NRSN NeuroSense Therapeutics Ltd

As filed with the Securities and Exchange Commission on November 21, 2023.

Registration No. 333-260338

 

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

 

 

POST-EFFECTIVE AMENDMENT NO. 2 TO
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

NeuroSense Therapeutics Ltd.
(Exact Name of Registrant as Specified in Its Charter)

 

 

Not Applicable
(Translation of Registrant’s name into English)

 

State of Israel		2834		Not Applicable
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

11 HaMenofim Street, Building B
Herzliya 4672562 Israel
+972-9-799-6183

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Cogency Global Inc.
122 East 42nd Street,
18th Floor, New York, NY 10168
(212) 947-7200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

 

Copies to:

 

Brian K. Rosenzweig Sarah C. Griffiths Covington & Burling LLP The New York Times Building 620 Eighth Avenue New York, New York 10018 (212) 841-1000

Perry Wildes Goldfarb Gross Seligman & Co. One Azrieli Center Tel Aviv 6702100, Israel +972 (3) 607-4444

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

 

Emerging growth company ☒

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards^† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

†	The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

 

 

 

EXPLANATORY NOTE

 

NeuroSense Therapeutics Ltd. (the “Company”) filed with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form F-1 (Registration No. 333-260338) on October 18, 2021, as subsequently amended by Post-Effective Amendment No.1, which was initially declared effective by the Securities and Exchange Commission, or the SEC, on December 8, 2021 (the “Registration Statement”). The Registration Statement originally registered the offer and sale by the Company in its initial public offering (the “IPO”) of (i) 2,000,000 units (the “Units”), with each Unit consisting of one ordinary share and a warrant to purchase one ordinary share (the “Base Warrants”), (ii) an option by the underwriters to purchase up to 300,000 additional ordinary shares and/or 300,000 warrants to purchase up to an additional 300,000 ordinary shares (the “Option Warrants,” and together with the together with the Base Warrants, the “Public Warrants”), and (iii) warrants granted to the underwriters to purchase up to 100,000 ordinary shares (the “Underwriter Warrants,” and together with the Public Warrants, the “Warrants”).

 

On December 13, 2021, the Company closed its IPO in which it sold the Units. In addition, the underwriters exercised their option to purchase the Option Warrants. As of the date of this prospectus, we had (i) 1,655,000 outstanding Public Warrants and (ii) 100,000 Underwriter Warrants.

 

On April 28, 2022, the Company filed a post-effective amendment to the Registration Statement, to file a consent of Somekh Chaikin, Member Firm of KPMG International, with respect to its report dated April 14, 2022 relating to the Company’s financial statements contained in its Annual Report on Form 20-F for the year ended December 31, 2021. 

 

This Post-Effective Amendment No. 2 is being filed by the Company to update and supplement information contained in the Registration Statement and to incorporate by reference the Company’s Annual Report on Form 20-F for the year ended December 31, 2022, filed with the SEC on March 22, 2023 and subsequent submissions made by the Registration with the SEC.

 

No additional securities are being registered under this Post-Effective Amendment No. 2. This Post-Effective Amendment No. 2 concerns only the offer and sale of ordinary shares issuable from time to time upon exercise of the Warrants that remain unexercised.

 

All filing fees payable in connection with the registration of these securities were previously paid in connection with the initial filing of the Registration Statement.

 

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PROSPECTUS

SUBJECT TO COMPLETION DATED NOVEMBER 21, 2023

 

Up to 1,755,000 Ordinary Shares Underlying Previously Issued Warrants

 

 

NeuroSense Therapeutics Ltd.

 

This prospectus relates to the issuance of up to (i) 1,655,000 of our ordinary shares, no par value per share (the “ordinary shares”) issuable upon the exercise of warrants that were issued as part of an initial public offering (the “Public Warrants”), at an exercise price of $6.00 per ordinary share and (ii) 100,000 ordinary shares issuable upon the exercise of warrants that were issued to the underwriters of our initial public offering at an exercise price of $7.50 per ordinary share (the “Underwriter Warrants”).

 

Our ordinary shares trade on the Nasdaq Capital Market, or Nasdaq, under the symbol “NRSN”, and our Public Warrants trade on the Nasdaq under the symbol “NRSNW”. On November 20, 2023, the last reported sale price of our ordinary shares on Nasdaq was $0.51 per ordinary share.

 

We are an “emerging growth company” and a “foreign private issuer” as defined under the U.S. federal securities laws, and as such, are eligible for reduced public company disclosure requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company and a Foreign Private Issuer” for additional information.

 

Investing in our securities is highly speculative and involves a high degree of risk. See “Risk Factors” beginning on page 5 to read about factors you should consider before buying any of our ordinary shares.

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of the disclosures in this prospectus. Any representation to the contrary is a criminal offense.

 

Prospectus dated            , 2023

 

 

TABLE OF CONTENTS

 

		Page
ABOUT THIS PROSPECTUS		ii
TRADEMARKS, SERVICE MARKS AND TRADENAMES		ii
MARKET AND INDUSTRY DATA		ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		iii
PROSPECTUS SUMMARY		1
THE OFFERING		4
RISK FACTORS		5
USE OF PROCEEDS		7
MARKET FOR ORDINARY SHARES AND DIVIDEND POLICY		7
CAPITALIZATION		8
DILUTION		9
TAXATION		10
DESCRIPTION OF SECURITIES		20
PLAN OF DISTRIBUTION		28
LEGAL MATTERS		29
EXPERTS		29
WHERE YOU CAN FIND MORE INFORMATION		29
INCORPORATION BY REFERENCE		30
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES		31

 

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of the registration statement on Form F-1 that we filed with the Securities and Exchange Commission (the “SEC”) for the issuance of the ordinary shares covered by this prospectus.

 

You should not assume that the information contained in, or incorporated by reference into, this prospectus is accurate on any date subsequent to the date set forth on the front cover of this prospectus, even though this prospectus is delivered or ordinary shares covered by this prospectus are sold or otherwise disposed of on a later date. It is important for you to read and consider all information contained in, or incorporated by reference into, this prospectus in making your investment decision. You should also read and consider the information in the documents to which we have referred you under the caption “Where You Can Find Additional Information” in this prospectus.

 

We have not authorized anyone to provide any information or to make any representation other than those contained in, or incorporated by reference into, this prospectus. You must not rely upon any information or representation not contained in, or incorporated by reference into, this prospectus. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any of our securities other than the securities covered hereby, nor does this prospectus constitute an offer to sell or the solicitation of an offer to buy any securities of the Company in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.

 

This prospectus, including the information incorporated by reference herein, contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. See “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

 

Unless otherwise indicated or the context otherwise requires, all references in this prospectus to the terms “NeuroSense,” “NeuroSense Therapeutics,” the “Company,” “we,” “us” and “our” refer to NeuroSense Therapeutics Ltd. In this prospectus, any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof. Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.

 

TRADEMARKS, SERVICE MARKS AND TRADENAMES

 

The NeuroSense Therapeutics logo and other trademarks and service marks of NeuroSense Therapeutics Ltd. appearing in this prospectus or the information incorporated by reference herein are the property of the Company. Solely for convenience, some of the trademarks, service marks, logos and trade names referred to in this prospectus are presented without the^® and^™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names. This prospectus, including the information incorporated by reference herein, contains additional trademarks, service marks and trade names of others. All trademarks, service marks and trade names appearing in this prospectus or the information incorporated by reference herein are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

MARKET AND INDUSTRY DATA

 

This prospectus, including the information incorporated by reference herein, contains industry, market and competitive position data that are based on industry publications and studies conducted by third parties as well as our own internal estimates and research. These industry publications and third-party studies generally state that the information that they contain has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these publications and third-party studies is reliable, we have not independently verified the market and industry data obtained from these third-party sources. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements included in, or incorporated by reference into, this prospectus. While we believe our internal research is reliable and the definition of our market and industry are appropriate, neither such research nor these definitions have been verified by any independent source.

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus and certain information incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other securities laws. Many of the forward-looking statements contained in, or incorporated by reference into, this prospectus can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “should,” “target,” “would” and other similar expressions that are predictions of or indicate future events and future trends, although not all forward-looking statements contain these identifying words.

 

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to substantial risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors, including, but not limited to, those identified under the section titled “Risk Factors” in this prospectus or the documents incorporated herein. These risks and uncertainties include factors relating to:

 

●

the going concern reference in our financial statements and our need for substantial additional financing to achieve our goals;

 

●

our limited operating history and history of incurring significant losses and negative cash flows since our inception, which we anticipate will continue for the foreseeable future;

 

●

our dependence on the success of our lead product candidate, PrimeC, including our obtaining of regulatory approval to market PrimeC in the United States;

 

●

our limited experience in conducting clinical trials and reliance on clinical research organizations and others to conduct them;

 

●

our ability to advance our preclinical product candidates into clinical development and through regulatory approval;

 

●

the results of our clinical trials, which may fail to adequately demonstrate the safety and efficacy of our product candidates;

 

●

our ability to achieve the broad degree of physician adoption and use and market acceptance necessary for commercial success;

 

●

our reliance on third parties in marketing, producing or distributing products and research materials for certain raw materials, compounds and components necessary to produce PrimeC for clinical trials and to support commercial scale production of PrimeC, if approved;

 

●

our receipt of regulatory clarity and approvals for our therapeutic candidates and the timing of other regulatory filings and approvals;

 

●

estimates of our expenses, revenues, capital requirements and our needs for additional financing;

 

●

our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our product candidates and technologies;

 

●

our ability to maintain the listing of our ordinary shares on Nasdaq; and

 

●

the impact of the public health, political and security situation in Israel, the U.S. and other countries in which we may obtain approvals for our products or our business.

 

The preceding list is not intended to be an exhaustive list of all of our risks and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements contained in, or incorporated by reference into, this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus or any document incorporated herein or therein, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information.

 

 

RISK FACTORS

 

Investing in our securities involves significant risks. Before making an investment decision, you should carefully consider the risks described below and under the section titled “Item 3. Key Information — D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2022 which is incorporated by reference herein, as well as any other information included or incorporated by reference in this prospectus, together with all of the other information appearing in this prospectus or incorporated by reference herein, including in light of your particular investment objectives and financial circumstances. The risks so described are not the only risks we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations and become material. Our business, financial condition and results of operations could be materially adversely affected by any of these risks. The trading price of our securities could decline due to any of these risks, and you may lose all or part of your investment. The discussion of risks includes or refers to forward-looking statements; you should read the explanation of the qualifications and limitations on such forward-looking statements discussed elsewhere in this prospectus under the caption “Cautionary Note Regarding Forward-Looking Statements” above.

 

Risk Related to our Ordinary Shares

 

Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our ordinary shares.

 

On September 25, 2023, we received a notice from the Listing Qualifications Department of Nasdaq notifying us that, because the closing bid price for our ordinary shares had fallen below $1.00 per share for 30 consecutive business days, we no longer meet the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5550(a)(2). The notice provided a grace period of 180 calendar days, or until March 25, 2024, to regain compliance with the minimum closing bid price requirement for continued listing.

 

In order to regain compliance, the closing bid price of the ordinary shares must meet or exceed $1.00 per share for at least ten consecutive business days during this 180-day grace period. If we do not regain compliance with Rule 5550(a)(2) by March 25, 2024, we may be eligible for an additional 180-calendar day compliance period. To qualify for the additional 180-calendar day compliance period, we must meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq, except for the minimum bid price requirement, and provide written notice to Nasdaq of our intent to cure the deficiency during this second compliance period, by effecting a reverse share split, if necessary. However, if it appears to the Nasdaq staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice to us that the ordinary shares will be subject to delisting.

 

No assurance can be given that we will be able to comply with the other standards that we are required to meet in order to maintain a listing on such exchange, such as the minimum stockholders’ equity and minimum market value of publicly held shares, and no assurance can be given that the price of the ordinary shares will not again be in violation of Nasdaq’s minimum bid price rule in the future. Our failure to meet these requirements may result in our securities being delisted from Nasdaq.

 

If the ordinary shares are delisted from Nasdaq, we may seek to list them on other markets or exchanges or the ordinary shares may trade on the pink sheets. In the event of such delisting, our shareholders’ ability to trade, or obtain quotations of the market value of, our ordinary shares would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our securities. In addition, the substantially decreased trading in the ordinary shares and decreased market liquidity of the ordinary shares as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws, which could materially adversely affect our ability to obtain financing on acceptable terms, if at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. Additionally, the market price of the ordinary shares may decline further and stockholders may lose some or all of their investment. There can be no assurance that the ordinary shares, if delisted from the Nasdaq in the future, would be listed on another national or international securities exchange or on a national quotation service, the Over-The-Counter Markets or the pink sheets.

 

 

We may effect a reverse stock split of our ordinary shares, but it may not result in us obtaining the intended benefits.

 

We may be required to seek shareholder approval to effect a reverse share split in order to regain compliance with Nasdaq’s minimum closing bid price requirement. However, if we do effect a reverse share split, there can be no assurance that the market price per new ordinary share after the reverse share split will remain unchanged or increase in proportion to the reduction in the number of old shares outstanding before the reverse share split. Other factors, such as our financial results, market conditions and the market perception of our business may adversely affect the market price of our ordinary shares, and there can be no assurance that a reverse share split, if completed, will result in the intended benefits, that the market price of our ordinary shares will increase in proportion to the reduction in the number of shares outstanding before the reverse share split or that the market price of our ordinary shares will not decrease in the future. If the market price of our ordinary shares does not increase the price per share above Nasdaq’s minimum bid price threshold of $1.00 per share or if the market price of our ordinary shares does not remain above Nasdaq’s minimum bid price threshold of $1.00 per share, our ordinary shares may still be delisted from Nasdaq.

 

If we do effect a reverse stock split, the liquidity of our ordinary shares may be affected adversely by any such reverse share split given the reduced number of shares that will be outstanding following the reverse share split, especially if the market price of our ordinary shares does not increase as a result of the reverse share split.

 

Risk Related to this Offering

 

The price of our ordinary shares may be volatile.

 

The market price of the ordinary shares has fluctuated in the past. Consequently, the current market price of our ordinary shares may not be indicative of future market prices, and we may be unable to sustain or increase the value of your investment in our ordinary shares.

 

Risks Related to our Operations in Israel

 

We conduct some of our operations in Israel. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may affect our operations.

 

Because we are incorporated under the laws of the State of Israel, and most of our officers and fourteen out of sixteen of our employees are residents of Israel, our business and operations are directly affected by economic, political, geopolitical and military conditions in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and terrorist organizations active in the region. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian targets in various parts of Israel, which have negatively affected business conditions in Israel.

 

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers.  Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. In parallel, border clashes between Israel and the Hezbollah terrorist group on Israel’s northern border with Lebanon intensified and may escalate into a greater regional conflict.

 

All of our clinical and pre-clinical research and development is currently being conducted outside of Israel, other than our 12-month open label-extension (“OLE”) study of the PARADIGM trial, partially conducted in Tel Aviv, and a planned Phase 2 trial with PrimeC for Alzheimer’s disease that we plan to conduct in Haifa, Israel. The OLE has not been affected by the war, although the quality of the study may be adversely affected if as a result of the war patients are unable to visit the study center or the study coordinator is not able to conduct home visits and monitor the patients. In addition, in the event of a significant escalation of hostilities in northern Israel, there may be a delay in the planned Alzheimer trial. We may also elect to set up a site in Israel for a Phase 3 pivotal ALS trial of PrimeC, but this would be in addition to numerous other sites in Europe and the U.S., and as a result we do not expect the timeline or quality of this trial to be adversely affected by the war.

 

The Israel Defence Force (the “IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Since October 7, 2023, the IDF has called up several hundred thousand of its reserve forces to serve. Fourteen out of our current 16 employees are resident in Israel. Two of our non-management employees in Israel who do not perform critical functions have been called, and additional employees may be called, for service in the current or future wars or other armed conflicts with Hamas, and such persons may be absent for an extended period of time. As a result, our operations in Israel may be disrupted by such absences, which disruption may materially and adversely affect our business, prospects, financial condition and results of operations.

 

It is currently not possible to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial conditions. The ongoing conflict is rapidly evolving and developing, and could disrupt our business and operations, and hamper our ability to raise additional funds or sell our securities, among others.

 

 

USE OF PROCEEDS

 

We will receive gross proceeds of approximately $10.7 million assuming the exercise of all 1,755,000 Warrants for cash. We will not receive any proceeds from the sale of the ordinary shares underlying the Warrants.

