies Law,
shall bear the same meaning when used in these Articles
|
|
1.4. |
The captions in the Articles are for convenience only and shall not be deemed a part hereof or affect the interpretation of any provision hereof.
|
|
2. |
Name
|
|
3. |
Purpose and Objective
|
|
3.1. |
The objective of the Company shall be to undertake any lawful activity, including any objective set forth in the Memorandum (for as long as it is in effect).
|
|
3.2. |
The purpose of the Company is to operate in accordance with commercial considerations with the intention of generating profits. Such considerations may take into
account, amongst others, public interest and the interests of the Company’s creditors and employees. In addition, the Company may contribute reasonable amounts for any suitable purpose even if such contributions do not fall within the
business considerations of the Company. The Board may determine the amounts of the contributions, the purpose for which the contribution is to be made, and the recipients of any such contribution.
|
|
4. |
Share Capital
|
|
4.1. |
17,000,000 ordinary shares, NIS 0.03 par value (the “Ordinary
Shares”); and
|
|
4.2. |
3,000,000 preferred shares, NIS 0.03 par value (the “Preferred
Shares”).
|
|
5. |
Limited Liability
|
|
6. |
Alteration of Share Capital
|
|
6.1. |
Increase its share capital in an amount it considers expedient by the creation of new shares. The power to increase the share capital may be exercised by the
Company whether or not all of the shares then authorized have been issued and whether or not all of the shares theretofore issued have been called up for payment. Such resolution shall set forth the amount of the increase, the number of
the new shares created thereby, their nominal value and class, and may also provide for the rights, preferences of deferred rights that shall be attached to the newly created shares and the restrictions to which such shares shall be
subject;
|
|
6.2. |
Consolidate all or any of its issued or unissued share capital and divide same;
|
|
6.3. |
Subdivide all or any of its issued or unissued share capital; provided, however, that the proportion between the amount paid and the amount unpaid on each share
which is not fully paid-up shall be retained in the subdivision;
|
|
6.4. |
Cancel any shares which, as at the date of the adoption of the resolution, have not been issued or agreed to be issued;
|
|
7. |
Rights Attached to Shares
|
|
7.1. |
The Ordinary Shares shall have equal right for every purpose and will confer upon the holder thereof:
|
|
7.1.1. |
equal rights to receive an invitation to, attend all of and vote at all of the general meetings of the Company. Each one of the Ordinary Shares will confer upon
the holder a single vote at every general meeting of the Company at which he/she participates and votes, by himself/herself, by agent, or by proxy.
|
|
7.1.2. |
equal rights to receive dividends, if and when distributed, whether in cash or any other manner, and to participate in a distribution of bonus shares, if and when
distributed, according to the ratio between the shareholders’ holdings in the Company’s issued and outstanding share capital (Ordinary Shares and Preferred Shares on an as-converted basis, without regard to the Beneficial Ownership
Limitation, as such term is defined in Exhibit A) and the Company’s total issued and outstanding share capital (Ordinary Shares and Preferred
Shares on an as-converted basis, without regard to the Beneficial Ownership Limitation, as such term is defined in Exhibit A).
|
|
7.1.3. |
equal right to participate in a distribution of the Company’s assets available for distribution, in the event of liquidation or winding-up of the Company,
pari-passu with the Preferred Shares )on an as-converted basis).
|
|
7.2. |
The Preferred Shares shall have equal rights for every purpose and will confer upon the holder thereon:
|
|
7.2.1. |
equal rights to receive dividends, if and when distributed, whether in cash or any other manner, and to participate in a distribution of bonus shares, if and when
distributed, according to the ratio between the shareholders’ holdings in the Company’s issued and outstanding share capital (Ordinary Shares and Preferred Shares on an as-converted basis, without regard to the Beneficial Ownership
Limitation, as such term is defined in Exhibit A) and the Company’s total issued and outstanding share capital (Ordinary Shares and Preferred
Shares on an as-converted basis, without regard to the Beneficial Ownership Limitation, as such term is defined in Exhibit A).
|
|
7.2.2. |
equal right to participate in a distribution of the Company’s assets available for distribution, in the event of liquidation or winding-up of the Company, on an
as-converted basis, pari-passu with the Ordinary Shares.
|
|
7.2.3. |
a right of conversion into Ordinary Shares as provided in Exhibit A.
|
|
7.2.4. |
equal rights to vote on all matters submitted to a vote of the Ordinary Shares (on an as-converted basis, but only up to the number of votes equal to the number
of Ordinary Shares into which the Preferred Shares would be convertible pursuant to the Beneficial Ownership Limitation (as such term is defined in Exhibit
A) on the record date for any such vote). The rights attached to any class may be modified or abrogated by the affirmative consent of the respective Determining Majority of the shares of such class; provided, however,
that the creation of additional shares of a specific class, or the issuance of additional shares of a specific class, shall not be deemed a modification or abrogation of rights attached to shares of such class or of any other class.
|
|
8. |
Issuance of Shares
|
|
9. |
Share Certificates
|
|
9.1. |
Each shareholder shall be entitled, not later than 60 days from the date of issuance or the date of transfer, to receive from the Company one share certificate in
respect of all the shares of any class registered in his name on the Register of Shareholders or, if approved by the Company, several share certificates, each for one or more of such shares.
|
|
9.2. |
Each share certificate issued by the Company shall be numerated, denote the class of the shares represented thereby and the name of the owner, thereof as
registered on the Register of Shareholders, and may also specify the amount paid-up thereon. A share certificate shall be signed on behalf the Company by the person or persons authorized by the Board.
|
|
9.3. |
A share certificate denoting two or more persons as joint owners of the shares represented thereby shall be delivered to any one of the persons named on the
Register of Shareholders in respect of such joint ownership.
|
|
9.4. |
A share certificate defaced or defective, may be replaced upon being delivered to the Company and being canceled. A share certificate lost or destroyed may be
replaced upon furnishing of evidence to the satisfaction of the Board proving such loss or destruction and subject to the submission to the Company of an indemnity letter and/or securities as the Board may deem fit and subject to such
conditions as the Company shall stipulate.
|
|
10. |
Owners of Shares
|
|
11. |
Calls on Shares
|
|
11.1. |
The Board may, from time to time, make calls upon shareholders to perform payment of any amount of the consideration of their shares not yet paid, provided same
amount is not, by the terms of issuance of same shares, payable at a definite date. Each shareholder shall pay to the Company the amount of every call so made upon him at the time(s) and place(s) designated in such call. Unless
otherwise stipulated in the resolution of the Board, each payment with respect to a call shall be deemed to constitute a pro-rata payment on account of all of the shares in respect of which such call was made.
|
|
11.2. |
A call may contain a demand for payment in installments.
|
|
11.3. |
A call shall be made in writing and shall be delivered to the shareholder(s) in question not less than fourteen (14) days prior to the date of payment stipulated
therein. Prior to the due date stipulated in the call the Board may, by delivering a written notice to the shareholder(s), revoke such call, in whole or in part, postpone the designated date(s) of payment or change the designated place
of payment.
|
|
11.4. |
If, according to the terms of issuance of any share, any amount is due at a definite date, such amount shall be paid on same date, and the holder of the same
share shall be deemed, for all intents and purposes, to have duly received a call in respect of such amount.
