{"url_path":"/sec/eltk/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 INFORMATION ON THE COMPANY","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":4854,"has_tables":true,"body_markdown":"ITEM 4.\n\nINFORMATION ON THE COMPANY\n\n \n\nA.          History and Development of the Company\n\n \n\nWe were incorporated under the laws of the State of Israel on January\n1, 1970. We are a public limited liability company under the Israeli Companies Law, and operate under that law and associated legislation.\nOur registered offices and principal place of business are located at 20 Ben Zion Gelis Street, Sgoola Industrial Zone, Petach-Tikva 4927920,\nIsrael and our telephone number is +972-3-9395023. Our website is www.nisteceltek.com.  The information on our website is not incorporated\nby reference into this annual report.\n\n \n\nIn November 2013, Nistec Ltd. acquired 50.5% of our issued share\ncapital and gained control of our company.  In December 2018, Nistec Ltd., transferred its ownership interest in our company to Nistec\nGolan Ltd. Nistec Golan and Nistec Ltd. are privately held companies indirectly controlled by Mr. Nissan, through Nistec\nHoldings Ltd. Since then, Nistec Golan Ltd. and Mr. Nissan have purchased and sold shares of our company on several occasions and, as\nof March 3, 2026 they jointly hold 58.7% of our company’s shares.  We manufacture and supply technologically advanced custom-made\ncircuitry solutions for use in sophisticated and compact electronic products.  We provide specialized services and are a solution\nprovider in the PCB business, mainly in Israel, Europe, North America and Asia. PCBs are platforms that conduct an electric current among\nactive and passive microelectronics components, microprocessors, memories, resistors and capacitors and are integral parts of the products\nproduced by high‑technology industries. Our focus is on short run quick-turnaround, prototype, pre-production and low to medium\nvolume runs of high-end PCB products for high growth, advanced electronics applications, mainly flex-rigid PCBs.\n\n \n\nWe design and develop innovative manufacturing solutions pursuant\nto complex interconnect requirements of original equipment manufacturers, and provide our customers with a wide range of custom designed\nPCBs, including complex rigid, double-sided and multi-layer PCBs as well as flexible circuitry (flex and flex-rigid boards) made of several\ntypes of high-performance base material. To complement our quick-turnaround, prototype, pre-production and low to medium volume production\ncapability and provide our customers with single source service, we also act as a supplier for the importation of PCBs from South-East\nAsia when customers require high volume production runs, although such activity was not significant in recent years.\n\n \n\nDuring the three years ended December 31, 2025, we invested approximately\n$17 million in new equipment and the expansion of our facilities and infrastructure.  Subject to availability of financial resources,\nwe expect to invest approximately $5 million in capital expenditures in 2026, mainly for manufacturing equipment to expand our manufacturing\ncapacity and to upgrade our technological capabilities. We intend to finance these expenditures with cash flow from operations and our\ncash balances. Our ability to satisfy our cash needs and implement our capital allocation strategy depends on our ability to generate\ncash from operations and to access the financial markets, both of which are subject to general economic, financial, competitive, legislative,\nregulatory, and other factors that are beyond our control. In addition to cash on hand, we sometimes rely on external financing to help\nsatisfy our cash needs. However, various factors affect external financing, including general market conditions, interest rate fluctuations,\nand operating results. Consequently, external financing may not be available on acceptable terms or at all.\n\n \n\nRecent Developments\n\n \n\nOn February 28, 2026, Israel and the United States launched a joint\nattack on Iran, targeting key officials, military commanders and facilities, resulting in the death of Iran’s Supreme Leader and\nother key officials and military commanders. In retaliation, Iran launched hundreds of ballistic missiles and drones against civilian\ntargets in Israel and against U.S. military bases, civilian aviation facilities and other civilian targets in several countries in the\nPersian Gulf, including Jordan, Kuwait, Bahrain Qatar, Iraq, Saudi Arabia and United Arab Emirates. Hezbollah rejoined the conflict as\nwell and launched attacks against Israel, which lead to Israel commencing a combined aerial and ground operation in south Lebanon on March\n3, 2026.The war has also led to widespread airspace closures in the region. At this time, we do not expect the current conflict to have\na material impact on our financial and operational results; however, since these are events beyond our control, their continuation or\ncessation may affect our expectations. We continue to monitor political and military developments closely and examine the consequences\nfor our operations, assets and financial and operational results.