PART I [Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) Eltek's key financial data and significant business, stock, and Israeli operational risks are summarized, highlighting its return to profitability in 2019 [Selected Financial Data](index=6&type=section&id=A.%20Selected%20Financial%20Data) The company presents selected consolidated financial data, showing a return to net profit of **$1.8 million** in 2019 after prior losses Consolidated Statement of Operations Data (in thousands, except per share data) | Year ended December 31, | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $34,794 | $33,939 | $32,754 | $37,065 | $41,350 | | Gross profit | $6,007 | $2,597 | $1,327 | $2,817 | $6,548 | | Operating profit (loss) | $1,387 | $(2,072) | $(3,418) | $(1,999) | $1,497 | | Net profit (loss) | $1,793 | $(2,607) | $(3,775) | $(3,725) | $1,026 | | Basic and diluted net profit (loss) per share | $0.48 | $(1.28) | $(1.58) | $(1.82) | $0.51 | Consolidated Balance Sheets Data (in thousands) | As of December 31, | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Working capital (deficit) | $(1,248) | $(5,314) | $(4,565) | $(93) | $1,982 | | Total assets | $22,829 | $18,160 | $22,145 | $20,145 | $25,419 | | Total shareholders' equity | $6,269 | $882 | $3,459 | $6,634 | $10,335 | [Risk Factors](index=8&type=section&id=D.%20Risk%20Factors) The company identifies numerous business, share, and Israeli operational risks, including a history of losses and geopolitical instability - The company has an accumulated deficit of approximately **$19.7 million** since inception and may require additional capital; a rights offering in April 2019 raised net proceeds of approximately **$3.2 million**[29](index=29&type=chunk)[31](index=31&type=chunk) - The COVID-19 pandemic poses a significant risk, potentially affecting customer operations, supply chains, revenue, and profit margins[36](index=36&type=chunk)[49](index=49&type=chunk) - Significant customer concentration exists, with one affiliated group accounting for **19.5%** of 2019 revenues and another for **11.5%**[40](index=40&type=chunk) - The company faces NASDAQ delisting risks due to past non-compliance with minimum bid price and stockholders' equity requirements, though compliance was regained in March 2019[124](index=124&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Chairman Yitzhak Nissan beneficially owns **65.4%** of outstanding ordinary shares, granting significant influence over shareholder votes and corporate transactions[123](index=123&type=chunk) - Operations in Israel expose the company to risks from regional political, economic, and military instability, potentially disrupting business conditions[136](index=136&type=chunk)[137](index=137&type=chunk) [Information on the Company](index=29&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) Eltek's corporate history, business, structure, and assets are detailed, highlighting its specialization in high-end custom PCBs for defense and medical industries [History and Development of the Company](index=29&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Eltek, incorporated in Israel in 1970, manufactures advanced custom PCBs, is controlled by Nistec, and plans **$2.0 million** in 2020 capital expenditures - The company, incorporated in Israel in 1970, specializes in manufacturing technologically advanced custom-made PCBs[163](index=163&type=chunk)[164](index=164&type=chunk) - Nistec acquired a controlling stake in November 2013; Mr. Yitzhak Nissan's beneficial ownership was **69.9%** after a March 2019 rights offering, later reduced to **65.4%**[168](index=168&type=chunk)[170](index=170&type=chunk)[219](index=219&type=chunk) - The company plans approximately **$2.0 million** in 2020 capital expenditures, following a **$1.7 million** investment over the past three years, to expand manufacturing capacity and upgrade technology[171](index=171&type=chunk) [Business Overview](index=30&type=section&id=B.%20Business%20Overview) Eltek operates in the competitive high-end PCB industry, serving defense, aerospace, and medical markets, with its order backlog increasing to **$9.1 million** in 2019 Revenue by Industry (as % of production) | Industry | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Defense and Aerospace | 55.2% | 43.1% | 48.0% | | Medical Equipment | 9.5% | 9.5% | 14.3% | | Industrial Equipment | 2.1% | 6.0% | 4.2% | | Distributors, CEMs, Others | 33.2% | 41.4% | 33.6% | - The company focuses on high-end PCBs, including flex-rigid boards, targeting defense and medical industries, holding ITAR, AS 9100, and Nadcap certifications[198](index=198&type=chunk) - The global PCB industry is highly fragmented and competitive, with Eltek competing against Israeli, Southeast Asian, European, and North American firms[202](index=202&type=chunk) - The company's order backlog increased from approximately **$7.0 million** at year-end 2018 to **$9.1 million** at year-end 2019[204](index=204&type=chunk) - The company faces environmental regulatory scrutiny, having received March 2019 warnings from the Israeli Ministry of Environmental Protection regarding alleged breaches of environmental laws[211](index=211&type=chunk) [Organizational Structure](index=35&type=section&id=C.