|
|
11.5. |
The joint holders of a share shall be bound jointly and severally to pay all calls in respect thereof. A call duly made upon one of the joint holders shall be
deemed to have been duly made upon all of the joint holders.
|
|
11.6. |
Any amount not paid when due shall bear an interest from its due date until its actual payment at a rate equal to the then prevailing rate of interest for
unauthorized overdrafts as charged by Bank Hapoalim Ltd, unless otherwise prescribed by the Board.
|
|
11.7. |
The Board may agree to accept prepayment by any shareholder of any amount due with respect to his shares, and may direct the payment of interest for such
prepayment at a rate as may be agreed upon between the Board and the shareholder so prepaying.
|
|
11.8. |
Upon the issuance of shares of the Company, the Board may stipulate similar or different terms with respect to the payment of the consideration thereof by their
respective holders.
|
|
12. |
Forfeiture and Surrender
|
|
12.1. |
If any shareholder fails to pay when due any amount payable pursuant to a call, or interest thereon as provided for herein, the Company may, by a resolution of
the Board, at any time thereafter, so long as said amount or interest remains unpaid, forfeit all or any of the shares in respect of which said call had been made. All expenses incurred by the Company with respect to the collection of
any such amount of interest, including, inter-alia, attorney’s fees and costs of legal proceedings, shall be added to, and shall constitute a part of the amount payable to the Company in respect of such call for all purposes (including
the accrual of interest thereon).
|
|
12.2. |
Upon the adoption of a resolution of forfeiture, the Board shall cause the delivery of a notice thereof to the shareholder in question. Same notice shall specify
that, in the event of failure to pay the entire amount due within the period stipulated in the notice (which period shall be not less than thirty (30) days), same failure shall cause, ipso facto, the forfeiture of the shares. Prior to
the expiration of such period, the Board may extend the period specified in the notice of forfeiture or nullify the resolution of forfeiture, but such nullification shall not estop nor derogate from the power of the Board to adopt a
further resolution of forfeiture in respect of the non-payment of said amount.
|
|
12.3. |
Whenever shares are forfeited as herein provided, all dividends theretofore declared in respect thereof and not actually paid shall be deemed to have been
forfeited together with the shares.
|
|
12.4. |
The Company, by a resolution of the Board, may accept the voluntary surrender by any shareholder of all or any part of his shares.
|
|
12.5. |
Any share forfeited or surrendered as provided herein shall thereupon constitute the property of the Company, and may be resold. Such shares that have not yet
been resold shall be considered dormant shares.
|
|
12.6. |
Any shareholder whose shares have been forfeited or surrendered shall cease to be a shareholder in respect of the forfeited or surrendered shares, but shall,
notwithstanding, be obligated to pay to the Company all amounts at the time of forfeiture or surrender due to the Company with respect thereof, including interest and expenses as aforesaid until actual repayment, whether the maturity
date of same amounts is on or prior to the date of forfeiture or surrender or at any time thereafter, and the Board, in its discretion, may enforce payment of such amounts or any part thereof, unless such shares have been resold in
which event the provisions of the Law shall apply. In the event of such forfeiture or surrender, the Company, by a resolution of the Board, may accelerate the maturity date(s) of any or all amounts then owed to the Company by same
shareholder and not yet due, however, arising whereupon all of such amounts shall forthwith become due and payable.
|
|
13. |
Lien
|
|
13.1. |
The Company shall have, at all times, a first and paramount lien upon all the shares registered in the name of each shareholder on the Register of Shareholders,
upon all the dividends declared in respect of such shares and upon the proceeds of the sale thereof, as security for his obligations. For the purposes of this Article 13 and of Article 14, the term “Obligation” shall mean any and all
present and future indebtedness owed to the Company by a shareholder with respect to his shares, however arising, whether such indebtedness is absolute or contingent, joint or several, matured or unmatured, liquidated or non-liquidated.
|
|
13.2. |
Shall a shareholder fail to fulfill any or all of his Obligations, the Company may enforce the lien, after same shareholder was provided with a period of fourteen
(14) days to fulfill the Obligations so breached.
|
|
13.3. |
A shareholder shall be obliged to reimburse the Company for all expenses thereby incurred with respect to the enforcement of a lien upon same shareholder’s
shares, and such obligation shall be secured by the shares which are subject to same lien.
|
|
14. |
Sale of Shares after Forfeiture or Surrender or in Enforcement of Lien
|
|
14.1. |
Upon any sale of shares after forfeiture or surrender or in the course of enforcement of a lien, the Company may appoint any person to execute an adequate
instrument of transfer or any other instrument required to effect the sale, and shall be entitled to register the purchaser on the Register of Shareholders as the holder of the shares so purchased. The purchaser shall not be obliged to
check the regularity of the proceedings of forfeiture, surrender or enforcement of a lien or the use that was made consideration thereby paid with respect to the shares.
|
|
14.2. |
The net proceeds of any such sale, after payment of the selling expenses, shall serve for repayment of the Obligations of the respective shareholder, and the
balance if any shall be paid to the shareholder, his inheritors, the executors of his will, the administrators of his estate, and to persons on his behalf.
|
|
15. |
Redeemable Securities
|
|
16. |
Effectiveness of Transfer of Shares
|
|
17. |
Procedure on Voluntary Transfer of Shares
|
|
18. |
Transfer of Shares
|
|
18.1. |
The transfer of shares of the Company and any other securities issued by the Company and owned by a Registered Holder (in this Article 18, hereinafter, “Securities”) shall be made in writing in a conventional manner or as established by the Board; it may be effected by the signature of the
transferor only, on the condition that an appropriate share transfer deed shall be submitted to the Company.
|
|
18.2. |
Securities that are not paid up in full or are subject to any lien or pledge may not be transferred unless the transfer is approved by the Board, which may at its
sole discretion withhold its approval without having to show grounds.
|
|
18.3. |
Any transfer of Securities that are not paid up in full shall be subject to the signature of the transferee and the signature of a witness in verification of the
authenticity of the signatures on the share transfer deed.
|
|
18.4. |
The transferor shall be deemed to be the Registered Holder of the transferred Securities until the name of the transferee is entered in the Register of
Shareholders.
|
|
18.5. |
The share transfer deed shall be submitted to the office for registration together with the certificates to be transferred and such other evidence as the Company
may require with regard to the transferor’s title or right to transfer the Securities. The share transfer deed shall remain with the Company after its registration.
|
|
18.6. |
The Company may demand payment of a transfer registration fee at a rate to be determined by the Board from time to time.
|
|
18.7. |
The Board may close the Register of Shareholders for a period no longer than 30 days every year.
|
|
18.8. |
Upon the death of a Registered Holder of Securities of the Company, the Company shall recognize the guardians, administrators of the estate, executors of the
will, and in the absence of such persons, the inheritors of the deceased person as the only ones entitled to be registered as the Registered Holders of Securities of the Company, subject to proof of their rights in a manner established
by the Board.
|
|
18.9. |
In the event of the deceased shareholder being a Registered Holder of a Security jointly with other persons, the surviving shareholder shall be considered the
sole Registered Holder of said Securities, upon the approval of the Company, without exempting the estate of the deceased joint holder from any of the obligations relating to the jointly held Securities.
|
|
18.10. |
A person acquiring a right to a Security by virtue of his being a guardian or administrator of the estate or inheritor of the deceased shareholder, or receiver,
liquidator or trustee in liquidation proceedings regarding a corporate shareholder, or by any operation of law, may be subject to submission of such proof of entitlement as the Board may establish be entered as the Registered Holder of
the respective Security or transfer the Security subject to the provisions of the Articles with regard to such transfer.
