UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 20-F

 

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2019

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

OR

 

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of event requiring this shell company report _________

 

Commission file number 000-30394

 

Metalink Ltd.

(Exact name of Registrant as specified in its charter)

 

Israel

(Jurisdiction of incorporation or organization)

 

c/o Top Alpha Capital Ltd., Haaliya 24, Beit-Yitzhak 4292000, Israel 

(Address of principal executive offices)

 

Attn: Daniel Magen, Tel: +972-72-2117400 Fax: +972-9-8877326, Haaliya 24, Beit-Yitzhak 4292000, Israel
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

None

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

Ordinary Shares, NIS 1.0 par value per share
(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

 

None

(Title of Class)

 

 

 

  

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report (December 31, 2019):

 

1,255,640 Ordinary Shares, NIS 1.0 par value per share (excluding 1,525,067 treasury shares)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes    ☒ No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  ☐ Yes   ☒ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes   ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes   ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☐
   
Non-accelerated filer ☒ Emerging growth company ☐

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

☒ U.S. GAAP

 

☐ International Financial Reporting Standards as issued by the International Accounting Standards Board

 

☐ Other


If “Other” has been checked in response to the previous question indicate by check mark which financial statements the registrant has elected to follow: ☐ Item 17     ☐ Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☒ Yes    ☐ No

 

 

 

 

 

 

INTRODUCTION

 

Unless indicated otherwise by the context, all references in this annual report to “we”, “us”, “our”, “Metalink”, or the “Company” are to Metalink Ltd.

 

When the following terms and abbreviations appear in the text of this annual report, they have the meanings indicated below:

 

● the “Companies Law” or the “Israeli Companies Law” are to the Israeli Companies Law, 5759-1999;

 

● “dollars” or “$” are to United States dollars;

 

● “Lantiq” are to Lantiq Israel Ltd. and Lantiq Beteiligungs - GmbH & Co. KG.;

 

● “Lantiq Transaction” are to the sale of our WLAN business to Lantiq on February 15, 2010 pursuant to that Asset Purchase Agreement, dated January 5, 2010, by and among us and Lantiq;

 

● “NASDAQ” are to the NASDAQ Capital Market (formerly, the Nasdaq SmallCap Market);

 

● “NIS” or “shekel” are to New Israeli Shekels;

 

● “ordinary shares” are to our ordinary shares, NIS 1.0 par value per share; and

 

● “SEC” are to the United States Securities and Exchange Commission.

  

Incorporation by Reference

 

Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this annual report or to any registration statement or annual report that we previously filed, you may read the document itself for a complete description of its terms, and the summary included herein is qualified by reference to the full text of the document which is incorporated by reference into this annual report.

 

Exchange Rate

 

On December 31, 2019, the exchange rate between the NIS and the dollar, as quoted by the Bank of Israel, was NIS 3.456 to $1.00. Unless derived from our financial statements or indicated otherwise by the context, statements in this annual report that provide the dollar equivalent of NIS amounts or provide the NIS equivalent of dollar amounts are based on such exchange rate.

 

Cautionary Statement Concerning Forward-Looking Statements

 

Except for the historical information contained herein, the statements contained in this annual report are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws with respect to our business, financial condition, prospects and results of operations. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including uncertainty as to our plan of operation; uncertainty as to our ability to generate revenues and reach profitability; the fact that our U.S. shareholders may suffer adverse tax consequences if we will be classified as a passive foreign investment company; changes in general economic and business conditions; changes in currency exchange rates and interest rates; as well as the other risks discussed in Item 3.D. “Key Information—Risk Factors” and elsewhere in this annual report.

 

We urge you to consider that statements which use the terms “believe,” “do not believe,” “expect,” “plan,” “intend,” “estimate,” “anticipate,” and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties.

 

Except as required by applicable law, including the securities laws of the United States, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

  

TABLE OF CONTENTS

 

    Page
  PART I  
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT and ADVISERS 1
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 1
ITEM 3. key information 2
ITEM 4. information on the company 10
ITEM 4A. UNRESOLVED STAFF COMMENTS 12
ITEM 5. Operating and financial review and prospects 12
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 18
ITEM 7. Major Shareholders and Related Party Transactions 28
ITEM 8. financial information 30
ITEM 9. The Offer and Listing 31
ITEM 10. additional information 32
ITEM 11. Quantitative and qualitative disclosures about market risk 41
ITEM 12. description of securities other than equity securities 41
     
  PART II  
ITEM 13. Defaults, Dividend arrearages and delinquencies 42
ITEM 14. material modifications to the rights of security holders and use of proceeds 42
ITEM 15. CONTROLS AND PROCEDURES 42
ITEM 16. RESERVED  
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 43
ITEM 16B. CODE OF ETHICS 43
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 43
ITEM 16D.  EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES 43
ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 43
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT 43
ITEM 16G. CORPORATE GOVERNANCE 43
ITEM 16H. MINE SAFETY DISCLOSURE 43
     
  PART III  
ITEM 17. financial statements 44
ITEM 18. financial statements 44
ITEM 19. exhibits 44

  

i

 

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

1

 

 

ITEM 3. key information

 

A. Selected Financial Data

 

We have derived the following selected financial data from our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP.

 

The following selected data is derived from our audited financial statements included elsewhere in this annual report:

 

  ● statement of income data for the years ended December 31, 2017, 2018 and 2019; and

 

  ● balance sheet data as of December 31, 2018 and 2019.

 

The following selected data is derived from our audited financial statements that are not included in this annual report:

 

  ● statement of income data for the years ended December 31, 2015 and 2016; and

 

  ● balance sheet data as of December 31, 2015, 2016 and 2017.

 

You should read the following selected financial data together with Item 5 of this annual report entitled “Operating and Financial Review and Prospects” and our financial statements and notes thereto and the other financial information appearing elsewhere in this annual report.

 

    Year Ended December 31,*  
    2015     2016     2017     2018     2019  
    (U.S. dollars in thousands, except share and per share data)  
Statement of Operations Data:                              
Revenues   $ 506     $ 0     $ 0     $ 0     $ 0  
Cost of revenues:                                        
Costs and expenses     202       -       -       -       -  
Royalties to the Government of Israel     15       -       -       -       -  
Total cost of revenues     217       0       0       0       0  
Gross profit (loss)     289       0       0       0       0  
Operating expenses:                                        
Sales and marketing     84       -       -       -       -  
General and administrative     175       291       194       58       45  
Total operating expenses     259       291       194       58       45  
Operating profit (loss)     30       (291 )     (194 )     (58 )     (45 )
Financial income (expenses), net:     12       39       4       23       49  
Net profit (loss) from continuing operation   $ 42     $ (252 )   $ (190 )   $ (35 )     4  
Per share data:                                        
Basic and diluted earnings (loss)   $ 0.02     $ (0.09 )   $ (0.136 )   $ (0.028 )     0.003  
Shares used in computing loss per ordinary share:                                        
Basic and diluted     2,690,857       2,690,857       1,401,128       1,255,640       1,255,640  

 

    As of December 31,  
    2015     2016     2017     2018     2019  
    (U.S. dollars in thousands)  
Balance Sheet Data:                              
Cash and cash equivalents   $ 4,573     $ 4,347     $ 1,966     $ 24     $ 12  
Deposits     -       -       -       1,902       1,919  
Working capital     4,415       4,163       1,820       1,785       1,789  
Total assets     4,584       4,357       1,966       1,926       1,931  
Shareholders’ equity     4,415       4,163       1,820       1,785       1,789  

 

2

 

  

B. Capitalization and Indebtedness

 

Not Applicable.

 

C. Reasons for the Offer and Use of Proceeds

 

Not Applicable.

 

D. Risk Factors

 

You should carefully consider the following risks before deciding to purchase, hold or sell our stock. Set forth below are the most significant risks, as identified by our management, but we may also face risks in the future that are not presently foreseen. Our business, operating results or financial condition could be materially and adversely affected by these and other risks. You should also refer to the other information contained or incorporated by reference in this annual report, before making any investment decision regarding our company.

 

Risks Related to Our Business and Industry

 

We currently do not engage in any business.

 

Since February 2010, we conducted only limited business activities related to our DSL business, which, since March 2015, we no longer conduct. Our plan of operation is to consider strategic alternatives, including a possible business combination, other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of our affiliates, and, to a limited extent, voluntary liquidation. In particular, our Board of Directors has determined to focus on exploring a possible business combination with an operating company. See also below under “We may not be successful in executing our plan of operations”.

 

We may not be successful in executing our plan of operations.

 

Since February 2010, we have not been able to identify and consummate a suitable business opportunity in accordance with our plan of operations and there can be no assurance that we will be successful in identifying and evaluating suitable business opportunities or to otherwise execute our plan of operations. While our plan of operation is to consider strategic transactions and opportunities, we have not determined to pursue any particular opportunities at this time. Accordingly, we may enter into a business combination with a business entity having no significant operating history or other negative characteristics such as having a limited or no potential for immediate earnings, or otherwise pursue a strategic transaction that will not necessarily provide us or our shareholders with significant financial benefits in the short or long term. In the event that we will complete a business combination with an operating company, the success of our operations is likely to be dependent upon the management of the target company and numerous other factors beyond our control. There is no assurance that we will be able to negotiate a business combination on terms favorable to us, or at all, or that we will otherwise be successful in executing our plan of operations. In addition, if we do consummate a major strategic transaction, such as a business combination, our shareholders may suffer a dilution of value of shares and we may need to raise additional financing because a business combination normally will involve the issuance of a significant number of additional Metalink shares and may require us to raise funds through a public or private financing. See also above under “We currently do not engage in any business” and below under “We have a controlling shareholder”.

 

We have a history of operating losses.

 

We incurred significant operating losses since our inception. Although we generated a profit from continuing operations of approximately $4,000 and $40,000 for the years ended December 31, 2019 and December 31, 2015, respectively, we incurred a loss from continuing operations for each of the years ended December 31, 2018, 2017, 2016, 2014 and 2013. Even if we are able to sustain profitability, we cannot assure that future net income will offset our accumulated deficit, which, as of December 31, 2018, was approximately $145.1 million. This is likely to have an adverse impact on the value of our stock.

 

3

 

  

We hold substantially all of our assets in cash, which exposes us to decrease in the value of such funds. Even if we determine to invest part of such cash in financial instruments, we will be exposed to decreases in the value of our financial investments and may also be deemed an “investment company” under the Investment Company Act of 1940, which could subject us to material adverse consequences.

 

As of December 31, 2019, we held approximately $1.9 million in cash (including short-term bank deposits), which represent substantially all of our assets. If we continue to hold such funds in cash or short-term bank deposit, it will expose us to decrease in value of such funds, especially if these short-term deposits do not yield interest rates at levels similar to the rate of inflation. On the other hand, if we determine to invest some or all of these funds in financial instruments or securities, we will be subject to loss to the extent that the market value of these instruments decline, which will adversely affect our financial condition. In addition, in order to invest such funds in any securities, we will first need to ensure that the investment of the cash proceeds will not cause us to be an “investment company” under the United States Investment Company Act of 1940, or the Investment Company Act. This is because if we were deemed to be an investment company, we would not be permitted to register under the Investment Company Act without obtaining exemptive relief from the SEC because we are incorporated outside of the United States and, prior to being permitted to register, we would not be permitted to publicly offer or promote our securities in the United States. As a result, we may be required to take certain actions with respect to the investment of our assets or the distribution of cash to shareholders in order to avoid being deemed an investment company, which actions may not be as favorable to us as if we were not potentially subject to regulation under the Investment Company Act. If we are deemed to be an investment company, we could be found to be in violation of the Investment Company Act, and a violation of that act could subject us to material adverse consequences. We seek to conduct our operations, including by way of investing our cash and cash equivalents, to the extent possible so as not to become subject to regulation under the Investment Company Act.

 

We will not generate any more revenues from our DSL business.

 

In early 2008, we issued an “end-of-life” notice to our customers, according to which we discontinued the production of the majority of our DSL components. In March 2015, we completed the delivery of certain of our DSL products to a customer and received approximately $450,000, which we recognized in the first quarter of 2015. This order marks the last order that we will receive for our DSL products.

 

Risks Relating to Our Ordinary Shares

 

We have a controlling shareholder.

 

As of April 1, 2020, Mr. Daniel Magen, our Chief Executive Officer and Chief Financial Officer and a member of our Board of Directors, beneficially owned 670,000 ordinary shares representing approximately 53.4% of our outstanding ordinary shares. As a result, Mr. Magen may have sufficient voting power, subject to special approvals required by Israeli law for transactions involving controlling shareholders, to elect all of our directors (subject to the provisions of the Companies Law with regard to external directors); control our management; approve or reject any merger, consolidation or full tender offer; and otherwise exert significant influence on decisions by our shareholders on matters submitted to shareholder vote. This concentration of ownership of our ordinary shares could delay or prevent proxy contests, mergers, tender offers, or other purchases of our ordinary shares that might otherwise give our shareholders the opportunity to realize a premium over the then-prevailing market price for our ordinary shares and, as a result, may also adversely affect our share price.

 

The limited market for our shares may reduce their liquidity and make our stock price more volatile. You may have difficulty selling your shares.

 

Our ordinary shares are currently quoted on the over-the-counter market in the Pink Open Market (also known as the Pink Sheets), or OTC Pink, which is operated by OTC Markets Group, Inc. OTC Pink is a market tier of OTC Markets for various companies, including those that are registered with and reporting to the SEC (like us) and others that are delinquent in their filings. Securities traded on the OTC Pink market typically have low trading volumes and reduced liquidity. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our share price. As a result, there may be only a limited public market for our ordinary shares, and it may be more difficult to dispose of or to obtain accurate quotations as to the market value of our ordinary shares. In addition, unlike the NASDAQ Stock Market and the various international stock exchanges, there are no corporate governance requirements imposed on OTC Pink-listed companies.

 

4

 

 

Our ordinary shares are subject to the “penny stock” rules of the SEC, which makes transactions in our ordinary shares cumbersome and may reduce the value of our shares.

 

Rule 3a51-1 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. The market price of our ordinary shares on the OTC Pink has been substantially less than $5.00 per share and we do not currently meet any of the other rule exclusions, and therefore our ordinary shares are currently subject to the “penny stock” rules of the SEC. For as long as they are subject to such rules, transactions in our ordinary shares are cumbersome and may reduce the value of our shares. This is because for any transaction involving a penny stock like ours, unless exempt, Rule 15g-9 of the Exchange Act generally requires:

 

  ● that a broker or dealer approve a person’s account for transactions in penny stocks; and

 

  ● the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

 In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

 

  ● obtain financial information and investment experience objectives of the person; and

 

  ● make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, generally:

 

  ● sets forth the basis on which the broker or dealer made the suitability determination; and

 

  ● requires that the broker or dealer receive a signed, written statement from the investor prior to the transaction.

 

Disclosure also has to be made by the broker or dealer about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our ordinary shares and cause a decline in our market value for as long as we are subject to the said “penny stock” rules.

 

Substantial future sales of our ordinary shares may depress our share price.

 

As of April 1, 2020, Mr. Daniel Magen, our Chief Executive Officer and Chief Financial Officer and a member of our Board of Directors, beneficially owned 670,000 ordinary shares representing approximately 53.4% of our outstanding shares. If Mr. Magen sells substantial amounts of our ordinary shares, or if the perception exists that he may sell a substantial number of our ordinary shares, the market price of our ordinary shares may fall.

 

5

 

 

If we are characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences.

 

As more fully described in Item 10 – “Additional Information - Taxation” under the caption “Passive Foreign Investment Company Considerations,” we may be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes in 2019. If, for any taxable year, our passive income, or our assets that produce passive income, exceed specified levels, we may be characterized as a PFIC for that year and possibly also for later years. We satisfied the corporate level test to be a PFIC during some of the years 2002 – 2019. Our ordinary shares will be considered shares of a PFIC in the case of any United States person that owned those shares in 2002 or 2003 and that person has not made any of certain elections that could permit the PFIC classification of our shares to terminate in a taxable year in which we did not satisfy the test to be a PFIC. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences. These consequences may include having gains realized on the sale of our ordinary shares treated as ordinary income, rather than capital gains, and having the highest possible tax rates in prior years, together with significant interest charges, apply to substantial portions of those gains and to certain distributions, if any, that we make, whether or not we have any earnings and profits. U.S. shareholders should consult their own U.S. tax advisers with respect to the U.S. tax consequences of investing in our ordinary shares. 

 

If we fail to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, it could have a material adverse effect on our business, operating results and stock price.

 

The Sarbanes-Oxley Act of 2002 imposes certain duties on us. Our efforts to comply with the management assessment requirements of Section 404 thereof have resulted in a devotion of management time and attention to compliance activities, and we expect these efforts to require the continued commitment of significant resources. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting. We may also identify material weaknesses or significant deficiencies in our internal control over financial reporting. In addition, our internal control over financial reporting has not been, and is not required to be, audited by our independent registered public accounting firm. In the future, if we are unable to assert that our internal controls are effective, our investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline. Failure to maintain effective internal control over financial reporting could also result in investigation and/or sanctions by regulatory authorities, and could have a material adverse effect on our business and operating results, investor confidence in our reported financial information, and the market price of our ordinary shares.

 

6

 

 

Risks Relating to Our Location in Israel

 

Conditions in the Middle East may adversely affect our business and limit our ability to persue our strategic alternatives.

 

We are incorporated under the laws of the State of Israel, and our principal offices are located in Israel. In addition, all of our officers and directors are residents of Israel. Accordingly, security, political and economic conditions in the Middle East in general, and in Israel in particular, affect our business.

 

Over the past several decades, a number of armed conflicts have taken place between Israel and its Arab neighbors and a state of hostility, varying in degree and intensity, has existed between Israel and certain other countries or militant groups in the region. Since late 2000, there has also been an increase in violence and unrest between Israel and the Palestinians, including during the summer of 2014, when Israel was engaged in an armed conflict with Hamas, a militia and political group operating in the Gaza Strip. This conflict has strained Israel’s relationship with its Arab citizens, Arab countries and, to some extent, with other countries around the world. In addition, since the end of 2010, several countries in the region have been experiencing increased political instability, which has led to changes in government in some of these countries and increases in violence and turbulence, including the ongoing civil war in Syria which shares a common border with Israel, the effects of which are currently difficult to assess. In addition, Israel faces threats from more distant neighbors, such as Iran (which has previously threatened to attack Israel and is believed to have influence over Hamas in Gaza and Hezbollah, a militia and political group operating in Lebanon) and the militant group known as the Islamic State of Iraq and Syria. This situation may potentially escalate in the future. In addition, this instability in the region may affect the global economy and marketplace. We do not believe that the political and security situation has had a material impact on our business to date; however, there can be no assurance that this will be the case for future operations. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot be assured that this government coverage will be maintained or will be adequate in the event we submit a claim. We could be adversely affected by any major hostilities, including acts of terrorism as well as cyber-attacks or any other hostilities involving or threatening Israel, the interruption or curtailment of trade between Israel and its trading partners, a significant downturn in the economic or financial condition of Israel or a significant increase in the rate of inflation.

 

Furthermore, some neighboring countries, as well as certain companies, organizations and movements, continue to participate in a boycott of Israeli firms and others doing business with Israel or with Israeli companies. In the past several years, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies. Similarly, Israeli companies are limited in conducting business with entities from several countries. For example, in 2008, the Israeli legislature passed a law forbidding any investments in entities that transact business with Iran. Restrictive laws, policies or practices directed towards Israel or Israeli businesses could have an adverse impact on our operating results, financial condition or the expansion of our business.

 

7

 

 

 

Provisions of Israeli law may delay, prevent or complicate merger or acquisition activity, which could depress the market price of our shares.

 

 Provisions of Israeli corporate, securities and tax law may have the effect of delaying, preventing or making an acquisition of our company more difficult. For example, under the Companies Law, upon the request of a creditor of either party to a proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that as a result of the merger the surviving company will be unable to satisfy the obligations of any of the parties to the merger. This and other provisions of Israeli law could cause our ordinary shares to trade at prices below the price for which third parties might be willing to pay to gain control of us, since third parties who are otherwise willing to pay a premium over prevailing market prices to gain control of us may be unable or unwilling to do so because of these provisions of Israeli law.

 

It may be difficult to enforce a U.S. judgment against us, our officers and directors or to assert U.S. securities laws claims in Israel.

 

We are incorporated under the laws of the State of Israel. Service of process upon us, and our directors and officers, all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, because the majority of our assets and investments, and all of our directors and officers are located outside the United States, any judgment obtained in the United States against us or any of them may be difficult to collect within the United States and may not be enforced by an Israeli court.

 

We have been informed by our legal counsel in Israel that it may also be difficult to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws because Israel reasoning that the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing these matters.

 

Subject to specified time limitations and legal procedures, under the rules of private international law currently prevailing in Israel, Israeli courts may enforce a U.S. judgment in a civil matter, including a judgment based upon the civil liability provisions of the U.S. securities laws, as well as a monetary or compensatory judgment in a non-civil matter, provided that the following key conditions are met:

 

  ● subject to limited exceptions, the judgment is final and non-appealable;

 

  ● the judgment was given by a court competent under the laws of the state of the court and is otherwise enforceable in the state in which it was given;

 

  ● the judgment was rendered by a court competent under the rules of private international law applicable in Israel;

 

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  ● the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts;

 

  ● adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and evidence;

 

  ● the judgment is enforceable under the laws of State of Israel and its enforcement is not contrary to the law, public policy, security or sovereignty of the State of Israel;

 

  ● the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; and

 

  ● an action between the same parties in the same matter was not pending in any Israeli court at the time the lawsuit was instituted in the U.S. court.

 

Since we received government grants for research and development expenditures, we are subject to ongoing restrictions and conditions.

 

We have received in the past royalty-bearing grants from the Government of Israel through the Israel Innovation Authority (formerly known as the Office of the Chief Scientist) of the Israeli Ministry of Economy, or the IIA, for research and development programs that meet specified criteria pursuant to the Law for the Encouragement of Research, Development and Technological Innovation, 1984, and the regulations promulgated thereunder, or the R&D Law. The terms of the IIA grants limit our ability to manufacture products or transfer technologies outside of Israel if such products or technologies were developed using know-how developed with or based upon IIA grants. In addition, any non-Israeli who becomes an “interested party” in Metalink (e.g., a holder of 5% or more of our share capital) is generally required to notify the IIA and to undertake to observe the R&D Law governing the grant programs of the IIA, the principal restrictions of which are the transferability limits described above in this paragraph. The IIA may establish new guidelines regarding the R&D Law, which may affect our existing and/or future IIA programs and incentives for which we may be eligible. We cannot predict what changes, if any, the IIA may make.

