{"url_path":"/sec/eltk/10-k/2026/item-10","section_key":"item-10","section_title":"Item 10 ADDITIONAL INFORMATION","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-03-26","source_url":"https://www.sec.gov/Archives/edgar/data/1024672/0001178913-26-001768-index.html","accession_number":"0001178913-26-001768","cik":"0001024672","ticker":"ELTK","issuer_name":"ELTEK LTD","edgar_url":"https://www.sec.gov/Archives/edgar/data/1024672/0001178913-26-001768-index.html","primary_entity_key":"0001024672","primary_entity_name":"ELTEK LTD"},"word_count":7104,"has_tables":true,"body_markdown":"ITEM 10.\n\nADDITIONAL INFORMATION\n\n \n\nA.          Share Capital\n\n \n\nNot applicable.\n\n \n\nB.          Memorandum and Articles\nof Association\n\n \n\nSet out below is a description of certain provisions of our memorandum\nof association and articles of association and of the Israeli Companies Law related to such provisions.  This description is only\na summary and does not purport to be complete and is qualified by reference to the full text of the memorandum of association and articles\nof association, which are incorporated by reference as exhibits to this Annual Report, and to Israeli law.\n\n \n\nPurposes and Objects of the Company\n\n \n\nWe are registered with the Israeli Registrar of Companies and have\nbeen assigned company number 52-004295-3. Section 2 of our memorandum of association provides that we were established for the purpose\nof engaging in the business of developing, manufacturing, producing, vending, importing, exporting, supplying, distributing and dealing\nin printed, multi-layer, flexible, thick film, hybrid and integrated circuits, components or portions thereof, processes for making the\nsame and related products.  In addition, the purpose of our company is to perform various corporate activities permissible under\nIsraeli law.\n\n \n\nThe Powers of the Directors\n\n \n\nUnder the provisions of the Israeli Companies Law and our articles\nof association, a director cannot vote on a proposal, arrangement or contract in which he or she is has personal interest in, nor be present\nin the discussion relating to such transaction is considered. In addition, our directors’ compensation is approved through special\nprocedures prescribed in the Israeli Companies Law. In general, with respect to a director’s compensation, approval is required\nby the (i) compensation committee; (ii) board of directors; and (iii) company’s shareholders with a regular majority (in that order).\n\n \n\nThe authority of our directors to enter into borrowing arrangements\non our behalf is not limited, except in the same manner as any other transaction by us.\n\n \n\nUnder our articles of association, the service of directors in\noffice 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\nas directors.\n\n \n\nAnnual and Extraordinary Meetings of Shareholders\n\n \n\nThe board of directors must convene an annual general meeting of\nshareholders at least once every calendar year, within 15 months of the last annual meeting. Depending on the matter to be voted upon,\nnotice of at least 21 days or 35 days prior to the date of the meeting is required. In addition, the board of directors must convene a\nspecial general meeting of the shareholders upon the demand of any of: (1) two of the directors; (ii) 25% of the nominated directors;\n(iii) one or more shareholders holding at least 5% of our company’s issued and outstanding share capital and at least 1% of the\nvoting power in the company; or (iv) one or more shareholders holding at least 5% of the voting power in our company.\n\n55\n\n \n\nThe quorum required for a shareholders meeting consists of at least\ntwo shareholders present in person or represented by proxy who hold or represent, in the aggregate, at least one third of the voting rights\nof the issued share capital.  A meeting adjourned for lack of a quorum is adjourned by seven business days, at the same time and\nplace, or any later time and place as the board of directors designate in a notice to the shareholders.  The requisite quorum at\nan adjourned general meeting will be: (i) if the original meeting was convened upon requisition by shareholders pursuant to the Israeli\nCompanies Law - the number of shareholders holding the minimum number of voting shares necessary to make such requisition, present in\nperson or by proxy; and (ii) in any other event - one or more shareholders, present in person or by proxy, holding at least one share. \nWe do not follow the requirements of the NASDAQ Stock Market Rules regarding the quorum at shareholder meetings.  See Item 16G. “Corporate\nGovernance.”\n\n \n\nPlease refer to Exhibit 2.2 for Items 10.B.3, B.4, B.6, B.7, B.8,\nB.9 and B.10.\n\n \n\nC.          Material Contracts\n\n \n\nNone.\n\n \n\nD.          Exchange Controls\n\n \n\nIsraeli law and regulations do not impose any material foreign\nexchange restrictions on non-Israeli holders of our ordinary shares.  Non-residents of Israel who purchase our ordinary shares will\nbe able to convert dividends, if any, thereon, and any amounts payable upon our dissolution, liquidation or winding up, as well as the\nproceeds of any sale in Israel of our ordinary shares to an Israeli resident, into freely repatriable dollars, at the exchange rate prevailing\nat the time of conversion, provided that the Israeli income tax has been withheld (or paid) with respect to such amounts or an exemption\nhas been obtained.\n\n \n\nE.          Taxation\n\n \n\nThe following is a discussion of Israeli and United States tax\nconsequences material to our shareholders.  