\n\n22\n\n \n\nB.          Business Overview\n\n \n\nIndustry Overview\n\n \n\nPrinted circuit boards (PCBs) are fabricated from a variety of\nbase materials and may be double-sided or multilayered, constructed as rigid, flexible, flex rigid, or high frequency types. Essentially,\nPCBs serve as platforms that conduct electrical signals among active and passive microelectronic components, such as microprocessors,\nmemory devices, resistors, and capacitors. Photolithographic processes transfer the circuit images onto individual layers, which are then\netched using chemical processes.  The main categories of PCBs include:\n\n \n\nRigid PCBs.  Rigid\nPCBs represent the core product of the industry and are used in virtually all electronic devices. The layer count typically ranges from\n2 to 30, although some PCBs may comprise up to 42 layers.\n\n \n\nFlexible and flex‑rigid\nPCBs.  Flexible PCBs are thin, lightweight circuits used to interconnect other boards and electronic components within various\ndevices. Flex rigid PCBs combine rigid sections with flexible layers and generally range from 2 to 30 layers. These products are suitable\nfor applications that impose space or shape constraints, or require highly reliable interconnections. They are commonly used in military\n(primarily avionics), medical, measurement, and automotive systems, among others.\n\n \n\nBackplanes.  Backplanes\nare large, high-density circuit boards with design features such as tightly controlled finished hole sizes that demand precise process\nmanagement. These products, commonly referred to as motherboards, contain connectors that receive and interconnect additional PCBs. They\nare primarily used in telecommunications and data communication systems.\n\n \n\nPCB manufacturers are generally classified by two main parameters:\nproduct sophistication and service sophistication. Product sophistication reflects a manufacturer’s ability to produce PCBs with\nhigher layer counts and more complex structures, as well as finer line widths and spacing. State of the art high density interconnect\n(HDI) technology enables the production of PCBs with line widths and spacing as narrow as 2–3 mils and hole diameters between 4\nand 6 mils.\n\n \n\nIndustry Trends\n\n \n\nWe believe that several trends are impacting the PCB manufacturing\nindustry. These trends include:\n\n \n\nShorter electronic product life\ncycles. Continual advances in technology have shortened the life cycles of complex commercial electronic products, placing\ngreater pressure on manufacturers to quickly bring new products to market. The accelerated time-to-market and ramp-to-volume needs of\nmanufacturers for high-end commercial equipment create opportunities for PCB manufacturers that can offer engineering support in the prototype\nstage and manufacturing scalability throughout the production life cycle.\n\n \n\nIncreasing complexity of electronic\nproducts. Manufacturers continue to design higher performance electronic products which take advantage of advances in semiconductor\ntechnology. This in turn requires technologically complex PCBs that can accommodate higher speeds and component densities, including HDI,\nflexible and substrate PCBs.  These complex PCBs can require very high layer counts, miniaturized circuit connections, advanced\nmanufacturing processes and materials, and high-mix production capabilities, which involve processing small lots in a flexible manufacturing\nenvironment.  Manufacturers increasingly rely upon larger PCB manufacturers, which possess the financial resources necessary to invest\nin advanced manufacturing process technologies and sophisticated engineering staff, often to the exclusion of smaller PCB manufacturers\nthat do not possess such technologies or resources.\n\n \n\nDecreasing concentration of global\nPCB production in China. During the past decade, many electronics manufacturers have moved their commercial production to Asia\nto take advantage of its exceptionally large, relatively low-cost labor pool.  In particular, the trend has favored China, which\naccording to industry sources has the largest PCB market in terms of both revenue and number of suppliers. The overall technical capability\nof suppliers in China has improved dramatically in recent years, and China has emerged as a global production center for cellular phones,\nsmartphones, tablet PCs, computers and computer peripherals, and high-end consumer electronics.  