 

Also, as more fully described in Item 8-A-“Legal Proceedings,” in August 2011, we received a demand from the IIA to pay it royalties in the amount of approximately NIS 940,000 (equal to approximately $268,000), excluding interest and linkeage to CPI. While we believe the claim has no merits, there is no assurance that we will necessarily prevail in our efforts to oppose this demand, which may harm our results of operations.

 

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ITEM 4. information on the company

 

A. History and Development of the Company

 

Corporate History and Details

 

Metalink was incorporated in September 1992 as a corporation under the laws of the State of Israel. Our principal executive offices are located at Kinneret 5, Bnei Brak, Israel. Our telephone number is 972-72-2117400.

 

From our inception through the third quarter of 1994, our operating activities related primarily to establishing a research and development organization, developing prototype chip designs which meet industry standards and developing strategic OEM partnerships with leading telecommunications equipment manufacturers. We shipped our first chipset in the fourth quarter of 1994. From that time until February 2010, we focused on developing additional products and applications, shaping new industry standards and building our worldwide indirect sales and distribution channels. In February 2010, we sold our wireless local area network (WLAN) business to Lantiq. In February 2017, we completed our self-tender offer and purchased approximately 53.3% of the shares issued and outstanding as of immediately prior to the consummation of the tender offer, for $1.50 per share, or approximately $2.15 million in the aggregate. Consequently, to our knowledge, (1) Mr. Daniel Magen became our largest beneficial owner, owning, in the aggregate, 670,000 ordinary shares, representing approximately 53.4% of the issued and outstanding shares of Metalink, and (2) each of Uzi Rozenberg, the former Chairman of our Board of Directors, and Tzvi Shukhman, a former member of the Board of Directors, who were also principal shareholders of Metalink prior to completion of the tender offer, no longer hold any shares of Metalink (but see Item 7 – Major Shareholders for details about the stock options held by Mr. Shukhman).

 

Recent Major Developments

 

There were no major developments in Metalink since January 1, 2019.

 

Principal Capital Expenditure and Divestitures

 

Capital expenditures were $0 for each of the years ended December 31, 2019, 2018 and 2017.

 

During 2017, 2018 and 2019, we did not make any significant divestitures.

 

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B. Business Overview

 

Overview

 

Our plan of operation is to consider strategic alternatives, including a possible business combination or other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of our affiliates, and, to a limited extent, voluntary liquidation. In particular, our Board of Directors has determined to focus on exploring a possible business combination with an operating company.

 

Historic DSL Business

 

We previously marketed and sold DSL chipsets used by manufacturers of telecommunications equipment. In March 2015, we completed the delivery of our DSL products to a customer. In exchange therefor we received a payment of approximately $450,000, which we recognized in the first quarter of 2015. This order marks the last order that we will receive for our DSL products, which were the subject of an “end of life” notice that we issued in early 2008.

 

All of our sales in 2014 and 2015 were to one customer in Taiwan. We had no sales since 2016.

 

Research and Development

 

Since the sale of the WLAN business to Lantiq in February 2010, we are not engaged in any research and development activities.

 

The Government of Israel, through the IIA, encourages research and development projects. Since 1995, we received grants from the IIA for the development of our products, including DSL products. In addition, we were engaged in a research project, under the sixth framework program of the European Commission, under which we were entitled to grants based on certain approved expenditures of a research and development plan. See Item 5.A under “Government Grants” and Item 5.C under “Grants from the IIA”.

 

Manufacturing

 

We have never owned or operated a semiconductor fabrication facility. As a fabless provider of chipsets, we subcontracted our entire semiconductor manufacturing to third party contractors. Our chipsets were delivered to us fully assembled and tested based on our proprietary designs.

 

We subcontracted our semiconductor wafer manufacturing, packaging and testing to semiconductor manufacturing companies in Taiwan. The selection of these manufacturers was based on the breadth of available technology, quality, manufacturing capacity and support for design tools used by us.

 

Proprietary Rights

 

We used to rely on patent, copyright, trademark and trade secret laws, confidentiality agreements and other contractual arrangements with our employees, strategic partners and others to protect our technology. We do not currently own any registered trademarks or registered copyrights.

 

In addition, other parties may assert rights as inventors of the underlying technologies, which could limit our ability to fully exploit the rights conferred by any patent that we receive. Our competitors may be able to design around any patent that we receive and other parties may obtain patents that we would need to license or circumvent in order to exploit our patents.

 

All of our U.S. patents expired in 2018. 

 

Government Regulations

 

Israeli Innovation Authority. See Item 5.C under “Grants from the IIA”.

 

C. Organizational Structure

 

We currently have no active subsidiaries.

 

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D. Property, Plants and Equipment

 

In November 2017, our offices relocated to Bnei Brak, Israel, as part of our engagement with Daniel Magen to provide CFO and CEO services to the Company, without remuneration.

 

We believe that the aforesaid office space is suitable and adequate for our operations as currently conducted and as currently foreseen. In the event any additional or substitute offices and/or facilities will become required, we believe that we could obtain such offices and facilities at commercially reasonable rates.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 5. Operating and financial review and prospects

 

The information contained in this section should be read in conjunction with our financial statements and related notes included elsewhere in this annual report. Our financial statements have been prepared in accordance with U.S. GAAP.

 

Overview

 

General

 

Our plan of operation is to consider strategic alternatives, including a possible business combination, other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of our affiliates, and, to a limited extent, voluntary liquidation.

 

Revenues in 2019 and 2018 were $0.

 

Operating loss for 2019 was $45,000, compared to an operating loss of $58,000 in 2018. This decrease was mainly due to the decrease of our operating expenses.

 

As of December 31, 2019 we had approximately $12,000 in cash and cash equivalents and short-term deposits of approximately $1.9 million. As of the date of this annual report, we anticipate that we will be able to meet our cash requirements in the next 12 months without obtaining additional capital from external sources.

 

2020 Outlook

 

Revenues. In March 2015, we completed the delivery of certain of our DSL products to a customer. In exchange therefor we received approximately $450,000, which we recognized in the first quarter of 2015. This order marked the last order that we will receive for DSL products, which were the subject of an “end of life” notice that we issued in early 2008. As a result, we do not expect to generate any revenues in 2020.

 

Plan of Operations. Our plan of operation is to consider strategic alternatives, including a possible business combination or other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of our affiliates, and, to a limited extent, voluntary liquidation. There is no assurance that any of these alternatives will be pursued or, if one is pursued, what the timing thereof would be or the terms on which it would occur.

 

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Critical Accounting Policies

 

Management’s discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. A change in those accounting rules can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced. Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. Actual results could differ from those estimates.

 

However, we currently did not identify any critical accounting policies that require significant judgments and estimates used in the preparation of our financial statements.

 

A. Operating Results

 

General

 

The following discussion of our results of operations for the years ended December 31, 2019, 2018 and 2017, including the following table, which presents selected financial information data in dollars (dollars in thousands) and as a percentage of total revenues, is based upon our statements of operations contained in our financial statements for those periods, and the related notes, included in this annual report.

 

    Year Ended December 31,  
    2017     2018     2019  
                                     
Revenues     0       0 %     0       0 %     0       0 %
Cost of revenues:                                                
Costs and expenses     -       -       -       -       -       -  
Royalties to the Government of Israel     -       -       -       -       -       -  
Total Cost of revenues     -       -       -       -       -       -  
Gross profit     -       -       -       -       -       -  
Operating expenses:                                                
Sales and marketing     -       -       -       -       -       -  
General and administrative     194       -       58       -       45       -  
Other expenses     -       -       -       -       -       -  
Total operating expenses     194       -       58       -       45       -  
Operating loss     (194 )     -       (58 )     -       (45 )     -  
Financial income, net     4       -       23       -       49       -  
Net income (loss)     (190 )     0 %     (35 )     0 %     4       0 %

 

Revenues. Our revenues are generated in U.S. dollars, and the majority of our costs and expenses are incurred in U.S. dollars. Consequently, we use the dollar as our functional currency. For additional details regarding the manner in which we recognize revenues, see the discussion under the caption “Critical Accounting Policies - Revenue Recognition” above.

 

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Cost of Revenues. Our cost of revenues consists primarily of materials and components used in the manufacture and assembly of our chips, fees for subcontractors who manufacture, assemble and test our chipsets, and other overhead expenses and royalties paid to the Government of Israel.

 

Operating Expenses. Operating expenses consist of sales and marketing expenses as well as general and administrative expenses (primarily salaries and other personnel related expenses for executive, accounting and administrative personnel, professional fees, and other general corporate expenses).

 

Financial Income, Net. In 2019, 2018 and 2017, financial income, net was primarily attributable to interest income, exchange rates differences and balance annulments.

 

Taxes. Israeli companies were subject to corporate tax at the rate of 24% for the year 2017. For 2018 and 2019, the corporate tax rate was decreased to 23%. Israeli companies are generally subject to Capital Gains Tax at the corporate tax rate.

 

Year Ended December 31, 2019 Compared with Year Ended December 31, 2018

 

Revenues. There were no revenues in 2019 and in 2018. This occurred due to completion of delivery of our last DSL products order in 2015, which was the subject of an “end of life” notice we issued already in early 2008.

 

Cost of Revenues. Cost of revenues was $0 in 2019 and in 2018.

 

Operating Expenses. Operating expenses were $45,000 in 2019, compared with $58,000 in 2018. This decrease was primarily due to cost reduction efforts we implemented during 2019.

 

Financial Income, net. Financial income, net was $49,000 in 2019, compared with $23,000 in 2018.

 

Year Ended December 31, 2018 Compared with Year Ended December 31, 2017

 

Revenues. There were no revenues in 2018 and in 2017. This occurred due to completion of delivery of our last DSL products order in 2015, which was the subject of an “end of life” notice we issued already in early 2008.

 

Cost of Revenues. Cost of revenues was $0 in 2018 and in 2017.

 

Operating Expenses. Operating expenses were $58,000 in 2018, compared with $194,000 in 2017. This decrease was primarily due to cost reduction efforts we implemented during 2018.

 

Financial Income, net. Financial income, net was $23,000 in 2018, compared with $4,000 in 2017.

 

Impact of Inflation and Foreign Currency Fluctuations

 

The dollar cost of our operations is influenced by the extent to which any increase in the rate of inflation in Israel is (or is not) offset, or is offset on a lagging basis, by the devaluation of the NIS in relation to the dollar. Inflation in Israel has a negative effect on our profitability as we receive payment in dollars or dollar-linked NIS for substantially all of our sales while we incur a portion of our expenses, principally salaries and related personnel expenses, in NIS, unless such inflation is offset by a devaluation of the NIS.

 

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The following table sets forth, for the periods indicated, (1) devaluation or appreciation of the U.S. dollar against the most significant currency for our business, i.e., the NIS; and (2) inflation as reflected in changes in the Israeli consumer price index.

 

    Year Ended December 31,  
    2015     2016     2017     2018     2019  
NIS     0.3 %     (1.5 )%     (9.8 )%     8.1 %     (7.8 )%
Israeli Consumer Price Index     (1.0 )%     (0.2 )%     0.4 %     0.8 %     0.6 %

 

A revaluation of the NIS in relation to the dollar, as was the case in 2016 and 2017 and 2019, has the effect of increasing the dollar amount of any of our expenses or liabilities which are payable in NIS (unless such expenses or payables are linked to the dollar). Such revaluation also has the effect of increasing the dollar value of any asset, which consists of NIS or receivables payable in NIS (unless such receivables are linked to the dollar). Conversely, any decrease in the value of the NIS in relation to the dollar, as was the case in 2015 and 2018, has the effect of decreasing the dollar value of any unlinked NIS assets and the dollar amounts of any unlinked NIS liabilities and expenses.

 

In 2015-2019, foreign currency fluctuations and the rate of inflation in Israel did not have a material impact on our financial results. However, we cannot predict any future trends in the rate of inflation/deflation in Israel or the rate of devaluation/revaluation of the NIS against the dollar. We cannot assure you that we will not be adversely affected in the future if inflation in Israel exceeds the devaluation of the NIS against the dollar or if the timing of such devaluation lags behind increases in inflation in Israel or if the NIS will be appreciated against the dollar.

 

The effects of foreign currency re-measurements are reported in our financial statements in current operations.

 

Corporate Tax Rate

 

Israeli companies were generally subject to corporate tax at the rate of 23% for the years 2018 and 2019 and for future years.

 

As a result of our accumulated tax loss carry-forwards (which totaled more than $200 million at December 31, 2019), and based on the current tax system in Israel, we do not anticipate being subject to income tax in Israel for the 2019 tax year.

 

Israeli Government Grants

 

We used to conduct a substantial part of our research and development operations in Israel. Some of our research and development efforts have been financed through internal resources and grants per project from the IIA. The IIA provided us grants for research and development efforts of approximately $1.9 million for the year ended December 31, 2009 (20% of our then total research and development expenses), $0.1 million for the year ended December 31, 2010 (86% of our then total research and development expenses) and none for the year ended December 31, 2011 and thereafter.

 

Since the grant program has the impact of lowering our research and development expenditures and improving our operating margins, reduction in the Company’s participation in the program or in the benefits that the Company receives under the program could affect the Company’s financial condition and results of operations. Currently, we are obligated to pay royalties to the IIA at the rate of 3% to 4.5%. Due to our manufacturing outside of Israel, our aggregate payment amount with respect to grants received in 2009 and 2010 is 100% of the dollar-linked value of such grants. In 2003, we were required by the IIA to perform at least 50% of our manufacturing in Israel. See “Item 5(C)- Research and Development, Patents and Licenses, etc.- Grants from the IIA”.

 

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The refund of the grants is contingent on future sales (or related services) and we have no obligation to refund these grants if sales are not generated.

 

We paid or accrued to the IIA $0 for 2019, 2018 and 2017. See also Item 8A – “Legal Proceedings” regarding a pending claim of the IIA.

 

B. Liquidity and Capital Resources

 

Historically, we have financed our operations primarily through funds generated by our public offerings in 1999 and 2000 as well as research and development and marketing grants, primarily from the Government of Israel. From 2008 until 2010, we also financed our operations through private equity investments and, on a limited basis, through short-term loans.

 

Working Capital and Cash Flows

 

We had cash and cash equivalents of approximately $12,000, $24,000 and $2.0 million as of December 31, 2019, 2018 and 2017, respectively. In addition, we had short-term deposits of approximately $1.9 million as of December 31, 2019 and 2018 and $0 as of December 31, 2017. It should be noted that as of each of those dates we did not have any short-term (other than the above mentioned short-term deposit) or long-term investments or outstanding borrowings.

 

Our total proceeds from grants received from the IIA (DSL and WLAN), net of royalties paid, was approximately $28 million as of each of December 31, 2019, 2018 and 2017. See also Item 8A – “Legal Proceedings” regarding a pending claim of the IIA.

 

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No capital expenditures were made in our continuing operation for each of the years ended December 31, 2019, 2018 and 2017.

 

Net cash provided by operating activities was $5,000 for the year ended December 31, 2019. Net cash used in operating activities was $40,000 and $228,000 for the years ended December 31, 2018 and 2017, respectively.

 

Net cash used in financing activities was $0 for the years ended December 31, 2019 and 2018, compared to $2,153,000 for the year ended December 31, 2017, primarily related to the self-tender offer we completed in February 2017. Since 2010, we no longer hold government treasury securities and we do not conduct interest rate or currency hedging activities.

 

Net cash used in investing activities was $17,000 and $1.9 million for the years ended December 31, 2019 and 2018, respectively, compared to $0 for the year ended December 31, 2017, primarily related to a short-term deposit renewed automatically on a half year basis.

 

 Outlook

 

In light of several factors, primarily our current cash position, we anticipate that our existing capital resources will be adequate to satisfy our working capital and capital expenditure requirements in the next twelve months.

 

C. Research and Development, Patents and Licenses, etc.

 

Grants from the IIA

 

The Government of Israel encourages research and development projects through the Israel Innovation Authority (formerly known as the Office of the Chief Scientist) of the Israeli Ministry of Economy, or the IIA, pursuant to the R&D Law. Grants received under such programs are generally repaid through a mandatory royalty based on revenues from products (and ancillary services) incorporating know-how developed, in whole or in part, with the grants. This government support is condition upon our ability to comply with certain applicable requirements and conditions specified in the IIA’s programs and the R&D Law.

 

Generally, grants from the IIA constitute up to 50% of qualifying research and development expenditures for particular approved projects. Under the terms of these IIA projects, a royalty of 3% to 5% is due on revenues from sales of products and related services that incorporate know-how developed, in whole or in part, within the framework of projects funded by the IIA.

 

The R&D Law also provides that know-how developed under an approved research and development program or rights associated with such know-how (1) may not be transferred to third parties in Israel without the approval of the IIA (such approval is not required for the sale or export of any products resulting from such research or development) and (2) may not be transferred to any third parties outside Israel, except in certain special circumstances and subject to the IIA’s prior approval, which approval, if any, may generally be obtained, in the following cases: (a) the grant recipient pays to the IIA a portion of the sale price paid in consideration for such IIA-funded know-how (according to certain formulas, which may result in repayment of up to 600% of the grant amounts plus interest), or (b) the grant recipient receives know-how from a third party in exchange for its IIA-funded know-how. Such approval is not required for the export of any products resulting from such research or development.

 

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The R&D Law imposes reporting requirements with respect to certain changes in the ownership of a grant recipient. The law requires the grant recipient and its controlling shareholders and foreign interested parties to notify the IIA of any change in control of the recipient or a change in the holdings of the means of control of the recipient and requires a non-Israeli interested party to undertake to the IIA to comply with the R&D Law. In addition, the rules of the IIA may require additional information or representations in respect of certain of such events. For this purpose, “Control” is defined as the ability to direct the activities of a company other than any ability arising solely from serving as an officer or director of the company. A person is presumed to have control if such person holds 50% or more of the means of control of a company. “Means of Control” refers to voting rights or the right to appoint directors or the chief executive officer. An “interested party” of a company includes a holder of 5% or more of its outstanding share capital or voting rights, its chief executive officer and directors, someone who has the right to appoint its chief executive officer or at least one director, and a company with respect to which any of the foregoing interested parties owns 25% or more of the outstanding share capital or voting rights or has the right to appoint 25% or more of the directors. Accordingly, any non-Israeli who acquires 5% or more of our ordinary shares will be required to notify the IIA that it has become an interested party and to sign an undertaking to comply with the R&D Law. 

 

A major amendment to the R&D Law entered into force on January 1, 2016. This amendment may create uncertainty in respect of the terms of our existing and/or future IIA programs and incentives we may be eligible for as it empowers the IIA to issue new guidelines in connection therewith.

 

See also Item 8A – “Legal Proceedings” regarding a pending claim of the IIA.

 

D. Trend Information

 

See Item 5A – “Operating Results – Overview – 2020 Outlook.”

 

E. Off-balance sheet arrangements

 

We do not have any off-balance sheet arrangements, as such term is defined under Item 5E of the instructions to Form 20-F, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. In addition, we have no special purpose financing or partnership entities that are likely to create material contingent obligations.

 

F. Tabular disclosure of Contractual Obligations.

 

There were no contractual obligations or commercial commitments as of December 31, 2019, as such terms are defined under Item 5F of the instructions to Form 20-F.

 

ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A. Directors and Senior Management

 

The following table lists our current directors and executive officers:

 

Name   Age   Position
Joseph Winston   41   Chairman of the Board of Directors
Daniel Magen   49   Director, Chief Executive Officer and Chief Financial Officer
Roi Kol   37   Director
Ron Mekler*   46   Director
Avi Mann*   57   External Director
Mor Kaniel*   30   External Director

 

* Member of the Audit Committee and Compensation Committee.

 

Joseph Winston has served as Chairman of our Board of Directors since March 2017. He is the Chief Financial Officer of Finext Capital, a subsidiary of the Futureal Group, a European real estate developer. From November 2007 until June 2011, Mr. Winston worked as an analyst and portfolio manager at Erez Investments, a subsidiary of Vision Sigma Ltd. (TASE: VISN). Mr. Winston has a B.A. in economics with a minor in business from the University of California, Berkeley and an M.B.A. in finance and strategy from the UCLA Anderson School of Management. Mr. Winston earned the right to use the Charted Financial Analyst designation in 2005.

 

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Daniel Magen has served as our director since March 2017. Effective December 2017, Mr. Magen also serves as our Chief Executive Officer and Chief Financial Officer. He currently also serves as the sole director of Top Alpha Capital S.M. Ltd., a controlling shareholder of the Company. Mr. Magen has a B.A. in economics and accounting from Tel Aviv University. Mr. Magen is a certified public accountant.

 

Roi Kol has served as our director since March 2017. He is the VP Investments of Top Alpha Investment House, an affiliate of Top Alpha Capital S.M. Ltd., a controlling shareholder of the Company. Mr. Kol has a B.A. in economics with a specialty in business management from Ben Gurion University. Mr. Kol holds a portfolio management license from the Israel Securities Authority.

 

Ron Mekler has served as our director since June 2018. He is the Chief Financial Officer at a large health services organization. Mr. Mekler previously served as CFO and as a Controller in several international industrial and real estate companies. Mr. Mekler has a B.A. in economics and accounting from Ben Gurion University and an M.B.A. in business administration with a specialty in finance and tax from the Ono Academic College. Mr. Mekler is a certified public accountant.

 

Avi Mann has served as our external director since June 2018. He is the Chief Executive Officer of Ezer Construction, a privately held company that provides marketing, engineering and technological solutions for construction projects to a number of international companies. Mr. Mann has a BSc in mechanical engineering from the Technion, Israel Institute of Technology with a specialty in energy systems and an M.B.A. in business administration with a specialty in strategic management, marketing, human resources, systems management and organizational structure from the Technion, Israel Institute of Technology.

 

Mor Kaniel has served as our external director since June 2018. She is the Head of Finance of the Retail Division of Alpha Cosmetics Ltd. Ms. Kaniel has a B.A. in economics and business administration from Bar Ilan University.

 

Additional Information

 

There are no family relations between the directors and executive officers named above. We are also not aware of any arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which (1) any person referred to above was selected as a director or member of senior management or (2) any director will receive compensation by a third party in connection with his or her candidacy or board service in the Company.

