PART
I
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ITEM
1.
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IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
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Not
applicable
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ITEM
2.
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OFFER STATISTICS AND EXPECTED TIMETABLE
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Not
applicable
A.
SELECTED FINANCIAL DATA
You
should read the following selected consolidated financial data in conjunction with the section of this annual report entitled
“Item 5 - Operating and Financial Review and Prospects” and our consolidated financial statements and the notes thereto
included elsewhere in this annual report.
The selected data presented
below under the captions “Statement of Operations Data,” and “Consolidated Statement of Position” as of
and for each of the years in the five-year period ended December 31, 2015, are derived from the audited consolidated financial
statements of the Company. The consolidated financial statements as of December 31, 2015, and 2014, and for each of the years
in the three-year period ended December 31, 2015, are included elsewhere in this annual report. The selected data should be read
in conjunction with the consolidated financial statements and the related notes. The consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board.
At
December 31, 2015, the Company was under the management of a Temporary Liquidator under the appointment of the District Court
of Tel Aviv. Effective February 2016, the Company was sold to the new owners by the Temporary Liquidator, free and clear of all
assets and liabilities. The financial information below represents the historical results of the business in which the Company
was previously engaged prior to the sale of the Company by the Temporary Liquidator to Aviv and Magic Stones.
Year
ended December 31,
(U.S.
dollars in thousands, except share and per share data)
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2015
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2014
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2013
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2012
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2011
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Statement
of Operations Data:
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Revenues
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---
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---
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---
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62
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63
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Expenses
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Operating expenses and facility maintenance
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---
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264
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2,068
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2,952
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2,526
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Marketing expenses
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---
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---
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251
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549
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1,200
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Administrative and general expenses
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166
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483
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956
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1,430
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1,759
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Other expenses
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---
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884
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12,415
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---
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---
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Total Expenses
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166
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1,631
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15,690
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4,931
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5,485
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Loss from ordinary activities
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(166
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)
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(1,631
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)
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(15,690
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)
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(4,869
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)
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(5,422
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)
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Financing Income
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12
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84
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42
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428
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54
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Financing Expenses
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(72
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)
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(49
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)
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(47
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)
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(60
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)
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(878
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)
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Total Financing Expenses, Net
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(60
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)
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35
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(5
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)
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368
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(824
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)
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Loss for the year
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(226
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)
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(1,596
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)
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(15,695
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)
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(4,501
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)
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(6,246
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)
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Loss attributable to:
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Owners of the Company
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(201
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)
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(1,316
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)
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(12,583
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)
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(3,615
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)
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(5,950
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)
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Non-controlling interests
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(25
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)
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(280
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)
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(3,112
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)
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(886
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)
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(296
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)
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Basic and diluted loss per ordinary share (in US$)
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*(26.43)
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*(173,04)
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*(1654.56)
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*(537.63)
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*(966.69)
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Weighted average number of ordinary shares used in basic and diluted loss per Ordinary Share calculation(*)
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7,605
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7,605
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7,605
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6,724
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6,155
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(*)
The number of ordinary shares as of the periods presented were adjusted consistent with the applications and adjustments made
and reflected in the annual report on Form 20-F for the year ended December 31, 2014 in respect of EER transaction and also reflect
the 30,465:1 reverse share split implemented on February 25, 2016.
For
the year ended December 31,
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2015
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2014
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2013
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2012
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2011
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Consolidated Statement of Position:
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Cash and cash equivalents
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-
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12
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102
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2,613
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6,751
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Fixed assets, net [2014-held for sale]
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-
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123
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642
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11,092
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12,505
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Intangible assets, net
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-
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-
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-
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3,110
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3,521
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Total assets
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20
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302
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2,127
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17,493
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23,015
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Bank credits and loans
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-
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-
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-
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-
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603
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Equity attributable to owners of the Company (deficit)
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(1,127
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)
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(926
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)
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329
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13,113
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17,076
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Non-controlling interests
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173
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198
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529
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3,428
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3,902
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Total Equity(deficit)
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(954
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)
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(728
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)
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858
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16,541
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20,978
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B.
CAPITALIZATION AND INDEBTEDNESS
Not
applicable.
C.
REASONS FOR THE OFFER AND USE OF PROCEEDS
Not
applicable.
D.
RISK FACTORS
The risk factors below
relate solely to our new business focus in the area of developing and commercializing a light passenger electric operated propulsion
aircraft. At December 31, 2015, we were under the management of a Temporary Liquidator appointed by the District Court in Tel Aviv,
Israel. In February, 2016 pursuant to a court approval our company was sold free of assets and liabilities to Aviv and Magic Stones.
In May 2016, we established an Israeli based subsidiary to which were assigned and otherwise transferred rights relating to our
new business focus.
You should carefully
consider the risks described below and in the other sections of, and the documents we have incorporated by reference into this
prospectus before making an investment decision. The risks described below and in the documents we have incorporated by reference
into this prospectus are not the only ones facing our company. Our business, financial condition or results of operations could
be materially adversely affected by any of these risks. The trading price of our ordinary shares could decline due to any of these
risks.
RISKS
RELATED TO OUR NEW BUSINESS AND PRODUCTS
We
are a start-up company.
The
Company’s sole business is ownership of its wholly owned newly created subsidiary, Eviation Tech Ltd., an Israeli start-up
company (the “Subsidiary”), engaged in a new business that has not generated any revenue since its inception in May
2016. We expect to incur significant operating losses for the foreseeable future, and there can be no assurance that we will be
able to validate and market products in the future that will generate revenues, or that any revenues generated will be sufficient
for us to become profitable or thereafter maintain profitability.
We
have no operating history upon which to evaluate our business.
We
have no history of operations in our industry as we are embarking on a new business venture. Accordingly, it is more difficult
to accurately assess growth rate and earnings potential. Our business is dependent upon the implementation of our business plan.
We have recently finalized our licensing agreements and are setting in place operations. Our limited operating history makes it
difficult for prospective investors to evaluate our business. Therefore, our operations are subject to all of the risks inherent
in the initial expenses, challenges, complications and delays frequently encountered in connection with the early stages of any
new business, as well as those risks that are specific to aviation industry. Investors should evaluate us in light of the problems
and uncertainties frequently encountered by early stage companies attempting, like ours, to develop markets for new products,
services, and technologies, such as unforeseen capital requirements, failure of market acceptance, failure to establish business
relationships, and competitive disadvantages as against larger and more established companies. If we are unable to successfully
address these difficulties as they arise, our future growth and earnings will be negatively affected.
We
may be unable to obtain additional capital that we will require to implement our business plan, which could restrict our ability
to grow.
Our subsidiary has,
to date, received loans of approximately $2.5 million from Aviv and Magic Stones, our shareholders under the terms of agreements
with these shareholders. We have under these agreements another $2 million in unutilized credit availability. In addition, we
have received a loan in the principal amount of $ 0.5 million from these shareholders. We expect that these amounts will suffice
for our working capital through December 31, 2017, as described in our business plan.
However, we will require
additional capital to continue implementing our business plan beyond January 1, 2018 and to grow our business beyond the development
phase. We plan to partner with an established airframe manufacturer to support and fund the process of commercialization of the
design. We may not, however, succeed in securing such partnership and obtaining the additional capital required, and if we are
able to secure such additional capital, it may not be pursuant to terms deemed favorable to the Company and its shareholders. We
may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities
could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financing covenants that would restrict our operations. Our ability to obtain additional
capital on acceptable terms is subject to a variety of uncertainties, including:
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investors’ perception of an aviation company,
and demand for its securities;
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●
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conditions of the U.S. and other capital markets in
which we may seek to raise funds;
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●
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our future results of operations and financial condition;
and
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●
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economic, political and other conditions in North America.
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Financing
may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms
favorable to us, or at all, could have a material adverse effect on our business, financial condition and results of operations.
In addition, our administrative requirements (such as salaries, insurance, expenses and general overhead expenses, as well as
legal compliance costs and accounting expenses) may require a substantial amount of additional capital and cash flow.
We may pursue sources of
additional capital through various financing transactions or arrangements, including partnership with an established airframe manufacturer,
joint venturing of projects, debt financing, equity financing or other means. We may not be successful in locating suitable financing
transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed
in raising additional capital, our resources may not be sufficient to fund our planned operations going forward. Any additional
capital raised through the sale of equity may dilute the ownership percentages of our shareholders, and could also result in a
decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity.
The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences,
superior voting rights and the issuance of other derivative securities, and issuances of incentive awards under equity employee
incentive plans, which may have a further dilutive effect.
Our
ability to obtain needed financing may be impaired by such factors as the capital markets, our status as a new enterprise without
a significant demonstrated operating history and/or the loss of key management. If the amount of capital we are able to raise
from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may
be required to cease our operations.
We
may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees,
securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash
expenses in connection with certain securities we may issue, such as convertible notes, which may adversely impact our financial
condition.
A
default by us under the secured financing arrangement with our shareholder would enable them to take control of our assets.
Under
the credit facilities referred to above with our shareholders, Aviv and Magic Stones, we have granted to such shareholders a
security interest in all of the assets of the Subsidiary, including its intellectual property as well as our shareholdings of
the Subsidiary. A default by us under this financing arrangement would enable the holder to foreclose on our assets,
including our intellectual property. Any foreclosure could force us to substantially curtail or cease our operations on our
newly entered aviation business.
Our
lack of diversification will increase the risk of an investment in the Company, and our financial condition and results of operation
may deteriorate if we fail to diversify.
Our
new business will initially be in the regional transportation (or aviation) industry. Larger companies have the ability to manage
their risk by diversification. However, we will lack diversification, in terms of both the nature and geographic scope of our
business. As a result, we will likely be impacted more acutely by factors affecting our industry or the regions in which we operate
than we would if our business were more diversified, enhancing our risk profile. If we cannot diversify or expand our operations,
our financial condition and results of operations could deteriorate.
The
success of our business depends upon the continuing contributions of our Chief Executive Officer and other key personnel and our
ability to attract highly qualified personnel to expand our business.
We
will rely heavily on the services of our CEO, Mr. Omer Bar Yohay, as well as our shareholder Mr. Aviv Tzidon and other senior
management personnel that we intend to hire. Loss of the services of any of such individuals or any other key management and technical
personnel could have a material adverse impact on our future operations. Our success is also dependent on our ability to retain
these key employees and our ability to attract and retain, among others, skilled financial, engineering, technical and managerial
personnel to continue the development and commercialization of the EViation Aircraft. As such, our future success highly depends
on our ability to attract, retain and motivate personnel, including contractors, required for the development, maintenance and
expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional
qualified employees or consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in
the future could have a material adverse effect on our business, financial condition and results of operation. In addition, if
we fail to engage qualified personnel, we may be unable to meet our responsibilities as a public reporting company under the rules
and regulations of the Securities and Exchange Commission.
The
product we intend to market may not be accepted by the market.
Our success depends on the acceptance
of our electric propulsion aircraft (the “EViation Aircraft”) as a viable alternative to the current existing regional
transportation options. Market acceptance will depend upon several factors, including (a) the desire and ability of consumers
to use EViation Aircraft (b) the accessibility of the EViation Aircraft; and (c) the convenience of using the EViation Aircraft.
A number of factors may inhibit acceptance of the EViation Aircraft, including (i) the ease of use of competing alternatives such
as cars, trains and buses; (ii) our inability to change Consumers’ habits of using car, train and buses for regional travel;
(iii) our inability to change consumers’ perception that using light aircraft is highly expensive and is reserved mainly
for the extremely rich population of the world; or (iv) fear of individuals to use the EViation Aircraft. If the EViation Aircraft
is not accepted by the market, we may have to curtail our business operations, which could have a material negative effect on
operating results and result in a lower stock price.
We
may not be able to compete successfully against current and future competitors.
We
will compete, in our proposed businesses, with other companies, some of which have far greater marketing and financial resources
and experience than we do. A number of companies may develop and offer products that provide the same or greater functionality
than our product. We may not be able to maintain our competitive position against current or potential competitors, especially
those in the general aviation market with significantly greater financial, marketing, service, support, technical and other resources.
Competitors with greater resources may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to potential employees, distributors, resellers or other strategic partners. We expect
additional competition from other established and emerging companies as the market for light aircraft continues to develop.
In
addition, we cannot guarantee that we will be able to penetrate the regional transportation market and be able to compete at a
profit. In addition to established competitors, other companies can easily enter our market and compete with us. Effective competition
could result in price reductions, reduced margins or have other negative implications, any of which could adversely affect our
business and chances for success. Competition is likely to increase significantly as new companies enter the market and current
competitors expand their services. Many of these potential competitors are likely to enjoy substantial competitive advantages,
including: larger technical staffs, greater name recognition, larger customer bases and substantially greater financial, marketing,
technical and other resources. To be competitive, we must respond promptly and effectively to the challenges of technological
change, evolving standards and competitors’ innovations by continuing to enhance our services and sales and marketing channels.
Any pricing pressures, reduced margins or loss of market share resulting from increased competition or our failure to compete
effectively, could seriously damage our business and chances for success.
Our
commercial success will depend in part on the ability of the licensors of key technologies to maintain protection of their intellectual
property.
Our
success will depend in part on the ability of the licensors of key technologies for use in our new business to obtain, maintain
and enforce patent and other intellectual property rights for the technology and to preserve trade secrets, and on our ability
to operate without infringing upon the proprietary rights of third parties. We cannot be certain that our licensors were the first
inventors of inventions covered by their patents and patent applications or that they were the first to file. Accordingly, there
can be no assurance that licensed patents and patents application used by the Subsidiary are valid or will afford us protection
against competitors with similar technologies. Failure to obtain or maintain patent or other intellectual property protection
on the technology underlying our licensed electric double box tail aircraft may have a material adverse effect on our competitive
position and business prospects. It is also possible that the technology may infringe on third party patents or other intellectual
property rights owned by others. If we are found liable for infringement, we may be liable for significant money damages and may
encounter significant delays in bringing products and services to market.
We
may be forced to abandon development of the EViation Aircraft altogether, which will significantly impair our ability to generate
revenues.
We
are currently in the proof of concept stage, and intend to test all the components of the EViation Aircraft enabling core technologies
(airframe design, electric drive, battery technology and autonomous flight and sensing systems). Testing will take place on the
scaled models and EViation Aircraft that are currently under construction by the Subsidiary. Upon the completion of the testing,
the results of such testing may not support the claims sought by us. Further, success in the proof of concept stage does not ensure
that the later stages of development would be successful, and the results of later testing may not meet our expectation or the
results of the proof of concept stage. Any such failure may cause us to abandon the development of the EViation Aircraft altogether.
Our
future growth is dependent upon consumers’ willingness to adopt light electric aircraft.
Our
growth is highly dependent upon the adoption by consumers of light electric aircraft as a viable alternative for regional travel,
and we are subject to an elevated risk of any reduced demand for, alternative fuel aircraft in general, and light electric aircraft
in particular. If the market for light electric aircraft in North America, Europe and Asia does not develop as we expect, or develops
more slowly than we expect, our business, prospects, financial condition and operating results will be harmed. The market for
alternative fuel aircraft is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition,
additional competitors, evolving government regulation and industry standards.
Other
factors that may influence the adoption of alternative fuel aircraft, and specifically electric aircraft, include:
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|
●
|
perceptions about electric aircraft quality, safety
(in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents
occur that are linked to the quality or safety of electric aircraft, such as those relating to the battery in the Boeing Dreamliner;
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|
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|
●
|
perceptions about airplane safety in general, in particular
safety issues that may be attributed to the use of advanced technology;
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|
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|
●
|
the limited range over which electric aircraft may fly
on a single battery charge and the effects of weather on this range;
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|
●
|
the decline of an electric aircraft’s range resulting
from deterioration over time in the battery’s ability to hold a charge;
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●
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The availability of service for electric aircraft;
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|
●
|
concerns about electric grid capacity and reliability,
which could derail our present efforts to promote electric aircraft as a practical solution to aircraft which require gasoline;
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●
|
consumers’ desire and ability to use electric
aircraft in regional trips instead of other alternatives such as trains, buses and cars;
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|
●
|
government regulations and economic incentives promoting
fuel efficiency and alternate forms of energy as well as tax and other governmental incentives to purchase and use electric aircraft;
|
Our
Business is subject to extensive and costly government regulation.
Our
product is subject to extensive regulation and we may never obtain the certification required for its operation. In the U.S.,
the EViation Aircraft must comply with Federal Aviation Administration("FAA") regulations governing production and quality
systems, airworthiness and installation approvals, repair procedures and continuing operational safety before it can be certified.
The FAA and foreign regulatory authorities have full discretion over this approval process. We will need to perform significant
testing of the EViation Aircraft and its systems before we could file an application for certification. We may encounter delays
or rejections based upon the FAA regulations, which may delay the commercialization of our product. Failure to obtain FAA certification
of the EViation Aircraft in a timely manner or at all will severely undermine our business by delaying or halting commercialization
of our product, imposing costly procedures and diminishing competitive advantage, and we may be required to cease our operations.
Our
business is also subject to various federal, state, and local laws and regulations relating to environmental footprint in emissions,
noise and treatment of hazardous materials. However, the costs incurred to ensure continued environmental compliance could have
a material impact on our results of operations, financial condition or cash flows if additional work requirements or more stringent
clean-up standards are imposed by regulators, new areas of soil, air and groundwater contamination are discovered and/or expansions
of work scope are prompted by the results of investigations.
We
may be subject to legal proceedings and/or to product liability lawsuits.
We
could incur substantial costs in connection with product liability or other tortious claims relating to the EViation Aircraft.
The EViation Aircraft may be involved in aerial accidents, which may cause death, bodily injury and other damages. These accidents
may expose us to product liability or other type of tortious lawsuits. If product liability or tortious lawsuits are successfully
brought against us, we may incur substantial liabilities and may be required to limit or to halt the operation of the EViation
Aircraft, which may result in substantial losses. In addition, such accidents would deter consumers from using our product, which
could have a material impact on our results of operations, financial condition or cash flow and may cause us to cease operations.
Our business exposes us to potential product liability and aerial accidents risks, which are inherent in the testing, manufacturing,
and marketing aviation products and services. We may not be able to avoid product liability or tortious claims. Product liability
and aerial accidents insurance are expensive, subject to deductibles and coverage limitations, and may not be available in the
amounts that we desire for a price we are willing to pay. Product liability and aerial accidents insurance for aviation companies
is generally expensive, if available at all. If, at any time, we are unable to obtain sufficient insurance coverage on reasonable
terms or to otherwise protect against potential product liability or tortious claims, we may be unable to test, market or commercialize
our product. A successful product liability claim or tort claim brought against us in excess of our insurance coverage, if any,
may cause us to incur substantial liabilities, and, as a result, our business, liquidity and results of operations would be materially
adversely affected. In addition, the existence of a product liability claim or tortious claim could affect the market price of
our securities.
