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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report....................
For the transition period from to |
None
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None
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Title of each class
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Name of each exchange on which registered
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Ordinary Shares, NIS 0.01 nominal value per share
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NASDAQ GLOBAL SELECT MARKET
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Large accelerated filer ☐
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Accelerated filer ☒
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Non-accelerated filer ☐
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Emerging growth company ☐
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3 | ||
3 | ||
3 | ||
3 | ||
A. |
[Reserved] |
3 |
B. |
Capitalization and indebtedness |
3 |
C. |
Reason for the offer and use of proceeds
|
3 |
D. |
Risk Factors |
3 |
31 | ||
A. |
History and Development of the Company
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31 |
B. |
Business Overview |
32 |
Principal Markets |
34 | |
Manufacturing and Suppliers |
35 | |
Marketing Channels |
36 | |
Patents and Licenses |
38 | |
Competition |
39 | |
Governmental Regulation Affecting the Company
|
40 | |
C. |
Organizational Structure |
41 |
UNRESOLVED STAFF COMMENTS |
42 | |
ITEM 5. |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
43 |
Impact of Inflation and
Currency Fluctuations on Results of Operations, Liabilities and Assets |
47 | |
C. |
Research and development, patents and licenses,
etc. |
49 |
E. |
Critical Accounting Estimates |
52 |
54 | ||
A. |
Directors and Senior Management |
54 |
B. |
Compensation |
56 |
Board of Directors |
61 | |
External Directors |
61 | |
Audit Committee |
66 | |
Compensation Committee |
68 | |
D. |
Employees |
74 |
E. |
Share Ownership |
75 |
76 | ||
A. |
Major Shareholders |
76 |
B. |
Related Party Transactions |
77 |
ITEM 8. |
79 | |
A. |
Consolidated Statements and Other Financial Information |
79 |
B. |
Significant Changes |
79 |
ITEM 9. | 80 | |
A. |
Offer and Listing Details |
80 |
Markets and Share Price History |
80 | |
ITEM 10. |
81 | |
103 | ||
Interest Rate Risk |
103 | |
Foreign Currency Exchange Risk |
103 | |
105 | ||
106 | ||
106 | ||
106 | ||
106 | ||
Disclosure Controls and Procedures |
106 | |
Management's Annual Report on Internal Control
over Financial Reporting |
106 | |
Inherent Limitations on Effectiveness of Controls
|
107 | |
Changes in Internal Control over Financial
Reporting |
107 | |
107 | ||
107 | ||
107 | ||
107 | ||
107 | ||
Audit committee's pre-approval policies and
procedures |
112 | |
108 | ||
108 | ||
109 | ||
110 | ||
110 | ||
110 | ||
ITEM 16J. | 111 | |
ITEM 16K. |
111 | |
113 | ||
113 | ||
113 | ||
113 |
|
• |
We may not be able to capitalize, as planned, on our Design Wins. |
|
• |
The market for Cloud-based and Cloud-focused solutions is rapidly developing, and if it develops in ways that differ from our expectations,
our business could be harmed. |
|
• |
The market for Edge Networking Devices to Telcos and service providers for NFV or SD-WAN deployments is rapidly developing, and if
it develops in ways that differ from our expectations, our business could be harmed. |
|
• |
Rapid development of our business in the Cloud-based, Telco and service providers' markets may require us to offer our potential
customers with longer payment terms to better position ourselves in these markets, to hold higher inventory levels and to significantly
increase our need for working capital. |
|
• |
Our networking and data infrastructure solution products which are targeted by us mainly to customers in the OEM, Cloud, Telco, Mobile
and related service providers' markets, are characterized by long sales cycles. |
|
• |
The loss of Design Wins from customers in the Cloud, Telco, Mobile and related service providers' markets may result in significant
quarterly and even annual fluctuations in our revenues. |
|
• |
Rapid development of our business in the Cloud, Telco, Mobile and related service providers' markets may lead to a decrease in our
gross margins which may result in a decrease in our profitability. |
|
• |
Should some of our customers explore various technologies during their development process in ways which are not compatible with
our solutions, this may result in them deciding to pursue different solutions even after we secured Design Wins with such customers, which
may impair our financial results. |
|
• |
A loss of a material Design Win may lead to a decrease in the volume of orders placed in relation to such Design Win, which would
impair our financial results. |
|
• |
Difficulties in the fulfillment of financial obligations of one or more of our customers may have an adverse effect on our ability
to collect consideration payable under purchase orders placed by such customers. |
|
• |
We may not be successful in achieving and consummating Design Wins for our products for the Cloud, Telco, Mobile and the service
providers markets, which constitute a main source of growth. |
|
• |
Significant growth in markets demanding functionality similar to the functionality offered by certain of our products may cause manufacturers
to integrate such characteristics into server motherboards or increase the market share of servers and appliances that already have such
functionality in-built, eliminating the need for our products. |
|
• |
Our customers may replace the servers and appliances they currently use, use or sell servers and appliances that do not require our
cards, and/or incorporate cards other than ours. |
|
• |
We may experience difficulty in developing solutions for servers and appliances with proprietary interfaces, which may be used by
some of our potential customers. |
|
• |
The dollar cost of our operations in Israel may increase to the extent the results of inflation in Israel are not offset by a devaluation
of the NIS against the dollar. |
|
• |
The tax benefits available to us under Israeli law require us to meet several conditions and may be terminated or reduced in the
future, which would increase our taxes. |
|
• |
The government programs and benefits, which we previously received, require us to meet several conditions in order to transfer intellectual
property and know-how developed using government funding abroad, or in order to consummate a change of control. |
|
• |
The political environment and hostilities in Israel could harm our business. |
|
• |
Many of our employees in Israel are required to perform military reserve duty. |
|
• |
The U.S. trade tariffs implemented by President Trump may increase the costs of importing our products into the U.S, which could
potentially reduce profit margins and affect our competitive position. |
|
• |
We may experience a decline in our share price, including during periods of uncertainty in global economic conditions, and there
is no guarantee that our share price will remain stable or not decline. |
|
• |
If we are characterized as a passive foreign investment company for U.S. federal income tax purposes, our U.S. shareholders may suffer
adverse tax consequences. |
|
• |
Unfavorable or unstable economic conditions in the markets in which we operate could have a material adverse effect on our business,
financial condition, or operating results. |
|
• |
Loss of our sources for certain key components could harm our operations. |
|
• |
The markets for our products change rapidly and demand for new products is difficult to predict. |
|
• |
We may need to invest significantly in research and development and business development in order to diversify our product offering
and enter new markets. |
|
• |
Our short lead time of customer orders introduces uncertainty into our revenues and severely limits our ability to accurately forecast
future sales. |
|
• |
The fluctuations in components' lead time and price may adversely affect our business. |
|
• |
The decrease in demand for basic/standard server adapters may adversely affect our business. |
|
• |
The loss or ineffectiveness of any of our key customer relationships or a reduction of purchase orders by such customers may have
a material adverse effect on our operations and financial results. |
|
• |
We are dependent on key personnel. |
|
• |
We may not be able to protect our intellectual proprietary rights. |
|
• |
Inability to cooperate with and receive information from our key component manufacturers could affect our ability to develop new
products. |
|
• |
We may make acquisitions or pursue mergers that could disrupt our business and harm our financial condition. |
|
• |
We may be subject to risks associated with laws, regulations, economic sanctions and customer initiatives, which may force us to
incur additional expenses and add complexities to our supply chain and operations. |
|
• |
We depend on governmental licenses for our exports. |
|
• |
Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.
|
• |
Substantial research and development and business development expenditures, which could divert funds from other corporate uses and/or
have a significant negative effect on our short-term results; |
• |
Diversion of management's attention from our core business; and |
• |
Entrance into markets in which we have little or no experience. |
• |
Post-merger integration problems resulting from the combination of any acquired operations with our own operations or from the combination
of two or more operations into a new merged entity; |
• |
Diversion of management's attention from our core business; |
• |
Substantial expenditures, which could divert funds from other corporate uses; |
• |
Entering markets in which we have little or no experience; and |
• |
Loss of key employees of the acquired operations. |
(i) |
Server network interface cards (Server Adapters) - These adapters are used mostly in networking appliances which are used both in
the Cloud (including public cloud and On Premise cloud) and in the Edge. |
(ii) |
Smart Cards - Intelligent and/or programmable cards, with features such as encryption, acceleration, data compression, redirection
and switching, packet processing, time stamping, packet capture solutions, ultra-low latency solutions, and other offloading features.