To the extent that the discussion is based on tax legislation which has not been subject\nto judicial or administrative interpretation, the views expressed in the discussion might not be accepted by the tax authorities in question\nor by court.  The discussion is not intended, and should not be construed, as legal or professional tax advice and does not exhaust\nall possible tax considerations.\n\n \n\nHolders of our ordinary shares should consult\ntheir own tax advisors as to the United States, Israeli or other tax consequences of the purchase, ownership and disposition of ordinary\nshares, including, in particular, the effect of any foreign, state or local taxes.\n\n \n\nIsraeli Tax Considerations\n\n \n\nGeneral Corporate Tax Structure\n\n \n\nIsraeli companies are generally subject to income tax on their\ntaxable income.  The regular corporate tax rate in Israel has been 23% since 2018. However, the effective rate of tax payable by\na company which is qualified under Israeli law as an “Industrial Company” and/or which derives income from an “approved\nenterprise,” “benefited enterprise,” “preferred enterprise” or “preferred technological enterprise”\n(as further discussed below) may be lower.  See this Item 10E. “Additional Information – Taxation – Tax Benefits\nUnder the Law for the Encouragement of Capital Investments, 5719-1959.”\n\n \n\nTax Benefits under the Law for the Encouragement of Industry (Taxes),\n5729-1969\n\n \n\nPursuant to the Law for the Encouragement of Industry (Taxes),\n5729-1969, or the Industry Encouragement Law, a company qualifies as an “Industrial Company” if it is a resident of Israel,\nwas incorporated in Israel and at least 90% of its income in any tax year (exclusive of income raising from certain governmental security\nloans) is derived from an “Industrial Enterprise” it owns, which is located in Israel. An “Industrial Enterprise”\nis defined for purposes of the Industry Encouragement Law as an enterprise whose principal activity in a given tax year is production.\n\n56\n\n \n\nWe believe that we are currently an Industrial Company. An Industrial\nCompany is entitled to certain tax benefits, including a deduction of the purchase price of patents or the right to use a patent or know-how\nused for the development or promotion of the Industrial Enterprise at the rate of 12.5% per annum, commencing the year in which such rights\nwere first exercised.\n\n \n\nThe tax laws and regulations dealing with the adjustment of taxable\nincome for local inflation provided that Industrial Enterprises, such as us, were eligible for special rates of depreciation deductions.\nThese rates vary in the case of plant and equipment. With respect to equipment, the applicable rates of depreciation are determined according\nto the number of shifts in which the equipment is being operated and generally range from 20% to 40% on a straight-line basis, a 30% to\n50% on a declining balance basis for equipment first put into operation on or after June 1, 1989 (instead of the regular rates which\nare applied on a straight-line basis). The applicable regulations are valid for equipment whose date of first operation was not later\nthan December 31, 2016.\n\n \n\nMoreover, companies which own Industrial Enterprises that are approved\nenterprises or benefited enterprises (see below) can choose, with respect to income deriving from such enterprises, between (a) the special\ndepreciation rates referred to above or (b) accelerated regular rates of depreciation applied on a straight-line basis in respect of property\nand equipment, generally ranging from 200% (for equipment) to 400% (for buildings) of the ordinary depreciation rates during the first\nfive years of service of these assets, provided that the depreciation on a building may not exceed 20% per annum, multiplied by the applicable\nadjustment rate.\n\n \n\nEligibility for benefits under the Industry Encouragement Law is\nnot contingent upon the prior approval of any Government agency. There can be no assurance that we will continue to so qualify, or will\nbe able to avail ourselves of any benefits under the Industry Encouragement Law in the future.\n\n \n\nTax Benefits under the Law for the Encouragement of Capital Investments,\n5719-1959 \n\n \n\nGeneral\n\n \n\nOur production facility qualifies as a “benefited enterprise”\nunder the Law for the Encouragement of Capital Investments, 5719-1959, as amended in 2005, or the Investment Encouragement Law, which\nprovides certain tax benefits to investment programs of an “approved enterprise” or “benefited enterprise.” \nOur benefited enterprise was converted from a previously approved enterprise program pursuant to the approval of the Israel Tax Authority\nthat we received in September 2006.  As of yet, it was not necessary for us to utilize these tax benefits.\n\n \n\nThe Investment Encouragement Law stipulates certain criteria which\nneed be met with respect to investment programs carried out by an enterprise, in order for such an enterprise to be classified as a “benefited\nenterprise.”  Israeli resident companies which own benefited enterprise are generally classified as Benefited Companies. Benefited\nCompanies may claim tax benefits (as further discussed below) granted by the Investment Encouragement Law in its tax returns (and there\nis no need to obtain prior approval to qualify for such benefits).  There is no requirement to file reports with the Investment Center. \nAudits are the responsibility of the Israeli Income Tax Authority as part of their tax audits.  Companies may also approach the Israeli\nTax Authority for a pre-ruling regarding their eligibility for benefits under the Investment Encouragement Law.