%20Organizational%20Structure) Eltek has wholly-owned sales subsidiaries in the US and Europe and is controlled by Nistec Golan Ltd., with Mr. Yitzhak Nissan's beneficial ownership at **65.4%** - Eltek has wholly-owned subsidiaries in the USA (Eltek USA Inc.) and Germany (Eltek Europe GmbH) for sales and marketing in North America and Europe[215](index=215&type=chunk) - Nistec Ltd. transferred its ownership to Nistec Golan Ltd. in December 2018, both controlled by Mr. Yitzhak Nissan[217](index=217&type=chunk) - Following a March 2019 rights offering and a May 2019 share sale, Mr. Nissan's beneficial ownership in the company is **65.4%**[219](index=219&type=chunk) [Property, Plants and Equipment](index=36&type=section&id=D.%20Property,%20Plants%20and%20Equipment) The company's main operations are in a leased **90,000 square foot** facility in Petach Tikva, Israel, with a U.S. subsidiary leasing office space - The company's principal **90,000 square foot** facilities are leased in Petach Tikva, Israel, with the lease expiring in February 2022[220](index=220&type=chunk) - The U.S. subsidiary leases approximately **938 square feet** of office space in New Hampshire, with the lease extending through February 2024[221](index=221&type=chunk) [Operating and Financial Review and Prospects](index=36&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) Management discusses Eltek's financial condition and operations, highlighting **2.7%** revenue growth and a shift to **$1.4 million** operating profit in 2019 [Operating Results](index=36&type=section&id=A.%20Operating%20Results) In 2019, Eltek's revenues grew **2.7%** to **$34.8 million**, with cost reductions leading to a **131%** gross profit increase and a shift to **$1.4 million** operating profit Year-over-Year Performance Comparison (2019 vs. 2018, in millions) | Metric | 2019 ($ millions) | 2018 ($ millions) | Change ($ millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $34.8 | $33.9 | +$0.9 | +2.7% | | Cost of Revenues | $28.8 | $31.3 | -$2.5 | -8.0% | | Gross Profit | $6.0 | $2.6 | +$3.4 | +131% | | Operating Profit (Loss) | $1.4 | $(2.1) | +$3.5 | N/A | - The 2019 operating profit improvement was primarily due to cost savings and a slight increase in revenues[251](index=251&type=chunk) - Other income of **$923,000** in 2019 was primarily from an insurance claim payment for 2018 manufacturing machine damage[253](index=253&type=chunk) - The COVID-19 outbreak, beginning in late 2019, could adversely affect the global economy and company operations, though not materially impacting operations as of the report date[241](index=241&type=chunk)[242](index=242&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's liquidity improved in 2019, with cash increasing to **$1.6 million** and the working capital deficit narrowing, largely due to a **$3.4 million** rights offering - A March 2019 rights offering raised gross proceeds of **$3.4 million**, used for debt reduction and working capital[281](index=281&type=chunk)[311](index=311&type=chunk) Cash Flow Summary (in thousands) | Year ended December 31, | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,578 | $(813) | $(3,444) | | Net cash used in investing activities | $(806) | $(619) | $(275) | | Net cash provided by (used in) financing activities | $(1,132) | $1,527 | $3,244 | - As of December 31, 2019, the company had loans payable to Nistec totaling **NIS 12 million** (approximately **$3.5 million**), with renegotiated and extended repayment terms[300](index=300&type=chunk)[304](index=304&type=chunk) - The company was in compliance with bank covenants as of December 31, 2019, following a waiver for 2018 non-compliance[297](index=297&type=chunk) [Contractual Obligations](index=47&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) As of December 31, 2019, the company had total contractual obligations of approximately **$10.0 million**, with **$7.6 million** due within one year Contractual Obligations as of December 31, 2019 (in thousands) | Obligation Type | Total (in thousands) | Less than 1 year (in thousands) | 2-3 years (in thousands) | 4-5 years (in thousands) | More than 5 years (in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Short-term bank credit | $2,120 | $2,120 | - | - | - | | Long-term debt obligations | $863 | $477 | $290 | $96 | - | | Operating lease | $2,060 | $953 | $1,079 | $28 | - | | Other contractual obligations | $1,233 | $616 | $480 | $137 | - | | **Total** | **$10,004** | **$7,563** | **$1,860** | **$267** | **$314** | [Directors, Senior Management and Employees](index=48&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board structure, and employee base, noting total compensation for directors and officers was approximately **$1.85 million** in 2019 [Directors and Senior Management](index=48&type=section&id=A.%20Directors%20and%20Senior%20Management) The company's board comprises seven directors, chaired by controlling shareholder Yitzhak Nissan, with the executive team led by CEO Eli Yaffe and CFO Alon Mualem - The Board of Directors is chaired by Yitzhak Nissan, the company's controlling shareholder[319](index=319&type=chunk)[320](index=320&type=chunk) - The executive management team is led by Chief Executive Officer Eli Yaffe and Chief Financial Officer Alon Mualem[327](index=327&type=chunk)[328](index=328&type=chunk) [Compensation](index=50&type=section&id=B.