These products are used mostly inside servers which are a part of Cloud, Telco and Enterprise Data centers or at the Edge. |
(iii) |
Smart Platforms - (Edge Products) - including virtualized Customer-Premises Equipment (vCPE) and universal Customer-Premises Equipment
(uCPE) (together, "CPE"), Edge devices for SD-WAN, SASE, Telco dedicated routers and NFV deployments. |
(i) |
Providers of applications on Network appliances, including mostly SD-WAN, Cyber Security and Application Delivery applications;
|
(ii) |
Telcos / Carriers / service providers deploying CPEs/Edge for SD-WAN, SASE and NFV; |
(iii) |
The "Cloud". |
• |
We approach a potential customer or are approached by such customer. |
• |
If the potential customer shows interest in the products and we believe that achievement of a business relationship with the potential
customer is possible, we ship products for such potential customer's evaluation. |
• |
During the evaluation process the potential customer receives a few units of the relevant product for initial basic testing. If the
evaluation process is successful, we ship products for qualification. |
• |
During the qualification process the potential customer usually purchases a larger amount of our products for more specific testing,
which may include certain adaptations of our products to its needs. |
• |
If the qualification process is successful, we enter into negotiations regarding the terms of a business relationship. |
• |
In some cases, typically with the larger customers and with respect to Smart Cards and Smart Platforms, the evaluation and qualification
process may take 12 months or more. |
• |
Silicom Connectivity Solutions, Inc. – a private company incorporated in the United States; and |
• |
Silicom Denmark (Fiberblaze A/S) – a private company incorporated in Denmark. |
A. |
Operating Results |
Year
Ended December 31, |
2022 |
2023 |
2024 |
Sales |
100% |
100% |
100% |
Cost of sales |
65.5 |
76.9 |
71.4 |
Gross profit |
34.5 |
23.1 |
28.6 |
Research and development expenses
|
13.7 |
16.6 |
33.6 |
Sales and marketing expenses |
4.6 |
5.6 |
10.3 |
General and administrative expenses
|
3.0 |
3.4 |
7.5 |
Impairment of goodwill |
- |
20.6 |
- |
Operating Income |
13.2 |
(23.1) |
(22.8) |
Financial income, net |
1.6 |
1.1 |
3.4 |
Income (loss) before income taxes
|
14.9 |
(22.0) |
(19.5) |
Income tax expenses (benefit) |
2.8 |
(0.7) |
4.1 |
Net Income (loss) |
12.2 |
(21.3) |
(23.6) |
Name |
Age |
Position with Company | ||
Avi Eizenman(1) |
67 |
Active Chairman of the Board | ||
Shaike Orbach(2)
|
73 |
Executive Vice Chairman of the Board | ||
Ayelet Aya Hayak(3)
|
55 |
Director | ||
Ilan Erez(3) |
57 |
Director | ||
Eli Doron(4) |
72 |
Director | ||
Liron Eizenman(5)
|
39 |
President, Chief Executive Officer | ||
Eran Gilad |
|
57 |
Chief Financial Officer and Company Secretary |
(1) |
Serving an additional three-year term, commencing as of June 26, 2024. |
(2) |
Serving an additional three-year term, commencing as of June 14, 2023. |
(3) |
Serving an additional three-year term, commencing as of June 7, 2022. |
(4) |
Serving an additional three-year term, commencing as of June 26, 2024. |
(5) |
Liron Eizenman, who is the son of the active chairman of our board, Avi Eizenman, commenced serving as our President and Chief Executive
Officer, on July 1, 2022. |
• |
An employment relationship; |
• |
A business or professional relationship maintained on a regular basis; |
• |
Control; and |
• |
Service as an office holder. |
• |
the majority includes at least a majority of the shares held by non-controlling and disinterested shareholders who are present and
voting at the meeting; or |
• |
the total number of shares held by non-controlling and disinterested shareholders that voted against the election of the director
does not exceed two percent of the aggregate voting rights in the company. |
• |
The chairman of the board of directors; |
• |
Any director employed by or otherwise providing services to the company or to the controlling shareholder or entity under such controlling
shareholder’s control; |
• |
Any director who derives his salary primarily from a controlling shareholder; |
• |
A controlling shareholder; or |
• |
Any relative of a controlling shareholder. |
• |
The chairman of the board of directors; |
• |
Any director employed by or otherwise providing services to the company or to the controlling shareholder or entity under such controlling
shareholder’s control; |
• |
Any director who derives his salary primarily from a controlling shareholder; |
• |
A controlling shareholder; or |
• |
Any relative of a controlling shareholder. |
1. |
To recommend to the Board of Directors as to a compensation policy for office holders of the company, as well as to recommend, once
every three years to extend the compensation policy subject to receipt of the required corporate approvals; |
2. |
To recommend to the Board of Directors as to any updates to the compensation policy which may be required; |
3. |
To review the implementation of the compensation policy by the company; |
4. |
To approve transactions relating to terms of office and employment of certain company office holders, which require the approval
of the compensation committee pursuant to the Companies Law; and |
5. |
To exempt, under certain circumstances, a transaction relating to terms of office and employment from the requirement of approval
of the shareholders meeting. |
a. |
Advancement of the goals of the company, its working plan and its long term policy; |
b. |
The creation of proper incentives for the office holders while taking into consideration, inter alia, the company’s risk management
policies; |
c. |
The company’s size and nature of its operations; |
d. |
The contributions of the relevant office holders in achieving the goals of the company and profit in the long term in light of their
positions; |
e. |
The education, skills, expertise and achievements of the relevant office holders; |
f. |
The role of the office holders, areas of their responsibilities and previous agreements with them; |
g. |
The correlation of the proposed compensation with the compensation of other employees of the company, and the effect of such differences
in compensation on the employment relations in the company; and |
h. |
The long term performance of the office holder. |
(i) |
the majority of the votes includes at least a majority of all the votes of shareholders who are not controlling shareholders of the
company or who do not have a personal interest in the compensation policy and participating in the vote; abstentions shall not be included
in the total of the votes of the aforesaid shareholders; or |
(ii) |
the total of opposing votes from among the shareholders described in Sub-section (i) above does not exceed 2% of all the voting rights
in the company. |
|
Female |
Male |
Non-Binary |
Did Not Disclose Gender
|
Directors |
1 |
4 |
0 |
0 |
Underrepresented Individual in Home Country Jurisdiction
|
0 |
LGBTQ+ |
0 |
Did Not Disclose Demographic Background |
0 |
As of December 31, |
2022
|
2023
|
2024
|
|||||||||
Total Employees |
306 |
246 |
229 |
|||||||||
Marketing, Sales, Customer Services |
27 |
25 |
21 |
|||||||||
Research & Development |
134 |
125 |
118 |
|||||||||
Manufacturing |
127 |
80 |
76 |
|||||||||
Corporate Operations and Administration |
18 |
16 |
14 |
Name |
Number of Shares and
Options Owned1
|
Percent of
Outstanding Shares
|
||||||
Avi Eizenman |
277,418 |
4.79 |
% | |||||
Shaike Orbach |
* |
* |
||||||
Eli Doron |
* |
* |
||||||
Ayelet Aya Hayak |
* |
* |
||||||
Ilan Erez |
* |
* |
||||||
Liron Eizenman |
* |
* |
||||||
Eran Gilad |
* |
* |
||||||
All directors and office holders as a group |
293,318 |
5.07 |
% |
* |
Denotes ownership of less than 1% of the outstanding shares. |
(1) |
The table above includes the number of shares and options that are exercisable within 60 days of March 31, 2025. Ordinary shares
subject to these options are deemed beneficially owned for the purpose of computing the ownership percentage of the person or group holding
these options, but are not deemed outstanding for purposes of computing the ownership percentage of any other person. Except where otherwise
indicated, and subject to applicable community property laws, based on information furnished to us by such owners or otherwise disclosed
in any public filings, to our knowledge, the persons and entities named in the table have sole voting and dispositive power with respect
to all shares shown as beneficially owned by them. |
Name
of Shareholder |
Number
of Shares and Options Owned(1) |
Percentage
of Outstanding Shares |
Systematic Financial Management, LP (2)
|
510,358 |
8.96% |
First Wilshire Securities Management, Inc. (3)
|
390,700 |
6.86% |
Forsakringsatiebolaget Avanza Pension(4)
|
334,087 |
5.86% |
(1) |
The table above includes the number of shares and options that are exercisable within 60 days of March 31, 2025. Ordinary shares
subject to these options are deemed beneficially owned for the purpose of computing the ownership percentage of the person or group holding
these options, but are not deemed outstanding for purposes of computing the ownership percentage of any other person. Except where otherwise
indicated, and subject to applicable community property laws, based on information furnished to us by such owners or otherwise disclosed
in any public filings, to our knowledge, the persons and entities named in the table have sole voting and dispositive power with respect
to all shares shown as beneficially owned by them. All the information detailed in this table is as set forth in major shareholders' public
filings, unless stated otherwise. |
(2) |
As reported on Schedule 13G/A filed by Systemic Financial Management, LP with the SEC on February 13, 2025. |
(3) |
As reported on Schedules 13G/A filed by First Wilshire Securities Management, Inc. with the SEC on February 13, 2025. |
(4) |
As reported on Schedules 13G filed by Forsakringsaktiebolaget Avanza Pension, Inc. with the SEC on October 3, 2024. |
|
• |
Gross monthly base salary of NIS 70,000. |
|
• |
Entitlement to the Chief Executive Officer annual bonus upon the terms and in accordance with the formula approved by the Company’s
shareholders at the Annual General Meeting held on June 8, 2016 (the “CEO Bonus”),
|
|
• |
Standard social benefits package applicable to all full-time employees of the Company. |
|
• |
Severance/Termination provisions. |
A1. |
See Item 18 for our consolidated financial statements. |
A2. |
See Item 18 for our consolidated financial statements, which cover the last three
financial years. |
A3. |
See page F-3 for the audit report of our accountants, entitled "Report of Independent
Registered Public Accounting Firm." |
A4. |
Not applicable. |
A5. |
Not applicable. |
A6. |
See Note __ to our audited consolidated financial statements included in Item 18 of
this annual report for the geographic distribution of our sales based on the location of the customer. |
A7. |
Litigation |
A8. |
Dividend Policy |
PERIOD |
LOW |
HIGH |
||||||
March 2025 |
14.27 |
16.13 |
||||||
February 2025 |
15.90 |
18.15 |
||||||
January 2025 |
15.36 |
18.24 |
||||||
December 2024 |
12.66 |
17.30 |
||||||
November 2024 |
12.29 |
15.14 |
||||||
October 2024 |
12.72 |
14.00 |
||||||
FINANCIAL QUARTERS DURING THE PAST TWO YEARS |
||||||||
First Quarter 2025 |
14.27 |
18.24 |
||||||
Fourth Quarter 2024 |
12.29 |
17.30 |
||||||
Third Quarter 2024 |
11.35 |
16.41 |
||||||
Second Quarter 2024 |
14.4 |
18.00 |
||||||
First Quarter 2024 |
14.80 |
19.04 |
||||||
Fourth Quarter 2023 |
13.75 |
26.10 |
||||||
Third Quarter 2023 |
24.07 |
40.07 |
||||||
Second Quarter 2023 |
33.25 |
37.79 |
||||||
FIVE MOST RECENT FULL FINANCIAL YEARS |
||||||||
2024 |
11.35 |
19.04 |
||||||
2023 |
13.75 |
50.00 |
||||||
2022 |
31.30 |
51.66 |
||||||
2021 |
36.02 |
59.27 |
||||||
2020 |
20.93 |
42.55 |
• |
Appointment or termination of our auditors; |
• |
Appointment and dismissal of external directors, unless the company elects to opt-in to the exemptions promulgated under the Amendment
to the Relief Regulations as detailed above, under which there is no requirement to appoint external directors; |
• |
Approval of interested party acts and transactions requiring general meeting approval as provided in Sections 255 and 268 to 275
of the Companies Law; |
• |
A merger as provided in Section 320(a) of the Companies Law; |
• |
The exercise of the powers of the board of directors, if the board of directors is unable to exercise its powers and the exercise
of any of its powers is vital for our proper management, as provided in Section 52(a) of the Companies Law; |
• |
Amendments to our Articles of Association; and |
• |
Approval of an increase or decrease of the registered share capital. |
• |
All of the directors are permitted to vote on the matter and attend the meeting in which the matter is considered; and |
• |
The matter requires approval of the shareholders at a general meeting. |
1. |
A private placement that meets all of the following conditions: |
|
• |
The private placement will increase the relative holdings of a shareholder that holds five percent or more of the company's outstanding
share capital, assuming the exercise of all of the securities convertible into shares held by that person, or that will cause any person
to become, as a result of the issuance, a holder of more than five percent of the company's outstanding share capital. |
|
• |
20 percent or more of the voting rights in the company prior to such issuance are being offered. |
|
• |
All or part of the consideration for the offering is not cash or registered securities, or the private placement is not being offered
at market terms. |
2. |
A private placement which results in anyone becoming a "controlling shareholder" of the public company. |
• |
Any amendment to the articles of association; |
• |
An increase of the company's authorized share capital; |
• |
A merger; or |
• |
Approval of interested party acts and transactions that require general meeting approval as provided in Sections 255 and 268 to 275
of the Companies Law. |
• |
Distribution of annual and quarterly reports to shareholders –
Under Israeli law we are not required to distribute annual and quarterly reports directly to shareholders and the generally accepted business
practice in Israel is not to distribute such reports to shareholders. We do however make our audited financial statements available to
our shareholders prior to our annual general meeting and furnish our quarterly and annual financial results with the SEC on Form 6-K.
|
• |
Independence, Nomination and Compensation of Directors –
A majority of our board of directors may not necessarily be comprised of independent directors as defined in NASDAQ Listing Rule 5605(a)(2).
Our board of directors contains two external directors in accordance with the provisions of the Companies Law. Israeli law does not require,
nor do our external directors conduct, regularly scheduled meetings at which only they are present. In addition, with the exception of
our external directors, our directors are elected to our board of directors in accordance with the provisions set forth in our amended
and restated Articles of Association, as approved by our shareholders on the Annual General Meeting which took place on June 8, 2016.