|
|
18.11. |
A person acquiring a Security as a result of a transfer by operation of law shall be entitled to dividends and other rights in respect of the Security and also to
receive and certify the receipt of dividends and other sums of money in connection with the said Security; however, such person shall not be entitled to receive notices of the convening of General Meetings of the Company or to
participate or vote therein or to exercise any right conferred by the Security with the exception of the aforementioned rights, pending the registration of such person in the Register of Shareholders.
|
|
19. |
Issuance of Shares
|
|
20. |
Price Per Share Protection
|
|
21. |
Annual Meeting
|
|
21.1. |
An Annual Meeting shall be held once in every calendar year at such time (within a period of not more than fifteen (15) months after the last preceding Annual
Meeting) and at such place as may be determined by the Board.
|
|
21.2. |
The Annual Meeting shall:
|
|
21.2.1. |
Discuss the audited financial statements of the Company for the last fiscal year;
|
|
21.2.2. |
Appoint auditors and establish their remuneration, or empower the Board to establish their remuneration;
|
|
21.2.3. |
Appoint the directors as stipulated in Article 34 below (and subject to its terms), and establish their remuneration;
|
|
21.2.4. |
Discuss any other business to be transacted at a General Meeting according to the Articles or by operation of law.
|
|
22. |
Extraordinary Meeting
|
|
22.1. |
All General Meetings other than Annual Meetings shall be called “Extraordinary Meetings”.
|
|
22.2. |
The Board may, whenever it deems fit, convene an Extraordinary Meeting, and shall be obligated to do so upon receipt of a requisition in writing in accordance
with Section 63 of the Law.
|
|
22.3. |
Shareholders of the Company shall not be authorized to convene an Extraordinary Meeting except as provided in Section 64 of the Law.
|
|
23. |
Notice of General Meetings
|
|
23.1. |
Prior to any General Meeting, a written notice thereof shall be made public as required by Law. Such notice shall specify the place, the day and the hour of the
General Meeting, the agenda of the meeting and such other information required under law. The notice will be published not less than fourteen (14) days prior to any General Meeting. The Company shall not be required to deliver notice
to each shareholder, except as may be specifically required by Law.
|
|
22.2. |
Any written notice or other document may be served by the Company upon any shareholder either personally or by sending it by prepaid mail addressed to such
shareholder at his address as described in the Register of Shareholders or such other address as he may have designated in writing for the receipt of notices and other documents.
|
|
22.3. |
Notwithstanding anything to the contrary herein, notice by the Company of a General Meeting which is published in one international wire service shall be deemed
to have been duly given on the date of such publication.
|
|
24. |
Quorum
|
|
24.1. |
Two or more shareholders present in person or by proxy and holding Ordinary Shares (on an as-converted basis) conferring in the aggregate more than twenty-five
percent (25%) of the total voting power attached to the Ordinary Shares of the Company (on an as-converted basis, subject further to the provisions of Article Error! Reference source not found.), shall constitute a quorum at General Meetings. No business shall be considered or determined at a General Meeting, unless the requisite quorum is present when the General
Meeting proceeds to consider and/or determine same business.
|
|
24.2. |
If within half an hour from the time appointed for the General Meeting a quorum is not present, the General Meeting shall, if convened upon requisition under
Section 64 of the Law, be dissolved, but in any other case it shall stand adjourned on the same day, in the next week, at the same time and place. The requisite quorum at an adjourned General Meeting shall be any two or more holders of
Ordinary Shares (on an as-converted basis, subject further to the provisions of Article Error! Reference source not found.), present
in person or by proxy. At an adjourned General Meeting the only businesses to be considered shall be those matters which might have been lawfully considered at the General Meeting originally called if a requisite quorum had been
present, and the only resolutions to be adopted are such types of resolutions which could have been adopted at the General Meeting originally called.
|
|
25. |
Chairman
|
|
26. |
Adoption of Resolution at General Meetings
|
|
26.1. |
A resolution, including, but not limited to, a resolution to amend these
Articles and to approve a merger of the Company, shall be deemed adopted at a General Meeting if the requisite quorum is present and the resolution is
supported by holders of Ordinary Shares (on an as-converted basis) present, in person or by proxy, vested with more than fifty percent (50%) of the total voting power attached to the Ordinary Shares (on an as-converted basis, subject
further to the provisions of Article Error! Reference source not found.) whose holders were present, in person or by proxy, at such
General Meeting and voted thereon, or such other percentage as is required by these Articles or by the Law.
|
|
26.2. |
Any proposed resolution put to vote at a General Meeting shall be decided by a poll.
|
|
26.3. |
Subject to approval by a General Meeting at which the requisite quorum is present, the chairman is obligated at the request of the General Meeting, to adjourn the
General Meeting, and the adjourned meeting shall convene at such date and place as is decided by the General Meeting. If the General Meeting is adjourned by more than twenty-one (21) days, a notice of the adjourned meeting shall be
given in the manner set forth in Sections 67 through 69 of the Law. An adjourned meeting may only transact such business as left unfinished at the original meeting.
|
|
26.4. |
A declaration by the Chairman of the General Meeting that a proposed resolution has been adopted or rejected, shall constitute conclusive evidence of the adoption
or rejection, respectively, of same resolution, and no further proof verifying the contents of such declaration or the number or proportion of the votes recorded in favor of or against such resolution shall be required.
|
|
27. |
Voting Power
|
|
27.1. |
Subject to the provisions of Article 28.1 below and subject to any other provision hereof pertaining to voting rights attached or not-attached to shares of the
Company (including without limitations, the provisions of Article Error! Reference source not found.), whether in general or in
respect of a specific matter or matters, every shareholder shall have one vote for each share registered in his name on the Register of Shareholders, regardless of its denomination or class.
|
|
27.2. |
In case of equality of votes, the resolution shall be deemed to have been rejected.
|
|
28. |
Attendance and Voting Rights at General Meeting
|
|
28.1. |
Unless provided otherwise by the terms of issue of the shares, no shareholder shall be entitled to be present or vote at a General Meeting (or be counted as part
of the quorum thereat) unless all amounts due as at the date designated for same General Meeting with respect to his shares were paid.
|
|
28.2. |
A corporate body being a shareholder of the Company and entitled to vote and/or attend at a General Meeting may exercise such rights by authorizing any person,
whether in general or for a specific General Meeting, to be present and/or vote on its behalf. Upon the request of the Chairman of the General Meeting, a writing evidence of such authorization and its validity (in a form acceptable to
the Chairman) shall be furnished thereto.
|
|
28.3. |
A shareholder entitled to vote and/or attend at a General Meeting may appoint a proxy, whether is general or for a specific General Meeting, to exercise such
rights, in a form approved by the Board.
|
|
28.4. |
The instrument appointing a proxy shall be delivered to the Company not later than forty-eight (48) hours before the time designated for the General Meeting at
which the person named in the instrument proposes to vote and/or attend.
|
|
28.5. |
A shareholder entitled to vote and/or attend at a General Meeting and is legally incapacitated, may exercise such rights by his custodian.
|
|
28.6. |
If two or more persons are registered as joint owners of any share, the right to attend at a General Meeting, if attached to such share, shall be conferred upon
all of the joint owners, but the right to vote at a General Meeting and/or the right to be counted as part of the quorum thereat, if attached to such share, shall be conferred exclusively upon the senior amongst the joint owners
attending the General Meeting, in person or by proxy; and for this purpose seniority shall be determined by the order in which the names appear on the Register of Shareholders.