 

B. Compensation

 

General

 

The aggregate remuneration we paid for the year ended December 31, 2019 to our directors and executive officers (six persons during 2019), was approximately NIS 19,300 (equivalent to $5,590) in salaries, fees, commissions and bonuses. There were no amounts set aside or accrued to provide for pension, retirement or similar benefits.

 

 As approved by our shareholders, commencing June 2018, our external directors, including Messrs. Mann and Kaniel, and our independent directors, including Mr. Mekler, and such other external and independent directors who may serve the Company from time to time are entitled to receive the minimum compensation permitted for external directors under the Companies Regulations (Rules Regarding Compensation and Expenses to External directors), 2000, as amended (the “Compensation Regulations”), which currently means: (i) fixed compensation for their service on the Board of Directors or any committee of the Board of Directors of NIS 21,210 (equivalent to approximately $5,800) on an annual basis, and (ii) compensation for their participation in any Board of Directors or committee meetings of NIS 615 per meeting attended (equivalent to approximately $170), or, for attendance via teleconference, 60% of such participation fee and 50% of such fee for the approval of actions of the Board of Directors by way of written consent all linked to the Israeli CPI.

 

As approved by our shareholders, commencing June 2018, our directors affiliated with our controlling shareholder (namely, Mr. Kol) or that may be affiliated with our controlling shareholder (namely, Mr. Winston) are entitled to a meeting attendance fee of NIS 620 (equivalent to approximately $170), or, for attendance via teleconference, 60% of such participation fee and 50% of such fee for the approval of actions of the Board of Directors by way of written consent, all linked to the Israeli CPI. 

 

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For the sake of clarity, Mr. Magen is not entitled to any fees in consideration for his service as a member of the Board of Directors or as an executive officer.

 

No directors have arrangements to receive benefits upon termination of employment.

 

Compensation of Executive Officers

 

In 2019, we did not pay any compensation to our executive officer.  

 

C. Board Practices

 

Introduction

 

We are incorporated in Israel and therefore are subject to various corporate governance practices under the Israeli Companies Law, relating to such matters as external directors, the audit committee, the internal auditor and approvals of interested party transactions. These matters are in addition to the ongoing conditions and other relevant provisions of U.S. securities laws.

 

Board of Directors

 

According to the Companies Law and our articles of association, the oversight of the management of our business is vested in our Board of Directors. The Board of Directors may exercise all powers and may take all actions that are not specifically granted to our shareholders. As part of its powers, our Board of Directors may cause us to borrow or secure payment of any sum or sums of money for our purposes, at times and upon terms and conditions as it thinks fit, including the grant of security interests in all or any part of our property.

 

According to our articles of association, our Board of Directors may consist of between four (4) and nine (9) directors. Our Board of Directors currently consists of six (6) directors.

 

Under the Companies Law, our Board of Directors must determine the minimum number of directors having financial and accounting expertise, as defined in the regulations, that our Board of Directors should have. In determining the number of directors required to have such expertise, the Board of Directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our Board of Directors has determined that we require at least one director with the requisite financial and accounting expertise and that Mr. Mann has such expertise.

 

Our directors are elected at annual meetings of shareholders by a vote of the holders of a majority of the ordinary shares voting thereon. Directors generally hold office until the next annual meeting of shareholders. Our annual meeting of shareholders is required to be held at least once during every calendar year and not more than fifteen months after the last preceding meeting. The Board of Directors generally may temporarily fill vacancies in the board.

 

A resolution proposed at any meeting of the Board of Directors is deemed adopted if approved by a majority of the directors present and voting on the matter.

 

External Directors

 

Qualifications of External Directors

 

Under the Israeli Companies Law, companies incorporated under the laws of Israel whose shares are listed for trading on a stock exchange or have been offered to the public in or outside of Israel, such as Metalink, are generally required to appoint at least two external directors. The Companies Law provides that a person may not be appointed as an external director if the person or the person’s relative, partner, employer or any entity under the person’s control has, as of the date of the person’s appointment to serve as an external director, or had, during the two years preceding that date, any affiliation with:

 

  ● the company;

 

  ● any entity controlling the company;

 

  ● any entity controlled by the company or by its controlling entity; or

 

  ● in a company that does not have a controlling shareholder, affiliation with the chairman, the chief executive officer, the chief financial officer or a 5% shareholder of the company.

  

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The term affiliation includes:

 

  ● an employment relationship;

 

  ● a business or professional relationship;

 

  ● control; and

 

  ● service as an office holder.

 

The Companies Law defines the term “office holder” of a company to include a director, the chief executive officer and any officer of the company who reports directly to the chief executive officer.

 

No person can serve as an external director if the person’s position or other business creates, or may create, a conflict of interest with the person’s responsibilities as an external director or may otherwise interfere with the person’s ability to serve as an external director.

 

Until two years from termination of office, a company and its controlling shareholder generally not give any direct or indirect benefit to the former external director or his relative.

 

In addition, pursuant to the Companies Law, (1) an external director must have either “accounting and financial expertise” or “professional qualifications” (as such terms are defined in regulations promulgated under the Companies Law) and (2) at least one of the external directors must have “accounting and financial expertise”. Our current external directors are Mr. Mann and Ms. Kaniel. We have determined that Mr. Mann has the requisite “accounting and financial expertise”.

 

Election of External Directors

 

External directors are elected at meetings of shareholders by a vote of the holders of a majority of the ordinary shares voting thereon, provided that either:

 

  ● At least a majority of the shares of non-controlling shareholders voted at the meeting vote in favor of the external director’s election; or

 

  ● The total number of shares of non-controlling shareholders that voted against the election of the external director does not exceed 2% of the aggregate voting rights in the company.

 

The initial term of an external director is three years and may be extended for up to two additional three-year terms.

 

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Reelection of an external director may be effected through one of the following mechanisms: (1) the board of directors proposed the reelection of the nominee and the election was approved by the shareholders by the majority required to appoint external directors for their initial term as described above; or (2) a shareholder holding 1% or more of the voting rights or the external director proposed the reelection of the nominee, and the reelection is approved by a majority of the votes cast by the shareholders of the company, excluding the votes of controlling shareholders and those who have a personal interest in the matter as a result of their relations with the controlling shareholders; provided that the aggregate votes cast in favor of the reelection by such non-excluded shareholders constitute more than 2% of the voting rights in the company.

 

External directors may be removed from office only by the same percentage of shareholders as is required for their election, or by a court, only if the external directors cease to meet the statutory qualifications for their appointment or if they violate their duty of loyalty to the company.

 

Each committee of a company’s board of directors that exercises a power of the board of directors is required to include at least one external director, except for the audit committee and compensation committee, each of which is required to include all the external directors.

 

Committees

 

Subject to the provisions of the Companies Law, our Board of Directors may delegate its powers to committees consisting of board members. Our board has formed an audit committee and a compensation committee.

 

Audit Committee

 

Under the Companies Law, our Board of Directors is required to appoint an audit committee, which must be comprised of at least three directors, include all of the external directors, a majority of its members must satisfy the independence standards under the Companies Law, and the chairman is required to be an external director.

 

The duties of the audit committee under the Companies Law include, among others, examining flaws in the business management of the company and suggesting remedial measures to the board, assessing the company’s internal audit system and the performance of its internal auditor, and as more fully described below, approval of certain interested party transactions. An interested party is defined in the Companies Law to include 5% or greater shareholder, any person or entity who has the right to designate one director or more or the general manager of the company or any person who serves as a director or as a general manager.

 

Our Audit Committee adopted a written charter specifying the committee’s duties and responsibilities, which include, among other:

 

  ● Overseeing financial and operational matters involving accounting, corporate finance, internal and independent auditing, internal control over financial reporting, compliance and business ethics; and

 

  ● Authority to oversee the Company’s independent registered public accounting firm and recommend to our shareholders to appoint or remove them.

 

Our Audit Committee consists of Mr. Mann, Ms. Kaniel and Mr. Mekler.

  

Our Board of Directors has determined that Mr. Mann qualifies as an “audit committee financial expert” within the meaning of the SEC rules.

 

Our Audit Committee meets when required.

 

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Compensation Committee

 

Under the Companies Law, our Board of Directors is required to appoint a compensation committee, which must be comprised of at least three directors, including all of the external directors and whose other members must satisfy certain independence standards under the Companies Law, and the chairman of which is required to be an external director. Under the Companies Law, the role of the compensation committee is to recommend to the board of directors, for ultimate shareholder approval by a special majority, a policy governing the compensation of office holders based on specified criteria; to review, from time to time, modifications to the compensation policy and examine its implementation; to approve the actual compensation terms of office holders prior to approval thereof by the board of directors; and to resolve whether to exempt the compensation terms of a candidate for chief executive officer from shareholder approval.

 

Our compensation committee consists of the same members as the Audit Committee and meets as required.

 

Internal Auditor

 

Under the Companies Law, our Board of Directors is also required to appoint an internal auditor proposed by the audit committee. The role of the internal auditor is to examine, among other things, whether our activities comply with the law and orderly business procedure. At present, we have no serving internal auditor.

 

Approval of Specified Related Party Transactions Under Israeli Law

 

Fiduciary Duties of Office Holders

 

The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company, including directors and executive officers.

 

The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the circumstances. The duty of care includes a duty to use reasonable means to obtain:

 

  ● information on the appropriateness of a given action brought for his/her approval or performed by him/her by virtue of his/her position; and

 

  ● all other important information pertaining to the previous actions.

 

The duty of loyalty of an office holder includes a duty to:

 

  ● refrain from any conflict of interest between the performance of his duties in the company and his personal affairs;

 

  ● refrain from any activity that constitutes competition with the company’s business;

  

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  ● refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and

 

  ● disclose to the company any information or documents relating to a company’s affairs which the office holder has received due to his position as an office holder.

 

Each person listed in the table under “Directors and Senior Management” above is an office holder. Under the Companies Law, all arrangements as to compensation of directors and officers in public companies such as ours, generally require the approvals of the compensation committee, the board of directors and, in the case of the Chief Executive Officer and the directors, subject to certain exceptions, the shareholders as well, in that order.

 

Disclosure of Personal Interests of an Office Holder.

 

The Companies Law requires that an office holder of a company promptly disclose any personal interest that he may have and all related material information known to him in connection with any existing or proposed transaction by the company. A personal interest of an office holder includes an interest of a company in which the office holder is, directly or indirectly, a 5% or greater shareholder, director or general manager or in which he has the right to appoint at least one director or the general manager. In the case of an “extraordinary transaction”, the office holder’s duty to disclose applies also to a personal interest of the office holder’s relative.

 

Under the Companies law, an extraordinary transaction is a transaction:

 

  ● other than in the ordinary course of business;

 

  ● other than on market terms; or

 

  ● that is likely to have a material impact on the company’s profitability, assets or liabilities.

 

Under the Companies Law, once an office holder complies with the above disclosure requirement the board of directors may approve a transaction between the company and such office holder or a third party in which such office holder has a personal interest, unless the articles of association provide otherwise. Nevertheless, a transaction that is adverse to the company’s interest cannot be approved.

 

If the transaction is an extraordinary transaction, both the audit committee and the board of directors must approve the transaction. Under specific circumstances, shareholder approval may also be required. Generally, when a transaction is considered by the audit committee and board of directors, the interested director may not be present or vote, unless a majority of the members of the board of directors or the audit committee, as the case may be, has a personal interest in the matter. If a majority of members of the board of directors have a personal interest therein, shareholder approval is generally also required.

 

Approval of Office Holder Compensation

 

Under the Companies Law, every Israeli public company was required to adopt a compensation policy, recommended by the compensation committee, and approved by the board of directors and the shareholders, in that order, no later than January 2014. The shareholder approval requires a majority of the votes cast by shareholders, provided that either (i) the shares voted in favor of the resolution include at least a majority of the shares voted by shareholders who are not controlling shareholders and do not have a “personal interest” in such matter or (ii) the total number of shares voted against such matter by said group of disinterested shareholders does not exceed two percent of the voting rights in the company. In general, all office holders’ terms of compensation – including fixed remuneration, bonuses, equity compensation, retirement or termination payments, indemnification, liability insurance and the grant of an exemption from liability – must comply with the company’s compensation policy. To date, we have not sought shareholder approval for any compensation policy primarily because we believe that we are exempt from such requirement.

 

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In addition, the compensation terms of directors, the chief executive officer, and any employee or service provider who is considered a controlling shareholder must be approved separately by the compensation committee, the board of directors and the shareholders of the company (by the same majority noted above), in that order. The compensation terms of other officers require the approval of the compensation committee and the board of directors. Shareholder approval is not required for director compensation payable in cash up to the maximum amount set forth in the regulations governing the compensation of external directors. The compensation terms of other officers who report directly to the chief executive officer require the approval of the compensation committee and the board of directors.

 

Exculpation, Insurance and Indemnification of Directors and Officers

 

Exculpation of Office Holders

 

Under the Companies Law, an Israeli company may not exempt an office holder from liability with respect to a breach of his duty of loyalty, but may exempt in advance an office holder from his liability to the company, in whole or in part, with respect to a breach of his duty of care (except in connection with distributions), provided that the articles of association of the company allow it to do so. Our articles of association allow us to exempt our office holders to the fullest extent permitted by law.

 

Office Holder Insurance

 

Our articles of association provide that, we may, to the maximum extent permitted by the Companies Law, insure the liability of officers. Without derogating from the foregoing, we may enter into a contract for the insurance of the liability of any of our office holders with respect to an act performed in the capacity of an office holder for:

 

  ● a breach of his duty of care to us or to another person;

 

  ● a breach of his duty of loyalty to us, provided that the office holder acted in good faith and had reasonable cause to assume that his act would not prejudice our interests;

 

  ● a financial liability imposed upon him in favor of another person;

 

  ● expenses he or she incurs as a result of administrative proceedings that may be instituted against him or her under Israeli securities laws, if applicable, and payments made to injured persons under specific circumstances thereunder; and

 

  ● 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.

  

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Indemnification of Office Holders

 

We may, to the maximum extent permitted by the Companies Law, indemnify the liability of office holders. Without derogating from the foregoing, we may indemnify an office holder for acts or omissions committed in his or her capacity as an office holder of the Company for:

 

  ● a financial liability imposed on him in favor of another person by any judgement, including a settlement or an arbitrator’s award approved by a court. Such indemnification may be approved (i) after the liability has been incurred, or (ii) in advance, provided that our undertaking to indemnify is limited to events that our Board of Directors believes are foreseeable in light of our actual operations at the time of providing the undertaking and to a sum or criterion that our Board of Directors determines to be reasonable under the circumstances;

 

  ● reasonable litigation expenses, including attorneys’ fees, expended by the office holder as a result of an investigation or proceeding instituted against him by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against him and either (i) concluded without the imposition of any financial liability in lieu of criminal proceedings, or (ii) concluded with the imposition of a financial liability in lieu of criminal proceedings but relates to a criminal offense that does not require proof of criminal intent or in connection with a financial sanction;

 

  ● reasonable litigation expenses, including attorneys’ fees, expended by the office holder or charged to him or her by a court, resulting from the following: proceedings we institute against him or her or instituted on our behalf or by another person; a criminal indictment from which he or she was acquitted; or a criminal indictment in which he or she was convicted for a criminal offense that does not require proof of intent;

 

  ● expenses he or she incurs as a result of administrative proceedings that may be instituted against him or her under Israeli securities laws, if applicable, and payments made to injured persons under specific circumstances thereunder; and

 

  ● any other matter in respect of which it is permitted or will be permitted under applicable law to indemnify an office holder.

 

Limitations on Insurance and Indemnification

 

The Companies Law provides that a company may not exculpate or indemnify an office holder nor enter into an insurance contract which would provide coverage for any monetary liability incurred as a result of any of the following:

 

  ● a breach by the office holder of his duty of loyalty unless, with respect to insurance coverage or indemnification, the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

 

  ● a breach by the office holder of his duty of care if the breach was done intentionally or recklessly, unless the breach was done negligently;

 

  ● any act or omission done with the intent to derive an illegal personal benefit; or

 

  ● any fine levied against the office holder.

  

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In addition, under the Companies Law, indemnification of, and procurement of insurance coverage for, our office holders must be approved by our audit committee and our Board of Directors and, in specified circumstances, by our shareholders.

 

We currently do not have director’s and officer’s liability insurance. We entered into indemnification and exculpation agreements with our directors and executive officers in accordance with our articles of association.

 

Management and Director Service Contracts

 

We receive chief executive officer and chief financial officer services from Mr. Magen, for no remuneration.

 

Except as set forth above, there are no arrangements or understandings between us and any of our current directors for benefits upon termination of service.

 

D. Employees

 

Since January 2012, we do not have any employees. Rather, all of our personnel are composed of the Chief Executive Officer and the Chief Financial Officer, whom we engaged (through Top Alpha) for no remuneration in December 2017.

 

E. Share Ownership

 

The following table sets forth certain information regarding the ownership of our ordinary shares by our directors and officers as of April 1, 2020. The percentage of outstanding ordinary shares is based on 1,255,640 ordinary shares outstanding as of April 1, 2020 (excluding 1,435,217 treasury shares).

 

Name   Number of Ordinary Shares Beneficially Owned(1)     Percentage of Outstanding Ordinary Shares(2)  
Daniel Magen     670,000       53.4 %
Joseph Winston     -       -  
Roi Kol     -       -  
Ron Mekler     -       -  
Avi Mann     -       -  
Mor Kaniel     -       -  
Directors and Officers as a group (consisting of 6 persons)     670,000       53.4 %

 

* Less than 1%.

 

(1) Except as otherwise noted and pursuant to applicable community property laws, each person named in the table has sole voting and investment power with respect to all ordinary shares listed as owned by such person. Shares beneficially owned include shares that may be acquired pursuant to options that are exercisable within 60 days of April 1, 2020.

 

(2) Ordinary shares deemed beneficially owned by virtue of the right of any person or group to acquire such shares within 60 days of April 1, 2020, are treated as outstanding only for the purposes of determining the percent owned by such person or group.

  

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Share Option Plans

 

We have two option plans, our Share Option Plan (2003), for our advisors and independent contractors, which is currently in use and one other plan. The expiration dates of the options granted under the plans range from 4 to 25 years from the date of grant. Our plans are administered currently by our Board of Directors. All of our employees and directors are eligible to participate in our plans. Members of advisory board, if any and our independent contractors are eligible to receive options under our Share Option Plan (2003).

 

In 2017, 2018 and 2019, we did not grant any options to purchase ordinary shares. As of April 1, 2020, options to purchase 112,500 ordinary shares, at an exercise price per share of $1.50, are outstanding, all of which are fully vested and expire on December 31, 2021. These options were granted to Mr. Shukhman, our former CEO, and to Mr. Zack, our former Director.

 

  ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A. Major Shareholders

 

The following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of April 1, 2020 by each person or entity known to own beneficially more than 5% of our outstanding ordinary shares based on information provided to us by the holders or disclosed in public filings with the SEC.

 

Name   Number of Ordinary Shares Beneficially Owned (1)     Percentage of
Outstanding Ordinary Shares(2) 		 
Daniel Magen(3)     670,000       53.4 %
Tzvi Shukhman(4)     100,000       7.4 %

 

(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 pursuant to applicable community property laws, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.

  

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(2) The percentage of outstanding ordinary shares is based on 1,255,640 ordinary shares outstanding as of April 1, 2020 (excluding 1,435,217 treasury shares).

 

(3) The record holder of the 670,000 shares is Top Alpha, an Israeli company wholly owned by Mr. Magen.

 

(4) Consists of options exercisable into 100,000 ordinary shares, at exercise price per share of $1.50, all of which are fully vested and expires on December 31, 2021.

 

Our major shareholders do not have voting rights different from the voting rights of our other shareholders.

 

In May 2013, Daniel Magen, through his ownership of Top Alpha, purchased 271,600 of our ordinary shares, which constituted approximately 7.13% of our outstanding shares at that time. Since that time, Mr. Magen, through his ownership of Top Alpha, has purchased an additional 398,400 of our ordinary shares, and now beneficially owns 670,000 of our ordinary shares, which constitutes approximately 53.4% of our outstanding shares.

 

Record Holders

 

Based on a review of the information provided to us by our transfer agent, as of April 1, 2020, there were 22 holders of record of our ordinary shares. These numbers are not representative of the number of beneficial holders of our ordinary shares nor is it representative of where such beneficial holders reside since many of these ordinary shares were held of record by brokers or other nominees.

 

B. Related Party Transactions

 

Not applicable.

 

C. Interests of Experts and Counsel

 

Not applicable.

 

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ITEM 8. financial information

 

A. Statements and Other Financial Information

 

Financial Statements

 

See Item 18– “Financial Statements” below.

 

Legal Proceedings

 

In August 2011, we received a demand from the IIA to pay it royalties in the amount of approximately NIS 940,000 (approximately $268,000), excluding interest and linkeage to CPI, due to the consideration we received from the Lantiq Transaction. We objected to the demand and asked the IIA to withdraw it. In February 2012, the IIA rejected our request and informed us that it intends to pursue full payment of such royalties. Since that time, to our knowledge, the IIA has not instituted legal proceedings against us in regards to such amount. While we believe the claim has no merits, there is no assurance that we will necessarily prevail.

 

Except as stated above, we are currently not, and have not been in the recent past, a party to any legal proceedings which may have or have had in the recent past significant effects on our financial position or profitability.

 

Dividend Policy

 

On January 28, 2013, our Board of Directors authorized a special one-time dividend of $0.10 per ordinary share, or approximately $270,000 in the aggregate, payable to shareholders of record as of March 15, 2013. On February 6, 2017, we announced that we have successfully completed our self tender offer and, as contemplated in the offer to purchase, we have accepted for purchase all of the 1,435,217 shares tendered for $1.50 per share, or approximately $2.15 million in the aggregate. The distribution of the dividend to shareholders and the self tender offer were subject to deduction of applicable withholding taxes.

 

Our Board of Directors has not adopted any dividend policy at this time, and any future dividend policy will be determined by our Board of Directors and will be based upon conditions then existing, including our results of operations, financial condition, current and anticipated cash needs, contractual restrictions and other conditions.