\n\n \n\nA company that owns an approved enterprise is eligible for governmental\ngrants, but may elect to receive an alternative package comprised of tax benefits, referred to as the “previous alternative benefits\ntrack”. The tax benefits of an approved enterprise include lower tax rates or no tax depending on the area and the track chosen,\nlower tax rates on dividends and accelerated depreciation.  In order to receive benefits in the grant track or the alternative benefit\ntrack, the industrial enterprise must contribute to the economic independence of the Israeli economy, be competitive and contribute to\nthe gross local product in one of the manners stipulated in the Investment Encouragement Law. Tax benefits would be available, subject\nto certain conditions (described below), to production facilities that generally derive more than 25% of their annual revenue from export,\nor that do not derive 75% or more of their annual revenue in a single market.\n\n57\n\n \n\nAmendments to Investment Encouragement Law\n\n \n\nIn December 2010, the Israeli Parliament passed the Law for Economic\nPolicy for the Years 2011 and 2012 (Amended Legislation), 5771-2011, which prescribes, among other things, amendments to the Investment\nEncouragement Law, effective as of January 1, 2011 (the “2011 Amendment”).  The 2011 Amendment introduced new benefits\nfor income generated by a “Preferred Company” through its Preferred Enterprise (as such terms are defined in the Investment\nEncouragement Law), if certain criteria are met.  The new tax benefits (described below) would be available, subject to certain conditions,\nto production facilities that generally derive more than 25% of their annual revenue from export, or that do not derive 75% or more of\ntheir annual revenue in a single market, or, to competitive facilities in the field of renewable energy.  A “Preferred Company”\nis defined in the amendment as either (i) a company incorporated in Israel and not wholly-owned by governmental entities; or (ii) a partnership\n(a) that was registered under the Israeli Partnerships Ordinance; and (b) all of its partners are companies incorporated in Israel, which\nare in general not transparent for Israeli tax purposes and that not all of them are fully owned by governmental entities and such companies\nor partnerships own, among other conditions, Preferred Enterprises and are controlled and managed from Israel.\n\n \n\nIn accordance with the 2011 Amendment and further amendments, a\nPreferred Company is entitled to reduced corporate tax with respect to income derived by it Preferred Enterprise (and subject to certain\nconditions) at the rate of 16%, unless it is located in a certain development zone, in which case the rate will be 7.5%.\n\n \n\nUnder the amendments, dividends distributed out of income which\nis generally attributed to a Preferred Enterprise are subject to withholding tax at the rate of 20% (or lower, under an applicable tax\ntreaty).  However, upon distribution of a dividend attributed to income generated in Israel, to an Israeli company, no withholding\ntax will apply.\n\n \n\nThe 2011 Amendment applies to income generated as of January 1,\n2011. Under the transitional provisions of the 2011 Amendment, we may elect to irrevocably implement the 2011 Amendment to the Investment\nEncouragement Law while waiving benefits provided under the Investment Encouragement Law as in effect prior to the 2011 Amendment or to\nremain subject to the Investment Encouragement Law as in effect prior to the 2011 Amendment. We may elect to implement the 2011 Amendment\nby May 31 of any year, and such an election shall apply as of the tax year following the year on which the company's tax return (and the\nelection) was filed.  Electing to implement the 2011 Amendment is irreversible.\n\n \n\nWe qualify for the status of a “Preferred Company”\npursuant to the 2011 Amendment.  We are contemplating the implementation of the 2011 Amendment in future tax years.\n\n \n\n In 2021, we have reversed the valuation allowance recorded in past years due\nto our forecast that it is more likely than not that the Company will realize its deferred tax losses in the future.\n\n \n\nThe termination or substantial reduction of any of the benefits\navailable under the Investment Encouragement Law could have a material adverse effect on our future investments in Israel, and could adversely\naffect our results of operations and financial condition.\n\n \n\nTaxation of Gains Upon Disposition of, and Dividends Paid on, our Ordinary Shares\n\n \n\nTaxation of Israeli Resident Shareholders\n\n \n\nIsraeli law imposes a capital gains tax on the sale of capital\nassets. The law distinguishes between real gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain\nthat is equivalent to the increase of the relevant asset’s purchase price which is attributable to the increase in the CPI between\nthe date of purchase and the date of sale. Foreign residents who purchased an asset in foreign currency may request that the inflationary\nsurplus will be computed on the basis of the devaluation of the NIS against such foreign currency.  The real gain is the excess of\nthe total capital gain over the inflationary surplus. The inflationary surplus accumulated from and after December 31, 1993, is exempt\nfrom any capital gains tax in Israel while the real gain is taxed at the applicable rate discussed below.\n\n \n\nDealers in securities in Israel are taxed at regular tax rates applicable to business\nincome.