If
we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately
insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely
affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.
Our
business will expose us to potential liability that results from risks associated with conducting testing on the EViation Aircraft
and from flying the EViation Aircraft. A successful liability claim, if any, brought against us could have a material adverse
effect on our business, prospects, financial condition and results of operations even though liability insurance is successfully
maintained or obtained. The current and planned insurance coverages may only mitigate a small portion of a substantial claim against
us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claims made against
our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or
recruit qualified officers and directors to manage the Company.
Two
Shareholders Control More than 80% of the Company
Each of Aviv and Magic
Stones currently own 41.21% of the Company’s outstanding share capital. Accordingly, they alone can make determinations
on any matter requiring shareholder approval.
If
we are considered to be a passive foreign investment company, either presently or in the future, U.S. Holders will be subject
to adverse U.S. tax consequences.
We
will be a passive foreign investment company, or a PFIC, if 75% or more of our gross income in a taxable year, including our pro
rata share of the gross income of any company, U.S. or foreign, in which we are considered to own, directly or indirectly, 25%
or more of the shares by value, is passive income. Alternatively, we will be considered a PFIC if at least 50% of our assets in
a taxable year, averaged over the year and ordinarily determined based on fair market value, including our pro rata share of the
assets of any company in which we are considered to own, directly or indirectly, 25% or more of the shares by value, are held for
the production of, or produce, passive income. If we were to be a PFIC, and a U.S. Holder does not make an election to treat us
as a “qualified electing fund,” or QEF, or a “mark to market” election, “excess distributions”
to a U.S. Holder, and any gain recognized by a U.S. Holder on a disposition of our ordinary shares, would be taxed in an unfavorable
way. Among other consequences, our dividends would be taxed at the regular rates applicable to ordinary income, rather than the
15% maximum rate applicable to certain dividends received by an individual from a qualified foreign corporation. The tests for
determining PFIC status are applied annually and it is difficult to make accurate predictions of future income and assets, which
are relevant to the determination of PFIC status. In addition, under the applicable statutory and regulatory provisions, it is
unclear whether we would be permitted to use a gross loss from sales (sales less cost of goods sold) to offset our passive income
in the calculation of gross income. In light of the uncertainties described above, we have not obtained an opinion of counsel with
respect to our PFIC status and no assurance can be given that we will not be a PFIC in any year. If we determine that we have become
a PFIC, we will then notify our U.S. Holders and provide them with the information necessary to comply with the QEF rules. If the
IRS determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, however, it might
be too late for a U.S. Holder to make a timely QEF election, unless the U.S. Holder qualifies under the applicable treasury regulations
to make a retroactive (late) election. U.S. Holders who hold ordinary shares during a period when we are a PFIC will be subject
to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. Holders who made a timely
QEF or mark-to-market election.
RISK
FACTORS RELATED TO THE INTELLECTUAL PROPERTY OF OUR NEW EVIATION BUSINESS
If
we fail to adequately protect, enforce or secure rights to the patents which we own or that were licensed to us or any patents
we may own in the future, the value of our intellectual property rights would diminish and our business and competitive position
would suffer.
Our
success, competitive position and future revenues, if any, depend in part on our ability to obtain and successfully leverage intellectual
property covering the EViation Aircraft, know-how, methods, processes and other technologies, to protect our trade secrets, to
prevent others from using our intellectual property and to operate without infringing the intellectual property rights of third
parties.
The
risks and uncertainties that we face with respect to our intellectual property rights include, but are not limited to, the following:
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the degree and range of protection any patents will
afford us against competitors;
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the patents concerning our business activities were
not registered in all countries and therefore our patent protection may be lacking in some territories;
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if and when patents will be issued;
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whether or not others will obtain patents claiming aspects
similar to those covered by our own or licensed patents and patent applications;
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we may be subject to interference or derivation proceedings;
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we may be subject to opposition or post-grant proceedings
in the U.S. and foreign countries;
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any patents that are issued may not provide meaningful
protection;
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we may not be able to develop additional proprietary
technologies that are patentable;
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other companies may challenge patents licensed or issued
to us or our customers;
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other companies may independently develop similar or
alternative technologies, or duplicate our technologies;
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other companies may design around technologies we have
licensed or developed;
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enforcement of patents is complex, uncertain and expensive;
and
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we may need to initiate litigation or administrative
proceedings that may be costly whether we win or lose.
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If
patent rights covering our product and methods are not sufficiently broad, they may not provide us with any protection against
competitors with similar products and technologies. Furthermore, if the United States Patent and Trademark Office, or the USPTO,
or any foreign patent office issue patents to us or our licensors, others may challenge the patents or design around the patents,
or the patent office or the courts may invalidate the patents. Thus, any patents we own or license from or to third parties may
not provide any protection against our competitors.
We cannot be certain
that patents will be issued as a result of any pending applications, and we cannot be certain that any of our issued patents
or patents licensed from a third-party will give us adequate protection from competing products. For example, issued patents,
including the patents licensed by us, may be circumvented or challenged, declared invalid or unenforceable, or narrowed in
scope.
In
addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we were the first to make our inventions or to file patent applications covering those inventions.
It
is also possible that others may obtain issued patents that could prevent us from commercializing our products or require us to
obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those
patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement,
and we may be unable to do so.
In
addition to patents and patent applications, we depend upon proprietary know-how to protect our proprietary technology. We require
our employees, consultants, advisors and collaborators to enter into confidentiality agreements that limit the disclosure of confidential
information to any other parties. We also require our employees and consultants to disclose and assign to us their ideas, developments,
discoveries and inventions. These agreements may not, however, provide adequate protection for our know-how or other proprietary
information in the event of any unauthorized use or disclosure.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance
with these requirements.
Periodic
maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime
of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,
fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be
cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights
in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application
include, but are not limited to, failure to respond to office actions within prescribed time limits, non-payment of fees and failure
to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would
have a material adverse effect on our business.
Costly
litigation may be necessary to protect our intellectual property rights and we may be subject to claims alleging the violation
of the intellectual property rights of others.
We
may face significant expense and liability as a result of litigation or other proceedings relating to patents and other intellectual
property rights of others. In the event that another party has also filed a patent application or been issued a patent relating
to an invention or technology claimed by us in pending applications, we may be required to participate in an interference proceeding
declared by the USPTO to determine priority of invention, which could result in substantial uncertainties and costs for us, even
if the eventual outcome is favorable to us. We, or our licensors, also could be required to participate in interference proceedings
involving issued patents and pending applications of another entity. An adverse outcome in an interference proceeding could require
us to cease using the technology or to license rights from prevailing third parties.
The
cost to us of any patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved
in our favor, could be substantial and could divert management’s resources and attention. Our ability to enforce our patent
protection could be limited by our financial resources, and may be subject to lengthy delays. A third party may claim that we
are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and activities,
such as research, development and the sale of any future products. Such lawsuits are expensive and would consume time and other
resources. There is a risk that a court will decide that we are infringing the third party’s patents and will order us to
stop the activities claimed by the patents, redesign our products or processes to avoid infringement or obtain licenses (which
may not be available on commercially reasonable terms or at all). In addition, there is a risk that a court will order us to pay
the other party damages for having infringed their patents.
Moreover,
there is no guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities
claimed by the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. In
addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to
our product candidate, technologies or other matters. Any claims of infringement asserted against us, whether or not successful,
may have a material adverse effect on us.
We
rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties
using our intellectual property to compete against us.
Although
we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the
non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and
assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we
employ them, the agreements can be difficult and costly to enforce. Although we seek to enter into these types of agreements with
our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize or independently
develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights
associated with the EViation Aircraft or any future product. If a dispute arises, a court may determine that the right belongs
to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary
know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors
or others. Despite the protective measures we employ, we still face the risk that:
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these agreements may be breached;
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these agreements may not provide adequate remedies for
the applicable type of breach;
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our proprietary know-how will otherwise become known;
or
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our competitors will independently develop similar technology
or proprietary information.
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International
patent protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have
to expend substantial sums and management resources.
Patent
law outside the United States may be different than in the United States. Further, the laws of some foreign countries may not
protect our intellectual property rights to the same extent as the laws of the United States, if at all. A failure to obtain sufficient
intellectual property protection in any foreign country could materially and adversely affect our business, results of operations
and future prospects. Moreover, we may participate in opposition proceedings to determine the validity of our foreign patents
or our competitors’ foreign patents, which could result in substantial costs and divert management’s resources and
attention.
Intellectual
property rights do not necessarily address all potential threats to our competitive advantage.
The
degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples
are illustrative:
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others may be able to design or develop an aircraft
that is substantially similar to the EViation Aircraft or any future product but that are not covered by the claims of the
patents that we own or have exclusively licensed;
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we or our licensors or any future strategic partners
might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or
have exclusively licensed;
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we or our licensors or any future strategic partners
might not have been the first to file patent applications covering certain of our inventions;
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others may independently develop similar or alternative
technologies or duplicate any of our technologies without infringing our intellectual property rights;
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it is possible that our pending patent applications
will not lead to issued patents;
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issued patents that we own or have exclusively licensed
may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by
our competitors;
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our competitors might conduct research and development
activities in countries where we do not have patent rights and then use the information learned from such activities to develop
competitive products for sale in our major commercial markets;
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we may not develop additional proprietary technologies
that are patentable; and
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the patents of others may have an adverse effect on
our business.
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We
may be subject to claims challenging the inventorship of our patents and other intellectual property.
We
may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other
intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations
of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against
these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.
Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management and other employees. In addition, the Israeli
Supreme Court ruled in 2012 that an employee who receives a patent or contributes to an invention during his employment may be
allowed to seek compensation for such contributions from his or her employer, even if the employee’s contract of employment
specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The Israeli Supreme
Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation, does not rule out
the right of the employee to claim their right for royalties. As a result, it is unclear whether and, if so, to what extent our
employees may be able to claim compensation with respect to our future revenue. We may receive less revenue from future products
if any of our employees successfully claim for compensation for their work in developing our intellectual property, which in turn
could impact our future profitability.
RISKS
RELATED TO OUR ISRAELI OPERATIONS
You
may have difficulty enforcing a judgment issued by a court in the United States against us in Israel.
We
are organized under the laws of Israel and our headquarters are in Israel. All of our officers and directors reside outside of
the United States. Therefore, you may not be able to enforce any judgment obtained in the United States against us or any of such
persons. You may not be able to enforce civil actions under United States securities laws if you file a lawsuit in Israel. In
addition, if a foreign judgment is enforced by an Israeli court, it will be payable in Israeli currency.
Currency
fluctuations may affect the value of our assets and decrease our earnings
The
Company's functional currency is the U.S. dollar. We anticipate that a significant portion of our expenses will continue to be
denominated in NIS. The devaluation of the U.S. dollar against the NIS may decrease the value of our assets and could impact our
business.
Your
rights and responsibilities as a shareholder will be governed by Israeli law and differ in some respects from the rights and responsibilities
of shareholders under U.S. law.
We are incorporated under
Israeli law. The rights and responsibilities of the holders of our ordinary shares are governed by our amended and restated articles
of association (“Articles of Association”) and by Israeli law. These rights and responsibilities differ in some respects
from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, a shareholder of an Israeli company
has a duty to act in good faith toward the company and other shareholders and to refrain from abusing his power in the company,
including, among other things, in voting at the general meeting of shareholders on certain matters. See “Item 10.B. Additional
Information – Memorandum and Articles of Association”
It
may be difficult to enforce a U.S. judgment against us or our officers and directors or to assert U.S. securities law claims in
Israel.
We
are incorporated in Israel. All of our directors and officers reside outside of the United States. Service of process on them
may be difficult to effect in the United States. Furthermore, because a substantial portion of our assets are located in Israel,
any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United
States.
An
Israeli court may declare a judgment rendered by a foreign court in a civil matter, including judgments awarding monetary or other
damages in non-civil matters, enforceable if it finds that:
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the
judgment was rendered by a court which was, according to Israeli law, competent to render
it;
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the
judgment is no longer appealable;
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the
obligation in the judgment is enforceable according to the rules relating to the enforceability
of judgments in Israel and the substance of the judgment is not contrary to public policy
in Israel; and
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the
judgment can be executed in the state in which it was given.
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A
foreign judgment will not be declared enforceable by Israeli courts if it was given in a state, the laws of which do not provide
for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice
the sovereignty or security of Israel. An Israeli court also will not declare a foreign judgment enforceable if it is proven to
the Israeli court that:
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the
judgment was obtained by fraud;
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there
was no due process;
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the
judgment was given by a court not competent to render it according to the laws of private
international law in Israel;
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the
judgment conflicts with another judgment that was given in the same matter between the
same parties and which is still valid; or
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at
the time the action was brought to the foreign court a claim in the same matter and between
the same parties was pending before a court or tribunal in Israel.
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Israeli
courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not 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 proved
as a fact that can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law.
Additionally, there is doubt as to the enforceability of civil liabilities under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, in original actions instituted in Israel.
Conditions
in Israel may adversely affect our operations and may limit our ability to produce and sell our products.
We
are incorporated under Israeli law and our principal offices are located in Israel. Political, economic and military conditions
in Israel directly affect our operations. Since the establishment of the State of Israel in 1948, 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 led to security
and economic problems for Israel. We could be adversely affected by any major hostilities involving Israel, the interruption or
curtailment of trade between Israel and its trading partners, a significant increase in inflation, or a significant downturn in
the economic or financial condition of Israel. Ongoing and revived hostilities with the Palestinians or Arab countries might require
more widespread military reserve service by some of our employees, which could have an adverse effect on our business. In addition,
several Arab and Muslim countries still restrict business with Israeli companies. We could be adversely affected by restrictive
laws or policies directed towards Israel or Israeli businesses.
Generally, all male adult
citizens and permanent residents of Israel under the age of 45 can, unless exempt, be called up and obligated to perform active
military reserve duty for as many as 36 days annually (beyond this age, they may be called up and obligated to take part in military
training for as many as 13 days annually). Additionally, all Israeli residents of this age are subject to being called to active
duty at any time. Although we have operated effectively under these requirements since we began operations, we cannot assess the
full impact of these requirements on our workforce or business if political and military conditions should change, and we cannot
predict the effect on us of any expansion or reduction of these obligations.
RISKS
RELATING TO OWNERSHIP OF OUR ORDINARY SHARES
If
we are considered a shell company, we will be subject to various restrictions and requirements under the U.S. Securities Laws.
While
we are not as of the date of this report on Form 20-F a shell company, the Company may be deemed to have been, at one point or
another in time prior to the establishment of our Israeli subsidiary to which were assigned the rights to our new business focus,
a shell company. A “shell company”, as defined by Rule 12b-2 promulgated under the Securities Exchange Act of 1934,
is (1) a company that has no or nominal operations; and (2) either: (i) no or nominal assets; (ii) assets consisting solely of
cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets. If
however, due to the scope or range of our operations we are deemed to have been a shell company, then certain consequences follow.
During
the period in which we are deemed to be a shell company and for a period of sixty days following the filing of the Form 20-F for
the year ending December 31, 2016 reflecting the change in our status, we may not use any Form S-8 we have on file in order to
enable the issuance of our shares and the resale of such shares by our employees. In addition, the provisions of Rule
144 promulgated under the Securities Exchange Act of 1934 may not be used for resale of shares issued by us at the time we were
deemed to be a shell company for as long as we are deemed to be a shell company and for a period of one-year after the filing
of the above referenced report. These restrictions may limit our ability to compensate our employees and attract new
key personnel and may also restrict our ability to raise capital via the private placement of our shares.
We
are unlikely to pay dividends in the foreseeable future and any return on investment may be limited to the value of our ordinary
shares.
Under the Israeli Companies
Law, dividends may only be paid out of profits legally available for distribution and provided that there is no reasonable concern
that such payment will prevent us from satisfying our existing and foreseeable obligations as they become due. In addition, a competent
court may approve, as per a motion to be filed by a company in accordance with the Israeli Companies Law requirements, a payment
which does not meet the profits test, provided that the court was convinced that there is no reasonable concern that such payment
will prevent the company from satisfying its existing and foreseeable obligations as they become due. We do not expect to declare
or pay cash dividends in the foreseeable future and intend to retain future earnings, if any, to finance the growth and development
of our business. If we do not pay dividends, our ordinary shares may be less valuable because a return on your investment will
only occur if our share price appreciates. If we issue additional shares in the future, it will result in the dilution of our existing
shareholders.
We are authorized to issue
up to ten million ordinary shares of our ordinary shares. Our board of directors may choose to issue some or all of such shares
to acquire one or more companies or products and to fund our overhead and general operating requirements. The issuance of any such
shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of
our ordinary shares. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power
of all current shareholders. Further, such issuance may result in a change of control of our company.
Trading
of our ordinary shares is restricted by the Securities Exchange Commission’s penny stock regulations, which may limit a
stockholder’s ability to buy and sell our ordinary shares.
The
Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security
that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers
who sell to persons other than established customers and “accredited investors”. The term “accredited investor”
refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to
a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form
prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer
and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the
secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the
ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit
the marketability of our ordinary shares.
FINRA sales practice requirements
may also limit a shareholder’s ability to buy and sell our shares.
In addition to the “penny
stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require
that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers
must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives
and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low
priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers
to recommend that their customers buy our ordinary shares, which may limit your ability to buy and sell our shares and have an
adverse effect on the market for our shares.
The market for our ordinary
shares is illiquid and the price of our ordinary shares may be negatively impacted by factors that are unrelated to our operations.
Although our ordinary shares
are currently listed for quotation on the OTC Pink there is no market for our ordinary shares. Even when a market is established
and trading begins, trading through the OTCPK is frequently thin and highly volatile. There is no assurance that a sufficient
market will develop in our shares, in which case it could be difficult for shareholders to sell their shares. The market price
of our ordinary shares could fluctuate substantially due to a variety of factors, including market perception of our ability to
achieve our planned growth, quarterly operating results of our competitors, trading volume in our ordinary shares, changes in
general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition,
the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect
on 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.
|
ITEM
4.
|
INFORMATION
ON
The COmpany
|
A.
HISTORY AND DEVELOPMENT OF THE COMPANY
Our
legal and commercial name is R.V.B. Holdings Ltd. Our offices are at 1 Ha’Ofe St., Kadima-Tzoran, P.O. Box 5062, Israel,
6092000. Our corporate governance complies with the Israeli Companies Law, 1999, as amended (the “Companies Law”).
Our shares are currently quoted on the OTC Market, Pink, under the symbol, RVBHF.