%20Compensation) Total compensation for all 14 directors and executive officers in 2019 was approximately **$1.5 million** in salaries and fees, plus **$347,000** in benefits - Total compensation for all 14 directors and executive officers in 2019 was **$1.5 million** in salaries and fees, plus **$347,000** in pension and other benefits[336](index=336&type=chunk)[337](index=337&type=chunk) Compensation of Five Most Highly Compensated Officers (2019) | Name of Officer | Position | Total Compensation (USD) | | :--- | :--- | :--- | | Yitzhak Nissan | Chairman of the Board | $302,988 | | Eli Yaffe | Chief Executive Officer | $578,042 | | Alon Mualem | Chief Financial Officer | $244,473 | | Yitzhak Zemach | VP Operations | $188,585 | | Shmuel Wider | Former VP Sales and Marketing | $158,854 | [Board Practices](index=52&type=section&id=C.%20Board%20Practices) The company's seven-member board includes two external directors serving on Audit and Compensation Committees, adhering to Israeli corporate governance practices - Israeli law requires the company to appoint at least two external directors, currently Gad Dovev and Ilana Lurie[349](index=349&type=chunk)[351](index=351&type=chunk) - The Audit Committee comprises three independent members: Gad Dovev (Chairman), Mordechai Marmorstein, and Ilana Lurie[368](index=368&type=chunk) - The Compensation Committee consists of Ilana Lurie, Gad Dovev, and Mordechai Marmorstein; a new compensation policy was approved on December 5, 2019[370](index=370&type=chunk)[372](index=372&type=chunk) - The company has indemnification agreements with directors and officers, with an aggregate limit of the greater of **25%** of net equity or **$3 million**[390](index=390&type=chunk)[750](index=750&type=chunk) [Employees](index=59&type=section&id=D.%20Employees) As of December 31, 2019, Eltek employed **283** full-time employees in Israel and **3** in the U.S., with most Israeli employees in manufacturing services Employee Headcount by Year-End | Location | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | :--- | | Israel | 283 | 316 | 329 | | USA | 3 | 4 | 4 | - The majority of employees in Israel (**217** out of **283**) are engaged in manufacturing services[395](index=395&type=chunk) - The company's employees in Israel are not currently unionized, following significant resignations from Histadrut membership in 2012[400](index=400&type=chunk) [Share Ownership](index=61&type=section&id=E.%20Share%20Ownership) As of April 24, 2020, Chairman Yitzhak Nissan beneficially owned **65.4%** of outstanding shares, with **123,519** options outstanding - As of April 24, 2020, Chairman Yitzhak Nissan beneficially owned **2,862,523** ordinary shares, representing **65.4%** of outstanding shares[407](index=407&type=chunk)[408](index=408&type=chunk) - All executive officers and directors as a group (**14** persons) beneficially owned **2,899,413** shares, or **65.6%** of the company[407](index=407&type=chunk) - Under the 2018 Share Incentive Plan, **123,519** options were outstanding as of December 31, 2019, with a weighted average exercise price of **$4.65** per share[412](index=412&type=chunk) [Major Shareholders and Related Party Transactions](index=61&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details major shareholders and related party transactions, noting Nistec Golan Ltd. and Chairman Yitzhak Nissan hold a **65.4%** controlling stake [Major Shareholders](index=61&type=section&id=A.%20Major%20Shareholders) As of April 24, 2020, major shareholders include Nistec Golan Ltd. (**62.4%**) and Chairman Yitzhak Nissan (**3.0%**), totaling **65.4%** beneficial ownership Major Shareholders (as of April 24, 2020) | Name | Number of Shares | Percentage of Ownership | | :--- | :--- | :--- | | Nistec Golan Ltd. | 2,731,783 | 62.4% | | Yitzhak Nissan | 130,740 | 3.0% | | XDOOD LLC | 228,230 | 5.21% | - Nistec Golan Ltd. is controlled by Yitzhak Nissan, resulting in his total beneficial ownership of **65.4%**[415](index=415&type=chunk) [Related Party Transactions](index=62&type=section&id=B.%20Related%20Party%20Transactions) The company engages in multiple related party transactions with controlling shareholder Nistec and Chairman Yitzhak Nissan, including a management agreement for **NIS 90,000** monthly - The company has a Management Agreement with Nistec, renewed in December 2019, paying a monthly fee of **NIS 90,000** (approximately **$26,000**) for Chairman Yitzhak Nissan's services[425](index=425&type=chunk)[426](index=426&type=chunk)[428](index=428&type=chunk) - Nistec has provided significant financial support, including loans totaling **NIS 10 million** (approximately **$2.9 million**) as of December 2019, with renegotiated terms[434](index=434&type=chunk) - The company has established procedures for arm's-length transactions with Nistec, including PCB purchases by Nistec and the company's acquisition of soldering and assembly services from Nistec[431](index=431&type=chunk)[821](index=821&type=chunk)[822](index=822&type=chunk) [Financial Information](index=65&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section covers legal proceedings, noting Eltek is involved in employee lawsuits with aggregate claims exceeding **$2.2 million**, and the company's dividend policy - The company is involved in several employee lawsuits alleging personal injuries and seeking compensation, with specified claims totaling approximately **$1.7 million** and other claims unspecified[442](index=442&type=chunk)[758](index=758&type=chunk)[759](index=759&type=chunk) - The company has never declared or paid cash dividends and intends to retain future earnings to finance operations and business expansion[445](index=445&type=chunk) [Additional Information](index=66&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section details corporate governance, articles of association, and material tax considerations, including Israeli corporate tax and U.S. federal income tax consequences [Memorandum and Articles of Association](index=67&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) The company's purpose is to develop and sell circuits, with director powers and shareholder meeting quorums governed by Israeli Companies Law - The company's purpose is to develop, manufacture, and deal in printed, multi-layer, flexible, and integrated circuits[457](index=457&type=chunk) - A shareholders meeting quorum requires at least two shareholders holding or representing at least **one-third** of the issued share capital's voting rights[461](index=461&type=chunk) [Taxation](index=68&type=section&id=E.