Exhibit 99.1
NOTICE OF
A SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD ON NOVEMBER 4, 2024
To the shareholders of PainReform Ltd.:
Notice is hereby given that a Special Meeting (the “Meeting”) of the shareholders of PainReform Ltd. (the “Company”)
will be held at the offices of the Company’s attorneys, Doron Tikotzky Kantor Gutman & Amit Gross, at 7 Metsada St., B.S.R Tower 4, Bnei Brak, Israel on November 4, 2024 at 3:00 p.m. (Israel Time).
The agenda of the Meeting will be as follows:
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1. |
To approve a reverse split of the Company ordinary shares, so that each four (4) ordinary shares of the Company with no nominal value, shall be recapitalized into one (1) ordinary share of the Company at a ratio of 1 share for 4 shares,
and to amend the Company Articles of Association accordingly.
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2. |
To approve a grant of options to Dr. Ehud Geller the Interim Chief Executive Officer, and to Prof. Eli Hazum, the Company Chief Technology Officer, who are both members of the Board of Directors.
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Only shareholders at the close of business on October 17, 2024 shall be entitled to notice of, and to vote at, the Meeting and any adjournment or postponement thereof. You are
cordially invited to attend the Meeting in person.
If you are unable to attend the Meeting in person, you are requested to complete, date and sign the enclosed proxy and to return it promptly in the pre-addressed envelope provided.
Shareholders who attend the Meeting may revoke their proxies and vote their shares in person.
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By Order of the Board of Directors
/s/ Ehud Geller
Ehud Geller, Interim Chief Executive Officer
October 10, 2024
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65 Yigal Alon St. Tel Aviv, 6744431, Israel
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD ON NOVEMBER 4, 2024
This Proxy Statement is furnished to our holders of ordinary shares, no nominal value per share, in connection with a Special Meeting of Shareholders, to be held on November 4,
2024 at 3:00 p.m. Israel time at the offices of the Company’s attorneys, Doron Tikotzky Kantor Gutman & Amit Gross., at 7 Metsada St., B.S.R Tower 4, Bnei Brak, Israel, or at any adjournments thereof.
Throughout this Proxy Statement, we use terms such as “PainReform”, “we”, “us”, “our” and the “Company” to refer to PainReform Ltd. and terms such as “you” and “your” to refer to
our shareholders.
Agenda Items
The agenda of the Special meeting will be as follows:
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1. |
To approve a reverse split of the Company ordinary shares, so that each four (4) ordinary shares of the Company with no nominal value, shall be recapitalized into one (1) ordinary share of the Company at a ratio of 1 share for 4 shares,
and to amend the Company Articles of Association accordingly.
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2. |
To approve a grant of options to Dr. Ehud Geller, a member of the Board of Directors.
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3. |
To approve a grant of options to Prof. Eli Hazum, a member of the Board of Directors.
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We currently are unaware of any other matters that may be raised at the Meeting. Should any other matters be properly raised at the Meeting, the persons designated as proxies shall
vote according to their own judgment on those matters.
Board Recommendation
Our Board of Directors unanimously recommends that you vote “FOR” all items.
Who Can Vote
Only the holders of record of ordinary shares (“Ordinary Shares”) of the Company as at the close of business on October 17, 2024 (the “Record Date”) shall be entitled to receive notice of and attend the Meeting and any adjournment thereof. You are also entitled to notice of the Meeting and to vote at the Meeting if you held Ordinary Shares through
a bank, broker or other nominee that is one of our shareholders of record at the close of business on October 17, 2024, or which appeared in the participant listing of a securities depository on that date.
Quorum
A quorum shall be the presence of at least two (2) shareholders who hold at least twenty five percent (25%) of the voting rights (including through a proxy or voting instrument)
within one half hour from the time the meeting was designated to start. If within half an hour from the time designated for the Meeting a quorum is not present, the Meeting will stand adjourned to the same day in the following week, at the same time
and place. If a quorum is not present at the adjourned meeting within half hour from the time designated for its start, the meeting shall take place with any number of participants. This notice will serve as notice of such reconvened meeting if no
quorum is present at the original date and time and no further notice of the reconvened meeting will be given to shareholders.
