Annual and Transition Report (foreign Private Issuer) (20-f)

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

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

☐ 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 _________

Commission file number 000-30394

Metalink Ltd.

(Exact name of Registrant as specified in its charter)

Israel

(Jurisdiction of incorporation or organization)

c/o Top Alpha Capital Ltd., Haaliya 24, Beit-Yitzhak 4292000, Israel

(Address of principal executive offices)

Attn: Daniel Magen, Tel: +972-72-2117400 Fax: +972-9-8877326, Haaliya 24, Beit-Yitzhak 4292000, Israel
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Ordinary Shares, NIS 1.0 par value per share
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report (December 31, 2020):

1,255,640 Ordinary Shares, NIS 1.0 par value per share (excluding 1,525,067 treasury shares)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

☒

U.S. GAAP

☐	International Financial Reporting Standards as issued by the International Accounting Standards Board

☐

Other

If “Other” has been checked in response to the previous question indicate by check mark which financial statements the registrant has elected to follow: ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☒ Yes ☐ No

INTRODUCTION

Unless indicated otherwise by the context, all references in this annual report to “we”, “us”, “our”, “Metalink”, or the “Company” are to Metalink Ltd.

When the following terms and abbreviations appear in the text of this annual report, they have the meanings indicated below:

·the “Companies Law” or the “Israeli Companies Law” are to the Israeli Companies Law, 5759-1999;

·“dollars” or “$” are to United States dollars;

·“Lantiq” are to Lantiq Israel Ltd. and Lantiq Beteiligungs - GmbH & Co. KG.;

·“Lantiq Transaction” are to the sale of our WLAN business to Lantiq on February 15, 2010 pursuant to that Asset Purchase Agreement, dated January 5, 2010, by and among us and Lantiq;

·“NASDAQ” are to the NASDAQ Capital Market (formerly, the Nasdaq SmallCap Market);

·“NIS” or “shekel” are to New Israeli Shekels;

·“ordinary shares” are to our ordinary shares, NIS 1.0 par value per share; and

·“SEC” are to the United States Securities and Exchange Commission.

Incorporation by Reference

Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this annual report or to any registration statement or annual report that we previously filed, you may read the document itself for a complete description of its terms, and the summary included herein is qualified by reference to the full text of the document which is incorporated by reference into this annual report.

Exchange Rate

On December 31, 2020, the exchange rate between the NIS and the dollar, as quoted by the Bank of Israel, was NIS 3.215 to $1.00. Unless derived from our financial statements or indicated otherwise by the context, statements in this annual report that provide the dollar equivalent of NIS amounts or provide the NIS equivalent of dollar amounts are based on such exchange rate.

Cautionary Statement Concerning Forward-Looking Statements

Except for the historical information contained herein, the statements contained in this annual report are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws with respect to our business, financial condition, prospects and results of operations. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including uncertainty as to our plan of operation; uncertainty as to our ability to generate revenues and reach profitability; the fact that our U.S. shareholders may suffer adverse tax consequences if we will be classified as a passive foreign investment company; changes in general economic and business conditions; changes in currency exchange rates and interest rates; as well as the other risks discussed in Item 3.D. “Key Information—Risk Factors” and elsewhere in this annual report.

We urge you to consider that statements which use the terms “believe,” “do not believe,” “expect,” “plan,” “intend,” “estimate,” “anticipate,” and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties.

Except as required by applicable law, including the securities laws of the United States, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

TABLE OF CONTENTS

		Page
	PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3.	KEY INFORMATION	1
ITEM 4.	INFORMATION ON THE COMPANY	7
ITEM 4A.	UNRESOLVED STAFF COMMENTS	9
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	9
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	14
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	22
ITEM 8.	FINANCIAL INFORMATION	23
ITEM 9.	THE OFFER AND LISTING	23
ITEM 10.	ADDITIONAL INFORMATION	24
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	31

	PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	32
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	32
ITEM 15.	CONTROLS AND PROCEDURES	32
ITEM 16.	RESERVED
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	33
ITEM 16B.	CODE OF ETHICS	33
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	33
ITEM 16D.	EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES	33
ITEM 16E.	PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	33
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	33
ITEM 16G.	CORPORATE GOVERNANCE	33
ITEM 16H.	MINE SAFETY DISCLOSURE	33

	PART III
ITEM 17.	FINANCIAL STATEMENTS	33
ITEM 18.	FINANCIAL STATEMENTS	33
ITEM 19.	EXHIBITS	34

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

Selected Financial Data

We have derived the following selected financial data from our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP.

The following selected data is derived from our audited financial statements included elsewhere in this annual report:

●

statement of income data for the years ended December 31, 2018, 2019 and 2020; and

●

balance sheet data as of December 31, 2019 and 2020.

The following selected data is derived from our audited financial statements that are not included in this annual report:

●

statement of income data for the years ended December 31, 2016 and 2017; and

●

balance sheet data as of December 31, 2016, 2017 and 2018.

You should read the following selected financial data together with Item 5 of this annual report entitled “Operating and Financial Review and Prospects” and our financial statements and notes thereto and the other financial information appearing elsewhere in this annual report.

	Year Ended December 31,*
	2016		2017			2018		2019		2020
	(U.S. dollars in thousands, except share and per share data)
Statement of Operations Data:
Revenues	$	0	$	0		$	0	$	0	$	0
Cost of revenues:
Costs and expenses		-		-			-		-		-
Royalties to the Government of Israel		-		-			-		-		-
Total cost of revenues		0		0			0		0		0
Gross profit (loss)		0		0			0		0		0
Operating expenses:
Sales and marketing		-		-			-		-		-
General and administrative		291		194			58		45		48
Total operating expenses		291		194			58		45		48
Operating (loss)		(291		(194	)		(58)		(45)		(48)
Financial income (expenses), net:		39		4			23		49		25
Net profit (loss)	$	(252)	$	(190	)	$	(35)	$	4		(23)
Per share data:
Basic and diluted earnings (loss)	$	(0.09)	$	(0.136	)	$	(0.028)	$	0.003		(0.018)
Shares used in computing loss per ordinary share:
Basic and diluted		2,690,857		1,401,128			1,255,640		1,255,640		1,255,640

	As of December 31,
	2016		2017		2018		2019		2020
	(U.S. dollars in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	4,347	$	1,966	$	24		$ 12		$301
Deposits		-		-		1,902		1,919		1,624
Working capital		4,163		1,820		1,785		1,789		1,771
Total assets		4,357		1,966		1,926		1,931		1,925
Shareholders’ equity		4,163		1,820		1,785		1,789		1,766

Capitalization and Indebtedness

Not Applicable.

Reasons for the Offer and Use of Proceeds

Not Applicable.

Risk Factors

You should carefully consider the following risks before deciding to purchase, hold or sell our stock. Set forth below are the most significant risks, as identified by our management, but we may also face risks in the future that are not presently foreseen. Our business, operating results or financial condition could be materially and adversely affected by these and other

risks. You should also refer to the other information contained or incorporated by reference in this annual report, before making any investment decision regarding our company.

Risks Related to Our Business and Industry

We currently do not engage in any business.

Since February 2010, we conducted only limited business activities related to our DSL business, which, since March 2015, we no longer conduct. Our plan of operation is to consider strategic alternatives, including a possible business combination, other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of our affiliates, and, to a limited extent, voluntary liquidation. In particular, our Board of Directors has determined to focus on exploring a possible business combination with an operating company. See also below under “We may not be successful in executing our plan of operations”.

We may not be successful in executing our plan of operations.

Since February 2010, we have not been able to identify and consummate a suitable business opportunity in accordance with our plan of operations and there can be no assurance that we will be successful in identifying and evaluating suitable business opportunities or to otherwise execute our plan of operations. While our plan of operation is to consider strategic transactions and opportunities, we have not determined to pursue any particular opportunities at this time. Accordingly, we may enter into a business combination with a business entity having no significant operating history or other negative characteristics such as having a limited or no potential for immediate earnings, or otherwise pursue a strategic transaction that will not necessarily provide us or our shareholders with significant financial benefits in the short or long term. In the event that we will complete a business combination with an operating company, the success of our operations is likely to be dependent upon the management of the target company and numerous other factors beyond our control. There is no assurance that we will be able to negotiate a business combination on terms favorable to us, or at all, or that we will otherwise be successful in executing our plan of operations. In addition, if we do consummate a major strategic transaction, such as a business combination, our shareholders may suffer a dilution of value of shares and we may need to raise additional financing because a business combination normally will involve the issuance of a significant number of additional Metalink shares and may require us to raise funds through a public or private financing. See also above under “We currently do not engage in any business” and below under “We have a controlling shareholder”.

We have a history of operating losses.

We incurred significant operating losses since our inception. Although we generated a profit from continuing operations of approximately $4,000 for the year ended December 31, 2019, we incurred a loss from continuing operations for each of the years ended December 31, 2020, 2018, 2017, 2016. Even if we are able to sustain profitability, we cannot assure that future net income will offset our accumulated deficit, which, as of December 31, 2020, was approximately $145.1 million. This is likely to have an adverse impact on the value of our stock.

We hold substantially all of our assets in cash, which exposes us to decrease in the value of such funds. Even if we determine to invest part of such cash in financial instruments, we will be exposed to decreases in the value of our financial investments and may also be deemed an “investment company” under the Investment Company Act of 1940, which could subject us to material adverse consequences.

As of December 31, 2020, we held approximately $1.9 million in cash (including short-term bank deposits), which represent substantially all of our assets. If we continue to hold such funds in cash or short-term bank deposit, it will expose us to decrease in value of such funds, especially if these short-term deposits do not yield interest rates at levels similar to the rate of inflation. On the other hand, if we determine to invest some or all of these funds in financial instruments or securities, we will be subject to loss to the extent that the market value of these instruments decline, which will adversely affect our financial condition. In addition, in order to invest such funds in any securities, we will first need to ensure that the investment of the cash proceeds will not cause us to be an “investment company” under the United States Investment Company Act of 1940, or the Investment Company Act. This is because if we were deemed to be an investment company, we would not be permitted to register under the Investment Company Act without obtaining exemptive relief from the SEC because we are incorporated outside of the United States and, prior to being permitted to register, we would not be permitted to publicly offer or promote our securities in the United States. As a result, we may be required to take certain actions with respect to the investment of our assets or the distribution of cash to shareholders in order to avoid being deemed an investment company, which actions may not be as favorable to us as if we were not potentially subject to regulation under the Investment Company Act. If we are deemed to be an investment company, we could be found to be in violation of the Investment Company Act, and a violation of that act could

subject us to material adverse consequences. We seek to conduct our operations, including by way of investing our cash and cash equivalents, to the extent possible so as not to become subject to regulation under the Investment Company Act.

We will not generate any more revenues from our DSL business.

In early 2008, we issued an “end-of-life” notice to our customers, according to which we discontinued the production of the majority of our DSL components. In March 2015, we completed the delivery of certain of our DSL products to a customer and received approximately $450,000, which we recognized in the first quarter of 2015. This order marks the last order that we will receive for our DSL products.

Risks Relating to Our Ordinary Shares

We have a controlling shareholder.

As of April 1, 2021, Mr. Daniel Magen, our Chief Executive Officer and Chief Financial Officer and a member of our Board of Directors, beneficially owned 670,000 ordinary shares representing approximately 53.4% of our outstanding ordinary shares. As a result, Mr. Magen may have sufficient voting power, subject to special approvals required by Israeli law for transactions involving controlling shareholders, to elect all of our directors (subject to the provisions of the Companies Law with regard to external directors); control our management; approve or reject any merger, consolidation or full tender offer; and otherwise exert significant influence on decisions by our shareholders on matters submitted to shareholder vote. This concentration of ownership of our ordinary shares could delay or prevent proxy contests, mergers, tender offers, or other purchases of our ordinary shares that might otherwise give our shareholders the opportunity to realize a premium over the then-prevailing market price for our ordinary shares and, as a result, may also adversely affect our share price.

The limited market for our shares may reduce their liquidity and make our stock price more volatile. You may have difficulty selling your shares.

Our ordinary shares are currently quoted on the over-the-counter market in the Pink Open Market (also known as the Pink Sheets), or OTC Pink, which is operated by OTC Markets Group, Inc. OTC Pink is a market tier of OTC Markets for various companies, including those that are registered with and reporting to the SEC (like us) and others that are delinquent in their filings. Securities traded on the OTC Pink market typically have low trading volumes and reduced liquidity. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our share price. As a result, there may be only a limited public market for our ordinary shares, and it may be more difficult to dispose of or to obtain accurate quotations as to the market value of our ordinary shares. In addition, unlike the NASDAQ Stock Market and the various international stock exchanges, there are no corporate governance requirements imposed on OTC Pink-listed companies.

Our ordinary shares are subject to the “penny stock” rules of the SEC, which makes transactions in our ordinary shares cumbersome and may reduce the value of our shares.

Rule 3a51-1 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. The market price of our ordinary shares on the OTC Pink has been substantially less than $5.00 per share and we do not currently meet any of the other rule exclusions, and therefore our ordinary shares are currently subject to the “penny stock” rules of the SEC. For as long as they are subject to such rules, transactions in our ordinary shares are cumbersome and may reduce the value of our shares. This is because for any transaction involving a penny stock like ours, unless exempt, Rule 15g-9 of the Exchange Act generally requires:

●

that a broker or dealer approve a person’s account for transactions in penny stocks; and

●

the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

●

obtain financial information and investment experience objectives of the person; and

●

make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, generally:

●

sets forth the basis on which the broker or dealer made the suitability determination; and

●

requires that the broker or dealer receive a signed, written statement from the investor prior to the transaction.