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|
28.7. |
The voting on the terms of the instrument of proxy shall be legal even in case of prior death or incapacity or bankruptcy of the principal, and in respect of a
corporate principal, in case of its winding up or revocation of the instrument of proxy or transfer of the respective share, unless a notice in writing of such death or incapacity or bankruptcy or winding up or revocation of share
transfer shall have been received by the Register of Shareholders.
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|
28.8. |
No proxy shall be valid after the expiry of 12 months from the date of its issue.
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29. |
Proceedings and Resolutions Adopted at General Meetings of Holders of Preferred Shares
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|
29.1. |
The Preferred Shares shall not confer upon the holders thereof any voting rights or any right to appoint directors or any other right with respect to general
meetings, including without limitation, attending, voting at or requesting to convene, such general meetings or proposing matters for the agenda of such general meetings, except as expressly set forth in this Article 29 or as otherwise
specifically provided by the Law.
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|
29.2. |
So long as any Preferred Shares are held by Alpha Capital, the Company shall not take any actions and/or adopt any resolutions in connection with the following
matters, without the affirmative consent of Alpha Capital, and if applicable for such purpose, Alpha Capital Anstalt shall be deemed as a third party beneficiary:
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|
29.2.1. |
Any amendment, alteration or repeal of any provision of the Articles so as to adversely affect the special rights, preferences, privileges or voting powers of the
Preferred Shares, including without limitation, the majority and quorum requirements set forth in this Article 29.
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29.2.2. |
Any increase to the number of members comprising the Board, as stipulated under Article 33 (or otherwise), during the Alpha Directors Service Term (as defined
below).
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29.2.3. |
Any consummation of a binding share exchange or reclassification involving the Preferred Shares, or of a merger or consolidation of the Company with or into
another entity, unless in each case the Preferred Shares remain outstanding or equivalent shares are issued to the holders of the Preferred Shares, in each case with rights attached which are no less benefitting than such rights
attached to the Preferred Shares immediately prior to the consummation of such transaction;
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|
29.3. |
provided, however, that (A) for all purposes of this Article 29, (1) any increase in the amount of the authorized Ordinary Shares or Preferred Shares or the
issuance of any additional Ordinary Shares or Preferred Shares or (2) the authorization or creation of any class or series of shares established after the initial issuance of any class of Preferred Shares, the terms of which do not
expressly provide that such class or series ranks senior to or on a parity with the previously issued and outstanding Preferred Shares as to dividend rights and distribution rights upon any liquidation, winding up or dissolution of the
Company (collectively, “Junior Shares”); or the authorization or creation of any class or series of shares established after the
initial issuance of any class of Preferred Shares the terms of which expressly provide that such class or series will rank on a parity with the previously issued and outstanding Preferred Shares as to dividend rights and distribution
rights upon any liquidation, winding up or dissolution of the Company (collectively, “Parity Shares”); and, any increase in the
amount of authorized but unissued shares of such class or series of Parity Shares or Junior Shares or the issuance of additional shares of such class or series of Parity Shares or Junior Shares, will be deemed not to adversely affect
(or to otherwise cause to be materially less favorable) the rights, preferences, privileges or voting powers of the previously issued and outstanding Preferred Shares and shall not require the consent or the adoption of a resolution by
the holders of the previously issued and outstanding Preferred Shares.
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30. |
Powers of the Board
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|
30.1. |
The Board shall be vested with the exclusive authority to exercise all of the Company’s powers which are not, by Law, the Memorandum (for as long as it is in
effect), the Articles or any applicable law, required to be exercised by the General Meeting, the General Manager, or any other organ of the Company as such term is defined in the Law.
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|
30.2. |
The Board shall set the policy guidelines for the Company and shall supervise the performance and activities of the General Manager.
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|
31. |
Exercise of Powers of the Board
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|
31.1. |
The powers conferred upon the Board shall be vested in the Board as a collective body, and not in each one or more of the directors individually, and all such
powers may be exercised by the Board by adopting resolutions in accordance with the provisions of the Articles.
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|
31.2. |
Except as otherwise required by these Articles, a resolution shall be deemed adopted at a meeting of the Board if supported by a majority of the directors
attending such meeting and entitled to vote thereon.
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|
31.3. |
The Board may hold meetings using any means of communication, provided that all of the directors participating can simultaneously hear one another.
|
|
31.4. |
The Board may adopt resolutions without convening a meeting, as provided in the Law.
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|
32. |
Committees of Directors
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|
32.1. |
The Board may, subject to Section 112 of the Law, delegate any or all of its powers to committees, each consisting of two or more directors, one of which shall be
an External Director, and it may, from time to time, revoke or alter the powers so delegated. Without derogating from the generality of the foregoing, subject to the Law, the Board may delegate to a committee its power to approve the
terms of compensation of Office Holders. Each committee shall, in the exercise of the powers so delegated, conform to any regulations and conditions prescribed by the Board upon the delegation or at any other time. Each resolution
adopted by a committee within the powers delegated to it by the Board shall be deemed to have been held by the Board.
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|
32.2. |
The Board will appoint from among its members an audit committee. All External Directors shall be members of the audit committee.
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|
32.3. |
The provision of the Articles with respect to the meetings of the Board, their convening and adoption of resolutions thereat shall apply, mutatis mutandis, to the
meetings of any such committee, unless otherwise prescribed by the Board.
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|
33. |
Number of Directors
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|
34. |
Appointment and Removal of Directors
|
|
34.1. |
The directors shall be elected annually at a General Meeting as aforesaid and shall remain in office until the next Annual Meeting at which time they shall
retire, unless their office is vacated previously as stipulated in the Articles, provided however that the External Directors shall be appointed, and shall remain in office, as prescribed in the Law.
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|
34.2. |
The elected directors shall assume office on the day of their election.
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|
34.3. |
A retiring director may be reelected. Pending the convening of an Annual Meeting at which the directors are to retire from office, all directors shall remain in
office until the convening of the Annual Meeting of the Company except in case of prior vacation of a director’s office according to the Articles.
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|
34.4. |
If no directors are elected at the Annual Meeting, all the retiring directors shall remain in office pending their replacement by a General Meeting of the
Company.
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|
34.5. |
Except with regard to a director whose tenure of office expires upon the convening of a General Meeting or a person recommended by the Board to serve as director,
no motions for appointment of a candidate as a director shall be made unless a notice in writing signed by a shareholder of the Company (other than the candidate himself) who is entitled to participate in and vote at the meeting,
stating the intent of the said shareholder to propose a candidate for election to the office of director, together with a document in writing by the candidate expressing his consent to be so elected, shall have been received at the
office of the Company within a period of not less than forty-eight (48) hours and not more than forty-two (42) days before the appointed date of the General Meeting.
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|
34.6. |
The General Meeting may, by way of a resolution, remove a director from office before the expiry of his tenure, and appoint another person to serve as director of
the Company in his place, and also appoint a number of directors in the event of the number of directors having decreased below the minimum established by the General Meeting.