\n\n58\n\n \n\nSubject to certain provisions relating to the linear calculation\nmethod applicable to the determination of the capital gain tax pertaining to capital gains derived from the sale of assets, purchased\nprior to January 1, 2003, or prior to January 1, 2012 (with respect to sale of assets or securities not listed in a stock exchange prior\nto 1.1.2012), the tax rate on capital gains, including capital gain from the sale of securities listed on a stock exchange and on dividends,\nis generally 25% for individuals and 30% for substantial individual shareholders (that are, generally, holders of 10% or more of the shares\nof the company on the date of the sale of the shares or at any date during the 12 months period preceding such sale).  The tax rate\nfor capital gains generated by corporations is 23% (since 2018). Dividends paid to an Israeli company by another Israeli company are not\nsubject to tax, unless received out of income derived from a benefited enterprise, or an approved enterprise, or stems from income derived\nor accrued outside of Israel. In any event the applicable paying company and/or bank withholds at source income tax at the rate of 25%\nor 30% in the case of a substantial individual shareholder.\n\n \n\nIf the shares were sold by Israeli residents, then (i) for the\nperiod ending December 31, 2002 their sale would generally be tax exempt so long as (1) the shares were listed on a stock exchange, such\nas, in our case, the NASDAQ Capital Market, which is recognized by the Israeli Ministry of Finance on December 31, 2002, and (2) we qualified\nas an Industrial Company or Industrial Holding Company under the law for Industry Encouragement Law, at the relevant times as provided\nby the Income Tax Ordinance [New Version], 5721-1961, which we believe we so qualified and (ii) for the period commencing January 1, 2003,\nthe sale of the shares would be, generally, subject to a 25% tax if sold by non-substantial individual shareholders and 30% tax if sold\nby a substantial individual shareholders.  The tax rate for corporate shareholders for the sale of the shares is 23% (since 2018).\nWe cannot provide any assurance that the Israeli tax authorities will agree with the determination that we qualified as an Industrial\nCompany at the relevant times.\n\n \n\nTaxation of Non-Israeli Resident Shareholders\n\n \n\nUnder the convention between the United States and Israel concerning\ntaxes on income, Israeli capital gains tax will generally not apply to the sale, exchange or disposition of ordinary shares by a person\nwho qualifies as a resident of the United States.  However, this exemption will not apply, among other cases, if the gain is attributable\nto a permanent establishment of such person in Israel, or if the qualified U.S. resident holds, directly or indirectly, shares representing\n10% or more of our voting power during any part of the 12-month period preceding the sale, exchange or disposition, subject to specified\nconditions.  In this case, the sale, exchange or disposition would be subject to Israeli tax, to the extent applicable under Israeli\ndomestic law. However, under the U.S.-Israel tax treaty, a U.S. resident generally would be permitted to claim a credit for the Israeli\ntax against the U.S. federal income tax imposed on the sale, exchange or disposition, subject to the limitations in U.S. laws applicable\nto foreign tax credits.  The U.S.-Israel tax treaty does not relate to U.S. state or local taxes.\n\n \n\nFor residents of other countries, the purchaser of the shares may\nbe required to withhold capital gains tax on all amounts paid by it for the purchase of shares for the sale of our ordinary shares, for\nso long as the capital gain from such a sale is not exempt from Israeli capital gains tax.\n\n \n\nNotwithstanding the above, the capital gain from the sale of our\nshares by non-Israeli residents would be tax exempt as long as our shares are listed on the NASDAQ Capital Market or any other stock exchange\nrecognized by the Israeli Ministry of Finance, and provided that certain other conditions are met. The most relevant conditions are as\nfollows: (i) the capital gain is not attributed to the foreign resident’s permanent establishment in Israel, and (ii) the shares\nwere acquired by the foreign resident after the company’s shares had been listed for trading on the foreign Exchange.\n\n \n\nOn the distribution of dividends other than bonus shares (stock\ndividends) to individual Israeli residents shareholders or to non-Israeli shareholders, income tax applies at the rate of 25% or 30%,\nas described above, or the lower rate payable with respect to dividends received out of income derived from a preferred or benefited enterprise\n(see the Investment Encouragement Law), unless a double taxation treaty is in effect between Israel and the shareholder's country of residence\nwhich provides for a lower tax rate in Israel on dividends.  The Convention between the State of Israel and the Government of the\nUnited States relating to relief from double taxation provides for a maximum tax of 25% on dividends paid to a resident of the United\nStates. As set forth above, dividends paid to an Israeli company by another Israeli company are not subject to corporate tax, unless received\nout of income derived from a benefited enterprise, or an approved enterprise or unless the dividend stems from income produced or accrued\nabroad.\n\n59\n\n \n\nNon-residents of Israel are subject to income tax on income accrued\nor derived from sources in Israel.  Such sources of income include passive income such as dividends, royalties and interest, as well\nas non-passive income from services rendered in Israel.  