On all matters considered at the Meeting, abstentions and broker non-votes will not be treated as either a vote “for” or “against” the matter, although they will be counted to
determine if a quorum is present. Broker non-votes occur when brokers that hold their customers’ shares in street name sign and submit proxies for such shares and vote such shares on some matters but not on others. This occurs when brokers have not
received any instructions from their customers, in which case the brokers, as the holders of record, are permitted to vote on “routine” matters, but not on non-routine matters.
Unsigned or unreturned proxies, including those not returned by banks, brokers, or other record holders, will not be counted for quorum or voting purposes.
Voting Required for Approval of the Proposals
Each Ordinary Share issued and outstanding as of the close of business on the Record Date is entitled to one vote at the Meeting. As of the close of business on October 9, 2024,
2,226,452 Ordinary Shares were issued and outstanding.
Proposals 1, and 3 to be presented at the Meeting require the affirmative vote of holders of at least a majority of the voting power represented and voting on such proposal in
person or by proxy on the matter presented for passage.
The approval of Proposal 2 is subject to the affirmative vote of the holders of a majority of the voting power represented and voting on such proposal in person or by proxy. In
addition, the shareholders’ approval must either include at least a majority of the ordinary shares voted by shareholders who are not controlling shareholders nor are they shareholders who have a personal interest in the approval of the proposal
(excluding a personal interest that is not related to a relationship with the controlling shareholders), or the total ordinary shares of non-controlling shareholders and non-interested shareholders voted against the proposal must not represent more
than 2% of the outstanding ordinary shares.
Under the Israeli Companies Law, in general, you will be deemed to be a controlling shareholder if you have the power to direct our activities, otherwise than by reason of being a
director or other office holder of ours, if you hold 50% or more of the voting rights in our Company or have the right to appoint the majority of the directors of the Company or its chief executive officer, and you are deemed to have a personal
interest if any member of your immediate family or their spouse has a personal interest in the adoption of the proposal. In addition, you are deemed to have a personal interest if a company, other than PainReform, that is affiliated to you has a
personal interest in the adoption of the proposal. Such company is a company in which you or a member of your immediate family serves as a director or chief executive officer, has the right to appoint a director or the chief executive officer, or
owns 5% or more of the outstanding shares. However, you are not deemed to have a personal interest int he adoption of the proposal if your interest in such proposal arises solely from your ownership of our shares, or to a matter that is not related
to a relationship with a controlling shareholder.
According to the Companies Regulations (exemptions for companies whose securities are listed for trading on a stock exchange outside of Israel) 5760-2000 (the “Exemption
Regulations for Companies Listed Abroad”), by signing and submitting the attached Proxy Card, you as a shareholder declare and approve that you have no personal interest in the adoption of Proposal 2, except if you notified the Company of such in
writing. If you believe that you have a personal interest in Proposal 2, and you wish to inform the Company of such personal interest, you should submit such information in advance of voting to the Company at its registered offices at Painreform 65
Yigal Alon St., Tel Aviv 6744316, Israel, to the attention of Mr. Eyal Broder.
If you provide specific instructions (mark boxes) with regard to the proposal, your shares will be voted as you instruct. If you sign and return your proxy card or voting
instruction form without giving specific instructions, your shares will be voted in accordance with the recommendations of our Board of Directors. The proxy holders will vote in their discretion on any other matters that properly come before the
meeting.
If you are a shareholder of record and do not return your proxy card, your shares will not be voted. If you hold shares beneficially in a street name, your shares will also not be
voted at the meeting if you do not return your proxy card or voting instruction card to instruct your broker how to vote. This will be true even for a routine matter, as your broker will not be permitted to vote your shares in their discretion on any
proposal at the meeting. For the proposal, a broker may only vote in accordance with instructions from a beneficial owner of shares.