Due to geopolitical dynamics, in\nrecent years there has been a clear shift of PCB manufacturing from China to “green” countries like India, South Korea, Thailand\nand others. The trend also extends to Chinese companies, who choose to build new plants outside of China, mainly in Thailand.\n\n23\n\n \n\nDecreased reliance on multiple\nPCB manufacturers. Manufacturers traditionally have relied on multiple PCB manufacturers to provide different services as\nan electronic product moves through its life cycle.  The transfer of a product among different PCB manufacturers often results in\nincreased costs and inefficiencies due to incompatible technologies and manufacturing processes and production delays.  In addition,\nmanufacturers generally find it easier and less costly to manage fewer PCB manufacturers. As a result, manufacturers are reducing the\nnumber of PCB manufacturers and backplane assembly service providers on which they rely, presenting an opportunity for those that can\noffer one-stop manufacturing capabilities — from prototype to volume production.\n\n \n\nIncreased requirements for aerospace\nand defense products.  The aerospace and defense markets are characterized by increasingly time-consuming and complex certification\nprocesses, long product life cycles, and a demand for leading-edge technology with extremely high reliability and durability. While the\nDepartment of War budget faces increasing scrutiny as part of overall U.S. budget deficit reduction efforts, we anticipate that a continued\nDepartment of War commitment to new product development and upgrades – incorporating leading-edge PCB technology in products for\nintelligence, surveillance and reconnaissance, communications and weapon systems – combined with Foreign Military Sales programs\nand a recovering global commercial aerospace industry will support a significant long-term market for these products. In addition, the\ncurrent political climate in various parts of the world has led to an increased demand for defense and aerospace applications world-wide.\nThis has resulted in heightened interest from countries looking to upgrade their military capabilities and secure their borders. The situation\nhas also sparked a renewed focus on national security, with governments investing more resources towards strengthening their defense systems.\nThese trends are reflected in a significant increase in the volume of orders.\n\n \n\nShortage of key raw materials.\nPCB manufacturers obtain their key raw materials from a few suppliers. Any delays in delivery of or shortages in these raw materials could\ninterrupt and delay manufacturing of PCB products and may result in the cancellation of orders for our products. If a raw material or\ncomponent supplier fails to satisfy our product quality standards, including standards relating to “conflict minerals” it\ncould harm our customer relationships.  Furthermore, if we are unable to identify an alternative source of raw material or component\nsupplier, we may have to modify our products or a large portion of our production process to use a substitute raw material, which requires\ncustomers’ consent of use of such materials and which may cause delays in production and shipments, increased design and manufacturing\ncosts and increased prices for our products. In addition, price increases for our principal raw materials may materially affect our operating\nmargins and future profitability.\n\n \n\nIntroduction of new disruptive\ntechnologies. The traditional PCB production method is subtractive, commencing from an intact copper on the surface of the dielectric,\nwhich is reduced and etched using a lithography process. In recent years, a new technology has been introduced, the mSAP/SAP, an additive\nmethod, in which the copper in the photolithographic processes is enlarged on the basis of a predefined mold. The advantage of this production\nmethod is the ability to utilize a limited path area on which are compressed a large number of processors with a conductor space/width\nof less than 25 microns. These new semi-additive and fully additive technologies for ultra-dense (1/1 mil line/space) topography are gaining\ntraction and are affecting the conventional industries including us. If found to be cost effective and reliable we may need to adopt such\nproduction capabilities in the future.\n\n \n\nManufacturing and Engineering Processes\n\n \n\nContinued significant investments in equipment are necessary in\norder to maintain technological competitiveness in the PCB industry. During the three years ended December 31, 2025, we invested approximately $17\nmillion in machinery and equipment for that purpose.\n\n \n\nManufacturing Capabilities.