R.V.B.
Holdings Ltd., formerly B.V.R. Systems (1998) Ltd. (“BVR”), is an Israeli company that was formed in January 1998
to receive all of the assets and liabilities of the defense related business of BVR Technologies Ltd. in accordance with the terms
of a reorganization plan. BVR commenced operations as an independent company effective as of January 1, 1998. In November 2009,
BVR sold substantially all of its assets and liabilities, including the brand name “B.V.R.”, to Elbit Systems Ltd.
(“Elbit”) and following the sale changed its name in January 2010 to R.V.B. Holdings Ltd. RVB was controlled by Mr.
Aviv Tzidon until March 2010, when Greenstone Industries Ltd. (“Greenstone”) purchased a controlling interest in RVB
from A.O. Tzidon (1999) Ltd. and Aviv Tzidon.
On
April 2, 2015, the Tel Aviv District Court (the “Court”) granted Greenstone’s petition, due to the financial
and business condition of the Company, to appoint Adv. Mordechai Shalev as the Temporary Liquidator of the Company, with a mandate
to identify and liquidate the Company’s assets and to investigate its conduct. The Temporary Liquidator may be granted additional
powers as may be determined by the Court.
On
October 28, 2015, the Temporary Liquidator filed with the Court an agreement for the sale of the Company (the “Agreement”)
by way of a share issuance to Aviv and Magic Stones in consideration for NIS 600,000. The Agreement was reached following a ‘request
for proposals’ (RFP) procedure carried out by the Temporary Liquidator to sell the Company free and clear from all assets
and obligations of any kind.
Following the approval of
the Agreement by the Court on February 2, 2016, the following was implemented (1) canceling the nominal value of the Company’s
shares, such that the Company’s shares will not have any nominal value, (2) converting 71,923,175 non-tradeable options to
purchase ordinary shares of the Company into 71,923,175 ordinary shares of the Company, (3) effectuating a reverse split of the
Company’s shares at a ratio of 30,465:1, such that for each 30,465 shares of the Company, the shareholders of the Company
received one share, and (4) increasing the share capital of the Company to 700,000,000 ordinary shares of the Company with no nominal
value. After giving effect to such actions and prior to the share issuances to Aviv and Magic Stones, the total number
of issued ordinary shares of the Company was 10,000. The reverse split became effective on February 25, 2016.
Pursuant to the Agreement,
the Company, through its Temporary Liquidator, issued to Aviv and Magic Stones, in the aggregate, 9,990,000 ordinary shares representing,
on the date of their issuance, 99.9% of the issued and outstanding share capital of the Company (the “Issuance”), in
consideration for which these shareholders paid to the Temporary Liquidator the amount of NIS 600,000 (approximately $ 153,000).
Following
the acquisition of the Company, the Board of the Company identified a new business direction to pursue in the area of aviation
transportation via light electrically operated aircrafts. The viable electric aircraft eco-system that the Company seeks to establish
is intended to enable passengers to book an “on demand” flight as a cost-effective solution compared with other available
transportation methods of regional travels. The aircraft to be developed will be inexpensive to operate, significantly reducing
the cost of travel for passengers and is planned to be an emissions-free, quiet, high speed, safe and easy to operate, with lower
operating and ownership costs. In furtherance thereof, on May 15, 2016, the Company established a new, wholly-owned Israeli
subsidiary company under the name “EViation Tech Ltd.”, or the Subsidiary, for the purpose of developing and commercializing
its new business focus. Aviv and Magic Stones assigned or otherwise transferred to the Subsidiary all rights that each had or
entered into relating to the new business focus of light aircraft aviation technology.
Our
legacy business of waste management as at December 31, 2015 has been discontinued. The discussion below in this item relates solely
to our new business focus in light aviation regional transportation field.
B.
AVIATION BUSINESS OVERVIEW
Our
Business
The
Subsidiary
The
Subsidiary was incorporated in Israel on May 15, 2016 as a wholly-owned subsidiary of the Company, a private company limited by
shares. The Subsidiary seeks to develop and manufacture a light, electric passenger aircraft, which we refer to as the “EViation
Aircraft”, and to provide supportive services required for an economically viable electric aircraft eco-system.
The
viable electric aircraft eco-system that the Subsidiary seeks to establish is intended to enable passengers to book an “on
demand” flight as a cost-effective solution compared with other available transportation methods of regional travels. The
EViation Aircraft to be developed will be inexpensive to operate, significantly reducing the cost of travel for passengers.
ABOUT
THE EVIATION AIRCRAFT
The
EViation Aircraft is planned to be an emissions-free, quiet, high speed, safe and easy to fly aircraft, with lower operating and
ownership costs. The Subsidiary expects this aircraft to achieve a reduction of over 60% of operational costs, compared with similarly
sized non-electric aircraft. The Subsidiary also estimates that such cost reduction, combined with the inherently low maintenance
costs of electrical drives, will place the EViation Aircraft in competition with personal automobiles and the various modes of
public transportation to destinations over 100 miles away.
The
EViation Aircraft is designed to accommodate up to six passengers for a maximum travel distance of 700 miles, using electrical
power only. It will be able cruise at 200 knots (ktas) using only 90 kilowatt (kW) of power during the flight, at a cost per seat
mile, or “CASM”, of approximately US $0.10, allowing the EViation Aircraft to favorably compete in the general aviation
market in addition to providing a viable alternative to the regional transportation options of today.
The
EViation Aircraft is designed to provide an economically accessible travel option for a wider range of passengers. In addition,
due to the quiet and emission free engine of the EViation Aircraft, the Subsidiary will be able to utilize many small airfields
that were not previously accessible due to environmental regulations.
In
addition to the License and Service Agreement entered on September 1, 2015 by Aviv and Magic Stones and subsequently assigned
to the Subsidiary, the Subsidiary intends to enter into license agreements with a number of inventors and holders of key proprietary
technologies, in order to facilitate the further development and improvement of the EViation Aircraft’s airframe design,
electric system, battery technology and flight control systems.
CORE
ENABLING TECHNOLOGIES FOR THE EVIATION AIRCRAFT
Airframe
design
The
Subsidiary has developed a highly efficient airframe, designed and built from the ground up for electric propulsion. The air frame
allows for efficient use of distributed propulsion; low cooling drag and efficient thermal management. The airframe has been extensively
tested and analyzed and is expected to fly at scale in the first half of 2017. The first full scale, 6 passengers carrying implementation
of the airframe is to be constructed throughout 2017 and 2018 and is expected to be ready for first prototype flight by the third
quarter of 2018. The construction of the full-scale aircraft has been found eligible for Israeli government support, and was granted
3,000,000 NIS in match-up funding, over the period of construction of the full-scale aircraft. The funds are considered as a loan,
to be repaid out of future company revenue.
Electric
drive
Two
sets of highly efficient motors and controllers has been purchased and integrated as the electric drive system of the aircraft.
Suitable motors and controllers are manufactured by two separate potential suppliers and testing and integration will be performed
on both, to allow supply chain flexibility in the future.
Battery
technology
The
EViation Aircraft will utilize an aluminum-air battery to be developed and supplied by Phinergy Ltd., a company controlled by
Aviv, and a Lithium Polymer buffer battery for high power at takeoff, as well as for regenerated power storage. The aluminum-air
battery system produces electricity from the reaction of oxygen in the air with aluminum, and will be integrated into our airframes
as part of a combined battery solution. The integration and optimization of the batteries and energy storage system design for
our airframe has been performed by the Subsidiary during the second half of 2016.
Autonomous
flight and sensing systems
In
addition to the development and manufacturing of the EViation Aircraft, the Subsidiary is also developing services and technologies
that will demonstrate our vision of the EViation Aircraft eco-system. These developments include low cost auto-piloting solutions,
high volume, machine airspace management and real-time remote assistance and piloting service. These technologies are sub-systems
that could be integrated into existing and future general aviation aircraft as products or services, regardless of the maturity
of the EViation Aircraft.
Remote
Ground Station Assistance and Control
Under
the Laminar MOU discussed below, Aviv has contracted on behalf of the Subsidiary with Mr. Austin Meyer and Laminar Research LLC,
for the development of the software to be integrated into the Subsidiary’s ground stations and air traffic control demonstrators.
The software that includes uniquely modified versions of a commercially available flight simulator and a controller, developed
for and owned by the Subsidiary, will be integrated into the Eviation aircraft’s hardware. The system created shall be used
for safety support, to safely manage and control high numbers of aircraft in a given airspace.
Collision
Avoidance and Remote Communication
The
Subsidiary is also developing an obstacle detection and collision warning system, in addition to other optical sensors to assist
with full surrounding awareness by the aircraft. This system will also include a machine to machine (M2M) data connection that
will allow the plane to communicate with other planes for safety and automated formation flights.
Auto
Landing System
The
Subsidiary has bought all rights under a U.S. patent for a high precision electro-optical positioning system. Under the rights
obtained, the Subsidiary has completed the conceptual design of a low-cost auto-landing system, currently being developed under
contract with Zickel Engineering Ltd. The system prototype was completed during the second half of 2016, and integrated as part
of our advanced auto-pilot system. As such, this feature will be integrated into the EViation aircraft, and its scale models.
The
autonomous flight and sensing systems are also intended to be developed as the first stage for auto-pilot aircraft.
MARKET
OVERVIEW
General
Aviation
General
aviation, comprising all aircraft other than military aircraft and scheduled commercial airliners, presents an uncommon form of
long distance transport method, reserved mainly for ultra-wealthy individuals.
According
to the 2014 General Aviation Statistical Databook and 2015 Industry Outlook, the general aviation market includes approximately
400,000 aircraft worldwide, ranging from two-seat training aircraft and utility helicopters to intercontinental business jets
flying today, most of which are based in the United States and Europe. In the U.S., the general aviation fleet flies almost 23
million flight hours to more than 5,000 U.S. public airports, while scheduled commercial airlines serve less than 500 airports.
The European general aviation fleet can access over 4,200 airports.
The
global aviation industry has been growing and developing over the past few years. In 2014, the general aviation industry showed
total revenue of roughly $24.5 billion and delivery of 2,454 new aircraft, a slight increase compared to the previous year. The
increase is mostly attributable to a 6.5% increase in the number of business jets delivered that year. In comparison, the commercial
aviation industry is estimated at $260 billion in new aircraft deliveries each year. Moreover, commercial aviation has been growing
at roughly 5% per year since 1980, compared with a 0.5% annual growth rate for general aviation since 2010.
Regional
Transportation
According
to national household travel surveys made in 2001 and 2009, or NHTS, as summarized in Long Distance Transportation Patterns: Mode
Choice, out of the 2.6 billion trips of over 50 miles in distance taken annually by Americans, 2.36 billion trips are of 100-750
miles, making the regional distance account for 91% of the total trips taken, and an estimated total of over $1 trillion spent
on this type of travel.
The
Subsidiary aims to target trips at a destination distance of 100-749 miles, rendering 50-100 miles more suitable for a car and
trips over 750 miles for main-stream commercial aviation. According to the data provided by the NHTS, we estimate a regional-distance
trip that accounts for 91% of all trips over 50 miles, and that is served almost exclusively by cars (93.1%).
COMPETITION
The
EViation Aircraft will compete with light aircraft in the general aviation market and with trains, buses and private automobiles
in the regional travel market. Light aircraft are highly expensive for travel. The CASM (cost per seat mile) for light aircraft
is estimated at US $0.20 to US $0.50, not including pilot’s expenses.
According
to an AAA, “Your Driving Costs” 2015 report, the driving CASM for a mid-size sedan at full seating capacity in 2015
was US $0.12 - US $0.20. The average CASM in the commercial aviation industry is US $0.13, but additional costs for the customer
significantly vary based on competition on routes, so that regional prices in the U.S. commercial aviation industry range between
US $0.21 and US $0.90 cents per mile traveled. Buses and regional trains are less expensive (CASM of US $0.8 - US $0.11), but
are also very slow in commute. High speed trains are more expensive (CASM of US $0.25 - US $0.35), and like commercial aviation
require a significant investment in infrastructure.
The
EViation Aircraft adds a unique and inexpensive alternative to the current existing regional transportation options for travel
distances of 100-750, while using the existing infrastructure of general aviation, at an estimated CASM of US $0.10 or less.
OUR
BUSINESS STRATEGY
Our
business plan includes four distinct stages as described below:
1.
Proof
of Concept
– The Subsidiary is currently in the proof of concept stage, and intends to test all the components of the
Eviation Aircraft core enabling technologies (airframe design, electric drive, battery technology and autonomous flight and sensing
systems). Testing will take place on the scaled models and the full-scale aircraft once completed. Our goal is to successfully
complete the construction and first test flights of the Eviation Aircraft. The Subsidiary expects to complete the proof of concept
stage by the end of 2018. The expected cost of this stage is approximately US $3.4 million.
2.
Aircraft
and Services Development
– Following the proof of concept stage, the Subsidiary intends to develop potential products
to defined services and solutions and protect any intellectual property created during the proof of concept stage. The Subsidiary
also intends to partner with leading aerospace industrial suppliers to commercialize and market these services and solutions.
This stage will focus mainly on the development and commercialization of autonomous flight and sensing systems, including the
remote pilot assistance and auto landing system. In addition, the Subsidiary intends to continue the flight testing of the EViation
Aircraft to both validate and improve the Aircraft’s design. We expect to complete this stage by the end of 2019 at an estimated
cost of approximately US $2 million.
3.
Production
- In this third stage the Subsidiary plans to complete the industrial production design process for the EViation Aircraft,
based on the results of the flight tests for the purpose of commercialization and type certification of the EViation Aircraft.
The Subsidiary further intends to partner with established airframe manufacturers to support the process of commercialization of
the design. The Subsidiary also plans, based on the assessment of the certification process, to complete the development of the
transportation service platform and initiate its marketing. The Subsidiary may independently manufacture a limited series of experimental
EViation Aircraft, to be sold in the U.S. market. This stage is planned to be completed by the end of 2020. We cannot estimate
the cost at this time.
4.
Production
and Operations
- In the fourth and final stage, the Subsidiary plans to complete the certification process of the EViation
Aircraft and partner with manufacturers and marketers for the commercialization of the aircraft, along with additional developed
systems and services. We estimate the earliest expected sale of a complete certified EViation Aircraft will be in the year 2022.
EMPLOYEES
As
of the date of this proxy statement, the Subsidiary has nine employees in Israel, of which eight are engaged in design and development
CAPITAL
RESOURCES
In
order to advance the business of the Company, on July 17, 2016, Aviv and Magic Stones, on the one hand, and the Company, on the
other, entered into a loan and security agreement pursuant to which the shareholders advanced a total of $500,000 to the Company
for a period of seven years at an annual interest rate equal to the lower of (i) 3.2% per annum, and (ii) the minimum rate required
by law to avoid the imputing of tax. As security for such loan, the Company granted to the advancing shareholders a specific lien
and security interest on all of the shares of the Subsidiary held by the Company. The loan may be repaid by the Company at any
time in minimum increments of $50,000. The proceeds of the loan are to be used for funding the on-going operations of the Company.
Additionally,
on July 17, 2016, Aviv and Magic Stones entered a loan and security agreement with the Subsidiary pursuant to which they will provide
a credit line to the Subsidiary of up to a total of $4,500,000 for a period of seven years at an annual interest rate equal to
the lower of (i) 3.2% per annum, and (ii) the minimum rate required by law to avoid the imputing of tax. Draws on such credit line
may be made in increments of not less than $50,000, and outstanding amounts on the credit line may be repaid in increments of not
less than $50,000. Accrued interest is payable annually. As security for amounts owing under the credit line, the Subsidiary granted
to these shareholders a floating lien and charge on all the assets of the Subsidiary, and a specific charge on all the intellectual
property rights owned by the Subsidiary at any time. An event of default on any one of the loan made to the Company and the credit
line granted to the Subsidiary triggers an event of default under the other of such loan and credit line. As of the date of this
report, the Subsidiary has drawn down on approximately $2.5 million under this facility.
MATERIAL
AGREEMENTS
License
and Service Agreement for the manufacturing of the scaled models and electric synergy prime aircraft
On
September 1, 2015, our shareholder, Aviv, entered on behalf of the Subsidiary into a License and Service Agreement (“the
LSA”) with Mr. John McGinnis, on behalf of himself and on behalf of his companies, Synergy Aircraft LLC and MC Squared Design
USA (collectively, “McGinnis”), for a patent and know-how in the field of aircraft, including a Double Boxtail Aircraft
design. Pursuant to the terms of the agreement, the Subsidiary acquired a worldwide exclusive license to a patent and know-how
necessary for the completion and utilization of a flying electric Double Boxtail aircraft for use solely in the field of electric
powered aircraft (including hybrid electric) above 55lbs, including the rights to develop, make, commercialize, and import products
and processes. Three years after the termination of the agreement, the license will automatically become non-exclusive. Pursuant
to the terms of the agreement, the Subsidiary agreed to pay US $300,000 for the development and production of four flying, unmanned,
scaled demonstrators, the first of which was provided to us in March 2016. The Subsidiary will be the owner of the physical scaled
demonstrators and their accompanying manuals, copies of design files and drawings. Aviv also agreed on behalf of the Subsidiary
to pay US $500,000 for the development and production of a full scale electric synergy prime aircraft, in consideration for which
the Subsidiary was granted the right to use the full-scale electric synergy prime aircraft for demonstrations, exhibitions and
events for a period of three years from the completion of the full scale electric Synergy prime aircraft. Of the US $500,000 to
be paid to McGinnis, US $200,000 was paid (by Aviv on behalf of the Subsidiary) in September 1, 2015; US $200,000 was paid between
January and April 2016 to enable completion of the sub-scale demos; and US $100,000 is payable upon completion of the full scale
electric Synergy prime aircraft, which was expected to take place by the end of 2016. By March 2016, one model had been delivered,
as well as all the needed files and drawings. Per the terms of the agreement, we will not be the owners of the physical embodiment
of the full scale electric Synergy prime aircraft or its intellectual property.
Pursuant
to the terms of the agreement, McGinnis will provide additional services and certain deliverables to us, and we agreed to pay
in accordance with a statement of work. The Agreement provides for payments to McGinnis aggregating $2,000,000 over the next four
years upon agreed upon development milestones specified in the statement of work.