Voting by Holders of Ordinary Shares
Ordinary Shares that are properly voted, for which proxy cards are properly executed and returned within the deadline set forth below, will be voted at the Meeting in accordance
with the directions given. If no specific instructions are given in such proxy cards, the proxy holder will vote in favor of the item(s) set forth in the proxy card. The proxy holder will also vote in the discretion of such proxy holder on any other
matters that may properly come before the Meeting, or at any adjournment thereof. Where any holder of Ordinary Shares affirmatively abstains from voting on any particular resolution, the votes attaching to such Ordinary Shares will not be included or
counted in the determination of the number of Ordinary Shares present and voting for the purposes of determining whether such resolution has been passed (but they will be counted for the purposes of determining the quorum, as described above).
Proxies submitted by registered shareholders and street shareholders (by returning the proxy card) must be received by us no later than 11:59 p.m., Eastern
Time, on November 1, 2024, to ensure your representation at our Meeting.
The manner in which your shares may be voted depends on how your shares are held. If you own shares of record, meaning that your shares are represented by book entries in your name
so that you appear as a shareholder on the records of Equiniti Trust Company, LLC (“Equiniti”) (i.e., you are a registered shareholder), our stock transfer agent, this proxy statement, the notice of Meeting and
the proxy card will be mailed to you by Equiniti. You may provide voting instructions by returning a proxy card. You also may attend the Meeting and vote in person, subject to our right to convert to a virtual only meeting format. If you own Ordinary
Shares of record and you do not vote by proxy or in person at the Meeting, your shares will not be voted.
If you own shares in street name (i.e., you are a streets shareholder), meaning that your shares are held by a bank, brokerage firm, or other nominee, you are then considered the
“beneficial owner” of shares held in “street name,” and as a result, this proxy statement, the notice of Meeting and the proxy card will be provided to you by your bank, brokerage firm, or other nominee holding the shares. You may provide voting
instructions to them directly by returning a voting instruction form received from that institution. If you own Ordinary Shares in street name and attend the Meeting in person, you must obtain a “legal proxy” from the bank, brokerage firm, or other
nominee that holds your shares in order to vote your shares at the Meeting and present your voting information card and subject to our right to convert to a virtual only meeting format.
Revocability of Proxies
Registered shareholders may revoke their proxy or change voting instructions before shares are voted at the Meeting by submitting a written notice of revocation to our Interim
Chief Executive Officer at egeller@medicavp.com or PainReform Ltd., 65 Yigal Alon St. Tel Aviv, 6744431, Israel, or a duly executed proxy bearing a later date (which must be received by us no later than the date set forth below) or by
attending the Meeting and voting in person. A beneficial owner owning Ordinary Shares in street name may revoke or change voting instructions by contacting the bank, brokerage firm, or other nominee holding the shares or by obtaining a legal proxy
from such institution and voting in person at the Meeting. If you are not planning to attend in person, to ensure your representation at our Meeting, revocation of proxies submitted by registered shareholders and
street shareholders (by returning a proxy card) must be received by us no later than 11:59 p.m., Eastern Time, November 1, 2024.
Position Statement
To the extent you would like to submit a position statement with respect to the proposal described in this proxy statement pursuant to the Companies Law, 1999, you may do so by
delivery of appropriate notice to the offices of our attorneys, Doron Tikotzky Kantor Gutman & Amit Gross. (Attention: Ronen Kantor, Adv) located at 7 Metsada St., B.S.R Tower 4, Bnei Brak, Israel, not later than ten days before the convening of
the Meeting (i.e. October 25, 2024). Response of the Board to the position statement may be submitted not later than five days after the deadline for sending the position statement (i.e. October 30, 2024).
Cost of Soliciting Votes for the Meeting
We will bear the cost of soliciting proxies from our shareholders. Proxies will be solicited by mail and may also be solicited in person, by telephone or electronic communication,
by our directors, officers and employees. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their expenses in accordance with the regulations of the U.S. Securities and Exchange Commission (“SEC”) concerning the
sending of proxies and proxy material to the beneficial owners of our shares.