Distributions of dividends other than bonus shares or stock dividends, are\nsubject to income tax at the rate of 25% or 30% (for individuals), or 23% (for corporations in 2018 and 2019) pursuant to Israeli domestic\nlaw as described above.  However, under the Investment Encouragement Law, dividends generated by an approved enterprise or by our\nbenefited enterprise are, generally, taxed at the rate of 15%.\n\n \n\nPursuant to the Convention between the State of Israel and the\nGovernment of the United States relating to relief from double taxation, the maximum tax rate on dividends paid to a holder of ordinary\nshares who is a Treaty U.S. Resident will be 25%.  However, dividends which are not generated by an approved enterprise will\ngenerally be subject to Israeli tax at a rate of 12.5% if paid to a U.S. corporation which holds 10% of our voting power for a designated\nperiod and provided that not more than 25% of our gross income for such period consists of certain types of dividends and interest. Notwithstanding\nthe foregoing, dividends distributed from income attributed to an approved enterprise are generally subject to a withholding tax rate\nof 15% for such a U.S. corporation shareholder (which meets both conditions set forth above).\n\n \n\nSubject to certain conditions, non-Israeli residents will be tax\nexempt on capital gain derived from investments in Israeli companies without derogating from any other capital gain tax exemption applying\nto non-Israeli resident under Israeli law or under any applicable double tax treaty.\n\n \n\nIn any event the applicable paying company and/or bank withholds at source income tax\nat the rate of 25% or 30% in the case of a substantial individual shareholder.\n\n \n\nUnited States Federal Income Taxation\n\n \n\nThe following is a general discussion of the material U.S. federal\nincome tax consequences of the acquisition, ownership and disposition of our ordinary shares. This description addresses only the U.S.\nfederal income tax considerations that may be relevant to U.S. Holders (as defined below) who hold our ordinary shares as capital assets.\nThis summary is based on the U.S. Internal Revenue Code of 1986, as amended, (the “Code”) Treasury regulations promulgated\nthereunder, judicial and administrative interpretations thereof and the U.S.-Israel Tax Treaty (the “Treaty”), all as in effect\non the date hereof and all of which are subject to change either prospectively or retroactively or to differing interpretations. There\ncan be no assurance that the U.S. Internal Revenue Service (“IRS”) will not take a different position concerning the tax consequences\nof the acquisition, ownership or disposition of our ordinary shares or that such a position would not be sustained. This discussion does\nnot address all tax considerations that may be relevant to a U.S. Holder of ordinary shares. In addition, this description does not account\nfor the specific circumstances of any particular investor, such as:\n\n \n\n•\n\nbroker-dealers;\n\n \n\n•\n\nfinancial institutions or financial services entities;\n\n \n\n \n\n•\n\ncertain insurance companies;\n\n \n\n•\n\ninvestors liable for alternative minimum tax;\n\n \n\n•\n\nregulated investment companies, real estate investment trusts, or grantor trusts;\n\n \n\n•\ndealers or traders in securities, commodities or currencies;\n\n \n\n•\n\ntax-exempt organizations;\n\n \n\n•\n\nretirement plans;\n\n \n\n•\n\nS corporations:\n\n \n\n•\n\npension funds;\n\n \n\n•\n\ncertain former citizens or long-term residents of the United States;\n\n \n\n•\n\nnon-resident aliens of the United States or taxpayers whose functional currency is not the U.S. dollar;\n\n \n\n•\n\npersons who hold ordinary shares through partnerships or other pass-through entities;\n\n \n\n60\n\n•\n\npersons who acquire their ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation\nfor services;\n\n \n\n•\n\ndirect, indirect or constructive owners of investors that actually or constructively own at least 10% of the total combined voting\npower of our shares or at least 10% of our shares by value; or\n\n \n\n•\n\ninvestors holding ordinary shares as part of a straddle, appreciated financial position, a hedging transaction or conversion transaction.\n\n \n\n If a partnership or an entity treated as a partnership for\nU.S. federal income tax purposes owns our ordinary shares, the U.S. federal income tax treatment of a partner in such a partnership will\ngenerally depend upon the status of the partner and the activities of the partnership. A partnership that owns our ordinary shares and\nthe partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of holding and disposing\nof ordinary shares.\n\n \n\nThis summary does not address the effect of any U.S. federal\ntaxation (such as estate and gift tax) other than U.S. federal income taxation. In addition, this summary does not include any discussion\nof state, local or non-U.S. taxation.\n\n \n\nFor purposes of this summary the term “U.S. Holder”\nmeans a person that is eligible for the benefits of the Treaty and is a beneficial owner of ordinary shares who is, for U.S. federal income\ntax purposes:\n\n \n\n•\n\nan individual who is a citizen or a resident of the United States;\n\n \n\n•\n\na corporation or other entity taxable as a corporation for United States federal income tax purposes, created or organized in or\nunder the laws of the United States or any political subdivision thereof;\n\n \n\n•\n\nan estate the income of which is subject to U.S. federal income taxation regardless of its source; or\n\n \n\n•\n\na trust if the trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or if (1) a court within\nthe United States is able to exercise primary supervision over the trust’s administration and (2) one or more U.S. persons have\nthe authority to control all of the substantial decisions of the trust.