\nWe have the capability to manufacture PCBs having up to 40 layers. Flex-rigid boards consist of blind and buried vias and designs using\nmaterials as thin as 1 mil.  We receive orders for production with turnaround times of generally between several days to two months.\nWe are able to produce short runs of five to 30 units of simple type PCBs within four to five working days, and a few hundred units within\nten working days, and are capable of producing such number of boards within five working days when production line scheduling permits.\n\n24\n\n \n\nIn the beginning of 2022, we decided to accelerate our investment\nprogram in machinery and equipment. The program includes investments in new production lines as well as in infrastructure in order to\nenable us to increase our production capabilities as well as our efficiency. The program includes investments of $15 million and the majority\nof its implementation is expected to conclude by the end of 2026. During 2025, we enhanced our production capabilities through the installation\nof several new machines and production lines. These include a new outer layer development line, an Alpha prep line for layer preparation\nprior to lamination, a Flying Probe electrical testing system, and a new planarizer machine integrated into the via-filling process. We\nexpect that the program will allow us to increase our sales by $10-15 million annually, to around $60 million, based on the continuity\nof the increased demand for our products. Due to the complexity of the investment program, we may encounter delays in the schedule and\nthe completion of our investments.\n\n \n\nComputer Aided Design/Computer\nAided Manufacturing (CAD/CAM). We utilize a state-of-the-art CAD system developed by Frontline PCB Solutions Ltd., an Israeli-based\ncompany, and can receive CAD data by electronic data transmission.  Our CAD workstations perform design rule checks on transmitted\ndesigns, incorporate any customer-specific design modifications and perform manufacturability enhancements that increase PCB quality.\n\n \n\nAdvanced Finishing Capabilities\nfor Dense Packaging Designs. We provide a wide assortment of alternative surface finishes, including hot air solder leveling, E-less\nnickel (ENIG), E- less nickel & palladium (ENEPIG), hard& soft electrolytic gold, immersion silver, outsource nickel/palladium/gold\nand immersion tin, for component soldering.\n\n \n\nOther Advanced Process Capabilities.\nWe provide fabrication of dense multi-layer PCBs. We use an advanced inner-layer production line, a direct laser imaging system, mechanical\nand laser drilling equipment and clean room environments (ISO-7) to produce technologically advanced products.\n\n \n\nQuality, Environmental and Safety\nStandards. Our quality management system has been ISO 9001:2015 certified since July 2002 and AS9001D certified since 2012. \nSuch certification is based on successful implementation of quality assurance requirements and includes ongoing monitoring of our business\nand periodic compliance audits conducted by the Israeli Institute of Standards.  We have obtained United States Department of Defense\nQualified Product List approval (MIL-PRF-55110G and MIL-P-50884E) for our products.  Since 1976, our rigid glass epoxy (FR4 and FR5)\nand flex-rigid boards have been UL 94V-0 certified by Underwriters Laboratories Inc and we are in the process of adding additional raw\nmaterials. (a standards organization that offers product safety testing and certification of product safety).  Our environmental\nmanagement system has been ISO 14001:2015 certified since 2005. We are ISO 45001:2018 certified for occupation health and safety management\nsystems since December 2007.\n\n \n\nSales, Customers and Marketing\n\n \n\nSales.  In the years\nended December 31, 2025, 2024 and 2023, the primary industries for which we produced PCBs were defense and aerospace equipment (73%, 65%\nand 51% of production, respectively), medical equipment (7%, 6%, and 7% of production, respectively), industrial equipment (9%, 13% and\n14% of production, respectively), distributors, contract electronic manufacturers and others (11%, 16% and 28% of production, respectively).\n\n \n\nCustomers.  During\nthe year ended December 31, 2025, we provided PCBs to approximately 109 customers in Israel and approximately 66 customers outside\nof Israel. Our customers outside of Israel are located primarily in North America, the Netherlands, India, Italy, Romania and Uruguay. \nSales to non-Israeli customers were $16.5 million (32% of revenues) for the year ended December 31, 2025, $15.9 million (34% of revenues)\nfor the year ended December 31, 2024 and $20.0 million (42.7% of revenues) for the year ended December 31, 2023. In the years ended December\n31, 2025, 2024 and 2023, a group of companies accounted for 18.3%, 8.3% and 13.7%, of our total revenues, respectively, and another group\nof companies accounted for 6.0%, 15.5% and 14.0% of our total revenues, respectively.