Availability of Proxy Materials
Copies of the proxy card and voting instruction card, the Notice of the Special Meeting and this Proxy Statement are available at the “Investor Information” portion of our website,
http://www.painreform.com/. The contents of that website are not a part of this Proxy Statement.
Reporting Requirements
We are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended, or Exchange Act, applicable to foreign private issuers. We fulfill
these requirements by filing reports with the SEC. Our filings are available to the public on the Commission’s website at http://www.sec.gov.
As a foreign private issuer, we are exempt from the rules under the Securities Exchange Act, or Exchange Act of 1934, as amended, related to the furnishing and content of proxy
statements. The circulation of this notice and proxy statement should not be taken as an admission that we are subject to the proxy rules under the Exchange Act.
PROPOSAL 1:
APPROVAL OF A REVERSE SHARE SPLIT OF THE COMPANY’S SHARE CAPITAL AND
AN AMENDMENT OF THE ARTICLES OF ASSOCIATION ACCORDINGLY
Background
On May 28, 2024, we received a notification from the Nasdaq Listing Qualifications (the “Staff”) that we are not in compliance with the minimum bid price requirement for continued
listing set forth in Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share, and that we had 180 calendar days from May 28, 2024, or until November 25, 2024, to regain compliance with the minimum
bid price requirement.
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We believe that the continued listing of our ordinary shares on the Nasdaq Capital Market will enable us to have better access to the public capital markets while providing for
greater liquidity for our shareholders. In addition, we believe that the reverse share split is advisable in order to make our ordinary shares more attractive to a broader range of investors and the general public. Our Board of Directors believes
that the anticipated increased price resulting from the reverse share split may generate additional interest and trading in our ordinary shares. Many brokerage houses and institutional investors have internal policies and practices that either
prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Furthermore, some of those policies and practices may function to make the processing of trades in
low-priced stocks economically unattractive to brokers. Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the share price than commissions on higher-priced stocks, the current average price per
share of ordinary shares can result in individual shareholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were higher.
We are therefore seeking approval of the shareholders to effect a reverse share split of our outstanding ordinary shares at a ratio of 1-to-4 (the “Reverse
Split”), and to amend our Articles of Association to effect such Reverse Split. If the Reverse Split is approved by our shareholders, then the Board of Directors implement the Reverse Split at a ratio of 1-to-4 and issue a press release
announcing the effective date of the Reverse Split and will amend our Articles of Association to effect such Reverse Split. The Company is required to give notice to Nasdaq at least 15 calendar days prior to the record date of a Reverse Split.
If the Reverse Split is implemented, the number of authorized shares as well as the issued and outstanding ordinary shares would be reduced in a ratio of 1-to-4, so that each four
(4) ordinary shares of the Company, with no nominal value each shall be recapitalized into one (1) ordinary share of the Company, with no nominal value.
In addition, if the Reverse Split is implemented, the exercise price and the number of ordinary shares issuable pursuant to outstanding warrants will be adjusted pursuant to the
terms of the respective warrants in connection with the Reverse Split. Furthermore, upon completion of the Reverse Split, the number of ordinary shares issuable pursuant to the 2019 PainReform Option Plan, as well as the number of shares and exercise
prices subject to outstanding options under the plans and the number of shares subject to outstanding RSUs under the plans shall be appropriately adjusted.
No fractional shares will be issued as a result of the Reverse Split. Instead, all fractional shares will be rounded up to the nearest whole ordinary share.
In the event that the Company’s shareholders do not approve the Reverse Split and the proposed amendments to the Company’s Articles of Association and the Company does not
otherwise regain compliance with the minimum bid price requirements in the requisite time period, the Company’s ordinary shares will likely be delisted from trading on the Nasdaq Capital Market. Delisting could also negatively impact the Company’s
ability to secure additional financing. Accordingly, the Board of Directors recommends that the shareholders vote to approve the Reverse Split as described above on a date to be determined by our Board of Directors and announced by the Company and
authorize the Company to amend the Articles of Association accordingly.