Disclosure also has to be made by the broker or dealer about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our ordinary shares and cause a decline in our market value for as long as we are subject to the said “penny stock” rules.

Substantial future sales of our ordinary shares may depress our share price.

As of April 1, 2021, Mr. Daniel Magen, our Chief Executive Officer and Chief Financial Officer and a member of our Board of Directors, beneficially owned 670,000 ordinary shares representing approximately 53.4% of our outstanding shares. If Mr. Magen sells substantial amounts of our ordinary shares, or if the perception exists that he may sell a substantial number of our ordinary shares, the market price of our ordinary shares may fall.

If we are characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences.

As more fully described in Item 10 – “Additional Information - Taxation” under the caption “Passive Foreign Investment Company Considerations,” we may be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes in 2019. If, for any taxable year, our passive income, or our assets that produce passive income, exceed specified levels, we may be characterized as a PFIC for that year and possibly also for later years. We satisfied the corporate level test to be a PFIC during some of the years 2002 – 2020. Our ordinary shares will be considered shares of a PFIC in the case of any United States person that owned those shares in 2002 or 2003 and that person has not made any of certain elections that could permit the PFIC classification of our shares to terminate in a taxable year in which we did not satisfy the test to be a PFIC. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences. These consequences may include having gains realized on the sale of our ordinary shares treated as ordinary income, rather than capital gains, and having the highest possible tax rates in prior years, together with significant interest charges, apply to substantial portions of those gains and to certain distributions, if any, that we make, whether or not we have any earnings and profits. U.S. shareholders should consult their own U.S. tax advisers with respect to the U.S. tax consequences of investing in our ordinary shares.

If we fail to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, it could have a material adverse effect on our business, operating results and stock price.

The Sarbanes-Oxley Act of 2002 imposes certain duties on us. Our efforts to comply with the management assessment requirements of Section 404 thereof have resulted in a devotion of management time and attention to compliance activities, and we expect these efforts to require the continued commitment of significant resources. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting. We may also identify material weaknesses or significant deficiencies in our internal control over financial reporting. In addition, our internal control over financial reporting has not been, and is not required to be, audited by our independent registered public accounting firm. In the future, if we are unable to assert that our internal controls are effective, our investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline. Failure to maintain effective internal control over financial reporting could also result in investigation and/or sanctions by regulatory authorities, and could have a material adverse effect on our business and operating results, investor confidence in our reported financial information, and the market price of our ordinary shares.

Risks Relating to Our Location in Israel

Conditions in the Middle East may adversely affect our business and limit our ability to persue our strategic alternatives.

We are incorporated under the laws of the State of Israel, and our principal offices are located in Israel. In addition, all of our officers and directors are residents of Israel. Accordingly, security, political and economic conditions in the Middle East in general, and in Israel in particular, affect our business.

Over the past several decades, a number of armed conflicts have taken place between Israel and its Arab neighbors and a state of hostility, varying in degree and intensity, has existed between Israel and certain other countries or militant groups in the region. Since late 2000, there has also been an increase in violence and unrest between Israel and the Palestinians, including during the summer of 2014, when Israel was engaged in an armed conflict with Hamas, a militia and political group operating in the Gaza Strip. This conflict has strained Israel’s relationship with its Arab citizens, Arab countries and, to some extent, with other countries around the world. In addition, since the end of 2010, several countries in the region have been experiencing increased political instability, which has led to changes in government in some of these countries and increases in violence and turbulence, including the ongoing civil war in Syria which shares a common border with Israel, the effects of which are currently difficult to assess. In addition, Israel faces threats from more distant neighbors, such as Iran (which has previously threatened to attack Israel and is believed to have influence over Hamas in Gaza and Hezbollah, a militia and political group operating in Lebanon) and the militant group known as the Islamic State of Iraq and Syria. This situation may potentially escalate in the future. In addition, this instability in the region may affect the global economy and marketplace. We do not believe that the political and security situation has had a material impact on our business to date; however, there can be no assurance that this will be the case for future operations. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot be assured that this government coverage will be maintained or will be adequate in the event we submit a claim. We could be adversely affected by any major hostilities, including acts of terrorism as well as cyber-attacks or any other hostilities involving or threatening Israel, the interruption or curtailment of trade between Israel and its trading partners, a significant downturn in the economic or financial condition of Israel or a significant increase in the rate of inflation.

Furthermore, some neighboring countries, as well as certain companies, organizations and movements, continue to participate in a boycott of Israeli firms and others doing business with Israel or with Israeli companies. In the past several years, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies. Similarly, Israeli companies are limited in conducting business with entities from several countries. For example, in 2008, the Israeli legislature passed a law forbidding any investments in entities that transact business with Iran. Restrictive laws, policies or practices directed towards Israel or Israeli businesses could have an adverse impact on our operating results, financial condition or the expansion of our business.

Provisions of Israeli law may delay, prevent or complicate merger or acquisition activity, which could depress the market price of our shares.

Provisions of Israeli corporate, securities and tax law may have the effect of delaying, preventing or making an acquisition of our company more difficult. For example, under the Companies Law, upon the request of a creditor of either party to a proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that as a result of the merger the surviving company will be unable to satisfy the obligations of any of the parties to the merger. This and other provisions of Israeli law could cause our ordinary shares to trade at prices below the price for which third parties might be willing to pay to gain control of us, since third parties who are otherwise willing to pay a premium over prevailing market prices to gain control of us may be unable or unwilling to do so because of these provisions of Israeli law.

It may be difficult to enforce a U.S. judgment against us, our officers and directors or to assert U.S. securities laws claims in Israel.

We are incorporated under the laws of the State of Israel. Service of process upon us, and our directors and officers, all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, because the majority of our assets and investments, and all of our directors and officers are located outside the United States, any judgment obtained in the United States against us or any of them may be difficult to collect within the United States and may not be enforced by an Israeli court.

We have been informed by our legal counsel in Israel that it may also be difficult to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws because Israel reasoning that the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear

a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing these matters.

Subject to specified time limitations and legal procedures, under the rules of private international law currently prevailing in Israel, Israeli courts may enforce a U.S. judgment in a civil matter, including a judgment based upon the civil liability provisions of the U.S. securities laws, as well as a monetary or compensatory judgment in a non-civil matter, provided that the following key conditions are met:

●

subject to limited exceptions, the judgment is final and non-appealable;

●

the judgment was given by a court competent under the laws of the state of the court and is otherwise enforceable in the state in which it was given;

●

the judgment was rendered by a court competent under the rules of private international law applicable in Israel;

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the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts;

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adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and evidence;

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the judgment is enforceable under the laws of State of Israel and its enforcement is not contrary to the law, public policy, security or sovereignty of the State of Israel;

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the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; and

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an action between the same parties in the same matter was not pending in any Israeli court at the time the lawsuit was instituted in the U.S. court.

ITEM 4.

INFORMATION ON THE COMPANY

History and Development of the Company

Corporate History and Details

Metalink was incorporated in September 1992 as a corporation under the laws of the State of Israel. Our principal executive offices are located at Kinneret 5, Bnei Brak, Israel. Our telephone number is 972-72-2117400.

From our inception through the third quarter of 1994, our operating activities related primarily to establishing a research and development organization, developing prototype chip designs which meet industry standards and developing strategic OEM partnerships with leading telecommunications equipment manufacturers. We shipped our first chipset in the fourth quarter of 1994. From that time until February 2010, we focused on developing additional products and applications, shaping new industry standards and building our worldwide indirect sales and distribution channels. In February 2010, we sold our wireless local area network (WLAN) business to Lantiq. In February 2017, we completed our self-tender offer and purchased approximately 53.3% of the shares issued and outstanding as of immediately prior to the consummation of the tender offer, for $1.50 per share, or approximately $2.15 million in the aggregate. Consequently, Mr. Daniel Magen became our largest beneficial owner, owning, in the aggregate, 670,000 ordinary shares, representing approximately 53.4% of the issued and outstanding shares of Metalink.

Recent Major Developments

There were no major developments in Metalink since January 1, 2020.

Principal Capital Expenditure and Divestitures

Capital expenditures were $0 for each of the years ended December 31, 2020, 2019 and 2018.

During 2018, 2019 and 2020, we did not make any significant divestitures.

Business Overview

Overview

Our plan of operation is to consider strategic alternatives, including a possible business combination or other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of our affiliates, and, to a limited extent, voluntary liquidation. In particular, our Board of Directors has determined to focus on exploring a possible business combination with an operating company.

Historic DSL Business

We previously marketed and sold DSL chipsets used by manufacturers of telecommunications equipment. In March 2015, we completed the delivery of our DSL products to a customer. In exchange therefor we received a payment of approximately $450,000, which we recognized in the first quarter of 2015. This order marks the last order that we will receive for our DSL products, which were the subject of an “end of life” notice that we issued in early 2008.

All of our sales in 2014 and 2015 were to one customer in Taiwan. We had no sales since 2016.

Research and Development

Since the sale of the WLAN business to Lantiq in February 2010, we are not engaged in any research and development activities.

The Government of Israel, through the Innovation Authority (formerly known as the Office of the Chief Scientist) of the Israeli Ministry of Economy, or the IIA, encourages research and development projects pursuant to the Law for the Encouragement of Research, Development and Technological Innovation, 1984, and the regulations promulgated thereunder, or the R&D Law. Since 1995, we received grants from the IIA for the development of our products, including DSL products. In addition, we were engaged in a research project, under the sixth framework program of the European Commission, under which we were entitled to grants based on certain approved expenditures of a research and development plan. See Item 5.A under “Government Grants” and Item 5.C under “Grants from the IIA”.

Manufacturing

We have never owned or operated a semiconductor fabrication facility. As a fabless provider of chipsets, we subcontracted our entire semiconductor manufacturing to third party contractors. Our chipsets were delivered to us fully assembled and tested based on our proprietary designs.

We subcontracted our semiconductor wafer manufacturing, packaging and testing to semiconductor manufacturing companies in Taiwan. The selection of these manufacturers was based on the breadth of available technology, quality, manufacturing capacity and support for design tools used by us.

Proprietary Rights

We used to rely on patent, copyright, trademark and trade secret laws, confidentiality agreements and other contractual arrangements with our employees, strategic partners and others to protect our technology. We do not currently own any registered trademarks or registered copyrights.

In addition, other parties may assert rights as inventors of the underlying technologies, which could limit our ability to fully exploit the rights conferred by any patent that we receive. Our competitors may be able to design around any patent that we receive and other parties may obtain patents that we would need to license or circumvent in order to exploit our patents.

All of our U.S. patents expired in 2018.

Government Regulations

Israeli Innovation Authority. See Item 5.C under “Grants from the IIA”.

Organizational Structure

We currently have no active subsidiaries.

Property, Plants and Equipment

In November 2017, our offices relocated to Bnei Brak, Israel, as part of our engagement with Daniel Magen to provide CFO and CEO services to the Company, without remuneration.

We believe that the aforesaid office space is suitable and adequate for our operations as currently conducted and as currently foreseen. In the event any additional or substitute offices and/or facilities will become required, we believe that we could obtain such offices and facilities at commercially reasonable rates.

ITEM 4A.

UNRESOLVED STAFF COMMENTS

None.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The information contained in this section should be read in conjunction with our financial statements and related notes included elsewhere in this annual report. Our financial statements have been prepared in accordance with U.S. GAAP.

Overview

General

Our plan of operation is to consider strategic alternatives, including a possible business combination, other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of our affiliates, and, to a limited extent, voluntary liquidation.

Revenues in 2020 and 2019 were $0.

Operating loss for 2020 was $48,000, compared to an operating loss of $45,000 in 2019. This increase was mainly due to the increase of our operating expenses.

As of December 31, 2020 and 2019, we had approximately $1.9 million in cash, cash equivalents and short-term deposits. As of the date of this annual report, we anticipate that we will be able to meet our cash requirements in the next 12 months without obtaining additional capital from external sources.

2021 Outlook

Revenues. In March 2015, we completed the delivery of certain of our DSL products to a customer. In exchange therefor we received approximately $450,000, which we recognized in the first quarter of 2015. This order marked the last order that we will receive for DSL products, which were the subject of an “end of life” notice that we issued in early 2008. As a result, we do not expect to generate any revenues in 2021.

Plan of Operations. Our plan of operation is to consider strategic alternatives, including a possible business combination or other strategic transaction with a domestic or foreign, private or public operating entity or a “going private” transaction, including with any of our affiliates, and, to a limited extent, voluntary liquidation. There is no assurance that any of these alternatives will be pursued or, if one is pursued, what the timing thereof would be or the terms on which it would occur.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. A change in those accounting rules can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced. Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. Actual results could differ from those estimates.

However, we currently did not identify any critical accounting policies that require significant judgments and estimates used in the preparation of our financial statements.

Operating Results

General

The following discussion of our results of operations for the years ended December 31, 2020, 2019 and 2018, including the following table, which presents selected financial information data in dollars (dollars in thousands) and as a percentage of total revenues, is based upon our statements of operations contained in our financial statements for those periods, and the related notes, included in this annual report.