Pursuant
to the terms of the agreement, McGinnis is and shall remain the sole and exclusive owner of the patent and the know-how he has
developed that relates thereto. Any intellectual property developed in the course of or as a result of the services under the
agreement shall belong to McGinnis and will automatically and for no additional consideration licensed to us under the license
granted in this agreement. We will have the right to coordinate, review, comment and approve any filing, prosecution, maintenance
and enforcement of patent applications and patents on the new developed intellectual property.
As
of March 2016, and in accordance to the terms of the agreement, due to a lack of progress in the development and supply of the
model or the completion of the Synergy Prime Aircraft, the agreement has in effect been suspended, and could be reinstated in
agreement between the parties in any stage. The suspension of the agreement has led us to focus only on the development of the
EViation Aircraft and accelerate its construction program as described above.
Administrative
Services Agreement for the provision of various services and the lease of office space
On
November 30, 2015, Aviv and Mr. Michael Ilan (beneficial owner of Magic Stones) entered on behalf of the Subsidiary into an Administrative
Services Agreement with Phinergy Ltd., a company also controlled by Aviv and Mr. Ilan – “the ASA”. Pursuant
to the ASA, Phinergy provides the Subsidiary with (i) administrative and general services, including secretarial and management
services; (ii) human resource services; (iii) accounting and bookkeeping services; and (iv) office space and office services,
including telephone, fax and data communications and cleaning services (the services described in (i) through (iv), collectively
– the “Services”). In consideration for these Services, the Subsidiary is to pay a monthly fee, calculated on
the basis of the actual cost to Phinergy of providing the Services, derived as a percentage of the global costs paid for Phinergy
for receiving such services for itself and the Subsidiary together. Fees are paid on a quarterly basis in arrears.
The
Laminar MOU
On
February 5, 2016, the Subsidiary (as an entity in formation) entered into a “Memorandum of Understandings” with Laminar
Research LLC (the “Laminar MOU” and “Laminar”, respectively) for the development of an air traffic control
(ATC) algorithm and its implementation on subscale aircraft models. The Laminar MOU comprises several steps of development by
Laminar, for a total payment by the Subsidiary of $180,000. The Subsidiary receives an irrevocable, royalty-free license for a
limited number of copies of the finished software products.
INTELLECTUAL
PROPERTY
In
July 2016, the Subsidiary acquired from Eye Point Ltd., a company owned by Mr. Dekel Tzidon, all rights under US patent No. 8,314,928
(the “Eye Point Patent”). The Eye Point Patent will expire on November 12, 2026. This patent allows us to develop
our conceptual design of an auto-landing system.
We
also license US Patent No. 8,657,226, owned by McGinnis, pursuant to the LSA. This patent will expire on April 26, 2029. Pursuant
to our agreement with McGinnis, any patents and other types of intellectual property developed in the framework of the LSA will
be owned by McGinnis and will be added to the license already granted by McGinnis for no additional consideration.
While
our intellectual property rights in the aggregate are important to the operation of each of our businesses, we do not believe
that our business would be materially affected by the expiration of any particular intellectual property right or termination
of any particular intellectual property patent license agreement.
REGULATORY
ASPECTS
Our
business is regulated by the FAA and the Department of Homeland Security. In the U.S., the EViation Aircraft will be required
to comply with FAA regulations governing production and quality systems, airworthiness and installation approvals, repair procedures
and continuing operational safety. When we reach the stage of mass production and deployment of the EViation Aircraft, we will
also be subject to various federal, state, and local laws and regulations relating to environmental protection, including the
discharge, treatment, storage, disposal and remediation of hazardous substances and wastes. We will continually assess our compliance
status and management of environmental matters to ensure our operations are in substantial compliance with all applicable environmental
laws and regulations. Investigation, remediation, operation and maintenance costs associated with environmental compliance and
management of sites will be a normal, recurring part of our operations. It is reasonably possible that costs we incur to ensure
continued environmental compliance could have a material impact on our results of operations, financial condition or cash flows,
if additional work requirements or more stringent clean-up standards are imposed by regulators, new areas of soil, air and groundwater
contamination are discovered and/or expansions of work scope are prompted by the results of investigations.
DEVELOPMENT
AWARDS
On
December 18, 2016 our subsidiary signed a Support and Investment Agreement with the Office of the Chief Scientist (“OCS”)
of the Ministry of National Infrastructures, Energy, Water and Resources of Israel. Under the agreement, the Company will develop
passenger's electric aircraft. The plan will be performed during 24 months commencing on January 1, 2017. The subsidiary is entitled
to receive up to 50% of the actual costs and up to NIS 3 million (approximately $780 thousand). As a security, the subsidiary
provided a bank guarantee in the amount of NIS 225 thousand that will be effective until 3 months after the end of the project.
The subsidiary is expected to record a lien on a bank deposit in the same amount in favor of the bank providing the guarantee.
According to the agreement, the subsidiary will be required to pay royalties in an amount of 5% on sales of products and services
derived from a technology developed using these grants until 100% of the CPI-linked grant plus interest is repaid.
RESEARCH
AND DEVELOPMENT
There
were no research and development expenses recorded in 2015.
C.
ORGANIZATIONAL STRUCTURE
See
discussion Above.
D.
PROPERTY, PLANTS AND EQUIPMENT
All of our facilities are
leased, and we do not own any real property. Our principal executive offices are located in
1
Ha’Ofeh Street, Kadima-Tzoran, Israel.
The space is in a commercial office building and has approximately 200 square
meters pursuant to a 2-month lease which commenced on December 1, 2015 with 12 option periods of 6 months each that will be automatically
exercised unless we provide a 90 days early termination notice before the end of each year lease period. We have no material tangible
fixed assets apart from the properties described above.
|
ITEM
4A.
|
UNRESOLVED STAFF COMMENTS
|
None.
|
ITEM
5.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
YOU
SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH ITEM 3 "SELECTED FINANCIAL DATA" AND OUR CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. THIS "OPERATING AND FINANCIAL REVIEW AND
PROSPECTS" SECTION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS INCLUDING, BUT NOT LIMITED
TO, THOSE SET FORTH UNDER THE CAPTION "RISK FACTORS" AND ELSEWHERE IN THIS REPORT.
A. OPERATING
RESULTS
Overview
In April 2015, the Tel Aviv
District Court appointed a Temporary Liquidator to obtain and realize the Company’s assets and to settle its liabilities.
Since such appointment, the Company was managed by the Temporary Liquidator who terminated the Company’s operations and arranged
for the consummation of a Scheme of Arrangement that included the transfer and assumption of all assets and liabilities of the
Company to a trust managed by him, and the issuance to Aviv and Magic Stones, our shareholders, of 9,990,000 ordinary shares of
the Company representing 99.9% of the issued and outstanding share capital of the Company. The agreement between these shareholders
and the Temporary Liquidator on behalf of the Company, was executed on October 22, 2015 (the “Agreement”), and the
Tel Aviv District Court approved the Scheme of Arrangement including the Agreement on February 2, 2016.
As
discussed above in May 2016, we set up a new subsidiary through which we manage our new Aviation- Business.
Results
of Operations
The
results of operations represent our legacy business operations as of December 31, 2015 engaged by the Company prior to the appointment
of the Temporary Liquidator and the sale of the Company to our shareholders. The new Aviation Business is not represented in the
financial information below as it started only in 2016.
Year
Ended December 31, 2015 Compared to Year Ended December 31, 2014
Our
operational loss for the year ended December 31, 2015 and 2014 was $226 thousand and $1,596 thousand, respectively. The decrease
in the operating loss for the year ended December 31, 2015 as compared to the year ended December 31, 2014 is primarily attributable
to the cessation of substantially all operational activities by the Company in March 2015 and the appointment in April 2015 of
a Temporary Liquidator by the Tel Aviv District Court.
Revenues
.
No
revenues have been recorded in the years 2015 and 2014.
Operating
expenses and facilities maintenance.
No
operating expenses and facilities maintenance expenses have been recorded in 2015 as compared to $ 264 thousands for 2014. The
decrease resulted from the termination of operations during 2015 in all our business segments.
Marketing
expenses.
No
marketing expenses have been recorded in the years 2015 and 2014 as a result of the Company’s determination to substantially
reduce operating activities in 2014 and to terminate active operations in 2015.
General
and Administrative Expenses.
General
and administrative expenses for the year ended December 31, 2015 and 2014 were $166 thousand and $483 thousand, respectively.
The decrease is attributable to cessation of substantially all operations in 2015.
Financing
Expenses, Net
Financing
income, net, in each of the years 2015 and 2014 was an immaterial amount.
Other
expenses
No other expenses were recorded
in 2015 as compared to $884 thousand for 2014. The other expenses recorded in 2014 are mainly attributable to the impairment loss
of tangible and intangible assets.
Year
Ended December 31, 2014 Compared to Year Ended December 31, 2013
The
operational loss for each of the years ending December 31, 2014 and 2013 was $1,596 thousand and $15,695 thousand, respectively.
The decrease in loss in 2014 as compared to 2013 is attributable to the Company’s determination to terminate certain operating
activities in 2014 and resulting termination of employees and related costs.
Revenues
No
revenues have been recorded for the years 2014 and 2013.
Operating
Expenses and Facility Maintenance
Operating and facility maintenance
expenses for each of the years ended December 31 2014 and 2013 were $264 thousand and $2,068 thousand, respectively. The decrease
in operating expenses and facility maintenance in 2014 as compared to 2013 is attributable to the Company’s determination
to terminate certain operating activities in 2014 and resulting termination of employees and related costs.
Marketing
Expenses
We
recorded no marketing expenses in 2014 as compared to $251 thousands in 2013. The decrease is, mainly due to the Company’s
determination to cease significant operating activities in 2014 and resulting termination of employees and related costs.
General
and Administrative Expenses
General
and administrative expenses for the years ended December 31, 2014 and 2013 were $483 thousand and $956 thousand, respectively.
The decrease is mainly due to efficiency measures taken by the Company.
Financing
Expenses, Net
Financing
income, net, in the years 2014 and 2013 was an immaterial amount.
Other
Expenses
Other expense for the year
ended December 31, 2014 and 2013 were $884 thousand and $12,415 thousand, respectively. The other expenses during 2013 were mainly
regarding an impairment loss of tangible and intangible assets. For further description, please see Notes 8 and 9 to RVB’s
financial statements for the year ended December 31, 2013, starting on page F-1 of the Company’s 2013 annual report filed
with the SEC on Form 20-F on April 28, 2014.
Critical
Accounting Policies and Estimates
Our
discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standard Board (IASB).
The
preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate our estimates,
including those related to product returns, bad debts, inventories, investments, income taxes, warranty obligations, and contingencies
and litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions.
For
a further description of RVB’s material accounting policies, please read Note 2 to RVB’s financial statements for
the year ended December 31, 2015, starting on page F-1 of this annual report.
B.
LIQUIDITY AND CAPITAL RESOURCES
Cash
flows used in operating activities during 2015 amounted to US$ 0.1 million. Cash flows during 2015 were mainly used to finance
the Company's expenses related to its legacy business operations during the year ended December 31, 2015 prior the sale of the
Company by the Temporary Liquidator to Aviv and Magic Stones.
Cash
flows provided by investment activities during 2015 amounted to US$0.1, mainly relating to proceeds from sales of fixed assets.
No
cash flows provided by or used in financing activities during 2015.
The
Company believes that its available cash resources, including the shareholder credit facilities and the newly awarded grant from
the OCS toward the design and development of the aircraft, are sufficient to meet its operating requirements in the new business
focus through January 2018.
C.
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
The
Company did not engage in any research and development activity in 2015.
D.
TREND INFORMATION
We
have recently begun to engage in the general aviation industry. It is not possible for us to predict with any degree of accuracy
the outcome of our research and development or commercialization efforts. Our research and development expenditure is our primary
expenditure. Increases or decreases in research and development expenditure are primarily attributable to the level and results
of our development plans.
E.
OFF-BALANCE SHEET ARRANGEMENTS
We
are not party to any material off-balance sheet arrangements.
F.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
As
of December 31, 2015, we had no contractual obligations of the type required to be disclosed in this section.
|
ITEM 6.
|
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
|
A.
Directors and Senior Management
Until
April 2, 2015, the Company’s board of directors was comprised of Yair Fudim, chairman, Mordechai (Moti) Menashe, Jonathan
Regev, Alicia Rotbard and Gedaliah Shelef. In addition, Ofer Nave served as the Company’s chief financial officer. On April
2, 2015, upon the appointment of a Temporary
Liquidator
by the Court and in accordance with the Companies Ordinance, 5743-1983, the authority of
the directors ceased and Ofer Nave ceased to serve as the Company’s chief financial officer. As such, as of May 14, 2015,
Mordechai Shalev, Adv., the Temporary
Liquidator
, age 58, served as the Company’s
sole officer and the Company had no appointed directors through February 2, 2016, when the sale of the Company to Aviv and Magic
Stones, our shareholders, approved by the Court.
The following table sets
forth the name, age and position of each of our executive officers, directors, as well as our senior employees, as of the date
of this report. Unless otherwise stated, the address for any of the individuals listed below is c/o R.V.B. Holdings Ltd., 1 Ha’Ofe
St., Kadima-Tzoran, P.O. Box 5062, Israel, 6092000
|
Name
|
|
Age
|
|
Position
|
|
Aviv Tzidon
|
|
|
60
|
|
Chairman of the Board of Directors
|
|
Omer Bar-Yohai
|
|
|
38
|
|
Chief Executive Officer
|
|
Liza Ohayon
|
|
|
42
|
|
Chief Financial Officer
|
|
Dan Halutz
|
|
|
69
|
|
Independent Director
|
|
Ilanit Zalmanovich
|
|
|
47
|
|
Director
|
|
Avi Toledano
|
|
|
56
|
|
Director
|
|
Abraham Nahmias
|
|
|
61
|
|
Director
|
|
Orit Stav
|
|
|
45
|
|
External Director
|
|
Aviad Pundak Mintz
|
|
|
52
|
|
External Director
|
Aviv Tzidon was appointed
as a director on February 2, 2016 and as the Company’s Chairman of the board of directors on April 3, 2016. Mr. Tzidon is
the Founder and CEO of Phinergy Ltd., an Israeli private company which operate in the green energy industry and develop metal-air
energy system. Aviv is an accomplished entrepreneur who founded over ten high-tech companies, three of which were quoted on NASDAQ
and another on the Frankfurt stock exchange. Aviv is a creative thinker who likes to think "out of the box." He
holds over fifteen granted patents many of which have led to breakthrough innovations across various industry segments (positioning
systems, network protocol, navigation accuracy, virtual studio). These innovations have been implemented into a wide range of products
and applications, from air combat training for the military to 3D graphics for TV broadcasting.
Omer Bar Yohai was appointed
as the Company's Chief Executive Officer on April 3, 2016. – Mr. Bar Yohai served in the Israel Defense Forces from 1997
to 2008, and departed from service with the rank of Major. From 2008 to 2015 Mr. Bar Yohai served in the offices of the Prime Minister
of Israel in various managerial positions.
Liza
Ohayon was appointed as the Company's Chief Financial Officer on April 3, 2016. Ms. Ohayon joined Phinergy Ltd. in July 2015 and
serves as the VP Finance. Prior to joining Phinergy, between March 2010 and March 2015, Ms. Ohayon served in several positions
in Telit Communications PLC, a global leader in Internet of Things (IoT) enablement, including Tax Director and Corporate Controller.
Between April 2001 and September 2009 Ms. Ohayon worked in PriceWaterHouseCoopers Israel and New York and has vast experience
in managing and leading assurance engagements with private and public companies from the technology and retail industries. She
is also very experienced in supporting startups from inception to maturity. Ms. Ohayon holds a BA in Business Administration and
Accounting awarded by the College of Management Academic Studies in Rishon LeZion, Israel and she is a Certified Public Accountant
in Israel.
Dan
Halutz was appointed as a director in July 17, 2016. - Mr. Halutz served as the Chief of Staff of the Israel Defense Forces and
commander of the Israeli Air Force from April 2000 to February 2007. From 2008 to 2010, Mr. Halutz was the chairman of the board
of Starling Advanced Communications Ltd., a private Israeli company specializing in satellite communications and served as the
chief executive officer of Kamor motors Ltd., an Israeli company traded in the Tel Aviv Stock Exchange, specializing in importing
BMW products to Israel and Bulgaria. From 2013 to 2016, Mr. Halutz served as the Chairman of Jobookit Holdings Ltd., an Israeli
company traded on the Tel Aviv Stock Exchange that specializes in on-line recruitment software. Mr. Haloutz is partnering
few private consulting companies and serves as board member in additional two companies: Berman Bakery Ltd which is
a private company and Intergama Holdings Ltd. a public company traded in the Tel-Aviv Stock Exchange. Mr. Halutz has a BA in economics
and completed Advanced Management Program course in Harvard university.
Ilanit Zalmanovich was
appointed as a director in February 2, 2016. Since March 2016, she has been serving as General Legal Counsel of Waxman Govrin Geva
Engineering Com, an Israel based company engaged in project management of civil engineering. Between 2014 and 2015, Ms. Zalmanovich
was in private legal practice. Between May 2008 and December 2012, she was General Counsel to Redstone Real Estate Group out of
Israel, a real estate investment fund. Prior thereto, from May 1995 to May 2005, she served as Legal Counsel to Shikun Ubinuei
& Solel Boneh Group in Israel. Ms. Zalmanovich holds a LLB degree in Law from Tel Aviv University (1995) and M.B.A. from Ben
Gurion University in Israel (2000).
Avi
Toledano was appointed as a director on February 2, 2016. Mr. Toledano is currently focusing on investment related activities
in real estate. Between November 2006 and March 2013 Mr. Toledano served as a director in Teva Naot. Prior to that, from January
1986 to December 2005, Mr. Toledano was a partner at Ernst and Young Israel – Kost Forer Gabbay & Kasierer, where he
focused on merger and acquisitions. Mr. Toledano holds a BA degree in Economy and Accounting from the College of Management Academic
Studies and has been a Certified Public Accountant in Israel since 1988.
Abraham
Nahmias was appointed as a director on February 2, 2016. Mr. Abraham Nahmias is a senior partner in Nahmias Grinberg
Shachar C.P.A. (Isr.) since January 1985. Mr. Nahmias possesses more than 20 years of experience as a director in several public
companies in a broad range of fields. He currently serves as a director in Nano Dimension Ltd (since 2014), in Orad Ltd (since
2011), in Allium Medical Solutions Ltd (since 2014), and in Cellect Biomed Ltd (since 2014). Mr. Nahmias holds a BA degree in
Economy and Accounting from Tel Aviv University and has been a Certified Public Accountant in Israel since January 1981.