According to our amended and restated Articles of Association, directors are divided into three groups, Group A, Group B and Group C.
Each group is brought for re-election once every three years, on a rotating basis, such that at each annual general meeting of the shareholders
a given group of directors is brought for election, to serve on a continuous basis for a three-year term, until the third annual general
meeting following the meeting on which such group was elected for service and until their respective successors are duly elected, at which
point their term in office shall expire. At each annual general meeting, the annual general meeting shall be entitled to elect directors
to replace the directors whose three-year term in office has expired, and so on ad infinitum, so that each year, the term in office of
one group of directors shall expire. The nominations for director which are presented to our shareholders are generally made by our board
of directors. One or more shareholders of a company holding at least one percent of the voting power of the company may nominate a currently
serving external director for an additional three-year term. Israeli law does not require the adoption of, and our board has not adopted,
a formal written charter or board resolution addressing the nomination process and related matters. Compensation of our directors and
other office holders of the Company is determined in accordance with Israeli law. |
• |
Audit Committee – Our audit committee
does not meet with all the requirements of NASDAQ Listing Rule 5605. We are of the opinion that the members of our audit committee comply
with the requirements of NASDAQ Listing Rule 5605(c)(3) and Rule 10A-3(b) of the general rules and regulations promulgated under the Securities
Act of 1933 and all requirements under Israeli law. Our audit committee has not adopted a formal written audit committee charter specifying
the items enumerated in NASDAQ Listing Rule 5605(c)(1). |
• |
Compensation Committee – We follow
the provisions of the Companies Law with respect to matters in connection with the composition and responsibilities of our compensation
committee, office holder compensation, and any required approval by the shareholders of such compensation. Israeli law, and our amended
and restated Articles of Association, do not require that a compensation committee composed solely of independent members of our board
of directors determine (or recommend to the board of directors for determination) an executive officer's compensation, as required under
NASDAQ's listing standards related to compensation committee independence and responsibilities; nor do they require that the Company adopt
and file a compensation committee charter. Instead, our compensation committee has been established and conducts itself in accordance
with provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law. Furthermore,
the compensation of office holders is determined and approved by our compensation committee and our Board of Directors, and in certain
circumstances by our shareholders, either in consistency with our previously approved Executive Compensation Policy or, in special circumstances
in deviation therefrom, taking into account certain considerations set forth in the Companies Law. The requirements for shareholder approval
of any office holder compensation, and the relevant majority or special majority for such approval, are all as set forth in the Companies
Law. Thus, we will seek shareholder approval for all corporate actions with respect to office holder compensation requiring such approval
under the requirements of the Companies Law, including seeking prior approval of the shareholders for the Executive Compensation Policy
and for certain office holder compensation, rather than seeking approval for such corporate actions in accordance with NASDAQ Listing
Rules. |
• |
Quorum – Under Israeli law a company
is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at
a shareholders meeting. Our Articles of Association provide that a quorum of two or more shareholders, present in person or by proxy,
holding shares conferring in the aggregate more than thirty-three and a third (33 1/3 %) percent of the voting power of the Company is
required for commencement of business at a general meeting. |
• |
Approval of Related Party Transactions –
All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts and
transactions, set forth in Sections 268 to 275 of the Companies Law. |
• |
Shareholder Approval – We seek
shareholder approval for all corporate action requiring such approval, in accordance with the requirements of the Companies Law.
|
• |
Equity Compensation Plans – We
do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as
set forth in NASDAQ Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law. We will attempt
to seek shareholder approval for our stock option or equity compensation plans (and the relevant annexes thereto) to the extent required
in order to ensure they are tax qualified for our employees in the United States. However, even if such approval is not received, then
the stock option or equity compensation plans will continue to be in effect, but the Company will be unable to grant options to its U.S.
employees that qualify as Incentive Stock Options for U.S. federal tax purpose. Our stock option or other equity compensation plans are
also available to our non-U.S. employees, and provide features necessary to comply with applicable non-U.S. tax laws. |
(a) |
Amortization of expenses incurred in connection with certain public securities issuances over a three-year period; and |
(b) |
Accelerated depreciation rates on know-how, patents and/or right to use a patent or certain other intangible property rights.
|
2024 |
2023 | |||||||
Audit Fees(1)
|
$ |
120,000 |
$ |
120,000 |
||||
Audit-Related Fees(2)
|
$ |
7,630 |
- |
|||||
Tax Fees(3)
|
$ |
36,000 |
$ |
22,454 |
(1) |
Audit Fees consist of fees for professional services rendered for the audit of the Company's annual consolidated financial statements
and services normally provided by the independent auditor in connection with statutory and regulatory filings or engagements. |
(2) |
Audit-Related Fees consist of accounting consultation and consultation on financial accounting standards, not arising as part of
the audit, as well as procedures performed over registration statements. |
(3) |
Tax Fees are the aggregate fees billed for professional services rendered for tax compliance, transfer pricing studies, and tax advice
other than in connection with the Audit. Tax compliance involves audit of original and amended tax returns, tax planning and tax advice.
|
Period |
Total Number of Shares Purchased (1)
|
Average Price Paid per Share (US$) |
Total Number of Shares Purchased as Part of
Publicly Announced Plan |
Approximate Dollar Value that May Yet Be Purchased
Under the Plan (US$) |
||||||||||||
January 1, 2024 - January 31, 2024 |
90,000 |
17.816 |
509,657 |
4,086,712 |
||||||||||||
February 1, 2024 - February 28, 2024 |
94,816 |
15.84 |
604,473 |
2,584,780 |
||||||||||||
March 1, 2024 - March 31, 2024 |
65,087 |
15.251 |
669,560 |
1,592,168 |
||||||||||||
April 1, 2024 - April 30, 2024 |
64,729 |
15.37 |
734,289 |
597,275 |
||||||||||||
May 1, 2024 - May 7, 2024 |
22,728 |
16.404 |
757,017 |
224,435 |
||||||||||||
May 8, 2024 - May 31, 2024 |
22,725 |
16.505 |
22,725 |
14,624,926 |
||||||||||||
May 1, 2024 - May 31, 2024 |
45,453 |
16.455 |
45,453 |
14,624,926 |
||||||||||||
June 1, 2024 - June 30, 2024 |
49,940 |
15.418 |
72,665 |
13,854,952 |
||||||||||||
July 1, 2024 - July 31, 2024 |
51,623 |
15.255 |
124,288 |
13,067,429 |
||||||||||||
August 1, 2024 - August 31, 2024 |
72,505 |
12.456 |
196,793 |
12,164,338 |
||||||||||||
September 1, 2024 - September 30, 2024 |
23,592 |
13.306 |
220,385 |
11,850,424 |
||||||||||||
October 1, 2024 - October 31, 2024 |
30,084 |
13.567 |
250,469 |
11,442,277 |
||||||||||||
November 1, 2024 - November 30, 2024 |
22,937 |
14.103 |
273,406 |
11,118,804 |
||||||||||||
December 1, 2024 - December 31, 2024 |
34,471 |
14.787 |
307,877 |
10,609,074 |
• |
We are not required to distribute annual and quarterly reports directly to shareholders, but we do make our audited financial statements
available to our shareholders prior to our annual general meeting and furnish our quarterly and annual financial results with the SEC
on Form 6-K; |
|
• |
A majority of our Board of Directors may not necessarily be comprised of independent directors as defined in the NASDAQ Listing Rules,
however, a majority of our audit committee are independent directors in accordance with NASDAQ Listing Rule 5605(a)(2). Our directors
are elected to our Board of Directors in accordance with the new directors voting mechanism approved by our shareholders on the Annual
General Meeting which took place on June 8, 2016. According to said directors voting mechanism, directors are divided into three groups,
Group A, Group B and Group C. Each group is brought for re-election once every three years, on a rotating basis, such that at each annual
general meeting of the shareholders a given group of directors is brought for election, to serve on a continuous basis for a three-year
term, until the third annual general meeting following the meeting on which such group was elected for service and until their respective
successors are duly elected, at which point their term in office shall expire. At each annual general meeting, the annual general meeting
shall be entitled to elect directors to replace the directors whose three-year term in office has expired, and so on ad infinitum, so
that each year, the term in office of one group of directors shall expire. The nominations for director which are presented to our shareholders
are generally made by our board of directors. Pursuant to the Companies Law, one or more shareholders of a company holding at least one
percent of the voting power of the company may nominate a currently serving external director for an additional three-year term. Israeli
law does not require the adoption of, and our board has not adopted, a formal written charter or board resolution addressing the nomination
process and related matters. Compensation of our directors and other office holders of the Company is determined in accordance with Israeli
law; |
• |
Our audit committee has not adopted a formal written audit committee charter specifying the items enumerated in NASDAQ Listing Rule
5605(c)(1). We believe that the members of our audit committee comply with the requirements of the Israeli law, as well as NASDAQ Listing
Rule 5605(c)(3) and Rule 10A-3(b) of the general rules and regulations promulgated under the Securities Act of 1933. For a detailed discussion
please refer to "Item 6 – Directors, Senior Management and Employees – Audit Committee"; |
• |
As opposed to NASDAQ Listing Rule 5620(c)(3), which sets forth a minimum quorum for a shareholders meeting, under Israeli law a company
is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at
a shareholders meeting. Our current Articles of Association provide that a quorum of two or more shareholders, present in person or by
proxy, holding shares conferring in the aggregate more than thirty-three and a third (33 1/3 %) percent of the voting power of the Company
is required; |
• |
All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts
and transactions set forth in the Companies Law, and are not subject to the review process set forth in NASDAQ Listing Rule 5630. For
a detailed discussion please refer to "Item 10 – Additional Information – the Companies Law"; |
• |
We seek shareholder approval for all corporate action requiring such approval in accordance with the requirements of the Companies
Law rather than under the requirements of the NASDAQ Marketplace Rules, including (but not limited to) the appointment or termination
of auditors, appointment and dismissal of directors, approval of interested party acts and transactions requiring general meeting approval
as discussed above and a merger; |
• |
We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilities of
our compensation committee, office holder compensation, and any required approval by the shareholders of such compensation. Israeli law,
and our amended and restated Articles of Association, do not require that a compensation committee composed solely of independent members
of our board of directors determine (or recommend to the board of directors for determination) an executive officer's compensation, as
required under NASDAQ listing standards related to compensation committee independence and responsibilities; nor do they require that
the Company adopt and file a compensation committee charter. Instead, our compensation committee has been established and conducts itself
in accordance with provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies
Law. Furthermore, the compensation of office holders is determined and approved by our compensation committee and our board of directors,
and in certain circumstances by our shareholders, either in consistency with our previously approved Executive Compensation Policy or,
in special circumstances in deviation therefrom, taking into account certain considerations set forth in the Companies Law. The requirements
for approval by the shareholders for any office holder compensation, and the relevant majority or special majority for such approval,
are all as set forth in the Companies Law. Thus, we will seek shareholder approval for all corporate actions with respect to office holder
compensation requiring such approval under the requirements of the Companies Law, including seeking prior approval of the shareholders
for the Executive Compensation Policy and for certain office holder compensation, rather than seeking approval for such corporate actions
in accordance with NASDAQ Listing Rules; and |
• |
We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation
plans (as set forth in NASDAQ Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law. We will
attempt to seek shareholder approval for our stock option or equity compensation plans (and the relevant annexes thereto) to the extent
required in order to ensure they are tax qualified for our employees in the United States. However, if such approval is not received,
then the stock option or equity compensation plans will continue to be in effect, but the Company will be unable to grant options to its
U.S. employees that qualify as Incentive Stock Options for U.S. federal tax purpose. Our stock option or other equity compensation plans
are also available to our non-U.S. employees, and provide features necessary to comply with applicable non-U.S. tax laws. |
|
• |
Our Board of Directors determined that the Company meets all of the requirements of the Israeli Companies Regulations (Relief for
Companies Whose Shares Are Registered for Trading Outside of Israel), 2000 (the "Regulations"),
pursuant to which Israeli companies which meet all of the following conditions may opt-out of certain Israeli regulations governing the
appointment of external directors and the composition of the audit and compensation committees (the "Israeli
Dahatz Rules"): (1) the Company's shares are listed on a foreign stock exchange which is referenced in Section 5A(c) of the Regulations,
which includes, among others, the New York Stock Exchange (NYSE); NASDAQ Global Select Market; and NASDAQ Global Market; (2) the Company
does not have a controlling shareholder; and (3) the Company complies with the requirements of the foreign securities laws and stock exchange
regulations relating to appointment of independent directors and composition of the audit and compensation committees as applicable to
companies which are incorporated under the laws of such foreign countries. The Board of Directors approved the opt-out of the Israeli
Dahatz Rules and follow the requirements of the NASDAQ Listing Rules and the rules under the Securities Act relating to appointment of
independent directors and composition of the audit and compensation committees which are applicable to companies which are incorporated
under the laws of the United States, effective July 29, 2020. |
To enhance our cybersecurity capabilities, we're actively investing in IT security measures. This includes identifying and safeguarding critical assets, fortifying our security infrastructure, and implementing robust monitoring and alert systems. We're collaborating with cybersecurity experts and external consultants to assess our information security landscape, identify vulnerabilities, and adopt industry-best practices. This involves leveraging a range of third-party tools and technologies to improve our overall cybersecurity.