Implementation of Reverse Split
If our shareholders approve the Reverse Split, the number of authorized shares as well as the issued and outstanding ordinary shares would be reduced in a ratio of 1-to-4, so that
each four (4) ordinary shares of the Company, with no nominal value each shall be recapitalized into one (1) ordinary share of the Company, with no nominal value. In addition, the number of authorized ordinary shares that the Company may issue will
be reclassified, and proportionately decreased in accordance with the Reverse Split ratio, so that following the Reverse Split, our authorized share capital, which was, 10,000,000 ordinary shares, with no nominal value each, shall be 2,500,000
ordinary shares, with no nominal value each.
Upon the implementation of the Reverse Split, we intend to treat shares held by shareholders through a bank, broker, custodian or other nominee in the same manner as registered
shareholders whose shares are registered in their names. Banks, brokers, custodians or other nominees will be instructed to effect the Reverse Split for their beneficial holders holding our ordinary shares in street name. However, these banks,
brokers, custodians or other nominees may have different procedures than registered shareholders for processing the Reverse Split. Shareholders who hold our ordinary shares with a bank, broker, custodian or other nominee and who have any questions in
this regard are encouraged to contact their banks, brokers, custodians or other nominees.
Our registered holders of ordinary shares hold their shares electronically in book-entry form with the transfer agent. The shareholders do not have share certificates evidencing
their ownership of their ordinary shares. They are, however, provided with a statement reflecting the number of shares registered in their accounts. Registered holders who hold shares electronically in book-entry form with the transfer agent will not
need to take action (the exchange will be automatic) to receive whole shares of post-Reverse Split ordinary shares, subject to adjustment for treatment of fractional shares.
Certain Risks Associated with the Reverse Split
There are numerous factors and contingencies that could affect our price following the proposed Reverse Split, including the status of the market for our ordinary shares at the
time, our reported results of operations in future periods, and general economic, market and industry conditions. Accordingly, the market price of our ordinary shares may not be sustainable at the direct arithmetic result of the Reverse Split. If the
market price of our ordinary shares’ declines after the Reverse Split, our total market capitalization (the aggregate value of all of our outstanding ordinary shares at the then existing market price) after the split will be lower than before the
split.
The Reverse Split may result in some shareholders owning “odd lots” of less than 100 ordinary shares on a post-split basis. Odd lots may be more difficult to sell, or require greater transaction costs per share to sell,
than shares in “round lots” of even multiples of 100 shares.
Certain Material U.S. Federal Income Tax Consequences
The following is a summary of certain material U.S. federal income tax consequences of the Reverse Split to U.S. Holders (as defined below) of our ordinary shares. This summary
does not purport to be a complete discussion of all of the possible U.S. federal income tax consequences. Further, it does not address the impact of the Medicare surtax on certain net investment income or the alternative minimum tax, U.S. federal
estate or gift tax laws, any state, local or foreign income or other tax consequences or any tax treaties and does not address the tax treatment of any fractional shares that may result from the Reverse Split. Also, it does not address the tax
consequences to holders that are subject to special tax rules, such as (i) persons who are not U.S. Holders; (ii) banks, insurance companies, or other financial institutions; (iii) regulated investment companies; (iv) tax-qualified retirement plans;
(v) dealers in securities and foreign currencies; (vi) persons whose functional currency is not the U.S. dollar; (vii) traders in securities that use the mark-to-market method of accounting for U.S. federal income tax purposes; (viii)persons deemed
to sell our ordinary shares under the constructive sale provisions of the Code; (ix) persons that acquired our ordinary shares through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan; (x)
persons that hold our ordinary shares as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction or other integrated investment or risk reduction transaction; (xi) persons that own, directly, indirectly
or constructively, at any time, ordinary shares representing 5% or more of our voting power or value; (xii) certain former citizens or long-term residents of the United States; and (xiii) tax-exempt entities or governmental organizations.