Orit Stav was appointed
as a director on February 2, 2016. Ms. Stav is an experienced investment manager with more than 15 years of experience in the Venture
Capital & Private Equity, as well as in the technology sector. Orit currently serves as a professional board member
in additional five public companies ( I.B.I Investment House Ltd., Elbit Vision Systems Ltd., Aran Research & Development Ltd.,
Israel Canada Ltd. and Prior-Tech Ltd.). From January 2006 to March 2010, Orit represented Siemens Venture Capital (SVC) in
Israel and was responsible for all Siemens investments in Israel. Prior to joining SVC, from January 1998 to May 2005 Orit was
a Partner at Platinum Neurone Ventures, an Israeli venture capital fund where she led investments from seed stage to successful
exits and was responsible for two M&A transactions. She has gained experience working with entrepreneurs, represented the fund
as a board member in portfolio companies and worked with leading international VCs. Ms. Stav holds a Master of Business Administration
from Hertfordshire University, UK, and a Bachelor degree in Arts (Economics and Management) from Tel Aviv University.
Aviad Pundak-Mintz was
appointed as a director on February 2, 2016. Mr. Pundak-Mintz serves as the Venture Partner and General Partner of Gemini Israel
Funds. Mr. Pundak-Mintz joined Gemini Israel Funds in 1999 and specializes in the area of enterprise software and systems investments.
He is employed at Pointer Telocation Ltd. He draws on his start-up, venture capital and scientific background to make seed investments
at Gemini Fund. Mr. Pundak-Mintz was Venture Partner of Gemini Fund IV, Gemini Fund III and Gemini Fund V. Previously, Mr.
Pundak-Mintz worked at Neurone Venture. He served as the Acting Chief Executive Officer of Sphera Corporation since 2003, where
he streamlined the operations of Sphera, lead it to its highest revenues in a quarter and recruited a top class Chief Executive
Officer as his replacement. Prior to becoming a venture capitalist, Mr. Pundak-Mintz held a number of positions in business development
and marketing at Nexus Telecommunications. Mr. Pundak-Mintz’ team developed the first SDH system. He has been a Director
of BlazeMeter LLC since July 2012. He has been a Director of CloudShare Ltd. and dbMotion Ltd. since June 28, 2005. He has been
a Director of Metrolight Ltd. since August 16, 2007. He serves as a Director of SaaSPulse and IT Structures. Mr. Pundak-Mintz serves
as a Member of Advisory Board at Zlago, LLC. He serves as a Director of ebuzzing SARL and Teads (alternative name Wikio Group).
Mr. Pundak-Mintz serves as Board Observer of OpTier, Inc. He served as a Director of Totango Ltd., TaKaDu Ltd., Traiana, Inc.,
ItemField, Inc., Neocleus, Inc., and Octavian, Inc. He served as a Director of Diligent Technologies Corporation since October
4, 2004. He served as a Director of Sphera Corporation since June 28, 2005. Mr. Pundak-Mintz served in the Israeli Navy as a Project
Engineer for naval underwater systems. Mr. Pundak-Mintz is a frequent Speaker in Israel and Europe on venture capital and high
technology topics. He holds an M.B.A. degree from INSEAD and MSc in Vision-Computer Science at the Weizmann Institute. Mr. Pundak-Mintz
holds a B.Sc. degree, with honors, in Electrical Engineering and a B.A. degree in Mathematics, with distinction, from Ohio State
University.
B.
COMPENSATION
No
compensation was paid during 2015 to any person who served as an executive officer and/or director.
C.
BOARD PRACTICES
Appointment
and Terms of Office
Under
the Companies Law and our articles of association, the supervision of the management of our business is vested in our board of
directors.
There must be at least 2 and not more than 11 directors on the board of the Company including at least two external
directors and one independent director. Any single shareholder of the Company holding at least twenty five percent (25%) of the
issued shares of the Company may appoint, dismiss and replace two directors. Directors serve until the next Annual General Meeting,
unless their offices are vacated earlier under any relevant provision of our Articles of Association.
Alternate
Directors
Our Articles
of Association provide that a director may appoint, by written notice to us, any individual to serve as an alternate director.
Currently, no alternate directors have been appointed. Under the Israeli Companies Law, (i) a director of a company whose articles
of association permit the appointment of an alternate director to the board, may appoint another director as an alternate director
to a committee of the board, provided that the alternate director is not already a member of such committee and further provided
that if the appointing director is an external director, the alternate director shall possess the financial and accounting expertise
or the professional qualification (as described under “External Directors” below) possessed by the appointing director,
and (ii) an external director may not appoint an alternate director except as set forth in clause (i).
External
Directors
Under
the Companies Law, companies incorporated under the laws of Israel whose shares have been offered to the public in or outside
of Israel are required to appoint at least two external directors. This 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 external director, or had, during the two years preceding that
date, any affiliation with the company or any entity controlling, controlled by or under common control with the company. The
term “affiliation” includes:
|
|
●
|
an employment relationship with the company;
|
|
|
|
|
|
|
●
|
a business or professional relationship with
the company maintained on a regular basis;
|
|
|
|
|
|
|
●
|
control of the company; and
|
|
|
|
|
|
|
●
|
service as an office holder, except where
the director was appointed as such for the purpose of serving as an external director of a company that was contemplating becoming
a publicly held company.
|
No
person may serve as an external director if the person’s position or other business activities create, 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.
External
directors are to be elected by a majority vote at a shareholders’ meeting, provided that either:
|
|
1.
|
at least one-third of the shares of non-controlling
shareholders voted at the meeting (disregarding votes abstained), vote in favor of election of the director; or
|
|
|
|
|
|
|
2.
|
the total number of shares of non-controlling
shareholders voted against the election of the director does not exceed one percent of the aggregate voting rights in the company.
|
The
initial term of an external director will be three years and may be extended for an additional three years. Each committee of
a company’s board of directors will be required to include at least one external director and the audit committee of a company’s
board of directors is required to include all of the external directors.
An
external director is entitled to compensation as provided in regulations adopted under the Companies Law and is otherwise prohibited
from receiving any other compensation, directly or indirectly, in connection with service provided as an external director.
Under
regulations recently promulgated under the Companies Law, at least one of the external directors serving on a company’s
board of directors is required to have “financial and accounting expertise” and the other external director or directors
are required to have “professional qualification”.
The recently promulgated
regulations set out the conditions and criteria for a director qualifying as having a "financial and accounting expertise"
or a "professional qualification". A director with financial and accounting expertise is a director who, due to his education,
experience and skills, possesses capabilities relating to and an understanding of business and accounting matters and financial
statements, which enable him to understand in depth the company’s financial statements and to initiate a debate regarding
the manner in which the company’s financial information is presented. A director who meets certain professional qualifications
is a director who satisfies one of the following requirements: (i) the director holds an academic degree in either economics, business
administration, accounting, law or public administration, (ii) the director either holds another academic degree or has obtained
other high education in the company’s primary field of business or in an area that is relevant to his position, (iii) the
director has at least five (5) years of experience serving in one of the following capacities or an aggregate of at least five
(5) years of experience in two or more of the following capacities: (a) a senior business management position of a company with
a substantial scope of business, (b) a senior position in the primary field of business of the company or (c) a senior public administration
position. A proposed external director must submit to the company a declaration as to his or her compliance with the requirements
for his or her election as an external director (including with respect to such person’s financial and accounting expertise
or professional qualification).
The
board of directors should determine the minimum number of directors having financial and accounting expertise in addition to the
external directors. In determining such number the board of directors shall consider, among other things, the type and size of
the company and the scope and complexity of its operations.
Audit
Committee
Under
the Companies Law, the board of directors of any publicly traded company must appoint an audit committee, comprised of at least
three directors including all of the external directors but excluding: (a) the chairman of the board of directors; (b) any controlling
shareholder or relative of a controlling shareholder; or (c) any director employed by the company or who provides services to
the company on a regular basis. Under the Nasdaq rules, we are required to have at least three independent directors on the audit
committee. In addition, Nasdaq requires that each member of the audit committee (i) be independent (as defined above under “Independent
Directors”); (ii) meet the criteria for independence set forth in certain rules under the US Securities Exchange Act of
1934 (subject to certain exemptions); (iii) not have participated in the preparation of the financial statements of the company
or any current subsidiary of the company at any time during the past three years; and (iv) be able to read and understand fundamental
financial statements, including a company's balance sheet, income statement and cash flow statement. Additionally, each company
must certify that it has, and will continue to have, at least one member of the audit committee who has past employment experience
in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities.
The
roles of our audit committee under the Companies Law include identifying irregularities in the management of the Company’s
business and approving related party transactions as required by law. The responsibilities of the audit committee under the Nasdaq
rules include, among other things, evaluating the independence of a company’s auditors.
In addition to such
functions as the audit committee may have under the Companies Law or under the Nasdaq rules, the primary purpose of our audit committee
is to assist the board of directors in fulfilling its responsibility to oversee management’s conduct of the financial reporting
process, the systems of internal accounting and financial controls and the annual independent audit of the Company’s financial
statements. The audit committee reviews with management and our auditors the audited financial statements included in our Annual
Report on Form 20-F.
The audit committee
must observe the independence of our auditors and has the authority and responsibility to nominate for shareholder approval, evaluate
and, where appropriate, replace our independent auditors.
In
discharging its oversight role, our audit committee is empowered to investigate any matter brought to its attention with full
access to all books, records, facilities and personnel of the Company and the power to retain independent counsel, auditors or
other experts for this purpose.
Upon
the appointment of the Temporary Liquidator by the Court and in accordance with the Companies Ordinance, 5743-1983, the authorities
of the directors ceased and the Company has no audit committee as of December 31, 2015.
On
April 3, 2016 the board of directors established an audit committee comprising Ms. Orit Stav as the chairman of the committee
and Ms. Ilanit Zalmanovich and Mr. Aviad Pundak-Mintz.
On
July 17, 2016 The board of directors appointed Mr. Dan Halutz to serve on the audit committee; Ilanit Zalmanovich resigned from
the audit committee.
Compensation
Committee
Under
the Companies Law, public companies and companies that have publicly issued debentures (“Public Companies”) must appoint
a compensation committee. The compensation committee shall be consisting of at least three members. All of the external directors
must serve on the committee and constitute a majority of its members. The chairman of the compensation committee must be an external
director. The remaining members must be directors who qualify to serve as members of the audit committee (as stated in item above).
Our compensation committee was comprised of three members, Mr. Jonathan Regev, Ms. Alicia Rotbard and Prof. Gedaliah Shelef during
2015. Mr. Regev and Ms. Rotbard were the Company’s external directors who served on the board of directors. Mr. Regev also
served as the chairman of the compensation committee. Prof. Shelef was the independent director that sat on our board of directors.
Upon the appointment of the Temporary Liquidator by the Court and in accordance with the Companies Ordinance, 5743-1983, the authorities
of the directors ceased and the Company has no compensation committee as of December 31, 2015.
On
April 3, 2016, the board of directors established a compensation committee comprising Ms. Orit Stav as the chairman of the committee
and, Ms. Ilanit Zalmanovich and Mr. Aviad Pundak-Mintz as members of the committee. On July 17, 2016, the board of directors appointed
Mr. Dan Halutz as a member to the compensation committee and Ilanit Zalmanovich resigned from the committee.
As
per the Companies Law, the roles of a compensation committee are, among others, as follows:
|
|
(1)
|
to
recommend to the board of directors with regards to the compensation policy for directors and officers, and recommend to the
board of directors once every three years regarding extension of the compensation policy that had been approved for a period
of more than three years;
|
|
|
(2)
|
to
recommend to the board of directors regarding the update of the compensation policy, from time to time, and examine its implementation;
|
|
|
|
|
|
|
(3)
|
to
decide whether to approve the terms of office and employment of directors and officers that require approval of the compensation
committee; and
|
|
|
|
|
|
|
(4)
|
to
decide, in certain circumstances, whether to exempt the approval of employment terms of a Chief Executive Officer
from the requirements of shareholders’ approval.
|
In
addition to the roles mentioned above our compensation committee will also make recommendations to our board of directors regarding
the awarding of employee options.
In
accordance with the provisions of the Companies Law, a compensation policy must be adopted by the Company. A compensation policy
must be approved by the board of directors after receiving and considering the recommendations of the compensation committee.
In addition, the compensation policy requires the approval of the general meeting of the shareholders. In Public Companies, shareholder
approval requires one of the following: (i) the majority of shareholder votes counted at the general meeting including the majority
of all of the votes of those shareholders who are non-controlling shareholders or do not have a personal interest in the approval
of the compensation policy, who participate at the meeting (excluding abstentions) or (ii) the total number of votes against the
proposal among the shareholders mentioned in paragraph (i) does exceed two percent (2%) of the total voting rights in the company.
Under special circumstances, the board of directors may approve the compensation policy despite the objection of the shareholders
on the condition that the compensation committee and then the board of directors decide, on the basis of detailed arguments and
after discussing again the compensation policy, that approval of the compensation policy, despite the objection at the meeting
of shareholders, is for the benefit of the company.
Internal
Auditor
Under the Companies Law,
the board of directors of a public company must appoint an internal auditor, nominated by its audit committee. The role of the
internal auditor is to examine, among other matters, whether the Company’s actions comply with the law and orderly business
procedure. Under the Companies Law, the internal auditor may be an employee of the Company but not an office holder, an affiliate,
or a relative of an office holder or affiliate, and he may not be the Company’s independent accountant or its representative.
On July 17, 2016 the audit committee appointed Ezra-Yehuda-Rosenblum Consulting, Control & Risk Management Firm to serve as
an internal auditor of the Company in accordance with the requirements of the Companies Law.
D.
EMPLOYEES
As
of December 31, 2015, the Company had no employees.
E.
SHARE OWNERSHIP
As
of December 31, 2015, none of our executive officers or management held more than 1% of our outstanding ordinary shares.
The following table sets
forth information with respect to the beneficial ownership of our ordinary shares as of the date of this report, following the
issuance, to:
|
|
●
|
each
of our directors, executive officers and senior management and employees individually; and
|
|
|
●
|
all
of our executive officers, directors, and senior management and employees as a group.
|
The beneficial ownership
of our ordinary shares in this table is determined in accordance with the rules of the SEC. Under these rules, a person is deemed
to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct
the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security.
For purposes of the table below, we deem ordinary shares issuable pursuant to options or warrants that are currently exercisable
or exercisable within 60 days of the date of this report, if any, to be outstanding and to be beneficially owned by the person
holding the options or warrants for the purposes of computing the percentage ownership of that person, but we do not treat them
as outstanding for the purpose of computing the percentage ownership of any other person. The percentage of ordinary shares beneficially
owned is based on 10,000,000 issued ordinary shares as of the date of this report.
Unless
otherwise noted below, each shareholder’s address is c/o R.V.B. Holdings Ltd., 1 Ha’Ofe St., Kadima-Tzoran, P.O. Box
5062, Israel, 6092000.
|
Name
|
|
Number of Ordinary
Shares Beneficially owned
|
|
|
Percentage of Outstanding Ordinary
Shares
|
|
|
Aviv Tzidon, Chairman of the Board
|
|
|
4,120,875
|
(1)
|
|
|
41.21
|
%
|
|
Omer Bar Yohai, Chief Executive Officer
|
|
|
999,000
|
(2)
|
|
|
9.9
|
%
|
|
Liza Ohayon, Chief Financial Officer
|
|
|
-
|
(1)
|
|
|
-
|
|
|
Dan Halutz, Independent Director
|
|
|
-
|
(1)
|
|
|
-
|
|
|
Ilanit Zalmanovich, Director
|
|
|
-
|
(1)
|
|
|
-
|
|
|
Avi Toledano, Director
|
|
|
-
|
(1)
|
|
|
-
|
|
|
Abraham Nahmias, Director
|
|
|
-
|
(1)
|
|
|
-
|
|
|
Orit Stav, External Director
|
|
|
-
|
(1)
|
|
|
-
|
|
|
Aviad Pundak Mintz, External Director
|
|
|
-
|
(1)
|
|
|
-
|
|
|
Directors and Officers as a Group ( 9 persons)
|
|
|
5,119,875
|
|
|
|
51.2
|
%
|
|
1.
|
Does
not
include options granted on October 15, 2016 to purchase up to 37,500 ordinary shares at a per share exercise price of $1 which is to vest as follows: options for 10,000 shares is to vest on each of October 15, 2017, 2018 and 2019 and options for 7,500 shares are to vest on October 15, 2020.
|
|
|
|
|
2.
|
On May 22, 2016, Mr. Yohai and each of Aviv and Magic Stones entered into an agreement pursuant to which each of Aviv and Magic Stones transferred to Mr. Yohai 499,500 shares, or a total of 999,000 shares.
|
|
ITEM 7.
|
MAJOR
SHAREHOLDERS AND INTERESTED PARTY TRANSACTIONS
|
The
following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of the date of this
report, 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 Securities and Exchange Commission.
A.
MAJOR SHAREHOLDERS
The following table sets
forth information with respect to the beneficial ownership of our ordinary shares as of the date of this report, by each person
or entity known by us to own beneficially more than 5% of our outstanding ordinary shares.
The beneficial ownership
of our ordinary shares in this table is determined in accordance with the rules of the SEC. Under these rules, a person is deemed
to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct
the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security.
For purposes of the table below, we deem ordinary shares issuable pursuant to options or warrants that are currently exercisable
or exercisable within 60 days of the date of this report, if any, to be outstanding and to be beneficially owned by the person
holding the options or warrants for the purposes of computing the percentage ownership of that person, but we do not treat them
as outstanding for the purpose of computing the percentage ownership of any other person. The percentage of ordinary shares beneficially
owned is based on 10,000,000 ordinary shares.
The data presented is based on information
provided to us by the holders, or disclosed in public regulatory filings in the U.S. or Israel, in accordance with the applicable
law.
None
of our shareholders has different voting rights from other shareholders. To the best of our knowledge, we are not owned or controlled,
directly or indirectly, by another corporation or by any foreign government. We are not aware of any arrangement that may, at
a subsequent date, result in a change of control of our company.
|
Name
|
|
Number of Ordinary Shares Beneficially owned
|
|
|
Percentage of Outstanding Ordinary Shares
|
|
|
Aviv
Tzidon, Chairman of the Board
|
|
|
4,120,875
|
|
|
|
41.21
|
%
|
|
Magic Stones Gemstone Import and Marketing Ltd.
|
|
|
4,120,875
|
|
|
|
41.21
|
%
|
|
Omer Bar Yohai (CEO)(1)
|
|
|
999,000
|
|
|
|
9.99
|
%
|
|
Dekel Tzidon (1)
|
|
|
749,250
|
|
|
|
7.49
|
%
|
|
1.
|
On May 22, Mr. Bar Yohai purchased 10% of the shares
held by Aviv and Magic Stones (5% from each). In addition, Mr. Dekel Tzidon (a brother of Aviv and a director in the Subsidiary)
purchased 7.5% of the shares held by Aviv and Magic Stones (3.75% from each).
|
B.