%20Taxation) The company is subject to Israeli corporate tax, potentially at reduced rates, and U.S. holders face tax implications, with a notable risk of PFIC classification - The standard Israeli corporate tax rate for 2019 is **23%**, but the company may be eligible for reduced rates (e.g., **16%**) as a "Preferred Enterprise" under the Law for the Encouragement of Capital Investments[467](index=467&type=chunk)[786](index=786&type=chunk)[795](index=795&type=chunk) - As of December 31, 2019, the company had approximately **$24.1 million** in tax operating loss carryforwards and **$9.0 million** in capital loss carryforwards in Israel, usable against future income without time limitation[274](index=274&type=chunk)[799](index=799&type=chunk) - U.S. holders face the risk of the company being classified as a Passive Foreign Investment Company (PFIC), leading to adverse U.S. federal income tax consequences, including higher tax rates on gains and distributions[133](index=133&type=chunk)[526](index=526&type=chunk) [Quantitative and Qualitative Disclosures About Market Risks](index=78&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISKS) The company faces market risks including foreign currency, commodity price, and interest rate risks, with a **1%** dollar devaluation against the NIS potentially decreasing operating income by **$200,000** - The company is exposed to foreign currency risk from dollar, NIS, and Euro denominations; a hypothetical **1%** U.S. dollar devaluation against the NIS would decrease operating income by approximately **$200,000**[542](index=542&type=chunk) - The company faces commodity price risk, with 2019 raw material costs at **$9.7 million**; a **1%** change in these costs would impact cost of revenues by approximately **$325,000**[544](index=544&type=chunk) - Interest rate risk primarily relates to short-term credit lines and loans; a hypothetical **1%** interest rate increase would raise annual financial expenses by approximately **$65,000**[546](index=546&type=chunk) PART II [Controls and Procedures](index=79&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of the report period end and December 31, 2018 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the fiscal year-end[552](index=552&type=chunk) - Management assessed internal control over financial reporting using the COSO framework, concluding it was effective as of December 31, 2018[556](index=556&type=chunk) [Corporate Governance and Other Items](index=80&type=section&id=ITEM%2016.%20CORPORATE%20GOVERNANCE%20AND%20OTHER%20ITEMS) This section details corporate governance, including an audit committee financial expert, a code of ethics, **$126,320** in 2019 accountant fees, and adherence to Israeli home country practices - The Board of Directors has determined that Mr. Gad Dovev, an external director, qualifies as an audit committee financial expert[558](index=558&type=chunk) Principal Accountant Fees (in thousands) | Service Type | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--- | :--- | :--- | :--- | | Audit Fees | $85.0 | $85.0 | $82.0 | | Audit Related Fees | $33.7 | $55.0 | - | | Tax Fees | - | - | $3.0 | | All other Fees | $7.6 | $6.7 | $13.5 | | **Total** | **$126.3** | **$146.7** | **$98.5** | - As a foreign private issuer, the company follows Israeli home country practices instead of certain NASDAQ corporate governance rules regarding board independence, director nominations, and shareholder meeting quorums[567](index=567&type=chunk)[568](index=568&type=chunk)[571](index=571&type=chunk) [Financial Statements](index=82&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements for the fiscal year ended December 31, 2019, prepared in accordance with U.S. GAAP - The report includes audited consolidated financial statements for Eltek Ltd. and its subsidiaries as of December 31, 2019 and 2018, and for the three years ended December 31, 2019[582](index=582&type=chunk) - The financial statements were prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP)[582](index=582&type=chunk) - The company adopted the new lease accounting standard (ASU No. 2016-02, Topic 842) in 2019, recognizing right-of-use assets and lease liabilities on the balance sheet[583](index=583&type=chunk)

Eltek Limited (NASDAQ:ELTK) Q4 2019 Earnings Conference Call April 27, 2020 8:30 AM ET Company Participants Eli Yaffe - Chief Executive Officer Alon Mualem - Chief Financial Officer Conference Call Participants Drew DePatie - Edward Jones Dean Chin - Operator Ladies and gentlemen, thank you for standing by and welcome to the Eltek Limited fourth quarter and full year 2019 financial results conference call. At participants are at present in a listen-only mode. Following management’s formal presentation, ins ...