As used herein, the term “U.S. Holder” means a beneficial owner of our ordinary shares that is (i) an individual citizen or resident of the United States, (ii) a corporation (or
other entity treated as a corporation for U.S. federal income tax purposes) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate
whose income is includible in gross income for U.S. federal income tax purposes regardless of its source, or (iv) a trust if (x) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized
to control all substantial decisions of the trust, or (y) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
The discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations, administrative rulings and judicial authority as of the date
hereof, all of which are subject to change or differing interpretations, possibly with retroactive effect. This summary also assumes that the ordinary shares prior to the Reverse Split (the “Old Shares”) were, and the ordinary shares after the
Reverse Split (the” New Shares”) will be, held as a “capital asset,” as defined within the meaning of Section 1221 of the Code (i.e., generally, property held for investment). The tax treatment of a U.S. Holder may vary depending upon the particular
facts and circumstances of such U.S. Holder. Each shareholder is urged to consult with such shareholder's own tax advisor with respect to the tax consequences of the Reverse Split.
If a partnership (or other entity or arrangement classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our ordinary shares, the U.S. federal
income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships that hold our ordinary shares, and partners in such partnerships, should consult their own tax
advisors regarding the U.S. federal income tax consequences of the Reverse Split.
We have not sought and will not seek any ruling from the Internal Revenue Service (“IRS”), or an opinion from counsel, with respect to the U.S. federal income tax consequences of
the Reverse Split. Our view regarding the tax consequences of the Reverse Split is not binding on the IRS or the courts. Moreover, there can be no assurance that the IRS or a court will agree with such statements and conclusions.
The Reverse Split is intended to constitute a “recapitalization” for U.S. federal income tax purposes. Therefore, subject to the discussion regarding passive foreign investment
company (“PFIC”) status below, no gain or loss should be recognized by a U.S. Holder upon such U.S. Holder’s exchange (or deemed exchange) of Old Shares for New Shares pursuant to the Reverse Split. The aggregate tax basis of the New Shares received
(or deemed received) in the Reverse Split should be the same as the U.S. Holder’s aggregate tax basis in the Old Shares exchanged (or deemed exchanged) therefor. The U.S. Holder’s holding period for the New Shares should include the period during
which the U.S. Holder held the Old Shares surrendered (or deemed surrendered) in the Reverse Split. U.S. holders that hold ordinary shares acquired on different dates and at different prices should consult their tax advisors regarding identifying the
bases and holding periods of the particular ordinary shares they hold after the Reverse Split.
Pursuant to Section 1291(f) of the Code, to the extent provided in U.S. Treasury regulations, if a U.S. person transfers stock in a PFIC in a transaction that does not result in
full recognition of gain, then any unrecognized gain is required to be recognized notwithstanding any nonrecognition provision in the Code. The U.S. Treasury has issued proposed regulations under Section 1291(f) of the Code, but they have not been
finalized. The IRS could take the position that Section 1291(f) of the Code is effective even in the absence of finalized regulations, or the regulations could be finalized with retroactive effect. Accordingly, no assurances can be provided as to the
potential applicability of Section 1291(f) of the Code to the Reverse Split.
We believe that we were not a PFIC for U.S. federal income tax purposes for our 2022 taxable year. Because PFIC status is determined annually and is based on our income, assets and
activities for the entire taxable year, it is not possible to determine with certainty whether we will be characterized as a PFIC for the 2023 taxable year until after the close of the year. If we are treated as a PFIC with respect to a U.S. Holder
for the 2023 taxable year and Section 1291(f) applies to the U.S. Holder’s exchange (or deemed exchange) of Old Shares for New Shares pursuant to the Reverse Split, the U.S. Holder may be required to recognize any gain realized on such transfer, in
which case such gain generally would be subject to the “excess distribution” rules under Section 1291 of the Code. U.S. Holders are urged to consult their own tax advisors regarding the application of the PFIC rules to the Reverse Split.
Each shareholder should consult with his, her or its own tax advisor with respect to all of the potential tax consequences to such shareholder of the Reverse Split, including the
applicability and effect of any state, local, and non-U.S. tax laws, as well as U.S. federal tax laws and any applicable tax treaties.