RELATED PARTY TRANSACTIONS
Insurance
. We have obtained
directors and officers’ liability insurance for the benefit of our office holders and intend to continue and obtain such
insurance and pay all premiums thereunder to the fullest extent permitted by the Companies Law. Under the Companies Law, an Israeli
company may not exempt an office holder from liability for 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, for a breach of his duty of care.
Our
Articles of Association provide that, subject to the provisions of the Companies Law, we may enter into a contract for the insurance
of the liability of any of our office holders for acts which he or she performed in his or her capacity as an office holder in
relation to:
|
|
●
|
a breach of his/her duty of care
to us or to another person;
|
|
|
|
|
|
|
●
|
a breach of his/her duty of loyalty to us,
provided that the office holder acted in good faith and had reasonable cause to assume that his/her act would not prejudice our
interests; or
|
|
|
|
|
|
|
●
|
a financial liability imposed upon him/her
in favor of another person.
|
Indemnification
of Office Holders
. Our Articles of Association provide that we may indemnify an office holder against:
|
|
●
|
a financial liability imposed on an office holder in favor of another person by any judgment, including a judgment given as a result of a settlement or an arbitrator’s award which has been confirmed by a court in respect of an act performed by the office holder;
|
|
|
|
|
|
|
●
|
reasonable litigation expenses, including attorneys` fees, expended by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment (as defined in the Companies Law) was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability as a substitute for the criminal proceeding (as defined in the Companies Law) was imposed upon him or her as a result of such investigation or proceeding or if such financial liability was imposed, it was imposed with respect to an offence that does not require proof of criminal intent; and
|
|
|
|
|
|
|
●
|
reasonable litigation costs, including attorney’s fees, expended by an office holder or which were imposed on an office holder by a court in proceedings filed against the office holder by the Company or in its name or by any other person or in a criminal charge in respect of which the office holder was acquitted or in a criminal charge in respect of which the office holder was convicted for an offence which did not require proof of criminal intent.
|
Our
Articles of Association also include:
|
|
●
|
authorization
to undertake, in advance, to indemnify an office holder, provided that the undertaking is limited to specified events which
the board of directors believes are anticipated and limited in amount determined by the board of directors to be reasonable
under the circumstances; and
|
|
|
|
|
|
|
●
|
authorization
to indemnify retroactively an office holder.
|
We
have agreed to indemnify our office holders under indemnification agreements with each office holder, to the maximum extent permitted
under the Companies Law.
Under
the terms of the indemnification agreement, the total amount of indemnification for each case (including all matters connected
therewith), shall not exceed US$ 1,000,000 (in addition to any amounts paid under an insurance coverage).
Grant of Options. In October
15, 2016, the Company granted options to purchase 37,500 ordinary shares of the Company to each of Aviv Tzidon, Abraham Nahmias,
Avi Toledano, Aviad Pundak Mintz, Orit Stav, Ilanit Zalmanovich and Dan Halutz, at an exercise price for each of such share of
$1.00. The options shall vest in four annual installments as follows: 10,000 options on each of the first, second and third anniversaries
of the vesting commencement date and 7,500 on the fourth anniversary of the vesting commencement date, so that four (4) years following
the vesting commencement date, all options will be fully vested and exercisable, subject to option holder’s continuing to
be a director of the Company or any affiliate thereof through such dates. Notwithstanding the above, the vesting of the options
may accelerate so that all shares subject to the option will be fully vested and exercisable immediately prior to the occurrence
of a corporate transaction (as such term is defined in the Company’s Option Plan).
Loan and Security Agreement
for the Company. The Company entered into a Loan and Security Agreement, dated July 17, 2016 with each of Aviv and Magic Stones,
our shareholders. pursuant to which these shareholders loaned a total of $500,000 to the Company for a period of seven years at
an annual interest rate equal to the lower of (i) 3.2% per annum, and (ii) the minimum rate required by law to avoid the imputing
of tax. As security for such loan, the Company granted to these shareholders a specific lien and security interest on all of the
shares of the Subsidiary held by the Company. The loan may be repaid by the Company at any time in minimum increments of $50,000.
The proceeds of the loan are to be used for funding the on-going operations of the Company.
Loan and Security Agreement
for the Subsidiary. The Subsidiary entered into a Loan and Security Agreement, dated July 17, 2016, with each of Aviv and Magic
Stones, our shareholders. pursuant to which these shareholders granted a credit line to the Subsidiary of up to a total of $4,500,000
for a period of seven years at an annual interest rate equal to the lower of (i) 3.2% per annum, and (ii) the minimum rate required
by law to avoid the imputing of tax. Draws on such credit line may be made in increments of not less than $50,000, and outstanding
amounts on the credit line may be repaid in increments of not less than $50,000. Accrued interest is payable annually. As security
for amounts owing under the credit line, the Subsidiary granted to the lending shareholders a floating lien and charge on all of
the assets of the Subsidiary, and a specific charge on all of the intellectual property rights owned by the Subsidiary at any time.
An event of default on any one of the loan made to the Company and the credit line granted to the Subsidiary triggers an event
of default under the other of such loan and credit line. As of the date of this report, the Subsidiary has drawn down on approximately
$2.5 million under the facility.
The Subsidiary and each of
Aviv and Magic Stones, our shareholders, each holding 41.21% of our outstanding ordinary shares, entered into an Assignment and
Assumption Agreement, dated July 17, 2016, pursuant to which the Subsidiary acquired from these shareholders their respective rights
in all of the License and Service Agreement with McGinnis, the Administrative Services Agreement with Phinergy, and the Laminar
MOU, all of which are is described in the Material Agreement Section above. The rights transferred under the Assignment and Assumption
Agreement was valued at $1.4 million. Such money was funded with a draw on the Loan and Security Agreement entered into by these
shareholders and the Subsidiary as described above.
C.
INTEREST OF EXPERT AND COUNSEL
Not applicable
|
ITEM
8.
|
FINANCIAL
INFORMATION
|
See
Item 18
Legal
Proceedings
From
time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are currently not involved
in any pending or contemplated legal proceedings that could reasonably be expected to have a material adverse effect on our business,
prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future. Regardless
of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources
and other factors
.
Dividend
Distribution Policy
We do not intend to pay cash
dividends on our ordinary shares in the foreseeable future. We currently intend to retain all future earnings to finance operations
and to expand our business.
Under
the provisions of our Articles of Association, the declaration of any final cash dividends in respect of any fiscal period requires
shareholder approval, which may reduce but not increase such dividend from the amount proposed by our board of directors; provided
that any failure by the shareholders to approve a final dividend will not affect any interim dividend which has been paid. Payments
of dividends may be subject to withholding and other taxes.
B.
SIGNIFICANT CHANGES
None
other than disclosed in this report.
|
ITEM 9.
|
THE
OFFER AND LISTING
|
A. Offer
and Listing Details
Stock
Price History
The
prices set forth below are high and low closing market prices for the ordinary shares of R.V.B. Holdings Ltd. as reported by the
Nasdaq Capital Market or the Pink Sheets, as applicable, for the fiscal year ended December 31 of each year indicated below, and
for each fiscal quarter indicated below. Such quotations reflect inter-dealer prices, without retail markup, markdown, or commission
and may not necessarily represent actual transactions. No information is available for the last six months. Our ordinary shares
are currently quoted in the over-the-counter market in the “Pink Sheets” under the symbol “RVBHF”.
Share
prices below reflect the reverse stock split ratio of 30,465:1 implemented on February 2, 2016.
|
Yearly highs and lows
|
|
High
|
|
Low
|
|
2011
|
|
$US
|
|
|
6,093.00
|
|
|
$US
|
|
|
1,218.60
|
|
|
2012
|
|
$US
|
|
|
6,702.30
|
|
|
$US
|
|
|
304.65
|
|
|
2013
|
|
$US
|
|
|
2,741.85
|
|
|
$US
|
|
|
45.70
|
|
|
2014
|
|
$US
|
|
|
3,046.5
|
|
|
$US
|
|
|
456.98
|
|
|
2015
|
|
$US
|
|
|
131.00
|
|
|
$US
|
|
|
3.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly highs and lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$US
|
|
|
2,741.85
|
|
|
$US
|
|
|
304.65
|
|
|
Second Quarter
|
|
$US
|
|
|
304.65
|
|
|
$US
|
|
|
152.33
|
|
|
Third Quarter
|
|
$US
|
|
|
913.95
|
|
|
$US
|
|
|
60.93
|
|
|
Fourth Quarter
|
|
$US
|
|
|
304.65
|
|
|
$US
|
|
|
45.70
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$US
|
|
|
48.74
|
|
|
$US
|
|
|
45.70
|
|
|
Second Quarter
|
|
$US
|
|
|
913.95
|
|
|
$US
|
|
|
30.47
|
|
|
Third Quarter
|
|
$US
|
|
|
3046.50
|
|
|
$US
|
|
|
48.74
|
|
|
Fourth Quarter
|
|
$US
|
|
|
158.42
|
|
|
$US
|
|
|
54.84
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$US
|
|
|
94.44
|
|
|
$US
|
|
|
57.88
|
|
|
Second Quarter
|
|
$US
|
|
|
131.00
|
|
|
$US
|
|
|
57.88
|
|
|
Third Quarter
|
|
$US
|
|
|
82.26
|
|
|
$US
|
|
|
67.02
|
|
|
Fourth Quarter
|
|
$US
|
|
|
106.63
|
|
|
$US
|
|
|
3.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly highs and lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2015
|
|
$US
|
|
|
106.63
|
|
|
$US
|
|
|
3.05
|
|
|
November 2015
|
|
$US
|
|
|
82.26
|
|
|
$US
|
|
|
82.26
|
|
|
October 2015
|
|
$US
|
|
|
82.26
|
|
|
$US
|
|
|
76.16
|
|
|
September 2015
|
|
$US
|
|
|
82.26
|
|
|
$US
|
|
|
67.02
|
|
|
August 2015
|
|
$US
|
|
|
70.07
|
|
|
$US
|
|
|
70.07
|
|
|
July 2015
|
|
$US
|
|
|
70.07
|
|
|
$US
|
|
|
70.07
|
|
|
June 2015
|
|
$US
|
|
|
70.07
|
|
|
$US
|
|
|
63.98
|
|
|
May 2015
|
|
$US
|
|
|
131.00
|
|
|
$US
|
|
|
60.93
|
|
As
a result of the removal of our ordinary shares from quotation on the Nasdaq Capital Market, our ordinary shares are not regularly
covered by securities analysts and the media and the trading of our ordinary shares is very limited. Such limited trading could
result in lower prices for our ordinary shares than might otherwise prevail and in larger spreads between the bid and asked prices
for our ordinary shares. Additionally, certain investors will not purchase securities that are quoted on the pink sheets,
which could materially impair our ability to raise funds through the issuance of our ordinary shares in the securities markets.
B.
Plan
of Distribution
Not
applicable.
C.
Markets
Our
ordinary shares were traded on the Nasdaq Capital Market until February, 2003 under the ticker symbol BVRSF. Our ordinary shares
were then delisted from the Nasdaq Capital Market after we failed to comply with its required listing standards. Our ordinary
shares traded on the Over-the-Counter Bulletin Board under the symbol “BVRSF.OB” from February, 2003 until March 2010.
Following the Elbit Transaction and our name change to R.V.B. Holdings Ltd, we changed our ticker symbol and on March 2, 2010
our ordinary shares began trading on the Over-the-Counter Bulletin Board under the symbol “RVBHF”. Since May 1, 2014,
our ordinary shares have been quoted on OTC Pink.
D.
Selling
Shareholders
Not
applicable.
E.
Dilution
Not
applicable.
F.
Expenses
of the Issue
Not
applicable.
|
ITEM
10.
|
ADDITIONAL
INFORMATION
|
A.
SHARE CAPITAL
Not
applicable
B.
MEMORANDUM AND ARTICLES OF ASSOCIATION
Objects
and Purposes
We
are a public company registered under the Companies Law as R.V.B. Holdings Ltd (formerly B.V.R. Systems (1998) Ltd.), registration
number 52-004362-1. Pursuant to Article 4.2 of our Articles of Association, our objective is any purpose stated in the Company’s
memorandum of association and to engage in any lawful activity.
On
September 26, 2016, the Company shareholders approved a new Articles of Association for the Company.
Board
of Directors
Under
the Companies Law and our articles of association, our board of directors may exercise all powers and take all actions that are
not required under the Companies Law or under our articles of association to be exercised or taken by another corporate body,
including the power to borrow money for the purposes of our Company. Our directors are not subject to any age limit requirement,
nor are they disqualified from serving on our board of directors because of a failure to own a certain amount of our shares.
Dividend
and Liquidation Rights
The
holders of the ordinary shares are entitled to their proportionate share of any cash dividend, share dividend or dividend in kind
declared with respect to our ordinary shares on or after the date of this annual report. We may declare dividends out of profits
legally available for distribution. Under the Companies Law, a company may distribute a dividend only if the distribution does
not create a reasonable risk that the company will be unable to meet its existing and anticipated obligations as they become due.
Furthermore, a company may only distribute a dividend out of the company’s profits, as defined under the Companies Law.
If the company does not meet the profit requirement, a court may allow it to distribute a dividend, as long as the court is convinced
that there is no reasonable risk that such distribution might prevent the company from being able to meet its existing and anticipated
obligations as they become due.
Under
the Companies Law, the declaration of a dividend does not require the approval of the shareholders of a company unless the company’s
articles of association provide otherwise. Our articles of association provide that the board of directors may declare and distribute
dividends without the approval of the shareholders. In the event of our liquidation, holders of our ordinary shares have the right
to share ratably in any assets remaining after payment of liabilities, in proportion to the paid-up par value of their respective
holdings.
These
rights may be affected by the grant of preferential liquidation or dividend rights to the holders of a class of shares that may
be authorized in the future.
Voting,
Shareholder Meetings and Resolutions
Holders
of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders. This right may
be changed if shares with special voting rights are authorized in the future.
Our
articles of association and the laws of the State of Israel do not restrict the ownership or voting of ordinary shares by non-residents
of Israel.
Under
the Companies Law, an annual meeting of our shareholders should be held once every calendar year, but no later than 15 months
from the date of the previous annual meeting. The quorum required under our articles of association for a general meeting of shareholders
consists of at least two shareholders present in person or by proxy holding in the aggregate at least 25% of the voting power.
According to our articles of association a meeting adjourned for lack of a quorum generally is adjourned to the following day,
at the same time and place or any time and place as the board of directors designates in a notice to the shareholders. At the
adjourned meeting, if a legal quorum is not present after 30 minutes from the time specified for the commencement of the adjourned
meeting, then the meeting shall take place regardless of the number of members present and in such event the required quorum shall
consist of any number of shareholders present in person or by proxy.
Most
shareholders’ resolutions, including resolutions to:
amend
our articles of association (except as set forth below);
make
changes in our capital structure such as a reduction of capital, increase of capital or share split, merger or consolidation;
authorize
a new class of shares;
elect
directors, other than external directors; or
appoint
auditors
will
be deemed adopted if approved by the holders of a majority of the voting power represented at a shareholders’ meeting, in
person or by proxy, and voting on that resolution.
Notices
Under
the Companies Law, shareholders’ meetings generally require prior notice of at least 21 days, or 35 days if the meeting
is adjourned for the purpose of voting on any of the following matters:
|
|
(1)
|
appointment and removal of directors;
|
|
|
|
|
|
|
(2)
|
approval of certain matters relating to the fiduciary
duties of office holders and of certain transactions with interested parties;
|
|
|
|
|
|
|
(3)
|
approval of certain mergers; and
|
|
|
|
|
|
|
(4)
|
any other matter in respect of which the articles of
association provide that resolutions of the general meeting may be approved by means of a voting document.
|
Modification
of Class Rights
The
Companies Law provides that, unless otherwise provided by the articles of association, the rights of a particular class of shares
may not be adversely modified without the vote of a majority of the affected class at a separate class meeting.
Election
of Directors
The Board may include
between two and eleven directors. Any single shareholder holding at least 25% of the issued and outstanding shares of the
Company may appoint and dismiss up to two directors to the Board. The Board must include an independent director who is
approved by the Audit Committee of the Company and appointed by the other members of the Board. Under the Law, the Board must
also include at least two external directors.
Directors are elected at the General
Meeting of the Company and serve until the following General Meeting unless they are dismissed or resign by the shareholders that
appointed them. Changes to the Articles of Association that address the rights to appoint directors require the consent of 65%
of the issued and outstanding shares of the Company.
Approval
of Specified Related Party Transactions
Transactions
Requiring Special Approval
The
Companies Law requires that an office holder disclose to the company any personal interest that he or she may have, and all related
material information known to him or her, in connection with any existing or proposed transaction by the company. The disclosure
is required to be made promptly and in any event, no later than the board of directors meeting in which the transaction is first
discussed. If the transaction is an extraordinary transaction, the office holder must also disclose any personal interest held
by his or her relative.
An
“office holder” is defined in the Companies Law as a general manager, chief business manager, deputy general manager,
vice general manager, any person assuming the responsibilities of any of the foregoing positions without regard to such person’s
title and a director or any manager who is directly subject to the general manager.
The
Companies Law imposes a duty of care and a fiduciary duty on all office holders of a company. The duty of care requires an office
holder to act with the level of care which a reasonable office holder in the same position would have acted under the same circumstances.
The duty of care includes a duty to use reasonable means to obtain:
information
on the appropriateness of a given act or action to be approved or performed by the officer holder by virtue of his or her position;
and
all
other important information pertaining to such an act or action.
The
fiduciary duty requires an office holder to act in good faith for the interests of the company and includes a duty to:
refrain
from any conflict of interest between the performance of the office holder’s duties in the company and his or her personal
affairs;
refrain
from any activity that is competitive with the company;
refrain
from exploiting any business opportunity of the company to receive a personal gain for himself or herself or for 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 or her position as an office holder.
Each
person listed in the table under “Item 6 – Directors, Senior Management and Employees – A. Directors and Senior
Management” is an office holder.