Eltek Ltd. (NASDAQ:ELTK) Q3 2019 Results Conference Call November 20, 2019 8:30 AM ET Company Participants Eli Yaffe - Chief Executive Officer Alon Mualem - Chief Financial Officer Conference Call Participants Operator Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. Third Quarter 2019 Financial Results Conference Call. All participants are present in a listen-only mode. Following managementÂ's formal presentation, instructions will be given for the question-and-answer session. [Op ...

Eltek Ltd. (NASDAQ:ELTK) Q2 2019 Results Earnings Conference Call September 4, 2019 8:30 AM ET Company Participants Eli Yaffe - CEO Alon Mualem - CFO Operator Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. Second Quarter 2019 Financial Results Conference Call. All participants are present in a listen-only mode. Following managementÂ's formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions]. As a reminder, this conference is bei ...

Eltek Ltd. (NASDAQ:ELTK) Q1 2019 Earnings Conference Call May 29, 2019 8:30 AM ET Company Participants Eli Yaffe - CEO Alon Mualem - CFO Conference Call Participants Martin Elbaum - Horizon Networks Operator Ladies and gentlemen, thank you for standing by. Welcome to the Eltek Ltd. First Quarter 2019 Financial Results Conference Call. All participants are at present in a listen-only mode. Following managementÂ's formal presentation, instructions will be given for the question-and-answer session. [Operator I ...

Part I [Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section provides a high-level financial overview and details significant risks facing the company, including a history of net losses and working capital deficits [Selected Financial Data](index=6&type=section&id=A.%20Selected%20Financial%20Data) Presents five years of audited financial data from 2014 to 2018, showing fluctuating revenues, consistent operating and net losses from 2016 to 2018, and declining total assets and shareholders' equity Consolidated Statement of Operations Data (2014-2018, in thousands) | Year ended December 31, | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | 33,939 | 32,754 | 37,065 | 41,350 | 46,626 | | **Gross profit** | 2,597 | 1,327 | 2,817 | 6,548 | 6,022 | | **Operating profit (loss)** | (2,072) | (3,418) | (1,999) | 1,497 | (903) | | **Net profit (loss) attributable to Eltek Ltd.** | (2,607) | (3,775) | (3,624) | 1,043 | (2,665) | | **Basic and diluted net profit (loss) per share** | (1.28) | (1.58) | (1.82) | 0.51 | (0.26) | Consolidated Balance Sheet Data (2014-2018, in thousands) | As of December 31, | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Working capital (deficit)** | (5,314) | (4,565) | (93) | 1,982 | (72) | | **Total assets** | 18,160 | 22,145 | 20,145 | 25,419 | 26,266 | | **Total shareholders' equity** | 882 | 3,459 | 6,634 | 10,335 | 9,307 | [Risk Factors](index=8&type=section&id=D.%20Risk%20Factors) This section details numerous business, industry, financial, and location-specific risks, including operating losses, working capital deficits, and geopolitical instability - The company has a history of operating losses, incurring a net loss of **$2.6 million** in 2018, an accumulated deficit of approximately **$21.5 million** since inception, and a working capital deficiency of **$5.3 million** as of December 31, 2018[26](index=26&type=chunk) - As of December 31, 2018, the company was not in compliance with its bank loan covenants, though waivers were granted, future non-compliance could lead to accelerated repayment demands[32](index=32&type=chunk)[34](index=34&type=chunk) - A significant portion of revenue comes from a small number of customers, with one group accounting for **12.0%** and another for **9.3%** of total revenues in 2018[37](index=37&type=chunk) - The company faced non-compliance with NASDAQ's minimum stockholders' equity requirement in October 2018 but regained compliance in March 2019 following a Rights Offering, with continued non-compliance risking delisting[124](index=124&type=chunk) - Mr. Yitzhak Nissan, Chairman of the Board, beneficially owns **69.9%** of the company's outstanding ordinary shares, giving him and his controlled entity, Nistec Golan, significant influence over all shareholder matters[120](index=120&type=chunk) - The company's location in Israel exposes it to political, economic, and military instability in the Middle East, which could disrupt operations and harm business conditions[133](index=133&type=chunk)[134](index=134&type=chunk) [Information on the Company](index=27&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) Eltek manufactures and supplies technologically advanced custom-made Printed Circuit Boards (PCBs), focusing on high-end, quick-turnaround products for defense, aerospace, and medical industries [History and Development of the Company](index=27&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Incorporated in Israel in 1970, Eltek specializes in advanced custom PCBs, with recent developments including Nistec's controlling stake acquisition in 2013 and a $3.4 million Rights Offering in 2019 - Nistec acquired a controlling stake (**50.5%**) in November 2013, and following a Rights Offering in March 2019, the beneficial ownership of Nistec's controlling shareholder, Mr. Nissan, increased to **69.9%**[162](index=162&type=chunk)[164](index=164&type=chunk) - In December 2016, the company sold all its shares of its German manufacturing subsidiary, Kubatronik-Leiterplatten GmbH[160](index=160&type=chunk) - A Rights Offering in March 2019 raised **$3.4 million** in gross proceeds from shareholders[164](index=164&type=chunk) [Business Overview](index=28&type=section&id=B.