	Year Ended December 31,
	2018					2019					2020

Revenues		0		0	%		0		0	%		0		0	%
Cost of revenues:
Costs and expenses		-		-			-		-			-		-
Royalties to the Government of Israel		-		-			-		-			-		-
Total Cost of revenues		-		-			-		-			-		-
Gross profit		-		-			-		-			-		-
Operating expenses:
Sales and marketing		-		-			-		-			-		-
General and administrative		58		-			45		-			48		-
Other expenses		-		-			-		-			-		-
Total operating expenses		58		-			45		-			48		-
Operating loss		(58	)	-			(45	)	-			(48	)	-
Financial income, net		23		-			49		-			25		-
Net income (loss)		(35	)	0	%		4		0	%		(23)		0	%

Revenues. Our revenues are generated in U.S. dollars, and the majority of our costs and expenses are incurred in U.S. dollars. Consequently, we use the dollar as our functional currency. For additional details regarding the manner in which we recognize revenues, see the discussion under the caption “Critical Accounting Policies - Revenue Recognition” above.

Cost of Revenues. Our cost of revenues consists primarily of materials and components used in the manufacture and assembly of our chips, fees for subcontractors who manufacture, assemble and test our chipsets, and other overhead expenses and royalties paid to the Government of Israel.

Operating Expenses. Operating expenses consist of sales and marketing expenses as well as general and administrative expenses (primarily salaries and other personnel related expenses for executive, accounting and administrative personnel, professional fees, and other general corporate expenses).

Financial Income, Net. In 2020, 2019 and 2018, financial income, net was primarily attributable to interest income, exchange rates differences and balance annulments.

Taxes. Israeli companies are subject to corporate tax at the rate of 23% for the years 2018, 2019 and 2020. Israeli companies are generally subject to Capital Gains Tax at the corporate tax rate.

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

Revenues. There were no revenues in 2020 and in 2019. This occurred due to completion of delivery of our last DSL products order in 2015, which was the subject of an “end of life” notice we issued already in early 2008.

Cost of Revenues. Cost of revenues was $0 in 2020 and in 2019.

Operating Expenses. Operating expenses were $48,000 in 2020, compared with $45,000 in 2019.

Financial Income, net. Financial income, net was $25,000 in 2020, compared with $49,000 in 2019.

Year Ended December 31, 2019 Compared with Year Ended December 31, 2018

Revenues. There were no revenues in 2019 and in 2018. This occurred due to completion of delivery of our last DSL products order in 2015, which was the subject of an “end of life” notice we issued already in early 2008.

Cost of Revenues. Cost of revenues was $0 in 2019 and in 2018.

Operating Expenses. Operating expenses were $45,000 in 2019, compared with $58,000 in 2018. This decrease was primarily due to cost reduction efforts we implemented during 2019.

Financial Income, net. Financial income, net was $49,000 in 2019, compared with $23,000 in 2018.

Impact of Inflation and Foreign Currency Fluctuations

The dollar cost of our operations is influenced by the extent to which any increase in the rate of inflation in Israel is (or is not) offset, or is offset on a lagging basis, by the devaluation of the NIS in relation to the dollar. Inflation in Israel has a negative effect on our profitability as we receive payment in dollars or dollar-linked NIS for substantially all of our sales while we incur a portion of our expenses, principally salaries and related personnel expenses, in NIS, unless such inflation is offset by a devaluation of the NIS.

The following table sets forth, for the periods indicated, (1) devaluation or appreciation of the U.S. dollar against the most significant currency for our business, i.e., the NIS; and (2) inflation as reflected in changes in the Israeli consumer price index.

	Year Ended December 31,
	2016			2017			2018			2019			2020
NIS		(1.5	)%		(9.8	)%		8.1	%		(7.8)	%		(6.97)	%
Israeli Consumer Price Index		(0.2	)%		0.4	%		0.8	%		0.6	%		(0.6)	%

A revaluation of the NIS in relation to the dollar has the effect of increasing the dollar amount of any of our expenses or liabilities which are payable in NIS (unless such expenses or payables are linked to the dollar). Such revaluation also has the effect of increasing the dollar value of any asset, which consists of NIS or receivables payable in NIS (unless such receivables are linked to the dollar). Conversely, any decrease in the value of the NIS in relation to the dollar has the effect of decreasing the dollar value of any unlinked NIS assets and the dollar amounts of any unlinked NIS liabilities and expenses.

In 2016-2020, foreign currency fluctuations and the rate of inflation in Israel did not have a material impact on our financial results. However, we cannot predict any future trends in the rate of inflation/deflation in Israel or the rate of devaluation/revaluation of the NIS against the dollar. We cannot assure you that we will not be adversely affected in the future if inflation in Israel exceeds the devaluation of the NIS against the dollar or if the timing of such devaluation lags behind increases in inflation in Israel or if the NIS will be appreciated against the dollar.

The effects of foreign currency re-measurements are reported in our financial statements in current operations.

Corporate Tax Rate

Israeli companies were generally subject to corporate tax at the rate of 23% for the years 2018 and 2019 and for future years.

As a result of our accumulated tax loss carry-forwards (which totaled more than $200 million at December 31, 2020), and based on the current tax system in Israel, we do not anticipate being subject to income tax in Israel for the 2020 tax year.

Israeli Government Grants

We used to conduct a substantial part of our research and development operations in Israel. Some of our research and development efforts have been financed through internal resources and grants per project from the IIA. The IIA provided us grants for research and development efforts of approximately $1.9 million for the year ended December 31, 2009 (20% of our then total research and development expenses), $0.1 million for the year ended December 31, 2010 (86% of our then total research and development expenses) and none for the year ended December 31, 2011 and thereafter.

Since the grant program has the impact of lowering our research and development expenditures and improving our operating margins, reduction in the Company’s participation in the program or in the benefits that the Company receives under the program could affect the Company’s financial condition and results of operations. Currently, we are obligated to pay royalties to the IIA at the rate of 3% to 4.5%. Due to our manufacturing outside of Israel, our aggregate payment amount with respect to grants received in 2009 and 2010 is 100% of the dollar-linked value of such grants. In 2003, we were required by the IIA to perform at least 50% of our manufacturing in Israel. See “Item 5(C)- Research and Development, Patents and Licenses, etc.- Grants from the IIA”.

The refund of the grants is contingent on future sales (or related services) and we have no obligation to refund these grants if sales are not generated.

We paid or accrued to the IIA $0 for 2020, 2019 and 2018. See also Item 8A – “Legal Proceedings” regarding a pending claim of the IIA.

Liquidity and Capital Resources

Historically, we have financed our operations primarily through funds generated by our public offerings in 1999 and 2000 as well as research and development and marketing grants, primarily from the Government of Israel. From 2008 until 2010, we also financed our operations through private equity investments and, on a limited basis, through short-term loans.

Working Capital and Cash Flows

We had cash and cash equivalents and restricted deposits of approximately $1.9 million as of December 31, 2020, 2019 and 2018, respectively. It should be noted that as of each of those dates we did not have any short-term (other than the above mentioned short-term deposit) or long-term investments or outstanding borrowings.

No capital expenditures were made in our continuing operation for each of the years ended December 31, 2020, 2019 and 2018.

Net cash used in operating activities was $11,000 for the year ended December 31, 2020. Net cash used in operating activities was $10,000 for the year ended December 31, 2019. Net cash used in operating activities was $44,000 for the year ended December 31, 2018.

Net cash used in financing activities was $0 for the years ended December 31, 2020, 2019 and 2018. Since 2010, we no longer hold government treasury securities and we do not conduct interest rate or currency hedging activities.

Net cash provided by (used in) investing activities was $300,000, ($2,000) and ($1,898) thousand for the years ended December 31, 2020, 2019 and 2018, respectively, primarily related to a short-term deposit renewed automatically on a half year basis.

Outlook

In light of several factors, primarily our current cash position, we anticipate that our existing capital resources will be adequate to satisfy our working capital and capital expenditure requirements in the next twelve months.

Research and Development, Patents and Licenses, etc.

Grants from the IIA

The Government of Israel encourages research and development projects through the IIA pursuant to the R&D Law. Grants received under such programs are generally repaid through a mandatory royalty based on revenues from products (and ancillary services) incorporating know-how developed, in whole or in part, with the grants. This government support is condition

upon our ability to comply with certain applicable requirements and conditions specified in the IIA’s programs and the R&D Law.

Generally, grants from the IIA constitute up to 50% of qualifying research and development expenditures for particular approved projects. Under the terms of these IIA projects, a royalty of 3% to 5% is due on revenues from sales of products and related services that incorporate know-how developed, in whole or in part, within the framework of projects funded by the IIA.

The R&D Law also provides that know-how developed under an approved research and development program or rights associated with such know-how (1) may not be transferred to third parties in Israel without the approval of the IIA (such approval is not required for the sale or export of any products resulting from such research or development) and (2) may not be transferred to any third parties outside Israel, except in certain special circumstances and subject to the IIA’s prior approval, which approval, if any, may generally be obtained, in the following cases: (a) the grant recipient pays to the IIA a portion of the sale price paid in consideration for such IIA-funded know-how (according to certain formulas, which may result in repayment of up to 600% of the grant amounts plus interest), or (b) the grant recipient receives know-how from a third party in exchange for its IIA-funded know-how. Such approval is not required for the export of any products resulting from such research or development.

The R&D Law imposes reporting requirements with respect to certain changes in the ownership of a grant recipient. The law requires the grant recipient and its controlling shareholders and foreign interested parties to notify the IIA of any change in control of the recipient or a change in the holdings of the means of control of the recipient and requires a non-Israeli interested party to undertake to the IIA to comply with the R&D Law. In addition, the rules of the IIA may require additional information or representations in respect of certain of such events. For this purpose, “Control” is defined as the ability to direct the activities of a company other than any ability arising solely from serving as an officer or director of the company. A person is presumed to have control if such person holds 50% or more of the means of control of a company. “Means of Control” refers to voting rights or the right to appoint directors or the chief executive officer. An “interested party” of a company includes a holder of 5% or more of its outstanding share capital or voting rights, its chief executive officer and directors, someone who has the right to appoint its chief executive officer or at least one director, and a company with respect to which any of the foregoing interested parties owns 25% or more of the outstanding share capital or voting rights or has the right to appoint 25% or more of the directors. Accordingly, any non-Israeli who acquires 5% or more of our ordinary shares will be required to notify the IIA that it has become an interested party and to sign an undertaking to comply with the R&D Law.

See also Item 8A – “Legal Proceedings” regarding a pending claim of the IIA.

Trend Information

See Item 5A – “Operating Results – Overview – 2020 Outlook.”

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements, as such term is defined under Item 5E of the instructions to Form 20-F, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. In addition, we have no special purpose financing or partnership entities that are likely to create material contingent obligations.

Tabular disclosure of Contractual Obligations.

There were no contractual obligations or commercial commitments as of December 31, 2020, as such terms are defined under Item 5F of the instructions to Form 20-F.

ITEM 6

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

The following table lists our current directors and executive officers:

Name	Age	Position
Joseph Winston	42	Chairman of the Board of Directors
Daniel Magen	50	Director, Chief Executive Officer and Chief Financial Officer
Roi Kol	38	Director
Ron Mekler*	47	Director
Avi Mann*	58	External Director
Mor Kaniel*	31	External Director

Member of the Audit Committee and Compensation Committee.

Joseph Winston has served as Chairman of our Board of Directors since March 2017. He is the Chief Financial Officer of Finext Capital, a subsidiary of the Futureal Group, a European real estate developer. From November 2007 until June 2011, Mr. Winston worked as an analyst and portfolio manager at Erez Investments, a subsidiary of Vision Sigma Ltd. (TASE: VISN). Mr. Winston has a B.A. in economics with a minor in business from the University of California, Berkeley and an M.B.A. in finance and strategy from the UCLA Anderson School of Management. Mr. Winston earned the right to use the Charted Financial Analyst designation in 2005.

Daniel Magen has served as our director since March 2017. Effective December 2017, Mr. Magen also serves as our Chief Executive Officer and Chief Financial Officer. He currently also serves as the sole director of Top Alpha Capital S.M. Ltd., a controlling shareholder of the Company. Mr. Magen has a B.A. in economics and accounting from Tel Aviv University. Mr. Magen is a certified public accountant.

Roi Kol has served as our director since March 2017. He is the VP Investments of Top Alpha Investment House, an affiliate of Top Alpha Capital S.M. Ltd., a controlling shareholder of the Company. Mr. Kol has a B.A. in economics with a specialty in business management from Ben Gurion University. Mr. Kol holds a portfolio management license from the Israel Securities Authority.

Ron Mekler has served as our director since June 2018. He is the Chief Financial Officer at a large health services organization. Mr. Mekler previously served as CFO and as a Controller in several international industrial and real estate companies. Mr. Mekler has a B.A. in economics and accounting from Ben Gurion University and an M.B.A. in business administration with a specialty in finance and tax from the Ono Academic College. Mr. Mekler is a certified public accountant.

Avi Mann has served as our external director since June 2018. He is the Chief Executive Officer of Ezer Construction, a privately held company that provides marketing, engineering and technological solutions for construction projects to a number of international companies. Mr. Mann has a BSc in mechanical engineering from the Technion, Israel Institute of Technology with a specialty in energy systems and an M.B.A. in business administration with a specialty in strategic management, marketing, human resources, systems management and organizational structure from the Technion, Israel Institute of Technology.

Mor Kaniel has served as our external director since June 2018. She is the Head of Finance of the Retail Division of Alpha Cosmetics Ltd. Ms. Kaniel has a B.A. in economics and business administration from Bar Ilan University.