\n\n \n\nMarketing. We market and\nsell our products primarily through our direct sales personnel, sales representatives and through PCB trading and manufacturing companies.\nWe currently have six direct salespersons, of which five persons are located in Israel and one person is located in the United States.\nIn North America, we market and sell our products through Eltek USA as well as through independent local sales representatives. PCB trading\nand manufacturing companies act as distributors of our products in the Netherlands, Italy, and South Africa.  In India, we market\nour products through a local sales representative. We maintain technical support services for our customers worldwide. We also maintain\ncustomer service support centers that handle all logistical matters relating to the delivery of our products and receive and handle complaints\nrelating to delivered products.  Our customer service personnel currently consist of five persons.\n\n25\n\n \n\nOur strategy is to focus on the high end of the PCB market, mainly\nin flex-rigid PCBs, in which margins are better.  We are currently focusing our marketing efforts on the defense and medical industries.\nTo penetrate the U.S. defense market, we applied for ITAR registration from the U.S. Department of State, Bureau of Political-Military\nAffairs, which we received in January 2009. ITAR regulates the manufacture, export and transfer of defense articles, information and services. \nITAR is a set of U.S. government regulations that controls the export and import of certain defense-related articles and services. \nThe regulations restrict sensitive information and technologies only to be shared with U.S. persons, unless special approval is acquired.\nTo qualify for ITAR registration, we met strict requirements for corporate structure, security, record keeping and procedures to allow\nus to sell our PCBs for use in U.S. defense products. Following said registration, we bid on and won an MLA (manufacturing license agreement)\nwith DDTC, supporting the manufacturing of boards for the Department of War and defense and aerospace contractors in Israel. In November\n2009, we became certified to the AS 9100B quality management standard for the avionic industry in order to strengthen our position in\nthe avionic and aerospace market in North America and Europe. In January 2014, we received accreditation from Nadcap, a global cooperative\naccreditation program for aerospace engineering and related industries, for our advanced circuitry solutions, including rigid and flex-rigid\nprinted circuit boards.\n\n \n\nStarting in 2021, we have a dedicated sales team for commercial\nactivities whose members cooperate with reliable PCB manufacturers from the Far East.\n\n \n\nIn the past two years, we have been expanding our commercial offering\nby entering into agreements with Asian manufacturers  who are able to manufacturer variety of applications, including complex boards.\n\n \n\nWe have ongoing programs to upgrade our processes by implementing\nhigh-quality standards, employee training and special training activities for clients. Marketing efforts include recruiting independent\nsales representatives in various geographic areas, the distribution of promotional materials, seminars for engineers, and the supply of\ntechnical information to business publications.\n\n \n\nMaterials and Supplies\n\n \n\nThe materials used in the manufacture of PCBs are primarily laminates\n(copper clad, with an isolating core separating them), prepreg composite materials, photo-chemical films, chemicals and inks. The materials\nwe use are manufactured in Europe, North America and South-East Asia.  Some of the materials are purchased directly from the manufacturer,\nwhile others are purchased from local distributors.\n\n \n\nWe, like most PCB manufacturers, generally obtain our key raw materials\nfrom a few suppliers. Any delays in delivery of or shortages in these raw materials could interrupt and delay manufacturing of PCB products\nand may result in the cancellation of orders for our products. If a raw material or component supplier fails to satisfy our product quality\nstandards, including standards relating to “conflict minerals” it could harm our customer relationships. Furthermore, if we\nare unable to identify an alternative source of raw material or component supplier, we may have to modify our products or a large portion\nof our production process to use a substitute raw material, which requires customers’ consent of use of such materials and which\nmay cause delays in production and shipments, increased design and manufacturing costs and increased prices for our products.