%20Business%20Overview) The company operates in the highly competitive PCB industry, focusing on complex, high-reliability products for defense/aerospace and medical equipment, facing intense competition and a decreasing order backlog Production by Industry (2016-2018) | Industry | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Defense and aerospace | 43.1% | 48.0% | 44.8% | | Medical equipment | 9.5% | 14.3% | 16.0% | | Industrial equipment | 6.0% | 4.2% | 9.2% | | Others | 41.4% | 33.6% | 30.0% | - Sales to non-Israeli customers accounted for **44.2%** of revenues in 2018, an increase from **39.8%** in 2017 but a decrease from **52.7%** in 2016[188](index=188&type=chunk) - The company's order backlog decreased to approximately **$7.0 million** as of December 31, 2018, compared to **$9.1 million** at the end of 2017[197](index=197&type=chunk) [Organizational Structure](index=33&type=section&id=C.%20Organizational%20Structure) Eltek Ltd. is the parent company with wholly-owned marketing subsidiaries in the USA and Germany, with Nistec Golan Ltd., controlled by Chairman Yitzhak Nissan, holding a controlling stake - The company has two wholly-owned subsidiaries: Eltek USA Inc. in Delaware and Eltek Europe GmbH in Germany, which manage sales and marketing in their respective regions[207](index=207&type=chunk) - In December 2018, the controlling shareholder Nistec Ltd. transferred its ownership interest in the company to Nistec Golan Ltd., both entities controlled by Mr. Yitzhak Nissan[209](index=209&type=chunk) [Property, Plants and Equipment](index=34&type=section&id=D.%20Property,%20Plants%20and%20Equipment) The company's main facilities are located in a leased building in Petach Tikva, Israel, with the lease expiring in February 2022, and it also leases office space and manufacturing equipment - The company's principal facilities in Petach Tikva, Israel, are leased under an agreement that expires in February 2022[212](index=212&type=chunk) - The company leases manufacturing equipment with total payment obligations of **$1.2 million** through October 2024[214](index=214&type=chunk) [Operating and Financial Review and Prospects](index=34&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides a detailed analysis of the company's financial performance and condition, highlighting revenue growth, improved gross profit, continued net losses, and liquidity concerns addressed by a recent Rights Offering [Operating Results](index=34&type=section&id=A.%20Operating%20Results) In 2018, revenues grew 3.4% to $33.9 million, gross profit doubled to $2.6 million, and the operating loss narrowed significantly to $2.1 million, driven by increased demand and cost reduction efforts Financial Performance Comparison (2017 vs. 2018) | Metric | 2018 ($M) | 2017 ($M) | Change | | :--- | :--- | :--- | :--- | | Revenues | 33.9 | 32.8 | +3.4% | | Gross Profit | 2.6 | 1.3 | +100% | | Operating Loss | (2.1) | (3.4) | -38.2% | Financial Performance Comparison (2016 vs. 2017) | Metric | 2017 ($M) | 2016 ($M) | Change | | :--- | :--- | :--- | :--- | | Revenues | 32.8 | 37.0 | -11.7% | | Gross Profit | 1.3 | 2.8 | -51.2% | | Operating Loss | (3.4) | (2.0) | +70.0% | [Liquidity and Capital Resources](index=41&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's liquidity is strained with a $5.3 million working capital deficit as of December 31, 2018, financed through operations, bank loans, and significant shareholder loans, with a March 2019 Rights Offering raising $3.4 million for debt and working capital - The company had a working capital deficit of **$5.3 million** as of December 31, 2018, an increase from a deficit of **$3.7 million** at the end of 2017[274](index=274&type=chunk) Summary of Cash Flows (2016-2018, in thousands) | Cash Flow Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | (813) | (3,444) | 165 | | Net cash used in investing activities | (619) | (275) | (750) | | Net cash provided by financing activities | 1,527 | 3,244 | 473 | - In March 2019, a Rights Offering provided **$3.4 million** in gross proceeds to support liquidity[275](index=275&type=chunk) - As of April 16, 2019, the total principal amount of loans payable by the company to its controlling shareholder, Nistec, was approximately **$3.3 million**[301](index=301&type=chunk) [Tabular Disclosure of Contractual Obligations](index=45&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) As of December 31, 2018, the company had total contractual obligations of $18.9 million, with the majority ($15.4 million) due within one year, primarily consisting of short-term bank credit Contractual Obligations as of December 31, 2018 (in thousands) | Contractual Obligations | Total | Less than 1 year | 2-3 years | 4-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Short-term bank credit | 9,274 | 9,274 | - | - | - | | Long-term debt obligations | 724 | 416 | 308 | - | - | | Operating lease | 2,852 | 883 | 1,766 | 203 | - | | Other contractual obligations | 1,538 | 581 | 652 | 305 | - | | **Total** | **18,876** | **15,421** | **2,736** | **508** | **211** | [Directors, Senior Management and Employees](index=45&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation practices, and employee base, highlighting the controlling shareholder's role and a decrease in employee count [Compensation](index=48&type=section&id=B.%20Compensation) Details the compensation for the five most highly compensated officers for 2018, with Chairman Yitzhak Nissan receiving $312,100 and total compensation for all directors and executive officers approximately $1.5 million Compensation of 5 Most Highly Compensated Officers (2018) | Name of Officer | Position | Total Compensation (USD) | | :--- | :--- | :--- | | Yitzhak Nissan | Chairman & Former CEO | 312,100 | | Kathy Nargi-Toth | Former President of Eltek USA | 237,313 | | Eli Yaffe | CEO | 216,142 | | Amnon Shemer | Former CFO | 205,173 | | Avraham Gal | Former VP Operations | 158,223 | [Employees](index=58&type=section&id=D.