Additional Information

There are no family relations between the directors and executive officers named above. We are also not aware of any arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which (1) any person referred to above was selected as a director or member of senior management or (2) any director will receive compensation by a third party in connection with his or her candidacy or board service in the Company.

Compensation

General

The aggregate remuneration we paid for the year ended December 31, 2020 to our directors and executive officers (six persons during 2020), was approximately NIS 26,000 (equivalent to $8,090) in salaries, fees, commissions and bonuses. There were no amounts set aside or accrued to provide for pension, retirement or similar benefits.

As approved by our shareholders, commencing June 2018, our external directors, including Messrs. Mann and Kaniel, and our independent directors, including Mr. Mekler, and such other external and independent directors who may serve the Company from time to time are entitled to receive the minimum compensation permitted for external directors under the Companies Regulations (Rules Regarding Compensation and Expenses to External directors), 2000, as amended (the “Compensation Regulations”), which currently means: (i) fixed compensation for their service on the Board of Directors or any committee of the Board of Directors of NIS 21,210 (equivalent to approximately $6,600) on an annual basis, and (ii) compensation for their participation in any Board of Directors or committee meetings of NIS 615 per meeting attended (equivalent to approximately $190), or, for attendance via teleconference, 60% of such participation fee and 50% of such fee for the approval of actions of the Board of Directors by way of written consent all linked to the Israeli CPI.

As approved by our shareholders, commencing June 2018, our directors affiliated with our controlling shareholder (namely, Mr. Kol) or that may be affiliated with our controlling shareholder (namely, Mr. Winston) are entitled to a meeting attendance fee of NIS 620 (equivalent to approximately $190), or, for attendance via teleconference, 60% of such participation fee and 50% of such fee for the approval of actions of the Board of Directors by way of written consent, all linked to the Israeli CPI.

For the sake of clarity, Mr. Magen is not entitled to any fees in consideration for his service as a member of the Board of Directors or as an executive officer.

No directors have arrangements to receive benefits upon termination of employment.

Compensation of Executive Officers

In 2020, we did not pay any compensation to our executive officer.

Board Practices

Introduction

We are incorporated in Israel and therefore are subject to various corporate governance practices under the Israeli Companies Law, relating to such matters as external directors, the audit committee, the internal auditor and approvals of interested party transactions. These matters are in addition to the ongoing conditions and other relevant provisions of U.S. securities laws.

Board of Directors

According to the Companies Law and our articles of association, the oversight of the management of our business is vested in our Board of Directors. The Board of Directors may exercise all powers and may take all actions that are not specifically granted to our shareholders. As part of its powers, our Board of Directors may cause us to borrow or secure payment of any sum or sums of money for our purposes, at times and upon terms and conditions as it thinks fit, including the grant of security interests in all or any part of our property.

According to our articles of association, our Board of Directors may consist of between four (4) and nine (9) directors. Our Board of Directors currently consists of six (6) directors.

Under the Companies Law, our Board of Directors must determine the minimum number of directors having financial and accounting expertise, as defined in the regulations, that our Board of Directors should have. In determining the number of directors required to have such expertise, the Board of Directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our Board of Directors has determined that we require at least one director with the requisite financial and accounting expertise and that Mr. Mann has such expertise.

Our directors are elected at annual meetings of shareholders by a vote of the holders of a majority of the ordinary shares voting thereon. Directors generally hold office until the next annual meeting of shareholders. Our annual meeting of shareholders is required to be held at least once during every calendar year and not more than fifteen months after the last preceding meeting. The Board of Directors generally may temporarily fill vacancies in the board.

A resolution proposed at any meeting of the Board of Directors is deemed adopted if approved by a majority of the directors present and voting on the matter.

External Directors

Qualifications of External Directors

Under the Israeli Companies Law, companies incorporated under the laws of Israel whose shares are listed for trading on a stock exchange or have been offered to the public in or outside of Israel, such as Metalink, are generally required to appoint at least two external directors. The Companies Law provides that a person may not be appointed as an external director if the person or the person’s relative, partner, employer or any entity under the person’s control has, as of the date of the person’s appointment to serve as an external director, or had, during the two years preceding that date, any affiliation with:

●

the company;

●

any entity controlling the company;

●

any entity controlled by the company or by its controlling entity; or

●

in a company that does not have a controlling shareholder, affiliation with the chairman, the chief executive officer, the chief financial officer or a 5% shareholder of the company.

The term affiliation includes:

●

an employment relationship;

●

a business or professional relationship;

●

control; and

●

service as an office holder.

The Companies Law defines the term “office holder” of a company to include a director, the chief executive officer and any officer of the company who reports directly to the chief executive officer.

No person can serve as an external director if the person’s position or other business creates, or may create, a conflict of interest with the person’s responsibilities as an external director or may otherwise interfere with the person’s ability to serve as an external director.

Until two years from termination of office, a company and its controlling shareholder generally not give any direct or indirect benefit to the former external director or his relative.

In addition, pursuant to the Companies Law, (1) an external director must have either “accounting and financial expertise” or “professional qualifications” (as such terms are defined in regulations promulgated under the Companies Law) and (2) at least one of the external directors must have “accounting and financial expertise”. Our current external directors are Mr. Mann and Ms. Kaniel. We have determined that Mr. Mann has the requisite “accounting and financial expertise”.

Election of External Directors

External directors are elected at meetings of shareholders by a vote of the holders of a majority of the ordinary shares voting thereon, provided that either:

●

At least a majority of the shares of non-controlling shareholders voted at the meeting vote in favor of the external director’s election; or

●

The total number of shares of non-controlling shareholders that voted against the election of the external director does not exceed 2% of the aggregate voting rights in the company.

The initial term of an external director is three years and may be extended for up to two additional three-year terms.

Reelection of an external director may be effected through one of the following mechanisms: (1) the board of directors proposed the reelection of the nominee and the election was approved by the shareholders by the majority required to appoint external directors for their initial term as described above; or (2) a shareholder holding 1% or more of the voting rights or the external director proposed the reelection of the nominee, and the reelection is approved by a majority of the votes cast by the shareholders of the company, excluding the votes of controlling shareholders and those who have a personal interest in the matter as a result of their relations with the controlling shareholders; provided that the aggregate votes cast in favor of the reelection by such non-excluded shareholders constitute more than 2% of the voting rights in the company.

External directors may be removed from office only by the same percentage of shareholders as is required for their election, or by a court, only if the external directors cease to meet the statutory qualifications for their appointment or if they violate their duty of loyalty to the company.

Each committee of a company’s board of directors that exercises a power of the board of directors is required to include at least one external director, except for the audit committee and compensation committee, each of which is required to include all the external directors.

Committees

Subject to the provisions of the Companies Law, our Board of Directors may delegate its powers to committees consisting of board members. Our board has formed an audit committee and a compensation committee.

Audit Committee

Under the Companies Law, our Board of Directors is required to appoint an audit committee, which must be comprised of at least three directors, include all of the external directors, a majority of its members must satisfy the independence standards under the Companies Law, and the chairman is required to be an external director.

The duties of the audit committee under the Companies Law include, among others, examining flaws in the business management of the company and suggesting remedial measures to the board, assessing the company’s internal audit system and the performance of its internal auditor, and as more fully described below, approval of certain interested party transactions. An interested party is defined in the Companies Law to include 5% or greater shareholder, any person or entity who has the right to designate one director or more or the general manager of the company or any person who serves as a director or as a general manager.

Our Audit Committee adopted a written charter specifying the committee’s duties and responsibilities, which include, among other:

●

Overseeing financial and operational matters involving accounting, corporate finance, internal and independent auditing, internal control over financial reporting, compliance and business ethics; and

●

Authority to oversee the Company’s independent registered public accounting firm and recommend to our shareholders to appoint or remove them.

Our Audit Committee consists of Mr. Mann, Ms. Kaniel and Mr. Mekler.

Our Board of Directors has determined that Mr. Mann qualifies as an “audit committee financial expert” within the meaning of the SEC rules.

Our Audit Committee meets when required.

Compensation Committee

Under the Companies Law, our Board of Directors is required to appoint a compensation committee, which must be comprised of at least three directors, including all of the external directors and whose other members must satisfy certain independence standards under the Companies Law, and the chairman of which is required to be an external director. Under the

Companies Law, the role of the compensation committee is to recommend to the board of directors, for ultimate shareholder approval by a special majority, a policy governing the compensation of office holders based on specified criteria; to review, from time to time, modifications to the compensation policy and examine its implementation; to approve the actual compensation terms of office holders prior to approval thereof by the board of directors; and to resolve whether to exempt the compensation terms of a candidate for chief executive officer from shareholder approval.

Our compensation committee consists of the same members as the Audit Committee and meets as required.

Internal Auditor

Under the Companies Law, our Board of Directors is also required to appoint an internal auditor proposed by the audit committee. The role of the internal auditor is to examine, among other things, whether our activities comply with the law and orderly business procedure. At present, we have no serving internal auditor.

Approval of Specified Related Party Transactions Under Israeli Law

Fiduciary Duties of Office Holders

The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company, including directors and executive officers.

The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the circumstances. The duty of care includes a duty to use reasonable means to obtain:

●

information on the appropriateness of a given action brought for his/her approval or performed by him/her by virtue of his/her position; and

●

all other important information pertaining to the previous actions.

The duty of loyalty of an office holder includes a duty to:

●

refrain from any conflict of interest between the performance of his duties in the company and his personal affairs;

●

refrain from any activity that constitutes competition with the company’s business;

●

refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and

●

disclose to the company any information or documents relating to a company’s affairs which the office holder has received due to his position as an office holder.

Each person listed in the table under “Directors and Senior Management” above is an office holder. Under the Companies Law, all arrangements as to compensation of directors and officers in public companies such as ours, generally require the approvals of the compensation committee, the board of directors and, in the case of the Chief Executive Officer and the directors, subject to certain exceptions, the shareholders as well, in that order.

Disclosure of Personal Interests of an Office Holder.

The Companies Law requires that an office holder of a company promptly disclose any personal interest that he may have and all related material information known to him in connection with any existing or proposed transaction by the company. A personal interest of an office holder includes an interest of a company in which the office holder is, directly or indirectly, a 5% or greater shareholder, director or general manager or in which he has the right to appoint at least one director or the general manager. In the case of an “extraordinary transaction”, the office holder’s duty to disclose applies also to a personal interest of the office holder’s relative.

Under the Companies law, an extraordinary transaction is a transaction:

●

other than in the ordinary course of business;

●

other than on market terms; or

●

that is likely to have a material impact on the company’s profitability, assets or liabilities.

Under the Companies Law, once an office holder complies with the above disclosure requirement the board of directors may approve a transaction between the company and such office holder or a third party in which such office holder has a personal interest, unless the articles of association provide otherwise. Nevertheless, a transaction that is adverse to the company’s interest cannot be approved.

If the transaction is an extraordinary transaction, both the audit committee and the board of directors must approve the transaction. Under specific circumstances, shareholder approval may also be required. Generally, when a transaction is considered by the audit committee and board of directors, the interested director may not be present or vote, unless a majority of the members of the board of directors or the audit committee, as the case may be, has a personal interest in the matter. If a majority of members of the board of directors have a personal interest therein, shareholder approval is generally also required.

Approval of Office Holder Compensation

Under the Companies Law, every Israeli public company was required to adopt a compensation policy, recommended by the compensation committee, and approved by the board of directors and the shareholders, in that order, no later than January 2014. The shareholder approval requires a majority of the votes cast by shareholders, provided that either (i) the shares voted in favor of the resolution include at least a majority of the shares voted by shareholders who are not controlling shareholders and do not have a “personal interest” in such matter or (ii) the total number of shares voted against such matter by said group of disinterested shareholders does not exceed two percent of the voting rights in the company. In general, all office holders’ terms of compensation – including fixed remuneration, bonuses, equity compensation, retirement or termination payments, indemnification, liability insurance and the grant of an exemption from liability – must comply with the company’s compensation policy. To date, we have not sought shareholder approval for any compensation policy primarily because we believe that we are exempt from such requirement.

In addition, the compensation terms of directors, the chief executive officer, and any employee or service provider who is considered a controlling shareholder must be approved separately by the compensation committee, the board of directors and the shareholders of the company (by the same majority noted above), in that order. The compensation terms of other officers require the approval of the compensation committee and the board of directors. Shareholder approval is not required for director compensation payable in cash up to the maximum amount set forth in the regulations governing the compensation of external directors. The compensation terms of other officers who report directly to the chief executive officer require the approval of the compensation committee and the board of directors.

Exculpation, Insurance and Indemnification of Directors and Officers

Exculpation of Office Holders

Under the Companies Law, an Israeli company may not exempt an office holder from liability with respect to a breach of his duty of loyalty, but may exempt in advance an office holder from his liability to the company, in whole or in part, with respect to a breach of his duty of care (except in connection with distributions), provided that the articles of association of the company allow it to do so. Our articles of association allow us to exempt our office holders to the fullest extent permitted by law.