 

However, the holders of the Warrants are not obligated to exercise the Warrants, and we cannot predict whether or when, if ever, the holders of the Warrants will choose to exercise the Warrants, in whole or in part. The exercise price of the Warrants may exceed the trading price of our ordinary shares. If the trading price of the ordinary shares is below $6.00 ($7.50 in the case of the Underwriter Warrants), we believe that holder of the Warrants will be unlikely to exercise their warrants, resulting in little to no cash proceeds to us. Accordingly, we currently intend to use the proceeds received upon such exercise, if any, for general corporate purposes and working capital.

 

MARKET FOR ORDINARY SHARES AND DIVIDEND POLICY

 

The ordinary shares are traded on the Nasdaq Capital Market under the symbol “NRSN.” The last reported sale price of the ordinary shares on November 20, 2023 on the Nasdaq Capital Market was $0.51 per share. As of November 17, 2023, there were 1,389 shareholders of record of the ordinary shares.

 

We have never declared or paid any cash dividends on the ordinary shares, and we anticipate that, for the foreseeable future, we will retain any future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends for at least the next several years.

 

The distribution of dividends may also be limited by the Israeli Companies Law, 5759-1999 (the “Companies Law”), which permits the distribution of dividends only out of retained earnings or earnings derived over the two most recent fiscal years, whichever is higher, provided that there is no reasonable concern that payment of a dividend will prevent a company from satisfying its existing and foreseeable obligations as they become due. As of June 30, 2023, we did not have distributable earnings pursuant to the Companies Law. Dividend distributions may be determined by our board of directors, as our amended and restated articles of association do not provide that such distributions require shareholder approval.

 

 

CAPITALIZATION

 

The table below sets forth our total capitalization as of June 30, 2023:

 

●

on an actual basis; and

 

●

on an as adjusted basis to give effect to the issuance of 1,755,000 ordinary shares upon the exercise of the Warrants for aggregate gross proceeds of approximately $10.7 million.

 

The financial data in the following table should be read in conjunction with the “Use of Proceeds” section herein, our financial statements and notes thereto incorporated by reference herein. Our historical results do not necessarily indicate our expected results for any future periods. 

 

		As of June 30, 2023
		Actual (in thousands)				As Adjusted
Cash		$	7,089				17,769
Liability in respect to warrants and pre-funded warrants			6,304				5,984
Shareholders’ equity:
Ordinary shares, no par value per share			—
Share premium and capital reserve			28,355				39,355
Accumulated deficit			(29,900	)			(29,900	)
Total shareholders’ equity			(1,545	)			9,455
Total capitalization		$	4,759				15,439

 

 

DILUTION

 

If you invest in our ordinary shares in this offering, your ownership interest will be diluted to the extent of the difference between the exercise price per ordinary share and the as adjusted net tangible book value per ordinary share immediately after this offering.

 

Our net tangible book value as of June 30, 2023 was approximately $1.5 million, or $(0.11) per share. Net tangible book value per ordinary share is determined by dividing our total tangible assets (including our right-of-use lease assets), less total liabilities, by the number of ordinary shares outstanding as of June 30, 2023. Dilution with respect to net tangible book value per ordinary share represents the difference between the amount per ordinary share paid by the purchaser of ordinary shares in this offering and the net tangible book value per ordinary share immediately after this offering.

 

After giving effect to the issuance of 1,655,000 ordinary shares upon the exercise of the Public Warrants at an exercise price of $6.00 per ordinary share and the issuance of 100,000 ordinary shares upon the exercise of the Underwriter Warrants at an exercise price of $7.50 per ordinary share, our as adjusted net tangible book value as of June 30, 2023 would have been approximately $9.4 million, or $0.61 per ordinary share. This amount represents an increase in the net tangible book value of $0.72 per ordinary share to our existing shareholders and an immediate dilution in net tangible book value of $5.39 per ordinary share and $6.89 per ordinary share to new investors exercising Public Warrants and Underwriter Warrants, respectively. The following table illustrates this per ordinary share dilution:

 

Exercise price per ordinary share underlying Public Warrants						$	6.00
Exercise price per ordinary share underlying Underwriter Warrants						$	7.50
Net tangible book value per ordinary share as of June 30, 2023		$	(0.11	)
Net increase in net tangible book value per ordinary share attributable to existing shareholders		$	0.72
As adjusted net tangible book value per ordinary share after this offering						$	0.61
Dilution in net tangible book value per ordinary share to new investors exercising Public Warrants						$	5.39
Dilution in net tangible book value per ordinary share to new investors exercising Underwriter Warrants						$	6.89

 

Unless otherwise indicated, the number of ordinary shares outstanding prior to this offering is based on 13,623,042 ordinary shares outstanding as of June 30, 2023, and excludes: 

 

●

1,024,128 ordinary shares issuable upon the exercise of options outstanding as of June 30, 2023, at a weighted average exercise price of $2.39 under our 2018 Employee Share Option Plan;

 

●

403,000 ordinary shares issuable upon the vesting of restricted share units outstanding under our 2018 Share Incentive Plan;

 

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278,543 ordinary shares reserved for issuance and available for future grant under our 2018 Share Incentive Plan;

 

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1,670,000 ordinary shares underlying pre-funded warrants with an exercise price of $0.0001 per share issued in connection with our registered direct offering in June 2023 (all of which have been exercised as of the date of this prospectus); and

 

●

3,000,000 ordinary shares underlying warrants with an exercise price of $1.50 per share issued in connection with our registered direct offering in June 2023.

 

 

TAXATION

 

The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our securities offered hereby. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

 

Material United States Federal Income Tax Considerations

 

The following discussion describes material United States federal income tax considerations relating to the acquisition, ownership, and disposition of ordinary shares covered by this prospectus by a U.S. Holder (as defined below) that acquires the ordinary shares in this offering and holds them as a capital asset. This discussion is based on the tax laws of the United States, including the Internal Revenue Code of 1986, as amended (the “Code”), the United States Department of the Treasury (“Treasury”) regulations promulgated or proposed thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof. These tax laws are subject to change, possibly with retroactive effect, and subject to differing interpretations that could affect the tax consequences described herein. This discussion does not address the tax consequences to a U.S. Holder under the laws of any state, local or foreign taxing jurisdiction, estate tax consequences, alternative minimum tax consequences, potential application of the Medicare contribution tax on net investment income, and tax consequences applicable to U.S. Holders subject to special rules, as discussed below.

 

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of the ordinary shares that, for United States federal income tax purposes, is:

 

●

an individual who is a citizen or resident of the United States;

 

●

a domestic corporation (or other entity taxable as a corporation);

 

●

an estate the income of which is subject to United States federal income taxation regardless of its source; or

 

●

a trust if (1) a court within the United States is able to exercise primary supervision over the trust’s administration and one or more United States persons have the authority to control all substantial decisions of the trust or (2) a valid election under the Treasury regulations is in effect for the trust to be treated as a United States person.

 

This discussion does not address all aspects of United States federal income taxation that may be applicable to U.S. Holders in light of their particular circumstances or status (including, for example, banks and other financial institutions, insurance companies, broker and dealers in securities or currencies, traders in securities that have elected to mark securities to market, regulated investment companies, real estate investment trusts, partnerships or other pass-through entities and arrangements, corporations that accumulate earnings to avoid U.S. federal income tax, tax-exempt organizations, pension plans, persons that own or who are treated as constructively owning 10 percent or more of our stock by vote or by value, persons that hold the ordinary shares as part of a straddle, hedge or other integrated investment, and persons subject to alternative minimum tax or whose “functional currency” is not the U.S. dollar).

 

If a partnership (including any entity or arrangement treated as a partnership for United States federal income tax purposes) holds the ordinary shares the tax treatment of a person treated as a partner in the partnership for United States federal income tax purposes generally will depend on the status of the partner and the activities of the partnership. Partnerships (and other entities or arrangements so treated for United States federal income tax purposes) and their partners should consult their own tax advisors.

 

This discussion addresses only U.S. Holders and does not discuss any tax considerations other than United States federal income tax considerations. Prospective investors are urged to consult their own tax advisors regarding the United States federal, state, and local, and non-United States tax consequences of the purchase, ownership, and disposition of the ordinary shares.

 

 

Dividends

 

We do not expect to make any distribution with respect to the ordinary shares. However, if we make any such distribution, under the United States federal income tax laws, and subject to the passive foreign investment company (“PFIC”) rules discussed below, the gross amount of any dividend we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be includible in income for a U.S. Holder and subject to United States federal income taxation. Dividends paid to a noncorporate U.S. Holder that constitute qualified dividend income will be taxable at a preferential tax rate applicable to long-term capital gains of, currently, 20 percent, provided that the U.S. Holder holds the ordinary shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. If we are treated as a PFIC, dividends paid to a U.S. Holder will not be treated as qualified dividend income. If we are not treated as a PFIC, dividends we pay with respect to the ordinary shares generally will be qualified dividend income, provided that the holding period requirements are satisfied by the U.S. Holder and in the year that the U.S. Holder receives the dividend, the ordinary shares are readily tradable on an established securities market in the United States.

 

A U.S. Holder must include any Israeli tax withheld from the dividend payment in the gross amount of the dividend even though the holder does not in fact receive it. The dividend is taxable to the holder when the holder of ordinary shares receives the dividend, actually or constructively. Because we are not a United States corporation, the dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution includible in a U.S. Holder’s income will be the U.S. dollar value of the NIS payments made, determined at the spot NIS/U.S. dollar rate on the date the dividend distribution is includible in income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in income to the date the payment is converted into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes.

 

Subject to certain limitations, the Israeli tax withheld in accordance with the United States Israel Tax Treaty and paid over to Israel will be creditable or deductible against a U.S. Holder’s United States federal income tax liability, if the U.S. Holder satisfies certain minimum holding period requirements. Dividends that we distribute generally should constitute “passive category income,” or, in the case of certain U.S. Holders, “general category income” for foreign tax credit limitation purposes. The rules relating to the determination of the foreign tax credit limitation are complex, and U.S. Holders should consult their tax advisor to determine whether and to what extent they will be entitled to a credit for Israeli withholding taxes imposed in respect of any dividend we distribute.

 

To the extent a distribution with respect to the ordinary shares exceeds our current or accumulated earnings and profits, as determined under United States federal income tax principles, the distribution will be treated, first, as a tax-free return of the U.S. Holder’s investment, up to the holder’s adjusted tax basis in its ordinary shares, and, thereafter, as capital gain, which is subject to the tax treatment described below in “— Gain on Sale, Exchange or Other Taxable Disposition of the ordinary shares.”

 

Gain on Sale, Exchange or Other Taxable Disposition of the ordinary shares

 

Subject to the PFIC rules described below under “— Passive Foreign Investment Company Considerations,” a U.S. Holder that sells, exchanges or otherwise disposes of ordinary shares in a taxable disposition generally will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. Dollar value of the amount realized and the holder’s tax basis, determined in U.S. Dollars, in the ordinary shares. Gain or loss recognized on such a sale, exchange or other disposition of ordinary shares generally will be long-term capital gain if the U.S. Holder’s holding period in the ordinary shares exceeds one year. Long-term capital gains of non-corporate U.S. Holders are generally taxed at preferential rates. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. A U.S. Holder’s ability to deduct capital losses is subject to limitations.

 

 

Passive Foreign Investment Company Considerations

 

Based on our income and assets, we believe that we were a PFIC for the preceding taxable year and expect that we will be a PFIC for the current taxable year. Because the determination of our PFIC status is made annually based on the factual tests described below, however, we cannot provide any assurances regarding our PFIC status for the current or future taxable years or that the IRS will agree with our conclusion regarding our PFIC status. If we were classified as a PFIC in any taxable year, a U.S. Holder would be subject to special rules with respect to distributions on and sales, exchanges and other dispositions of the ordinary shares. We will be treated as a PFIC for any taxable year in which at least 75 percent of our gross income is “passive income” or at least 50 percent of our gross assets during the taxable year (based on the average of the fair market values of the assets determined at the end of each quarterly period) are assets that produce or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, rents, royalties, gains from commodities and securities transactions, and gains from assets that produce passive income. However, rents and royalties received from unrelated parties in connection with the active conduct of a trade or business are not considered passive income for purposes of the PFIC test. In determining whether we are a PFIC, a pro rata portion of the income and assets of each corporation in which we own, directly or indirectly, at least a 25% interest (by value) is taken into account.

 

Excess Distribution Rules

 

If we were a PFIC with respect to a U.S. Holder, then unless the holder makes one of the elections described below under “— QEF Election” or “— Mark-to-Market Election,” a special tax regime would apply to the U.S. Holder with respect to (a) any “excess distribution” (generally, aggregate distributions in any year that are greater than 125% of the average annual distribution received by the holder in the shorter of the three preceding years or the holder’s holding period for the ordinary shares) and (b) any gain realized on the sale or other disposition of the ordinary shares. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax as if (a) the excess distribution or gain had been realized ratably over the U.S. Holder’s holding period, (b) the amount deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. Holder’s regular ordinary income rate for the current year and would not be subject to the interest charge discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years. In addition, dividend distributions would not qualify for the lower rates of taxation applicable to long-term capital gains discussed above under “— Dividends.” For ordinary shares acquired pursuant to the exercise of the Warrants, a U.S. Holder’s holding period will for this purpose include the holding period of such warrants.

 

A U.S. Holder that holds the ordinary shares at any time during a taxable year in which we are classified as a PFIC generally will continue to treat such ordinary shares, as well as ordinary shares acquired pursuant to an exercise of the Warrants, as ordinary shares in a PFIC, even if we no longer satisfy the income and asset tests described above, unless the U.S. Holder elects to recognize gain, which will be taxed under the excess distribution rules as if such ordinary shares had been sold on the last day of the last taxable year for which we were a PFIC.

 

Certain elections by a U.S. Holder would alleviate some of the adverse consequences of PFIC status and would result in an alternative treatment of the ordinary shares, as described below. However, under U.S. Treasury Regulations applying to warrants with respect to stock in a PFIC, these elections are not available with respect to the Warrants.

 

QEF Election

 

If we were a PFIC, the rules above would not apply to a U.S. Holder that timely makes an election to treat the ordinary shares as stock of a “qualified electing fund” (“QEF”). A U.S. Holder that makes a QEF election is required to include in income its pro rata share of the ordinary earnings and net capital gain as ordinary income and long-term capital gain, respectively, subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge.

 

The timely QEF election also allows the electing U.S. Holder to: (i) generally treat any gain recognized on the disposition of its shares of the PFIC as capital gain; (ii) treat its share of the PFIC’s net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on its share of the PFIC’s annual realized net capital gain and ordinary earnings subject, however, to an interest charge on the deferred tax computed by using the statutory rate of interest applicable to an extension of time for payment of tax. In addition, net losses (if any) of a PFIC will not pass through to an electing U.S. Holder and may not be carried back or forward in computing such PFIC’s ordinary earnings and net capital gain in other taxable years. Consequently, a U.S. Holder may over time be taxed on amounts that as an economic matter exceed our net profits.

 

 

A U.S. Holder’s tax basis in ordinary shares will be increased to reflect QEF income inclusions and will be decreased to reflect distributions of amounts previously included in income as QEF income inclusions. No portion of the QEF income inclusions attributable to ordinary income will be treated as qualified dividend income. Amounts included as QEF income inclusions with respect to direct and indirect investments generally will not be taxed again when distributed. U.S. Holders should consult their tax advisors as to the manner in which QEF income inclusions affect their allocable share of our income and their basis in their ordinary shares..

 

A U.S. Holder makes a QEF election generally by attaching a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) (“IRS Form 8621”) to a timely filed United States federal income tax return for the year beginning with which the QEF election is to be effective (taking into account any extensions). A QEF election can be revoked only with the consent of the IRS. In order for a U.S. Holder to make a valid QEF election, we must annually provide or make available to the holder certain information. While we intend to provide to U.S. Holders the information required to make a valid QEF election, we cannot provide any assurances that we will in fact provide such information. A QEF election under the proposed U.S. Treasury Regulations is not available for the Warrants regardless of whether we provide such information

 

Mark-to-Market Election

 

If we were a PFIC, the rules above also would not apply to a U.S. Holder that makes a “mark-to-market” election with respect to the ordinary shares, but this election will be available with respect to the ordinary shares only if they meet certain minimum trading requirements to be considered “marketable stock” for purposes of the PFIC rules. A mark-to-market election under the U.S. Treasury Regulations is not available for the Warrants.

 

Ordinary shares will be marketable stock if they are regularly traded on a national securities exchange that is registered with the SEC or on a non-U.S. exchange or market that meets certain requirements under the Treasury regulations. Ordinary shares generally will be considered regularly traded during any calendar year during which they are traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Any trades that have as their principal purpose meeting this requirement will be disregarded.