\n\n \n\nUnless otherwise indicated, it is assumed for the purposes of this\ndiscussion that the Company is not, and will not become, a “passive foreign investment company” (“PFIC”) for U.S. federal\nincome tax purposes. See “—Passive Foreign Investment Companies” below.\n\n \n\nTaxation of Distributions\n\n \n\nSubject to the discussion below under the heading “—Passive\nForeign Investment Companies,” the gross amount of any distributions received with respect to our ordinary shares, including\nthe amount of any Israeli taxes withheld therefrom, will constitute dividends for U.S. federal income tax purposes when such distribution\nis actually or constructively received, to the extent such distribution is paid out of our current and accumulated earnings and profits,\nas determined for U.S. federal income tax purposes.  Because we do not expect to maintain calculations of our earnings and profits\nunder U.S. federal income tax principles, it is expected that the entire amount of any distribution will generally be reported as dividend\nincome to you. Dividends are included in gross income at ordinary income rates, unless such dividends constitute \"qualified dividend income,\"\nas set forth in more detail below. Distributions in excess of our current and accumulated earnings and profits would be treated as a non-taxable\nreturn of capital to the extent of your adjusted tax basis in our ordinary shares and any amount in excess of your tax basis would be\ntreated as gain from the sale of ordinary shares. See “—Sale, Exchange or Other Disposition\nof Ordinary Shares” below for a discussion of the taxation of capital gains.  Our dividends would not qualify for the\ndividends-received deduction generally available to corporations under Section 243 of the Code.\n\n \n\nDividends that we pay in NIS, including the amount of any Israeli\ntaxes withheld therefrom, will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect\non the day such dividends are received, regardless of whether the payment is in fact converted into U.S. dollars. A U.S. Holder who receives\npayment in NIS and converts NIS into U.S. dollars at an exchange rate other than the rate in effect on such day may have a foreign currency\nexchange gain or loss that would generally be treated as U.S.-source ordinary income or loss. U.S. Holders should consult their own tax\nadvisors concerning the U.S. tax consequences of acquiring, holding and disposing of NIS.\n\n61\n\n \n\nSubject to complex limitations, some of which vary depending upon\nthe U.S. Holder’s circumstances, any Israeli withholding tax imposed on dividends paid with respect to our ordinary shares, may\nbe a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or, alternatively, for deduction\nagainst income in determining such tax liability). Israeli taxes withheld in excess of the applicable rate allowed by the Treaty (if any)\nwill not be eligible for credit against a U.S. Holder’s federal income tax liability. The limitation on foreign income taxes eligible\nfor credit is calculated separately with respect to specific classes of income.  Dividends paid with respect to our ordinary shares\ngenerally will be treated as foreign-source passive category income or, in the case of certain U.S. Holders, general category income for\nU.S. foreign tax credit purposes. Further, there are special rules for computing the foreign tax credit limitation of a taxpayer who receives\ndividends subject to a reduced tax rate. A U.S. Holder may be denied a foreign tax credit with respect to Israeli income tax withheld\nfrom dividends received on our ordinary shares if such U.S. Holder fails to satisfy certain minimum holding period requirements or to\nthe extent such U.S. Holder’s position in ordinary shares is hedged. An election to deduct foreign taxes instead of claiming a foreign\ntax credit applies to all foreign taxes paid or accrued in the taxable year. The rules relating to the determination of the foreign tax\ncredit are complex.  You should consult with your own tax advisors to determine whether and to what extent you would be entitled\nto this credit.\n\n \n\nSubject to certain limitations (possibly including the PFIC rules\ndiscussed below), “qualified dividend income” received by a non-corporate U.S. Holder may be subject to tax at the lower long-term\ncapital gain rates (currently, a maximum rate of 20%). Distributions taxable as dividends paid on our ordinary shares should qualify for\na reduced rate if we are a “qualified foreign corporation,” as defined in Code section 1(h)(11)(C). We will be a qualified\nforeign corporation if either: (i) we are entitled to benefits under the Treaty or (ii) our ordinary shares are readily tradable on an\nestablished securities market in the United States and certain other requirements are met.  We believe that we are entitled to benefits\nunder the Treaty and that our ordinary shares currently are readily tradable on an established securities market in the United States.\nHowever, no assurance can be given that our ordinary shares will remain readily tradable. The rate reduction does not apply unless certain\nholding period requirements are satisfied, nor does it apply to dividends received from a PFIC (see discussion below), in respect of certain\nrisk-reduction transactions, or in certain other situations. U.S. Holders of our ordinary shares should consult their own tax advisors\nregarding the effect of these rules in their particular circumstances.