Office Holder Insurance

Our articles of association provide that, we may, to the maximum extent permitted by the Companies Law, insure the liability of officers. Without derogating from the foregoing, we may enter into a contract for the insurance of the liability of any of our office holders with respect to an act performed in the capacity of an office holder for:

●

a breach of his duty of care to us or to another person;

●

a breach of his duty of loyalty to us, provided that the office holder acted in good faith and had reasonable cause to assume that his act would not prejudice our interests;

●

a financial liability imposed upon him in favor of another person;

●

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

●

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

Indemnification of Office Holders

We may, to the maximum extent permitted by the Companies Law, indemnify the liability of office holders. Without derogating from the foregoing, we may indemnify an office holder for acts or omissions committed in his or her capacity as an office holder of the Company for:

●

a financial liability imposed on him in favor of another person by any judgement, including a settlement or an arbitrator’s award approved by a court. Such indemnification may be approved (i) after the liability has been incurred, or (ii) in advance, provided that our undertaking to indemnify is limited to events that our Board of Directors believes are foreseeable in light of our actual operations at the time of providing the undertaking and to a sum or criterion that our Board of Directors determines to be reasonable under the circumstances;

●

reasonable litigation expenses, including attorneys’ fees, expended by the office holder as a result of an investigation or proceeding instituted against him by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against him and either (i) concluded without the imposition of any financial liability in lieu of criminal proceedings, or (ii) concluded with the imposition of a financial liability in lieu of criminal proceedings but relates to a criminal offense that does not require proof of criminal intent or in connection with a financial sanction;

●

reasonable litigation expenses, including attorneys’ fees, expended by the office holder or charged to him or her by a court, resulting from the following: proceedings we institute against him or her or instituted on our behalf or by another person; a criminal indictment from which he or she was acquitted; or a criminal indictment in which he or she was convicted for a criminal offense that does not require proof of intent;

●

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

Limitations on Insurance and Indemnification

The Companies Law provides that a company may not exculpate or indemnify an office holder nor enter into an insurance contract which would provide coverage for any monetary liability incurred as a result of any of the following:

●

a breach by the office holder of his duty of loyalty unless, with respect to insurance coverage or indemnification, the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

●

a breach by the office holder of his duty of care if the breach was done intentionally or recklessly, unless the breach was done negligently;

●

any act or omission done with the intent to derive an illegal personal benefit; or

●

any fine levied against the office holder.

In addition, under the Companies Law, indemnification of, and procurement of insurance coverage for, our office holders must be approved by our audit committee and our Board of Directors and, in specified circumstances, by our shareholders.

We currently do not have director’s and officer’s liability insurance. We entered into indemnification and exculpation agreements with our directors and executive officers in accordance with our articles of association.

Management and Director Service Contracts

We receive chief executive officer and chief financial officer services from Mr. Magen, for no remuneration.

Except as set forth above, there are no arrangements or understandings between us and any of our current directors for benefits upon termination of service.

Employees

Since January 2012, we do not have any employees. Rather, all of our personnel are composed of the Chief Executive Officer and the Chief Financial Officer, whom we engaged (through Top Alpha) for no remuneration in December 2017.

Share Ownership

The following table sets forth certain information regarding the ownership of our ordinary shares by our directors and officers as of April 1, 2021. The percentage of outstanding ordinary shares is based on 1,255,640 ordinary shares outstanding as of April 1, 2021 (excluding 1,525,067 treasury shares).

Name	Number of Ordinary Shares Beneficially Owned⁽¹⁾		Percentage of Outstanding Ordinary Shares⁽²⁾
Daniel Magen		670,000		53.4	%
Joseph Winston		-		-
Roi Kol		-		-
Ron Mekler		-		-
Avi Mann		-		-
Mor Kaniel		-		-
Directors and Officers as a group (consisting of 6 persons)		670,000		53.4	%

Less than 1%.

(1)

Except as otherwise noted and pursuant to applicable community property laws, each person named in the table has sole voting and investment power with respect to all ordinary shares listed as owned by such person. Shares beneficially owned include shares that may be acquired pursuant to options that are exercisable within 60 days of April 1, 2021.

(2)

Ordinary shares deemed beneficially owned by virtue of the right of any person or group to acquire such shares within 60 days of April 1, 2021, are treated as outstanding only for the purposes of determining the percent owned by such person or group.

Share Option Plans

We have two option plans, our Share Option Plan (2003), for our advisors and independent contractors, which is currently in use and one other plan. The expiration dates of the options granted under the plans range from 4 to 25 years from the date of grant. Our plans are administered currently by our Board of Directors. All of our employees and directors are eligible to participate in our plans. Members of advisory board, if any and our independent contractors are eligible to receive options under our Share Option Plan (2003).

In 2018, 2019 and 2020, we did not grant any options to purchase ordinary shares. As of April 1, 2021, options to purchase 112,500 ordinary shares, at an exercise price per share of $1.50, are outstanding, all of which are fully vested and expire on December 31, 2021. These options were granted to Mr. Shukhman, our former CEO, and to Mr. Zack, our former Director.

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

The following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of April 1, 2021 by each person or entity known to own beneficially more than 5% of our outstanding ordinary shares based on information provided to us by the holders or disclosed in public filings with the SEC.

Name	Number of Ordinary Shares Beneficially Owned ⁽¹⁾		Percentage of Outstanding Ordinary Shares⁽²⁾
Daniel Magen⁽³⁾		670,000		53.4	%
Tzvi Shukhman⁽⁴⁾		100,000		7.4	%

(1)

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by pursuant to applicable community property laws, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.

(2)

The percentage of outstanding ordinary shares is based on 1,255,640 ordinary shares outstanding as of April 1, 2021 (excluding 1,525,067 treasury shares).

(3)

The record holder of the 670,000 shares is Top Alpha, an Israeli company wholly owned by Mr. Magen.

(4)

Consists of options exercisable into 100,000 ordinary shares, at exercise price per share of $1.50, all of which are fully vested and expires on December 31, 2021.

Our major shareholders do not have voting rights different from the voting rights of our other shareholders.

In May 2013, Daniel Magen, through his ownership of Top Alpha, purchased 271,600 of our ordinary shares, which constituted approximately 7.13% of our outstanding shares at that time. Since that time, Mr. Magen, through his ownership of Top Alpha, has purchased an additional 398,400 of our ordinary shares, and now beneficially owns 670,000 of our ordinary shares, which constitutes approximately 53.4% of our outstanding shares.

Record Holders

Based on a review of the information provided to us by our transfer agent, as of April 1, 2021, there were 22 holders of record of our ordinary shares. These numbers are not representative of the number of beneficial holders of our ordinary shares nor is it representative of where such beneficial holders reside since many of these ordinary shares were held of record by brokers or other nominees.

Related Party Transactions

Not applicable.

Interests of Experts and Counsel

Not applicable.

ITEM 8.

FINANCIAL INFORMATION

Statements and Other Financial Information

Financial Statements

See Item 18– “Financial Statements” below.

Legal Proceedings

In August 2011, we received a demand from the IIA to pay it royalties in the amount of approximately NIS 940,000 (approximately $292,000), excluding interest and linkeage to CPI, due to the consideration we received from the Lantiq Transaction. We objected to the demand and asked the IIA to withdraw it. In February 2012, the IIA rejected our request and informed us that it intends to pursue full payment of such royalties. Since that time, to our knowledge, the IIA has not instituted legal proceedings against us in regards to such amount. While we believe the claim has no merits, there is no assurance that we will necessarily prevail.

Except as stated above, we are currently not, and have not been in the recent past, a party to any legal proceedings which may have or have had in the recent past significant effects on our financial position or profitability.

Dividend Policy

On January 28, 2013, our Board of Directors authorized a special one-time dividend of $0.10 per ordinary share, or approximately $270,000 in the aggregate, payable to shareholders of record as of March 15, 2013. On February 6, 2017, we announced that we have successfully completed our self tender offer and, as contemplated in the offer to purchase, we have accepted for purchase all of the 1,435,217 shares tendered for $1.50 per share, or approximately $2.15 million in the aggregate. The distribution of the dividend to shareholders and the self tender offer were subject to deduction of applicable withholding taxes.

Our Board of Directors has not adopted any dividend policy at this time, and any future dividend policy will be determined by our Board of Directors and will be based upon conditions then existing, including our results of operations, financial condition, current and anticipated cash needs, contractual restrictions and other conditions.

According to the Companies Law, a company may distribute dividends only out of its “profits,” as such term is defined in the Companies Law, as of the end of the most recent fiscal year or as accrued over a period of two years, whichever is higher. Our Board of Directors is authorized to declare dividends, provided that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. Notwithstanding the foregoing, dividends may be paid with the approval of a court, provided that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. Profits, for purposes of the Companies Law, means the greater of retained earnings or earnings accumulated during the preceding two years, after deduction of previous distributions that were not already deducted from the surpluses, as evidenced by financial statements prepared no more than six months prior to the date of distribution.

Significant Changes

Except as otherwise disclosed in this annual report, no significant change has occurred since December 31, 2020.

ITEM 9.

THE OFFER AND LISTING

Offer and Listing Details

Our ordinary shares are currently quoted on the over-the-counter market in the Pink Open Market (also known as the Pink Sheets), or OTC Pink, which is operated by OTC Markets Group, Inc. This means there may be limited liquidity for trading in our shares. See Item 3.D “Risk Factors” under “The limited market for our shares may reduce their liquidity and make our stock price more volatile. You may have difficulty selling your shares.”

Plan of Distribution

Not applicable.

Markets

Our ordinary shares began trading on the NASDAQ Global Market on December 2, 1999 under the symbol “MTLK”. In March 2009, our ordinary shares were transferred to the NASDAQ Capital Market.

As of December 3, 2000, our ordinary shares began trading also on the Tel Aviv Stock Exchange, or TASE, under the symbol “MTLK.” We voluntarily delisted our ordinary shares from trade on the TASE, effective June 14, 2010.

On April 21, 2011, our ordinary shares were delisted from The NASDAQ Capital Market and became quoted on the OTCQB under the symbol “MTLK” and, since January 1, 2018, are quoted on the OTC Pink.

Selling shareholders.

Not applicable.

Dilution.

Not applicable.

Expenses of the Issue.

Not applicable.

ITEM 10.

ADDITIONAL INFORMATION

A.	Share Capital

Not applicable.

B.	Memorandum and Articles of Association

Copies of our memorandum of association and our articles of association are filed as Exhibits 1.1 and 1.2 to this annual report. The information called for by this Item 10.B. is included in Exhibit 2.1 to this annual report and is incorporated herein by reference.

C.	Material Contracts

None

D.	Exchange Controls

There are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or the proceeds from the sale of our shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding some transactions. However, legislation remains in effect under which currency controls can be imposed by administrative action at any time.

The ownership or voting of our ordinary shares by non-residents of Israel, except with respect to citizens of countries which are in a state of war with Israel, is not restricted in any way by our articles of association or by the laws of the State of Israel.

E.	Taxation

The following is a brief summary of the current tax structure applicable to companies in Israel, with special reference to its effect on us and certain Israeli Government programs benefiting us. The following also contains a discussion of material Israeli and United States tax consequences to purchasers of our ordinary shares. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation, there can be no assurance that the views expressed in the discussion will be accepted by the tax authorities in question of the courts. The discussion is not intended, and should not be construed, as legal or professional tax advice.

Holders of our ordinary shares are encouraged to consult their own tax advisors as to the United States, Israeli or other tax consequences of the purchase, ownership and disposition of ordinary shares.

Israeli Tax

General Corporate Tax

For a discussion of the current corporate tax applicable to companies in Israel - see Item 5A “Operating Results – Corporate Tax Rate” above.

Capital Gains Tax

Israeli law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale of assets located in Israel by non-residents of Israel, including our ordinary shares, unless a specific exemption is available or unless a tax treaty between Israel and the shareholder’s country of residence provides otherwise. The law distinguishes between the real gain and inflationary surplus. Real gain is the difference between the total capital gain and the inflationary surplus. The inflationary surplus is computed on the basis of the difference between the Israeli consumer price index or, in certain circumstances, a foreign currency exchange rate, on the date of sale and the date of purchase. The real gain is the excess of the total capital gain over the inflationary surplus.

Provisions of Israeli tax law may treat a sale of securities listed on a stock exchange differently than the sale of other securities. In the past, the ITA has indicated that it does not recognize the OTC Bulletin Board or the OTC Pink as a “stock exchange” for purposes of the Tax Ordinance. However, the ITA has indicated that it will view securities quoted on the OTC Bulletin Board or the OTC Pink as listed on a “stock exchange” where such securities were previously delisted from a “stock exchange” (such as the Nasdaq Capital Market), such as our ordinary shares.

Generally, as of January 1, 2012, the tax rate applicable to capital gains derived from the sale of shares, whether listed on a stock market or not, is 25% for Israeli individuals, unless such shareholder claims a deduction for financing expenses in connection with such shares, in which case the gain will generally be taxed at a rate of 30%. Additionally, if such shareholder is considered a “Significant Shareholder” at any time during the 12-month period preceding such sale, i.e. such shareholder holds directly or indirectly, including with others, at least 10% of any means of control in the company, the tax rate shall be 30%. However, the foregoing tax rates will not apply to: (i) dealers in securities; and (ii) shareholders who acquired their shares prior to an initial public offering (that may be subject to a different tax arrangement). Israeli Companies are subject to the Corporate Tax rate on capital gains derived from the sale of listed shares.

The tax basis of our shares acquired prior to January 1, 2003 will generally be determined in accordance with the average closing share price in the three trading days preceding January 1, 2003. However, a request may be made to the tax authorities to consider the actual adjusted cost of the shares as the tax basis if it is higher than such average price.