 

A U.S. Holder that makes a valid mark-to-market election for the first tax year in which the holder holds (or is deemed to hold) the ordinary shares and for which we are a PFIC will be required to include each year an amount equal to the excess, if any, of the fair market value of such shares the U.S. Holder owns as of the close of the taxable year over their adjusted tax basis in such shares. The U.S. Holder will be entitled to a deduction for the excess, if any, of the U.S. Holder’s adjusted tax basis in the ordinary shares over the fair market value of such shares as of the close of the taxable year, but only to the extent of any net mark-to-market gains with respect to such shares included by the U.S. Holder under the election for prior taxable years. The U.S. Holder’s basis in such ordinary shares will be adjusted to reflect the amounts included or deducted pursuant to the election. Amounts included in income pursuant to a mark-to-market election, as well as gain on the sale, exchange or other taxable disposition of such ordinary shares, will be treated as ordinary income. The deductible portion of any mark-to-market loss, as well as loss on a sale, exchange or other disposition of the ordinary shares to the extent that the amount of such loss does not exceed net mark-to-market gains previously included in income, will be treated as ordinary loss.

 

The mark-to-market election applies to the taxable year for which the election is made and all subsequent taxable years, unless the ordinary shares cease to be treated as marketable stock for purposes of the PFIC rules or the IRS consents to its revocation. The excess distribution rules described above generally will not apply to a U.S. Holder for tax years for which a mark-to-market election is in effect. However, if we were a PFIC for any year in which the U.S. Holder owns the ordinary shares but before a mark-to-market election is made, the interest charge rules described above would apply to any mark-to-market gain recognized in the year the election is made.

 

PFIC Reporting Obligations

 

If we were, or in the future are, a PFIC. a U.S. Holder of the ordinary shares must generally file an annual information return on IRS Form 8621 containing such information as the Treasury may require. A U.S. Holder’s failure to file the annual information return will cause the statute of limitations for such U.S. Holder’s U.S. federal income tax return to remain open with regard to the items required to be included in such report until three years after the U.S. Holder files the annual information return, and, unless such failure is due to reasonable cause and not willful neglect, the statute of limitations for the U.S. Holder’s entire U.S. federal income tax return will remain open during such period. U.S. Holders should consult their tax advisors regarding the requirements of filing such information returns under these rules.

 

 

U.S. Holders are urged to consult their tax advisors as to our status as a PFIC, and the tax consequences to them if we were a PFIC, including the reporting requirements and the desirability of making, and the availability of, a QEF election or a mark-to-market election with respect to the ordinary shares .

 

Medicare Tax

 

Non-corporate U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on all or a portion of their net investment income, which may include their gross dividend income and net gains from the disposition of ordinary shares. A United States person that is an individual, estate or trust is encouraged to consult its tax advisors regarding the applicability of this Medicare tax to its income and gains in respect of any investment in the ordinary shares.

 

Information Reporting with Respect to Foreign Financial Assets

 

Individual U.S. Holders (and, under regulations, certain entities) may be subject to certain reporting obligations on IRS Form 8938 (Statement of Specified Foreign Financial Asset) with respect to the ordinary shares for any taxable year during which the U.S. Holder’s aggregate value of these and certain other “specified foreign financial assets” exceed a threshold amount that varies with the filing status of the individual or entity. This reporting obligation also applies to domestic entities formed or availed of to hold, directly or indirectly, specified foreign financial assets, including the ordinary shares. Significant penalties can apply if U.S. Holders are required to make this disclosure and fail to do so. Such U.S. Holders who fail to timely furnish the required information may be subject to a penalty. Additionally, if a U.S. Holder does not file the required information, the statute of limitations with respect to tax returns of the U.S. Holder to which the information relates may not close until three years after such information is filed. U.S. Holders should consult their tax advisors regarding their reporting obligations with respect to their ownership and disposition of the ordinary shares .

 

Information Reporting and Backup Withholding

 

In general, information reporting, on IRS Form 1099, will apply to dividends in respect of ordinary shares and the proceeds from the sale, exchange or redemption of ordinary shares that are paid to a holder of ordinary shares within the United States (and in certain cases, outside the United States), unless such holder is an exempt recipient such as a corporation. Backup withholding (currently at a 24% rate) may apply to such payments if a holder of ordinary shares fails to provide a taxpayer identification number (generally on an IRS Form W-9) or certification of other exempt status or fails to report in full dividend and interest income.

 

Backup withholding is not an additional tax. A U.S. Holder generally may obtain a refund or credit of any amounts withheld under the backup withholding rules that exceed the U.S. Holder’s income tax liability by timely filing a refund claim with the IRS.

 

Israeli Tax Considerations

 

The following is a brief summary of certain material Israeli tax laws applicable to us, and certain Israeli government programs that benefit us. This section also contains a discussion of certain material Israeli tax consequences concerning the ownership and disposition of our securities offered hereby. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based on tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is not intended, and should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations. The discussion is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below, possibly with a retroactive effect.

 

THEREFORE, YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS AS TO THE ISRAELI OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR SECURITIES OFFERED HEREBY, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN, STATE OR LOCAL TAXES.

 

 

General Corporate Tax Structure in Israel

 

Israeli companies are generally subject to corporate tax at a flat rate. In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years) (“EEL”) which reduced the corporate income tax rate from 25% to 24% effective from January 1, 2017, and to 23% effective from January 1, 2018 and thereafter. However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a Preferred Enterprise, a Benefited Enterprise or a Technological Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to corporate tax rate.

 

Law for the Encouragement of Industry (Taxes), 5729-1969

 

The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law (“IEL”) provides several tax benefits for “Industrial Companies.” We may qualify as an Industrial Company within the meaning of the IEL.

 

The IEL defines an “Industrial Company” as an Israeli resident-company, of which 90% or more of its income in any tax year, other than income from certain government loans, capital gains, interest and dividends, is derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area,” in accordance with the definition under Section 3A of the Israeli Income Tax Ordinance (New Version) 1961 (the “Ordinance”). An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.

 

The following are the main tax benefits available to Industrial Companies:

 

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Amortization of the cost of purchased patent, rights to use a patent, and know-how, which are used for the development or advancement of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised;

 

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Under limited conditions, an election to file consolidated tax returns with controlled Israeli Industrial Companies; and

 

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Expenses related to a public offering are deductible in equal amounts over three years commencing on the year of the offering.

 

Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.

 

Tax Benefits and Grants for Research and Development

 

Israeli tax law allows, under certain conditions, a tax deduction for expenditures related to scientific research and development projects, including capital expenditures, for the year in which they are incurred. Expenditures are deemed related to scientific research and development projects, if:

 

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The research and expenditures are approved by the relevant Israeli government ministry, determined by the field of research;

 

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The research and development must be for the promotion of the company; and

 

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The research and development is carried out by or on behalf of the company seeking such tax deduction.

 

The amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable under the general depreciation rules of the Ordinance. Expenditures that are unqualified under the conditions above are deductible, under certain conditions, in equal amounts over three years.

 

From time to time we may apply to the Israel Innovation Authority (“IIA”) for approval to allow a tax deduction for all or most of research and development expenses during the year incurred. There can be no assurance that such application will be accepted. If we will not be able to deduct research and development expenses during the year of the payment, we may be able to deduct research and development expenses in equal amounts over a period of three years commencing in the year of the payment of such expenses.

 

 

Law for the Encouragement of Capital Investments, 5719-1959

 

The Law for the Encouragement of Capital Investments, 5719-1959 (“the Investment Law”) provides certain incentives for capital investments in production facilities (or other eligible assets). Generally, an investment program that is implemented in accordance with the provisions of the Investment Law, referred to as an Approved Enterprise, a Beneficiary Enterprise, a Preferred Enterprise, a Preferred Technological Enterprise, or a Special Preferred Technological Enterprise, is entitled to benefits as discussed below. These benefits may include cash grants from the Israeli government and tax benefits, based upon, among other things, the geographic location in Israel of the facility in which the investment is made. In order to qualify for these incentives, the Company is required to comply with the requirements of the Investment Law.

 

The Investment Law was significantly amended effective as of April 1, 2005 (“the 2005 Amendment”), as of January 1, 2011 (the “2011 Amendment”), and as of January 1, 2017 (the “2017 Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the amended Investment Law. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. The 2017 Amendment introduces new benefits for Technological Enterprises, alongside the existing tax benefits.

 

Tax Benefits Under the 2011 Amendment

 

The 2011 Amendment cancelled the availability of the benefits granted to Industrial Companies under the Investment Law prior to 2011 and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 15% with respect to its income derived by its Preferred Enterprise in 2011 and 2012, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 10%. Under the 2011 Amendment, such corporate tax rate was reduced from 15% and 10%, respectively, to 12.5% and 7%, respectively, in 2013, 16% and 9% respectively, in 2014, 2015 and 2016, and 16% and 7.5%, respectively, in 2017 and thereafter. Income derived by a Preferred Company from a “Special Preferred Enterprise” (as such term is defined in the Investment Law) would be entitled, subject to certain conditions and during a benefits period of 10 years, to further reduced tax rates of 8%, or 5% if the Special Preferred Enterprise is located in a certain development zone.

 

Dividends distributed from income which is attributed to a “Preferred Enterprise” will be subject to tax at the following rates: (i) Israeli resident corporations–0% (although, if such dividends are subsequently distributed to individuals or a non-Israeli company the below rates detailed in sub sections (ii) and (iii) shall apply); (ii) Israeli resident individuals–20%; or (iii) non-Israeli residents (individuals and corporations)–20%, subject to a reduced tax rate under the provisions of any applicable tax treaty. The withholding tax rate applicable to distribution of dividend from such income to non-Israeli residents is 25% (or 30% if distributed to a “substantial shareholder” at the time of the sale or at any time during the preceding twelve months period, as defined below), which may be reduced under an applicable tax treaty by applying in advance for a withholding certificate from the Israel Tax Authority (“ITA”). A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “Means of Control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right.

 

The 2011 Amendment also provided transitional provisions to address companies already enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things, that unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January 1, 2011, a Beneficiary Enterprise can elect to continue to benefit from the benefits provided to it before the 2011 Amendment came into effect, provided that certain conditions are met.

 

 

New Tax Benefits Under the 2017 Amendment That Became Effective on January 1, 2017

 

The 2017 Amendment was enacted as part of the EEL that was published on December 29, 2016 and is effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for two types of “Technological Enterprises,” as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.

 

The 2017 Amendment provides that a Preferred Company satisfying certain conditions will qualify as having a “Preferred Technological Enterprise” and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technological Income,” as defined in the Investment Law. The corporate tax rate is further reduced to 7.5% with respect to a Preferred Technological Enterprise located in development zone “A.” In addition, a Preferred Company who qualifies as having a “Preferred Technological Enterprise” will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the IIA.

 

The 2017 Amendment further provides that a Preferred Company satisfying certain conditions (including group consolidated revenues of at least NIS 10 billion) will qualify as having a “Special Preferred Technological Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technological Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technological Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by the Special Preferred Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from the IIA. A Special Preferred Technological Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law.

 

Dividends distributed by a Preferred Technological Enterprise or a Special Preferred Technological Enterprise, paid out of Preferred Technological Income, are generally subject to tax at the rate of 20% or such lower rate as may be provided in an applicable tax treaty. The withholding tax rate applicable to distribution of dividend from such income to non-Israeli residents is 25% (or 30% if distributed to a “substantial shareholder” at the time of the sale or at any time during the preceding twelve months period), which may be reduced under an applicable tax treaty by applying in advance for a withholding certificate from the ITA. In addition, if such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4% (subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate). However, if such dividends are paid to an Israeli company, no tax is required to be withheld.

 

Taxation of Our Securityholders

 

Capital gains Tax on Sales of the ordinary shares

 

Israeli law generally imposes a capital gains tax on the sale of any capital assets by Israeli residents, as defined for Israeli tax purposes, and on the sale of capital assets located in Israel, including shares of Israeli companies, by both Israeli residents and non-Israeli residents, unless a specific exemption is available or unless a tax treaty between Israel and the shareholder’s country of residence provides otherwise. The Ordinance distinguishes between real gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain equivalent to the increase of the relevant asset’s purchase price attributable to an increase in the Israeli consumer price index, or, in certain circumstances, a foreign currency exchange rate, between the date of purchase and the date of sale. Inflationary surplus is currently not subject to tax in Israel. The real gain is the excess of the total capital gain over the inflationary surplus.

 

 

Capital Gains Taxes Applicable to Non-Israeli Resident Securityholders

 

A non-Israeli resident who derives capital gains from the sale of shares or warrants in an Israeli resident company that were purchased after the company was listed for trading on a stock exchange outside of Israel, will be exempt from Israeli tax as long as (among other conditions) the securities were not held through a permanent establishment that the non-resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of more than 25% in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. In addition, such exemption is not applicable to a person whose gains from selling or otherwise disposing of the securities are deemed to be business income.

 

Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the Convention Between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended, or the U.S. Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder who is a United States resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the U.S. Israel Tax Treaty (a “U.S. Resident”) is generally exempt from Israeli capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition is attributed to a permanent establishment in Israel, under certain terms; (iv) such U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12 month period preceding the disposition, subject to certain conditions; or (v) such U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year. In any such case, the sale, exchange or disposition of such shares by the U.S. Resident would be subject to Israeli tax (unless exempt under the Israeli domestic law as described above). Under the U.S. Israel Tax Treaty, the gain may be treated as foreign source income for United States foreign tax credit purposes, upon an election by the U.S. Resident, and such U.S. Resident may be permitted to claim a credit for such taxes against the United States federal income tax imposed on such sale, subject to the limitations under the United States federal income tax laws applicable to foreign tax credits. The U.S. Israel Tax Treaty does not provide such credit against any United States state or local taxes.

 

Regardless of whether securityholders may be liable for Israeli tax on the sale of our securities, the payment of the consideration may be subject to the withholding of Israeli tax at source. Securityholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale (i.e., provide a non-Israeli resident certificate and other documentation).

 

Capital Gains Taxes Applicable to Israeli Resident Securityholders

 

An Israeli resident corporation who derives capital gains from the sale of shares or warrants in an Israeli resident company will generally be subject to tax on the real capital gains generated on such sale at the corporate tax rate (currently of 23%). An Israeli resident individual will generally be subject to capital gain tax at the rate of 25%. However, if the individual securityholder is claiming deduction of interest expenditures or is a “substantial shareholder” at the time of the sale or at any time during the preceding twelve months period, such gain will be taxed at the rate of 30%. Individual holders dealing in securities in Israel for whom the income from the sale of securities is considered “business income” as defined in section 2(1) of the Ordinance are taxed at the marginal tax rates applicable to business income (up to 47% in 2023 plus 3% Surtax). Certain Israeli institutions who are exempt from tax under section 9(2) or section 129(C)(a)(1) of the Ordinance (such as exempt trust funds and pension funds) may be exempt from capital gains tax from the sale of the securities.

 

 

Taxation of Israeli Shareholders on Receipt of Dividends

 

An Israeli resident individual is generally subject to Israeli income tax on the receipt of dividends paid on the ordinary shares at the rate of 25%. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. Such dividends are generally subject to Israeli withholding tax at a rate of 25% if the shares are registered with a nominee company (whether the recipient is a substantial shareholder or not). If the recipient of the dividend is an Israeli resident corporation such dividend income will be exempt from tax provided the income from which such dividend is distributed was derived or accrued within Israel and was received directly or indirectly from another corporation that is liable to Israeli corporate tax. An exempt trust fund, pension fund or other entity that is exempt from tax under section 9(2) or section 129C(a)(1) of the Ordinance is exempt from tax on a dividend.

 

Dividend distribution by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise is subject to beneficial withholding tax rates. For a further discussion, see “Taxation and Government Programs — Israeli Tax Considerations — Law for the Encouragement of Capital Investments, 5719-1959 — New Tax Benefits Under the 2017 Amendment that Became Effective on January 1, 2017.”

 

Taxation of Non-Israeli Shareholders on Receipt of Dividends

 

Non-Israeli residents (either individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on the ordinary shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s country of residence. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. Such dividends are generally subject to Israeli withholding tax at a rate of 25% if the shares are registered with a nominee company (whether the recipient is a substantial shareholder or not), unless a reduced rate is provided under an applicable tax treaty (subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate). For example, under the U.S. Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of the ordinary shares who is a U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by a Preferred Technological Enterprise, Preferred Enterprise, Approved Enterprise or Beneficial Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed from income attributed to an Approved Enterprise, Preferred Technological Enterprise, Benefited Enterprise or Preferred Enterprise are not entitled to such reduction under the tax treaty but are subject to a withholding tax rate of 15% for a shareholder that is a U.S. corporation, provided that the conditions related to the outstanding voting rights and the gross income for the previous year (as set forth in the previous sentences) are met. If the dividend is attributable partly to income derived from an Approved Enterprise, Preferred Technological Enterprise, Benefited Enterprise or Preferred Enterprise, and partly to other sources of income, the withholding rate may be a blended rate reflecting the relative portions of the two types of income. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.