\n\n \n\nSale, Exchange or Other Disposition of Ordinary Shares\n\n \n\nSubject to the discussion of the PFIC rules below, if you sell\nor otherwise dispose of our ordinary shares (other than with respect to certain non-recognition transactions), you will generally recognize\ngain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other\ndisposition and your adjusted tax basis in our ordinary shares, in each case determined in U.S. dollars. Such gain or loss will generally\nbe capital gain or loss and will be long-term capital gain or loss if you have held the ordinary shares for more than one year at the\ntime of the sale or other disposition. Long-term capital gain realized by a non-corporate U.S. Holder is generally eligible for a preferential\ntax rate (currently at a maximum of 20%). In general, any gain that you recognize on the sale or other disposition of ordinary shares\nwill be U.S.-source for purposes of the foreign tax credit limitation; losses will generally be allocated against U.S. source income.\nDeduction of capital losses is subject to certain limitations under the Code.\n\n \n\nIn the case of a cash basis U.S. Holder who receives NIS in connection\nwith the sale or disposition of our ordinary shares, the amount realized will be based on the U.S. dollar value of the NIS received with\nrespect to the ordinary shares as determined on the settlement date of such exchange. A cash basis U.S. Holder who receives payment in\nNIS and converts NIS into U.S. dollars at a conversion rate other than the rate in effect on the settlement date may have a foreign currency\nexchange gain or loss, based on any appreciation or depreciation in the value of NIS against the U.S. dollar, which would be treated as\nordinary income or loss.\n\n \n\nAn accrual basis U.S. Holder may elect the same treatment of currency\nexchange gain or loss required of cash basis taxpayers with respect to a sale or disposition of our ordinary shares that are traded on\nan established securities market, provided that the election is applied consistently from year to year. Such election may not be changed\nwithout the consent of the IRS. In the event that an accrual basis U.S. Holder does not elect to be treated as a cash basis taxpayer (pursuant\nto the Treasury regulations applicable to foreign currency transactions), such U.S. Holder is required to calculate the value of the proceeds\nas of the \"trade date\" and may have a foreign currency gain or loss for U.S. federal income tax purposes in the event of any difference\nbetween the U.S. dollar value of NIS prevailing on the trade date and on the settlement date. Any such currency gain or loss generally\nwould be treated as U.S.- source ordinary income or loss and would be subject to tax in addition to the gain or loss, if any, recognized\nby such U.S. Holder on the sale or disposition of such ordinary shares.\n\n62\n\n \n\nPassive Foreign Investment Companies\n\n \n\nWe believe that we were not a PFIC for U.S. federal income tax\npurposes for the 2025 taxable year. However, since PFIC status depends upon the composition of our income and assets and the market value\nof our assets from time to time, there can be no assurance that we will not be considered a PFIC for any future taxable year. If we were\na PFIC for any taxable year during which a U.S. Holder owned ordinary shares, certain adverse consequences could apply to the U.S. Holder.\nSpecifically, unless a U.S. Holder makes one of the elections mentioned below, gain recognized by the U.S. Holder on a sale or other disposition\nof ordinary shares would be allocated ratably over the U.S. Holder’s holding period for the ordinary shares. The amounts allocated\nto the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount\nallocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate,\nfor that taxable year, and an interest charge would be imposed on the resulting tax liability. Further, any distribution in excess of\n125% of the average of the annual distributions received by the U.S. Holder on our ordinary shares during the preceding three years or\nthe U.S. Holder’s holding period, whichever is shorter, would be subject to taxation as described immediately above. Certain elections\n(such as a mark-to-market election or a QEF election) may be available to U.S. Holders and may result in alternative tax treatment. U.S.\nHolders should consult their tax advisors as to the availability and consequences of a mark-to-market election or a QEF election with\nrespect to their ordinary shares.\n\n \n\nIn addition, if we were a PFIC for a taxable\nyear in which we pay a dividend or the prior taxable year, the favorable dividend rates discussed above with respect to dividends paid\nto certain non-corporate U.S. Holders would not apply. If we were a PFIC for any taxable year in which a U.S. Holder owned our shares,\nthe U.S. Holder would generally be required to file annual returns with the IRS on IRS Form 8621.\n\n \n\nAdditional Tax on Investment Income\n\n \n\nIn addition to the income taxes described above, U.S. Holders that\nare individuals, estates or trusts and whose income exceeds certain thresholds may be subject to a 3.8% Medicare contribution tax on net\ninvestment income, which includes dividends and capital gains from the sale or exchange of our ordinary shares.\n\n \n\nBackup Withholding and Information Reporting\n\n \n\nPayments in respect of our ordinary shares may be subject to information\nreporting to the IRS and to U.S. backup withholding tax at the rate (currently) of 24%. Backup withholding will not apply, however,\nif you (i) fall within certain exempt categories and demonstrate the fact when required or (ii) furnish a correct taxpayer identification\nnumber and make any other required certification.