PART III.
1.1 |
4.1 |
4.2 |
4.3 |
4.4 | English summary of a Hebrew language addendum to the lease included in exhibit 4.2, between the Company and C.P.M Medical Equipment Ltd., dated August 24, 2024. (*) |
4.5 |
4.6 |
4.7 |
4.8 |
4.9 |
4.10 |
4.11 |
8.1 |
11.1 |
11.2 |
12.1 |
12.2 |
13.1 |
13.2 |
15.1 |
97.1 |
(*) |
Filed herewith.
|
SILICOM LIMITED
|
|
|
|
|
By:/s/ Liron Eizenman
Liron Eizenman
Chief Executive Officer
|
Page
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1309)
|
F - 3
|
F - 6
|
|
F - 8
|
|
F - 9
|
|
F - 10
|
|
F - 12
|
/s/ Kesselman & Kesselman
|
Certified Public Accountants (Isr.)
|
A member firm of PricewaterhouseCoopers International Limited
|
Haifa, Israel
|
March 17, 2025
|
Consolidated Balance Sheets as of December 31
|
2023
|
2024
|
||||||||||
Note
|
US$ thousands
|
US$ thousands
|
|||||||||
Assets
|
|||||||||||
Current assets
|
|||||||||||
Cash and cash equivalents
|
3
|
46,972
|
51,283
|
||||||||
Marketable securities
|
2E, 4
|
7,957
|
20,860
|
||||||||
Accounts receivable:
|
|||||||||||
Trade, net
|
2F
|
|
25,004
|
11,748
|
|||||||
Other
|
5
|
3,688
|
4,839
|
||||||||
Inventories
|
6
|
51,507
|
41,060
|
||||||||
Total current assets
|
135,128
|
129,790
|
|||||||||
Marketable securities
|
2E, 4
|
16,619
|
6,839
|
||||||||
Assets held for employees' severance benefits
|
11
|
1,357
|
1,483
|
||||||||
Deferred tax assets
|
15G
|
|
2,359
|
-
|
|||||||
Property, plant and equipment, net
|
7
|
3,552
|
3,055
|
||||||||
Intangible assets, net
|
8
|
2,253
|
2,300
|
||||||||
Operating leases right-of-use, net
|
10
|
6,466
|
6,942
|
||||||||
Total assets
|
167,734
|
150,409
|
Avi Eizenman
|
Liron Eizenman
|
Eran Gilad
|
||
Chairman of the Board of Directors
|
Chief Executive Officer
|
Chief Financial Officer
|
Consolidated Balance Sheets as of December 31 (Continued)
|
2023
|
2024
|
|||||||||||
Note
|
US$ thousands
|
US$ thousands
|
||||||||||
Liabilities and shareholders' equity
|
||||||||||||
Current liabilities
|
||||||||||||
Trade accounts payable
|
4,139
|
6,477
|
||||||||||
Other accounts payable and accrued expenses
|
9
|
6,668
|
6,945
|
|||||||||
Operating lease liabilities
|
10
|
2,070
|
1,670
|
|||||||||
Total current liabilities
|
12,877
|
15,092
|
||||||||||
Long-term liabilities
|
||||||||||||
Operating lease liabilities
|
10
|
3,877
|
4,797
|
|||||||||
Liability for employees' severance benefits
|
11
|
2,672
|
2,649
|
|||||||||
Deferred tax liabilities
|
15G
|
|
46
|
32
|
||||||||
Total liabilities
|
19,472
|
22,570
|
||||||||||
Shareholders' equity
|
12
|
|||||||||||
Ordinary shares, ILS 0.01 par value; 10,000,000 shares authorized; 7,739,274 and 7,747,274 issued as at December 31, 2023 and 2024, respectively;
6,405,523 and 5,766,286 outstanding as at December 31, 2023 and 2024, respectively |
||||||||||||
22 | 22 | |||||||||||
Additional paid-in capital
|
70,671
|
73,837
|
||||||||||
|
||||||||||||
Treasury shares (at cost) 1,333,751 and 1,980,988 ordinary shares as at December 31, 2023 and 2024, respectively
|
(43,631
|
)
|
(53,512
|
)
|
||||||||
Retained earnings
|
121,200
|
107,492
|
||||||||||
Total shareholders' equity
|
148,262
|
127,839
|
||||||||||
Total liabilities and shareholders’ equity
|
167,734
|
150,409
|
Consolidated Statements of Operations for the Year Ended December 31
|
2022
|
2023
|
2024
|
||||||||||||||
US$ thousands
|
||||||||||||||||
Note
|
Except for share and per share data
|
|||||||||||||||
Sales
|
2M, 13
|
150,582
|
124,131
|
58,114
|
||||||||||||
Cost of sales
|
98,626
|
95,442
|
41,516
|
|||||||||||||
Gross profit
|
51,956
|
28,689
|
16,598
|
|||||||||||||
Operating expenses
|
||||||||||||||||
Research and development
|
20,563
|
20,638
|
19,508
|
|||||||||||||
Sales and marketing
|
6,990
|
6,935
|
6,014
|
|||||||||||||
General and administrative
|
4,477
|
4,229
|
4,354
|
|||||||||||||
Impairment of goodwill
|
-
|
25,561
|
-
|
|||||||||||||
Total operating expenses
|
32,030
|
57,363
|
29,876
|
|||||||||||||
Operating income (loss)
|
19,926
|
(28,674
|
)
|
(13,278
|
)
|
|||||||||||
Financial income (expenses), net
|
14
|
2,464
|
1,372
|
1,961
|
||||||||||||
Income (loss) before income taxes
|
22,390
|
(27,302
|
)
|
(11,317
|
)
|
|||||||||||
Income taxes
|
15
|
4,084
|
(889
|
)
|
2,391
|
|||||||||||
Net income (loss)
|
18,306
|
(26,413
|
)
|
(13,708
|
)
|
|||||||||||
Income per share:
|
||||||||||||||||
Basic income (loss) per ordinary share (US$)
|
2T
|
|
2.733
|
(3.942
|
)
|
(2.277
|
)
|
|||||||||
Diluted income (loss) per ordinary share (US$)
|
2.694
|
(3.942
|
)
|
(2.277
|
)
|
|||||||||||
Weighted average number of ordinary
|
||||||||||||||||
shares used to compute basic income (loss)
|
||||||||||||||||
per share (in thousands)
|
6,697
|
6,700
|
6,020
|
|||||||||||||
Weighted average number of ordinary
|
||||||||||||||||
shares used to compute diluted income (loss)
|
||||||||||||||||
per share (in thousands)
|
6,796
|
6,700
|
6,020
|
Consolidated Statements of Changes in Shareholders' Equity
|
Ordinary shares
|
Additional paid-in capital
|
Treasury shares(3)
|
Retained earnings
|
Total shareholders’ equity
|
||||||||||||||||||||
Number
of shares(1)
|
US$ thousands
|
|||||||||||||||||||||||
Balance at
|
||||||||||||||||||||||||
January 1, 2022
|
6,709,528
|
22
|
63,390
|
(34,995
|
)
|
130,046
|
158,463
|
|||||||||||||||||
Purchase of treasury shares
|
(80,120
|
)
|
-
|
-
|
(3,428
|
)
|
-
|
(3,428
|
)
|
|||||||||||||||
Reissuance of treasury shares under
share-based compensation plan
|
109,298
|
-
|
(411
|
)
|
3,527
|
(739
|
)
|
2,377
|
||||||||||||||||
Share-based compensation
|
-
|
-
|
3,577
|
-
|
-
|
3,577
|
||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
18,306
|
18,306
|
||||||||||||||||||
Balance at
|
||||||||||||||||||||||||
December 31, 2022
|
6,738,706
|
22
|
66,556
|
(34,896
|
)
|
147,613
|
179,295
|
|||||||||||||||||
Exercise of options and RSUs(2)
|
69,241
|
-
|
762
|
-
|
-
|
762
|
||||||||||||||||||
Purchase of treasury shares
|
(419,657
|
)
|
-
|
-
|
(9,320
|
)
|
-
|
(9,320
|
)
|
|||||||||||||||
Reissuance of treasury shares under
share-based compensation plan
|
17,233
|
*-
|
-
|
585
|
-
|
585
|
||||||||||||||||||
Share-based compensation
|
-
|
-
|
3,353
|
-
|
-
|
3,353
|
||||||||||||||||||
Net income (loss)
|
-
|
-
|
-
|
-
|
(26,413
|
)
|
(26,413
|
)
|
||||||||||||||||
Balance at
|
||||||||||||||||||||||||
December 31, 2023
|
6,405,523
|
22
|
70,671
|
(43,631
|
)
|
121,200
|
148,262
|
|||||||||||||||||
Exercise of RSUs(2)
|
8,000
|
*-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Purchase of treasury shares
|
(647,237
|
)
|
-
|
-
|
(9,881
|
)
|
-
|
(9,881
|
)
|
|||||||||||||||
Share-based compensation
|
-
|
-
|
3,166
|
-
|
-
|
3,166
|
||||||||||||||||||
Net income (loss)
|
-
|
-
|
-
|
-
|
(13,708
|
)
|
(13,708
|
)
|
||||||||||||||||
Balance at
|
||||||||||||||||||||||||
December 31, 2024
|
5,766,286
|
22
|
73,837
|
(53,512
|
)
|
107,492
|
127,839
|
(1)
|
Net of shares held by Silicom Inc. and Silicom Ltd.
|
(2)
|
Restricted share units (hereinafter - "RSUs").
|
(3)
|
Company shares held by the Company - presented as a reduction of equity at their cost to the Company.