 

Application for the reduced tax rate requires appropriate documentation presented and specific instruction received from the ITA. To the extent tax is withheld at source at the maximum rates (see above), a qualified tax treaty recipient will have to comply with some administrative procedures with the ITA in order to receive a refund of any excess tax withheld.

 

A foreign resident who had income from a dividend that was accrued from Israeli source, from which, among other conditions, the full tax was deducted, will be exempt from filing a tax return in Israel, unless (i) such income was generated from a business conducted in Israel by such foreign resident, (ii) such foreign resident has other taxable sources of income in Israel with respect to which a tax return is required to be filed, or (iii) such foreign resident is liable to Surtax (see below) in accordance with section 121B of the Ordinance.

 

Dividend distribution by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise is subject to beneficial withholding tax rates. For a further discussion, see “Taxation and Government Programs — Israeli Tax Considerations — Law for the Encouragement of Capital Investments, 5719-1959 — New Tax benefits Under the 2017 Amendment that Became Effective on January 1, 2017.”

 

Surtax

 

Subject to the provisions of an applicable tax treaty, individuals who are subject to tax in Israel are also subject to an additional tax at a rate of 3% on annual income (including, but not limited to, dividends, interest and capital gain) exceeding NIS 698,280 for 2023, which amount is linked to the annual change in the Israeli consumer price index.

 

Estate and Gift Tax

 

Israeli law presently does not impose estate or gift taxes.

 

 

DESCRIPTION OF SECURITIES

 

The securities to be registered on this registration statement on Form F-1 of which this prospectus forms a part include up to an aggregate amount of 1,655,000 ordinary shares issuable upon exercise of the Public Warrants at the exercise price of $6.00 per ordinary share and 100,000 ordinary shares issuable upon exercise of the Underwriter Warrants at an exercise price of $7.50 per ordinary share issued as part of our initial public offering.

 

Ordinary shares

 

The Company’s authorized share capital consists of 60,000,000 ordinary shares, no par value per share, of which 13,623,042 ordinary shares were issued and outstanding as of June 30, 2023.

 

All of the outstanding ordinary shares are validly issued, fully paid and non-assessable. The ordinary shares are not redeemable and do not have any pre-emptive rights.

 

Voting Rights and Conversion

 

All ordinary shares will have identical voting and other rights in all respects. None of our major shareholders have different voting rights than our other shareholders.

 

Transfer of Shares

 

Fully paid ordinary shares are issued in registered form and may be freely transferred under the Company’s amended and restated articles of association, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of a stock exchange on which the shares are listed for trading. The ownership or voting of the ordinary shares by non-residents of Israel is not restricted in any way by the amended and restated articles of association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.

 

Liability to Further Capital Calls

 

Our board of directors may make, from time to time, such calls as it may deem fit upon shareholders with respect to any sum unpaid with respect to ordinary shares held by such shareholders, which is not payable at a fixed time. Such shareholder shall pay the amount of every call so made upon him. Unless otherwise stipulated by our board of directors, each payment in response to a call shall be deemed to constitute a pro rata payment on account of all shares with respect to which such call was made. A shareholder shall not be entitled to his rights as shareholder, including the right to dividends, unless such shareholder has fully paid all the notices of call delivered to him, or which according to the Company’s amended and restated articles of association are deemed to have been delivered to him, together with interest, linkage and expenses, if any, unless otherwise determined by our board of directors.

 

Business Combinations

 

Under the Company’s amended and restated articles of association, we may not engage in any “business combinations” with any “interested shareholder” for a three-year period following the time that such shareholder became an interested shareholder, unless:

 

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prior to the time that such shareholder became an interested shareholder, our board of directors approved either the business combination or the transaction which resulted in the shareholder becoming an interested shareholder;

 

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upon consummation of the transaction which resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our voting shares outstanding at the time the transaction commenced, excluding for purposes of determining our voting shares outstanding (but not the outstanding voting shares owned by the interested shareholder) those shares owned by persons who are directors and also officers; or

 

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at the time that such shareholder became an interested shareholder, or subsequent to such time, the business combination is approved by our board of directors and authorized at a general meeting of shareholders by the affirmative vote of at least 662/3% of our voting shares outstanding that are not owned by the interested shareholder.

 

 

Generally, a “business combination” includes any merger, consolidation, sale or other transaction resulting in a financial benefit to the interested shareholder. Subject to certain exceptions, an “interested shareholder” is any person (other than the Company and any of the Company’s direct or indirect majority-owned subsidiaries) who, together with such person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting shares.

 

Under certain circumstances, this provision will make it more difficult for a person who would be an “interested shareholder” to effect various business combinations with a corporation for a three-year period. This provision may encourage companies interested in acquiring us to negotiate in advance with our board of directors because the shareholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction which results in the shareholder becoming an interested shareholder. These provisions also may have the effect of preventing changes in our board of directors and may make it more difficult to accomplish transactions which shareholders may otherwise deem to be in their best interests.

 

Election of Directors

 

The ordinary shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect our directors, subject to the special approval requirements for external directors under the Companies Law. Under the Company’s amended and restated articles of association, the number of directors on our board of directors must be no less than three and no more than nine, including any external directors required to be appointed under the Companies Law. The minimum and maximum number of directors may be changed, at any time and from time to time, by a special vote of the holders of at least 66^2/3% of the outstanding shares.

 

Other than external directors, for whom special election requirements apply under the Companies Law, the vote required to appoint a director is a simple majority vote. In addition, under the Company’s amended and restated articles of association, our board of directors may elect new directors to fill vacancies (whether such vacancy is due to a director no longer serving or due to the number of directors serving being less than the maximum required in our amended and restated articles of association), provided that the total number of directors shall not, at any time, exceed nine directors and provided that our board of directors may not elect external directors. The Company’s amended and restated articles of association provide that the term of a director appointed by our board of directors to fill any vacancy will be for the remaining term of office of the director(s) whose office(s) have been vacated. Furthermore, under the Company’s amended and restated articles of association, our directors, other than external directors, are divided into three classes with staggered three-year terms. Each class of directors consists, as nearly as possible, of 1/3 of the total number of directors constituting the entire board of directors (other than the external directors).

 

External directors are elected for an initial term of three years, may be elected for additional three-year terms, and may be removed from office pursuant to the terms of the Companies Law.

 

Dividend and Liquidation Rights

 

We may declare a dividend to be paid to the holders of the ordinary shares in proportion to their respective shareholdings. Under the Companies Law, dividend distributions are determined by our board of directors and do not require the approval of the shareholders of a company unless the Company’s articles of association provide otherwise. The Company’s amended and restated articles of association to be effective immediately prior to the closing of this offering do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our board of directors.

 

Pursuant to the Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two years, according to our then last reviewed or audited financial statements (less the amount of previously distributed dividends, if not reduced from the earnings), provided that the end of the period to which the financial statements relate is not more than six months prior to the date of the distribution. If the Company does not meet such criteria, then the Company may distribute dividends only with court approval. In each case, the Company is only permitted to distribute a dividend if our board of directors and, if applicable, the court determines that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of the ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

 

 

Exchange Controls

 

There are currently no Israeli currency control restrictions on remittances of dividends on the ordinary shares, proceeds from the sale of ordinary shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of certain countries that are, or have been, in a state of war with Israel at such time.

 

Shareholder Meetings

 

Under Israeli law, the Company is required to hold an annual general meeting of our shareholders once every calendar year that must be held no later than 15 months after the date of the previous annual general meeting. All general meetings other than the annual meeting of shareholders are referred to in our amended and restated articles of association as special meetings. Our board of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides that our board of directors is required to convene a special general meeting upon the written request of (i) any two of our directors or one-quarter of the members of our board of directors or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of our outstanding issued shares and 1% or more of our outstanding voting power or (b) 5% or more of our outstanding voting power.

 

Under Israeli law, one or more shareholders holding at least 1% of the voting rights at the general meeting may request that the board of directors include a matter in the agenda of a general meeting to be convened in the future, such as nominating a director candidate, provided that it is appropriate to discuss such a matter at the general meeting. The Company’s amended and restated articles of association contain procedural guidelines and disclosure items with respect to the submission of shareholder proposals for shareholders meetings.

 

Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and 40 days prior to the date of the meeting. Furthermore, the Companies Law requires that resolutions regarding, among other things, the following matters must be passed at a general meeting of our shareholders:

 

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amendments to our amended and restated articles of association;

 

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appointment or termination of our auditors;

 

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election of directors, including external directors (unless otherwise determined in our amended and restated articles of association);

 

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approval of certain related party transactions;

 

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increases or reductions of our authorized share capital;

 

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a merger; and

 

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the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management.

 

Under our amended and restated articles of association, we are not required to give notice to our registered shareholders pursuant to the Companies Law, unless otherwise required by law. The Companies Law requires that a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, or an approval of a merger, or as otherwise required under applicable law, notice must be provided at least 35 days prior to the meeting. Under the Companies Law, shareholders of a public company are not permitted to take action by written consent in lieu of a meeting.

 

Voting Rights

 

Quorum Requirements

 

Pursuant to the Company’s amended and restated articles of association, holders of the ordinary shares have one vote for each Ordinary Share held on all matters submitted to a vote before the shareholders at a general meeting. Under the Company’s amended and restated articles of association, the quorum required for general meetings of shareholders must consist of at least two shareholders present in person or by proxy (including by voting deed) holding 25% or more of our voting rights. A meeting adjourned for lack of a quorum will generally be adjourned to the same day of the following week at the same time and place, or to such other day, time or place as indicated by our board of directors if so specified in the notice of the meeting. At the reconvened meeting, any number of shareholders present in person or by proxy shall constitute a lawful quorum.

 

 

Vote Requirements

 

The Company’s amended and restated articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by the Companies Law or by our amended and restated articles of association. The Company’s amended and restated articles of association provide that all resolutions of our board of directors require a simple majority vote of the directors present and voting at such meeting, unless otherwise required by the Companies Law or by the Company’s amended and restated articles of association. Pursuant to the Company’s amended and restated articles of association, in the event the vote is tied, the chair of the board of directors will have a casting vote.

 

Pursuant to the Company’s amended and restated articles of association, an amendment to the Company’s amended and restated articles of association regarding any change of the composition or election procedures of our directors will require a special majority vote (66⅔%). In addition, any change to the rights and privileges of the holders of any class of our shares requires a simple majority of the class so affected (or otherwise in accordance with the terms of such class), in addition to the simple majority vote of all classes of shares voting together as a single class at a shareholder meeting.

 

Under the Companies Law, each of (i) the approval of an extraordinary transaction with a controlling shareholder and (ii) the terms of employment or other engagement of the controlling shareholder of the company or such controlling shareholder’s relative (even if not extraordinary) requires the approval based on the codified fiduciary duties that the office holders owe to a company in the Companies Law. Certain transactions with respect to remuneration of our office holders and directors require further approvals the approval based on the codified fiduciary duties that the office holders owe to a company in the Companies Law. Another exception to the simple majority vote requirement is a resolution for the voluntary winding up, or an approval of a scheme of arrangement or reorganization, of the company pursuant to Section 350 of the Companies Law, which requires the approval of holders of 75% of the voting rights represented at the meeting, in person or by proxy and voting on the resolution.

 

Access to Corporate Records

 

Under the Companies Law, shareholders are provided access to: minutes of our general meetings; our shareholders register and material shareholders register; the Company’s amended and restated articles of association; our financial statements; and any document that we are required by law to file publicly with the Israeli Companies Registrar (the “ISA”). In addition, shareholders may request to be provided with any document related to an action or transaction requiring shareholder approval under the related party transaction provisions of the Companies Law. We may deny this request if we believe it has not been made in good faith or if such denial is necessary to protect our interest or protect a trade secret or patent.

 

Modification of Class Rights

 

Under the Companies Law and the Company’s amended and restated articles of association, the rights attached to any class of share, such as voting, liquidation and dividend rights, may be amended by adoption of a resolution by the holders of a majority of the shares of that class present at a separate class meeting, or otherwise in accordance with the terms of such class of shares, in addition to the simple majority vote of all classes of shares voting together as a single class at a shareholder meeting, as set forth in our amended and restated articles of association.

 

 

Acquisitions Under Israeli Law

 

Full Tender Offer. A person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the target company’s issued and outstanding share capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the relevant class for the purchase of all of the issued and outstanding shares of that class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offer accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares.

 

Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined by the court. However, under certain conditions, the offeror may include in the terms of the tender offer that an offeree who accepted the offer will not be entitled to petition the Israeli court as described above.

 

If (a) the shareholders who did not respond or accept the tender offer hold at least 5% of the issued and outstanding share capital of the company or of the applicable class or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personal interest in the acceptance of the tender offer or (b) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of the applicable class), the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.

 

Special Tender Offer. The Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company. These requirements do not apply if, in general, the acquisition (1) was made in a private placement that received shareholder approval, (2) was from a 25% or greater shareholder of the company which resulted in the acquirer becoming a 25% or greater shareholder of the company, or (3) was from a 45% or greater shareholder of the company which resulted in the acquirer becoming a 45% or greater shareholder of the company.

 

A special tender offer must be extended to all shareholders of a company but the offeror is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding the purchaser and its controlling shareholders, holders of 25% or more of the voting rights in the company or any person having a personal interest in the acceptance of the tender offer or any other person acting on their behalf, including the relatives and entities under such person’s control). If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.

 

Merger. The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under the Companies Law are met, by a majority vote of each party’s shares, and, in the case of the target company, a majority vote of each class of its shares, voted on the proposed merger at a shareholders meeting.

 

For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the votes of shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person (or group of persons acting in concert) who holds (or hold, as the case may be) 25% or more of the voting rights or the right to appoint 25% or more of the directors of the other party, vote against the merger. If, however, the merger involves a merger with a company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders. See “Management — Approval of Related Party Transactions under Israeli Law — Fiduciary Duties of Directors and Officers — Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions.”

 

 

If the transaction would have been approved by the shareholders of a merging company but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value to the parties to the merger and the consideration offered to the shareholders of the company.

 

Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of the merging entities, and may further give instructions to secure the rights of creditors.

 

In addition, a merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger was filed by each party with the IRC and at least 30 days have passed from the date on which the merger was approved by the shareholders of each party.

 

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

 

Anti-Takeover Measures Under Israeli Law

 

The Companies Law allows us to create and issue shares having rights different from those attached to the ordinary shares, including shares providing certain preferred rights with respect to voting, distributions or other matters and shares having pre-emptive rights. As of the date of this prospectus, no preferred shares were authorized under the Company’s amended and restated articles of association. In the future, if we do authorize, create and issue a specific class of preferred shares, such class of shares, depending on the specific rights that may be attached to it, may have the ability to frustrate or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization and designation of a class of preferred shares will require an amendment to the Company’s amended and restated articles of association, which requires the prior approval of the holders of a majority of the voting power attaching to our issued and outstanding shares at a general meeting. The convening of the meeting, the shareholders entitled to participate and the majority vote required to be obtained at such a meeting will be subject to the requirements set forth in the Companies Law as described above in “— Voting Rights.”

 

Borrowing Powers

 

Pursuant to the Companies Law and the Company’s amended and restated articles of association, our board of directors may exercise all powers and take all actions that are not required under law or under our amended and restated articles of association to be exercised or taken by our shareholders, including the power to borrow money for company purposes.

 

Changes in Capital

 

The Company’s amended and restated articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution duly adopted by our shareholders at a general meeting. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings or profits, require the approval of both our board of directors and an Israeli court.

 

Establishment

 

We were incorporated under the laws of the State of Israel on February 13, 2017. We are registered with the IRC.

 

 

Exclusive Forum

 

The Company’s amended and restated articles of association to be effective immediately prior to the closing of this offering provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may increase the costs associated with such lawsuits, which may discourage such lawsuits against us and our directors, officers and employees.

 

This exclusive forum provision would not apply to claims brought pursuant to the Securities Act or the Exchange Act or any other claim for which U.S. federal courts would have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.