\n\n \n\nBackup withholding is not an additional tax. Amounts withheld under\nthe backup withholding rules may be credited against a U.S. Holder’s U.S. tax liability. A U.S. Holder may obtain a refund of any\nexcess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.\n\n \n\n U.S. citizens and individuals taxable as resident aliens\nof the United States that (i) own “specified foreign financial assets” (as defined in Section 6038D of the Code and the regulations\nthereunder) with an aggregate value in a taxable year in excess of certain thresholds (as determined under rules in Treasury regulations)\nand (ii) are required to file U.S. federal income tax returns generally will be required to file an information report with respect to\nthose assets with their tax returns. IRS Form 8938 has been issued for that purpose. “Specified foreign financial assets”\ninclude any financial accounts maintained by foreign financial institutions, foreign stocks held directly, and interests in foreign estates,\nforeign pension plans or foreign deferred compensation plans. Under those rules, our ordinary shares, whether owned directly or through\na financial institution, estate or pension or deferred compensation plan, would be “specified foreign financial assets.” Under\nTreasury regulations, the reporting obligation applies to certain U.S. entities that hold, directly or indirectly, specified foreign financial\nassets. Penalties can apply if there is a failure to satisfy this reporting obligation. In addition, in the event a U.S. Holder that is\nrequired to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income\ntaxes of such U.S. Holder for the related tax year may not close until three years after the date that the required information is filed.\nA U.S. Holder is urged to consult the U.S. Holder’s tax advisor regarding the reporting obligation.\n\n63\n\n \n\nAny U.S. Holder who acquires more than $100,000 of our ordinary\nshares or holds 10% or more of our ordinary shares by vote or value may be subject to certain additional U.S. information reporting requirements. \n\n \n\nProposed legislation in the U.S. Congress, including changes in\nU.S. tax law, may adversely impact the company and the value of the Ordinary Shares. Changes to U.S. tax laws (which changes may have\nretroactive application) could adversely affect the company or holders of Ordinary Shares. In recent years, many changes to U.S. federal\nincome tax laws have been proposed and made, and additional changes to U.S. federal income tax laws are likely to continue to occur in\nthe future. In addition, the Inflation Reduction Act of 2022 includes provisions that impact the U.S. federal income taxation of corporations.\nAmong other items, this legislation includes provisions that impose a minimum tax on the book income of certain large corporations and\nan excise tax on certain corporate stock repurchases that would be imposed on the corporation repurchasing such stock. It remains unclear\nin certain respects how this legislation will be implemented by the U.S. Department of the Treasury and the company cannot predict how\nthis legislation or any future changes in tax laws might affect the company or purchasers of the Ordinary Shares.\n\n \n\nThe above description is not intended to constitute a complete\nanalysis of all tax consequences relating to acquisition, ownership and disposition of our ordinary shares. You should consult your tax\nadvisor concerning the tax consequences of your particular situation.\n\n \n\nF.          Dividends and Paying Agents\n\n \n\nNot applicable.\n\n \n\nG.          Statement by Experts\n\n \n\nNot applicable.\n\n \n\nH.          Documents on Display\n\n \n\nWe are subject to certain of the reporting requirements of the\nExchange Act as applicable to “foreign private issuers” as defined in Rule 3b-4 under the Exchange Act. As a foreign private\nissuer, we are exempt from certain provisions of the Exchange Act. Accordingly, our proxy solicitations are not subject to the disclosure\nand procedural requirements of Regulation 14A under the Exchange Act, and transactions in our equity securities by our officers and directors\nare exempt from the “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act.  In addition,\nwe are not required under the Exchange Act to file quarterly reports and financial statements. However, we file with the SEC an annual\nreport on Form 20-F containing financial statements audited by an independent accounting firm. We also submit to the SEC reports on Form\n6-K containing (among other things) press releases and unaudited financial information. We post our annual report on Form 20-F on our\nwebsite promptly following the filing of our annual report with the SEC.  The information on our website is not incorporated by reference\ninto this annual report.\n\n \n\n  The SEC maintains an Internet website that contains\nreports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.\nWe make our reports available on our internet website, free of charge, as soon as reasonably practicable after such material is electronically\nfiled with the SEC.\n\n \n\nThe documents concerning our company that are referred to in this\nannual report may also be inspected at our offices located at 20 Ben Zion Gelis Street, Sgoola Industrial Zone, Petach Tikva 4910101,\nIsrael.\n\n \n\nI.            Subsidiary Information\n\n \n\nNot applicable.\n\n64"}