Under
the Companies Law, a “personal interest” is defined as the personal interest of a person in an action or in a transaction
of the company, including the personal interest of such person’s relative or the interest of any other corporate body in
which the person and/or such person’s relative is a director or general manager, a 5% shareholder or holds 5% or more of
the voting rights, or has the right to appoint at least one director or the general manager, but excluding a personal interest
stemming solely from the fact of holding shares in the company. A personal interest also includes a personal interest of a person
who votes according to a proxy of another person, even if the other person has no personal interest, and a personal interest of
a person who gave a proxy to another person to vote on his behalf – all whether the discretion how to vote lies with the
person voting or not.
Under
the Companies Law, an extraordinary transaction is a transaction:
not
in the ordinary course of business;
not
on market terms; or
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 the
transaction, unless the company’s articles of association provide otherwise. A transaction that is adverse to the company’s
interest may not be approved. If the transaction is (i) an extraordinary transaction with an office holder or a third party in
which the office holder has a personal interest, or (ii) an engagement by the company with an office holder who is not a director
regarding his or her service and terms of employment, including an undertaking to indemnify, exculpate or insure such office holder,
then it must be approved by the audit committee, before the board approval. In the event that an amendment is made to an existing
engagement with an office holder, such amendment does not require board approval to the extent that it is immaterial to the existing
engagement. Transaction between a company and its directors regarding such directors' service and terms of employment, including
with respect to exculpation, indemnification or insurance, including compensation for non-directorial duties in the company, require
the approval of each of the audit committee, the board of directors and the shareholders, in that order.
Extraordinary
transactions of a public company with its controlling shareholder or in which a controlling shareholder has a personal interest,
including a private placement in which a controlling shareholder has a personal interest, and the terms of engagement of the company,
directly or indirectly, with a controlling shareholder or a controlling shareholder’s relative (including through a corporation
controlled by a controlling shareholder), regarding the company’s receipt of services from the controlling shareholder,
and if such controlling shareholder is also an office holder or an employee of the company, regarding his or her terms of engagement
and employment, require the approval of the audit committee, the board of directors and the shareholders of the company. The shareholders’
approval must satisfy either of the following criteria:
the
majority must include a majority of the total votes of shareholders who are present and voting at the meeting and who have no
personal interest in the transaction (the votes of abstaining shareholders shall not be included in the number of the said total
votes); or
the
total of opposition votes, among the shareholders who are present at the meeting and who have no personal interest in the transaction,
shall not exceed 2% of the aggregate voting rights in the company.
In
addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest
with a term of more than three years, requires the abovementioned approval every three years; unless, with respect to transactions
not involving the receipt of services or compensation, the audit committee has determined that a longer term is reasonable under
the circumstances.
A
person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee
may not be present at this meeting or vote on this matter. However, if the chairman of the board of directors or the chairman
of the audit committee has determined that the presence of an office holder with a personal interest is required, such office
holder may be present at the meeting. Notwithstanding the foregoing, a director who has a personal interest may be present at
the meeting and vote on the matter if a majority of the directors or members of the audit committee have a personal interest in
the approval of such transaction. If a majority of the directors have a personal interest in a transaction, such transaction requires
approval of the shareholders of the company.
Under
the Companies Law, the disclosure requirements which apply to an office holder also apply to a controlling shareholder of a public
company. A shareholder is presumed to have “control” of the company and thus to be a controlling shareholder of the
company if the shareholder holds 50% or more of the “means of control” of the company. “Means of control”
is defined as (1) the right to vote at a general meeting of a company or a corresponding body of another corporation; or (2) the
right to appoint directors of the corporation or its general manager. For the purpose of approving transactions with controlling
shareholders, the term also includes any shareholder that holds 25% or more of the voting rights in a public company if no other
shareholder owns more than 50% of the voting rights in the company. For purposes of determining the holding percentage stated
above, two or more shareholders who have a personal interest in a transaction that is brought for the company’s approval
are deemed as joint holders.
The
Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument in a vote regarding
a transaction with a controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a
personal interest in the vote in question. Failure to indicate so will result in the invalidation of that shareholder’s
vote.
For
information concerning the direct and indirect personal interests of certain of our office holders and principal shareholders
in certain transactions with us, see “Item 7.B. – Major Shareholders and Related Party Transactions – Related
Party Transactions.”
Rights,
Preferences and Restrictions on Shares
Modifications
of Share Rights
Under
our Articles of Association, the rights attached to any class may be varied by adoption of the necessary amendment of the Company’s
Articles of Association, provided that the holders of the majority of the shares of such class represented at a meeting of the
shareholders of such class. Our Articles of Association require for quorum at a meeting of a particular class of shares the presence
of two shareholders holding at least 25% of the voting power of that class. Our Articles of Association may be amended by majority
of the voting power of our Company represented at a shareholders meeting and voting thereon, except that the provisions of our
Articles of Association relating to mergers and acquisitions can only be amended by a vote of 75% of the voting power of our Company
represented at a meeting and voting thereon.
Shareholders
Meetings and Resolutions
We are required to hold
an annual general meeting of our shareholders once every calendar year, but no later than 15 months after the date of the previous
annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as extraordinary general
meetings. Our board of directors may call extraordinary general meetings whenever it sees fit, at such time and place, within
or without the State of Israel, as it may be determined. In addition, the Companies Law provides that the board of directors of
a public company is required to convene an extraordinary meeting upon the request of (a) any two directors of the company or one
quarter of the company’s board of directors or (b) one or more shareholders holding, in the aggregate, (i) five percent
of the outstanding shares of the company and one percent of the voting power in the company or (ii) five percent of the voting
power in the company.
The
quorum required by our Articles of Association for a meeting of shareholders consists of at least two shareholders present in
person or by proxy who hold or represent between them at least 25% of the voting power in our Company. A meeting adjourned for
lack of quorum is adjourned to the following day at the same time and place or any time and place as the board decides. At such
reconvened meeting, the required quorum consists of any number of shareholders present in person or by proxy.
Limitation
on Ownership of Securities
The ownership and voting
of our ordinary shares by non-residents of Israel are not restricted in any way by our Articles of Association or by the laws
of the State of Israel, except for shareholders who are subjects of countries which are enemies of the State of Israel.
Mergers
and Acquisitions; Anti-takeover Provisions
The
Companies Law includes provisions allowing corporate mergers. These provisions require that the board of directors of each company
that is party to the merger approve the transaction. In addition, the holders of the majority of the shares of each company must
approve the merger. The Companies Law does not require court approval of a merger other than in specified situations. However,
upon the request of a creditor of either party to the proposed merger, a 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 of the merger to their creditors.
A
merger may not be completed until at least 50 days have passed from the time that a merger proposal was filed with the Israeli
Registrar of Companies and 30 days have passed from the shareholders’ approval of the merger in each of the merging companies.
The
Companies Law also provides that the acquisition of shares in a public company on the open market (i.e., from other shareholders
of the company) must be made by means of a tender offer if, as a result of the acquisition, the purchaser would become a 25% shareholder
of the company. The rule does not apply if there already is another 25% shareholder of the company. Similarly, the law provides
that an acquisition of shares in a public company must be made by means of a tender offer if, as a result of the acquisition,
the purchaser would become a 45% shareholder of the company, unless there is already another 45% shareholder of the company.
If,
following any acquisition of shares, the purchaser would hold 90% or more of the shares of the company that acquisition must be
made by means of a tender offer for all of the target company’s shares. An acquirer who wishes to eliminate all minority
shareholders must do so by means of a tender offer and acquire 95% of all shares not held by or for the benefit of the acquirer
prior to the acquisition. However, in the event that the tender offer to acquire that 95% is not successful, the acquirer may
not acquire tendered shares if by doing so the acquirer would own more than 90% of the shares of the target company.
Changes
in Capital
Our Articles of Association
enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must
be approved by a resolution passed by a majority of the voting power of our Company present, in person or by proxy, at a general
meeting and voting on such change in the capital. In addition, certain transactions, which have the effect of reducing capital,
such as the declaration and payment of dividends under certain conditions and the issuance of shares for less than their nominal
value, require a resolution of the board of directors and court approval.
Compensation.
Every Israeli public company must adopt a compensation policy, recommended by the compensation committee, and approved by the
board of directors and the shareholders, in that order. The shareholder approval requires a majority of the votes cast by shareholders,
excluding any controlling shareholder and those who have a personal interest in the matter (similar to the threshold described
below under " – Shareholders"). 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. In addition, the compensation
terms of directors, the chief executive officer, and any employee or service provider who is considered a controlling shareholder
generally must be approved separately by the compensation committee, the board of directors and the shareholders of the company,
in that order. The compensation terms of other officers require the approval of the compensation committee and the board of directors.
Anti-Takeover
Provisions; Mergers and Acquisitions
Merger.
The Companies Law permits merger transactions with the approval of each party’s board of directors and shareholders.
Under
the Companies Law, a merging company must inform its creditors of the proposed merger. Any creditor of a party to the merger may
seek a court order to delay or block the merger, if there is a reasonable concern that the surviving company will not be able
to satisfy all of the obligations of the parties to the merger. Moreover, a merger may not be completed until all of the required
approvals have been filed by both merging companies with the Israeli Registrar of Companies and (i) 30 days have passed from the
time both companies’ shareholders resolved to approve the merger, and (ii) at least 50 days have passed from the time that
the merger proposal was filed with the Israeli Registrar of Companies.
Tender
Offer. The Companies Law requires a purchaser to conduct a tender offer in order to purchase shares in publicly held companies,
if as a result of the purchase the purchaser would hold more than 25% of the voting rights of a company in which no other shareholder
holds more than 25% of the voting rights, or the purchaser would hold more than 45% of the voting rights of a company in which
no other shareholder holds more than 45% of the voting rights. The tender offer must be extended to all shareholders, but the
offeror is not required to purchase more than 5% of the company’s outstanding shares, regardless of how many shares are
tendered by shareholders. The tender offer generally may be consummated only if (i) at least 5% of the voting rights in the company
will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders
objected to the offer. The requirement to conduct a tender offer shall not apply to (i) the purchase of shares in a private placement,
provided that such purchase was approved by the company’s shareholders for this purpose; ; (ii) a purchase from a holder
of more than 25% of the voting rights of a company that results in a person becoming a holder of more than 25% of the voting rights
of a company, and (iii) a purchase from the holder of more than 45% of the voting rights of a company that results in a person
becoming a holder of more than 45% of the voting rights of a company.
Under the Companies Law, a person
may not purchase shares of a public company if, following the purchase of shares, the purchaser would hold more than 90% of the
company’s shares, unless the purchaser makes a tender offer to purchase all of the target company’s shares. If, as
a result of the tender offer, the purchaser would hold more than 95% of the company’s shares and more than half of the offerees
that have no personal interest have accepted the offer, the ownership of the remaining shares will be transferred to the purchaser.
Alternatively, the purchaser will be able to purchase all shares if the percentage of the offerees that did not accept the offer
constitutes less than 2% of the company’s shares. If the purchaser is unable to purchase 95% or more of the company’s
shares, the purchaser may not own more than 90% of the shares of the target company.
Tax
Law. Israeli tax law treats some acquisitions, such as a stock-for-stock swap between an Israeli company and a foreign company,
less favorably than U.S. tax law. For example, Israeli tax law may subject a shareholder who exchanges his ordinary shares for
shares in a foreign corporation to immediate taxation. Please see "Item 10.E Taxation — Israeli Taxation."
Exculpation,
Indemnification and Insurance of Directors and Officers
Our
articles of association allow us to indemnify, exculpate and insure our office holders, which includes our directors, to the fullest
extent permitted by the Companies Law (other than with respect to certain expenses in connection with administrative enforcement
proceedings under the Israeli Securities Law).
Under
the Companies Law, a company may indemnify an office holder in respect of some liabilities, either in advance of an event or following
an event. If a company undertakes to indemnify an office holder in advance against monetary liability incurred in his or her capacity
as an office holder, whether imposed in favor of another person pursuant to a judgment, a settlement or an arbitrator’s
award approved by a court, the indemnification must be limited to foreseeable events in light of the company’s actual activities
at the time of the indemnification undertaking and to a specific sum or a reasonable criterion under such circumstances, as determined
by the board of directors.
Under
the Companies Law, only if and to the extent provided by its articles of association, a company may indemnify an office holder
against the following liabilities or expenses incurred in his or her capacity as an office holder:
any
monetary liability whether imposed on him or her in favor of another person pursuant to a judgment, a settlement or an arbitrator’s
award approved by a court;
reasonable
litigation expenses, including attorneys’ fees, incurred by him or her as a result of an investigation or proceedings instituted
against him or her by an authority empowered to conduct an investigation or proceedings, which are concluded either (i) without
the filing of an indictment against the office holder and without the levying of a monetary obligation in lieu of criminal proceedings
upon the office holder, or (ii) without the filing of an indictment against the office holder but with levying a monetary obligation
in substitute of such criminal proceedings upon the office holder for a crime that does not require proof of criminal intent;
reasonable
litigation expenses, including attorneys’ fees, in proceedings instituted against him or her by the company, on the company’s
behalf or by a third-party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result
of a conviction for a crime that does not require proof of criminal intent, or in connection with an administrative enforcement
proceeding or financial sanction instituted against him; and
reasonable
litigation expenses, including attorneys’ fees, incurred by him or her as a result of an administrative enforcement proceeding
instituted against him or her.
Under
the Companies Law, a company may obtain insurance for an office holder against liabilities incurred in his or her capacity as
an office holder, if and to the extent provided for in its articles of association. These liabilities include a breach of duty
of care to the company or a third-party, a breach of duty of loyalty, any monetary liability imposed on the office holder in favor
of a third-party, and reasonable litigation expenses, including attorney fees, incurred by an office holder as a result of an
administrative enforcement proceeding instituted against him.
A
company may, in advance only, exculpate an office holder for a breach of the duty of care, except in connection with a distribution
of dividends or a repurchase of the company’s securities. A company may not exculpate an office holder from a breach of
the duty of loyalty towards the company.
Under
the Companies Law, however, an Israeli company may only indemnify or insure an office holder against a breach of duty of loyalty
to the extent that the office holder acted in good faith and had reasonable grounds to assume that the action would not prejudice
the company. In addition, an Israeli company may not indemnify, insure or exculpate an office holder against a breach of duty
of care if committed intentionally or recklessly, or an action committed with the intent to derive an unlawful personal gain,
or for a fine or forfeit levied against the office holder.
We
have purchased liability insurance and entered into indemnification and exculpation agreements for the benefit of our office holders
in accordance with the Companies Law and our articles of association.
C. MATERIAL
CONTRACTS
Other
than as described in other parts of this annual report, we have no other material contracts to which we were party during the
last two years.
D.
EXCHANGE CONTROLS
Other
than general anti-money laundering regulations, there are currently no Israeli currency control regulations in effect that restrict
our import or export of capital to or from the State of Israel, or the availability of cash and cash equivalents for use by our
company. Under the Bank of Israel Law, 5770-2010, the Governor of the Bank of Israel, with the approval of the monetary policy
committee of the Bank of Israel, is authorized to issue an administrative order restricting the transfer of funds to or from Israel.
However, such an order is only likely to be issued under emergency circumstances and only for a temporary period, if necessary
for the achievement of the goals of the Bank of Israel or the carrying out of its responsibilities under Israeli law. Furthermore,
Israel has agreed, pursuant to international agreements to which it is a party (including incident to Israel’s having joined
the International Monetary Fund) to allow for the free flow of capital to and from within its borders. Certain transactions nevertheless
require the filing of reports with the Bank of Israel.
Similarly,
there are no currently effective Israeli governmental laws, decrees, regulations or other legislation that restrict the payment
of dividends or other distributions with respect to our ordinary shares or the proceeds from the sale of the 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.
E.
TAXATION
HOLDERS
OF OUR ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE UNITED STATES, ISRAELI OR OTHER TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF ORDINARY SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN, STATE OR LOCAL TAXES.
Israeli
Tax Considerations and Government Programs
The
following is a summary of the current tax structure applicable to companies in Israel, with special reference to its effect on
us. The following also contains a discussion of certain Israeli and United States tax consequences to purchasers of our ordinary
shares and certain Israeli Government programs benefiting us. To the extent that the discussion is based on new tax legislation
that 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. The discussion is not intended, and should not be construed,
as legal or professional tax advice and is not exhaustive of all possible tax considerations.
General
Corporate Tax Structure
Israeli
companies were generally subject to corporate tax at a rate of 25% in 2016. In December 2016, the Israeli Parliament approved
a measure whereby the corporate tax rate would be reduced in two stages from 25% to 23%, starting with a corporate income tax
rate of 24% beginning January 2017 which is to be reduced to 23% beginning January 2018.
Capital
Gains Tax on Sales of Our Ordinary Shares
Capital
gains tax is imposed on the disposal of capital assets by an Israeli resident and on the disposal of such assets by a non- Israel
resident, if those assets are either: (i) located in Israel; (ii) shares or rights to shares in an Israeli resident company, or
(iii) represent, directly or indirectly, rights to assets located in Israel. The Israeli Income Tax Ordinance, 1961 [new version]
(the “Ordinance”) distinguishes between “Real Capital Gain” and “Inflationary Surplus”. The
Real Capital Gain on the disposition of a capital asset is the amount of total capital gain in excess of Inflationary Surplus.
Inflationary Surplus is generally computed on the basis of the increase in the Israeli Consumer Price Index between the date of
purchase and the date of disposal of the capital asset.
Real
Capital Gain generated by a company is generally subject to tax at the corporate tax rate (25% in 2016). The Real Capital Gain
accrued by individuals on the sale of our ordinary shares will be taxed at the rate of 25%. However, if the individual shareholder
is a “Controlling Shareholder” (i.e., a person who holds, directly or indirectly, alone or together with another,
10% or more of one of the Israeli resident company’s “means of control” (including, among others, the right
to company profits, voting rights, the right to the company’s liquidation proceeds and the right to appoint a company director)
at the time of sale or at any time during the preceding 12 month period)), such gain will be taxed at the rate of 25%.
Individual
and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income – 25%
for corporations in 2016 and a marginal tax rate of up to 50% for individuals in 2016 (including a 2% excess tax for individuals
whose taxable income in Israel exceeds 810,720 NIS in 2016).