 

Alternatively, if a court were to find these provisions of the Company’s amended and restated articles of association to be effective immediately prior to the closing of this offering inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

 

The Company’s amended and restated articles of association to be effective immediately prior to the closing of this offering also provide that unless we consent in writing to the selection of an alternative forum, the competent courts in Tel Aviv, Israel shall be the exclusive forum for any derivative action or proceeding brought on behalf of the Company, any action asserting a breach of a fiduciary duty owed by any of our directors, officers or other employees to the Company or our shareholders or any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law.

 

Any person or entity purchasing or otherwise acquiring any interest in our share capital shall be deemed to have notice of and to have consented to these choice of forum provisions.

 

History of Share Capital

 

Since January 1, 2020, our issued share capital has changed as provided below.

 

On February 18, 2020, we entered into a crowd-funding transaction in which we issued 370,356 ordinary shares to 536 different investors for total net consideration of $447 thousand (net of $52 thousand issuance cost).

 

On April 26 2020, we entered into another crowd-funding transaction in which we issued 47,688 shares to 161 different investors for total net consideration of $61 thousand (net of $8 thousand issuance cost).

 

In February, May, June and July 2021, we entered into Simple Agreements for Future Equity (each, a “SAFE”) with four separate investors for aggregate proceeds of $800 thousand. Pursuant to the terms of each SAFE, upon consummation of an equity financing, we were required to issue to each investor the number of ordinary shares equal to the purchase amount divided by the SAFE price, which was defined as the price per share equal to 80% of the equity financing valuation (to be no less than $25,000 thousand). The SAFE Agreements also provide the investor the right to automatically receive ordinary shares in the case of a liquidity event, defined as a change of control event or an initial public offering. In the case of a liquidity event the investors are entitled to the number of ordinary shares equal to the investment amount divided by the liquidity price. The liquidity price is defined as the price per share equal to the Company’s valuation at the time of the liquidity event, multiplied by 80%, and divided by the Company’s capitalization (to be no less than $25,000 thousand). As part of our initial public offering, the SAFEs were converted at a price per share of $2.892 into 276,672 ordinary shares.

 

In May and October 2021, we issued 240,000 and 45,000 ordinary shares, respectively, pursuant to the exercise of options at an exercise price of $0.033 per share.

 

In August and September 2021, we issued 1,837,500 ordinary shares pursuant to the exercise of warrants at a weighted average price of $0.67 per share.

 

On November 9, 2021, we implemented a 1-for-3 split of our share capital, resulting in an increase of the issued and outstanding ordinary shares.

 

On December 13, 2021, we completed our initial public offering and issued 2,000,000 units, each consisting of one ordinary share and a warrant representing the right to purchase one ordinary share with an exercise price of $6.00 per share, at an initial public offering price of $6.00 per unit. We also issued Warrants to purchase an additional 300,000 ordinary shares at an exercise price of $6.00 per share upon exercise by the underwriter of their overallotment option.

 

 

In connection with the closing of our initial public offering, on December 13, 2021, we issued 961,440 ordinary shares pursuant to the exercise of options at a weighted average exercise price of $0.079 per share.

 

In March 2022, we issued 645,000 ordinary shares upon exercise of warrants issued in our initial public offering at a price per share of $6.00.

 

In October 2022, we issued 35,980 ordinary shares pursuant to vesting of restricted stock units (“RSUs”) that were granted to one of our officers in October 2021.

 

In December 2022, we issued 72,000 ordinary shares pursuant to vesting of RSUs that were granted to our officers in November 2021.

 

In 2022, we issued 85,449 ordinary shares to certain consultants in exchange for their services. One of the consultants received 44,000 shares of restricted stock which were issued in 4 equal installments and subject to 2 year lock-up period. The other consultant’s received ordinary shares subject to a 6 month lock-up.

 

In March and June 2023, we issued 36,000 ordinary shares pursuant to vesting of RSUs that were granted to our officers in November 2021.

 

In May 2023, we issued 3,600 ordinary shares for gross proceeds of $7,200 in connection with our at-the-market offering program. The ordinary Shares were sold at market prices at the time of sale.

 

In May and June we issued 320,479 ordinary shares pursuant to vesting of RSUs that were granted to our officers in March 202.

 

In June 2023, we issued 25,000 ordinary shares pursuant to vesting of RSUs that were granted to our employees in March 2023.

 

In June 2023, we issued 126,000 ordinary shares pursuant to the exercise of options at an exercise price of $0.033 per share.

 

In June 2023, we issued 1,330,000 ordinary shares pursuant to a registered direct offering at a price per share of $1.50.

 

Transfer Agent and Registrar of ordinary shares

 

The transfer agent and registrar for the ordinary shares American Stock Transfer & Trust Company, LLC. Its address is 6201 15^th Avenue, Brooklyn, New York 11219, and its telephone number is (800) 937-5449.

 

 

PLAN OF DISTRIBUTION

 

The ongoing offer and sale by us of the ordinary shares issuable upon exercise of the Warrants is being made pursuant to this prospectus.

 

We will deliver ordinary shares upon exercise of the Warrants, in whole or in part. We will not issue fractional ordinary shares. Each Warrant contains instructions for the exercise. In order to exercise a Warrant, the holder must deliver the information required by the applicable warrant agreement, along with payment of the exercise price, if the exercise price is being paid in cash, for the ordinary shares to be purchased. We will then deliver our ordinary shares in the manner described in the applicable warrant agreement.

 

Offer Restrictions Outside the United States

 

Other than in the United States, no action has been taken by us that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful. 

 

 

LEGAL MATTERS

 

The validity of our ordinary shares offered by this prospectus relating to Israeli law will be passed upon for us by Goldfarb Gross Seligman & Co., Israel. Certain members of Goldfarb Gross Seligman & Co. are the beneficial owners of an aggregate of less than 1.0% of our ordinary shares.

 

EXPERTS

 

The consolidated financial statements of NeuroSense Therapeutics Ltd. as of December 31, 2022 and 2021 and for each of the years in the three-year period ended December 31, 2022 have been incorporated by reference herein in reliance upon the report of Somekh Chaikin, a member firm of KPMG International, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2022 consolidated financial statements contains an explanatory paragraph that states that the Company’s recurring losses and its expectation to incur significant additional losses raise substantial doubt about the entity’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty.

 

WHERE YOU CAN FIND MORE INFORMATION

 

This prospectus is part of the registration statement on Form F-1 we filed with the SEC under the Securities Act, with respect to the securities offered by this prospectus. However, as is permitted by the rules and regulations of the SEC, this prospectus, which is part of our registration statement on Form F-1, omits certain non-material information, exhibits, schedules and undertakings set forth in the registration statement. For further information about us, and the securities offered by this prospectus, please refer to the registration statement and the exhibits and schedules filed as a part of the registration statement. You should rely only on the information contained in this prospectus or incorporated by reference. We have not authorized anyone else to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted.

 

We are subject to the reporting requirements of the Exchange Act that are applicable to a foreign private issuer. In accordance with the Exchange Act, we file reports, including annual reports on Form 20-F by April 30 of each year. We also furnish to the SEC under cover of Form 6-K material information required to be made public in Israel, filed with and made public by any stock exchange or distributed by us to our shareholders.

 

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the SEC (http://www.sec.gov).

 

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders and our officers, directors and principal shareholders are exempt from the “short-swing profits” reporting and liability provisions contained in Section 16 of the Exchange Act and related Exchange Act rules.

 

 

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

 

We file annual and special reports and other information with the SEC (File Number 001-41084). These filings contain important information which does not appear in this prospectus. The SEC allows us to “incorporate by reference” information into this prospectus, which means that we can disclose important information to you by referring you to other documents which we have filed with the SEC. We are incorporating by reference in this prospectus the documents listed below:

 

●

our Annual Report on Form 20-F for the fiscal year ended on December 31, 2022, filed with the SEC on March 22, 2023; and

 

	●	our reports on Form 6-K furnished to the SEC on April 14, 2023, April 17, 2023 (with respect to Exhibit 99.1, all of the text other than the paragraph immediately preceding the heading “About NeuroSense”), May 2, 2023 (with respect to Exhibit 99.1, all of the text other than the three paragraphs immediately preceding the heading “About Parkinson’s Disease”), May 15, 2023 (with respect to Exhibit 99.1, all of the text other than the three paragraphs immediately preceding the heading “About ALS”), May 25, 2023, May 31, 2023, June 1, 2023 (with respect to Exhibit 99.1, all of the text other than the paragraph immediately preceding the heading “Business Update”), June 13, 2023, June 23, 2023, July 6, 2023 (with respect to Exhibit 99.1, all of the text other than the paragraph immediately preceding the heading “About NeuroSense”), August 16, 2023 (with respect to Exhibit 99.1, only the text under the headings “Financial Summary” and “Forward-Looking Statements”), September 19, 2023 (other than the paragraph immediately preceding the heading “About NeuroSense” in Exhibit 99.1), September 20, 2023 (with respect to Exhibit 99.1, all of the text other than the paragraph immediately preceding the heading “About NeuroSense”), September 29, 2023, October 2, 2023 (with respect to Exhibit 99.1, only the first paragraph), October 4, 2023 (with respect to Exhibit 99.1, only the first three paragraphs), October 17, 2023 (with respect to Exhibit 99.1, all of the text other than the paragraph immediately preceding the heading “About NeuroSense”), November 6, 2023 (with respect to Exhibit 99.1, all of the text other than for the two paragraphs immediately preceding the heading “About ALS”), November 13, 2023 (with respect to Exhibit 99.1, all of the text other than for the second paragraph ) and our report on Form 6-K/A furnished to the SEC on January 19, 2023 (with respect to Exhibit 99.1, only the text under the headings “Business Update” (first two paragraphs), “Financial Summary”, “Forward-Looking Statements” and financial tables); and
	●	the description of the ordinary shares contained under the heading “Item 1. Description of Registrant’s Securities to be Registered” in our registration statement on Form 8-A, as filed with the SEC on November 18, 2021, including any subsequent amendment or any report filed for the purpose of updating such description.

 

Certain statements in and portions of this prospectus update and replace information in the above listed documents incorporated by reference.

 

We will provide each person, including any beneficial owner to whom a prospectus is delivered, without charge, upon a written or oral request, a copy of any of the documents incorporated by reference in this prospectus, other than exhibits to such documents which are not specifically incorporated by reference into such documents. Please direct your written or telephone requests to NeuroSense Therapeutics Ltd., 11 HaMenofim Street, Building B, Herzliya, 4672562, Israel, Attn: Or Eisenberg, telephone number +972587531153. You may also obtain information about us by visiting our website at www.neurosense-tx.com. Information contained in our website is not part of this prospectus. 

 

 

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

 

We are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts named in this prospectus, substantially all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, because substantially all of our assets and substantially all of our directors and officers are located outside the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United States.

 

We have irrevocably appointed Cogency Global Inc. as our agent to receive service of process in any action against us in any U.S. federal or state court arising out of this offering or any purchase or sale of securities in connection with this offering. The address of our agent is 122 East 42nd Street, 18th Floor, New York, NY 10168. 

 

We have been informed by our legal counsel in Israel, Goldfarb Gross Seligman & Co., that it may be difficult to initiate an action with respect to U.S. securities law in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum to hear such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact by expert witnesses which can be a time-consuming and costly process. Certain matters of procedure may also be governed by Israeli law.

 

Subject to certain time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter which, subject to certain exceptions, is non-appealable, including judgments based upon the civil liability provisions of the Securities Act and the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that:

 

●

the judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment;

 

●

the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and

 

●

the judgment is executory in the state in which it was given.

 

Even if these conditions are met, an Israeli court will not declare a foreign civil judgment enforceable if:

 

●

the judgment was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases);

 

●

the enforcement of the judgment is likely to prejudice the sovereignty or security of the State of Israel;

 

●

the judgment was obtained by fraud;

 

●

the opportunity given to the defendant to bring its arguments and evidence before the court was not reasonable in the opinion of the Israeli court;

 

●

the judgment was rendered by a court not competent to render it according to the laws of private international law as they apply in Israel;

 

●

the judgment is contradictory to another judgment that was given in the same matter between the same parties and that is still valid; or

 

●

at the time the action was brought in the foreign court, a lawsuit in the same matter and between the same parties was pending before a court or tribunal in Israel.

 

If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.

 

 

Up to 1,755,000 Ordinary Shares Underlying Warrants

 

 

Prospectus

 

, 2023

 

 

PART II

 

INFORMATION NOT REQUIRED IN THE PROSPECTUS

 

Item 6. Indemnification of Directors and Officers

 

Exculpation, Insurance and Indemnification of Directors and Officers

 

Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our amended and restated articles of association, include such a provision. A company may not exculpate in advance a director from liability arising from a breach of his or her duty of care in connection with a prohibited dividend or distribution to shareholders.

 

As permitted under the Companies Law, our amended and restated articles of association provide that we may indemnify an office holder in respect of the following liabilities, payments and expenses incurred for acts performed by him or her as an office holder, either in advance of an event or following an event:

 

●

a monetary liability incurred by or imposed on the office holder in favor of another person pursuant to a court judgment, including pursuant to a settlement confirmed as judgment or arbitrator’s decision approved by a competent court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;

 

●

reasonable litigation expenses, including reasonable attorneys’ fees, which were incurred by the office holder as a result of an investigation or proceeding filed against the office holder by an authority authorized to conduct such investigation or proceeding, provided that such investigation or proceeding was either (i) concluded without the filing of an indictment against such office holder and without the imposition on him of any monetary obligation in lieu of a criminal proceeding, (ii) concluded without the filing of an indictment against the office holder but with the imposition of a monetary obligation on the office holder in lieu of criminal proceedings for an offense that does not require proof of criminal intent or (iii) in connection with a monetary sanction;

 

●

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or which were imposed on the office holder by a court (i) in a proceeding instituted against him or her by the company, on its behalf, or by a third party, (ii) in connection with criminal indictment of which the office holder was acquitted or (iii) in a criminal indictment for which the office holder was convicted of an offense that does not require proof of criminal intent;

 

●

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

 

●

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

 

As permitted under the Companies Law, our amended and restated articles of association provide that we may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder:

 

●

a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

 

●

a breach of duty of care to the company or to another person, to the extent such a breach arises out of the negligent conduct of the office holder;

 

●

a monetary liability imposed on the office holder in favor of a third party;

 

 

●

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

 

●

any other matter in respect of which it is permitted or will be permitted under applicable law to insure the liability of an office holder in the company.

 

Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:

 

●

a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

 

●

a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

 

●

an act or omission committed with intent to derive illegal personal benefit; or

 

●

a fine or forfeit levied against the office holder.

 

Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the board of directors and, with respect to directors or controlling shareholders, their relatives and third parties in which controlling shareholders have a personal interest, also by the shareholders.

 

Our amended and restated articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by law. Our office holders are currently covered by a directors’ and officers’ liability insurance policy. As of the date of this prospectus, no claims for directors’ and officers’ liability insurance have been filed under this policy and we are not aware of any pending or threatened litigation or proceeding involving any of our office holders, including our directors, in which indemnification is sought.

 

We have entered into agreements with each of our current office holders exculpating them from a breach of their duty of care to us to the fullest extent permitted by law, subject to limited exceptions, and undertaking to indemnify them to the fullest extent permitted by law, subject to limited exceptions, including, with respect to liabilities resulting from this offering, to the extent that these liabilities are not covered by insurance. This indemnification is limited, with respect to any monetary liability imposed in favor of a third party, to events determined as foreseeable by the board of directors based on our activities. The maximum aggregate amount of indemnification that we may pay to our office holders based on such indemnification agreement is the greater of (i) an amount equal to 25% of our shareholders’ equity on a consolidated basis, based on our most recent financial statements made publicly available before the date on which the indemnity payment is made, and (ii) $25 million. Such indemnification amounts are in addition to any insurance amounts. These indemnification agreements will supersede all previous letters of indemnification that we have provided to him or her in the past, if any. However, in the opinion of the SEC, indemnification of office holders for liabilities arising under the Securities Act is against public policy and therefore unenforceable.

 

Item 7. Recent Sales of Unregistered Securities

 

The following sets forth information regarding all unregistered securities sold since January 2020. These issuances did not result in changes to the voting rights attached to our ordinary shares.

 

Issuance of Capital Stock

 

●

In February and April 2020, we issued an aggregate of 418,044 ordinary shares, at a weighted average price per share of $1.43.

 

●

In June 2023, as part of a registered direct offering of 1,330,000 ordinary shares and pre-funded warrants to purchase up to 1,670,000 ordinary shares at an exercise price of $0.0001, we issued 3,000,000 warrants to purchase ordinary shares at an exercise price of $1.50 per ordinary share in a private placement.