Shareholders that are individuals who have taxable income that exceeds NIS 640,000 in a tax year (linked to the Israeli CPI each year) will be subject to an additional tax, referred to as High Income Tax, at the rate of 3% on their taxable income for such tax year that is in excess of such threshold. For this purpose, taxable income will include taxable capital gains from the sale of our shares and taxable income from dividend distributions.

Non-Israeli residents are exempt from Israeli capital gains tax on any gains derived from the sale of shares publicly traded on a recognized stock market outside of Israel, provided that such capital gains are not derived from a permanent establishment in Israel and that such shareholders did not acquire their shares prior to the issuer’s initial public offering. However, non-Israeli corporations will not be entitled to such exemption if Israeli residents (i) have a controlling interest of more than 25% in such non-Israeli corporation, or (ii) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.

In some instances where our shareholders may be liable to Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at the source.

Application of the U.S.-Israel Tax Treaty to Capital Gains Tax

Pursuant to the Convention between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, as amended (the “U.S.-Israel Tax Treaty”), the sale, exchange or disposition of our ordinary shares by a person who qualifies as a resident of the United States and is entitled to claim the benefits afforded to a resident, or a Treaty U.S. Resident, will not be subject to Israeli capital gains tax unless (i) that Treaty U.S. Resident held, directly or

indirectly, shares representing 10% or more of our voting power during any part of the 12-month period preceding the sale, exchange or disposition; or (ii) the capital gains from such sale can be allocated to a permanent establishment in Israel; or (iii) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year. If any of these exceptions apply, then the sale, exchange or disposition of our ordinary shares by a Treaty U.S. Resident will be subject to Israeli capital gains tax, to the extent applicable. However, under the U.S.-Israel Tax Treaty, the Treaty U.S. Resident would be permitted to claim credit for these taxes if required to be paid against U.S. income tax imposed with respect to such sale, exchange or disposition, subject to the limitations set in U.S. laws applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate to state or local taxes.

Taxation of Non-Residents on Receipt of Dividends

On distributions of dividends other than bonus shares, or stock dividends, income tax is withheld at the source. Non-residents of Israel are subject to Israeli income tax on the receipt of dividends paid on our ordinary shares, at the rate of 25%, or 30% for a shareholder that is considered a Significant Shareholder at any time during the 12-month period preceding such distribution, unless the dividends are paid from income derived under certain tax incentive programs provided by Israeli tax law, or a different rate is provided in a treaty between Israel and the shareholder’s country of residence. Under the U.S.-Israel Tax Treaty, the maximum tax on dividends paid to a holder of our ordinary shares who is a Treaty U.S. Resident will be 25%. However, dividends paid from income derived during any period for which the Israeli company is not entitled to the reduced tax rate applicable to tax incentive programs, the maximum tax will be 12.5% if the holder is a U.S. company holding shares representing at least 10% of the issued voting power during the part of the taxable year preceding the date of payment of dividends and during the whole of the prior taxable year, and provided that not more than 25% of the Israeli company’s gross income consists of interest or dividends.

For information with respect to the applicability of High Income Tax on distribution of dividends, see - “Capital Gains Tax” above.

United States Federal Income Tax Considerations

General

Subject to the limitations described below, the following discussion describes the material U.S. federal income tax consequences to a U.S. Holder (as defined below) that is a beneficial owner of our ordinary shares and that holds them as capital assets. For purposes of this summary, a “U.S. Holder” is a beneficial owner of our ordinary shares who or that is for U.S. federal income tax purposes:

●

a citizen or individual resident of the United States;

●

a corporation (or other entity treated as a corporation for U.S. federal tax purposes) created or organized in the United States or under the law of the United States or of any State or the District of Columbia;

●

an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or

●

a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) the trust was in existence on August 20, 1996 and properly elected to continue to be treated as a United States person.

This summary is not a comprehensive description of all of the tax considerations that may be relevant to each individual investor’s decision to purchase, sell or hold ordinary shares. We recommend that owners of our ordinary shares consult their own tax advisers with respect to the U.S. federal, state and local tax consequences, as well as non-U.S. tax consequences, of the acquisition, ownership and disposition of our ordinary shares applicable to their particular tax situations.

This discussion is based on current provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), current and proposed U.S. Treasury regulations promulgated thereunder, and administrative and judicial decisions, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular holder based on that holder’s individual circumstances. In particular, this discussion does not address the potential application of the alternative minimum tax or the U.S. federal income tax consequences to U.S. Holders that are subject to special treatment, including:

●

broker-dealers, including dealers in securities or currencies;

●

insurance companies;

●

taxpayers that have elected mark-to-market accounting;

●

tax-exempt organizations;

●

financial institutions or “financial services entities”;

●

taxpayers who hold the ordinary shares as part of a straddle, “hedge”, constructive sale, “conversion transaction” or other risk reduction transaction;

●

holders owning directly, indirectly or by attribution shares having at least ten percent of the total voting power of all our shares;

●

taxpayers whose functional currency is not the U.S. dollar; and

●

taxpayers who acquire our ordinary shares as compensation.

This discussion does not address any aspect of U.S. federal gift or estate tax or state or local tax laws. Additionally, the discussion does not consider the tax treatment of partnerships or other entities treated as pass-throughs for U.S. federal income tax purposes or persons who hold our ordinary shares through a partnership or other pass-through entity.

Material aspects of U.S. federal income tax relevant to a Non-U.S. Holder are also discussed below. In general, a Non-U.S. Holder is a beneficial owner of our ordinary shares who or that is for U.S. federal income tax purposes: (i) a nonresident alien individual, (ii) a corporation (or an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the law of a country other than the United States or a political subdivision thereof or, (iii) an estate or trust that is not a U.S. Holder.

Each prospective investor is advised to consult that person’s own tax adviser with respect to the specific tax consequences to that person of purchasing, holding or disposing of our ordinary shares.

Taxation of Dividends Paid on Ordinary Shares

In the event of dividend distribution, and subject to the discussion of the passive foreign investment company, or PFIC, rules below, a U.S. Holder will be required to include in gross income as a dividend the amount of any distribution paid on our ordinary shares, including any Israeli taxes withheld from the amount paid, on the date the distribution is received to the extent the distribution is paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Distributions in excess of those earnings and profits will be applied against and will reduce the U.S. Holder’s basis in the ordinary shares and, to the extent in excess of that basis, will be treated as a gain from the sale or exchange of the ordinary shares. The legislation until the end of 2010 provided that dividend income generally would be taxed to noncorporate taxpayers at the rates applicable to long-term capital gains, provided certain holding period and other requirements (including a requirement that we are not a PFIC in the year of the dividend or in the preceding year) are satisfied. Dividends received after 2010 will be taxable as ordinary income.

Distributions out of current or accumulated earnings and profits paid in foreign currency to a U.S. Holder will be includible in the income of the U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate on the date the distribution is received. A U.S. Holder that receives a foreign currency distribution and converts the foreign currency into U.S. dollars subsequent to receipt will have foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. dollar, which will generally be U.S. source ordinary income or loss.

U.S. Holders will have the option of claiming the amount of any Israeli income taxes withheld at source either as a deduction from gross income or as a dollar-for-dollar credit against their U.S. federal income tax liability. Individuals who do not claim itemized deductions, but instead utilize the standard deduction, may not claim a deduction for the amount of any Israeli income taxes withheld, but those individuals may still claim a credit against their U.S. federal income tax liability. The amount of foreign income taxes that may be claimed as a credit in any year is subject to complex limitations and restrictions, which must be determined on an individual basis by each shareholder. The total amount of allowable foreign tax credits in any year cannot exceed the pre-credit U.S. tax liability for the year attributable to foreign source taxable income.

A U.S. Holder will be denied a foreign tax credit with respect to Israeli income tax withheld from dividends received on the ordinary shares:

●

if the U.S. Holder has not held the ordinary shares for at least 16 days of the 31-day period beginning on the date which is 15 days before the ex-dividend date; or

●

to the extent the U.S. Holder is under an obligation to make related payments on substantially similar or related property.

Any days during which a U.S. Holder has substantially diminished his or its risk of loss on the ordinary shares are not counted toward meeting the 16-day holding period required by the statute. In addition, distributions of current or accumulated earnings and profits generally will be foreign source passive income for U.S. foreign tax credit purposes and will not qualify for the dividends received deduction otherwise available to corporations.

Taxation of the Disposition of Ordinary Shares

Subject to the discussion of the PFIC rules below, upon the sale, exchange or other disposition of our ordinary shares, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between that U.S. Holder’s basis in the ordinary shares, which is usually the U.S. dollar cost of those shares, and the amount realized on the disposition. A disposition of the ordinary shares will be considered to occur on the “trade date”, regardless of the U.S. Holder’s method of accounting. A U.S. Holder that uses the cash method of accounting calculates the U.S. dollar value of the proceeds received on the sale as of the date that the sale settles. However, a U.S. Holder that uses an accrual method of accounting is required to calculate the value of the proceeds of the sale as of the “trade date” and may therefore realize foreign currency gain or loss, unless that U.S. Holder has elected to use the settlement date to determine its proceeds of sale for purposes of calculating that foreign currency gain or loss. Capital gain from the sale, exchange or other disposition of the ordinary shares held more than one year is long-term capital gain. Long-term capital gains of noncorporate taxpayers are eligible for reduced rates of taxation.

Gain or loss recognized by a U.S. Holder on a sale, exchange or other disposition of our ordinary shares generally is treated under the U.S. Internal Revenue Code as U.S. source income or loss for U.S. foreign tax credit purposes, and thus a U.S. Holder ordinarily would not be entitled to claim a foreign tax credit for taxes paid to Israel with respect to gains. However, under the U.S.- Israel Tax Treaty, gains derived from the sale, exchange or other disposition of our ordinary shares generally are considered to be from Israeli sources if the sale, exchange or other disposition occurs in Israel, and a U.S. Holder who is entitled to claim the benefits of that treaty is permitted to claim a foreign tax credit for taxes paid to Israel with respect to the sale, exchange or disposition, subject to the limitations on foreign tax credits under U.S. federal income tax law. The U.S. Israel Tax Treaty does not relate to state or local taxes. (See Israeli Tax - Application of the U.S.- Israel Tax Treaty to Capital Gains Tax).

The deductibility of a capital loss recognized on the sale, exchange or other disposition of the ordinary shares is subject to limitations. In addition, a U.S. Holder that receives foreign currency upon disposition of the ordinary shares and converts the foreign currency into U.S. dollars subsequent to receipt will have foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. dollar, which will generally be U.S. source ordinary income or loss.

Passive Foreign Investment Company Considerations

If we are characterized as a PFIC for U.S. federal income tax purposes, adverse tax consequences can arise for our shareholders. Generally a foreign corporation is treated as a PFIC if either (i) 75 percent or more of its gross income in a taxable year, including the pro-rata share of the gross income of any company, U.S. or foreign, in which that corporation is considered to own 25 percent or more by value of the shares, is passive income, or (ii) 50 percent or more of its assets in a taxable year, averaged over the year and ordinarily determined based on quarter-end fair market values and including the pro-rata share of the assets of any company in which that corporation is considered to own 25 percent or more by value of the shares, produce, or, are held for the production of, passive income. In general, passive income for this purpose means, with certain designated exceptions, dividends, interest, rents, royalties (other than certain rents and royalties derived in the active conduct of trade or business), annuities, net gains from dispositions of certain assets, net foreign currency gains, income equivalent to interest, income from notional principal contracts and payments in lieu of dividends.

We believe that we satisfied the test to be a PFIC in 2001, 2002 and 2003 but not in 2004 – 2020. Although we will endeavor to avoid characterization as a PFIC in the future, we may not be able to do so. Although the Code contains an exception to PFIC classification for certain corporations that change their business, that exception is not available to a corporation that was, as we were, a PFIC in any prior taxable year.

The determination of whether a foreign corporation is a PFIC is a factual determination made annually and is therefore subject to change. However, once stock in a foreign corporation is stock in a PFIC in the hands of a particular shareholder that is a United States person, it remains stock in a PFIC in the hands of that shareholder, even if in later taxable years the foreign corporation ceases to satisfy the test to be a PFIC, unless the shareholder makes any of certain elections. As described below, those elections include a “qualified electing fund”, or QEF, election and a mark-to-market election.

A U.S. Holder who is subject to the PFIC rules and who does not make a QEF election or a mark to-market election will be subject to the following rules:

●

gain recognized by the U.S. Holder upon the disposition of, as well as income recognized upon receiving certain dividends on, the ordinary shares will be taxable as ordinary income;

●

the U.S. Holder will be required to allocate that dividend income and/or disposition gain ratably over the shareholder’s entire holding period for the ordinary shares;

●

the amount allocated to each year other than the year of the dividend payment or disposition will be subject to tax at the highest applicable tax rate, and an interest charge will be imposed with respect to the resulting tax liability;

●

the U.S. Holder will be subject to information reporting requirements each year and will be required to report distributions received on, and gain recognized on dispositions of, our shares; and

●

any U.S. Holder who acquired our ordinary shares upon the death of a shareholder will not receive a step-up in the tax basis of those shares to fair market value but instead, the U.S. Holder beneficiary will have a tax basis equal to the decedent’s basis, if lower.