 

According to the Companies Law, a company may distribute dividends only out of its “profits,” as such term is defined in the Companies Law, as of the end of the most recent fiscal year or as accrued over a period of two years, whichever is higher. Our Board of Directors is authorized to declare dividends, provided that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. Notwithstanding the foregoing, dividends may be paid with the approval of a court, provided that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. Profits, for purposes of the Companies Law, means the greater of retained earnings or earnings accumulated during the preceding two years, after deduction of previous distributions that were not already deducted from the surpluses, as evidenced by financial statements prepared no more than six months prior to the date of distribution.

 

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B. Significant Changes

 

Except as otherwise disclosed in this annual report, no significant change has occurred since December 31, 2019.

 

ITEM 9. THE OFFER AND LISTING

 

A. Offer and Listing Details

 

Our ordinary shares are currently quoted on the over-the-counter market in the Pink Open Market (also known as the Pink Sheets), or OTC Pink, which is operated by OTC Markets Group, Inc. This means there may be limited liquidity for trading in our shares. See Item 3.D “Risk Factors” under “The limited market for our shares may reduce their liquidity and make our stock price more volatile. You may have difficulty selling your shares.”

 

B. Plan of Distribution

 

Not applicable.

 

C. Markets

 

Our ordinary shares began trading on the NASDAQ Global Market on December 2, 1999 under the symbol “MTLK”. In March 2009, our ordinary shares were transferred to the NASDAQ Capital Market.

 

As of December 3, 2000, our ordinary shares began trading also on the Tel Aviv Stock Exchange, or TASE, under the symbol “MTLK.” We voluntarily delisted our ordinary shares from trade on the TASE, effective June 14, 2010.

 

On April 21, 2011, our ordinary shares were delisted from The NASDAQ Capital Market and became quoted on the OTCQB under the symbol “MTLK” and, since January 1, 2018, are quoted on the OTC Pink.

 

D. Selling shareholders.

 

Not applicable.

 

E. Dilution.

 

Not applicable.

 

F. Expenses of the Issue.

 

Not applicable.

 

 

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ITEM 10. additional information

 

A. Share Capital

 

Not applicable.

 

B. Memorandum and Articles of Association

 

Copies of our memorandum of association and our articles of association are filed as Exhibits 1.1 and 1.2 to this annual report. The information called for by this Item 10.B. is included in Exhibit 2.1 to this annual report and is incorporated herein by reference.

 

 

C. Material Contracts

 

None

 

D. Exchange Controls

 

There are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or the proceeds from the sale of our shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding some transactions. However, legislation remains in effect under which currency controls can be imposed by administrative action at any time.

 

The ownership or voting of our ordinary shares by non-residents of Israel, except with respect to citizens of countries which are in a state of war with Israel, is not restricted in any way by our articles of association or by the laws of the State of Israel.

 

E. Taxation

 

The following is a brief summary of the current tax structure applicable to companies in Israel, with special reference to its effect on us and certain Israeli Government programs benefiting us. The following also contains a discussion of material Israeli and United States tax consequences to purchasers of our ordinary shares. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation, there can be no assurance that the views expressed in the discussion will be accepted by the tax authorities in question of the courts. The discussion is not intended, and should not be construed, as legal or professional tax advice.

 

Holders of our ordinary shares are encouraged to consult their own tax advisors as to the United States, Israeli or other tax consequences of the purchase, ownership and disposition of ordinary shares.

 

Israeli Tax

 

General Corporate Tax

 

For a discussion of the current corporate tax applicable to companies in Israel - see Item 5A “Operating Results – Corporate Tax Rate” above.

 

Capital Gains Tax

 

Israeli law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale of assets located in Israel by non-residents of Israel, including our ordinary shares, unless a specific exemption is available or unless a tax treaty between Israel and the shareholder’s country of residence provides otherwise. The law distinguishes between the real gain and inflationary surplus. Real gain is the difference between the total capital gain and the inflationary surplus. The inflationary surplus is computed on the basis of the difference between the Israeli consumer price index or, in certain circumstances, a foreign currency exchange rate, on the date of sale and the date of purchase. The real gain is the excess of the total capital gain over the inflationary surplus.

  

Provisions of Israeli tax law may treat a sale of securities listed on a stock exchange differently than the sale of other securities. In the past, the ITA has indicated that it does not recognize the OTC Bulletin Board or the OTC Pink as a “stock exchange” for purposes of the Tax Ordinance. However, the ITA has indicated that it will view securities quoted on the OTC Bulletin Board or the OTC Pink as listed on a “stock exchange” where such securities were previously delisted from a “stock exchange” (such as the Nasdaq Capital Market), such as our ordinary shares.

  

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Generally, as of January 1, 2012, the tax rate applicable to capital gains derived from the sale of shares, whether listed on a stock market or not, is 25% for Israeli individuals, unless such shareholder claims a deduction for financing expenses in connection with such shares, in which case the gain will generally be taxed at a rate of 30%. Additionally, if such shareholder is considered a “Significant Shareholder” at any time during the 12-month period preceding such sale, i.e. such shareholder holds directly or indirectly, including with others, at least 10% of any means of control in the company, the tax rate shall be 30%. However, the foregoing tax rates will not apply to: (i) dealers in securities; and (ii) shareholders who acquired their shares prior to an initial public offering (that may be subject to a different tax arrangement). Israeli Companies are subject to the Corporate Tax rate on capital gains derived from the sale of listed shares.

 

The tax basis of our shares acquired prior to January 1, 2003 will generally be determined in accordance with the average closing share price in the three trading days preceding January 1, 2003. However, a request may be made to the tax authorities to consider the actual adjusted cost of the shares as the tax basis if it is higher than such average price.

 

Shareholders that are individuals who have taxable income that exceeds NIS 640,000 in a tax year (linked to the Israeli CPI each year) will be subject to an additional tax, referred to as High Income Tax, at the rate of 3% on their taxable income for such tax year that is in excess of such threshold. For this purpose, taxable income will include taxable capital gains from the sale of our shares and taxable income from dividend distributions.

 

Non-Israeli residents are exempt from Israeli capital gains tax on any gains derived from the sale of shares publicly traded on a recognized stock market outside of Israel, provided that such capital gains are not derived from a permanent establishment in Israel and that such shareholders did not acquire their shares prior to the issuer’s initial public offering. However, non-Israeli corporations will not be entitled to such exemption if Israeli residents (i) have a controlling interest of more than 25% in such non-Israeli corporation, or (ii) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.

 

In some instances where our shareholders may be liable to Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at the source.

 

Application of the U.S.-Israel Tax Treaty to Capital Gains Tax

 

Pursuant to the Convention between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, as amended (the “U.S.-Israel Tax Treaty”), the sale, exchange or disposition of our ordinary shares by a person who qualifies as a resident of the United States and is entitled to claim the benefits afforded to a resident, or a Treaty U.S. Resident, will not be subject to Israeli capital gains tax unless (i) that Treaty U.S. Resident held, directly or indirectly, shares representing 10% or more of our voting power during any part of the 12-month period preceding the sale, exchange or disposition; or (ii) the capital gains from such sale can be allocated to a permanent establishment in Israel; or (iii) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year. If any of these exceptions apply, then the sale, exchange or disposition of our ordinary shares by a Treaty U.S. Resident will be subject to Israeli capital gains tax, to the extent applicable. However, under the U.S.-Israel Tax Treaty, the Treaty U.S. Resident would be permitted to claim credit for these taxes if required to be paid against U.S. income tax imposed with respect to such sale, exchange or disposition, subject to the limitations set in U.S. laws applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate to state or local taxes. 

 

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Taxation of Non-Residents on Receipt of Dividends

 

On distributions of dividends other than bonus shares, or stock dividends, income tax is withheld at the source. Non-residents of Israel are subject to Israeli income tax on the receipt of dividends paid on our ordinary shares, at the rate of 25%, or 30% for a shareholder that is considered a Significant Shareholder at any time during the 12-month period preceding such distribution, unless the dividends are paid from income derived under certain tax incentive programs provided by Israeli tax law, or a different rate is provided in a treaty between Israel and the shareholder’s country of residence. Under the U.S.-Israel Tax Treaty, the maximum tax on dividends paid to a holder of our ordinary shares who is a Treaty U.S. Resident will be 25%. However, dividends paid from income derived during any period for which the Israeli company is not entitled to the reduced tax rate applicable to tax incentive programs, the maximum tax will be 12.5% if the holder is a U.S. company holding shares representing at least 10% of the issued voting power during the part of the taxable year preceding the date of payment of dividends and during the whole of the prior taxable year, and provided that not more than 25% of the Israeli company’s gross income consists of interest or dividends.

 

For information with respect to the applicability of High Income Tax on distribution of dividends, see - “Capital Gains Tax” above.

 

United States Federal Income Tax Considerations

 

General

 

Subject to the limitations described below, the following discussion describes the material U.S. federal income tax consequences to a U.S. Holder (as defined below) that is a beneficial owner of our ordinary shares and that holds them as capital assets. For purposes of this summary, a “U.S. Holder” is a beneficial owner of our ordinary shares who or that is for U.S. federal income tax purposes:

 

  ● a citizen or individual resident of the United States;

 

  ● a corporation (or other entity treated as a corporation for U.S. federal tax purposes) created or organized in the United States or under the law of the United States or of any State or the District of Columbia;

 

  ● an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or

 

  ● a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) the trust was in existence on August 20, 1996 and properly elected to continue to be treated as a United States person.

 

This summary is not a comprehensive description of all of the tax considerations that may be relevant to each individual investor’s decision to purchase, sell or hold ordinary shares. We recommend that owners of our ordinary shares consult their own tax advisers with respect to the U.S. federal, state and local tax consequences, as well as non-U.S. tax consequences, of the acquisition, ownership and disposition of our ordinary shares applicable to their particular tax situations.

  

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This discussion is based on current provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), current and proposed U.S. Treasury regulations promulgated thereunder, and administrative and judicial decisions, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular holder based on that holder’s individual circumstances. In particular, this discussion does not address the potential application of the alternative minimum tax or the U.S. federal income tax consequences to U.S. Holders that are subject to special treatment, including:

 

  ● broker-dealers, including dealers in securities or currencies;

 

  ● insurance companies;

 

  ● taxpayers that have elected mark-to-market accounting;

 

  ● tax-exempt organizations;

 

  ● financial institutions or “financial services entities”;

 

  ● taxpayers who hold the ordinary shares as part of a straddle, “hedge”, constructive sale, “conversion transaction” or other risk reduction transaction;

 

  ● holders owning directly, indirectly or by attribution shares having at least ten percent of the total voting power of all our shares;

 

  ● taxpayers whose functional currency is not the U.S. dollar; and

 

  ● taxpayers who acquire our ordinary shares as compensation.

 

This discussion does not address any aspect of U.S. federal gift or estate tax or state or local tax laws. Additionally, the discussion does not consider the tax treatment of partnerships or other entities treated as pass-throughs for U.S. federal income tax purposes or persons who hold our ordinary shares through a partnership or other pass-through entity.

 

Material aspects of U.S. federal income tax relevant to a Non-U.S. Holder are also discussed below. In general, a Non-U.S. Holder is a beneficial owner of our ordinary shares who or that is for U.S. federal income tax purposes: (i) a nonresident alien individual, (ii) a corporation (or an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the law of a country other than the United States or a political subdivision thereof or, (iii) an estate or trust that is not a U.S. Holder.

 

Each prospective investor is advised to consult that person’s own tax adviser with respect to the specific tax consequences to that person of purchasing, holding or disposing of our ordinary shares.

 

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Taxation of Dividends Paid on Ordinary Shares

 

In the event of dividend distribution, and subject to the discussion of the passive foreign investment company, or PFIC, rules below, a U.S. Holder will be required to include in gross income as a dividend the amount of any distribution paid on our ordinary shares, including any Israeli taxes withheld from the amount paid, on the date the distribution is received to the extent the distribution is paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Distributions in excess of those earnings and profits will be applied against and will reduce the U.S. Holder’s basis in the ordinary shares and, to the extent in excess of that basis, will be treated as a gain from the sale or exchange of the ordinary shares. The legislation until the end of 2010 provided that dividend income generally would be taxed to noncorporate taxpayers at the rates applicable to long-term capital gains, provided certain holding period and other requirements (including a requirement that we are not a PFIC in the year of the dividend or in the preceding year) are satisfied. Dividends received after 2010 will be taxable as ordinary income.

 

Distributions out of current or accumulated earnings and profits paid in foreign currency to a U.S. Holder will be includible in the income of the U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate on the date the distribution is received. A U.S. Holder that receives a foreign currency distribution and converts the foreign currency into U.S. dollars subsequent to receipt will have foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. dollar, which will generally be U.S. source ordinary income or loss.

 

U.S. Holders will have the option of claiming the amount of any Israeli income taxes withheld at source either as a deduction from gross income or as a dollar-for-dollar credit against their U.S. federal income tax liability. Individuals who do not claim itemized deductions, but instead utilize the standard deduction, may not claim a deduction for the amount of any Israeli income taxes withheld, but those individuals may still claim a credit against their U.S. federal income tax liability. The amount of foreign income taxes that may be claimed as a credit in any year is subject to complex limitations and restrictions, which must be determined on an individual basis by each shareholder. The total amount of allowable foreign tax credits in any year cannot exceed the pre-credit U.S. tax liability for the year attributable to foreign source taxable income.

 

A U.S. Holder will be denied a foreign tax credit with respect to Israeli income tax withheld from dividends received on the ordinary shares:

 

  ● if the U.S. Holder has not held the ordinary shares for at least 16 days of the 31-day period beginning on the date which is 15 days before the ex-dividend date; or

 

  ● to the extent the U.S. Holder is under an obligation to make related payments on substantially similar or related property.

 

Any days during which a U.S. Holder has substantially diminished his or its risk of loss on the ordinary shares are not counted toward meeting the 16-day holding period required by the statute. In addition, distributions of current or accumulated earnings and profits generally will be foreign source passive income for U.S. foreign tax credit purposes and will not qualify for the dividends received deduction otherwise available to corporations.

  

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Taxation of the Disposition of Ordinary Shares

 

Subject to the discussion of the PFIC rules below, upon the sale, exchange or other disposition of our ordinary shares, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between that U.S. Holder’s basis in the ordinary shares, which is usually the U.S. dollar cost of those shares, and the amount realized on the disposition. A disposition of the ordinary shares will be considered to occur on the “trade date”, regardless of the U.S. Holder’s method of accounting. A U.S. Holder that uses the cash method of accounting calculates the U.S. dollar value of the proceeds received on the sale as of the date that the sale settles. However, a U.S. Holder that uses an accrual method of accounting is required to calculate the value of the proceeds of the sale as of the “trade date” and may therefore realize foreign currency gain or loss, unless that U.S. Holder has elected to use the settlement date to determine its proceeds of sale for purposes of calculating that foreign currency gain or loss. Capital gain from the sale, exchange or other disposition of the ordinary shares held more than one year is long-term capital gain. Long-term capital gains of noncorporate taxpayers are eligible for reduced rates of taxation.

 

Gain or loss recognized by a U.S. Holder on a sale, exchange or other disposition of our ordinary shares generally is treated under the U.S. Internal Revenue Code as U.S. source income or loss for U.S. foreign tax credit purposes, and thus a U.S. Holder ordinarily would not be entitled to claim a foreign tax credit for taxes paid to Israel with respect to gains. However, under the U.S.- Israel Tax Treaty, gains derived from the sale, exchange or other disposition of our ordinary shares generally are considered to be from Israeli sources if the sale, exchange or other disposition occurs in Israel, and a U.S. Holder who is entitled to claim the benefits of that treaty is permitted to claim a foreign tax credit for taxes paid to Israel with respect to the sale, exchange or disposition, subject to the limitations on foreign tax credits under U.S. federal income tax law. The U.S. Israel Tax Treaty does not relate to state or local taxes. (See Israeli Tax - Application of the U.S.- Israel Tax Treaty to Capital Gains Tax).

 

The deductibility of a capital loss recognized on the sale, exchange or other disposition of the ordinary shares is subject to limitations. In addition, a U.S. Holder that receives foreign currency upon disposition of the ordinary shares and converts the foreign currency into U.S. dollars subsequent to receipt will have foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. dollar, which will generally be U.S. source ordinary income or loss.

 

Passive Foreign Investment Company Considerations

 

If we are characterized as a PFIC for U.S. federal income tax purposes, adverse tax consequences can arise for our shareholders. Generally a foreign corporation is treated as a PFIC if either (i) 75 percent or more of its gross income in a taxable year, including the pro-rata share of the gross income of any company, U.S. or foreign, in which that corporation is considered to own 25 percent or more by value of the shares, is passive income, or (ii) 50 percent or more of its assets in a taxable year, averaged over the year and ordinarily determined based on quarter-end fair market values and including the pro-rata share of the assets of any company in which that corporation is considered to own 25 percent or more by value of the shares, produce, or, are held for the production of, passive income. In general, passive income for this purpose means, with certain designated exceptions, dividends, interest, rents, royalties (other than certain rents and royalties derived in the active conduct of trade or business), annuities, net gains from dispositions of certain assets, net foreign currency gains, income equivalent to interest, income from notional principal contracts and payments in lieu of dividends.

 

We believe that we satisfied the test to be a PFIC in 2001, 2002 and 2003 but not in 2004 – 2019. Although we will endeavor to avoid characterization as a PFIC in the future, we may not be able to do so. Although the Code contains an exception to PFIC classification for certain corporations that change their business, that exception is not available to a corporation that was, as we were, a PFIC in any prior taxable year.

   

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The determination of whether a foreign corporation is a PFIC is a factual determination made annually and is therefore subject to change. However, once stock in a foreign corporation is stock in a PFIC in the hands of a particular shareholder that is a United States person, it remains stock in a PFIC in the hands of that shareholder, even if in later taxable years the foreign corporation ceases to satisfy the test to be a PFIC, unless the shareholder makes any of certain elections. As described below, those elections include a “qualified electing fund”, or QEF, election and a mark-to-market election.

  

A U.S. Holder who is subject to the PFIC rules and who does not make a QEF election or a mark to-market election will be subject to the following rules:

 

  ● gain recognized by the U.S. Holder upon the disposition of, as well as income recognized upon receiving certain dividends on, the ordinary shares will be taxable as ordinary income;

 

  ● the U.S. Holder will be required to allocate that dividend income and/or disposition gain ratably over the shareholder’s entire holding period for the ordinary shares;

 

  ● the amount allocated to each year other than the year of the dividend payment or disposition will be subject to tax at the highest applicable tax rate, and an interest charge will be imposed with respect to the resulting tax liability;

 

  ● the U.S. Holder will be subject to information reporting requirements each year and will be required to report distributions received on, and gain recognized on dispositions of, our shares; and

 

  ● any U.S. Holder who acquired our ordinary shares upon the death of a shareholder will not receive a step-up in the tax basis of those shares to fair market value but instead, the U.S. Holder beneficiary will have a tax basis equal to the decedent’s basis, if lower.

 

In the case of a U.S. Holder that made, or, as described below, is treated as having made, a QEF election for the first taxable year the U.S. Holder owns our ordinary shares and we are a PFIC (that taxable year hereafter being referred to as the “First PFIC Year”), the following U.S. federal income tax consequences will arise:

 

  ● the U.S. Holder will be required for each taxable year in which we are a PFIC to include in income a pro-rata share of our (i) net ordinary earnings as ordinary income (which income is not eligible for any 15 percent maximum tax rate applicable to certain dividends) and (ii) net capital gain as long-term capital gain, subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge.

 

  ● the U.S. Holder will not be required under these rules to include any amount in income for any taxable year during which we do not have net ordinary earnings or capital gains; and

 

  ● the U.S. Holder will not be required under these rules to include any amount in income for any taxable year for which we are not a PFIC.

  

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The QEF election is made on a shareholder-by-shareholder basis and can be revoked only with the consent of the IRS. A QEF election applies to all shares of the PFIC held or subsequently acquired by an electing U.S holder. A shareholder makes a QEF election by attaching a completed IRS Form 8621, including the PFIC annual information statement, to a timely filed U.S. federal income tax return and by filing that form with the IRS Service Center in Philadelphia, Pennsylvania. Continuation of a QEF election requires ongoing annual filing of the PFIC annual information statement that we provide. Even if a QEF election is not made, a shareholder in a PFIC who is a United States person must satisfy information reporting requirements to the IRS every year. During January 2002, 2003 and 2004, we sent to our shareholders the required information to report income and gain under a QEF election – a “PFIC Annual Information Statement” for the years 2001, 2002, and 2003, respectively.

  

We did not have net ordinary earnings or net capital gain for our 2001-2003 taxable years. Therefore, any U.S. Holder who made a timely QEF election for those periods was not required to include any amount in income in those years as a result of that election.

 

Alternatively, provided our ordinary shares qualify as marketable stock, a U.S. Holder can elect to mark our ordinary shares to market annually, recognizing as ordinary income or loss each year that we are a PFIC and the U.S. Holder either holds or disposes of the shares, an amount equal to the difference between the U.S. Holder’s adjusted tax basis in our ordinary shares and their fair market value or amount realized. Losses would be allowed only to the extent of net mark-to-market gain included in income by the U.S. Holder for prior taxable years pursuant to the mark-to-market election. As with the QEF election, a U.S. Holder who makes a mark-to-market election with respect to our shares would not be subject to deemed ratable allocations of distributions or gain, the interest charge, or the denial of basis step-up at death described above (except for the first year that the election applies, if that is not the first PFIC Year). We believe that our shares should be treated as marketable stock for purposes of this mark-to-market election. Subject to our shares not being or ceasing to be marketable, a mark-to-market election is irrevocable without the consent of the IRS.

 

As noted above, once stock in a foreign corporation is stock in a PFIC in the hands of a particular U.S. shareholder, it remains stock in a PFIC in the hands of that shareholder, even if in later taxable years the foreign corporation ceases to satisfy the test to be a PFIC, unless the shareholder makes a QEF election for the First PFIC Year makes or the mark-to-market election.

 

If a U.S. shareholder makes a QEF election for the First PFIC Year, and if in any later year the foreign corporation does not satisfy the test to be a PFIC, the PFIC rules do not apply to the stock of the foreign corporation owned by that shareholder in that year. However, if the foreign corporation subsequently becomes a PFIC in a later taxable year, the QEF rules once again will apply to that stock. A U.S. shareholder who or that did not make a QEF election in the First PFIC Year may make a QEF election in a later taxable year, and if the U.S. shareholder also makes another election, sometimes called a “purging” election, pursuant to which the U.S. shareholder may be required to pay additional tax and interest, the U.S. shareholder will be treated as having made a QEF election in the First PFIC Year.