\n\n \n\nCompetition\n\n \n\nThe global PCB industry is highly fragmented and intensely competitive,\ntrends that we believe will continue and even intensify. The global PCB industry is characterized by rapidly changing technology, frequent\nnew product introductions and rapidly changing customer requirements. We compete principally in the market of high-end complex Rigid-Flex,\nmulti lamination HDI, RF boards and Mixed-material multi-layer PCBs. In the Israeli market, we mainly compete with the Israeli firm PCB\nTechnologies Ltd., and few major PCB trading companies like Fineline, NCAB and others. The trading companies are importing PCBs mainly\nfrom Asia, and some from North America and Europe. In the past two years, we have identified a trend of increased competition from manufacturers\nin India and South Korea, who are working directly with Israeli e defense and aerospace customers. In the European market we mainly compete\nwith Advanced Circuit Boards NV (Belgium), Dyconex and Cicor (Switzerland), Graphics, Exception PCB and Invotec (United Kingdom), Cistelaier\nand Somacis (Italy), Schoeller-Electronics GmbH (formerly Ruwel Werke GmbH) (Germany) and certain other German companies.  In the\nNorth American market, we mainly compete with TTM, Inc. (previously known as DDi Corp and Viasystems), Summit, Printed Circuits, Inc.\nand APCT. Many of these competitors have significantly greater financial, technical and marketing resources than us. Although capital\nrequirements are a significant entry barrier for manufacturing complex PCBs, the basic interconnect technology is generally not protected\nby patents or copyrights. Our competition in the rigid PCB segment comes mainly from PCB manufacturers in the Far-East, which have substantially\nlower production costs than us. Continued competitive pressures could cause us to lose market share and reduce prices.\n\n26\n\n \n\nBacklog\n\n \n\nDue to the costs involved, our customers are increasingly reluctant\nto maintain inventory and refrain from placing orders significantly in advance. Accordingly, the backlog outstanding at any point in time\nis not necessarily indicative of the level of business to be expected in the ensuing period.\n\n \n\nOur backlog on December 31, 2025 was approximately $15.8 million\ncompared to a backlog of approximately $23.1 million on December 31, 2024. We expect to deliver most of our December 31, 2025 backlog\nin 2026. We include in our backlog all purchase orders scheduled for delivery within the next 24 months.\n\n \n\nEnvironmental Matters\n\n \n\nOur environmental management system has been ISO 14001 certified\nsince May 2003. This certification was based on successful implementation of environmental management requirements and includes ongoing\nmonitoring of our processes, raw materials and products.  The certification is subject to periodic compliance audits conducted by\nthe Israeli Institute of Standards.\n\n \n\nPCB manufacturing requires the use of metals and chemicals classified\nas hazardous substances.  Water used in the manufacturing process must be treated to remove metal particles and other contaminates\nbefore it can be discharged into the local sewer systems.  We operate and maintain effluent water treatment systems and use approved\ntesting procedures at our manufacturing facilities. There is no assurance, however, that violations will not occur in the future. \nWe are also subject to environmental laws and regulations relating to the storage, use and disposal of chemicals, solid waste and other\nhazardous materials, as well as air quality regulations. Environmental laws and regulations could become more stringent over time, including,\ninter alia, in view of the Integrated Environmental Permitting Reform, that is entering into force gradually, which is based on consolidating\nthe air emissions permit, the poison permit, and the additional conditions for the business license issued by the Ministry of Environmental\nProtection into a single consolidated permit, and aligning the regulation with the European standard, and the costs of compliance with\nmore stringent laws could be substantial.  Our operation is subject to various regulatory requirements in connection with the discharge\nof wastewater into the sewer system, including regulations that limit the concentration of metals and other contaminants discharged, the\nbreach of which constitutes a criminal offense.  Over the years, we have undertaken various actions to reduce the use of water in\nour manufacturing facilities, and invested in improving our effluent wastewater treatment system to lower the amounts of inorganic salts\nand copper concentration in the discharged water.\n\n \n\nIn March 2019, representatives of the Ministry of Environmental\nProtection inspected our premises and issued a warning related to an alleged breach of the Clean Air Law and a warning related to the\nHazardous Materials Law (1993).