The treasury shares have no rights.
|
*
|
Less than 1 thousand.
|
Consolidated Statements of Cash Flows for the Year Ended December 31
|
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Cash flows from operating activities
|
||||||||||||
Net income (loss)
|
18,306
|
(26,413
|
)
|
(13,708
|
)
|
|||||||
Adjustments required to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||||||
Depreciation and amortization
|
2,415
|
2,497
|
2,209
|
|||||||||
Impairment of intangible assets
|
-
|
5,264
|
-
|
|||||||||
Impairment of goodwill
|
-
|
25,561
|
-
|
|||||||||
Write-down of obsolete inventory
|
3,002
|
6,433
|
3,682
|
|||||||||
Changes in marketable securities and exchange rate differences
|
(20
|
)
|
(140
|
)
|
(318
|
)
|
||||||
Share-based compensation expense
|
3,577
|
3,353
|
3,166
|
|||||||||
Deferred taxes, net
|
1,178
|
(1,885
|
)
|
2,345
|
||||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts receivable - trade
|
3,695
|
2,239
|
13,257
|
|||||||||
Accounts receivable - other
|
396
|
(138
|
)
|
(1,104
|
)
|
|||||||
Change in liability for employees' severance benefits, net
|
149
|
(395
|
)
|
(149
|
)
|
|||||||
Inventories
|
(15,289
|
)
|
29,909
|
6,580
|
||||||||
Trade accounts payable
|
(12,410
|
)
|
(11,508
|
)
|
2,147
|
|||||||
Other accounts payable and accrued expenses
|
(9,089
|
)
|
(2,852
|
)
|
181
|
|||||||
Net cash provided by (used in) operating activities
|
(4,090
|
)
|
31,925
|
18,288
|
||||||||
Cash flows from investing activities
|
||||||||||||
Purchase of property, plant and equipment
|
(2,089
|
)
|
(1,122
|
)
|
(932
|
)
|
||||||
Investment in intangible assets
|
(2,603
|
)
|
(1,092
|
)
|
(365
|
)
|
||||||
Proceeds from maturity of marketable securities
|
16,029
|
4,000
|
7,950
|
|||||||||
Purchases of marketable securities
|
(3,998
|
)
|
(9,623
|
)
|
(11,100
|
)
|
||||||
Amortization premium on marketable securities
|
934
|
320
|
167
|
|||||||||
Net cash provided by (used in) investing activities
|
8,273
|
(7,517
|
)
|
(4,280
|
)
|
|||||||
Cash flows from financing activities
|
||||||||||||
Exercise of options and RSUs
|
-
|
762
|
-
|
|||||||||
Purchase of treasury shares
|
(3,428
|
)
|
(9,320
|
)
|
(9,881
|
)
|
||||||
Proceeds from reissuance of treasury shares upon exercise of options
|
2,377
|
585
|
-
|
|||||||||
Net cash used in financing activities
|
(1,051
|
)
|
(7,973
|
)
|
(9,881
|
)
|
||||||
Effect of exchange rate changes on cash balances held
|
(1,683
|
)
|
(197
|
)
|
184
|
|||||||
Increase in cash and cash equivalents
|
1,449
|
16,238
|
4,311
|
|||||||||
Cash and cash equivalents at beginning of year
|
29,285
|
30,734
|
46,972
|
|||||||||
Cash and cash equivalents at end of year
|
30,734
|
46,972
|
51,283
|
Consolidated Statements of Cash Flows for the Year Ended December 31
|
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Supplementary cash flow information
|
||||||||||||
A. Non-cash transactions:
|
||||||||||||
Additions of right of use assets and lease liabilities
|
1,433
|
388
|
2,148
|
|||||||||
Termination of lease agreements
|
-
|
(620
|
)
|
-
|
||||||||
Investments in property, plant and equipment
|
37
|
54
|
332
|
|||||||||
1,470
|
(178
|
)
|
2,480
|
|||||||||
B. Cash paid (received) during the year for:
|
||||||||||||
Income taxes, net
|
(411
|
)
|
601
|
917
|
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
F - 12
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A. |
Financial statements in US dollars
|
B. |
Basis of presentation
|
F - 13
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
C. |
Estimates and assumptions
|
D. |
Cash and cash equivalents
|
E. |
Marketable securities
|
F - 14
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
F. |
Trade accounts receivable, net
|
G. |
Inventories
|
H. |
Assets held for employees’ severance benefits
|
I. |
Property, plant and equipment
|
%
|
||||
Machinery and equipment
|
15 - 33
|
|||
Office furniture and equipment
|
6 - 33
|
|||
Leasehold improvements
|
*
|
F - 15
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
J. |
Goodwill and other intangible assets
|
K. |
Impairment of long-lived assets
|
F - 16
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
L. |
Leases
|
F - 17
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
M. |
Revenue recognition
|
N. |
Cost of sales
|
O. |
Research and development costs and capitalized software development costs
|
F - 18
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
P. |
Allowance for product warranty
|
Q. |
Treasury shares
|
R. |
Income taxes
|
S. |
Share-based compensation
|
F - 19
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
S. |
Share-based compensation (cont’d)
|
T. |
Basic earnings (loss) and diluted earnings (loss) per share
|
Year ended December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
|
||||||||||||
Net earnings (loss) attributable to ordinary shares (US$ thousands)
|
18,306
|
(26,413
|
)
|
(13,708
|
)
|
|||||||
Weighted average number of ordinary shares outstanding used in basic earnings (loss) per ordinary share calculation
|
6,696,671
|
6,699,813
|
6,019,661
|
|||||||||
Add of outstanding dilutive potential ordinary shares
|
99,748
|
-
|
-
|
|||||||||
Weighted average number of ordinary shares outstanding
|
||||||||||||
used in diluted earnings (loss) per ordinary share calculation
|
6,796,419
|
6,699,813
|
6,019,661
|
|||||||||
Basic earnings (loss) per ordinary shares (US$)
|
2.733
|
(3.942
|
)
|
(2.277
|
)
|
|||||||
Diluted earnings (loss) per ordinary shares (US$)
|
2.694
|
(3.942
|
)
|
(2.277
|
)
|
|||||||
Weighted average number of shares related to options and RSUs excluded from the diluted earnings per share
|
||||||||||||
calculation because of anti-dilutive effect
|
251,868
|
69,005
|
230,696
|
F - 20
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies (cont’d)
U.
|
Comprehensive Income
|
V.
|
Fair Value Measurements
|
F - 21
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies (cont’d)
W.
|
Concentrations of risks
|
(1)
|
Credit risk
|
(2)
|
Significant customers
|
X.
|
Liabilities for loss contingencies
|
Y.
|
New accounting pronouncements
|
F - 22
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Y. |
New accounting pronouncements (cont’d) |
F - 23
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 3 - Cash and Cash Equivalents
|
December 31
|
||||||||
2023
|
2024
|
|||||||
US$ thousands
|
||||||||
Cash
|
42,009
|
47,727
|
||||||
Cash equivalents *
|
4,963
|
3,556
|
||||||
46,972
|
51,283
|
*
|
Comprised mainly of bank deposits in USD as at December 31, 2023 and 2024 carrying a weighted average interest rate of 4.57% and 3.46%, respectively.
|
F - 24
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 4 - Marketable Securities
|
The Company's investments in marketable securities as of December 31, 2023 and 2024 are classified as ''held-to-maturity'' and consist of the following:
|
Gross
|
Gross
|
|||||||||||||||
unrealized
|
unrealized
|
|||||||||||||||
Amortized
|
holding
|
holding
|
Aggregate
|
|||||||||||||
cost basis**
|
gains
|
(losses)
|
fair value*
|
|||||||||||||
US$ thousands
|
||||||||||||||||
At December 31, 2024
|
||||||||||||||||
Held to maturity:
|
||||||||||||||||
Corporate debt securities and government debt securities
|
||||||||||||||||
Current
|
20,990
|
-
|
(171
|
)
|
20,819
|
|||||||||||
Non-Current (1 to 3 years)
|
6,891
|
10
|
(61
|
)
|
6,840
|
|||||||||||
27,881
|
10
|
(232
|
)
|
27,659
|
||||||||||||
At December 31, 2023
|
||||||||||||||||
Held to maturity:
|
||||||||||||||||
Corporate debt securities and government debt securities
|
||||||||||||||||
Current
|
8,022
|
-
|
(121
|
)
|
7,901
|
|||||||||||
Non-Current (1 to 4 years)
|
16,742
|
-
|
(558
|
)
|
16,184
|
|||||||||||
24,764
|
-
|
(679
|
)
|
24,085
|
*
|
Fair value is being determined using Level 2 inputs.
|
**
|
Including accrued interest in the amount of US$ 188 thousand and US$ 182 thousand as of December 31, 2023 and 2024, respectively.
|
The accrued interest is presented as part of other receivables on the balance sheet.
|
F - 25
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 4 - Marketable Securities (Cont’d)
|
Activity in marketable securities in 2023 and 2024
|
US$ thousands
|
|||
Balance at January 1, 2023
|
19,321
|
|||
Purchases of marketable securities
|
9,623
|
|||
Changes in marketable securities, net
|
(180
|
)
|
||
Proceeds from maturity of marketable securities
|
(4,000
|
)
|
||
Balance at January 1, 2024
|
24,764
|
|||
Purchases of marketable securities
|
11,100
|
|||
Changes in marketable securities, net
|
(33
|
)
|
||
Proceeds from maturity of marketable securities
|
(7,950
|
)
|
||
Balance at December 31, 2024
|
27,881
|
The following table summarizes the gross unrealized losses or gains on investment securities and the fair value of those securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss or gain position, at December 31, 2024:
|
Less than 12 months
|
12 months or more
|
Total
|
||||||||||||||||||||||
Held to maturity:
|
Unrealized Losses
|
Fair value
|
Unrealized Losses
|
Fair value
|
Unrealized Losses
|
Fair value
|
||||||||||||||||||
Corporate debt securities and government debt securities
|
(38
|
)
|
11,102
|
(194
|
)
|
14,585
|
(232
|
)
|
25,687
|
Less than 12 months
|
12 months or more
|
Total
|
||||||||||||||||||||||
Held to maturity:
|
Unrealized Gains
|
Fair value
|
Unrealized Gains
|
Fair value
|
Unrealized Gains
|
Fair value
|
||||||||||||||||||
Corporate debt securities and government debt securities
|
7
|
990
|
3
|
982
|
10
|
1,972
|
The unrealized losses or gains on the investments were caused by changes in interest rate. The Company has the ability and intent to hold these investments until maturity and it is more likely than not that the Company will not be required to sell any of the securities before recovery.