 

If a U.S. shareholder makes the mark-to-market election for the stock in a PFIC, the stock will cease to be stock in a PFIC in any later year the foreign corporation does not satisfy the test to be a PFIC. However, if the foreign corporation subsequently becomes a PFIC in a later taxable year, the mark-to-market rules once again will apply to that stock. If a United States person makes a mark-to-market election after the First PFIC Year, his or its mark-to-market gain, if any, will be subject to the PFIC rules that apply when there is no special election, described above, but those rules will not thereafter apply in subsequent taxable years. 

 

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We believe that we satisfied the test to be a PFIC in 2001, 2002, 2003, 2016, 2017, 2018 and 2019, but not in 2004-2015. In that event, based on the rules described above, in the hands of any U.S. Holder that owned our ordinary shares in 2001, 2002 or 2003 and that has made, or is treated as having made, a QEF election for the First PFIC Year or that has made a mark-to-market election, our ordinary shares will not be shares in a PFIC in any year after 2003 in which we do not satisfy the test to be a PFIC. In addition, any U.S. Holder that acquired our ordinary shares in 2004, (or in a later year, if any, in which we were or are not a PFIC) will not be subject to the PFIC rules, unless in a subsequent year we again satisfy the test to be a PFIC. However, any U.S. Holder that owned our ordinary shares in 2001, 2002 or 2003 (or any later year we are a PFIC) and did not and does not make a QEF election effective for the First PFIC Year and has not made and does not make a mark-to-market election will remain subject to the PFIC rules that apply when no special election is in effect.

 

The U.S federal income tax rules relating to PFIC are complex. U.S. Holders of our shares are strongly urged to consult their tax advisers about the PFIC rules, including the availability, advisability and timing of, and procedure for, making a QEF or mark-to-market election with respect to their holding of our ordinary shares, including warrants or rights to acquire our ordinary shares.

 

Tax Consequences for Non-U.S. Holders of Ordinary Shares

 

Except as described in “U.S. Information Reporting and Backup Withholding” below, a Non-U.S. Holder who is a beneficial owner of our ordinary shares will not be subject to U.S. federal income or withholding tax on the payment of dividends on, or the proceeds from the disposition of, the ordinary shares, unless:

 

  ● that item is effectively connected with the conduct by the Non-U.S. Holder of trade or business in the United States and, in the case of a resident of a country which has a treaty with the United States, that item is attributable to a permanent establishment or, in the case of an individual, a fixed place of business, in the United States;

 

  ● the Non-U.S. Holder is an individual who holds the ordinary shares as capital assets and is present in the United States for 183 days or more in the taxable year of the disposition and does not qualify for an exemption; or

 

  ● the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S. tax law applicable to U.S. expatriates.

 

U.S. Information Reporting and Backup Withholding

 

U.S. Holders generally are subject to information reporting requirements with respect to dividends paid in the United States on our ordinary shares. In addition, U.S. Holders are subject to U.S. backup withholding at a rate of 28 percent on dividends paid in the United States on the ordinary shares unless the U.S. Holder provides an IRS Form W-9 or otherwise establishes an exemption. U.S. Holders are subject to information reporting and backup withholding at a rate of 28 percent on proceeds paid from the sale, exchange, redemption or other disposition of the ordinary shares unless the U.S. Holder provides an IRS Form W-9 or otherwise establishes an exemption.

 

Non-U.S. Holders generally are not subject to information reporting or backup withholding with respect to dividends paid on, or proceeds from the sale, exchange, redemption or other disposition of, the ordinary shares, provided that the Non-U.S. Holders provide a taxpayer identification number, certify to their foreign status or otherwise establish an exemption.

 

The amount of any backup withholding will be allowed as a credit against the U.S. Holder’s or Non-U.S. Holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the U.S. Internal Revenue Service.

 

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F. Dividends and Paying Agents

 

Not applicable.

 

G. Statements by Experts.

 

Not applicable.

 

H. Documents on Display

 

We are subject to the informational requirements of the Exchange Act applicable to foreign private issuers and fulfill our obligations with respect to such requirements by filing reports with the SEC.

 

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. Notwithstanding the foregoing, we solicit proxies and furnish proxy statements for all meetings of shareholders, a copy of which proxy statement is furnished promptly thereafter with the SEC under the cover of a Current Report on Form 6-K.

 

This annual report and the exhibits thereto and any other document we file pursuant to the Exchange Act are available on the SEC Internet site (http://www.sec.gov). The documents concerning our Company which are referred to in this annual report may also be inspected at our offices located at c/o Top Alpha Capital Ltd., Haaliya 24, Beit-Yitzhak 4292000, Israel.

  

ITEM 11. Quantitative and qualitative disclosures about market risk

 

Foreign Currency Risk

 

All of our sales were made in US dollars. In addition, a substantial portion of our costs is incurred in dollars. Since the dollar is the primary currency of the economic environment in which we operate, the dollar is our functional currency, and accordingly, monetary accounts maintained in currencies other than the dollar (principally cash and cash equivalents, short-term deposits and liabilities) are remeasured using the foreign exchange rate at the balance sheet date. Operational accounts and non-monetary balance sheet accounts are measured and recorded at the rate in effect at the date of the transaction. The effect of foreign currency remeasurement is reported in current operations.

 

Since 2008, we have not engaged in any hedging or other transactions intended to manage risks relating to foreign currency exchange rate or interest rate fluctuations.

 

For additional qualitative disclosure, see Item 5 – “Impact of Inflation and Foreign Currency Fluctuations”.

 

Interest Rate Risk

 

Historically, our exposure to market risk with respect to changes in interest rates related primarily to our short- and long-term investments and borrowings. At present, we do not have any short-term or long-term investments and borrowings.

 

ITEM 12. description of securities other than equity securities

 

Not applicable. 

 

41

 

 

PART II

 

ITEM 13. Defaults, DividenD arrearages and delinquencies

 

Not applicable.

 

ITEM 14. material modifications to the rights of security holders and use of proceeds

 

Not applicable.

 

ITEM 15. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Our management, which currently includes Daniel Magen, who serves as our chief executive officer, or CEO, and chief financial officer, or CFO, is responsible for establishing and maintaining our disclosure controls and procedures (within the meaning of Rule 13a-15(e) of the Exchange Act). These controls and procedures were designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information was accumulated and communicated to our management, including our then-current CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. We evaluated these disclosure controls and procedures under the supervision of our CEO and CFO as of December 31, 2019. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective.

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

We performed an evaluation of the effectiveness of our internal control over financial reporting that is designed by, or under the supervision of, our principal executive and principal financial officers, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

 

  ● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

  ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

  

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  ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

  

Our management recognizes that there are inherent limitations in the effectiveness of any system of internal control over financial reporting, including the possibility of human error and the circumvention or override of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation, and may not prevent or detect all misstatements. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

 

Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2019 based on the framework for Internal Control-Integrated Framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission.

 

Based on such evaluation, our CEO and CFO has concluded that our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) as of December 31, 2019 is effective.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting that occurred during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

 

Mr. Avi Mann, an independent member of our audit committee, serves as, and qualifies as, a financial expert under the applicable SEC rules.

 

ITEM 16B. CODE OF ETHICS

 

In April 2004, we adopted a Code of Business Conduct and Ethics (the “Code”) that applies to the Company’s employees and directors.

 

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees. Barzily & Co., Certified Public Accountants (Israel), a member of MSI Global Alliance, billed us aggregate annual amount of $15,625 for the year 2019 for audit of our annual financial statements, consultations on various accounting issues and performance of local statutory audits. 

 

Tax Fees. For 2019, our principal accountant did not bill us for tax services.

 

 All Other Fees. For 2019, our principal accountant did not bill us for other services.

 

Pre-approval Policies and Procedures. Our audit committee approves each audit and non-audit service to be performed by our independent accountant before the accountant is engaged.

 

ITEM 16D. EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES

 

Not applicable.

 

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

 

Not applicable.

 

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

Not applicable.

  

ITEM 16G. CORPORATE GOVERNANCE

 

Not applicable.

 

ITEM 16H. MINE SAFETY DISCLOSURE

 

Not applicable. 

 

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PART III

 

ITEM 17. financial statements

 

We have responded to Item 18 in lieu of this item.

 

ITEM 18. financial statements

 

Our financial statements and related auditor’s report for the year ended December 31, 2018 are enclosed as part of this annual report.

 

ITEM 19. exhibits

 

The exhibits filed with or incorporated into this annual report are listed on the index of exhibits below.

   

Exhibit No.   Description
     
1.1*   Memorandum of Association, as amended (translated from Hebrew).
     
1.2*   Articles of Association, as amended and restated.
     
2.1*   Description of the Rights of Each Class of Securities Registered under Section 12 of the Securities Exchange Act of 1934.
     
4.1   2003 Share Option Plan (incorporated herein by reference to Exhibit 4.10 to the Registrant’s Report on Form 20-F, filed with the SEC on June 26, 2003).
     
4.2   2003 International Employee stock option Plan (incorporated herein by reference to Exhibit 4.11 to the Registrant’s Report on Form S-8, filed with the SEC on April 1, 2004).
     
4.3   Form of Indemnity Letter to Office Holders (incorporated herein by reference to Appendix B to the Registrant’s Proxy Statement filed on Report of Foreign Private Issuer on Form 6-K submitted to the SEC on December 12, 2011).
     
8*   List of Subsidiaries.
     
11   Code of Business Conduct and Ethics, adopted in April 2004 (incorporated herein by reference to Exhibit 11 to the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012).
     
12*   Certification by CEO and CFO pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
     
13**   Certification of CEO and CFO pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
     
15*   Consent of Barzily & Co., independent auditors.
     
101*   The following financial information from the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets; (ii) Statements of Operations; (iii) Statements of Shareholders’ Equity; (iv) Statements of Cash Flows; and (v) Notes to Financial Statements, tagged as blocks of text and in detail*

 

* Filed herewith.
   
** Furnished herewith.

 

44

 

 

 

 

 

 

 

 

 

 

METALINK LTD.

 

FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

METALINK LTD.

 

FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019

 

INDEX TO FINANCIAL STATEMENTS

 

  Page
   
Report of Independent Registered Public Accounting Firm F-2
   
Balance Sheets as of December 31, 2019 and 2018 F-3
   
Statements of Operations for the years ended December 31, 2019, 2018 and 2017 F-4
   
Statements of Changes in Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017 F-5
   
Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 F-6
   
Notes to Financial Statements F-7 – F-12

 

F-1

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Board of Directors of Metalnik Ltd.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Metalnik Ltd. (the “Company”) as of December 31, 2019 and 2018 and the related statements of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019 and the related notes, collectively referred to as the “financial statements”. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Without qualifying our conclusion, we draw attention to Note 1 in the financial statements which indicated the lack of business activity as of the reporting date and the date of approval of the financial statements.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

 

/s/ Barzily & Co.

 

We have served as the Company’s auditor since 2017.

 

Jerusalem, Israel

April 29, 2020

 

F-2

 

 

METALINK LTD.

 

BALANCE SHEETS

(U.S. dollars in thousands)

 

    December 31,     December 31,  
    2019     2018  
ASSETS            
Current assets                
Cash and cash equivalents     12       24  
Deposits     1,919       1,902  
Total assets     1,931       1,926  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Current liabilities                
Other payables and accrued expenses (Note 6)     142       141  
Total current liabilities     142       141  
                 
Shareholders’ equity                
Ordinary shares of NIS 1.0 par value (5,000,000 and 100,000,000 shares authorized as of December 31, 2018 and December 31, 2019; 2,780,707 shares issued and 1,255,640 shares outstanding as of December 31, 2019 and December 31, 2018)     790       790  
Additional paid-in capital     158,111       158,111  
Accumulated deficit     (145,074 )     (145,078 )
      13,827       13,823  
                 
Treasury stock, at cost: 1,525,067 shares as of December 31, 2019 and December 31, 2018     (12,038 )     (12,038 )
Total shareholders’ equity     1,789       1,785  
Total liabilities and shareholders’ equity     1,931       1,926  

 

/s/ Joseph Winston     /s/ Daniel Magen

Joseph Winston

Chairman of the Board

   

Daniel Magen

CEO & CFO

 

The accompanying notes are an integral part of the financial statements

  

F-3

 

  

METALINK LTD.

 

STATEMENTS OF OPERATIONS

(U.S. dollars in thousands except share data)

 

    Year ended December 31,  
    2019     2018     2017  
                   
Revenues     -       -       -  
Cost of revenues     -       -       -  
                         
Gross profit     -       -       -  
                         
Sales and marketing     -       -       -  
General and administrative     45       58       194  
                         
Operating loss     (45 )     (58 )     (194 )
                         
Financial income, net     49       23       4  
                         
Net profit (loss)     4       (35 )     (190 )
                         
Per share data-                        
                         
Basic and diluted earnings (loss)     0.003       (0.028 )     (0.136 )
                         
Shares used in computing earnings (loss) per ordinary share:                        
                         
Basic and diluted     1,255,640       1,255,640       1,401,128  

 

The accompanying notes are an integral part of the financial statements

  

F-4

 

 

METALINK LTD.

 

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(U.S. dollars in thousands, except share data)

 

    Number  of     Number of           Additional     Treasury              
    issued     treasury     Share     paid-in     Stock     Accumulated        
    Shares     shares     Capital     capital     (at cost)     Deficit     Total  
                                           
Balance at January 1, 2017     2,780,707       89,850       790       158,111       (9,885 )     (144,853 )     4,163  
Purchase of treasury stock             1,435,217       -       -       (2,153 )     -       (2,153 )
Net loss for the year     -       -       -       -       -       (190 )     (190 )
Balance at December 31, 2017     2,780,707       1,525,067       790       158,111       (12,038 )     (145,043 )     1,820  
Changes during 2018:                                                        
Net loss for the year                                             (35 )     (35 )
Balance at December 31, 2018     2,780,707       1,525,067       790       158,111       (12,038 )     (145,078 )     1,785  
Changes during 2019:                                                        
Net profit for the year                                             4       4  
Balance at  December 31, 2019     2,780,707       1,525,067       790       158,111       (12,038 )     (145,074 )     1,789  

 

The accompanying notes are an integral part of the financial statements

  

F-5

 

 

METALINK LTD.

 

STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

 

    Year ended December 31,  
    2019     2018     2017  
                   
Cash flows from operating activities:                  
Net profit (loss)     4       (35 )     (190 )
Adjustments required to reconcile net profit to net cash provided by (used in) operating activities (Appendix A)     1       (5 )     (38 )
Net cash provided by (used in) continuing operating activities     5       (40 )     (228 )
                         
Cash flows for financing activities:                        
Purchase of treasury stock     -       -       (2,153 )
Net cash used in financing activities     -       -       (2,153 )
                         
Cash flows for investing activities:                        
Deposits     (17 )     (1,902 )     -  
Net cash used in investing activities     (17 )     (1,902 )     -  
                         
Decrease in cash and cash equivalents     (12 )     (1,942 )     (2,381 )
Cash and cash equivalents at beginning of year     24       1,966       4,347  
Cash and cash equivalents at end of year     12       24       1,966  
                         
Appendix A                        
Adjustments to reconcile net profit (loss) to net cash provided by (used in) operating activities:                        
                         
Changes in operating assets and liabilities:                        
                         
Decrease (increase) in assets:                        
Other receivables and prepaid expenses     -       -       10  
Increase (decrease) in liabilities:                        
Other payables and accrued expenses     1       (5 )     (48 )
                         
      1       (5 )     (38 )

 

The accompanying notes are an integral part of the financial statements

  

F-6

 

 

METALINK LTD.

 

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

  

NOTE 1 - GENERAL

 

Metalink Ltd. (the “Company”) is an Israeli company, which until the sale of its WLAN operations in February 2010 was engaged in the WLAN business and since then, conducted only limited business activities related to its DSL business, which, since March 2016, it no longer conducts. In February 2017, the Company completed its self-tender offer and purchased approximately 53.3% of the shares outstanding as of immediately prior to the consummation of the tender offer, for $1.50 per share, or approximately $2.15 million in aggregate. The Company’s current plan of operation is to consider strategic alternatives, including a possible business combination, other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of its affiliates, and, to a limited extent, voluntary liquidation.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

 

A. Use of Estimates in Preparation of Financial Statements

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

B. Financial Statements in U.S. Dollars

 

The reporting currency of the Company is the U.S. dollar (“dollar” or “$”). The currency of the primary economic environment in which the operations of the Company are conducted is the dollar, and the dollar has been determined to be the Company’s functional currency.

 

Transactions and balances originally denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been re-measured into dollars in accordance with the principles set forth in Accounting Standards Codification (“ASC”) No. 830 (“Foreign Currency Matters”). All exchange gains and losses from re-measurement of monetary balance sheet items resulting from transactions in non-dollar currencies are reflected in the statements of operations as they arise.

 

C. Cash Equivalents

 

Cash equivalents consist of short-term, highly liquid investments that are readily convertible into cash with original maturities when purchased of three months or less.

 

F-7

 

 

METALINK LTD.

 

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

D. Net Profit (Loss) Per Ordinary Share

 

Basic and diluted net profit (loss) per share have been computed in accordance with ASC No. 260-10 (formerly SFAS No. 128, “Earnings per Share”) using the weighted average number of ordinary shares outstanding. Basic profit (loss) per share excludes any dilutive effect of options and warrants.

 

E. Stock-based compensation

 

The Company applies ASC No. 718-10 (formerly SFAS No. 123(R), “Share Based Payment”). The Company’s net profit (loss) for the years ended December 31, 2019, 2018 and 2017 includes $0 of compensation expenses related to the Company’s share-based compensation awards, respectively.

 

For purposes of estimating fair value in, the Company utilized the Black-Scholes option-pricing model.

 

The Company determined the risk-free interest rate in accordance with ASC No. 718-10. The Company uses U.S. treasury zero-coupon issues with remaining time equal the expected term.

 

F. Equity instruments issued to other than employees for acquiring, or in conjunction with selling goods or services

 

The Company applies ASC No. 505-50 (formerly EITF 96-18), (“accounting for equity instruments issued to other than employees for acquiring, or in conjunction with selling, goods or services”). The Company’s compensation expenses related to the Company’s equity-based compensation awards for the year ended December 2019, 2018 and 2017 were $0.

 

G. Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, marketable securities and trade receivables.

 

(i) As of December 31, 2019, the Company had cash and cash equivalents that totaled to $12 and short-term deposits totaling to $1,919 all of which are deposited in a major Israeli financial institution. As of December 31, 2018, the Company had cash and cash equivalents that totaled to $24 and short-term deposits totaling to $1,902 all of which were deposited in a major Israeli financial institution. Management believes that the financial institutions holding the Company’s cash and cash equivalents and its deposits are financially sound.

 

H. Fair Value of Financial Instruments

 

The financial instruments of the Company consist mainly of cash and cash equivalents, deposits, accounts payable and accruals. In view of their nature, the fair value of the financial instruments included in working capital of the Company is usually identical or substantially similar to their carrying amounts.

 

F-8

 

 

METALINK LTD.

 

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

 

NOTE 3 - COMMITMENTS AND CONTINGENT LIABILITIES

 

In August 30, 2011, the Company received a letter from Tmura Fund, operating within the Israel Innovation Authority (formerly known as the Office of the Chief Scientist) of the Israeli Ministry of Economy) (the “IAA”) according to which - the Company is required to pay the IAA a sum of $247 for royalties on the basis of income derived from the sale of the WLAN business to Lantiq.

On September 15, 2011 the Company replied that it disagrees with the IAA position.

 

Until this day, the disagreement has not been resolved. The Company is of the opinion that the demand has no merits and intends to vigorously defend its case. The Company recorded a provision, included in other payables and accrued expenses, intended for legal claims against the Company, including the above mentioned demand dated August 30, 2011, which the Company’s management believes is sufficient under the circumstances.

 

NOTE 4 - SHARE CAPITAL -

 

Stock Options

 

(i) In January 2012, the Company granted its former CEO, Tzvika Shukhman, options to purchase up to 100,000 ordinary shares of Metalink, in accordance with the following terms: (i) exercise price equal to $1.50 per share; (ii) the options vested fully on December 31, 2013; (iii) the options expiration date is set 10 years from date of grant, i.e. December 31, 2021; and (iv) all other terms and conditions in connection with the above options shall be as set forth in the Company’s stock option plan. Those options are treated as equity instruments issued to other than employees.

 

(ii) During 2012, the Board of Directors decided to grant its former director, Hudi Zak, options to purchase up to 12,500 ordinary shares of Metalink, in accordance with the following terms: (i) exercise price equal to $1.50 per share; (ii) the options are all fully vested upon the grant; (iii) the options expiration date is set 10 years from date of grant; and (iv) all other terms and conditions in connection with the above options shall be as set forth in the Company’s stock option plan.

 

A summary of the status of the Company’s stock option plans to employees and directors of the Company as of December 31, 2019, 2018 and 2017 and changes during the years then ended are as follows:

 

F-9

 

 

METALINK LTD.

 

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

 

NOTE 4 - SHARE CAPITAL (Cont.)

 

Stock Options (Cont.)

 

    December 31, 2019     December 31, 2018     December 31, 2017  
          Weighted           Weighted           Weighted  
          average           average           average  
          exercise           exercise           exercise  
    Shares     Price     Shares     Price     Shares     Price  
Options outstanding at beginning of year     112,500       -       112,500       -       112,500       -  
Granted during year     -       -       -       -       -       -  
Forfeited during year     -       -       -       -       -       -  
Exercised during year     -       -       -       -       -       -  
                                                 
Outstanding at end of year     112,500       1.5       112,500       1.5       112,500       1.5  
                                                 
Options exercisable at end of year     112,500       1.5       112,500       1.5       112,500       1.5  
                                                 
Weighted average fair                                                
value of options & RSU granted during year     -               -               -          
                                                 
                                                 
                                                 
Forfeited average intrinsic value during year     -               -               -          
Exercised average intrinsic value during year     -               -               -          

 

 

F-10

 

 

METALINK LTD.

 

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

 

NOTE 5 - TAXES ON INCOME

 

A. Taxation under Various Laws

 

(i) The Company is assessed under the provisions of the Israeli Income Tax Ordinance.

 

(ii) Income derived from sources other than the “Approved Enterprise” is taxable at the ordinary corporate tax rate of 23% in 2019 and 2018 (regular “Company Tax”).