In the case of a U.S. Holder that made, or, as described below, is treated as having made, a QEF election for the first taxable year the U.S. Holder owns our ordinary shares and we are a PFIC (that taxable year hereafter being referred to as the “First PFIC Year”), the following U.S. federal income tax consequences will arise:

●

the U.S. Holder will be required for each taxable year in which we are a PFIC to include in income a pro-rata share of our (i) net ordinary earnings as ordinary income (which income is not eligible for any 15 percent maximum tax rate applicable to certain dividends) and (ii) net capital gain as long-term capital gain, subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge.

●

the U.S. Holder will not be required under these rules to include any amount in income for any taxable year during which we do not have net ordinary earnings or capital gains; and

●

the U.S. Holder will not be required under these rules to include any amount in income for any taxable year for which we are not a PFIC.

The QEF election is made on a shareholder-by-shareholder basis and can be revoked only with the consent of the IRS. A QEF election applies to all shares of the PFIC held or subsequently acquired by an electing U.S holder. A shareholder makes a QEF election by attaching a completed IRS Form 8621, including the PFIC annual information statement, to a timely filed U.S. federal income tax return and by filing that form with the IRS Service Center in Philadelphia, Pennsylvania. Continuation of a QEF election requires ongoing annual filing of the PFIC annual information statement that we provide. Even if a QEF election is not made, a shareholder in a PFIC who is a United States person must satisfy information reporting requirements to the IRS every year. During January 2002, 2003 and 2004, we sent to our shareholders the required information to report income and gain under a QEF election – a “PFIC Annual Information Statement” for the years 2001, 2002, and 2003, respectively.

We did not have net ordinary earnings or net capital gain for our 2001-2003 taxable years. Therefore, any U.S. Holder who made a timely QEF election for those periods was not required to include any amount in income in those years as a result of that election.

Alternatively, provided our ordinary shares qualify as marketable stock, a U.S. Holder can elect to mark our ordinary shares to market annually, recognizing as ordinary income or loss each year that we are a PFIC and the U.S. Holder either holds or disposes of the shares, an amount equal to the difference between the U.S. Holder’s adjusted tax basis in our ordinary shares and their fair market value or amount realized. Losses would be allowed only to the extent of net mark-to-market gain included in income by the U.S. Holder for prior taxable years pursuant to the mark-to-market election. As with the QEF election, a U.S. Holder who makes a mark-to-market election with respect to our shares would not be subject to deemed ratable allocations of distributions or gain, the interest charge, or the denial of basis step-up at death described above (except for the first year that the

election applies, if that is not the first PFIC Year). We believe that our shares should be treated as marketable stock for purposes of this mark-to-market election. Subject to our shares not being or ceasing to be marketable, a mark-to-market election is irrevocable without the consent of the IRS.

As noted above, once stock in a foreign corporation is stock in a PFIC in the hands of a particular U.S. shareholder, it remains stock in a PFIC in the hands of that shareholder, even if in later taxable years the foreign corporation ceases to satisfy the test to be a PFIC, unless the shareholder makes a QEF election for the First PFIC Year makes or the mark-to-market election.

If a U.S. shareholder makes a QEF election for the First PFIC Year, and if in any later year the foreign corporation does not satisfy the test to be a PFIC, the PFIC rules do not apply to the stock of the foreign corporation owned by that shareholder in that year. However, if the foreign corporation subsequently becomes a PFIC in a later taxable year, the QEF rules once again will apply to that stock. A U.S. shareholder who or that did not make a QEF election in the First PFIC Year may make a QEF election in a later taxable year, and if the U.S. shareholder also makes another election, sometimes called a “purging” election, pursuant to which the U.S. shareholder may be required to pay additional tax and interest, the U.S. shareholder will be treated as having made a QEF election in the First PFIC Year.

If a U.S. shareholder makes the mark-to-market election for the stock in a PFIC, the stock will cease to be stock in a PFIC in any later year the foreign corporation does not satisfy the test to be a PFIC. However, if the foreign corporation subsequently becomes a PFIC in a later taxable year, the mark-to-market rules once again will apply to that stock. If a United States person makes a mark-to-market election after the First PFIC Year, his or its mark-to-market gain, if any, will be subject to the PFIC rules that apply when there is no special election, described above, but those rules will not thereafter apply in subsequent taxable years.

We believe that we satisfied the test to be a PFIC in 2001, 2002, 2003, 2016, 2017, 2018, 2019 and 2020, but not in 2004-2015. In that event, based on the rules described above, in the hands of any U.S. Holder that owned our ordinary shares in 2001, 2002 or 2003 and that has made, or is treated as having made, a QEF election for the First PFIC Year or that has made a mark-to-market election, our ordinary shares will not be shares in a PFIC in any year after 2003 in which we do not satisfy the test to be a PFIC. In addition, any U.S. Holder that acquired our ordinary shares in 2004, (or in a later year, if any, in which we were or are not a PFIC) will not be subject to the PFIC rules, unless in a subsequent year we again satisfy the test to be a PFIC. However, any U.S. Holder that owned our ordinary shares in 2001, 2002 or 2003 (or any later year we are a PFIC) and did not and does not make a QEF election effective for the First PFIC Year and has not made and does not make a mark-to-market election will remain subject to the PFIC rules that apply when no special election is in effect.

The U.S federal income tax rules relating to PFIC are complex. U.S. Holders of our shares are strongly urged to consult their tax advisers about the PFIC rules, including the availability, advisability and timing of, and procedure for, making a QEF or mark-to-market election with respect to their holding of our ordinary shares, including warrants or rights to acquire our ordinary shares.

Tax Consequences for Non-U.S. Holders of Ordinary Shares

Except as described in “U.S. Information Reporting and Backup Withholding” below, a Non-U.S. Holder who is a beneficial owner of our ordinary shares will not be subject to U.S. federal income or withholding tax on the payment of dividends on, or the proceeds from the disposition of, the ordinary shares, unless:

●

that item is effectively connected with the conduct by the Non-U.S. Holder of trade or business in the United States and, in the case of a resident of a country which has a treaty with the United States, that item is attributable to a permanent establishment or, in the case of an individual, a fixed place of business, in the United States;

●

the Non-U.S. Holder is an individual who holds the ordinary shares as capital assets and is present in the United States for 183 days or more in the taxable year of the disposition and does not qualify for an exemption; or

●

the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S. tax law applicable to U.S. expatriates.

U.S. Information Reporting and Backup Withholding

U.S. Holders generally are subject to information reporting requirements with respect to dividends paid in the United States on our ordinary shares. In addition, U.S. Holders are subject to U.S. backup withholding at a rate of 28 percent on dividends paid in the United States on the ordinary shares unless the U.S. Holder provides an IRS Form W-9 or otherwise establishes an exemption. U.S. Holders are subject to information reporting and backup withholding at a rate of 28 percent on proceeds paid

from the sale, exchange, redemption or other disposition of the ordinary shares unless the U.S. Holder provides an IRS Form W-9 or otherwise establishes an exemption.

Non-U.S. Holders generally are not subject to information reporting or backup withholding with respect to dividends paid on, or proceeds from the sale, exchange, redemption or other disposition of, the ordinary shares, provided that the Non-U.S. Holders provide a taxpayer identification number, certify to their foreign status or otherwise establish an exemption.

The amount of any backup withholding will be allowed as a credit against the U.S. Holder’s or Non-U.S. Holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the U.S. Internal Revenue Service.

F.	Dividends and Paying Agents

Not applicable.

G.	Statements by Experts.

Not applicable.

H.	Documents on Display

We are subject to the informational requirements of the Exchange Act applicable to foreign private issuers and fulfill our obligations with respect to such requirements by filing reports with the SEC.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. Notwithstanding the foregoing, we solicit proxies and furnish proxy statements for all meetings of shareholders, a copy of which proxy statement is furnished promptly thereafter with the SEC under the cover of a Current Report on Form 6-K.

This annual report and the exhibits thereto and any other document we file pursuant to the Exchange Act are available on the SEC Internet site (http://www.sec.gov). The documents concerning our Company which are referred to in this annual report may also be inspected at our offices located at c/o Top Alpha Capital Ltd., Haaliya 24, Beit-Yitzhak 4292000, Israel.

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

All of our sales were made in US dollars. In addition, a substantial portion of our costs is incurred in dollars. Since the dollar is the primary currency of the economic environment in which we operate, the dollar is our functional currency, and accordingly, monetary accounts maintained in currencies other than the dollar (principally cash and cash equivalents, short-term deposits and liabilities) are remeasured using the foreign exchange rate at the balance sheet date. Operational accounts and non-monetary balance sheet accounts are measured and recorded at the rate in effect at the date of the transaction. The effect of foreign currency remeasurement is reported in current operations.

Since 2008, we have not engaged in any hedging or other transactions intended to manage risks relating to foreign currency exchange rate or interest rate fluctuations.

For additional qualitative disclosure, see Item 5 – “Impact of Inflation and Foreign Currency Fluctuations”.

Interest Rate Risk

Historically, our exposure to market risk with respect to changes in interest rates related primarily to our short- and long-term investments and borrowings. At present, we do not have any short-term or long-term investments and borrowings.

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, which currently includes Daniel Magen, who serves as our chief executive officer, or CEO, and chief financial officer, or CFO, is responsible for establishing and maintaining our disclosure controls and procedures (within the meaning of Rule 13a-15(e) of the Exchange Act). These controls and procedures were designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information was accumulated and communicated to our management, including our then-current CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. We evaluated these disclosure controls and procedures under the supervision of our CEO and CFO as of December 31, 2020. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control Over Financial Reporting

We performed an evaluation of the effectiveness of our internal control over financial reporting that is designed by, or under the supervision of, our principal executive and principal financial officers, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

●

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

●

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

●

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Our management recognizes that there are inherent limitations in the effectiveness of any system of internal control over financial reporting, including the possibility of human error and the circumvention or override of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation, and may not prevent or detect all misstatements. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the framework for Internal Control-Integrated Framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on such evaluation, our CEO and CFO has concluded that our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) as of December 31, 2020 is effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

Mr. Avi Mann, an independent member of our audit committee, serves as, and qualifies as, a financial expert under the applicable SEC rules.

ITEM 16B.

CODE OF ETHICS

In April 2004, we adopted a Code of Business Conduct and Ethics (the “Code”) that applies to the Company’s employees and directors.

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. Barzily & Co., Certified Public Accountants (Israel), a member of MSI Global Alliance, billed us aggregate annual amount of $16,796 for the year 2020 for audit of our annual financial statements, consultations on various accounting issues and performance of local statutory audits.

Tax Fees. For 2020, our principal accountant did not bill us for tax services.

All Other Fees. For 2020, our principal accountant did not bill us for other services.

Pre-approval Policies and Procedures. Our audit committee approves each audit and non-audit service to be performed by our independent accountant before the accountant is engaged.

ITEM 16D.

EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G.

CORPORATE GOVERNANCE

Not applicable.

ITEM 16H.

MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17.

FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of this item.

ITEM 18.

FINANCIAL STATEMENTS

Our financial statements and related auditor’s report for the year ended December 31,2020 are enclosed as part of this annual report.

ITEM 19.

EXHIBITS

The exhibits filed with or incorporated into this annual report are listed on the index of exhibits below.

Exhibit No.		Description

1.1		Memorandum of Association, as amended (translated from Hebrew) (incorporated herein by reference to Exhibit 1.1 to the Registrant’s Annual Report on Form 20-F, filed with the SEC on April 29, 2020).

1.2		Articles of Association, as amended and restated (incorporated herein by reference to Exhibit 1.2 to the Registrant’s Annual Report on Form 20-F, filed with the SEC on April 29, 2020).

2.1		Description of the Rights of Each Class of Securities Registered under Section 12 of the Securities Exchange Act of 1934 (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Annual Report on Form 20-F, filed with the SEC on April 29, 2020).

4.1		2003 Share Option Plan (incorporated herein by reference to Exhibit 4.10 to the Registrant’s Annual Report on Form 20-F, filed with the SEC on June 26, 2003).

4.2		2003 International Employee stock option Plan (incorporated herein by reference to Exhibit 4.11 to the Registrant’s Annual Report on Form S-8, filed with the SEC on April 1, 2004).

4.3		Form of Indemnity Letter to Office Holders (incorporated herein by reference to Appendix B to the Registrant’s Proxy Statement filed on Report of Foreign Private Issuer on Form 6-K submitted to the SEC on December 12, 2011).

8		List of Subsidiaries (incorporated herein by reference to Exhibit 8 to the Registrant’s Annual Report on Form 20-F, filed with the SEC on April 29, 2020).

11		Code of Business Conduct and Ethics, adopted in April 2004 (incorporated herein by reference to Exhibit 11 to the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012).

12*		Certification by CEO and CFO pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.

13**		Certification of CEO and CFO pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.

15*		Consent of Barzily & Co., independent auditors.

101*		The following financial information from the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets; (ii) Statements of Operations; (iii) Statements of Shareholders’ Equity; (iv) Statements of Cash Flows; and (v) Notes to Financial Statements, tagged as blocks of text and in detail*

*	Filed herewith.

**	Furnished herewith.

METALINK LTD.

FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

METALINK LTD.

FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

INDEX TO FINANCIAL STATEMENTS

	Page


Report of Independent Registered Public Accounting Firm	F-2

Balance Sheets as of December 31, 20 20 and 201 9	F-3

Statements of Operations for the years ended December 31, 2020 , 2019 and 201 8	F-4

Statements of Changes in Shareholders' Equity for the years ended December 31, 20 20 , 201 9 and 201 8	F-5

Statements of Cash Flows for the years ended December 31, 2020 , 201 9 and 201 8	F-6

Notes to Financial Statements	F-7 – F-13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Metalink Ltd.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Metalink Ltd. (the “Company”) as of December 31, 2020 and 2019 and the related statements of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020 and the related notes, collectively referred to as the "financial statements". In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Without qualifying our conclusion, we draw attention to Note 1 in the financial statements which indicated the lack of business activity as of the reporting date and the date of the filing of this report.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ Barzily & Co.