Certain Israeli Tax Consequences
The following discussion summarizing certain Israeli income tax consequences of the Reverse Split is based on the Israeli Income Tax Ordinance [New Version], 1961, as amended (the
“Ordinance”), and the policy of the Israel Tax Authority (“ITA”) as currently in effect and is for general information only. The Ordinance and ITA policy are subject to change retroactively as well as prospectively. This summary does not purport to
be a complete discussion of all the possible Israeli income tax consequences and is included for general information only. Further, it does not address the tax treatment of any fractional shares that may result from the Reverse Split. Shareholders
are urged to consult their own tax advisors to determine the particular consequences to them of the Reverse Split.
Generally, a reverse share split could be viewed for Israeli tax purposes as a sale of the ordinary shares held by each shareholder prior to the Reverse Split (the “Old Shares”),
with the consideration being the new ordinary shares received in the Reverse Split (the “New Shares”). Such sale (or deemed sale) of ordinary shares will generally be viewed as a capital gain taxable event for Israeli tax purposes and will result in
the recognition of capital gain or capital loss for Israeli income tax purposes, unless an applicable exemption is provided in Israeli tax law or under an applicable treaty for the prevention of double taxation that exists between the State of Israel
and the country of residence of the shareholder.
However, Income Tax Ruling 15/07 issued by the ITA provides that if certain requirements are met, a reverse split would not be viewed as a capital gain taxable event and the
aggregate tax basis of the New Shares received (or deemed received) in the Reverse Split will be the same as the shareholder’s aggregate tax basis in the Old Shares exchanged (or deemed exchanged) therefor. The shareholder’s holding period for the
New Shares will include the period during which the shareholder held the Old Shares surrendered (or deemed surrendered) in the Reverse Split. The requirements of the foregoing ruling are as follows: the Reverse Split shall apply the same conversion
ratio for all Company shares and all of the Company’s shareholders; there will be no change in the shareholders’ rights (whether in their voting rights or rights for profits) as a result of the Reverse Split; the Reverse Split shall not include any
consideration, compensation or other economic benefit (whether by cash or by cash equivalents) paid or accrued to the shareholders or to the Company; the economic value of all of the issued shares shall not be affected by the Reverse Split; and the
Reverse Split will not effect any change other than the number of issued shares. We believe that the Reverse Split meets the requirements of the foregoing ruling and accordingly, that the Reverse Split would not be viewed as a capital gain taxable
event and the aggregate tax basis of the New Shares received (or deemed received) in the Reverse Split will be the same as the shareholder’s aggregate tax basis in the Old Shares exchanged (or deemed exchanged) therefor. The shareholder’s holding
period for the New Shares will include the period during which the shareholder held the Old Shares surrendered (or deemed surrendered) in the Reverse Split. Our view regarding the tax consequences of the Reverse Split is not binding on the ITA or the
courts. Accordingly, each shareholder should consult with his, her or its own tax advisor with respect to all of the potential Israeli tax consequences to such shareholder of the Reverse Split.
THE U.S. AND ISRAELI TAX CONSEQUENCES OF THE REVERSE SPLIT MAY DEPEND UPON THEPARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER. ACCORDINGLY, EACH SHAREHOLDER IS ADVISEDTO CONSULT THE SHAREHOLDER’S TAX
ADVISOR WITH RESPECT TO ALL OF THE POTENTIAL TAXCONSEQUENCES TO THE SHAREHOLDER OF THE REVERSE SPLIT.
Approval of Amendment of our Articles of Association
We are proposing to amend Article 4 of our Articles of Association as follows:
“4. The registered share capital of the Company is divided into 2,500,000 ordinary shares with no nominal value each (hereinafter: “Ordinary Share”).”
Proposed Resolution
It is proposed that at the Meeting the following resolution be adopted:
“RESOLVED, to approve a reverse share split of the Company’s ordinary shares at a ratio of 1-to-4, and to amend the Company’s Articles of Association accordingly.”