%20Employees) As of December 31, 2018, the company had 316 full-time employees in Israel and 4 in the U.S., reflecting a steady decrease in Israeli employee count since 2016 - The number of full-time employees in Israel decreased to **316** at the end of 2018, down from **329** in 2017 and **354** in 2016[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk) [Share Ownership](index=59&type=section&id=E.%20Share%20Ownership) As of April 16, 2019, Chairman Yitzhak Nissan beneficially owned 69.9% of the company's outstanding ordinary shares, individually and through his controlled company, Nistec Golan, granting him significant control - As of April 16, 2019, Yitzhak Nissan, Chairman of the Board, beneficially owned **3,062,523** ordinary shares, representing **69.9%** of the outstanding shares[403](index=403&type=chunk) [Major Shareholders and Related Party Transactions](index=60&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details the ownership structure and transactions with related parties, highlighting Nistec Golan Ltd.'s majority ownership and ongoing financial and operational agreements with Nistec [Major Shareholders](index=60&type=section&id=A.%20Major%20Shareholders) As of April 16, 2019, Nistec Golan Ltd. held 62.4% and Yitzhak Nissan individually held 7.5% of the company's ordinary shares, solidifying their combined 69.9% control Major Shareholders (as of April 16, 2019) | Name | Number of Shares Beneficially Owned | Percentage of Ownership | | :--- | :--- | :--- | | Nistec Golan Ltd. | 2,731,783 | 62.4% | | Yitzhak Nissan | 330,740 | 7.5% | [Related Party Transactions](index=61&type=section&id=B.%20Related%20Party%20Transactions) The company has multiple crucial agreements with its controlling shareholder, Nistec, including a monthly management fee, regular business transactions for PCBs and services, and significant financial support through loans and guarantees - The company pays a monthly management fee of **NIS 90,000** (approximately **$25,000**) to its controlling shareholder, Nistec[419](index=419&type=chunk) - The company engages in regular business transactions with Nistec, including selling PCBs to Nistec and acquiring soldering and assembly services from Nistec[839](index=839&type=chunk)[840](index=840&type=chunk) - Nistec has provided significant financial support to the company through direct loans and guarantees for bank credit facilities[848](index=848&type=chunk) [Financial Information](index=63&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section references the consolidated financial statements and discusses legal proceedings and the company's dividend policy, noting ongoing lawsuits and no anticipated future dividends [Consolidated Statements and Other Financial Information](index=63&type=section&id=A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) The company is involved in several legal proceedings with former employees regarding personal injury and termination claims, with an aggregate claimed amount of approximately $900,000 for the latter, and has never paid dividends, intending to retain future earnings for business operations - The company is involved in lawsuits from four former employees seeking payments related to their employment and termination, with an aggregate claimed amount of approximately **$900,000**[433](index=433&type=chunk) - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain earnings to finance operations[435](index=435&type=chunk) [Additional Information](index=64&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers corporate governance details as dictated by the company's articles of association and Israeli law, including shareholder rights and meeting procedures, and provides a comprehensive overview of applicable Israeli and U.S. tax considerations for the company and its shareholders [Memorandum and Articles of Association](index=65&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) This section describes the company's corporate governance framework under its articles of association and Israeli law, detailing shareholder rights, meeting procedures, and specific provisions that could restrict a change in control - The company's authorized share capital consists of **10,000,000** ordinary shares with a nominal value of **NIS 3.00** each[450](index=450&type=chunk) - Israeli law includes provisions for full and special tender offers that regulate acquisitions of significant stakes (over **90%** and **25%/45%** respectively), which may delay, prevent, or make an acquisition of the company more difficult[459](index=459&type=chunk)[461](index=461&type=chunk) [Taxation](index=69&type=section&id=E.%20Taxation) This section details Israeli and U.S. tax implications, noting Israel's 23% corporate tax rate for 2018, potential benefits from "benefited enterprise" status, and the risk of Passive Foreign Investment Company (PFIC) classification for U.S. Holders - The regular corporate tax rate in Israel for 2018 is **23%**[478](index=478&type=chunk) - The company has a "benefited enterprise" status which may provide future tax exemptions or reduced rates, but these benefits have not yet been utilized and will expire if not used by the 2023 tax year[485](index=485&type=chunk)[488](index=488&type=chunk) - The company believes it was not a Passive Foreign Investment Company (PFIC) for the 2018 tax year, but notes this status is subject to change and could have adverse tax consequences for U.S. Holders[535](index=535&type=chunk) [Quantitative and Qualitative Disclosures