 

The offers, sales and issuances of the securities described in the preceding paragraphs were exempt from registration either (a) under Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder (including Regulation D and Rule 506), in that the transactions were between an issuer and sophisticated investors or members of its senior executive management and did not involve any public offering within the meaning of Section 4(a)(2), (b) under Regulation S promulgated under the Securities Act in that offers, sales and issuances were not made to persons in the United States and no directed selling efforts were made in the United States, (c) under Rule 144A under the Securities Act in that the shares were offered and sold by the initial purchasers to qualified institutional buyers or (d) under Rule 701 promulgated under the Securities Act in that the transactions were under compensatory benefit plans and contracts relating to compensation.

 

 

Item 8. Exhibits and Financial Statement Schedules

 

(a) The following documents are filed as part of this registration statement:

 

Exhibit no.		Exhibit
3.1*		Amended and Restated Articles of Association
4.1*!		Form of Share Purchase Agreement
4.2*		Registrant’s Specimen Certificate for Ordinary Shares
4.3*		Form of Underwriter’s Warrant
4.4*		Form of Ordinary Share Purchase Warrant
4.5*		Form of Warrant Agency Agreement between American Stock Transfer & Trust Company. LLC and NeuroSense Therapeutics Ltd.
5.1*		Opinion of Goldfarb Gross Seligman & Co., Israeli counsel to the Company, regarding the validity of the Ordinary Shares being registered (formerly Gross & Co.)
10.1*+		Form of Indemnification Agreement
10.2		2018 Share Incentive Plan
10.3*+		Compensation Policy
23.1		Consent of Somekh Chaikin (Member firm of KPMG International), Independent Registered Public Accounting Firm
23.2		Consent of Goldfarb Gross Seligman & Co. (included in Exhibit 5.1)
24.1*		Powers of Attorney (included on signature page)

 

*	Previously filed.
!	Annexes, schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish supplementally a copy of any omitted attachment to the Securities and Exchange Commission on a confidential basis upon request.
+	Management contract or compensatory plan or arrangement.
#	English translation of original Hebrew document.

 

Item 9. Undertakings

 

a.

The undersigned registrant hereby undertakes:

 

1.

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

i.

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933 (the “Securities Act”);

 

ii.

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

iii.

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

2.

That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

 

3.

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

4.

To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements.

 

5.

That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.

 

6.

That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities:, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

i.

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

ii.

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

iii.

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

iv.

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

8.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Herzliya, Israel on  November 21, 2023.

 

	NEUROSENSE THERAPEUTICS LTD.
	By:	/s/ Alon Ben-Noon
	Name:	Alon Ben-Noon
	Title:	Chief Executive Officer

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Alon Ben-Noon and Or Eisenberg and each of them, individually, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, in connection with this registration statement, including to sign in the name and on behalf of the undersigned, this registration statement and any and all amendments thereto, including post-effective amendments and registrations filed pursuant to Rule 462 under the U.S. Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons on November 21, 2023 and in the capacities indicated.

 

Name		Title
/s/ Mark Leuchtenberger		Chair of the Board of Directors
Mark Leuchtenberger
/s/ Alon Ben-Noon		Chief Executive Officer and Director
Alon Ben-Noon		(principal executive officer and director)
*		Chief Financial Officer
Or Eisenberg		(principal financial officer and principal accounting officer)
/s/ Cary Claiborne		External Director
Cary Claiborne
/s/ Christine Pellizzari		External Director
Christine Pellizzari
/s/ Caren Deardorf		Director
Caren Deardorf
/s/ Revital Mandil-Levin		Director
Dr. Revital Mandil-Levin

 

*By:	/s/ Alon Ben-Noon
Alon Ben-Noon
Attorney-in-fact

 

 

SIGNATURE OF AUTHORIZED U.S. REPRESENTATIVE OF REGISTRANT

 

Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of NeuroSense Therapeutics Ltd. has signed this Post-effective Amendment to Registration Statement on Form F-1 on November 21, 2023.

 

	By:	/s/ Colleen A. De Vries
	Name:	Colleen A. De Vries
	Title:	Sr. Vice -President, on behalf of Cogency Global

 

 

II-6

Exhibit 10.2

 

 

NEUROSENSE THERAPEUTICS LTD.

 

2018 SHARE INCENTIVE PLAN

 

AMENDED BY THE BOARD OF DIRECTORS

 

ON AUGUST 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

NEUROSENSE THERAPEUTICS LTD.

 

2018 SHARE INCENTIVE PLAN

 

1. Purpose. The purpose of this 2018 Share Incentive Plan (the “Plan”) is to advance the interests of the Company and its shareholders by attracting and retaining the best available personnel for positions of substantial responsibility, providing additional incentives to employees, officers, directors, Consultants and promoting a close identity of interests between those persons and the Company and/or an Affiliate (as defined below). The provisions specified hereunder apply only to persons who are subject to taxation by the State of Israel with respect to their Awards (as defined below).

 

2. Definitions

 

2.1

Defined Terms. Initially capitalized terms, as used in this Plan, shall have the meaning ascribed thereto as set forth below:

 

“102 Participant”		means, an Israeli tax resident who is an employee or a director of the Company or an Israeli Affiliate, on behalf of whom an Award is granted under Section 102.
“Administrator”		means the Board, or a committee to which the Board shall have delegated power to act on its behalf with respect to the Plan. The Administrator, if it is a committee, shall consist of such number of members (but not less than two (2)) as may be determined by the Board.
“Affiliate(s)”		means a present or future company that either (i) Controls the Company, (ii) is Controlled by the Company; or (iii) is Controlled by the same person or entity that Controls the Company.
“Applicable Law”		means all laws applicable to the grant of Awards pursuant to this Plan, including but not limited to the requirements under tax laws, social security laws, security laws, companies laws, any stock exchange or quotation system on which the Shares are listed or quoted, the applicable law in the country or jurisdiction of any such system, and the applicable law of any other country or jurisdiction where Awards are granted under the Plan.
“Articles”		means the Articles of Association of the Company, as may be amended from time to time.
“Award”		means, individually or collectively, Options, Shares, Restricted Shares, or Restricted Share Units.
“Board”		means the board of directors of the Company.
“Capital Gains Track Through a Trustee”		means the Company’s choice of the capital gains track of taxation for share allocation to employees under Section 102 through a trustee.
“Cause”		means, when used in connection with the termination of a Participant’s employment with, or services to the Company or an Affiliate, and forming the basis of such termination: (a) the definition ascribed to Cause in the individual employment agreement or services agreement between the Company and/or its Affiliate and the Participant; or (b) if no such definition exists, then any of the following, including but not limited to: dishonesty toward the Company or Affiliate, insubordination, substantial malfeasance or nonfeasance of duty, unauthorized disclosure of confidential information and conduct substantially prejudicial to the business of the Company or Affiliate; or any substantial breach by the Participant of: (A) his or her employment or service agreement with the Company or an Affiliate; or (B) any other obligations towards the Company or an Affiliate. For the sake of clarity, it is hereby clarified that the Administrator may adopt another definition(s) for the term “Cause” in the applicable Grant Letter.

 

 

“Commencement Date”		means the date of commencement of the vesting schedule with respect to a Grant of Awards which, unless otherwise determined by the Administrator, shall be the date on which such Awards shall be granted.
“Company”		means NeuroSense Therapeutics Ltd., a company incorporated under the laws of the State of Israel.
“Consultant”		means an Israeli resident, who serves as a consultant or adviser of the Company or of an Israeli resident Affiliate and is not entitled to receive Awards under Section 102, on behalf of whom an Award is granted under Section 3(i). For the sake of clarity, non-Israeli consultants or advisers to the Company or any of its Affiliates may only be granted Awards under Section 3(i).
“Control” or “Controlled”		shall have the meaning ascribed thereto in Section 102.
“Date of Grant”		shall have the meaning set forth in Section 6.2 of this Plan.
“Director”		means a member of the Board.
“Disability”		means total and permanent physical or mental impairment or sickness of a Participant, making it impossible for the Participant to continue such Participant’s employment with or service to the Company or Affiliate. For the sake of clarity, it is hereby clarified that the Administrator may adopt another definition(s) for the term “Disability” in the applicable Grant Letter.
“Earned Income Track”		means the Company’s choice of the work income course of taxation for share allocation to employees under Section 102 through a trustee.
“Election”		shall have the meaning set forth in Section 11.1 of this Plan.
“Employee”		shall have the meaning set forth in Section 102.
“Exercise Conditions”		means a vesting schedule and/or Performance Conditions.
“Exercise Notice”		shall have the meaning set forth in Section 7.4(a) of this Plan.
“Exercise Price”		means the price determined by the Administrator in accordance with Section 7.1 below which is to be paid to the Company in order to exercise a Granted Award and convert such Award into an Underlying Share.
“Exercised Share”		means a Share issued upon exercise of an Award or vesting of an Award, as applicable, or, if applicable, a freely transferable Share issued to a Participant not resulting from another type of Award.

 

 

“Fair Market Value”		means, as of any date, the value of a Share determined as follows: (i) if the Company’s shares are listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, Nasdaq Global Market or the Nasdaq Capital Market of the Nasdaq Stock Market, the Fair Market Value shall be the closing sales price of such shares (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; without derogating from the above and solely for the purpose of determining the tax liability pursuant to Section 102 (and in particular Section 102(b)(3)), if on the date of grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety days following the date of grant under the Section 102 Capital Gains Track Through a Trustee, the Fair Market Value of a Share on its date of grant shall be determined in accordance with the average value of the Company’s shares during the thirty trading days immediately preceding the date of grantor during the thirty (30) trading days immediately following the date of registration for trading (if the Company’s shares will be listed within ninety days following the date of grant), as the case may be; or (ii) if the Company’s shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Company’s shares on the last market trading day prior to the day of determination; or (iii) in the absence of an established market for the Company’s shares, the Fair Market Value shall be determined in good faith by the Administrator (including in accordance with an independent third party valuation of the Company which may be obtained by the Administrator).
“Grant Letter”		means a written agreement between the Company to a Participant evidencing the terms and conditions of an individual grant of Awards. The Grant Letter shall specify among others: (i) the Tax Provision under which the Award is granted; (ii) the Tax Track that the Company has elected according to Section 11 of the Plan (if applicable); (iii) the Exercise Price, if applicable; (iv) the number of Awards granted to the Participant; (v) the Date of Grant; and (vi) the vesting schedule (including acceleration events, if any).
“Grant of Awards” or “Granted Awards”		means the grant of Awards by the Company to a Participant pursuant to a Grant Letter.
“Holding Period”		means with respect to Awards granted under Section 102, the minimum period in which the Awards granted to a Participant or, upon exercise thereof, the Underlying Shares, are to be held by the Trustee on behalf of the Participant, in accordance with Section 102, and pursuant to the Tax Track which the Company elected.
“IPO”		means the initial public offering of shares of the Company and the listing of such shares for trading on any recognized stock exchange or over-the-counter or computerized securities trading system.
“ITA”		means the Israeli Tax Authority.
“Merger Transaction” or “Merger”		means any of the following but excluding any Re-organization or Spin-off Transaction: (a) a sale of all or substantially all of the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries; or (b) a sale of all or substantially all of the shares of the share capital of the Company whether by a single transaction or a series of related transactions which occur either over a period of 12 months or within the scope of the same acquisition agreement; or (c) a merger, consolidation or like transaction of the Company with or into another corporation in which the Company is not the surviving entity, including a reverse triangular merger but excluding a merger which falls within the definition of Re-organization. For the sake of clarity, whether a transaction is a “Merger Transaction” or “Merger” shall be finally and conclusively determined by the Board in its absolute discretion.

 

 

“Option”		means an option to purchase one Share of the Company.
“Non-Qualified Participant”		means a person who is not qualified to receive Awards under the provisions of Section 102, on behalf of whom an Award is granted under Section 3(i).
“Participant”		means 102 Participant, or a Non-Qualified Participant, or a Consultant.
“Performance Based Award”		means a performance based Award as defined in Section 8B.1 below.
“Performance Conditions”		mean Performance Conditions as defined in Section 8B.1 below
“Plan” or “Incentive Plan”		means this 2018 Share Incentive Plan, as may be amended from time to time.
“Re-organization”		means, any re-domestication of the Company, share flip, creation of a holding company for the Company which will hold substantially all of the shares of the Company or any other transaction involving the Company in which the ordinary shares of the Company outstanding immediately prior to such transaction continue to represent, or are converted into or exchanged for shares that represent, immediately following such transaction, at least a majority, by voting power, of the share capital of the surviving, acquiring or resulting corporation and in which there is no material change to the interests held by the Shareholders prior to such transaction and thereafter.
“Restricted Share”		means a Share issued under this Plan to a Participant for such consideration, if any, and subject to such restrictions as established by the Company, as detailed in Section 8A below
“RSU”		means Restricted Share Unit, as defined in Section 8 below.
“Retirement”		means the termination of a Participant’s employment as a result of his or her reaching the earlier of (i) the age of retirement as defined by the Applicable Law; or (ii) the age of retirement specified in the Participant’s employment agreement.
“Section 102”		means Section 102 of the Tax Ordinance.
“Section 102 Rules”		means the Income Tax Rules (Tax Relief for Issuance of Shares to Employees), 2003.
“Section 3(i)”		means section 3(i) of the Tax Ordinance and the applicable rules thereto or under applicable regulations.
“Service Provider”		means an Employee, Director or Consultant.
“Share” “Shareholders”		means, ordinary share(s) of the Company, having a no par value. means, the shareholders of the Company.
“Spin-off Transaction”		means, any transaction in which assets of the Company are transferred or sold to a company or corporate entity in which the Shareholders hold equal stakes, pro-rata to their ownership of the Company.
“Tax Ordinance”		means the Israeli Income Tax Ordinance [New Version], 1961, as amended, and any regulations, rules, orders or procedures promulgated thereunder.

 

 

“Tax Provision”		means, with respect to the Grant of Awards, the provisions of one of the three Tax Tracks in Section 102, or the provisions of Section 3(i).
“Tax Track”		means one of the three tax tracks described under Section 102, specifically: (1) the Capital Gains Track Through a Trustee; (2) Earned Income Track; or (3) the Income Tax Track Without a Trustee.
“Term of the Awards”		means, with respect to granted but unexercised Awards, the time period set forth in Section 9 below.
“Trust Agreement”		means the agreement/s between the Company and the Trustee regarding the Awards granted under this Plan to Section 102 Partipants and the underlying Shares to be held in trust, as in effect from time to time.
“Trustee”		means a trustee appointed by the Company and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Tax Ordinance, to hold in trust, the Granted Awards and the Underlying Shares issued upon exercise of such Awards, on behalf of Participants. The Trustee may be replaced from time to time subject to the provisions of Section 102.
“Underlying Shares”		means Shares issued or to be issued upon exercise of the Awards granted in accordance with the Plan.

 

2.2 General. Without derogating from the meanings ascribed to the capitalized terms above, all singular references in this Plan shall include the plural and vice versa, and reference to one gender shall include the other, unless otherwise required by the context.

 

3. Shares Available for Awards. The total number of Underlying Shares reserved for issuance under the Plan and any modification thereof, shall be:

 

(a) 1,400,000 Shares, plus

 

(b) an annual increase to be added as of the first day of the Company’s fiscal year, beginning in 2022 and occurring each year thereafter through 2032, equal to the 4% of the total number of Shares issued and outstanding on a fully-diluted basis as of the end of the Company’s immediately preceding fiscal year (or such lesser number of shares, including no shares, determined by the Board in its sole discretion).

 

Such number of Shares shall be subject to adjustment as required for the implementation of the provisions of the Plan, in accordance with Section 4 below. In the event that Awards are expired or forfeited or otherwise terminated in accordance with the provisions of the Plan, such expired or terminated Awards shall become available for future grants under the Plan.

 

4. Adjustments

 

4.1 Changes in Capitalization. Subject to any required action by the Shareholders, the number of Underlying Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, and the per share exercise price of each such Award, shall be proportionately and equitably adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, combination, reclassification, the payment of a stock dividend on the Shares or any other increase or decrease in the number of such Shares effected without receipt of consideration by the Company without changing the aggregate exercise price, provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration. Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award. The Administrator may, if it so determines in the exercise of its sole discretion, also make provision for proportionately adjusting the number or class of securities covered by any Award, as well as the price to be paid therefor, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings, or other increases or reductions of its outstanding Shares, and in the event of the Company being consolidated with or merged into any other corporation.