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|
34.7. |
The provisions of this Article 34 shall not apply to External Directors, whose appointment and removal shall be pursuant to the relevant provisions of the Law.
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|
34.8. |
Notwithstanding anything to the contrary herein, the two directors nominated by Alpha Capital Anstalt and appointed by the Company’s shareholders at the annual
general meeting of the Company’s shareholders held in connection with the adoption of these Articles, or any replacement directors nominated based on the terms of this Article 34.8 (the “Alpha Capital Directors”), shall continue to serve as directors until the end of the first general meeting to take place following the lapse of two years from the Closing Date of
the SPA (the “Alpha Directors Service Term”). Should any of the Alpha Capital Directors vacate his or her office during the Alpha
Directors Service Term, then the Alpha Capital Director remaining in office shall be entitled to nominate a replacement for the Alpha Director which office was vacated, and if no such nomination was made, then Alpha Capital Anstalt
shall be entitled to appoint his or her replacement.
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|
35. |
Qualification of Directors
|
|
36. |
Vacation of Director’s Office
|
|
36.1. |
Upon his death;
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|
36.2. |
On the date at which he is declared a bankrupt;
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|
36.3. |
On the date he is declared legally incapacitated;
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|
36.4. |
On the date stipulated therefor in the resolution of his election or the notice of his appointment, as the case may be;
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|
36.5. |
On the date stipulated therefor in the resolution or notice of his removal or on the date of the delivery of such notice to the Company, whichever is later;
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|
36.6. |
On the date stipulated therefor in a written notice of resignation thereby delivered to the Company or upon its delivery to the Company, whichever is later.
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|
36.7. |
If he is convicted in a final judgment of an offence of a nature which disqualifies a person from serving as a director, as set forth in the Law.
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|
36.8. |
If a court of competent jurisdiction decides to terminate his office, in accordance with the provisions of the Law, in a decision or judgment for which no stay of
enforcement is granted.
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|
37. |
Remuneration of Directors
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|
38. |
Conflict of Interests
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|
39. |
Alternate Director
|
|
39.1. |
Subject to the approval of the Board, a director may, by delivering a written notice to the Company, appoint an alternate for himself (hereinafter referred to as
“Alternate Director”), remove such Alternate Director and appoint another Alternate Director in place of any Alternate Director
appointed by him whose office has been vacated for any reason whatsoever. The appointment of the Alternate Director shall be for an indefinite period and for all purposes, unless restricted to a specific period, to a specific meeting or
act of the Board, to a specific matter or in any other manner, and same restriction was specified in the appointment instrument or in a written note delivered to the Company.
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|
39.2. |
Any notice delivered to the Company pursuant to Article 39.1 shall become effective on the date specified therefor therein or upon delivery thereof to the Company
or upon approval of the Board, whichever is later.
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|
39.3. |
An Alternate Director shall be vested with all rights and shall bear all obligations of the director who appointed him, provided, however, that he shall not be
entitled to appoint an alternate for himself (unless the instrument appointed him expressly provides otherwise), and provided further that the Alternate Director shall have no standing at any meeting of the Board or any committee
thereof whereat the director who appointed him is present.
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|
39.4. |
The following may not be appointed nor serve as an Alternate Director: (i) a person not qualified to be appointed as a director, (ii) an actual director, or (iii)
another Alternate Director.
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|
39.5. |
The office of an Alternate Director shall be vacated under the circumstances, mutatis mutandis, set forth in Article 36, and such office shall further be ipso
facto vacated if the director who appointed such Alternate Director ceases to be a director.
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|
40. |
Meeting of the Board
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|
40.1. |
Subject to Articles 41 and 42 below, the Board may meet, adjourn its meeting and otherwise determine and regulate such meetings and their proceedings as it deems
fit.
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|
40.2. |
In the event of a vacancy in the number of directors, the remaining directors may continue to discharge their functions until the number of remaining directors
decreases below the minimum established in the Articles. In the latter case the remaining directors may only act to convene a General Meeting of the Company.
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|
40.3. |
Subject to the provisions of Article 34.8, the Board, by unanimous approval of all directors then in office, may at any time appoint any person to serve as
director as replacement for a vacated office or in order to increase the number of directors, subject to the condition that the number of directors shall not exceed the maximum established in these Articles. Any so appointed director
shall remain in office until the next Annual Meeting, at which he may be reelected.
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|
41. |
Convening Meetings of the Board
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|
41.1. |
The Chairman of the Board may, at any time, convene a meeting of the Board, and shall be obliged to do so (i) at least once every three months, (ii) upon receipt
of a written demand from any one director, or (iii) in accordance with Section 122(4) or 169 of the Law. In the event there is no such Chairman or a meeting of the Board was not convened to a date which is no later than ten (10) days
following delivery of such written demand or receipt of the relevant notice or report, any of the abovementioned directors may convene a meeting of the Board.
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|
41.2. |
A resolution adopted at a meeting of the Board, which had not convened in accordance with the necessary requirements set forth in the Law or these Articles may be
invalidated in accordance with the applicable provisions of the Law.
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|
41.3. |
A director may waive his right to receive prior notice of any meeting, in general or in respect of a specific meeting, and shall be deemed to have waived such
right with respect to any meeting at which he was present.
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|
42. |
Quorum
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|
43. |
Chairman of the Board
|
|
41.1. |
The Board may from time to time elect one of its members to be the Chairman of the Board, remove such Chairman from office and appoint another in his place.
However, the General Manager shall not serve as the Chairman of the Board, nor shall the Chairman of the Board be vested with the powers designated to the General Manager, except in accordance with Section 121(3) of the Law. The
Chairman of the Board shall preside at every meeting of the Board, but if there is no such Chairman, or if he is not present or he is unwilling to take the chair at any meeting, the directors present shall elect one of their members to
be chairman of such meeting.
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|
41.2. |
The Chairman of the Board shall have no casting vote.
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|
44. |
General Manager
|
|
44.1. |
The Board shall appoint one or more persons, whether or not directors, as General Manager(s) of the Company, either for a definite period or without any
limitation of time, and may confer powers, authorities and rights and/or impose duties and obligations upon such person or persons and determine his or their salaries as the Board may deem fit and subject to the provisions of the
Law. Subject to the Law, the Board may delegate to the General Manager its power to approve the terms of compensation of other Office Holders (subject to the Law and/or any other applicable law).
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|
45. |
Minutes
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|
45.1. |
The proceedings of each meeting of the Board and meeting of committee of the Board shall be recorded in the minutes of the Company. Such minutes shall set forth
the names of the persons present at every such meeting and all resolutions adopted thereat and shall be signed by the chairman of the meeting.
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|
45.2. |
All minutes approved and signed by the chairman of the meeting or the Chairman of the Board, shall constitute prima facie evidence of its contents.
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|
46. |
Internal Auditor
|
|
46.1. |
The Board shall appoint an internal auditor in accordance with the provisions of the Law.
|
|
46.2. |
The internal auditor shall submit to the audit committee a proposal for an annual or periodic work program for its approval. The audit committee shall approve
such proposal subject to the modifications which it considers necessary.
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|
46.3. |
The General Manager shall be in charge of and supervise the internal auditor’s performance of its obligations.