Required Vote
Under the Israeli Companies Law and our Articles of Association, the affirmative vote of the holders of a majority of the ordinary shares represented at the annual meeting, in
person or by proxy, entitled to vote and voting on the matter, is required for this proposal.
Board Recommendation
The Board of Directors recommends a vote “FOR” approval of the proposed resolution
PROPOSAL 2:
GRANT OF OPTIONS TO INTERIM CHIEF EXECUTIVE OFFICER
Background
On October 10, 2024, our Compensation Committee and Board of Directors approved the grant, subject to shareholder approval, of options to our Interim Chief Executive Officer.
Dr. Ehud Geller, the Interim Chief Executive Officer, shall be entitled, subject to shareholders approval, to 3,667 options to purchase 3,667 ordinary shares of the Company. The
options will be issued under the following terms: (i) the options shall be immediately exercisable (fully vested) upon the approval of the relevant shareholders meeting, and (ii) the exercise price shall be equal to USD 1.50 in order to exercise each
option.
Proposed Resolution
It is therefore proposed that the following resolution be adopted at the meeting:
“RESOLVED, to grant an aggregate number of 3,667 options to purchase 3,667 ordinary shares to Dr. Ehud Geller, the Interim Chief Executive Officer, upon the terms described above.”
Required Vote
Under the Israeli Companies Law and our articles of association, the affirmative vote of the holders of a majority of the ordinary shares represented at the annual meeting, in
person or by proxy, entitled to vote and voting on the matter, is required for this proposal. In addition, the shareholders’ approval must either include at least a majority of the ordinary shares voted by shareholders who are not controlling
shareholders nor are they shareholders who have a personal interest in the approval of the Interim Chief Executive Officer’s option grant, or the total ordinary shares of non-controlling shareholders and non-interested shareholders voted against this
proposal must not represent more than 2% of the outstanding ordinary shares.
Please note that according to the Exemption Regulations for Companies Listed Abroad by signing and submitting the attached Proxy Card, you as a shareholder declare and approve that
you neither are a controlling shareholder nor have a personal interest in the adoption of Proposal 2, except if you notified the Company of such in writing. If you believe that you have a personal interest in Proposal 2, and you wish to inform the
Company of such personal interest, you should submit such information in advance of voting to the Company at its registered offices at Painreform 65 Yigal Alon St., Tel Aviv 6744316, Israel, to the attention of Mr. Eyal Broder.
Board Recommendation
The Board of Directors recommends a vote “FOR” approval of the proposed resolution
PROPOSAL 3:
GRANT OF OPTIONS TO EXECUTIVE DIRECTOR
Background
On October 10, 2024, our Compensation Committee and Board of Directors approved the grant, subject to shareholder approval, of options to our Chief Technology Officer and director.
Prof. Eli Hazum, shall be entitled, subject to shareholders approval, to 2,555 options to purchase 2,555 ordinary shares of the Company. The options will be issued under the
following terms: (i) the options shall be immediately exercisable (fully vested) upon the approval of the relevant shareholders meeting, and (ii) the exercise price shall be equal to USD 1.50 in order to exercise each option.
Proposed Resolution
It is therefore proposed that the following resolution be adopted at the meeting:
“RESOLVED, to grant an aggregate number of 2,555 options to purchase 2,555 ordinary shares to Prof. Eli Hazum, our Chief Technology Officer and director upon the terms described above.”
Required Vote
Under the Israeli Companies Law and our articles of association, the affirmative vote of the holders of a majority of the ordinary shares represented at the annual meeting, in
person or by proxy, entitled to vote and voting on the matter, is required to approve this proposal.
Board Recommendation
The Board of Directors recommends a vote “FOR” approval of the proposed resolution
OTHER BUSINESS
Other than as set forth above, as of the mailing of this proxy statement, management knows of no business to be transacted at the Special meeting, but, if any other matters are
properly presented at the Special meeting, the persons named in the attached form of proxy will vote upon such matters in accordance with their best judgment.
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By Order of the Board of Directors
/s/ Ehud Geller
Ehud Geller, Interim Chief Executive Officer
October 10, 2024
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