 

B. Reconciliation of Income Taxes

 

The following is a reconciliation of the taxes on income assuming that all income is taxed at the ordinary statutory corporate tax rate in Israel and the effective income tax rate:

 

    Year ended December 31,  
    2019     2018     2017  
Net profit (loss) as reported in the statements of operations     4       (35 )     (190 )
Statutory tax rate     23.0 %     23.0 %     24.0 %
Income Tax under statutory tax rate     1       (8 )     (46 )
                         
Less full valuation allowance     (1 )     8       46  
                         
Actual income tax     -       -       -  

 

F-11

 

 

METALINK LTD.

 

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

 

NOTE 5 - TAXES ON INCOME (Cont.)

 

C. Deferred Taxes

 

Under ASC 740-10 deferred tax assets are to be recognized for the anticipated tax benefits associated with net operating loss carry forwards and deductible temporary differences, unless it is more likely than not that some or all of the deferred tax assets will not be realized. The adjustment is made by a valuation allowance.

 

Since the realization of the net operating loss carry forwards and deductible temporary differences is less likely than not, a valuation allowance has been established for the full amount of the tax benefits.

 

Tax losses carried forward of the Company are $209 million (NIS 724 million) for December 2017, $193 million (NIS 724 million) for December 2018 and expected to be $210 million (NIS 724 million) for December 2019. This loss is unlimited in duration and denominated in nominal NIS (the dollar balance translated according to the exchange rate at yearend, and therefore fluctuates significantly through the periods).

 

D. Tax Assessments

 

The Company has not received final tax assessments for income tax purposes since incorporation. However, according to Israeli tax laws assessments considered final until and including the year ended in 2014.

 

NOTE 6 - SUPPLEMENTARY BALANCE SHEET INFORMATION

 

Other Payables and Accrued Expenses

 

    December 31,  
    2019     2018  
             
Payroll and related amounts     0       0  
Accrued expenses     142       141  
      142       141  

  

F-12

 

 

SIGNATURE

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

  Metalink Ltd.
     
  By: /s/ Daniel Magen
    Name: Daniel Magen
   

Title:   Chief Executive Officer and

            Chief Financial Officer

 

Date:  April 29, 2020

 

 

45

 

 

 

 

 

 

 

 

EXHIBIT 1.1

 

[Translated from the Hebrew Original]

 

COMPANY LIMITED BY SHARES

 

MEMORANDUM OF ASSOCIATION

 

OF METALINK LTD.

 

Amended and Restated as of September 23, 2019

 

1. NAME OF THE COMPANY: METALINK LTD.

 

2. THE OBJECTS FOR WHICH THE COMPANY HAS BEEN ESTABLISHED ARE:

 

a) To initiate, set up, found, develop, acquire, hold, operate and manage a business of development, planning, production and marketing of transmission devices in various communications systems.

 

b) Without prejudice to or derogating from that stated above, the Company shall be a corporation, fit for any right, obligation and legal act, and shall be permitted and entitled to engage in any business or matter as the company shall resolve upon.

 

3. THE LIABILITY OF THE MEMBERS: The liability of the members is limited.

 

4. SHARE CAPITAL:

 

a) The share capital of the company shall be as set forth in the Company’s Articles of Association, as may be amended from time to time.

 

b) The rights attached to the shares of the Company of any class may be modified pursuant to the manner and the form determined in the Articles of Association of the Company, as may be amended from time to time.

 

5. CHANGING THE MEMORANDUM

 

It is possible to change this Memorandum of Understanding by a shareholders resolution adopted in a General Meeting of the Company by a simple majority of shareholders who are entitled to vote, in person or represented by proxy.

 

EXHIBIT 1.2

 

THE COMPANIES LAW

 

A COMPANY LIMITED BY SHARES

 

ARTICLES OF ASSOCIATION

OF

METALINK LTD.

____________________

 

Amended and Restated as of September 23, 2019

 

GENERAL PROVISIONS


1. Object and Purpose of the Company

 

(a) The object and purpose of the Company shall be as set forth in the Company’s Memorandum of Association, as the same shall be amended from time to time in accordance with applicable law.

 

(b) In accordance with Section 11(a) of the Companies Law 5759 - 1999 (the “Companies Law”), the Company may contribute a reasonable amount to a worthy cause.

 

2. Limitation of Liability

 

The liability of the shareholders is limited to the payment of the nominal value of the shares in the Company allotted to them and which remains unpaid, and only to that amount. If the Company’s share capital shall include at any time shares without a nominal value, the shareholders’ liability in respect of such shares shall be limited to the payment of up to NIS 0.01 for each such share allotted to them and which remains unpaid, and only to that amount.

 

3. Interpretation

 

(a) Unless the subject or the context otherwise requires: words and expressions used herein which are defined in the Memorandum of Association of the Company shall have the meanings therein defined, and words and expressions defined in the Companies Law in force on the date when these Articles or any amendment thereto, as the case may be, first became effective shall have the same meanings herein; words and expressions importing the singular shall include the plural and vice versa; words and expressions importing the masculine gender shall include the feminine gender; and words and expressions importing persons shall include bodies corporate.

 

(b) The captions in these Articles are for convenience only and shall not be deemed a part hereof or affect the construction of any provision hereof.

 

3A Amendment

 

The approval of a resolution adopted in a General Meeting approved by a simple majority of the voting power represented at the meeting in person or by proxy and voting thereon (a “Shareholders’ Resolution”) is required to approve any amendment to these Articles of Association.

 

SHARE CAPITAL

 

4. Share Capital

 

The share capital of the Company is One Hundred Million New Israeli Shekels (NIS 100,000,000) divided into One Hundred Million (100,000,000) Ordinary A Shares, par value One New Israeli Shekel (NIS 1.00) each.

 

5. Increase of Share Capital

 

(a) The Company may, from time to time, by a Shareholders Resolution, whether or not all the shares then authorized have been issued, and whether or not all the shares theretofore issued have been called up for payment, increase its share capital by the creation of new shares. Any such increase shall be in such amount and shall be divided into shares of such nominal amounts, and such shares shall confer such rights and preferences, and shall be subject to such restrictions, as such resolution shall provide.

 

 

 

 

(b) Except to the extent otherwise provided in such resolution, such new shares shall be subject to all the provisions applicable to the shares of the original capital.

 

6. Special Rights; Modifications of Rights

 

(a) Without prejudice to any special rights previously conferred upon the holders of existing shares in the Company, the Company may, from time to time, by Shareholders Resolution, provide for shares with such preferred or deferred rights or rights of redemption or other special rights and/or such restrictions, whether in regard to dividends, voting, repayment of share capital or otherwise, as may be stipulated in such resolution.

 

(b) (i) If at any time the share capital is divided into different classes of shares, the rights attached to any class, unless otherwise provided by these Articles, may be modified or abrogated by the Company, by Shareholders Resolution, subject to the sanction of a resolution passed by a majority of the holders of a majority of the shares of such class present and voting at a separate General Meeting of the holders of the shares of such class.

 

(ii) The provisions of these Articles relating to General Meetings shall, mutatis mutandis, apply to any separate General Meeting of the holders of the shares of a particular class.

 

(iii) Unless otherwise provided by these Articles, the enlargement of an existing class of shares, or the issuance of additional shares thereof, shall not be deemed, for purposes of this Article 6(b), to modify or abrogate the rights attached to the previously issued shares of such class or of any other class.

 

7. Consolidation, Subdivision, Cancellation and Reduction of Share Capital

 

(a) The Company may, from time to time, by Shareholders Resolution (subject, however, to the provisions of Article 6(b) hereof and to applicable law):

 

(i) consolidate and divide all or any of its issued or unissued share capital into shares of larger nominal value than its existing shares,

 

(ii) subdivide its shares (issued or unissued) or any of them, into shares of smaller nominal value than is fixed by these Articles of Association (subject, however, to the provisions of the Companies Law), and the Shareholders Resolution whereby any share is subdivided may determine that, as among the holders of the shares resulting from such subdivision, one or more of the shares may, as compared with the others, have any such preferred or deferred rights or rights of redemption or other special rights, or be subject to any such restrictions, as the Company has power to attach to unissued or new shares,

 

(iii) cancel any shares which, at the date of the adoption of such resolution, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so canceled, or

 

(iv) reduce its share capital in any manner, and with and subject to any incident authorized, and consent required, by law.

 

(b) With respect to any consolidation of issued shares into shares of larger nominal value, and with respect to any other action which may result in fractional shares, the Board of Directors may settle any difficulty which may arise with regard thereto, as it deems fit, including, inter alia, resort to one or more of the following actions:

 

(i) determine, as to the holder of shares so consolidated, which issued shares shall be consolidated into each share of larger nominal value;

 

(ii) allot, in contemplation of or subsequent to such consolidation or other action, such shares or fractional shares sufficient to preclude or remove fractional share holdings;

 

(iii) redeem, in the case of redeemable preference shares, and subject to applicable law, such shares or fractional shares sufficient to preclude or remove fractional share holdings;

 

(iv) cause the transfer of fractional shares by certain shareholders of the Company to other shareholders thereof so as to most expediently preclude or remove any fractional shareholdings, and cause the transferees to pay the transferors the fair value of fractional shares so transferred, and the Board of Directors is hereby authorized to act as agent for the transferors and transferees with power of substitution for purposes of implementing the provisions of this sub-Article 7(b)(iv).

 


SHARES

 

8. Issuance of Share Certificates; Replacement of Lost Certificates

 

(a) Share certificates shall be issued under the seal or stamp of the Company and shall bear the signature of one Director, or of any other person or persons authorized thereto by the Board of Directors.

 

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(b) Each holder of shares shall be entitled to one numbered certificate for all the shares of any class registered in his name, and if reasonably requested by such member, to several certificates, each for one or more of such shares.

 

(c) A share certificate registered in the names of two or more persons shall be delivered to the person first named in the Registrar of Members in respect of such co-ownership.

 

(d) If a share certificate is defaced, lost or destroyed, it may be replaced, upon payment of such fee, and upon the furnishing of such evidence of ownership and such indemnity, as the Board of Directors may think fit.

 

(e) The Company may issue bearer shares.

 

9. Registered Holder

 

Except as otherwise provided in these Articles, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof, and, accordingly, shall not, except as ordered by a court of competent jurisdiction, or as required by statute, be bound to recognize any equitable or other claim to, or interest in such share on the part of any other person.

 

10. Allotment of Shares

 

The unissued shares from time to time shall be under the control of the Board of Directors, who shall have the power to allot shares or otherwise dispose of them to such persons, on such terms and conditions (including inter alia terms relating to calls as set forth in Article 12(f) hereof), and either at par or at a premium, or, subject to the provisions of the Companies Law, at a discount, and at such times, as the Board of Directors may think fit, and the power to give to any person the option to acquire from the Company any shares, either at par or at a premium, or, subject as aforesaid, at a discount, during such time and for such consideration as the Board of Directors may think fit.

 

11. Payment in Installments

 

If by the terms of allotment of any share, the whole or any part of the price thereof shall be payable in installments, every such installment shall, when due, be paid to the Company by the then registered holder(s) of the share of the person(s) entitled thereto.

 

12. Calls on Shares

 

(a) The Board of Directors may, from time to time, make such calls as it may think fit upon holders of shares in respect of any sum unpaid in respect of shares held by such holders which is not, by the terms of allotment thereof or otherwise, payable at a fixed time, and each such holder shall pay the amount of every call so made upon him (and of each installment thereof if the same is payable in installments), to the person(s) and at the time(s) and place(s) designated by the Board of Directors, as any such time(s) may be thereafter extended and/or such person(s) or place(s) changed. Unless otherwise stipulated in the resolution of the Board of Directors (and in the notice hereafter referred to), each payment in response to a call shall be deemed to constitute a pro rata payment on account of all shares in respect of which such call was made.

 

(b) Notice of any call shall be given in writing to the holder(s) in question not less than fourteen (14) days prior to the time of payment, specifying the time and place of payment, and designating the person to whom such payment shall be made, provided, however, that before the time for any such payment, the Board of Directors may, by notice in writing to such holder(s), revoke such call in whole or in part, extend such time, or alter such person and/or place. In the event of a call payable in installments, only one notice thereof need be given.

 

(c) If, by the terms of allotment of any share or otherwise, any amount is made payable at any fixed time, every such amount shall be payable at such time as if it were a call duly made by the Board of Directors and of which due notice had been given, and all the provisions herein contained with respect to such calls shall apply to each such amount.

 

(d) The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof and all interest payable thereon.

 

(e) Any amount unpaid in respect of a call shall bear interest from the date on which it is payable until actual payment thereof, at such rate (not exceeding the then prevailing debitory rate charged by leading commercial banks in Israel), and at such time(s) as the Board of Directors may prescribe.

 

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(f) Upon the allotment of shares, the Board of Directors may provide for differences among the allottees of such shares as to the amount of calls and/or the times of payment thereof.

 

13. Prepayment

 

With the approval of the Board of Directors, any holder of shares may pay to the Company any amount not yet payable in respect of his shares, and the Board of Directors may approve the payment of interest on any such amount until the same would be payable if it had not been paid in advance, at such rate and time(s) as may be approved by the Board of Directors. The Board of Directors may at any time cause the Company to repay all or any part of the money so advanced, without premium or penalty. Nothing in this Article 13 shall derogate from the right of the Board of Directors to make any call before or after receipt by the Company of any such advance.

 

14. Forfeiture and Surrender

 

(a) If any holder fails to pay any amount payable in respect of a call, or interest thereon as provided for herein, on or before the day fixed for payment of the same, the Company, by resolution of the Board of Directors, may at any time thereafter, so long as the said amount or interest remains unpaid, forfeit all or any of the shares in respect of which said call had been made. Any expense incurred by the Company in attempting to collect any such amount or interest, including, inter alia, attorneys’ fees and costs of suit, shall be added to, and shall, for all purposes (including the accrual of interest thereon), constitute a part of the amount payable to the Company in respect of such call.

 

(b) Upon the adoption of a resolution of forfeiture, the Board of Directors shall cause notice thereof to be given to such holder, which notice shall state that, in the event of the failure to pay the entire amount so payable within a period stipulated in the notice (which period shall not be less than fourteen (14) days and which may be extended by the Board of Directors), such shares shall be ipso facto forfeited, provided, however, that, prior to the expiration of such period, the Board of Directors may nullify such resolution of forfeiture, but no such nullification shall estop the Board of Directors from adopting a further resolution of forfeiture in respect of the non-payment of the same amount.

 

(c) 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 at the same time.

 

(d) The Company, by resolution of the Board of Directors, may accept the voluntary surrender of any share.

 

(e) Any share forfeited or surrendered as provided herein shall become the property of the Company, and the same, subject to the provisions of these Articles, may be sold, re-allotted or otherwise disposed of as the Board of Directors thinks fit.

 

(f) Any holder whose shares have been forfeited or surrendered shall cease to be a holder in respect of the forfeited or surrendered shares, but shall, notwithstanding, be liable to pay, and shall forthwith pay, to the Company, all calls, interest and expenses owing upon or in respect of such shares at the time of forfeiture or surrender, together with interest thereon from the time of forfeiture or surrender until actual payment, at the rate prescribed in Article 12(e) above, and the Board of Directors, in its discretion, may enforce the payment of such moneys, or any part thereof, but shall not be under any obligation to do so. In the event of such forfeiture or surrender, the Company, by resolution of the Board of Directors, may accelerate the date(s) of payment of any or all amounts then owing by the holder in question (but not yet due) in respect of all shares owned by such holder, solely or jointly with another, and in respect of any other matter or transaction whatsoever.

 

(g) The Board of Directors may at any time, before any share so forfeited or surrendered shall have been sold, re-allotted or otherwise disposed of, nullify the forfeiture or surrender on such conditions as it thinks fit, but no such nullification shall estop the Board of Directors from re-exercising its powers of forfeiture pursuant to this Article 14.

 

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15. Lien

 

(a) Except to the extent the same may be waived or subordinated in writing, the Company shall have a first and paramount lien upon all the shares registered in the name of each holder (without regard to any equitable or other claim or interest in such shares on the part of any other person), and upon the proceeds of the sale thereof, for his debts, liabilities and engagements arising from any cause whatsoever, solely or jointly with another, to or with the Company, whether the period for the payment, fulfillment or discharge thereof shall have actually arrived or not. Such lien shall extend to all dividends from time to time declared in respect of such share. Unless otherwise provided, the registration by the Company of a transfer of shares shall be deemed to be a waiver on the part of the Company of the lien (if any) existing on such shares immediately prior to such transfer.

 

(b) The Board of Directors may cause the Company to sell any shares subject to such lien when any such debt, liability or engagement has matured, in such manner as the Board of Directors may think fit, but no such sale shall be made unless such debt, liability or engagement has not been satisfied within fourteen (14) days after written notice of the intention to sell shall have been served on such holder, his executors or administrators.

 

(c) The net proceeds of any such sale, after payment of the costs thereof, shall be applied in or toward satisfaction of the debts, liabilities or engagements of such holder (whether or not the same have matured), or any specific part of the same (as the Company may determine), and the residue (if any) shall be paid to the holder, his executors, administrators or assigns.

 

16. Sale after Forfeiture or Surrender or in Enforcement of Lien

 

Upon any sale of shares after forfeiture or surrender or for enforcing a lien, the Board of Directors may appoint some person to execute an instrument of transfer of the shares so sold and cause the purchaser’s name to be entered in the Register of Members in respect of such shares, and the purchaser shall not be bound to see to the regularity of the proceedings, or to the application of the purchase money, and after his name has been entered in the Register of Members in respect of such shares, the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

 

17. Redeemable Shares

 

The Company may, subject to applicable law, issue redeemable shares and redeem the same.

 

18. [reserved]

 

TRANSFER OF SHARES

 

19. Effectiveness and Registration

 

No transfer of shares shall be registered unless a proper instrument of transfer (in form and substance satisfactory to the Board of Directors) has been submitted to the Company or its agent, together with any share certificate(s) and such other evidence of title as the Board of Directors may reasonably require. Until the transferee has been registered in the Register of Members in respect of the shares so transferred, the Company may continue to regard the transferor as the owner thereof. The Board of Directors, may, from time to time, prescribe a fee for the registration of a transfer.

 

20. Record Date for General Meetings

 

Notwithstanding any provision to the contrary in these Articles, for the determination of the holders entitled to receive notice of and to participate in and vote at a General Meeting, or to express consent to or dissent from any corporate action in writing, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of shares of the Company, the Board of Directors may fix, in advance, a record date, which, subject to applicable law, shall not be earlier than ninety (90) days prior to the General Meeting or other action, as the case may be. No persons other than holders of record of shares as of such record date shall be entitled to notice of and to participate in and vote at such General Meeting, or to exercise such other right, as the case may be. A determination of holders of record with respect to a General Meeting shall apply to any adjournment of such meeting, provided that the Board of Directors may fix a new record date for an adjourned meeting.

 


TRANSMISSION OF SHARES

 

21. Decedents’ Shares

 

(a) In case of a share registered in the names of two or more holders, the Company may recognize the survivor(s) as the sole owner(s) thereof unless and until the provisions of Article 21(b) have been effectively invoked.

 

(b) Any person becoming entitled to a share in consequence of the death of any person, upon producing evidence of the grant of probate or letters of administration or declaration of succession (or such other evidence as the Board of Directors may reasonably deem sufficient that he sustains the character in respect of which he proposes to act under this Article or of his title), shall be registered as a holder in respect of such share, or may, subject to the regulations as to transfer herein contained, transfer such share.

 

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22. Receivers and Liquidators

 

(a) The Company may recognize the receiver or liquidator of any corporate shareholder in winding-up or dissolution, or the receiver or trustee in bankruptcy of any shareholder, as being entitled to the shares registered in the name of such shareholder.

 

(b) The receiver or liquidator of a corporate shareholder in winding-up or dissolution, or the receiver or trustee in bankruptcy of any shareholder, upon producing such evidence as the Board of Directors may deem sufficient that he sustains the character in respect of which he proposes to act under this Article or of his title, shall with the consent of the Board of Directors (which the Board of Directors may grant or refuse in its absolute discretion), be registered as a shareholder in respect of such shares, or may, subject to the regulations as to transfer herein contained, transfer such shares.

 

GENERAL MEETINGS

 

23. Annual General Meeting

 

An Annual General 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 General Meeting) and at such place either within or without the State of Israel as may be determined by the Board of Directors.

 

24. Extraordinary General Meetings

 

All General Meetings other than Annual General Meetings shall be called “Extraordinary General Meetings.” The Board of Directors may, whenever it thinks fit, convene an Extraordinary General Meeting at such time and place, within or without the State of Israel, as may be determined by the Board of Directors, and shall be obliged to do so upon a requisition in writing in accordance with Sections 63(b)(1) or (2) and 63(c) of the Companies Law.

 

25. Notice of General Meetings

 

The Company is not required to give notice under Section 69(b) of the Companies Law. The Company is required to give such prior notice of a General Meeting as required by law or applicable stock exchange rules, but in any event not less than seven (7) days. The accidental omission to give notice of a meeting to any shareholder or the non-receipt of notice by one of the shareholders shall not invalidate the proceedings at any meeting.



PROCEEDINGS AT GENERAL MEETINGS

 

26. Quorum

 

(a) Two or more shareholders (not in default in payment of any sum referred to in Article 32(a) hereof), present in person or by proxy and holding shares conferring in the aggregate thirty-three and one-third percent (33 1/3%) of the voting power of the Company (subject to rules and regulations, if any, applicable to the Company), shall constitute a quorum at General Meetings. No business shall be transacted at a General Meeting, or at any adjournment thereof, unless the requisite quorum is present when the meeting proceeds to business.

 

(b) If within an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon requisition under Sections 63(b)(1) or (2), 64 or 65 of the Companies Law, shall be dissolved, but in any other case it shall stand adjourned to the same day in the next week, at the same time and place, or to such day and at such time and place as the Chairman may determine with the consent of the holders of a majority of the voting power represented at the meeting in person or by proxy and voting on the question of adjournment. No business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called. At such adjourned meeting, any two (2) shareholders (not in default as aforesaid) present in person or by proxy, shall constitute a quorum (subject to rules and regulations, if any, applicable to the Company).

 

(c) The Board of Directors may determine, in its discretion, the matters that may be voted upon at the meeting by proxy in addition to the matters listed in Section 87(a) to the Companies Law.