\n\n \n\nOn July 18, 2022, we received a notification from the Ministry\nof Environmental Protection about its intention to impose a penalty of approximately $0.1 million for an alleged breach of the Hazardous\nMaterials Law (1993). We have filed a request to reduce the amount of the penalty. In June 2023, the Ministry of Environmental Protection\ndecided to partially accept our request, reducing 20% of the amount of the financial sanction. We paid the penalty following the reduction.\n\n \n\nIn January 2023, we received a notification from the Ministry of\nEnvironmental Protection about its intention to impose a penalty of approximately $0.6 million for an alleged breach of the Clean Air\nLaw during the years 2019-2020. We have paid this penalty and recorded a relevant expense in our financial statements. We filed an administrative\nappeal to reduce the penalty to obtain a refund for a portion of the penalty. In February 2024, the court hearing the administrative petition\nruled that we should receive a 10% refund of the amount of the penalty that we paid. Such refund was received and recorded.\n\n27\n\n \n\nIn October 2023, we received a notice from the Ministry regarding\nsome suspicion of contamination of the soil from a drilling survey that was performed in May 2021 at the factory. On January 24, 2024,\nrepresentatives of the Ministry visited the Company's facility and informed us that an additional survey of the soil and groundwater in\nthe facility area would be required. On June 2025, we received a request from the Water Authority to carry out a preliminary investigation\nof the groundwater at the facility. We submitted our proposed investigation plan, which has been approved, and is expected to be carried\nout in the coming months. We are still in discussions with the ministry regarding the scope of a soil survey. We expect to hold a formal\nmeeting with the Ministry on this matter, particularly as the facility’s poison permit includes instructions on the subject, including\napplicable deadlines.\n\n \n\nIn February 2026, we received a summons for a hearing from representatives\nof the Ministry of Environmental Protection in connection with two hazardous materials incidents that occurred during 2025. The hearing\nis scheduled to take place in April 2026. We are unable to assess the outcome of this hearing.\n\n \n\nIf we are found to be in violation of environmental laws in the future, we could be\nliable for fees, damages, costs of remedial actions and a range of potential penalties and could also be subject to revocation of permits\nnecessary to conduct our business or any part thereof. Any such liability or revocation could have a material adverse effect on our business,\nfinancial condition and results of operations.\n\n \n\nIntellectual Property Rights\n\n \n\nOur success depends in part on our proprietary techniques and manufacturing expertise,\nparticularly in the area of manufacturing complex multi-layer and flex-rigid PCBs. Like many companies in the PCB industry, we do not\nhold any patents and rely principally on trade secret protection of our intellectual property. We believe that, because of the rapid pace\nof technological change in the electronics industry, the legal protections for our products are less significant factors in our success\nthan the knowledge, ability and experience of our employees, the frequency of product enhancements and the timeliness and quality of support\nservices that we provide.\n\n \n\nC.          Organizational Structure\n\n \n\nIn July 2007, we established Eltek USA Inc., a wholly-owned subsidiary incorporated\nin Delaware, to manage our sales and marketing activities in the North American market.\n\n \n\nD.          Property, Plants and Equipment\n\n \n\nLeased Facilities\n\n \n\nOur executive offices, as well as our design, production, storage\nand shipping facilities, aggregating approximately 90,000 square feet, are located in an industrial building in the Sgoola Industrial\nZone of Petach-Tikva, Israel. In 2020, we signed an amendment to the lease agreement which extends the lease contract until February 2027\nwith a 7% increase in rent, with an option to extend the lease for an additional five-year period with an additional 3% increase in rent,\nwhich will expire in February 2032. In January 2026 we signed an additional amendment to the lease extending it until the end of 2039,\nwithout changes to the rent increase mechanism, and with a 50% discount on several months of rent, reflecting  compensation from\nthe landlord for improvements made by us to the leased property. In the year ended December 31, 2025, we incurred $1.2 million of leasing\nexpenses for these premises."}