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|
47. |
Declaration of Dividends
|
|
47.1. |
A resolution of the Company regarding the distribution of a dividend and/or the distribution of share dividends will be adopted by the Board.
|
|
47.2. |
The shareholders entitled to a dividend are the shareholders on the date of the resolution regarding the dividend or on a later date if another date is determined
in the resolution regarding the distribution of the dividend.
|
|
47.3. |
For the purpose of performance of any resolution according to the provisions of this section, the Company’s board of directors may resolve, as it deems fit, any
difficulty that arises with respect to the distribution of the dividend and/or the stock dividends, and in this context determine the value, for the purpose of the said distribution, of certain assets and decide that payments in cash
shall be made to members based on the value so determined, determine provisions in respect of share fractions or in respect of non-payment of amounts smaller than NIS 200. Notice of the declaration of dividends shall be published as
required by applicable law.
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|
48. |
Rights to Participate in the Distribution of Dividends
|
|
48.1. |
Subject to special rights with respect to the Company’s profits to be conferred upon any person pursuant to these Articles and the Law, all the profits of the
Company may be distributed among the shareholders entitled to participate in the distribution of dividends.
|
|
48.2. |
Notwithstanding for foregoing, a holder of shares shall not be attributed with the right to participate in the distribution of dividends the record date for which
preceded the date of issuance of such shares.
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|
49. |
Interest on Dividends
|
|
50. |
Payment of Dividends
|
|
51. |
Payment in Specie
|
|
52. |
Setting-Off Dividends
|
|
53. |
Unclaimed Dividends
|
|
53.1. |
Dividends unclaimed by the person entitled thereto within thirty (30) days after the date stipulated for their payment, may be invested or otherwise used by the
company, as it deems fit, until claimed; but the Company shall not be deemed a trustee in respect thereof.
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|
53.2. |
Dividends unclaimed within the period of seven (7) years from the date stipulated for their payment, shall be forfeited and shall revert to the Company, unless
otherwise directed by the Board.
|
|
54. |
Reserves and Funds
|
|
54.1. |
The Board may, before recommending the distribution of dividends, determine to set aside out of the profits of the Company or out of an assets revaluation fund
and carry to reserve or reserves such sums as it deems fit, and direct the designation, application and use of such sums. The Board may further determine that any such sums which it deems prudent not to distribute as dividends will not
be set aside for reserve, but shall remain as such at the disposal of the Company.
|
|
54.2. |
The Board may, from time to time, direct the revaluation of the assets of the Company, in whole or in part, and the creation of an assets revaluation fund out of
the revaluation surplus, if any.
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|
55. |
Capitalization of Profits
|
|
55.1. |
The Board may capitalize all or any part of the sums or assets allocated to the credit of any reserve fund or to the credit of the profit and loss account or
being otherwise distributable as dividends (including sums or assets received as premiums on the issuance of shares or debentures), and direct accordingly that such sums or assets be released for distribution amongst the shareholders
who would have been entitled thereto if distributed by way of dividends and in the same proportion; provided that same sums or assets be not paid in cash or in specie but be applied for the payment in full or in part of the unpaid
consideration of the issued shares held by such shareholders and/or for the payment in full of the consideration (as shall be stipulated in said resolution) for shares or debentures of the Company to be issued to such shareholders
subsequent to the date of said resolution, credited as fully paid up.
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|
55.2. |
In the event a resolution as aforesaid shall have been adopted, the Board shall make all adjustments and applications of the moneys or assets resolved to be
capitalized thereby, and shall do all acts and things required to give effect thereto. The Board may authorize any person to enter into agreement with the Company on behalf of all shareholders entitled to participate in such
distribution, providing for the issuance to such shareholders of any shares or debentures, credited as fully paid, to which they may be entitled upon such capitalization or for the payment on behalf of such shareholders, by the
application thereto of the proportionate part of the money or assets resolved to be capitalized, of the amounts or any part thereof remaining unpaid on their existing shares, and any agreement made under such authority shall be
effective and binding upon all such shareholders.
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|
56. |
Accounting Books
|
|
56.1. |
The Board shall cause the Company to hold proper accounting books and to prepare an annual balance sheet, a statement of Profit and Loss, and such other financial
statements as the Company may be required to prepare under law.
|
|
56.2. |
The Board may determine at its sole discretion the terms on which any of the accounts and books of the Company shall be open to inspection by shareholders, and no
shareholder (other than a director) shall be entitled to inspect any account or ledger or document of the Company unless such right is granted by law or by the Board.
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|
56.3. |
At least once a year, the Board shall submit to the Annual Meeting financial statements for the period from the previous statement as required by Law. The balance
sheet shall be accompanied by an auditors’ report, if available.
|
|
56.4. |
The Company shall not be required to send copies of its financial statements to shareholders.
|
|
57. |
Authority to keep Branch Registers
|
|
58. |
Provisions in respect of keeping Branch Registers
|
|
59. |
The Company’s Signature
|
|
59.1. |
A document shall be deemed signed by the Company upon the fulfillment of the following:
|
|
59.1.1. |
It bears the name of the Company in print;
|
|
59.1.2. |
It bears the signature of one or more persons authorized therefor by the Board; and
|
|
59.1.3. |
The act of the person authorized by the Board as aforesaid was within its authority and without deviation therefrom.
|
|
59.2. |
The signatory rights on behalf of the Company shall be determined by the Board.
|
|
59.3. |
An authorization by the Board as provided in Article 59.2 may be for a specific matter, for a specific document or for a certain sort of document or for all the
Company’s documents or for a definite period of time or for an unlimited period of time, provided that any such authority may be terminated by Board, at will.
|
|
59.4. |
The provisions of this Article shall apply both to the Company’s documents executed in Israel and the Company’s documents executed abroad.
|
|
60. |
Notices in Writing
|
|
60.1. |
Notices pursuant to the Law, the Memorandum and the Articles shall be made in the manner prescribed by the Board from time to time.
|
|
60.2. |
Unless otherwise prescribed by the Board, all notices shall be made in writing and shall be sent by mail.
|
|
61. |
Delivery of Notices
|
|
61.1. |
Unless otherwise prescribed under Exhibit A with respect to its
provisions thereto and without derogating from the terms of Article 23, a notice or any other document shall be served by the Company to any shareholder or director in writing and shall be conclusively deemed to have been duly given:
(i) in the case of hand delivery to such recipient's address as provided to the Company by such recipient, on the next Business Day after delivery; (ii) in the case of delivery by an internationally recognized overnight courier to such
recipient's as provided to the Company by such recipient, on the next Business Day after delivery; (iii) in the case of a notice sent by facsimile transmission made in accordance with the contact details provided by such recipient, on
the next Business Day after delivery, if facsimile transmission is electronically confirmed; (iv) in the case of a notice sent by email to the email address of such recipient, as provided by such recipient to the Company, on the next
Business Day after the earlier of (1) the date of written acknowledgment of receipt of such e-mail by the recipient or (2) the date of written acknowledgment of delivery of such e-mail by automatic means of the sender; and (v) in the
case of delivery by prepaid registered mail (airmail if posted outside of Israel) to such recipient's address as provided to the Company by such recipient, seven (7) Business Days after the day on which such mail was sent at the post
office.