 

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27. Chairman

 

The Chairman, if any, of the Board of Directors shall preside as Chairman at every General Meeting of the Company. If there is no such Chairman, or if at any meeting he is not present within fifteen (15) minutes after the time fixed for holding the meeting or is unwilling to act as Chairman, the shareholders present shall choose someone of their number to be Chairman. The office of Chairman shall not, by itself, entitle the holder thereof to vote at any General Meeting nor shall it entitle such holder to a second or casting vote (without derogating, however, from the rights of such Chairman to vote as a shareholder or proxy of a shareholder if, in fact, he is also a shareholder or such proxy).


28. Adoption of Resolutions at General Meetings

 

(a) Unless otherwise indicated herein, a Shareholders Resolution shall be deemed adopted if approved by the holders of a majority of the voting power represented at the meeting in person or by proxy and voting thereon.

 

(b) A Shareholders Resolution approving a merger (as defined in the Companies Law) of the Company shall be deemed adopted if approved by the holders of a majority of the voting power represented at the meeting in person or by proxy and voting thereon.

 

(c) Every question submitted to a General Meeting shall be decided by a show of hands, but if a written ballot is demanded by any shareholder present in person or by proxy and entitled to vote at the meeting, the same shall be decided by such ballot. A written ballot may be demanded before the proposed resolution is voted upon or immediately after the declaration by the Chairman of the results of the vote by a show of hands. If a vote by written ballot is taken after such declaration, the results of the vote by a show of hands shall be of no effect, and the proposed resolution shall be decided by such written ballot. The demand for a written ballot may be withdrawn at any time before the same is conducted, in which event another shareholder may then demand such written ballot. The demand for a written ballot shall not prevent the continuance of the meeting for the transaction of business other than the question on which the written ballot has been demanded.

 

(d) A declaration by the Chairman of the meeting that a resolution has been carried unanimously, or carried by a particular majority, or lost, and an entry to that effect in the minute book of the Company, shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favor of or against such resolution.

 

29. Resolutions in Writing

 

A resolution in writing signed by all shareholders of the Company then entitled to attend and vote at General Meetings or to which all such shareholders have given their written consent (by letter, facsimile [telecopier], telegram, telex or otherwise), or their oral consent by telephone (provided that a written summary thereof has been approved and signed by the Chairman of the Board of Directors of the Company) shall be deemed to have been unanimously adopted by a General Meeting duly convened and held.


30. Power to Adjourn

 

(a) The Chairman of a General Meeting at which a quorum is present may, with the consent of the holders of a majority of the voting power represented in person or by proxy and voting on the question of adjournment (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called.

 

(b) It shall not be necessary to give any notice of an adjournment, whether pursuant to Article 26(b) or Article 30(a), unless the meeting is adjourned for thirty (30) days or more in which event notice thereof shall be given in the manner required for the meeting as originally called.

 

31. Voting Power

 

Subject to the provisions of Article 32(a) and subject to any provision hereof conferring special rights as to voting, or restricting the right to vote, every shareholder shall have one vote for each share held by him of record, on every resolution, without regard to whether the vote hereon is conducted by a show of hands, by written ballot or by any other means.

 

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32. Voting Rights

 

(a) No shareholder shall be entitled to vote at any General Meeting (or be counted as a part of the quorum thereat), unless all calls and other sums then payable by him in respect of his shares in the Company have been paid, but this Article shall not apply to separate General Meetings of the holders of a particular class of shares pursuant to Article 6(b).

 

(b) A company or other corporate body being a shareholder of the Company may, by resolution of its directors or any other managing body thereof, authorize any person to be its representative at any meeting of the Company. Any person so authorized shall be entitled to exercise on behalf of such shareholder all the power which the latter could have exercised if it were an individual shareholder. Upon the request of the Chairman of the meeting, written evidence of such authorization (in form acceptable to the Chairman) shall be delivered to him.

 

(c) Any shareholder entitled to vote may vote either personally or by proxy (who need not be a shareholder of the Company), or, if the shareholder is a company or other corporate body, by a representative authorized pursuant to Article 32(b).

 

(d) If two or more persons are registered as joint holders of any share, the vote of the senior who tenders a vote, in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s); and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.


PROXIES

 

33. Instrument of Appointment

 

(a) The instrument appointing a proxy shall be in writing and shall be substantially in the following form:

 

“I _____________________ of __________________________________

     (Name of Shareholder)                  (Address of Shareholder)

being a member of ___________________________ hereby appoint

                      (Name of the Company)

________________________of _____________________________

(Name of Proxy) (Address of Proxy)

as my proxy to vote for me and on my behalf at the General Meeting of the Company to be held on the _____ day of ___________, 20__ and at any adjournment(s) thereof.

 

Signed this ______ day of ____________, 20__.

 

 

  (Signature of Appointer)”  

 

or in any usual or common form or in such other form as may be approved by the Board of Directors. It shall be duly signed by the appointer or his duly authorized attorney or, if such appointer is a company or other corporate body, under its common seal or stamp or the hand of its duly authorized agent(s) or attorney(s).

 

(b) The instrument appointing a proxy (and the power of attorney or other authority, if any, under which such instrument has been signed) shall either be delivered to the Company (at its Registered Office, or at its principal place of business or at the offices of its registrar and/or transfer agent or at such place as the Board of Directors may specify) not less than seventy-two (72) hours (or such shorter period as determined by the Board of Directors) before the time fixed for the meeting at which the person named in the instrument proposes to vote.

 

34. Effect of Death of Appointor or Revocation of Appointment

 

A vote cast pursuant to an instrument appointing a proxy shall be valid notwithstanding the previous death of the appointing shareholder (or of his attorney-in-fact, if any, who signed such instrument), or the revocation of the appointment or the transfer of the share in respect of which the vote is cast, provided no written intimation of such death, revocation or transfer shall have been received by the Company or by the Chairman of the meeting before such vote is cast and provided, further, that the appointing shareholder, if present in person at said meeting, may revoke the appointment by means of a writing, oral notification to the Chairman, or otherwise.

 

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BOARD OF DIRECTORS

 

35. Powers of Board of Directors

 

(a) In General

 

The management of the business of the Company shall be vested in the Board of Directors, which may exercise all such powers and do all such acts and things as the Company is authorized to exercise and do, and are not hereby or by law required to be exercised or done by the Company in General Meeting. The authority conferred on the Board of Directors by this Article 35 shall be subject to the provisions of the Companies Law, of these Articles and any regulation or resolution consistent with these Articles adopted from time to time by the Company in General Meeting, provided, however, that no such regulation or resolution shall invalidate any prior act done by or pursuant to a decision of the Board of Directors which would have been valid if such regulation or resolution had not been adopted.

 

(b) Borrowing Power

 

The Board of Directors may from time to time, in its discretion, cause the Company to borrow or secure the payment of any sum or sums of money for the purposes of the Company, and may secure or provide for the repayment of such sum or sums in such manner, at such times and upon such terms and conditions in all respects as it thinks fit, and, in particular, by the issuance of bonds, perpetual or redeemable debentures, debenture stock, or any mortgages, charges, or other securities on the undertaking or the whole or any part of the property of the Company, both present and future, including its uncalled or called but unpaid capital for the time being.

 

(c) Reserves

 

The Board of Directors may, from time to time, set aside any amount(s) out of the profits of the Company as a reserve or reserves for any purpose(s) which the Board of Directors, in its absolute discretion, shall think fit, and may invest any sum so set aside in any manner and from time to time deal with and vary such investments, and dispose of all or any part thereof, and employ any such reserve or any part thereof in the business of the Company without being bound to keep the same separate from other assets of the Company, and may subdivide or redesignate any reserve or cancel the same or apply the funds therein for another purpose, all as the Board of Directors may from time to time think fit.

 

36. Exercise of Powers of Directors

 

(a) A meeting of the Board of Directors at which a quorum is present (in person, by means of a conference call or any other device allowing each director participating in such meeting to hear all the other directors participating in such meeting) shall be competent to exercise all the authorities, powers and discretions vested in or exercisable by the Board of Directors.

 

(b) A resolution proposed at any meeting of the Board of Directors shall be deemed adopted if approved by a majority of the Directors present when such resolution is put to a vote and voting thereon.

 

(c) A resolution may be adopted by the Board of Directors without convening a meeting if all Directors then in office and lawfully entitled to vote thereon (as conclusively determined by the Chairman of the Audit Committee, and, in the absence of such determination, by the Chairman of the Board of Directors) having given their consent (in any manner whatsoever) not to convene a meeting. Such a resolution shall be adopted if approved by a majority of the Directors entitled to vote thereon (as determined as aforesaid). The Chairman of the Board shall sign any resolutions so adopted, including the decision to adopt said resolutions without a meeting.

 

37. Delegation of Powers

 

(a) The Board of Directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees, each consisting of two or more persons (all of whose members must be Directors), and it may from time to time revoke such delegation or alter the composition of any such committee. Any Committee so formed (in these Articles referred to as a “Committee of the Board of Directors”), shall, in the exercise of the powers so delegated, conform to any regulations imposed on it by the Board of Directors. The meetings and proceedings of any such Committee of the Board of Directors shall, mutatis mutandis, be governed by the provisions herein contained for regulating the meetings of the Board of Directors, so far as not superseded by any regulations adopted by the Board of Directors under this Article. Unless otherwise expressly provided by the Board of Directors in delegating powers to a Committee of the Board of Directors, such Committee shall not be empowered to further delegate such powers.

 

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(b) Without derogating from the provisions of Article 50, the Board of Directors may, subject to the provisions of the Companies Law, from time to time appoint a Secretary to the Company, as well as officers, agents, employees and independent contractors, as the Board of Directors may think fit, and may terminate the service of any such person. The Board of Directors may, subject to the provisions of the Companies Law, determine the powers and duties, as well as the salaries and emoluments, of all such persons, and may require security in such cases and in such amounts as it thinks fit.

 

(c) The Board of Directors may from time to time, by power of attorney or otherwise, appoint any person, company, firm or body of persons to be the attorney or attorneys of the Company at law or in fact for such purpose(s) and with such powers, authorities and discretions, and for such period and subject to such conditions, as it thinks fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board of Directors may think fit, and may also authorize any such attorney to delegate all or any of the powers, authorities and discretions vested in him.

 

38. Number of Directors

 

The Board of Directors shall consist of such number of Directors (not less than four (4) nor more than nine (9) as may be determined by Shareholder Resolution of the Company.

 

39. Election and Removal of Directors

 

(a) If at any time, the Company shall be required to appoint independent or external directors such as a public director or directors of any other type as the may be required by law (“External Directors”) such directors shall serve on the Board according to the number required by law. External Directors will be appointed and removed pursuant to and shall be governed by the relevant provisions of the law which applies to External Directors. If permitted by applicable law, External Directors will be appointed by the Board.

 

(b) The members of the Board of Directors shall be called Directors, and other than External Directors (who will be chosen and appointed, and whose term will expire, in accordance with applicable law,) they shall be appointed in accordance with the provisions of this Article.

 

(c) Directors (other than External Directors) shall be elected at the Annual General Meeting by the vote of the holders of a majority of the voting power represented at such meeting in person or by proxy and voting on the election of directors, or by the Board of Directors. In the event that Directors are appointed by the Board of Directors, such appointment of Directors shall be adopted by Shareholders’ Resolution at the first extraordinary or annual general meeting of the shareholders following the date upon which the Director was appointed by the Board of Directors. Each Director shall serve, subject to Article 42 hereof, and with respect to a Director appointed pursuant to Article 41 hereof, subject to such Article, until the Annual General Meeting next following the Annual General Meeting at which such Director was appointed, or his earlier removal pursuant to this Article 39. The shareholders shall be entitled to remove any Director(s) from office, all subject to applicable law.

 

40. Qualification of Directors

 

No person shall be disqualified to serve as a Director by reason of his not holding shares in the Company or by reason of his having served as a Director in the past.

 

41. Continuing Directors in the Event of Vacancies

 

In the event of one or more vacancies in the Board of Directors, the continuing Directors may continue to act in every matter, and may temporarily fill any such vacancy until the next Annual General Meeting, provided, however, that if they number less than the minimum number provided for pursuant to Article 38 hereof, they may only act in an emergency, and may call a General Meeting of the Company for the purpose of electing Directors to fill any or all vacancies, so that at least a majority of the number of Directors provided for pursuant to Article 38 hereof are in office as a result of said meeting.

 

42. Vacation of Office

 

(a) The office of a Director shall be vacated, ipso facto, upon his death, or if he be found lunatic or become of unsound mind, or if he becomes bankrupt, or, if the Director is a company, upon its winding-up.

 

(b) The office of a Director shall be vacated by his written resignation. Such resignation shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later.

 

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43. Remuneration of Directors

 

No Director shall be paid any remuneration by the Company for his services as Director except as may be approved by the Company in a General Meeting (including, but not limited to, the grant of options for the Company’s shares) and except for reimbursement of reasonable expenses incurred in connection with carrying out his duties as a Director.

 

44. Conflict of Interests

 

Subject to the provisions of the Companies Law, the Company may enter into any contract or otherwise transact any business with any Director in which contract or business such Director has a personal interest, directly or indirectly; and may enter into any contract of otherwise transact any business with any third party in which contract or business a Director has a personal interest, directly or indirectly.

 

45. Alternate Directors

 

(a) A Director may, by written notice to the Company, appoint a natural person for himself (in these Articles 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. Unless the appointing Director, by the instrument appointing an Alternate Director or by written notice to the Company, limits such appointment to a specified period of time or restricts it to a specified meeting or action of the Board of Directors, or otherwise restricts its scope, the appointment shall be for an indefinite period, but will expire upon the expiration of the appointing Director’s term, and shall be for all purposes.

 

(b) Any notice given to the Company pursuant to Article 45(a) shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later.

 

(c) An Alternate Director shall have all the rights and obligations of the Director who appointed him, provided, however, that he may not in turn appoint an alternate for himself (unless the instrument appointing him otherwise expressly provides), and provided further that an Alternate Director shall have no standing at any meeting of the Board of Directors or any committee thereof while the Director who appointed him is present.

 

(d) An Alternate Director shall alone be responsible for his own acts and defaults, and he shall not be deemed the agent of the Director(s) who appointed him.

 

(e) The office of an Alternate Director shall be vacated under the circumstances, mutatis mutandis, set forth in Article 42, and such office shall ipso facto be vacated if the Director who appointed such Alternate Director ceases to be a Director.

 

(f) Notwithstanding Article 45(a), (i) no person shall be appointed as the Alternate Director for more than one Director and (ii) except as otherwise specifically permitted by the Companies Law, (A) no External Director may appoint an Alternate Director and (B) no Director may serve as an Alternate Director.

 

PROCEEDINGS OF THE BOARD OF DIRECTORS

 

46. Meetings

 

(a) The Board of Directors may meet and adjourn its meetings and otherwise regulate such meetings and proceedings as the Board of Directors think fit. Notice of the meetings of the Board of Directors shall be sent to each Director at the last address that the Director provided to the Company, or via telephone, facsimile or e-mail message.

 

(b) Any Director may at any time, and the Secretary, upon the request of such Director, shall, convene a meeting of the Board of Directors, but not less than seven (7) days’ notice (oral or written) shall be given of any meeting so convened. The failure to give notice to a Director in the manner required hereby may be waived by such Director.

 

47. Quorum

 

Until otherwise unanimously decided by the Board of Directors, a quorum at a meeting of the Board of Directors shall be constituted by the presence of a majority of the Directors then in office who are lawfully entitled to participate in the meeting (as conclusively determined by the Chairman of the Audit Committee and in the absence of such determination - by the Chairman of the Board of Directors), but shall not be less than two.

 

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48. Chairman of the Board of Directors

 

The Board of Directors may from time to time elect one of its members to be the Chairman of the Board of Directors, remove such Chairman from office and appoint another in its place. The Chairman of the Board of Directors shall preside at every meeting of the Board of Directors, but if there is no such Chairman, or if at any meeting he is not present within fifteen (15) minutes of the time fixed for the meeting, or if he is unwilling to take the chair, the Directors present shall choose one of their number to be the chairman of such meeting.

 

49. Validity of Acts Despite Defects

 

Subject to the provisions of the Companies Law, all acts done bona fide at any meeting of the Board of Directors, or of a Committee of the Board of Directors, or by any person(s) acting as Director(s), shall, notwithstanding that it may afterwards be discovered that there was some defect in the appointment of the participants in such meetings or any of them or any person(s) acting as aforesaid, or that they or any of them were disqualified, be as valid as if there were no such defect or disqualification.

 

GENERAL MANAGER

 

50. General Manager

 

The Board of Directors may from time to time appoint one or more persons, whether or not Directors, as General Manager(s) of the Company and may confer upon such person(s), and from time to time modify or revoke, such title(s) (including Managing Director, President, Director General or any similar or dissimilar title) and such duties and authorities of the Board of Directors as the Board of Directors may deem fit, subject to such limitations and restrictions as the Board of Directors may from time to time prescribe. Such appointment(s) may be either for a fixed term or without any limitation of time, and the Board of Directors may from time to time (subject to the provisions of the Companies Law and of any contract between any such person and the Company) fix his or their salaries and emoluments, remove or dismiss him or them from office and appoint another or others in his or their place or places.

 

MINUTES

 

51. Minutes

 

(a) Minutes of each General Meeting and of each meeting of the Board of Directors shall be recorded and duly entered in books provided for that purpose. Such minutes shall, in all events, set forth the names of the persons present at the meeting and all resolutions adopted thereat.

 

(b) Any minutes as aforesaid, if purporting to be signed by the chairman of the meeting or by the chairman of the next succeeding meeting, shall constitute prima facia evidence of the matters recorded therein.

 

DIVIDENDS

 

52. Declaration and Payment of Dividends

 

The Board of Directors may from time to time declare, and cause the Company to pay, such dividend as may appear to the Board of Directors to be justified. The Board of Directors shall determine the time for payment of such dividends, and the record date for determining the shareholders entitled thereto.

 

53. [Deleted]

 

54. Amount Payable by Way of Dividends

 

Subject to the rights of the holders of shares with special rights as to dividends, any dividend paid by the Company shall be allocated among the members entitled thereto in proportion to their respective holdings of the shares in respect of which such dividend is being paid.

 

55. Interest

 

No dividend shall carry interest as against the Company.

 

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56. Payment in Specie

 

Upon the declaration of the Board of Directors, a dividend may be paid, wholly or partly, by the distribution of specific assets of the Company or by distribution of paid up shares, debentures or debenture stock of the Company or of any other companies, or in any one or more of such ways.

 

57. Capitalization of Profits, Reserves etc.

 

Upon the resolution of the Board of Directors, the Company –

 

(a) may cause any moneys, investments, or other assets forming part of the undivided profits of the Company, standing to the credit of a reserve fund, or to the credit of a reserve fund for the redemption of capital, or in the hands of the Company and available for dividends, or representing premiums received on the issuance of shares and standing to the credit of the share premium account, to be capitalized and distributed among such of the shareholders as would be entitled to receive the same if distributed by way of dividend and in the same proportion, on the footing that they become entitled thereto as capital, or may cause any part of such capitalized fund to be applied on behalf of such shareholders in paying up in full, either at par or at such premium as the resolution may provide, any unissued shares or debentures or debenture stock of the Company which shall be distributed accordingly, in payment, in full or in part, of the uncalled liability on any issued shares or debentures or debenture stock; and

 

(b) may cause such distribution or payment to be accepted by such shareholders in full satisfaction of their interest in the said capitalized sum.

 

58. Implementation of Powers under Articles 56 and 57

 

For the purpose of giving full effect to any resolution under Articles 56 or 57, and without derogating from the provisions of Article 7(b) hereof, and subject to applicable law, the Board of Directors may settle any difficulty which may arise in regard to the distribution as it thinks expedient, and, in particular, may issue fractional certificates, and may fix the value for distribution of any specific assets, and may determine that cash payments shall be made to any members upon the footing of the value so fixed, or that fractions of less value than the nominal value of one share may be disregarded in order to adjust the rights of all parties, and may vest any such cash, shares, debentures, debenture stock or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalized fund as may seem expedient to the Board of Directors.

 

59. Deductions from Dividends

 

The Board of Directors may deduct from any dividend or other moneys payable to any member in respect of a share any and all sums of money then payable by him to the Company on account of calls or otherwise in respect of shares of the Company and/or on account of any other matter of transaction whatsoever.

 

60. Retention of Dividends

 

(a) The Board of Directors may retain any dividend or other moneys payable or property distributable in respect of a share on which the Company has a lien, and may apply the same in or toward satisfaction of the debts, liabilities, or engagements in respect of which the lien exists.

 

(b) The Board of Directors may retain any dividend or other moneys payable or property distributable in respect of a share in respect of which any person is, under Articles 21 or 22, entitled to become a member, or which any person is, under said Articles, entitled to transfer, until such person shall become a member in respect of such share or shall transfer the same.

 

61. Unclaimed Dividends

 

All unclaimed dividends or other moneys payable in respect of a share may be invested or otherwise made use of by the Board of Directors for the benefit of the Company until claimed. The payment by the Directors of any unclaimed dividend or such other moneys into a separate account shall not constitute the Company a trustee in respect thereof, and any dividend unclaimed after a period of seven (7) years from the date of declaration of such dividend, and any such other moneys unclaimed after a like period from the date the same were payable, shall be forfeited and shall revert to the Company, provided, however, that the Board of Directors may, at its discretion, cause the Company to pay any such dividend or such other moneys, or any part thereof, to a person who would have been entitled thereto had the same not reverted to the Company.

 

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62. Mechanics of Payment

 

Any dividend or other moneys payable in cash in respect of a share may be paid by check or warrant sent through the post to, or left at, the registered address of the person entitled thereto or by transfer to a bank account specified by such person (or, if two or more persons are registered as joint holders of such share or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, to any one of such persons or to his bank account), or to such person and at such address as the person entitled thereto may by writing direct. Every such check or warrant shall be made payable to the order of the person to whom it is sent, or to such person as the person entitled thereto as aforesaid may direct, and payment of the check or warrant by the banker upon whom it is drawn shall be a good discharge to the Company. Every such check or warrant shall be sent at the risk of the person entitled to the money represented thereby.

 

63. Receipt from a Joint Holder

 

If two or more persons are registered as joint holders of any share, or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, any one of them may give effectual receipts for any dividend or other moneys payable or property distributable in respect of such share.