|
F - 26
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
December 31
|
||||||||
2023
|
2024
|
|||||||
US$ thousands
|
||||||||
Advances to suppliers
|
136
|
184
|
||||||
Government authorities
|
2,030
|
3,183
|
||||||
Prepaid expense
|
829
|
1,130
|
||||||
Other receivables
|
693
|
342
|
||||||
3,688
|
4,839
|
December 31
|
||||||||
2023
|
2024
|
|||||||
US$ thousands
|
||||||||
Raw materials and components
|
36,979
|
23,130
|
||||||
Products in process
|
9,189
|
12,494
|
||||||
Finished products
|
5,339
|
5,436
|
||||||
51,507
|
41,060
|
December 31
|
||||||||
2023
|
2024
|
|||||||
US$ thousands
|
||||||||
Machinery and equipment
|
20,460
|
11,257
|
||||||
Office furniture and equipment
|
1,229
|
680
|
||||||
Leasehold improvements
|
3,547
|
2,742
|
||||||
Property, plant and equipment
|
25,236
|
14,679
|
||||||
Accumulated depreciation
|
(21,684
|
)
|
(11,624
|
)
|
||||
Property, Plant and equipment, net
|
3,552
|
3,055
|
F - 27
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
December 31
|
||||||||||||
2023
|
2024
|
|||||||||||
Useful life
|
US$ thousands
|
|||||||||||
Original cost:
|
||||||||||||
Capitalization of software development costs
|
8
|
4,909
|
5,274
|
|||||||||
Licenses
|
3
|
633
|
633
|
|||||||||
5,542
|
5,907
|
|||||||||||
Accumulated amortization:
|
||||||||||||
Capitalization of software development costs
|
2,695
|
2,993
|
||||||||||
Licenses
|
594
|
614
|
||||||||||
3,289
|
3,607
|
|||||||||||
Intangible assets, net:
|
||||||||||||
Capitalization of software development costs
|
2,214
|
2,281
|
||||||||||
Licenses
|
39
|
19
|
||||||||||
2,253
|
2,300
|
December 31
|
||||||||
2023
|
2024
|
|||||||
US$ thousands
|
||||||||
Accrued expenses
|
2,008
|
1,566
|
||||||
Employee benefits
|
3,675
|
4,184
|
||||||
Government authorities
|
520
|
242
|
||||||
Other payables
|
465
|
953
|
||||||
6,668
|
6,945
|
F - 28
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A. |
The components of operating lease cost for the year ended December 31, 2022, 2023 and 2024 were as follows:
|
Year ended
December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Operating lease costs (mainly plant and offices)
|
1,872
|
1,799
|
1,755
|
|||||||||
Variable lease payments not included in the lease liability
|
62
|
103
|
127
|
|||||||||
Short-term lease cost
|
273
|
248
|
239
|
|||||||||
Total operating lease cost
|
2,207
|
2,150
|
2,121
|
B. |
Supplemental cash flow information related to operating leases was as follows:
|
Year ended
December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Cash paid for amounts included in the measurement of lease liabilities:
|
||||||||||||
Operating cash flows from operating leases
|
1,847
|
1,662
|
1,566
|
|||||||||
Right-of-use assets obtained in exchange for lease liabilities (non-cash):
|
||||||||||||
Additions of operating leases
|
1,269
|
388
|
2,148
|
|||||||||
Termination of operating leases
|
-
|
(620
|
)
|
-
|
C. |
Supplemental balance sheet information related to operating leases was as follows:
|
December 31
|
||||||||
2023
|
2024
|
|||||||
US$ thousands
|
||||||||
Operating leases:
|
||||||||
Operating leases right-of-use
|
6,466
|
6,942
|
||||||
Current operating lease liabilities
|
2,070
|
1,670
|
||||||
Non-current operating lease liabilities
|
3,877
|
4,797
|
||||||
Total operating lease liabilities
|
5,947
|
6,467
|
F - 29
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 10 - Leases (cont’d)
|
D.
|
Supplemental balance sheet information related to operating leases was as follows (cont’d):
|
December 31
|
||||||||
2023
|
2024
|
|||||||
US$ thousands
|
||||||||
Weighted average remaining lease term (years)
|
5.8
|
5.1
|
||||||
Weighted average discount rate
|
2.3
|
%
|
3.3
|
%
|
E.
|
Future lease payments under non-cancellable leases as of December 31, 2024 were as follows:
|
December 31, 2024
|
||||
US$ thousands
|
||||
2025
|
1,635
|
|||
2026
|
1,551
|
|||
2027
|
1,283
|
|||
2028
|
1,219
|
|||
2029
|
879
|
|||
After 2029
|
318
|
|||
Total operating lease payments
|
6,885
|
|||
Less: imputed interest
|
(418
|
)
|
||
Present value of lease liabilities
|
6,467
|
F - 30
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A. |
Under Israeli law and labor agreements, Silicom is required to make severance payments to retired or dismissed employees and to employees leaving employment in certain other circumstances.
|
B. |
According to Section 14 to the Severance Pay Law ("Section 14") the payment of monthly deposits by a Company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to the employees that have entered into agreements with the Company pursuant to such Section 14. Commencing July 1, 2008, the Company has entered into agreements with a majority of its employees in order to implement Section 14. Therefore, as of that date, the payment of monthly deposits by the Company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to those employees that have entered into such agreements and therefore the Company incurs no additional liability since that date with respect to such employees. Amounts accumulated in the pension funds or insurance policies pursuant to Section 14 are not supervised or administrated by the Company and therefore neither such amounts nor the corresponding accrual are reflected in the balance sheet.
|
C. |
Consequently, the assets held for employees' severance benefits reported on the balance sheet, in respect of deposits for those employees who have signed agreements pursuant to Section 14, represent the redemption value of deposits made through June 30, 2008. The liability for employee severance benefits, with respect to those employees, represents the liability of the Company for employees' severance benefits as of June 30, 2008.
|
D. |
Expenses recorded with respect to employees' severance payments for the years ended December 31, 2022, 2023 and 2024, mainly attributed to Section 14, were US$ 1,194 thousand, US$ 878 thousand and US$ 556 thousand, respectively.
|
F - 31
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A. |
On October 21, 2013, the Board resolved to adopt the Global Share Incentive Plan (2013) (the "2013 Plan") and to reserve up to 500,000 ordinary shares for issuance under the 2013 Plan to employees, directors, officers and consultants of the Company or of any subsidiary or affiliate of the Company. In January 2018, the Board approved the increase of the number of ordinary shares reserved for issuance under the 2013 Plan by 600,000 additional ordinary shares, and on January 27, 2022, the Board increased the number of the ordinary shares available for issuance by an additional 750,000 Ordinary shares. In October 2023, the Board approved the extension of the Global Share Incentive Plan (2013) by an additional ten years and increased the number of the ordinary shares available for issuance by an additional 375,000 ordinary shares. Grants under the 2013 Plan, whether as options, restricted stock units, restricted stock or other equity based awards, including their terms, are subject to the Board of Directors' approval. Grants to directors and certain other officers are generally subject to the approvals of the Compensation Committee as well as Board of Directors, and grants to directors or a CEO (and under certain circumstances certain other officers) will also have to be approved by the Shareholders.
|
B. |
Options or RSUs granted to Israeli residents may be granted under Section 102 of the Israeli Income Tax Ordinance pursuant to which the awards of options, or the ordinary shares issued upon their exercise, must be deposited with a trustee for at least two years following the date of grant. Under Section 102, any tax payable by an employee from the grant or exercise of the awards is deferred until the transfer of the awards or ordinary shares by the trustee to the employee or upon the sale of the awards or ordinary shares.
|
F - 32
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
C. |
During 2022, 2023 and 2024, the Company granted 16,000, 86,000 and 2,969 RSUs respectively to certain of its directors, employees and consultants under the 2013 Plan. In relation to those grants:
|
1. |
The vesting period of the RSUs ranges between 2 to 3 years from the date of grant.
|
2. |
The fair value of RSUs is estimated based on the market value of the Company’s stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting.
|
3. |
The Company recognizes compensation expenses on these RSUs based on estimated grant date fair value, assuming that no dividend yield is expected in any of the years.
|
F - 33
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
D. |
On January 27, 2022, the Company granted, in the aggregate, 121,508 options to certain of its employees under the 2013 Plan. In relation to this grant:
|
1. |
The exercise price for the options (per ordinary share) was US$ 47.98 and the Option expiration date was the earlier to occur of: (a) January 27, 2030; and (b) the closing price of the shares falling below US$ 23.99 at any time after the date of grant and remains at such price or at a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant. All such outstanding options have expired by their terms in 2023.
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:
|
Average Risk-free interest rate (a)
|
1.79
|
%
|
||
Expected dividend yield
|
0.0
|
%
|
||
Average expected volatility (b)
|
44.38
|
%
|
||
Termination rate
|
9
|
%
|
||
Suboptimal factor (c)
|
3.16
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 34
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
E. |
On June 7, 2022, the Company granted, in the aggregate, 26,666 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:
|
1. |
The exercise price for the options (per ordinary share) was US$ 35.69 and the Option expiration date was the earlier to occur of: (a) June 7, 2030; and (b) the closing price of the shares falling below US$ 17.85 at any time after the date of grant and remains at such price or at a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant. All such outstanding options have expired by their terms in 2023.
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:
|
Average Risk-free interest rate (a)
|
3.01
|
%
|
||
Expected dividend yield
|
0.0
|
%
|
||
Average expected volatility (b)
|
43.93
|
%
|
||
Termination rate
|
9
|
%
|
||
Suboptimal factor (c)
|
3.14
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 35
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
F. |
On July 1, 2022, the Company granted, in the aggregate, 50,000 options to certain of its employee under the 2013 Plan. In relation to this grant:
|
1. |
The exercise price for the options (per ordinary share) was US$ 34.90 and the Option expiration date was the earlier to occur of: (a) July 1, 2030; and (b) the closing price of the shares falling below US$ 17.45 at any time after the date of grant and remains at such price or at a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant. All such outstanding options have expired by their terms in 2023.
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:
|
Average Risk-free interest rate (a)
|
2.91
|
%
|
||
Expected dividend yield
|
0.0
|
%
|
||
Average expected volatility (b)
|
44.02
|
%
|
||
Termination rate
|
9
|
%
|
||
Suboptimal factor (c)
|
3.14
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 36
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
G. |
On June 14, 2023, the Company granted, in the aggregate, 137,911 options to certain of its employee under the 2013 Plan. In relation to this grant:
|
1. |
The exercise price for the options (per ordinary share) was US$ 35.12 and the Option expiration date was the earlier to occur of: (a) July 1, 2031; and (b) the closing price of the shares falling below US$ 17.56 at any time after the date of grant and remains at such price or at a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant. All such outstanding options have expired by their terms in 2023.
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:
|
Average Risk-free interest rate (a)
|
3.91
|
%
|
||
Expected dividend yield
|
0.0
|
%
|
||
Average expected volatility (b)
|
41.78
|
%
|
||
Termination rate
|
7
|
%
|
||
Suboptimal factor (c)
|
2.76
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 37
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
H. |
On June 18, 2024, the Company granted, in the aggregate, 410,714 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:
|
1. |
The exercise price for the options (per ordinary share) was US$ 16.42 and the Option expiration date is June 18, 2032. The options vest and become exercisable in two equal portions: 50% on the second anniversary of the date of grant, and 50% on the third anniversary of the date of grant.