Certified Public Accountants.

We have served as the Company's auditor since 2017.

Jerusalem, Israel

April 26, 2021

F-2

METALINK LTD.

BALANCE SHEETS

(U.S. dollars in thousands)

	December 31,	December 31,
	2020	2019
ASSETS
Current assets
Cash and cash equivalents	301	12
Bank deposits	1,624	1,919

Total assets	1,925	1,931


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Other payables and accrued expenses	159	142
Total current liabilities	159	142

CONTINGENT LIABILTIIES

Shareholders' equity
Ordinary shares of NIS 1.0 par value (5,000,000 shares authorized as of December 31, 2020 and December 31, 2019; 2,780,707 shares issued and 1,255,640 shares outstanding as of December 31, 2020 and December 31, 2019)	790	790
Additional paid-in capital	158,111	158,111
Accumulated deficit	(145,097)	(145,074)
	13,804	13,827

Treasury stock, at cost: 1,525,067 shares as of December 31, 2020 and December 31, 2019	(12,038)	(12,038)
Total shareholders' equity	1,766	1,789

Total liabilities and shareholders' equity	1,925	1,931

/s/ Joseph Winston

/s/ Daniel Magen

Mr. Joseph Winston

Chairman of the Board

Mr. Daniel Magen

CEO & CFO

The accompanying notes are an integral part of the financial statements

F-3

METALINK LTD.

STATEMENTS OF OPERATIONS

(U.S. dollars in thousands except share data)

	Year ended December 31,
	2020	2019	2018


General and administrative (includes director fees in the amount of $8, $7 and $2 in 2020, 2019 and 2018, respectively)	48	45	58

Operating loss	(48)	(45)	(58)

Financial income, net	25	49	23

Net profit (loss)	(23)	4	(35)

Per share data-

Basic and diluted earnings (loss)	(0.018)	0.003	(0.028)

Shares used in computing earnings (loss) per ordinary share:
Basic and diluted	1,255,640	1,255,640	1,255,640

The accompanying notes are an integral part of the financial statements

F-4

METALINK LTD.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(U.S. dollars in thousands, except share data)

	Number of	Number of		Additional	Treasury
	issued	treasury	Share	paid-in	Stock	Accumulated
	Shares	shares	Capital	capital	(at cost)	Deficit	Total
Balance at
January 1, 2018	2,780,707	1,525,067	790	158,111	(12,038)	(145,043)	1,820

Changes during 2018:
Net loss for the year	-	-	-	-	-	(35)	(35)
Balance at
December 31, 2018	2,780,707	1,525,067	790	158,111	(12,038)	(145,078)	1,785
Changes during 2019:
Net profit for the year						4	4
Balance at
December 31, 2019	2,780,707	1,525,067	790	158,111	(12,038)	(145,074)	1,789

Changes during 2020:
Net loss for the year						(23)	(23)
Balance at
December 31, 2020	2,780,707	1,525,067	790	158,111	(12,038)	(145,097)	1,766

The accompanying notes are an integral part of the financial statements

F-5

METALINK LTD.

STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

	Year ended December 31,
	2 0 2 0	2 0 1 9	2 0 1 8

Cash flows from operating activities:
Net profit (loss)	(23)	4	(35)
Adjustments required to reconcile net profit (loss) to net cash provided by (used in) operating activities (Appendix A)
Deposit revaluation*	(5)	(15)	(4)
Increase (decrease) in operating liabilities:
Other payables and accrued expenses	17	1	(5)
Net cash (used in) continuing operating activities	(11)	(10)	(44)


Cash flows from investing activities:
Deposits*	300	(2)	(1,898)
Net cash provided by (used in( investing activities	300	(2)	(1,898)


Increase (decrease) in cash and cash equivalents	289	(12)	(1,942)
Cash and cash equivalents at beginning of year	12	24	1,966
Cash and cash equivalents at end of year	301	12	24

*Reclassified

The accompanying notes are an integral part of the financial statements

F-6

METALINK LTD.

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

NOTE 1-GENERAL

Metalink Ltd. (hereinafter: the "Company") is an Israeli company incorporated in September 1992, which until the sale of its WLAN operations in February 2010 was engaged in the WLAN business (see Note 4) and since then, conducted only limited business activities related to its DSL business, which, since March 2016, it no longer conducts. The Company's current plan of operation is to consider strategic alternatives, including a possible business combination, other strategic transaction with a domestic or foreign, private or public operating entity or a "going private" transaction, including with any of its affiliates, and, to a limited extent, voluntary liquidation.

NOTE 2- SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

A.Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

B.Financial Statements in U.S. Dollars

The reporting currency of the Company is the U.S. dollar ("dollar" or "$"). The currency of the primary economic environment in which the operations of the Company are conducted is the dollar, and the dollar has been determined to be the Company's functional currency.

Transactions and balances originally denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been re-measured into dollars in accordance with the principles set forth in Accounting Standards Codification ("ASC") No. 830 (“Foreign Currency Matters”). All exchange gains and losses from re-measurement of monetary balance sheet items resulting from transactions in non-dollar currencies are reflected in the statements of operations as they arise.

C.Cash Equivalents

Cash equivalents consist of short-term, highly liquid investments like bank deposits, which are readily convertible into cash with original maturities when purchased of three months or less.

F-7

METALINK LTD.

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

NOTE 2-SIGNIFICANT ACCOUNTING POLICIES (Cont.)

D.Net Profit (Loss) Per Ordinary Share

Basic net profit (loss) per ordinary share was computed in accordance with ASC No. 260-10 by dividing the net profit (loss) allocated to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. For purposes of calculating diluted earnings per ordinary share, the denominator includes both the weighted-average number of ordinary shares outstanding during the period and the number of ordinary share equivalents if the inclusion of such ordinary share equivalents is dilutive. Dilutive ordinary share equivalents potentially include stock options using the treasury stock method.

In 2020 and 2018, the Company incurred net losses which cannot be diluted; therefore, basic and diluted loss per ordinary share was the same. In 2019, the stock options were "out of the money" and therefore, basic and diluted loss per ordinary share was the same.

E.Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and bank deposits.

As of December 31, 2020, the Company had cash and cash equivalents that totaled to $301 and short-term deposits totaling to $1,624 all of which are deposited in a major Israeli financial institution. As of December 31, 2019, the Company had cash and cash equivalents that totaled to $12 and short-term deposits totaling to $1,919 all of which were deposited in a major Israeli financial institution. The Company has not incurred any losses on these accounts. Management believes that the financial institutions holding the Company's cash and cash equivalents and its deposits is financially sound.

F.Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, and other payables and accrued expenses approximated their fair values as of December 31, 2020 and 2019 due to their short-term nature.

G.Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements. Most of the newer standards issued represent technical corrections to the accounting literature or application to specific industries which have no effect on the Company’s financial statements.

F-8

METALINK LTD.

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

NOTE 3-BANK DEPOSITS

The Company’s bank deposits are denominated in U.S. dollars and bare different interest rates ranging from 0.37% to 0.53% depending on their maturity, which ranges from 6 to 12 months.

NOTE 4-CONTINGENT LIABILITIES

In August 30, 2011, the Company received a letter from Tmura Fund, operating within the Israel Innovation Authority (formerly known as the Office of the Chief Scientist) of the Israeli Ministry of Economy) (the "IAA") according to which - the Company is required to pay the IAA a sum of NIS 943 thousand ($293 thousand) for royalties on the basis of income derived from the sale of the WLAN business to Lantiq.

On September 15, 2011 the Company replied that it disagrees with the IAA position.

As of the filing of this report, the disagreement has not been resolved. The Company is of the opinion that the demand has no merits and intends to vigorously defend its case. Despite this opinion, the Company recorded a provision in the amount of USD $128 thousand, included in other payables and accrued expenses, intended for potential legal claims against the Company for the above mentioned demand dated August 30, 2011. See Note 7.

NOTE 5 - SHARE CAPITAL

Stock Options

(i)In January 2012, the Company granted its former CEO, Tzvika Shukhman, options to purchase up to 100,000 ordinary shares of Metalink, in accordance with the following terms: (i) exercise price equal to $1.50 per share; (ii) the options vested fully on December 31, 2013; (iii) the options expiration date is set 10 years from date of grant, i.e. December 31, 2021; Those options are treated as equity instruments issued to other than employees.

(ii)During 2012, the Board of Directors decided to grant its former director, Hudi Zak, options to purchase up to 12,500 ordinary shares of Metalink, in accordance with the following terms: (i) exercise price equal to $1.50 per share; (ii) the options are all fully vested upon the grant; (iii) the options expiration date is set 10 years from date of grant.

A summary of the status of the Company's stock option activities to employees and directors of the Company as of and the year ended December 31, 2020, 2019 and 2018 are as follows:

F-9

METALINK LTD.

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

NOTE 5-SHARE CAPITAL (Cont.)

Stock Options (Cont.)

	December 31, 2020		December 31, 2019		December 31, 2018
		Weighted		Weighted		Weighted
		average		average		average
		exercise		exercise		exercise
	Shares	price	Shares	price	Shares	price
Options outstanding at
beginning of year	112,500	1.50	112,500	1.50	112,500	1.50

Outstanding and exercisable at end of year	112,500	1.50	112,500	1.50	112,500	1.50

The aggregate intrinsic value is $0 for all years presented in the table above represents the total intrinsic value, based on the Company’s closing stock price of $0.43 as of December 31, 2020, $0.40 as of December 31, 2019, and $0.39 as of December 31, 2018, which would have been received by the option holders had all option holders exercised their options as of that date.

F-10

METALINK LTD.

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

NOTE 6-TAXES ON INCOME

A.Taxation under Various Laws

(i)The Company is assessed under the provisions of the Israeli Income Tax Ordinance.

(ii)Income derived from sources other than the "Approved Enterprise" is taxable at the ordinary corporate tax rate of 23% (regular "Company Tax").

B.Reconciliation of Income Taxes

The following is a reconciliation of the taxes on income assuming that all income is taxed at the ordinary statutory corporate tax rate in Israel and the effective income tax rate:

	Year ended December 31,
	2 0 2 0	2 0 1 9	2 0 1 8
Net profit (loss) as reported in the
statements of operations	(23)	4	(35)
Statutory tax rate	23.0%	23.0 %	23.0 %
Income Tax under statutory tax rate	(5.3)	1	(8)

Less full valuation allowance	5.3	(1)	8

Provision for income tax	-	-	-

F-11

METALINK LTD.

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

NOTE 6-TAXES ON INCOME (Cont.)

C.Deferred Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized. The effect of a change in tax rates or laws on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date of the rate change. A valuation allowance is established to reduce the deferred tax assets to the amounts that are more likely than not to be realized from operations.

Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has no liability for uncertain tax positions as of December 31, 2020, 2019 and 2018. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as income tax expense. The Company does not have any accrued interest or penalties associated with unrecognized tax benefits, nor was any significant interest expense recognized during 2020, 2019 and 2018.

Tax losses carried forward of the Company as of 31 December 2018 are $193 million (NIS 726 million), as of December 2019 $210 million (NIS 726 million) and expected to be $226 million (NIS 726 million) as of December 2020. This loss is unlimited in duration and denominated in nominal NIS (the dollar balance translated according to the exchange rate at year end, and therefore fluctuates significantly through the periods).

D.Tax Assessments

The Company has not received final tax assessments for income tax purposes since incorporation. However, according to Israeli tax laws assessments considered final until and including the year ended in 2015.

NOTE 7-SUPPLEMENTARY BALANCE SHEET INFORMATION

Other Payables and Accrued Expenses

	December 31,
	2 0 2 0	2 0 1 9

Provision for legal claims	128	128
Accrued expenses (in 2020 includes $8 to directors)	31	14
	159	142

F-12

METALINK LTD.

NOTES TO FINANCIAL STATEMENTS

(US dollars in thousands, except share and per share data)

NOTE 8-SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION

Financial Income

	December 31,
	2 0 2 0	2 0 1 9

Interest income	49	25
Income (expense) from revaluation of deposits	(24)	24
	25	49

NOTE 9- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (COVID-19)

Since January 2020 and until the filing of this report, the world is experiencing a pandemic that is having a macro-economic impact relating to the spread of the Covid-19 (Corona) virus (hereinafter “the Virus”). Corona has been declared a pandemic by the World Health Organization. Many countries, including Israel, have taken significant steps in an effort to minimize the spread of the Virus, such as restrictions on citizens, transportation of passengers and goods, reducing the number of employees who are allowed to get to work, etc.

This event has significant effects on the economies and world markets, and many countries were economically harmed by the spread of the Virus.

The Company's management is of the opinion that, as of the issuance of this report, there is no effect on the scope of the Company’s operations.

In case the Company will have an investment and/or new activity in the near future, at this stage the Company does not know in which sector or industry it will be, hence it does not know how to assess the possible impact of the Virus on the investment/new activity.

F-13

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	METALINK LTD.

	By:	/s/ Daniel Magen
		Name: Daniel Magen
		Title: Chief Executive Officer and Chief Financial Officer

Date: April 29, 2021

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