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|
62. |
Indemnity of Office Holders
|
|
62.1. |
The Company may indemnify an Office Holder to the fullest extent permitted by law. Without derogating from the aforesaid, the Company may, from time to time and
subject to any provision of law, indemnify an Office Holder in respect of a liability or expense set out below which is imposed on him or incurred by him as a result of an action taken in his capacity as an Office Holder of the Company:
|
|
62.1.1. |
monetary liability imposed on him in favor of a third party by a judgment, including a settlement or a decision of an arbitrator which is given the force of a
judgment by court order;
|
|
62.1.2. |
reasonable litigation expenses, including legal fees, incurred by the Office Holder as a result of an investigation or proceeding instituted against such Office
Holder by a competent authority, which investigation or proceeding has ended without the filing of an indictment or in the imposition of financial liability in lieu of a criminal proceeding, or has ended in the imposition of a financial
obligation in lieu of a criminal proceeding for an offence that does not require proof of criminal intent (the phrases “proceeding that has ended without the filing of an indictment” and “financial obligation in lieu of a criminal
proceeding” shall have the meanings ascribed to such phrases in Section 260(a)(1a) of the Companies Law) or in connection with an administrative enforcement proceeding or a financial sanction. Without derogating from the generality of
the foregoing, such expenses will include a payment imposed on the Office Holder in favor of an injured party as set forth in Section 52[54](a)(1)(a) of the Securities Law and expenses that the Office Holder incurred in connection with
a proceeding under Chapters H'3, H'4 or I'1 of the Securities Law or in connection with Article D of Chapter Four of Part Nine of the Companies Law, including reasonable legal expenses, which term includes attorney fees;
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|
62.1.3. |
reasonable litigation expenses, including legal fees, which the Office Holder has incurred or is obliged to pay by the court in proceedings commenced against him
by the Company or in its name or by any other person, or pursuant to criminal charges of which he is acquitted or criminal charges pursuant to which he is convicted of an offence which does not require proof of criminal intent; and
|
|
62.1.4. |
Expenses, including reasonable legal fees, including attorney fees, incurred by the Office Holder with respect to a proceeding in accordance with the Restrictive
Trade Practices Law, 1988 (as amended, the “Restrictive Trade Practices Law”).
|
|
62.2. |
The Company may, from time to time and subject to any provision of the law:
|
|
62.2.1. |
Undertake in advance to indemnify an Office Holder of the Company for any of the following:
|
|
(i) |
any liability as set out in Article 62.1.1 above, provided that the undertaking to indemnify is limited to the classes of events which in the opinion of the Board
can be anticipated in light of the Company’s activities at the time of giving the indemnification undertaking, and for an amount and/or criteria which the Board has determined are reasonable in the circumstances and, the events and the
amounts or criteria that the Board deem reasonable in the circumstances at the time of giving of the undertaking are stated in the undertaking;
|
|
(ii) |
any liability stated in Article 62.1.2 through 62.1.4 (inclusive) above;
|
|
(iii) |
any matter permitted by applicable law.
|
|
62.2.2. |
indemnify an Office Holder after the occurrence of the event which is the subject of the indemnity.
|
|
63. |
Insurance of Office Holders
|
|
63.1. |
A breach of a cautionary duty toward the Company or toward another person;
|
|
63.2. |
A breach of a fiduciary duty toward the Company, provided the Office Holder acted in good faith and has had reasonable ground to assume that the act would not be
detrimental to the Company;
|
|
63.3. |
A monetary liability imposed upon an Office Holder toward another;
|
|
63.4. |
Reasonable litigation expenses, including attorney fees, incurred by the Office Holder as a result of an administrative enforcement proceeding instituted against
him. Without derogating from the generality of the foregoing, such expenses will include a payment imposed on the Office Holder in favor of an injured party as set forth in Section 52[54](a)(1)(a) of the Securities Law and expenses that
the Office Holder incurred in connection with a proceeding under Chapters H'3, H'4 or I'1 of the Securities Law or in connection with Article D of Chapter Four of Part Nine of the Companies Law, including reasonable legal expenses,
which term includes attorney fees;
|
|
63.5. |
Expenses, including reasonable litigation expenses, including attorney fees, incurred by the Office Holder with respect to a proceeding in accordance with the
Restrictive Trade Practices Law;
|
|
63.6. |
Any other matter in respect of which it is permitted or will be permitted under applicable law to insure the liability of an Office Holder in the Company.
|
|
64. |
Exemption
|
|
65. |
Distribution of Assets
|
|
1. |
General
|
|
2. |
Definitions.
|
|
3. |
Conversion.
|
|
3.1. |
Conversions at Option of Holder. Each Preferred Share shall be
convertible, at any time and from time to time at the option of the Holder thereof, into such amount of Ordinary Shares (subject to the limitations set forth in Section 3.3) determined by dividing the Per Preferred Share Purchase Price
by the Conversion Price (as hereinafter defined) then in effect (the “Conversion Rate”). Holders shall effect conversions by
providing the Company with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”). Each Notice of
Conversion shall specify the number of Preferred Shares to be converted, the number of Preferred Shares and Ordinary Shares owned prior to the conversion at issue, and the date on which such conversion is to be effected, which date may
not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Company (such date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Company is deemed delivered hereunder.
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3.2. |
Mechanics of Conversion.
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3.2.1. |
Delivery of Conversion Shares Upon Conversion. Not later than two (2)
Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the
converting Holder (A) the number of Conversion Shares being acquired upon the conversion of the Preferred Shares which, to the extent possible, will be delivered electronically through the Depository Trust Company or another established
clearing Company performing similar functions.
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3.2.2. |
Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will at all times reserve and keep available out of its authorized and unissued Ordinary Shares for the sole purpose of issuance upon conversion of the Preferred Shares, free from preemptive rights or any other actual contingent
purchase rights of Persons other than the Holders, not less than such aggregate number of Ordinary Shares as shall be issuable (taking into account the adjustments set forth in Section 3.4) upon the conversion of the then outstanding
Preferred Shares. The Company covenants that all Ordinary Shares that shall be so issuable shall, upon issue in accordance with the terms herein, be duly authorized, validly issued, fully paid and nonassessable.
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3.2.3. |
Fractional Shares. No fractional shares shall be issued upon the
conversion of the Preferred Shares. The Company shall round any fractional Ordinary Share that results from the conversion of Preferred Shares either up or down, to the nearest whole Ordinary Share, as applicable (i.e., fractions of up
to 0.5 shall be rounded down and fractions equal to or higher than 0.5 shall be rounded up).
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3.2.4. |
Transfer Taxes and Expenses. The issuance of Conversion Shares on
conversion of this Preferred Shares shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Company shall
not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such Preferred Shares and the
Company shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established
clearing Company performing similar functions) required for same-day electronic delivery of the Conversion Shares.
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3.3. |
Beneficial Ownership Limitation. The Company shall not effect any
conversion of the Preferred Shares, and a Holder shall not have the right to convert any portion of the Preferred Shares, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of Ordinary Shares beneficially owned by
such Holder and its Affiliates and Attribution Parties shall include the number of Ordinary Shares issuable upon conversion of the Preferred Shares with respect to which such determination is being made, but shall exclude (i) conversion
of the remaining, unconverted Preferred Shares beneficially owned by such Holder or any of its Affiliates or Attribution Parties (ii)
the number of Ordinary Shares which are issuable upon exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 3.3, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 3.3 applies, the determination of whether a Preferred Share is convertible (in
relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many Preferred Shares are convertible shall be in the sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder’s determination of whether the Preferred Shares may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many
Preferred Shares are convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as
to any group status as contemplated above shall be made by the Holder and shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 3.3,
in determining the number of outstanding Ordinary Shares, a Holder may rely on the number of outstanding Ordinary Shares as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with
the SEC, as the case may be, (ii) a more recent public announcement by the Company or (iii) a more recent written notice by the Company setting forth the number of Ordinary Shares outstanding. Upon the written or oral request of a
Holder, the Company shall within two Trading Days confirm orally and in writing to such Holder the number of Ordinary Shares then outstanding. The “Beneficial Ownership Limitation” shall be 9.99% of the number of Ordinary Shares outstanding immediately after giving effect to the issuance of Ordinary Shares issuable upon conversion of Preferred Shares
held by the applicable Holder. A Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 3.3 applicable to its Preferred Shares. Any such increase or decrease in the
Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company and shall only apply to such Holder and no other Holder.