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:
|
Average Risk-free interest rate (a)
|
4.22
|
%
|
||
Expected dividend yield
|
0.0
|
%
|
||
Average expected volatility (b)
|
42.84
|
%
|
||
Post-vesting termination rate
|
7
|
%
|
||
Suboptimal factor (c)
|
2.76
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 38
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
|
Share based compensation (cont'd)
|
I.
|
The following table summarizes information regarding stock options as at December 31, 2024:
|
Options outstanding
|
Options exercisable
|
||||||||||||||||
Weighted average
|
Weighted average
|
||||||||||||||||
remaining
|
remaining
|
||||||||||||||||
Exercise price
|
Number
|
contractual life
|
Number
|
contractual life
|
|||||||||||||
US$
|
of options
|
(in years)
|
of options
|
(in years)
|
|||||||||||||
33.27
|
10,148
|
1.3
|
10,148
|
1.3
|
|||||||||||||
16.42
|
395,422
|
7.5
|
- | - |
F - 39
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
|
Share based compensation (cont'd)
|
J.
|
The stock option activity under the abovementioned plans is as follows:
|
Weighted
|
||||||||||||
Weighted
|
average
|
|||||||||||
Number
|
average
|
grant date
|
||||||||||
of options
|
exercise price
|
fair value
|
||||||||||
US$
|
US$
|
|||||||||||
Balance at January 1, 2022
|
579,521
|
|||||||||||
Granted
|
198,174
|
40.82
|
15.13
|
|||||||||
Exercised
|
(66,298
|
)
|
33.09
|
13.21
|
||||||||
Forfeited
|
(50,335
|
)
|
41.67
|
15.75
|
||||||||
Balance at December 31, 2022
|
661,062
|
|||||||||||
Granted
|
137,911
|
35.12
|
15.84
|
|||||||||
Exercised
|
(45,474
|
)
|
29.91
|
12.33
|
||||||||
Forfeited
|
(14,256
|
)
|
40.40
|
15.90
|
||||||||
Expired
|
(729,095
|
)
|
37.80
|
15.05
|
||||||||
Balance at December 31, 2023
|
10,148
|
|||||||||||
Granted
|
410,714
|
16.42
|
7.08
|
|||||||||
Forfeited
|
(15,292
|
)
|
16.42
|
7.08
|
||||||||
Balance at December 31, 2024
|
405,570
|
|||||||||||
Exercisable at December 31, 2024
|
10,148
|
F - 40
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
|
Share based compensation (cont'd)
|
K.
|
The Restricted Share Units activity under the abovementioned plans is as follows:
|
Weighted
|
||||||||
Number of
|
average
|
|||||||
Restricted
|
grant date
|
|||||||
Share Units
|
fair value
|
|||||||
US$
|
||||||||
Balance at January 1, 2022
|
86,000
|
|||||||
Granted
|
16,000
|
43.02
|
||||||
Forfeited
|
(2,000
|
)
|
35.33
|
|||||
Vested
|
(43,000
|
)
|
35.33
|
|||||
Balance at December 31, 2022
|
57,000
|
|||||||
Granted
|
86,000
|
36.24
|
||||||
Forfeited
|
(8,000
|
)
|
36.24
|
|||||
Vested
|
(41,000
|
)
|
35.33
|
|||||
Balance at December 31, 2023
|
94,000
|
|||||||
Granted
|
2,969
|
15.42
|
||||||
Forfeited
|
(500
|
)
|
43.02
|
|||||
Vested
|
(8,000
|
)
|
36.24
|
|||||
Balance at December 31, 2024
|
88,469
|
F - 41
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
|
Share based compensation (cont'd)
|
L.
|
During 2022, 2023 and 2024, the Company recorded share-based compensation expenses. The following summarizes the allocation of the stock-based compensation expenses:
|
Year ended December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Cost of sales
|
638
|
428
|
276
|
|||||||||
Research and development costs
|
1,454
|
1,423
|
1,373
|
|||||||||
Selling and marketing expenses
|
774
|
747
|
728
|
|||||||||
General and administrative expenses
|
711
|
755
|
789
|
|||||||||
3,577
|
3,353
|
3,166
|
F - 42
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A.
|
Information on sales by geographic distribution:
|
The Company has one operating segment.
Sales are attributed to geographic distribution based on the location of the ultimate customer:
|
Year ended December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
USA
|
107,908
|
103,985
|
43,698
|
|||||||||
North America - other
|
836
|
1,442
|
280
|
|||||||||
Israel
|
13,586
|
7,560
|
3,365
|
|||||||||
Europe
|
20,715
|
8,048
|
6,221
|
|||||||||
Asia-Pacific
|
7,537
|
3,096
|
4,550
|
|||||||||
150,582
|
124,131
|
58,114
|
B.
|
Sales to single ultimate customers exceeding 10% of sales (US$ thousands):
|
Year ended December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Customer "A"
|
22,926
|
11,018
|
7,611
|
|||||||||
Customer "B"
|
7,821
|
5,889
|
7,302
|
|||||||||
Customer "C"
|
3,733
|
26,808
|
2,904
|
F - 43
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
C.
|
Information on Long-Lived Assets - Property, Plant and Equipment and ROU assets by geographic areas:
|
The following table presents the locations of the Company’s long-lived assets as of December 31, 2023 and 2024:
|
Year ended December 31
|
||||||||
2023
|
2024
|
|||||||
US$ thousands
|
||||||||
North America
|
626
|
420
|
||||||
Europe
|
153
|
71
|
||||||
Israel
|
9,239
|
9,506
|
||||||
10,018
|
9,997
|
F - 44
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
D. | Segment information: |
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”). The Company’s operations are managed and reported to its Chief Executive Officer (“CEO”), the Company’s chief operating decision maker ("CODM"). Our chief operating decision maker (“CODM”), manages the Company’s business activities as a single operating and reportable segment at the consolidated level. Accordingly, our CODM uses consolidated net income to measure segment profit or loss, allocate resources and assess performance. |
Year ended December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Sales
|
150,582
|
124,131
|
58,114
|
|||||||||
Raw material and subcontracted manufacturing costs |
(85,190
|
)
|
(81,947
|
)
|
(35,364
|
)
|
||||||
Payroll & related expenses
|
(25,017
|
)
|
(21,465
|
)
|
(19,481
|
)
|
||||||
Share-based compensation expenses
|
(3,577
|
)
|
(3,353
|
)
|
(3,166
|
)
|
||||||
Subcontractor work
|
(2,329
|
)
|
(2,681
|
)
|
(3,747
|
)
|
||||||
Depreciation costs
|
(2,208
|
)
|
(2,212
|
)
|
(1,891
|
)
|
||||||
Rent
|
(2,207
|
)
|
(2,150
|
)
|
(2,121
|
)
|
||||||
Impairment of goodwill
|
-
|
(25,561
|
)
|
-
|
||||||||
Other segment items *
|
(9,921
|
)
|
(13,151
|
)
|
(5,304
|
)
|
||||||
Amortization expense
|
(207
|
)
|
(285
|
)
|
(318
|
)
|
||||||
Financial income, net
|
2,464
|
1,372
|
1,961
|
|||||||||
Income taxes
|
(4,084
|
)
|
889
|
(2,391
|
)
|
|||||||
Segment net income (loss)
|
18,306
|
(26,413
|
)
|
(13,708
|
)
|
* | Other segment items included in Segment net loss includes professional services, consulting and other outside services expenses, travel expenses, insurance, facilities, and other overhead items. |
F - 45
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Year ended December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Interest income
|
230
|
1,254
|
2,597
|
|||||||||
Exchange rate differences, net
|
2,308
|
163
|
(625
|
)
|
||||||||
Bank charges
|
(74
|
)
|
(45
|
)
|
(11
|
)
|
||||||
2,464
|
1,372
|
1,961
|
F - 46
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A. |
Measurement of results for tax purposes under the Israeli Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their Taxable Income) - 1986
|
B. |
Corporate tax rate in Israel
|
C. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law")
|
1. | On December 29, 2010, the Knesset approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments – 1959 (hereinafter – "the Amendment to the Law"). The Amendment to the Law is effective from January 1, 2011, and its provisions will apply to preferred income derived or accrued in 2011 and thereafter by a Preferred Company, per the definition of these terms in the Amendment to the Law. |
F - 47
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
C. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law") (cont'd)
|
F - 48
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
C. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law") (cont'd)
|
2. | In the event of distribution by the Company of dividends out of its retained earnings that were generated prior to the 2014 tax year and were tax exempt under the "Approved Enterprise" or "Benefited Enterprise" status, the Company would be subjected to a maximum of 25% corporate tax on the amount distributed, and a further 15% withholding tax would be deducted from the amounts distributed to the shareholders. |
F - 49
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
D.
|
Taxation of the subsidiaries
|
1. |
The subsidiary Silicom Inc. files tax returns with US federal tax authorities and with state tax authorities in the states of New Jersey, California, Virginia, New York, New Mexico, Tennessee, Texas and Illinois.
|
2. |
The subsidiary Silicom Denmark is taxed according to the tax laws in Denmark, subject to corporate tax of 22%.
|
3. |
The Company has not provided for Israeli income tax and foreign withholding taxes on US$ 18,676 thousand of its non-Israeli subsidiaries' undistributed earnings as of December 31, 2024. The earnings could become subject to tax if earnings are remitted or deemed remitted as dividends or upon sale of a subsidiary.
|
E.
|
Tax assessments
|
1. |
For the Israeli jurisdiction the Company has final tax assessments for all years up to and including the tax year ended December 31, 2019.
|
2. |
For the US federal jurisdiction, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2020. For the New Jersey and California state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2019. For the New York, Texas and Illinois state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2020. For the Virginia, Tennessee, and New Mexico state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2021.
|
3. |
For the Danish jurisdiction, Silicom Denmark has final tax assessments for all years up to and including the tax year ended December 31, 2020.
|
4. |
The balance of the operating loss carryforwards as of December 31, 2024, is US$ 16,892 thousand.
|
F - 50
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 15 - Taxes on Income (cont'd)
|
F.
|
Income (loss) before income taxes and income taxes expense (benefit) included in the consolidated statements of operations
|
Year ended December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Income (loss) before income taxes:
|
||||||||||||
Israel
|
17,915
|
(30,101
|
)
|
(12,287
|
)
|
|||||||
Foreign jurisdictions
|
4,475
|
2,799
|
970
|
|||||||||
22,390
|
(27,302
|
)
|
(11,317
|
)
|
||||||||
Current taxes:
|
||||||||||||
Israel
|
1,765
|
201
|
235
|
|||||||||
Foreign jurisdictions
|
1,198
|
921
|
457
|
|||||||||
2,963
|
1,122
|
692
|
||||||||||
Current tax (benefits) expenses relating to prior years:
|
||||||||||||
Israel
|
(215
|
)
|
(10
|
)
|
(814
|
)
|
||||||
Foreign jurisdictions
|
158
|
(116
|
)
|
168
|
||||||||
(57
|
)
|
(126
|
)
|
(646
|
)
|
|||||||
Deferred taxes:
|
||||||||||||
Israel
|
1,114
|
(1,857
|
)
|
2,359
|
||||||||
Foreign jurisdictions
|
64
|
(28
|
)
|
(14
|
)
|
|||||||
1,178
|
(1,885
|
)
|
2,345
|
|||||||||
Income tax expense (benefit)
|
4,084
|
(889
|
)
|
2,391
|
F - 51
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
G.