About Market Risks](index=79&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISKS) The company is exposed to market risks including foreign currency fluctuations (USD/NIS and EUR/NIS), commodity price risk for raw materials, and interest rate risk on its debt - A **1%** devaluation of the U.S. dollar against the NIS would result in an estimated decrease of approximately **$200,000** in the company's operating income[551](index=551&type=chunk) - A hypothetical **1%** increase in interest rates would result in an increase of approximately **$100,000** in the company's annual financial expenses[554](index=554&type=chunk) [Controls and Procedures](index=80&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Company management, including the CEO and CFO, concluded that as of December 31, 2018, the company's disclosure controls and procedures, as well as its internal control over financial reporting, were effective - Based on an evaluation as of December 31, 2018, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[561](index=561&type=chunk) - Management assessed the effectiveness of internal control over financial reporting using the COSO framework and concluded that it was effective as of December 31, 2018[565](index=565&type=chunk) [Corporate Governance and Accountant Fees](index=81&type=section&id=ITEM%2016.%20Corporate%20Governance%20and%20Accountant%20Fees) This section covers various governance and compliance topics, including the designated audit committee financial expert, the company's code of ethics, fees paid to its independent auditor, and reliance on Israeli home country practices for certain NASDAQ corporate governance rules [Principal Accountant Fees and Services](index=81&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) The company paid its independent registered public accounting firm, Kost Forer Gabbay & Kasierer, a total of $146,700 in fees for the year ended December 31, 2018, covering audit, audit-related, tax, and other professional services, all pre-approved by the Audit Committee Accountant Fees (in thousands) | Fee Type | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Audit Fees | $85.0 | $82.0 | $74.5 | | Audit Related Fees | $55.0 | - | - | | Tax Fees | - | $3.0 | $3.0 | | All other Fees | $6.7 | $13.5 | $11.3 | | **Total** | **$146.7** | **$98.5** | **$85.8** | [Corporate Governance](index=82&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) As a foreign private issuer, the company follows certain Israeli home country corporate governance practices instead of NASDAQ rules, including exceptions for board independence, director nomination, and shareholder meeting quorum requirements - The company follows Israeli law instead of NASDAQ rules for: maintaining a majority of independent directors, the director nomination process, and the quorum for shareholder meetings[581](index=581&type=chunk) [Financial Statements](index=83&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section contains the company's audited consolidated financial statements for the years ended December 31, 2018, 2017, and 2016, prepared in accordance with U.S. GAAP, including the independent auditor's report, balance sheets, statements of comprehensive loss, changes in shareholders' equity, cash flows, and detailed notes

Financial Data and Key Metrics Changes - Full year revenue for 2018 increased to $33.9 million from $32.8 million in 2017, while Q4 2018 revenue decreased to $7.8 million from $9.1 million in Q4 2017 [7][11][13] - Gross profit for the full year improved to $2.6 million (7.7% of revenues) in 2018 from $1.3 million (4.1% of revenues) in 2017 [11] - Net loss for 2018 was $2.6 million ($1.28 per share) compared to a net loss of $3.8 million ($1.86 per share) in 2017 [12] - EBITDA was negative $421,000 in 2018, an improvement from negative $1.3 million in 2017 [12] - Q4 2018 net loss was $631,000 ($0.31 per share) compared to a net loss of $669,000 ($0.33 per share) in Q4 2017 [14] Business Line Data and Key Metrics Changes - The company has implemented a turnaround plan, including a new leadership team and efficiency measures to reduce costs [7][9] - Initial reductions in sales volume were noted due to the implementation of these efficiency measures, but improvements in on-time delivery and customer satisfaction are expected [8] Market Data and Key Metrics Changes - The company sees significant potential in the high-end PCB market, leveraging skilled engineers and experienced management to capitalize on strengths [9] Company Strategy and Development Direction - The company aims to return to profitability through headcount reductions, improving yield by 3%, and passing costs to customers to eliminate loss-making products [21][22] - A rights offering in March 2019 raised approximately $3.4 million, which will improve working capital and reduce line of credit [15] Management Comments on Operating Environment and Future Outlook - Management is optimistic about returning to profitability but cannot forecast the exact quarter for this turnaround [20] - The focus on improving cash flow through better purchasing and inventory management is a key strategy moving forward [22] Other Important Information - The company regained compliance with NASDAQ listing requirements after receiving approximately $2.5 million from the rights offering [17] Q&A Session Summary Question: When will the company turn around to profitability? - Management cannot forecast the specific quarter for profitability but has initiated several activities to achieve this goal [20] Question: What are the plans for shareholder value? - If the company's strategies succeed and profitability is restored, it is expected that the stock value will increase [23]