 

ACCOUNTS

 

64. Books of Account

 

The Board of Directors shall cause accurate books of account to be kept in accordance with the provisions of the Companies Law and of any other applicable law. Such books of account shall be kept at the Registered Office of the Company, or at such other place or places as the Board of Directors may think fit, and they shall always be open to inspection by all Directors. No member, not being a Director, shall have any right to inspect any account or book or other similar document of the Company, except as conferred by law or authorized by the Board of Directors or by a Shareholders Resolution.

 

65. Audit

 

At least once in every fiscal year the accounts of the Company shall be audited and the correctness of the profit and loss account and balance sheet certified by one or more duly qualified auditors.

 

66. Auditors

 

The appointment, authorities, rights and duties of the auditor(s) of the Company, shall be regulated by applicable law. The Audit Committee of the Company shall have the authority to fix, in its discretion, the remuneration of the auditor(s) for the auditing services.

 

BRANCH REGISTERS

 

67. Branch Registers

 

Subject to and in accordance with the provisions of the Companies Law and to all orders and regulations issued thereunder, the Company may cause branch registers to be kept in any place outside Israel as the Board of Directors may think fit, and, subject to all applicable requirements of law, the Board of Directors may from time to time adopt such rules and procedures as it may think fit in connection with the keeping of such branch registers.

 

RIGHTS OF SIGNATURE, STAMP AND SEAL

 

68. Rights of Signature, Stamp and Seal

 

(a) The Board of Directors shall be entitled to authorize any person or persons (who need not be Directors) to act and sign on behalf of the Company, and the acts and signature of such person(s) on behalf of the Company shall bind the Company insofar as such person(s) acted and signed within the scope of his or their authority.

 

(b) The Company shall have at least one official stamp.

 

(c) The Board of Directors may provide for a seal. If the Board of Directors so provides, it shall also provide for the safe custody thereof. Such seal shall not be used except by the authority of the Board of Directors and in the presence of the person(s) authorized to sign on behalf of the Company, who shall sign every instrument to which such seal is affixed.

 

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NOTICES

 

69. Notices

 

(a) Any written notice or other document may be served by the Company upon any shareholder either personally, or by facsimile transmission, or by sending it by prepaid mail (airmail or overnight air courier if sent to an address on a different continent from the place of mailing) addressed to such shareholder at his address as described in the Register of Members or such other address as he may have designated in writing for the receipt of notices and other documents. Any written notice or other document may be served by any shareholder upon the Company by tendering the same in person to the Secretary or the General Manager of the Company at the principal office of the Company, or by facsimile transmission, or by sending it by prepaid registered mail (airmail or overnight air courier if posted outside Israel) to the Company at its Registered Address. Any such notice or other document shall be deemed to have been served (i) in the case of mailing, two (2) business days after it has been posted (seven (7) business days if sent internationally), or when actually received by the addressee if sooner than two (2) days or seven (7) days, as the case may be, after it has been posted; (ii) in the case of overnight air courier, on the third (3rd) business day following the day sent, with receipt confirmed by the courier, or when actually received by the addressee if sooner than three (3) business days after it has been sent; (iii) in the case of personal delivery, on the date such notice was actually tendered in person to such shareholder (or to the Secretary or the General Manager); (iv) in the case of facsimile transmission, on the date on which the sender receives automatic electronic confirmation by the recipient’s facsimile machine that such notice was received by the addressee. The mailing or publication date and the date of the meeting shall be counted as part of the days comprising any notice period. If a notice is, in fact, received by the addressee, it shall be deemed to have been duly served, when received, notwithstanding that it was defectively addressed or failed, in some respect, to comply with the provisions of this Article 69(a).

 

(b) All notices to be given to the shareholders shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the Register of Members, and any notice so given shall be sufficient notice to the holders of such share.

 

(c) Any shareholder whose address is not described in the Register of Members, and who shall not have designated in writing an address for the receipt of notices, shall not be entitled to receive any notice from the Company.

 

(d) Notwithstanding anything to the contrary herein,(i) notice by the Company of a General Meeting which is published in two (2) daily newspapers in the State of Israel, if at all, shall be deemed to have been duly given on the date of such publication to any shareholder whose address as registered in the Register of Members (or as designated in writing for the receipt of notices and other documents) is located in the State of Israel and (ii) notice by the Company of a General Meeting which is published in one (1) daily newspaper in the United States shall be deemed to have been duly given on the date of such publication to any member whose address as registered in the Registrar of Members (or as designated in writing for the receipt of notices and other documents) is located outside the State of Israel. Notwithstanding the foregoing, notice by the Company of a General Meeting which is either published in one international wire service or publicly filed with, or submitted to, the United States Securities and Exchange Commission shall be deemed to have been duly given on the date of such publication to any shareholder, whether located in or outside the State of Israel.

 

INSURANCE AND INDEMNITY

 

70. Exculpation, Indemnity and Insurance

 

(a) For purposes of these Articles, the term “Office Holder” shall mean every Director and every officer of the Company, including, without limitation, each of the persons defined as “Nosei Misra” in the Companies Law.

 

(b) Subject to the provisions of the Companies Law, the Company may prospectively exculpate an Office Holder from all or some of the Office Holder’s responsibility for damage resulting from the Office Holder’s breach of the Office Holder’s duty of care to the Company.

 

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(c) The Company may, to the maximum extent permitted by the Companies Law, indemnify the liability of Officers. Without derogating from the foregoing, the Company may indemnify an Office Holder in respect of an obligation or expense specified below imposed on or incurred by the Office Holder in respect of an act performed in his capacity as an Office Holder, as follows:

 

(i) a financial obligation imposed on him in favor of another person by a court judgment, including a compromise judgment or an arbitrator’s award approved by court;

 

(ii) reasonable litigation expenses, including attorney’s fees, expended by the Office Holder as a result of an investigation or proceeding instituted against him by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against him and either (A) concluded without the imposition of any financial liability in lieu of criminal proceedings or (B) concluded with the imposition of a financial liability in lieu of criminal proceedings but relates to a criminal offense that does not require proof of criminal intent or in connection with a financial sanction;

 

(iii) reasonable litigation expenses, including attorneys’ fees, expended by an Office Holder or charged to the Office Holder by a court, in a proceeding instituted against the Office Holder by the Company or on its behalf or by another person, or in a criminal charge from which the Office Holder was acquitted, or in a criminal proceeding in which the Office Holder was convicted of an offense that does not require proof of criminal intent;

 

(iv) a payment which he is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the the Israeli Securities Law, 5728-1968 (the “Securities Law”),, if applicable, and expenses that he incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law, if applicable, including reasonable legal expenses, which term includes attorney fees; and

 

(v) any other matter in respect of which it is permitted or will be permitted under applicable law to indemnify an Office Holder.

 

The Company may undertake to indemnify an Office Holder as aforesaid, (aa) prospectively, provided that in respect of Article 70(c)(i), the undertaking is limited to events which in the opinion of the Board of Directors are foreseeable in light of the Company’s actual operations when the undertaking to indemnify is given, and to an amount or criteria set by the Board of Directors as reasonable under the circumstances, and further provided that such events and amount or criteria are set forth in the undertaking to indemnify, and (bb) retroactively.

 

(d) The Company may, to the maximum extent permitted by the Companies Law, insure the liability of Officers. Without derogating from the foregoing, the Company may enter into a contract for the insurance of all or part of the liability of any Office Holder imposed on the Office Holder in respect of an act performed in his capacity as an Office Holder, in respect of each of the following:

 

(i) a breach of his duty of care to the Company or to another person;

 

(ii) a breach of his duty of loyalty to the Company, provided that the Office Holder acted in good faith and had reasonable cause to assume that such act would not prejudice the interests of the Company;

 

(iii) a financial obligation imposed on him in favor of another person;

 

(iv) a payment which he is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities Law, if applicable, and expenses that he incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law, if applicable, including reasonable legal expenses, which term includes attorney fees; and

 

(v) 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.

 

(e) The provisions of Articles 70(a), 70(b) and 70(c) above are not intended, and shall not be interpreted, to restrict the Company in any manner in respect of the procurement of insurance and/or in respect of indemnification (i) in connection with any person who is not an Office Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Office Holder, and/or (ii) in connection with any Office Holder to the extent that such insurance and/or indemnification is not specifically prohibited under law; provided that the procurement of any such insurance and/or the provision of any such indemnification shall be approved by the Audit Committee of the Company.

 

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WINDING UP

 

71. Winding Up

 

(a) A resolution adopted in a General Meeting approved by 75% of the voting shares represented at such meeting in person or by proxy is required to approve the winding up of the Company.

 

(b) If the Company be wound up, then, subject to applicable law and to the rights of the holders of shares with special rights upon winding up, the assets of the Company available for distribution among the members shall be distributed to them in proportion to the nominal value of their respective holdings of the shares in respect of which such distribution is being made.

 

 

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EXHIBIT 2.1

 

DESCRIPTION OF THE RIGHTS OF EACH CLASS OF SECURITIES REGISTERED
UNDER SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

 

References herein to “we,” “us,” “our” and the “Company” refer to Metalink Ltd.

 

Set out below is a description of our share capital and certain provisions of our memorandum of association, or memorandum, and articles of association and the Israeli Companies Law (as currently in effect) related to such provisions. This description is only a summary and does not purport to be complete and is qualified by reference to the full text of the memorandum and articles of association, which are incorporated by reference as exhibits to the annual report of which this Exhibit 2.1 is part, or the Annual Report, and to the applicable sections of the Israeli Companies Law.

 

Objects and Purposes

 

We were first registered under Israeli law on September 7, 1992 as a private company, and on December 14, 1999 became a public company. Our registration number with the Israeli registrar of companies is 52-004448-8.

 

Our objects and purposes include a wide variety of business purposes as set forth in Section 2 of our memorandum.

 

Authorized Share Capital

 

Our authorized share capital consists of 100,000,000 ordinary shares of a nominal value of NIS 1.0 each.

 

Under our memorandum and articles of association as well as the Companies Law, the liability of our shareholders is limited to the payment of the nominal value of the shares allotted to them and which remains unpaid, and only to that amount.  

 

All outstanding ordinary shares, are validly issued, fully paid and non-assessable.

 

Rights Attached to our Shares

 

The key rights attached to our ordinary shares are as follows:

 

Dividend Rights. Our articles of association provide that our Board of Directors may from time to time, declare such dividend as may appear to be justified. Under the Companies Law, the declaration of a dividend does not require the approval of the shareholders of the company, unless the company’s articles of association require otherwise. Subject to the rights of the holders of shares with preferential or other special rights that may be authorized in the future, holders of ordinary shares are entitled to receive dividends according to their rights and interest in our profits. Any dividend unclaimed after a period of seven years from the date of its declaration, shall be forfeited and reverted to us, provided, however, that our board may, at its discretion, cause us to pay any such dividend or any part thereof, to a person who would have been entitled thereto, had the same not reverted to us.

 

The Companies Law imposes restrictions on our ability to declare and pay dividends. According to the Companies Law, a company may distribute dividends only out of its “profits,” as such term is defined in the Companies Law and provided that there is no reasonable concern that payment of the dividend will prevent such company from satisfying its existing and foreseeable obligations as they become due. Notwithstanding the foregoing, dividends may be paid with the approval of a court, provided that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. “Profits”, for purposes of the Companies Law, means the greater of retained earnings or earnings accumulated during the preceding two years, after deduction of previous distributions that were not already deducted from the surpluses, as evidenced by the most recent audited or reviewed financial statements of the company prepared no more than six months prior to the date of distribution.

 

 

 

 

Voting Rights. Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders. These voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future. The ordinary shares do not have cumulative voting rights in the election of directors. As a result, holders of ordinary shares that represent more than 50% of the voting power present at the meeting have the power to elect all the directors, other than external directors.

 

Rights to Share in the Company’s Profits. Our board has the power to cause any moneys, investments, or other assets forming part of the undivided profits of the company, standing to the credit of a reserve fund for the redemption of capital, to be capitalized and distributed among such shareholders as would be entitled to receive the same if distributed by way of dividend.

 

Liquidation Rights. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of ordinary shares in proportion to their respective holdings. This liquidation right may be affected by the grant of preferential dividends or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

 

Redemption Provisions. We may, subject to applicable law, issue redeemable shares and redeem the same, and our board may redeem, in the case of redeemable preference shares, and subject to applicable law, such shares or fractional shares sufficient to preclude or remove fractional share holdings.

 

Preemptive Rights; Redemption. Our ordinary shares do not have preemptive rights and are not redeemable.

 

Transfer of Shares. Fully paid ordinary shares are issued in registered form and may be transferred pursuant to our articles of association, unless such transfer is restricted or prohibited by another instrument and subject to applicable securities laws.

 

Modification of Rights

 

Unless otherwise provided by our articles of association, rights attached to any class may be modified or abrogated by a resolution adopted in a general meeting approved by a simple majority of the voting power represented at the meeting in person or by proxy and voting thereon, subject to the sanction of a resolution passed by majority of the holders of a majority of the shares of such class present and voting as a separate general meeting of the holders of such class.

 

Shareholders’ Meetings and Resolutions

 

Our annual general meetings are required to be held once in every calendar year at such time (within a period of not more than fifteen months after the last preceding annual general meeting) and at such place determined by our board. All general meetings other than annual general meetings are called extraordinary general meetings. Our board may, whenever it thinks fit, convene an extraordinary general meeting at such time and place as it determines, and shall be obligated to do so upon a requisition in writing in accordance with the Companies Law.

 

The quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in person or by proxy, who hold or represent between them at least 33.3% of the outstanding voting shares, unless otherwise required by applicable rules. A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place or any time and place as the chairman of the board may designate. At such reconvened meeting the required quorum consists of any two members present in person or by proxy.

 

Under the Companies Law, shareholder meetings generally require prior notice of not less than 21 days or, with respect to certain matters, such as affiliated party transactions, not less than 35 days. However, in a company that has a controling shareholder that owns more than 50% of the outstanding shares, like Metalink, shareholder meetings generally require prior notice of only 14 days with respect to matters, such as election of directors (other than external directors), for which the requisite majority to pass the resolution is a majority that will allow the controlling shareholder to direct the outcome of the vote (i.e., a simple majority).

 

Under our articles of association, all resolutions of our shareholders require a simple majority of the shares present, in person or by proxy, and voting on the matter, except (i) a resolution for the winding up of Metalink that requires a special majority vote of at least 75% of the votes of shareholders present, in person or by proxy, and voting at the meeting, and (ii) as otherwise required by the Companies Law.

 

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Limitation on Owning Securities

 

The ownership of our ordinary shares by non-residents of Israel is not restricted in any way by our memorandum and articles of association or the laws of the State of Israel, except for citizens of countries which are in a state of war with Israel, who may not be recognized as owners of our ordinary shares.

 

Duties of Shareholders

 

Disclosure by Controlling Shareholders. Under the Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company. A controlling shareholder is a shareholder who has the ability to direct the activities of a company, including a shareholder that owns 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights, but excluding a shareholder whose power derives solely from his or her position on the board of directors or any other position with the company.

 

Extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, generally require the approval of the audit committee, the board of directors and the shareholders, in that order. The shareholder approval must include at least a majority of the shares of non-interested shareholders voted on the matter. However, the transaction can be approved by shareholders without this special majority approval if the total shares of non-interested shareholders that voted against the transaction do not represent more than 2% of the voting rights in the company.

 

In addition, any such extraordinary transaction whose term is longer than three years may require further shareholder approval every three years, unless, where permissible under the Israeli Companies Law, the audit committee approves that a longer term is reasonable under the circumstances.

 

General Duties of Shareholders. In addition, under the Companies Law, each shareholder has a duty to act in good faith toward the company and other shareholders and to refrain from abusing his or her power in the company, such as in shareholder votes. In addition, specified shareholders have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it possesses the power to determine the outcome of a shareholder vote and any shareholder who, pursuant to the provisions of the articles of association, has the power to appoint or prevent the appointment of an office holder or any other power with respect to the company.

 

Change of Control

 

There are no specific provisions of our memorandum or articles of association that would have an effect of delaying, deferring or preventing a change in control of us or that would operate only with respect to a merger, acquisition or corporate restructuring involving us. However, certain provisions of the Companies Law may have such effect.

 

The Companies Law includes provisions that allow a merger transaction and requires that each company that is a party to the merger have the transaction approved by its board of directors and a vote of the majority of its shares. For purposes of the shareholder vote of each party, unless a court rules otherwise, the merger will not be deemed approved if shares, representing a majority of the voting power present at the shareholders meeting and which are not held by the other party to the merger (or by any person who holds 25% or more of the voting power or the right to appoint 25% or more of the directors of the other party), vote against the merger. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that as a result of the merger the surviving company will be unable to satisfy the obligations of any of the parties to the merger. In addition, a merger may not be completed unless at least (i) 50 days have passed from the time that the requisite proposals for approval of the merger have been filed with the Israeli Registrar of Companies by each merging company and (ii) 30 days have passed since the merger was approved by the shareholders of each merging company.

 

The Companies Law also provides that an acquisition of shares in a public company must be made by means of a “special tender offer” if as a result of the acquisition the purchaser would become a 25% or greater shareholder of the company and there is no existing 25% or greater shareholder of the company. An acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a 45% or greater shareholder of the company, unless there is already a 45% or greater shareholder of the company. These requirements do not apply if, in general, the acquisition (1) was made in a private placement that received shareholder approval, (2) was from a 25% or greater shareholder of the company which resulted in the acquirer becoming a 25% or greater shareholder of the company, or (3) was from a 45% or greater shareholder of the company which resulted in the acquirer becoming a 45% or greater shareholder of the company. The tender offer must be extended to all shareholders, but the offeror is not required to purchase more than 5% of the company’s outstanding shares, regardless of how many shares are tendered by shareholders.

 

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If, as a result of an acquisition of shares, the acquirer will hold more than 90% of a company’s outstanding shares, the acquisition must be made by means of a “full tender offer” for all of the outstanding shares. In general, if less than 5% of the outstanding shares are not tendered in the tender offer and more than half of the offerees who have no personal interest in the offer tendered their shares, all the shares that the acquirer offered to purchase will be transferred to it. Shareholders may request appraisal rights in connection with a full tender offer for a period of six months following the consummation of the tender offer, but the acquirer is entitled to stipulate that tendering shareholders will forfeit such appraisal rights.

 

Finally, Israeli tax law treats some acquisitions, such as stock-for-stock acquisitions exchanges between an Israeli company and another company less favorably than does U.S. tax law. For example, Israeli tax law may, under certain circumstances, subject a shareholder who exchanges his ordinary shares for shares in another corporation, to taxation prior to the sale of the shares received in such stock-for-stock swap.

 

Access to Corporate Records

 

Under the Companies Law, shareholders generally have the right to review minutes of our general meetings, our shareholders register and principal shareholders register, our articles of association, our annual audited financial statements and any document that we are required by law to file publicly with the Israeli Registrar of Companies or the Israel Securities Authority. In addition, shareholders may request to be provided with any document related to an action or transaction requiring shareholder approval under the related party transaction provisions of the Companies Law. We may deny this request if we believe it has not been made in good faith or if such denial is necessary to protect our interests or protect a trade secret or patent.

 

Board of Directors

 

General. According to the Companies Law and our articles of association, the oversight of the management of our business is vested in our Board of Directors. The Board of Directors may exercise all powers and may take all actions that are not specifically granted to our shareholders. As part of its powers, our Board of Directors may cause us to borrow or secure payment of any sum or sums of money for our purposes, at times and upon terms and conditions as it thinks fit, including the grant of security interests in all or any part of our property. The authority of our directors to enter into borrowing arrangements on our behalf is not limited, except in the same manner as any other transaction by us.

 

Director Interests and Compensation. Under the provisions of the Israeli Companies Law and our articles of association, a director generally cannot participate in a meeting nor vote on a proposal, arrangement or contract in which he or she is personally interested. In addition, our directors generally cannot vote compensation to themselves or any members of their body without the approval of our compensation committee and our shareholders at a general meeting. See Item 6(C). “Directors, Senior Management and Employees – Board Practices – Approval of Specified Related Party Transactions Under Israeli Law” of our Annual Report.

 

Number and Election of Directors. According to our articles of association, our Board of Directors may consist of between four (4) and nine (9) directors. In addition, under the Israeli Companies Law, companies incorporated under the laws of Israel whose shares are listed for trading on a stock exchange or have been offered to the public in or outside of Israel, such as Metalink, are generally required to appoint at least two external directors. Under our articles of association, retirement of directors from office is not subject to any age limitation and our directors are not required to own shares in our company in order to qualify to serve as directors. See Item 6(C). “Directors, Senior Management and Employees – Board Practices” of our Annual Report.

 

 

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EXHIBIT 8

 

List of Subsidiaries

 

Name   Country of Incorporation   Proportion of Ownership Interest   Portion of Voting Power Held
Metalink International Ltd.*   Republic of Seychelles   100%   100%

 

* Currently inactive

 

EXHIBIT 12

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 17CFR 240.13a-14(a),

as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002

 

I, Daniel Magen, certify that:

 

1. I have reviewed this annual report on Form 20-F of Metalink Ltd.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

  a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)

disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of company’s board of directors (or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

Date: April 29, 2020

By:

/s/ Daniel Magen

  Name:  Daniel Magen
  Title: Chief Executive Officer and
Chief Financial Officer

 

EXHIBIT 13

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 USC §1350,

as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002

 

In connection with the annual report on Form 20-F for the fiscal year ended December 31, 2019 of Metalink Ltd. (the “Company”) as filed with the U.S. Securities and Exchange Commission (the “Commission”) on the date hereof (the “Report”), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Daniel Magen, Chief Executive Officer and Chief Financial Officer, certify that, to my knowledge:

 

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: April 29, 2020 

By:

/s/ Daniel Magen

  Name:  Daniel Magen
  Title: Chief Executive Officer and
Chief Financial Officer

 

 

EXHIBIT 15

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the incorporation by reference in Registration Statements Nos. 333-121901, 333-12064, 333-88172, 333-112755 and 333-149657 on Form S-8 and Nos. 333-104147, 333-13806, 333-145431 and 333-152119 on Form F-3, of our report, dated April 29, 2020, relating to the financial statements of Metalink Ltd. (the “Company”) for the year ended December 31, 2019, appearing in this Annual Report on Form 20-F of the Company for the year ended December 31, 2019.

 

/s/ Barzily & Co.  
Barzily & Co.  
Certified Public Accountants  
A member of MSI Global Alliiance  
Tel Aviv, Israel  

 

April 29, 2020