|
Deferred tax assets and liabilities
|
December 31
|
December 31
|
|||||||
2023
|
2024
|
|||||||
US$ thousands
|
US$ thousands
|
|||||||
Deferred tax assets:
|
||||||||
Accrued employee benefits
|
266
|
258
|
||||||
Research and development costs
|
1,065
|
1,029
|
||||||
Operating loss carryforwards
|
306
|
1,370
|
||||||
Property, plant and equipment
|
-
|
10
|
||||||
Share based compensation
|
338
|
438
|
||||||
Intangible assets
|
117
|
16
|
||||||
Operating lease liabilities
|
446
|
485
|
||||||
Goodwill*
|
382
|
55
|
||||||
Other
|
39
|
36
|
||||||
Gross deferred tax assets, before valuation allowances
|
2,959
|
3,697
|
||||||
Less: valuation allowance
|
-
|
(2,918
|
)
|
|||||
Total deferred tax assets:
|
2,959
|
779
|
||||||
Deferred tax liabilities:
|
||||||||
Intangible assets
|
(161
|
)
|
(290
|
)
|
||||
Operating leases right-of-use, net
|
(485
|
)
|
(521
|
)
|
||||
Total deferred tax liabilities
|
(646
|
)
|
(811
|
)
|
||||
Net deferred tax assets
|
2,313
|
(32
|
)
|
|||||
In Israel
|
2,359
|
-
|
||||||
Foreign jurisdictions
|
(46
|
)
|
(32
|
)
|
||||
Net deferred tax assets
|
2,313
|
(32
|
)
|
|||||
Non-current deferred tax assets
|
2,359
|
-
|
||||||
Non-current deferred tax liabilities
|
(46
|
)
|
(32
|
)
|
F - 52
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 15 - Taxes on Income (cont'd)
|
H.
|
Reconciliation of the statutory tax expense to actual tax expense
|
Year ended December 31
|
||||||||||||
2022
|
2023
|
2024
|
||||||||||
US$ thousands
|
||||||||||||
Income (loss) before income taxes
|
22,390
|
(27,302
|
)
|
(11,317
|
)
|
|||||||
Statutory tax rate in Israel
|
23.0
|
%
|
23.0
|
%
|
23.0
|
%
|
||||||
5,150
|
(6,279
|
)
|
(2,603
|
)
|
||||||||
Increase (decrease) in taxes resulting from:
|
||||||||||||
Non-deductible operating expenses
|
566
|
4,308
|
485
|
|||||||||
Non-taxable income
|
-
|
-
|
(61
|
)
|
||||||||
Prior years adjustments
|
(57
|
)
|
(126
|
)
|
(646
|
)
|
||||||
Tax effect due to "Preferred Enterprise" status
|
(1,949
|
)
|
784
|
2,121
|
||||||||
Statutory rate differential
|
168
|
221
|
177
|
|||||||||
Valuation Allowance
|
-
|
-
|
2,918
|
|||||||||
Other
|
206
|
203
|
-
|
|||||||||
Income tax expense (benefit)
|
4,084
|
(889
|
)
|
2,391
|
The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence during the year ended December 31, 2024, we cannot assume that it is more likely than not that the tax benefits relating to carry forward losses and deductible temporary differences will be realized. Accordingly, we have maintained a valuation allowance against the deferred tax assets and intend to maintain the applicable valuation allowance until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance.
F - 53
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
I.
|
Accounting for uncertainty in income taxes
|
F - 54
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
F - 55
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
|
1. |
The parties agree that the lease agreement dated December 3, 2014, will be extended by 60 additional months commencing on March 1, 2025 and terminating on February 28,
2030.
|
|
2. |
It is clarified that apart from what is written in this addendum, the Lease Agreement shall continue to bind the parties.
|
|
1. |
The parties agree that the lease agreement dated December 3, 2014, will be extended by 60 additional months commencing on March 1, 2025 and terminating on February 28,
2030.
|
|
2. |
It is clarified that apart from what is written in this addendum, the Lease Agreement shall continue to bind the parties.
|
Company Name
|
Country of Incorporation
|
|
Silicom Connectivity Solutions, Inc.
|
The United States
|
|
Silicom Denmark A/S (Fiberblaze A/S)
|
Denmark
|
|
• |
Financial results
|
|
• |
Adoption of new Company strategic plans
|
|
• |
News of a pending or proposed merger
|
|
• |
News of the disposition of a subsidiary
|
|
• |
Impending bankruptcy or financial liquidity problems
|
|
• |
Gain or loss of a substantial customer or supplier
|
|
• |
Obtaining or losing important contracts
|
|
• |
Significant disputes with major suppliers or customers
|
|
• |
Changes in dividend policy
|
|
• |
New product announcements of a significant nature
|
|
• |
Significant product defects or modifications
|
|
• |
Stock splits
|
|
• |
Acquisitions/Divestitures
|
|
• |
Criminal charge or government investigations
|
|
• |
New equity or debt offerings
|
|
• |
Significant litigation exposure due to actual or threatened litigation
|
|
• |
Major changes in senior management
|
|
• |
Major changes in accounting methods
|
|
• |
Any other information which might have a significant impact on the Company.
|
Announcement on Monday
|
First Day for Transaction
|
Before Market Opens
|
Wednesday
|
While Market is Open
|
Thursday
|
After Market Closes
|
Thursday
|
|
1. |
Liability for Insider Trading. Under U.S. securities law, insiders may be subject to fines of
up to $5,000,000 (and $25,000,000 for entities), civil penalties of up to three times the amount of the profit gained or loss avoided and/or up to twenty years in jail for each transaction in the Company's securities at a time when they
have knowledge of Material Non- Public information regarding the Company.
|
|
2. |
Liability for Tipping. Insiders may also be liable for improper transactions by any person (commonly referred to as a "Tippee") to whom they have disclosed Material Non-Public information regarding the Company or to whom they have made recommendations or expressed opinions on the basis of such information as to
trading in the Company's securities. The SEC has imposed large penalties even when the disclosing person did not profit from the trading. The SEC, the stock exchanges and the National Association of Securities Dealers, Inc. use sophisticated
electronic surveillance techniques to uncover insider trading.
|
|
3. |
Possible Disciplinary Actions. Employees, officers, consultants and directors of the Company who violate this Policy shall also be subject to disciplinary action by the
Company, which may among other things include ineligibility for future participation in the Company's equity incentive plans or termination of employment.
|
1. |
I have reviewed this annual report on Form 20-F of Silicom Ltd.;
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the Company and have: |
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
(d) |
disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting; and
|
5. | The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of Company's board of directors: |
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report
financial information; and
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.
|
/s/ Liron Eizenman
Liron Eizenman
Chief Executive Officer
|
1. | I have reviewed this annual report on Form 20-F of Silicom Ltd.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the Company and have: |
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
(d) |
disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting; and
|
5. | The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of Company's board of directors: |
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report
financial information; and
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.
|
/s/ Eran Gilad
Eran Gilad
Chief Financial Officer
|
1)
|
The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Liron Eizenman
Liron Eizenman
Chief Executive Officer
|
1)
|
The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Eran Gilad
Eran Gilad
Chief Financial Officer
|
|
I. |
Purpose
|
|
II. |
Definitions
|
|
(a) |
“Accounting Restatement” shall mean means an accounting restatement to correct the Company’s material noncompliance with any financial reporting requirement under securities laws, including restatements that correct an
error in previously issued financial statements (a) that is material to the previously issued financial statements or (b) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in
the current period.
|
|
(b) |
“Applicable Rules” means Section 10D of the Exchange Act, Rule
10D-1 promulgated thereunder, the listing rules of the national securities exchange or association on which the Company’s securities are listed, including Rule 5608 of the NASDAQ listing rules, and any applicable rules, standards or other
guidance adopted by the Securities and Exchange Commission or any national securities exchange or association on which the Company’s securities are listed, or the Companies Law.
|
|
(c) |
“Board” shall mean the Board of Directors of the Company.
|
|
(d) |
“Clawback Period” shall mean, with respect to any Accounting
Restatement, the three completed fiscal years immediately preceding the Restatement Date and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three
completed fiscal years.
|
|
(e) |
“Committee” shall mean the Compensation Committee of the Board.
|
|
(f) |
“Effective Date” shall mean October 2, 2023.
|
|
(g) |
“Erroneously-Awarded Compensation” shall mean the amount of
Incentive-Based Compensation that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received had it been determined based on the restated amounts. This amount must be computed without regard to any taxes paid.
|
|
(h) |
“Financial Reporting Measures” shall mean measures that are
determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures, including, without limitation, measures
that are “non-GAAP financial measures” for purposes of Exchange Act Regulation G and Item 10(e) of Regulation S-K, as well other measures, metrics and ratios that are not non- GAAP measures. For purposes of this Policy, Financial Reporting
Measures shall include stock price and total shareholder return (and any measures that are derived wholly or in part from stock price or total shareholder return). A Financial Reporting Measure need not be presented within the Company’s
financial statements or included in a Company filing with the SEC.
|
|
(i) |
“Impracticable” means (a) the direct expense paid to third
parties to assist in enforcing recovery would exceed the Erroneously Awarded Compensation; provided that the Company has (i) made reasonable attempt(s) to recover the Erroneously Awarded Compensation, (ii) documented such reasonable
attempt(s) and (iii) provided such documentation to the national securities exchange or association on which the Company’s securities are listed, (b) the recovery would violate the Company’s home country laws adopted prior to November 28,
2022, provided that the Company has (i) obtained an opinion of home country counsel, acceptable to the relevant listing exchange or association, that recovery would result in such a violation and (ii) provided such opinion to the relevant
listing exchange or association, or (c) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13)
or 26 U.S.C. 411(a) and the regulations thereunder.
|
|
(j) |
Incentive-Based Compensation” means any compensation (including, for the avoidance of doubt, any cash, equity, or equity-based compensation, whether deferred or current) that is granted, earned, and/or vested based wholly
or in part upon the attainment of one or more Financial Reporting Measures and “received” by a person: (a) after such person began service as an Officer; (b) who served as an Officer at any time during the performance period applicable to
such incentive-based compensation; (c) while the Company has a class of securities listed on a national securities exchange or association; and (d) during the Clawback Period.
|
|
(k) |
“Officer” shall mean means any “executive officer” of the Company
as such term is defined in Rule 5608 of the NASDAQ listing rules or within the meaning of the Companies Law. Individuals who are “executive officers” of the Company’s parent(s) or subsidiaries are deemed executive officers of the Company if
they perform such policy making functions for the Company.
|
|
(l) |
“Other Recovery Arrangements” means any clawback, recoupment, forfeiture or similar policies or provisions of the Company or its affiliates, including any such policies or provisions of such effect contained in any
employment agreement, bonus plan, incentive plan, equity-based plan or award agreement thereunder or similar plan, program or agreement of the Company or an affiliate or required under applicable law (including, without limitation, the Compensation Policy) and any other right of clawback, recoupment, forfeiture or
repayment that is required by applicable law.
|
|
(m) |
“Received” shall mean Incentive-Based Compensation received, or
deemed to be received, in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation is attained, even if the payment, vesting or grant occurs after the fiscal period.
|
|
(n) |
“Restatement Date” shall mean the earlier of (i) the date the
Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement,
or (ii) the date that a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement
|
|
III. |
Persons Subject to Clawback Policy
|
|
IV. |
Compensation Subject to Policy
|
V. | Recovery of Compensation |
|
VI. |
Manner of Recovery; Limitation of Duplicative Recovery
|
|
VII. |
No Indemnification
|
|
VIII. |
Administration
|
|
IX. |
Amendment; Termination
|
|
X. |
Other Recoupment Rights; No Additional Payments
|