 

 

4.2 Merger Transaction. In the event of a Merger Transaction, any and all outstanding and unexercised unvested Awards will be cancelled for no consideration, unless determined otherwise by the Administrator. The Administrator at its sole and absolute discretion may decide: (i) if and how the unvested Awards, as the case may be, shall be canceled, exchanged, assumed, replaced, repurchased or accelerated; (ii) if and how vested Awards (including Awards with respect to which the vesting period has been accelerated) shall be exercised, exchanged, assumed, replaced and/or sold by the Trustee or the Company (as the case may be) on behalf of the Participants, including determining that all unexercised vested Awards shall be cancelled for no consideration upon a Merger Transaction; (iii) how Underlying Shares issued upon exercise of the Options (or, if applicable, the vesting of other Awards) granted under of the trust tracks and held by the Trustee on behalf of 102 Participants shall be replaced and/or sold by the Trustee on behalf of these Participant; and (iv) how any treatment of Awards and underlying Shares may be made subject to any payment or escrow arrangement, or any other arrangement determined within the scope of the Merger Transaction in relation to Awards and underlying Shares of the Company.

 

In the case of assumption and/or substitution of Awards, appropriate adjustments shall be made so as to reflect such action and all other terms and conditions of the Grant Letter shall remain unchanged, including but not limited to the vesting schedule, all subject to the determination of the Board, which its determination shall be at its sole discretion and final. The grant of any substitutes for the Awards to Participants further to a Merger Transaction, as provided in this section, shall be considered to be in full compliance with the terms of this Plan. The value of the exchanged Awards pursuant to this section shall be determined in good faith solely by the Board, based on the Fair Market Value, and its decision shall be final and binding on all the Participants.

 

For the purposes of this section, the mechanism for determining the assumption or exchange as aforementioned shall be agreed upon between the Board and the successor company.

 

Without derogating from the above, in the event of a Merger Transaction, the Board shall be entitled, at its sole discretion, to require the Participants to exercise all vested Awards within a set time period and sell all of their Shares on the same terms and conditions as applicable to the other shareholders selling their Company’s Shares as part of the Merger Transaction. Each Participant acknowledges and agrees that the Board shall be entitled, subject to any applicable law, to authorize any one of its members to sign any agreement and any share transfer deeds in customary form with respect to the Shares held by such Participant and that such agreement and share transfer deed, as applicable, shall bind the Participant.

 

Despite the aforementioned and for the avoidance of any doubt, if and when the method of treatment of Awards within the scope of a Merger Transaction, as provided above, will in the sole opinion of the Board prevent the consummation of the Merger Transaction, or materially risk the consummation of the Merger Transaction, the Board may determine different treatment for different Awards held by Participants such that not all Awards will be treated equally within the scope of the Merger Transaction.

 

4.3 Fraction of Shares. In the event that the Company will be required to issue to a Participant a fraction of a Share pursuant to this Section 4, the Company will not issue fraction of a Share and the number of Shares shall be rounded down to the closest whole number of Shares.

 

4.4 Calculation. For the purposes of this section, the Company’s calculation will be final, and the Participant shall have no claims or demands against the Company or anyone on its behalf.

 

4.5 Re-Organization. In the event of a Re-Organization the Shares underlying the Awards subject to the Plan shall be exchanged or converted into Shares of the Company or successor company in accordance with the exchange effectuated in relation to the Shares of the Company, and the Exercise Price and quantity of shares shall be adjusted in accordance with the terms of the Re-organization. The adjustments required thereby shall be determined in good faith solely by the Board.

 

 

4.6 Spin-Off Transaction. In the event of a Spin-Off Transaction, the Board may determine that the holders of Awards shall be entitled to receive equity in the new company formed as a result of the Spin-Off Transaction, in accordance with equity granted to the ordinary Shareholders within the Spin-Off Transaction, taking into account the terms of the Awards, including the vesting schedule and Exercise Price. The determination regarding the Participant’s entitlement within the scope of a Spin-Off Transaction shall be in the sole and absolute discretion of the Board.

 

5. Administration of the Plan

 

5.1 Power. Subject to the Applicable Law, the Articles and any resolution to the contrary by the Board, the Administrator is authorized, at its sole and absolute discretion, to exercise all powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan (subject to the approval of the Board, if such approval is required by the Applicable Law) including, without limitation:

 

(A) to determine: (i) the Participants in the Plan, the number of Awards for each Participant’s benefit and the Exercise Price; (ii) the time or times at which Awards shall be granted; (iii) whether, to what extent, and under what circumstances an Award may be settled, canceled, forfeited, exchanged, or surrendered; (iv) any terms and conditions in addition to those specified in the Plan under which an Award may be granted; (v) any measures, and to take any actions, as deemed necessary or advisable for the administration and implementation of the Plan; (vi) the terms and conditions under which a Participant may elect to receive Ordinary Shares upon the exercise of the Award or in exchange for the Underlying Shares; (vii) subject to Applicable Law, to make an Election and (viii) to appoint a Trustee; and

 

(B) to interpret the provisions of the Plan and to take all actions resulting therefrom including without limitation: (i) subject to Section 7 below, to accelerate the date on which Granted Award under the Plan becomes exercisable; (ii) to waive or amend Plan provisions relating to exercise of Awards, including exercise of Awards after termination of employment, for any reason; and (iii) to amend any of the terms of the Plan, or any prior determinations of the Administrator.

 

5.2 Limitations. Notwithstanding the provisions of Section 5.1 above, no interpretations, determinations or actions of the Administrator shall contradict the provisions of Applicable Law, and no waiver or amendment with respect to the Plan shall have a material adverse affect on any Participant’s rights in connection with any Granted Award under the Plan without receiving the consent of such Participant.

 

6. Grant of Options

 

6.1 Conditions for Granting Options. Options may be granted at any time after the fulfillment of all of the following conditions: (i) the Plan has been approved by the necessary corporate bodies of the Company; (ii) thirty (30) days after a request for approval of the Plan has been filed for approval with the ITA or any longer period, as pursuant to the requirements of the Tax Ordinance; (iii) the Grant has been approved by the necessary corporate bodies of the Company; and (iv) all other approvals, consents or requirements necessary by Applicable Law have been received or met.

 

6.2 Date of grant. The date on which Options shall be deemed granted under the Plan shall be the date on which the Company’s Board approved the grant or the date specified as the date of grant in the Grant Letter, if specified (the “Date of Grant”).

 

6.3 Eligibility for Options. The Administrator may grant Options to any Employee, officer, Director, or Consultant of the Company and its Affiliates.

 

6.4 Grant Letter. Any grant of Options to a Participant shall be made in a form of a Grant Letter and shall include a copy of the Plan. The receipt by a Participant of such Grant Letter shall be deemed as consent by such Participant that the Option is subject to all the terms and conditions of the Grant Letter and the Plan.

 

 

6.5 Material Breach. In an event of a material breach by a Participant of the terms of this Plan or the Grant Letter provided to the Participant, or the applicable engagement agreement with such Participant, and without derogating from any of the remedies available to the Company under any Applicable Law, the Company may, at its sole discretion, after sending a written notice to such Participant, forfeit the right of the Participant to some or all the Options granted to such Participant.

 

7. Exercise of Options and Sale of Shares

 

7.1 Exercise Price; Purchase Price. The Exercise Price per Underlying Share deliverable upon the exercise of an Option shall be determined by the Administrator. The Exercise Price shall be set forth in the respective Grant Letter.

 

7.2 Vesting Schedule. All Options granted on a certain date may be subjected to continued employment with or service to the Company or Affiliate by the Participant, become vested and exercisable in accordance with the vesting schedule as shall be determined by the Administrator for each Participant and detailed in the respective Grant Letter.

 

7.3 minimum Exercise. Unless otherwise determined by the Administrator, no exercise of Options by any Participant shall be for a quantity of less than 10% of the Granted Options. An Option may not be exercised for fractional shares. The exercise of a portion of the Granted Options shall not cause the expiration, termination or cancellation of the remaining unexercised Options.

 

7.4 Manner of Exercise. An Option may be exercised by and upon the fulfillment of the following prerequisite terms and conditions:

 

(A) Exercise Notice- The signing by the Participant, and delivery to both the Company (at its principal office) and the Trustee (if the Options are held by a Trustee), of an exercise notice form as prescribed by the Administrator, with such details including but not limited to: (i) the identity of the Participant; (ii) the number of Options to be exercised; and (iii) the Exercise Price to be paid (the “Exercise Notice”).

 

(B) Exercise Price- The payment by the Participant to the Company, in such manner as shall be determined by the Administrator, of the Exercise Price with respect to all the Options exercised, as set forth in the Exercise Notice.

 

(C) Issuance of Underlying Shares- Upon the delivery of a duly signed Exercise Notice and the payment to the Company of the Exercise Price with respect to all the Options specified therein, the Company shall issue the Underlying Shares to the Trustee (according to the applicable Holding Period) or to the Participant, as the case may be.

 

(D) Expenses- All costs and expenses including broker fees and bank commissions, derived from the exercise of Options or Underlying Shares, shall be borne solely by the Participant.

 

 

7.5 Net Exercise. Notwithstanding the provisions of Section 7.4 above, the Board may determine (and, if so, only if indicated the same in the Grant Letter or amendment thereto) that Options may be exercised (either as an alternative for the cash exercise method in Section 7.4 or as the only exercise method) using the following method (the “Net Exercise”):

 

(a) Upon exercise of the Options, the Company shall issue to the Participant (or for his benefit) the Net Exercise Shares (as defined below), and the following formula shall apply:

 

X=Y(A-B) / A

 

Whereas:

 

X = The number of Shares resulting from the exercise of the Options (the “Net Exercise Shares”).

 

Y = The number Options in respect of which an Exercise Notice has been delivered to the Company.

 

A= The Fair Market Value.

 

B= The Exercise Price.

 

(b) The Participant shall not be required to pay to the Company any sum with respect to the exercise of such Options.

 

(c) In any event, no fractional Shares will be issued to the Participant and the number of Shares granted to the Participant under the Plan shall be rounded off (upward or downward, as the Administrator shall determine) to the nearest whole number.

 

7.6 Exercise Restrictions. Notwithstanding anything to the contrary herein, in the event the Participant initiates any legal proceedings to be maintained or instituted against the Company or its Representatives or participates in any manner in any legal proceedings against the Company or its respective Representatives at any time, the Participant’s right to exercise any unexercised Options granted to such Participant, whether vested or not on such date, shall cease as of such date and the Options shall thereupon expire. For purposes of this Section only, the term “Representatives” shall mean the respective past, present and future officers, directors, employees, consultants, holders of equity securities, Affiliates, successors and assigns.

 

8. Restricted Share Units

 

8.1 Subject to the sole and absolute discretion and determination of the Administrator, the Administrator may decide to grant under the Plan, Restricted Share Unit(s) (“RSU(s)”). A RSU is a right to receive a Share of the Company, under certain terms and conditions, for no consideration. Upon the lapse of the Exercise Conditions of a RSU, such RSU shall automatically vest into an Exercised Share of the Company (subject to adjustments under Section 4 herein).

 

8.2 Unless determined otherwise by the Administrator, in the event of a Termination of Employment (as defined under section 11.1 below) of a Participant, for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then all RSUs theretofore granted to such Participant when such Participant was a Service Provider of the Company that are not vested on the date of Termination of Employment, shall terminate immediately and have no legal effect.

 

8.3 All other terms and conditions of the Plan applicable to Options (section 6 and 7 above), shall apply to RSUs, mutatis mutandis. It is clarified, that without deviating from the foregoing in Sub-Section 8.2, the provisions of Section 11 herein, shall, mutatis mutandis, apply to RSUs in the event of Termination of Employment (as defined under section 11.1 below).

 

8A. Restricted Share

 

8A.1 Restricted Share Awards may be granted upon such terms and conditions, as the Administrator shall determine.

 

8A.2 Purchase Price. No monetary payment (other than payments made for applicable Taxes) shall be required as a condition of receiving Shares pursuant to a grant of Restricted Shares.

 

 

8A.3 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Shares may (but need not) be made subject to Exercise Conditions as described herein, as shall be established by the Administrator and set forth in the applicable Grant Letter evidencing such Award. During any restriction period in which Shares acquired pursuant to an award of Restricted Shares remain subject to Exercise Conditions, such Shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of unless otherwise provided in the Plan. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of Shares hereunder, and the Company may place appropriate legends evidencing any such transfer restrictions on the relevant share certificates.

 

8A.4 Voting Rights; Dividends and Distributions. Except as provided in this section and in any Grant Letter, during any restriction period applicable to Shares subject to an award of Restricted Shares, the Participant shall have all of the rights of a shareholder of the Company holding Shares, including the right to receive all dividends and other distributions paid with respect to such Shares. However, in the event of a dividend or distribution paid in Shares or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4, any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant’s award of Restricted Shares shall be immediately subject to the same Exercise Conditions as the Shares subject to the award of Restricted Shares with respect to which such dividends or distributions were paid or adjustments were made.

 

8A.5 Termination of Employment. Unless otherwise provided by the Administrator, in the event of Termination of Employment (as defined under section 11.1 below) of a Participant, for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Shares acquired by the Participant pursuant to an award of Restricted Shares which remain subject to Exercise Conditions as of the date of Termination of Employment.

 

8A.6 All other terms and conditions of the Plan applicable to Options (sections 6 and 7 above), shall apply to Restricted Shares, mutatis mutandis. It is clarified, that without deviating from the foregoing in Sub-Section 8A.5., the provisions of Section 11 herein, shall, mutatis mutandis, apply to Restricted Shares in the event of Termination of Employment (as defined under section 11.1 below).

 

8B. Performance Based Awards:

 

8B.1 Subject to the sole and absolute discretion and determination of the Administrator, the Administrator may decide to grant Awards under the Plan, the exercise or vesting of which, as applicable, shall be conditional upon the performance of the Company and/or an Affiliate and/or a division or other business unit of the Company or of an Affiliate and/or upon the performance of the Participant, over such period and measured against such criteria as shall be determined by the Administrator and notified to the Participant as part of the Grant Letter (“Performance Based Award(s)”). In granting each Performance Based Award, the Administrator shall establish in writing the applicable performance period (“Performance Period”), performance formula (“Performance Formula”) and one or more performance goals (“Performance Goal(s)”) which, when measured at the end of the Performance Period, shall determine on the basis of said Performance Formula the extent to which the Performance Based Award has vested and/or become exercisable (collectively, the “Performance Conditions”). For the avoidance of doubt, Performance Conditions may be determined for an Award either in addition to, or in substitution for, a Vesting Schedule.

 

8B.2 After a Performance Based Award has been granted, the Administrator may, in appropriate circumstances, amend any Performance Condition, at its sole and absolute discretion.

 

8B.3 If, in consequence of the applicable Performance Conditions being met a Performance Based Award becomes vested and/or exercisable in respect of some, but not all of the number of Shares underlying such Award, the portion of the Performance Based Award which did not become vested and exercisable by the end of the Performance Period, shall thereupon lapse and cease to be exercisable in respect of the balance of the Shares over which it was held.

 

 

8B.4 Performance Conditions shall not be automatically waived merely due to an event of (i) a Termination of Employment, (ii) a Merger Transaction, (iii) any other adjustment under Section 4 above.

 

8B.5 Measurement of Performance Goals. Performance Goals shall be established by the Administrator on the basis of targets to be attained with respect to one or more measures of business or financial performance or individual key performance indicators (“KPIs”) that may have the same meanings as used in the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they may have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Company’s industry or, if based on individual or other KPIs, in all cases, as determined by the Administrator (“Performance Measures”). For purposes of the Plan, the Performance Measures applicable to a Performance Based Award shall be calculated as instructed by the Administrator, which may include being calculated in accordance with generally accepted accounting principles, excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Administrator, occurring after the establishment of the Performance Goals applicable to the Performance Based Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Based Award. Performance Measures may be, among others, one or more of the following, as determined by the Administrator: revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: share-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; share price; earnings per share; return on shareholder equity; return on capital; return on assets; return on investment; employee satisfaction and/or individual KPIs; employee retention; balance of cash, cash equivalents and marketable securities; market share; customer satisfaction; product development; research and development expenses; R&D development milestones, including with respect to clinical trials; completion of an identified special project; and completion of a joint venture or other Corporate Transaction.

 

8B.6 All other terms and conditions of the Plan applicable to Awards, shall apply to Performance Based Awards, mutatis mutandis.

 

9. Waiver of Award Rights. At any time prior to the expiration of any unexercised Granted Award, a Participant may waive his rights to such Award by a written notice to the Company’s principal office. Such notice shall specify the number of Granted Awards, which the Participant waives, and shall be signed by the Participant. Upon receipt by the Company of a notice of waiver of such rights, such Awards shall expire and shall become available for future Grants under the Plan.

 

10. Term of the Awards. Unless earlier terminated pursuant to the provisions of this Plan, all granted but unexercised Awards shall expire and cease to be exercisable at 5:00 p.m. Israel time on the 10^th anniversary of the Commencement Date of such Awards.