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3.4. |
Adjustments Upon Share Dividends and Share Splits. If the Company, at
any time while any Preferred Shares are outstanding: (i) pays a share dividend or otherwise makes a distribution or distributions payable in Ordinary Shares on its Ordinary Shares (which, for avoidance of doubt, shall not include any
Ordinary Shares issued by the Company upon conversion of the Preferred Shares), (ii) subdivides outstanding Ordinary Shares into a larger number of shares, (iii) combines (including by way of a reverse share split) outstanding Ordinary
Shares into a smaller number of shares, or (iv) issues, in the event of a reclassification of Ordinary Shares, any shares of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the
number of Ordinary Shares (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of Ordinary Shares outstanding immediately after such event. Any
adjustment made pursuant to this Section 3.4 shall become effective immediately after the record date for the determination of shareholders entitled to receive such share dividend or distribution or after the effective date in the case
of a subdivision, combination or re-classification, as the case may be.
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4. |
Miscellaneous.
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4.1. |
Notices. Any and all notices or other communications or deliveries to
be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by an internationally recognized overnight courier service, addressed to
the Company, at the Company’s registered address, Attention: Chief Financial Officer, facsimile number +972-9- 7777-566, or such other facsimile number as the Company may specify in its filings made to the SEC. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section
prior to 5:30 p.m. (Israel time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not a
Trading Day or later than 5:30 p.m. (Israel time) on any Business Day, (iii) the third Business Day following the date of mailing, if sent by an internationally recognized overnight courier service, or (iv) upon actual receipt by the
party to whom such notice is required to be given.
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4.2. |
Lost or Mutilated Preferred Share Certificate. If a Holder received
from the Company certificates evidencing such Holder’s Preferred Share, and such certificate shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of
a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the Preferred Shares so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss,
theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Company.
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4.3. |
Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Israel, without regard to the principles of conflict of laws thereof.
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4.4. |
Waiver. Any waiver by the Company or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other
Holders. The failure of the Company or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the
right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Company or a Holder must be in writing.
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4.5. |
Severability. If any provision of this Certificate of Designation is
invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons
and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal
the maximum rate of interest permitted under applicable law.
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4.6. |
Next Business Day. Whenever any obligation hereunder shall be due on a
day other than a Business Day, such obligations shall be fulfilled on the next succeeding Business Day.
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4.7. |
Headings. The headings contained herein are for convenience only, do
not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
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• |
equal rights to receive an invitation to, attend all of and vote at all of the general meetings of the company. Each one of the Ordinary Shares will confer upon the holder a single vote at every general meeting of the company at which
he/she participates and votes, by himself/herself, by agent, or by proxy.
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equal rights to receive dividends, if and when distributed, whether in cash or any other manner, and to participate in a distribution of bonus shares, if and when distributed, according to the ratio between the shareholders’ holdings
in the company’s issued and outstanding share capital (Ordinary Shares and Preferred Shares on an as-converted basis, without regard to the Beneficial Ownership Limitation and the company’s total issued and outstanding share capital
(Ordinary Shares and Preferred Shares on an as-converted basis, without regard to the Beneficial Ownership Limitation).
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equal right to participate in a distribution of the company’s assets available for distribution, in the event of liquidation or winding-up of the company, pari-passu with the Preferred Shares )on an as-converted basis).
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equal rights to receive dividends, if and when distributed, whether in cash or any other manner, and to participate in a distribution of bonus shares, if and when distributed, according to the ratio between the shareholders’ holdings
in the Company’s issued and outstanding share capital (Ordinary Shares and Preferred Shares on an as-converted basis, without regard to the Beneficial Ownership Limitation) and the company’s total issued and outstanding share capital
(Ordinary Shares and Preferred Shares on an as-converted basis, without regard to the Beneficial Ownership Limitation).
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equal right to participate in a distribution of the company’s assets available for distribution, in the event of liquidation or winding-up of the company, on an as-converted basis, pari-passu with the Ordinary Shares.
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a right of conversion into Ordinary Shares. Each Preferred Share shall be convertible, at any time and from time to time at the option of the shareholder thereof, into such amount of Ordinary
Shares determined by dividing the Per Preferred Share Purchase Price ($1.14, subject to adjustments) by the conversion price then in effect, or the Conversion Rate. The initial Conversion Rate is 1:1. As to Alpha Capital Anstalt, from
the closing date of the Alpha Capital SPA and until 36 months from the closing date, if and whenever we issue or sell Ordinary Shares or Ordinary Shares equivalents for a consideration per share that is less than the conversion price
then in effect, or the Discounted Per Ordinary Share Purchase Price, and which is not an exempted issuance, then immediately after such dilutive issuance, the conversion price shall be reduced to equal the Discounted Per Ordinary Share
Purchase Price, but in no event shall the conversion price become lower than the greater of (i) $US 0.10 or (ii) 20% of the closing price on the trading day immediately prior to the date of the Alpha Capital SPA.
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equal rights to vote on all matters submitted to a vote of the Ordinary Shares (on an as-converted basis, but only up to the number of votes equal to the number of Ordinary Shares into which the Preferred Shares would be convertible
pursuant to the Beneficial Ownership Limitation on the record date for any such vote).
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Any amendment, alteration or repeal of any provision of the Articles so as to adversely affect the special rights, preferences, privileges or voting powers of the Preferred Shares, subject to certain exceptions.
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Any increase to the number of members comprising the Board (applies until the first general meeting following October 31, 2020)
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Any consummation of a binding share exchange or reclassification involving the Preferred Shares, or of a merger or consolidation of the company with or into another entity, subject to certain exceptions.
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the merger does not require the alteration of the memorandum or articles of association of the surviving company;
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the surviving company would not issue more than 20% of the voting rights thereof in the course of the merger and no person will become, as a result of the issuance, a controlling shareholder of the surviving company (for this purpose
any securities convertible into shares of the surviving company that such person holds or that are issued to him in the course of the merger are deemed to have been converted or exercised);
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neither the target company, nor any shareholder that holds 25% of the means of control of the target company is a shareholder of the surviving company; and
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there is no person that holds 25% or more of the means of control in both companies.
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Subsidiary Name
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Jurisdiction of Incorporation
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Ownership Percentage
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MTS IntegraTRAK Inc.
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Delaware
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100%
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MTS Asia Ltd.
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Hong Kong
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100%
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Bohera B.V.
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The Netherlands
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100%
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/s/ Kost Forer Gabbay & Kasierer
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Tel-Aviv, Israel
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KOST FORER GABBAY & KASIERER
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March 26, 2020
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A Member of Ernst & Young Global
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