 

11. Termination of Employment

 

11.1 Termination of Employment. If a Participant ceases to be an employee, director, officer or Consultant of the Company or Affiliate for any reason (“Termination of Employment”) other than by reason of death, Retirement, Disability or Cause, then any vested but unexercised Awards on the date of Termination of Employment (as shall be determined by the Company or Affiliate, at its sole discretion) granted on the Participant’s behalf (“Exercisable Awards”) may be exercised, if not previously expired, on or prior to the earlier of: (a) 90 days after the date of Termination of Employment; or (b) the end of the Term of the Awards. All other Granted Awards for the benefit of Participant shall expire upon the date of Termination of Employment.

 

 

11.2 Termination for Cause. In the event of Termination of Employment of a Participant for Cause, then: (A) the Participant’s right to exercise any unexercised Granted Awards, whether vested or not on the date of Termination of Employment, shall cease as of such date of Termination of Employment, and the Awards shall thereupon expire, and (B) any unvested Shares shall terminate and expire on the day the Participant has been notified of his/her dismissal. Pending a determination of whether a Participant’s conduct, activities or circumstances give rise to Cause, the Administrator shall have the authority to suspend the exercise, payment, delivery or settlement of all or any portion of such Participant’s outstanding Awards pending any investigation of the matter. If subsequent to the Participant’s Termination of Employment, but prior to the exercise of Awards granted to such Participant, the Administrator determines that either prior or subsequent to the Participant’s Termination of Employment, the Participant engaged in conduct which would constitute Cause, then the Participant’s right to exercise the Awards granted to such Participant shall immediately cease upon such determination and the Awards shall thereupon expire. The determination by the Administrator as to the occurrence of Cause shall be final and conclusive for all purposes of this Plan.

 

11.3 Termination by Reason of Death, Retirement, or Disability

 

(A) Death- If Termination of Employment is by reason of death of the Participant, than his/her estate, personal representative or beneficiaries may exercise the Participant’s Awards, to the extent it was vested within the sixty (60) days period following the Participant’s death, at any time but not later than the earlier of: (i) the one (1) year anniversary of Participant’s death; or (ii) the end of the Term of the Awards. All other Awards granted for the benefit of a Participant and which have not vested within such 60-days period shall expire upon the date of death.

 

(B) Disability and Retirement- If Termination of Employment is by reason of Retirement or Disability of the Participant, the Participant may exercise any portion of the Awards which have vested within the ninety (90) days period following the date of Retirement or Disability, at any time but not later than the earlier of: (i) the one (1) year anniversary of the date of Retirement or Disability, as the case may be; or (ii) the end of the Term of the Awards. All other Awards for the benefit of a Participant and which have not vested within such 90 days period shall expire upon the date of Retirement or Disability, as applicable.

 

11.4 Exceptions. In special circumstances pertaining to the Termination of Employment of a certain Participant, the Administrator may at its sole discretion decide to extend any of the periods stated above in Sections 10.1-10.3.

 

11.5 Transfer of Employment or Service. Subject to the receipt of appropriate approvals from the ITA, if applicable, a Participant’s right to Awards granted to him/her under this Plan shall not be terminated, expire or forfeited solely as a result of the fact that the Participant’s employment or service as an employee, officer or director changes from the Company to an Affiliate or vice versa. Any and all tax consequence of such a transfer, if any, shall be solely borne by the Participant.

 

Furthermore, and notwithstanding the foregoing provisions of this Section 11, unless determined otherwise by the Administrator, the transfer of a Participant from a status of an Employee to a status of a Consultant or from a status of a Consultant to a status of an Employee, shall not be deemed a Termination of Employment for purposes hereof.

 

12. Awards and Tax Provisions. All Awards shall be granted under the Plan in accordance with one of the following Tax Provisions:

 

(A) The Company may grant Awards to 102 Participant in accordance with the provisions of Section 102 and the Section 102 Rules; and

 

(B) The Company may Grant Awards to Non-Qualified Participant in accordance with the provisions of Section 3(i).

 

12.1 Tax Provision Selection. The Company shall elect under which Tax Provision each Award is granted at its sole discretion and in accordance with any Applicable Law (the “Election”). The Company shall notify each Participant in the Grant Letter, under which Tax Provision the Awards and/or Shares are granted and, if applicable, under which Tax Track, each Award is granted.

 

12.2 Section 102 Trustee Tax Tracks.

 

(a) If the Company elects to grant Awards to 102 Participants through: (i) the Capital Gains Track Through a Trustee; or (ii) the Earned Income Track, then, in accordance with the requirements of Section 102, the Company shall appoint a Trustee who will hold in trust at least for the Holding period on behalf of each 102 Participant the granted Awards and the Underlying Shares issued upon exercise of such Awards.

 

 

(b) The Holding Period for the Awards and/or Shares will be as follows: (i) The Capital Gains Tax Track Through a Trustee - if the Company elects to grant the Awards according to the provisions of this track, then the Holding Period will be 24 months from the Date of Grant, or such period as may be determined in any amendment of Section 102; and (ii) Earned Income Track - if the Company elects to grant Awards according to the provisions of this track, then the Holding Period will be 12 months from the Date of Grant, or such period as may be determined in any amendment of Section 102.

 

(c) Subject to Section 102 and the Section 102 Rules, Participants shall not be able to receive from the Trustee, nor shall they be able to sell or dispose of the Awards or Underlying Shares before the end of the applicable Holding Period. If a Participant sells or removes the Awards or the Underlying Shares form the Trustee before the end of the applicable Holding Period (“Breach”), the Participant shall pay all applicable taxes imposed on such Breach by Section 7 of the Section 102 Rules.

 

(d) In the event of a distribution of rights, including an issuance of bonus shares, in connection with Awards and/or Underlying Shares (the “Additional Rights”), all such Additional Rights shall be granted and/or issued to the Trustee for the benefit of Participants, and shall be held by the Trustee at least for the remainder of the Holding Period applicable to the Awards and/or Underlying Shares, as applicable. Such Additional Rights shall be treated in accordance with the provisions of the applicable Tax Track.

 

12.3 Income Tax Track Without a Trustee. If the Company elects to grant Awards to 102 Participants according to the provisions of the Income Tax Track Without a Trustee, then the Awards will not be subject to a Holding Period.

 

12.4 Concurrent Conditions. The Holding Period, if any, is in addition to the vesting period with respect to Awards, as specified in Section 7.2 of the Plan or in the Grant Letter. The Holding Period and vesting period may run concurrently, but neither is a substitute for the other, and each are independent terms and conditions for granted Awards.

 

12.5 Trust Agreement. The terms and conditions applicable to the trust relating to the Tax Track elected by the Company, as appropriate, shall be set forth in Trust Agreement.

 

13. Term of Shares Held In Trust. Unless otherwise extended by the Administrator, in its sole discretion, no Underlying Shares issued upon exercise of Awards shall be held by the Trustee on behalf of the Participant for a period longer than ten (10) years after the end of the Term of the applicable Awards. The Administrator shall instruct the Trustee as to the transfer of any Underlying Shares

 

14. Rights as a Shareholder. Unless otherwise specified in the Plan, a Participant shall not have any rights as a Shareholder with respect to Underlying Shares issued under this Plan, until such time as the Shares shall be registered in the name of the Participant in the Company’s register of Shareholders

 

14.1 Dividend. The Participants shall be entitled to receive any cash dividend paid to the Shareholders with respect to Underlying Shares issued to them under this Plan. Payments of such dividend to the Participants shall be subject to any required tax being withheld or otherwise deducted by the Trustee or the Company, as agreed between the Company and the Trustee, in accordance with Applicable Law.

 

15. No Special Employment Rights. Nothing contained in this Plan shall confer upon any Participant any right with respect to the continuation of employment by or service to the Company or Affiliate or to interfere in any way with the right of the Company or Affiliate, to terminate such employment or service or to increase or decrease the compensation of the Participant. The Awards are extraordinary, one-time benefits granted to the Participants and are not and shall not be deemed a salary component for any purpose whatsoever, including, in connection with calculating severance compensation under any Applicable Law.

 

 

16. Restrictions on Sale of Awards and Shares

 

16.1 Awards. Awards may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent.

 

16.2 Acceleration Provision. The Administrator, at its sole discretion, may decide to add a provision in certain Grant Letters, according to which in case of a Merger or other events, all or some of the unvested Awards or/and Shares, shall automatically accelerate, and become fully vested and exercisable upon such event.

 

16.3 Acknowledgement To Restrictions. As a condition for the grant of Awards and issuance of Underlying Shares thereunder, each Participant shall acknowledge the terms and provisions of the corporate documents of the Company, including organizational documents, as amended from time to time, and all other agreements among the Shareholders which are applicable to the holders of the Company’s Shares and shall agree to be bound by their terms with respect to any restriction applicable to the Shares of the Company (including without limitation, any right of first refusal, co-sale and bring along provisions, as applicable).

 

17. Tax Matters.

 

(a) This Plan shall be governed by, and shall conform with and be interpreted so as to comply with, the requirements of Section 102 and any written approval or ruling from the ITA. All tax consequences under any Applicable Law (other than stamp duty) which may arise from the Grant of the Awards, from the exercise of Awards or from the holding or sale of the Underlying Shares (or other securities issued under the Plan) by or on behalf of the Participant or from any other event or act hereunder (whether any act of the Participant or of the Company or its Affiliates or of the Trustee), shall be borne solely on the Participant. The Participant shall indemnify the Company and/or Affiliate and /or the Trustee, as the case may be, and hold them harmless, against and from any liability for any such tax or any penalty, interest or indexing.

 

(b) Except as otherwise required by Applicable Law, the Company shall not be obligated to honor the exercise of any Award by or on behalf of a Participant or the sale, exchange or other transfer of any Underlying Shares issued upon exercise of Awards until all tax consequences (if any) arising from the exercise of such Awards or sale, exchange or other transfer of Shares are resolved to the full satisfaction of the Company. Without derogating from the above, the Company and/or, when applicable, the Trustee shall not be required to release any share certificate to a Participant until all required payments have been fully made.

 

(c) If the Company elects to grant Awards according to the provisions of the Income Tax Track Without a Trustee, and if prior to the Exercise of any and/or all of these Awards, such Participant ceases to be an Employee, director, or officer of the Company or Affiliate, the Participant shall deposit with the Company a guarantee or other security as required by law, in order to ensure the payment of applicable taxes upon the Exercise of such Awards, as the case may be.

 

(d) It is clarified that if any grants made under either of the tax tracks under Section 102 do not comply with the requirement of such tax route, the grant shall be considered subject to the Income Tax Track Without a Trustee, or Section 3(i) or Section 2 of the Tax Ordinance, as applicable, and the Participant irrevocably waives any claim and/or demand it has or may have with respect to the tax treatment of the Award.

 

 

18. Withholding Taxes.

 

(a) Whenever an amount with respect to withholding tax relating to Awards granted to a Participant and/or Underlying Shares issued upon the exercise or vesting thereof is due from the Participant and/or the Company and/or an Affiliate, the Company and/or an Affiliate and/or the Trustee shall have the right to demand from a Participant such amount that would be sufficient to satisfy any applicable withholding tax requirements related thereto, and whenever Shares or any other non-cash assets are to be delivered pursuant to the exercise or vesting of an Award and the sale of Underlying Shares, or transferred thereafter, the Company and/or an Affiliate and/or the Trustee shall have the right to require the Participant to remit to the Company and/or to the Affiliate, or to the Trustee an amount in cash sufficient to satisfy any applicable withholding tax requirements related thereto, and if such amount is not timely remitted, the Company and/or the Affiliate and/or the Trustee shall have the right to withhold or set-off (subject to Applicable Law) such Shares or any other non-cash assets pending payment by the Participant of such amounts. In particular, the Company shall have the right, but not the obligation, to deduct from (i) the Shares issuable to a Grantee upon the exercise or vesting of an Award, or to accept from the Grantee the tender of, and/or to make resales (in the Stock Market, if applicable) of, in each case, a number of whole Shares having a fair market value, as determined by the Company, and/or (ii) Grantee’s compensation (including salary) a cash amount, in each case, that will enable the Company to satisfy any tax withholding obligations of the Company or its Affiliates.

 

(b) In any case where a tax is required to be withheld in connection with the delivery of Shares of the Company or of an Affiliate under the Plan, the Administrator may at its sole discretion (subject to Applicable Law) grant (either at the time of the grant or thereafter) to a Participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, that: (i) the Company reduce the number of Shares to be delivered by (or otherwise reacquire from the Participant) the appropriate number of Shares, valued in a consistent manner at their Fair Market Value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the minimum applicable withholding obligation on exercise, vesting or payment; or (ii) have the Company withhold from proceeds of the sale of such Shares (either through a voluntary sale or through a mandatory sale arranged by the Company on the Participant’s behalf) the minimum amount required to be withheld.(c) Until all taxes have been paid in accordance with Rule 7 of the Section 102 Rules or any other Applicable Law, Awards and/or Underlying Shares may not be sold, transferred, assigned, pledged, encumbered, or otherwise willfully hypothecated or disposed of, and no power of attorney or deed of transfer, whether for immediate or future use may be validly given. Notwithstanding the foregoing, the Awards and the Underlying Shares may be validly transferred upon the death of a Participant in accordance with Section 19 of this Plan, provided that the transferee thereof shall be subject to the provisions of Section 102 and the Section 102 Rules as would have been applicable to the deceased Participant in the event he/she would have survived.

 

19. No Transfer of Awards. The Trustee shall not transfer Awards to any third party, including a 102 Participant, except in accordance with instructions received from the Administrator.

 

20. Transfer of Rights Upon Death. No transfer of any Award or Underlying Share issued upon the exercise thereof by will or by the laws of descent shall be effective to bind the Company unless the Company shall have been furnished with all of the following signed and notarized documents: (i) a written request for such transfer and a copy of the legal documents creating and confirming the right of the person acting with respect to the Participant’s estate and of the transferee; (ii) written consent by the transferee to pay any payment due according to the provisions of the Plan and otherwise comply by all the terms of the Plan; and (iii) any such other evidence as the Administrator may deem necessary to establish the right to the transfer of the Granted Awards or Underlying Shares issued upon the exercise thereof and the validity of the transfer.

 

21. No Right of Others to Awards. Subject to the provisions of the Plan, no person other than the Participant shall have any right with respect to Awards granted to the Participants under the Plan.

 

22. Expenses and Receipts. The expenses incurred in connection with the administration and implementation of the Plan (including any applicable stamp duty) shall be borne by the Company. Any proceeds received by the Company in connection with the exercise of any Award may be used for general corporate purposes.

 

23. Required Approvals. The Plan is subject to the receipt of all approvals required under the Applicable Law including under the Tax Ordinance.

 

24. Treatment of Participants. There is no obligation for uniformity of treatment of Participants.

 

 

25. No Conflicts. In the event of any conflict between the terms of the Plan and the Grant Letter, the Plan shall prevail, unless the Grant Letter stated specifically that the conflicting provision in the Grant Letter shall prevail.

 

26. Participant Undertakings. By execution of any Grant Letter, the Participant shall be deemed to have agreed to the following: (i) agree and acknowledge that he or she have received and read the Plan, the Grant Letter and the Trust Agreement; (ii) undertake all the provisions set forth in Section 3(i) or Section 102 as applicable (including provisions regarding the applicable Tax Track that the Company has elected), the Plan, the Grant Letter and the Trust Agreement (if applicable); (iii) sign any required documentation, including but not limited, an irrevocable power of attorney and proxy; and (iv) to the extent the Awards are granted under Section 102, the 102 Participant shall undertake that subject to the provisions of Section 102 and the Section 102 Rules, he/she shall not sell or release the Awards or Underlying Shares from trust before the end of the Holding Period (if any).

 

27. Governing Law and Jurisdiction. This Plan shall be governed by and construed and enforced in accordance with the laws of the State of Israel, without giving effect to its principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to this Plan.

 

28. Non-Exclusivity of the Plan. The adoption of this Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements or imposing any limitations on the power of the Board to adopt other incentive arrangements as it may deem desirable, including, without limitation, the granting of shares or Awards otherwise than under this Plan.

 

* * * * *

 

 

17

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the use of our report dated March 20, 2023, with respect to the consolidated financial statements of NeuroSense Therapeutics Ltd., incorporated herein by reference and to the reference to our firm under the heading “Experts” in the prospectus.

 

/s/ Somekh Chaikin

 

Somekh Chaikin

Member Firm of KPMG International

Tel Aviv, Israel

November 21, 2023

 

 

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