Notwithstanding
the foregoing, capital gains generated from the sale of our securities by a non-Israeli shareholder may be exempt under the Ordinance
from Israeli taxes provided that all the following cumulative conditions are met: (i) the securities were purchased upon or after
the registration of the securities on a stock exchange (this requirement generally does not apply to shares purchased on or after
January 1, 2009); (ii) the seller of the securities does not have a permanent establishment in Israel to which the generated capital
gain is attributable; and (iii) if the seller is a corporation, less than 25% of its means of control are held, directly and indirectly,
by Israeli resident shareholders. In addition, the sale of the securities may be exempt from Israeli capital gain tax under the
provisions of an applicable tax treaty. For example, the Convention between the Government of the United States of America and
the Government of Israel with respect to Taxes on Income (the “Israel-U.S. Double Tax Treaty”) exempts U.S. residents
from Israeli capital gains tax in connection with such sale, provided that: (i) the U.S. resident owned, directly or indirectly,
less than 10% of the Israeli resident company’s voting power at any time within the 12-month period preceding such sale;
(ii) the seller, if an individual, has been present in Israel for less than 183 days (in the aggregate) during the taxable year;
and (iii) the capital gain from the sale was not generated through a permanent establishment of the U.S. resident in Israel.
Either
the purchaser of the securities, the stockbrokers who effected the transaction or the financial institution holding the traded
securities through which the payment to the seller is made is obligated, subject to the above-referenced exemptions, to withhold
tax on the Real Capital Gains resulting from the real capital gain or the consideration in the sale of securities at the rate
of 25% in respect of a corporation and/or an individual.
A
detailed return, including a computation of the tax due, must be filed and an advance payment must be paid on January 31 and July
31 of each tax year for sales of securities traded on a stock exchange made in the 6 months period prior to the month of each
of the aforementioned filing dates. However, if all tax due was withheld at source according to applicable provisions of the Ordinance
and the regulations promulgated thereunder, the return does not need to be filed and no advance payment is required. Capital gains
are also reportable on an annual income tax return.
Taxation
of Dividends
As
of January 1, 2012, a distribution of dividends from income derived during any period for which the Israeli company is not entitled
to reduced tax rates applicable to an Approved Enterprise/Benefited Enterprise/ Preferred Enterprise under the Law for the Encouragement
of Capital Investments-1959, to an Israeli resident individual, will generally be subject to tax at a rate of 25%. However, a
30% tax rate will apply if the dividend recipient is a “Controlling Shareholder” (as defined above) at the time of
distribution or at any time during the preceding 12 months period. If the recipient of the dividend is an Israeli resident corporation,
such dividend will be exempt from tax in Israel provided that the income from which such dividend was distributed was derived
or accrued within Israel.
The
aforementioned rates may be reduced by an applicable double tax treaty. Thus, under the Israel – U.S. Double Tax Treaty
the following rates will apply in respect of dividends distributed by an Israeli resident company to a U.S. resident: (i) if the
U.S. resident is a corporation which holds during that portion of the taxable year which precedes the date of payment of the dividend
and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting stock of the Israeli
resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation for such prior
taxable year (if any) consists of certain type of interest or dividends – the tax rate is 12.5%, (ii) if both the conditions
mentioned in section (i) above are met and the dividend is paid from an Israeli resident company's income which was entitled to
a reduced tax rate applicable to an Approved Enterprise/ Benefited Enterprise/Preferred Enterprise – the tax rate is 15%,
and (iii) in all other cases, the tax rate is 25%. The aforementioned rates under the Israel - U.S. Double Tax Treaty will not
apply if the dividend income has been derived through a permanent establishment of the U.S. resident in Israel.
In
general, dividend derived from an Israeli resident company (other than a family company), is not subject to tax as part of the
company's taxable income. However, dividend derived from non-Israeli resident or dividend derived from an Approved Enterprise's/Privileged
Enterprise's/Preferred Enterprise is subject to tax as described below.
Our
company is obligated to withhold tax, upon the distribution of a dividend attributed to an Approved Enterprise's/Privileged Enterprise's/Preferred
Enterprise's income, from the amount distributed, at the following rates: (i) Israeli resident corporations – 15% (20% if
the dividend income is attributable to a benefits plan implemented as of January 1, 2014) , (ii) Israeli resident individuals
– 15% (20% if the dividend income is attributable to a benefits plan implemented as of January 1, 2014), and (iii) non-Israeli
residents – 15% (20% if the dividend income is attributable to a benefits plan implemented as of January 1, 2014) (4% under
the Ireland Track), subject to a reduced tax rate under the provisions of an applicable double tax treaty. If the dividend is
distributed from an income not attributed to the Approved Enterprise/Privileged Enterprise/Preferred Enterprise, the following
withholding tax rates will apply: (a) for securities which are registered and held by a clearing corporation: (i) Israeli resident
corporations – 0%, (ii) Israeli resident individuals – 25% and (iii) non-Israeli residents - 25%, subject to a reduced
tax rate under the provisions of an applicable double tax treaty; (b) in all other cases: (i) Israeli resident corporations –
0%, (ii) Israeli resident individuals – 25%/30% (the 30% tax rate shall apply if the dividend recipient is a “Controlling
Shareholder” (as defined above) at the time of the distribution or at any time during the preceding 12 months period), and
(iii) non-Israeli residents - 25%/30% as referred to above with respect to Israeli resident individuals, subject to a reduced
tax rate under the provisions of an applicable double tax treaty.
United
States Federal Income Tax Considerations
The
following discussion describes certain material United States (“U.S.”) federal income tax consequences of the purchase,
ownership and disposition of our ordinary shares.
For
purposes of this discussion, a “U.S. holder” is a beneficial owner of ordinary shares who or which is any of the following
for U.S. federal income tax purposes:
a
citizen or resident of the U.S. or someone treated as a U.S. citizen or resident of the U.S.;
a
corporation (or another entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under
the laws of the U.S., any state thereof, or the District of Columbia;
an
estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
a
trust, if (a) a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons have the
authority to control all of its substantial decisions, or (b) the trust was in existence and treated as a U.S. person on August
20, 1996 and has a valid election in effect under applicable Treasury Regulations (as defined below) to be treated as a U.S. person.
A
“Non-U.S. Holder” is a beneficial owner of our ordinary shares that is neither a U.S. Holder nor a partnership (or
other entity treated as a partnership for U.S. federal income tax purposes).
This
summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal
income tax considerations that may be relevant to a decision to purchase, hold or dispose of the Company’s ordinary shares.
This summary generally considers only U.S. holders that will own the ordinary shares as capital assets and does not consider the
U.S. tax consequences to a person that is not a U.S. holder or the tax treatment of persons who hold the ordinary shares through
a partnership or other pass-through entity. In addition, the possible application of U.S. federal estate or gift taxes or any
aspect of state, local or non-U.S. tax laws is not considered. This discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated under the Code by the U.S. Treasury
Department (including proposed and temporary regulations) (the “Treasury Regulations”), rulings, current administrative
interpretations and official pronouncements by the Internal Revenue Service (the “IRS”), and judicial decisions, all
as currently in effect and all of which are subject to differing interpretations or to change, with a retroactive effect. Such
changes could materially and adversely affect the tax consequences described below. No assurance can be given that the IRS would
not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.
This
discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular U.S. holder based
on the holder’s particular circumstances, such as, persons who own, directly, indirectly or constructively, 10% or more
(by voting power or value) of our outstanding voting shares;
investors
holding ordinary shares as part of a “hedging,” “integrated” or “conversion” transaction or
as a position in a “straddle” for U.S. federal income tax purposes;
persons
whose functional currency is not the U.S. dollar;
persons
who acquire their ordinary shares in a compensatory transaction;
partnerships
(including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or holders
that will hold ordinary shares through such entities;
certain
former citizens or residents of the United States;
dealers
or traders in securities, commodities or currencies;
insurance
companies;
regulated
investment companies;
real
estate investment trusts, regulated investment companies or grantor trusts;
traders
who elect to mark-to-market their securities;
tax-exempt
entities or organizations;
banks
or other financial institutions;
U.S.
expatriates; and
persons
subject to the alternative minimum tax.
HOLDER
RELIANCE ON TAX STATEMENTS
THIS
SUMMARY OF MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. EACH
HOLDER SHOULD CONSULT ITS TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO IT OF AN INVESTMENT IN THE ORDINARY SHARES,
INCLUDING THE EFFECTS OF APPLICABLE UNITED STATES FEDERAL INCOME TAX LAWS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE UNITED
STATES FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY FOREIGN, STATE OR LOCAL JURISDICTION OR UNDER ANY APPLICABLE
TAX TREATY.
Availability
of Reduced Tax Rates
Recent
U.S. legislation increased to 20% the maximum U.S. Federal income tax rate on certain long-term capital gains and on qualifying
dividends. Long-term capital gains from the sale of our ordinary shares may be eligible for this rate, although the actual rates
may be higher due to the phase out of certain tax deductions, exemptions and credits. Subject to the discussion below, dividends,
if any, may also be eligible for this 20% maximum rate on long-term capital gains, provided that we do not constitute a passive
foreign investment company (a “PFIC”). However, tax rates are subject to change, especially given the uncertain economic
conditions in the United States and the size of the federal deficit. U.S. holders should consult their tax advisors.
Distributions
on the Ordinary Shares
In
general (and subject to the PFIC rules discussed below), any distribution paid by us on the ordinary shares to a U.S. holder will
be treated as dividend income if the distribution does not exceed our current or accumulated earnings and profits, as determined
for U.S. federal income tax purposes. If holding period and other requirements are met, dividends paid to non-corporate U.S. holders
currently should generally qualify for the reduced maximum tax rate of 20% as long as our ordinary shares remain “readily
tradable on an established securities market in the United States,” provided that we are not considered a PFIC (as discussed
below) in the taxable year in which the dividend is paid or in any preceding taxable year. The amount of any distribution which
exceeds these earnings and profits will be treated first as a non-taxable return of capital, reducing the U.S. holder’s
tax basis in its ordinary shares to the extent thereof, and then as capital gain, and as long-term capital gain if the U.S. holder’s
holding period exceeds one year, from the deemed disposition of the ordinary shares (subject to the PFIC rules discussed below).
Corporate holders generally will not be allowed a deduction for dividends received on the ordinary shares.
A
dividend paid by us in NIS will be included in the income of U.S. holders at the U.S. dollar value of the dividend, based upon
the spot rate of exchange in effect on the date of the distribution. U.S. holders will have a tax basis in NIS for U.S. federal
income tax purposes equal to that U.S. dollar value. Any subsequent gain or loss resulting from exchange rate fluctuations between
the day the dividend was included in the income of U.S. holders and the day the NIS are converted into U.S. dollars or are otherwise
disposed of, will be taxable as ordinary income, gain or loss from U.S. sources.
Dividends
paid by us generally will be foreign source “passive income” for U.S. foreign tax credit purposes or, in the case
of a U.S. holder that is a financial services entity, “financial services income.” U.S. holders may elect to claim
as a foreign tax credit against their U.S. federal income tax liability the Israeli income tax withheld from dividends received
on the ordinary shares. The Code provides limitations on the amount of foreign tax credits that a U.S. holder may claim. U.S.
holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income tax withheld, but only
for a year in which these U.S. holders elect to do so for all foreign income taxes. The rules relating to foreign tax credits
are complex (and may also be impacted by the tax treaty between the United States and Israel), and you should consult your tax
advisor to determine whether and if you would be entitled to this credit.
Subject
to the discussion below under “Backup Withholding Tax and Information Reporting Requirements,” if you are a Non-U.S.
Holder, you generally will not be subject to U.S. federal income (or withholding) tax on dividends received by you on your ordinary
shares, unless:
|
|
●
|
you
conduct a trade or business in the U.S. and such income is effectively connected with that trade or business (and, if required
by an applicable income tax treaty, the dividends are attributable to a permanent establishment or fixed base that such holder
maintains in the U.S.); or
|
|
|
●
|
you
are an individual and have been present in the U.S. for 183 days or more in the taxable year of such sale or exchange and
certain other conditions are met.
|
Sale
or Other Disposition of the Ordinary Shares
Upon
the sale or other disposition of the ordinary shares (subject to the PFIC rules discussed below), a U.S. holder generally will
recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or exchange and the
U.S. holder’s tax basis in the ordinary shares. The gain or loss recognized on the sale or exchange of the ordinary shares
generally will be long-term capital gain or loss if the U.S. holder’s holding period of the ordinary shares is more than
one year at the time of the disposition.
Gain
or loss recognized by a U.S. holder on a sale or exchange of ordinary shares generally will be treated as U.S. source income or
loss for U.S. foreign tax credit purposes. Under the tax treaty between the United States and Israel, gain derived from the sale,
exchange or other disposition of ordinary shares by a holder who is a resident of the U.S. for purposes of the treaty and who
sells the ordinary shares within Israel may be treated as foreign source income for U.S. foreign tax credit purposes.
The
amount of a distribution paid to a U.S. Holder in a foreign currency will be the dollar value of the foreign currency calculated
by reference to the spot exchange rate on the day the U.S. Holder receives the distribution, regardless of whether the foreign
currency is converted into U.S. dollars at that time. Any foreign currency gain or loss a U.S. Holder realizes on a subsequent
conversion of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If dividends received in foreign
currency are converted into U.S. dollars on the day they are received, a U.S. Holder generally should not be required to recognize
foreign currency gain or loss in respect of the dividend.
An
accrual basis U.S. Holder may elect the same treatment required of cash basis taxpayers with respect to foreign currency gain
or loss realized on a sale or disposition of our ordinary shares that are traded on an established securities market, provided
that the election is applied consistently from year to year. Such election may not be changed without the consent of the IRS.
In the event that an accrual basis U.S. Holder does not elect to be treated as a cash basis taxpayer for this purpose (pursuant
to the Treasury regulations applicable to foreign currency transactions), such U.S. Holder may have a foreign currency gain or
loss for U.S. federal income tax purposes because of differences between the U.S. dollar value of the currency received prevailing
on the trade date and the settlement date. Any such foreign currency gain or loss would be treated as ordinary income or loss
and would be in addition to the gain or loss, if any, recognized by such U.S. Holder on the sale or other disposition of our ordinary
shares. Any foreign currency gain or loss a U.S. Holder realizes will generally be U.S. source ordinary income or loss.
The
U.S. rules relating to foreign currency gains and losses are complex, and you should consult with your tax advisor to determine
whether and to what extent you would have to recognize such foreign currency gains or losses.
Subject
to the discussion below under “United States Information Reporting and Backup Withholding
,”
if you are a Non-U.S. Holder, you generally will not be subject to U.S. federal income or withholding tax on any gain realized
on the sale or exchange of our ordinary shares unless:
|
|
●
|
such
gain is effectively connected with your conduct of a trade or business in the United States (and, if required by an applicable
income tax treaty, the gain is attributable to a permanent establishment or fixed base that you maintain in the United States);
or
|
|
|
●
|
you
are an individual and have been present in the United States for 183 days or more in the taxable year of such sale or exchange
and certain other conditions are met.
|
Passive
Foreign Investment Companies
In
general, a foreign (i.e., non-U.S.) corporation will be a PFIC for any taxable year in which, after applying the relevant look-through
rules with respect to the income and assets of its subsidiaries, either (1) 75% or more of its gross income in the taxable year
is “passive income,” or (2) assets held for the production of, or that produce, passive income comprise 50% or more
of the average of its total asset value in the taxable year. For purpose of the income test, passive income includes dividends,
interest, royalties, rents, annuities and net gains from the disposition of assets, which produce passive income. For purposes
of the assets test, assets held for the production of passive income includes assets held for the production of, or that produce
dividends, interest, royalties, rents, annuities, and other income included in the income test. In determining whether we meet
the assets test, cash is considered a passive asset and the total value of our assets generally will be treated as equal to the
sum of the aggregate fair market value of our outstanding stock plus our liabilities. If we own at least 25% (by value) of the
stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other
corporation’s assets and receiving our proportionate share of the other corporation’s income. The income test is conducted
at the taxable year-end. The asset test is conducted on a quarterly basis and the quarterly results are then averaged together.
If
a corporation is treated as a PFIC for any year during a U.S. holder’s holding period and the U.S. holder does not timely
elect to treat the corporation as a “qualified electing fund” under Section 1295 of the Code or elect to mark its
ordinary shares to market (both as described below), any gain on the disposition of the shares will be treated as ordinary income,
rather than capital gain, and the holder will be required to compute its tax liability on that gain, as well as on dividends and
other distributions, as if the income had been earned ratably over each day in the U.S. holder’s holding period for the
shares. The portion of the gain and distributions allocated to prior taxable years in which a corporation was a PFIC will be ineligible
for any preferential tax rate otherwise applicable to any “qualified dividend income” or capital gains, and will be
taxed at the highest ordinary income tax rate in effect for each taxable year to which this portion is allocated. An interest
charge will be imposed on the amount of the tax allocated to these taxable years. A U.S. holder may elect to treat a corporation
as a qualified electing fund only if the corporation complies with requirements imposed by the IRS to enable the shareholder and
the IRS to determine the corporation’s ordinary income and net capital gain. Additionally, if a corporation is a PFIC, a
U.S. holder who acquires shares in the corporation from a decedent will be denied the normally available step-up in tax basis
to fair market value for the shares at the date of death and instead will have a tax basis equal to the decedent’s tax basis
if lower than fair market value. These adverse tax consequences associated with PFIC status could result in a material increase
in the amount of tax that a U.S. holder would owe and an imposition of tax earlier than would otherwise be imposed and additional
tax form filing requirements. Unless otherwise provided by the IRS, if a corporation is classified as a PFIC, a U.S. holder will
generally be required to file an informational return annually to report its ownership interest in such entity.
Available
Elections. If we become a PFIC for any taxable year, U.S. holders should consider whether or not to elect to treat us as a “qualified
electing fund” or to elect to “mark-to-market” their ordinary shares in order to mitigate the adverse tax consequences
of PFIC status.
If
a U.S. holder makes a qualified electing fund election (a “QEF election”) for its ordinary shares that is effective
from the first taxable year that the U.S. holder holds our ordinary shares and during which we are a PFIC, the electing U.S. holder
will avoid the adverse consequences of our being classified as a PFIC but will instead be required to include in income a pro
rata share of our net capital gain, if any, and other earnings and profits (“ordinary earnings”) as long-term capital
gains and ordinary income, respectively, on a current basis, in each case whether or not distributed, in the taxable year of the
U.S. holder in which or with which our taxable year ends. A subsequent distribution of amounts that were previously included in
the gross income of U.S. holders should not be taxable as a dividend to those U.S. holders who made a QEF election. In the event
we incur a net loss for a taxable year, such loss will not be available as a deduction to an electing U.S. holder, and may not
be carried forward or back in computing our net capital gain or ordinary earnings in other taxable years. The tax basis of the
shares of an electing U.S. holder generally will be increased by amounts that are included in income, and decreased by amounts
distributed but not taxed as dividends, under the QEF rules described above. In order to make (or maintain) a QEF election, the
U.S. holder must annually complete and file IRS Form 8621. In addition, we must make certain information regarding our net capital
gains and ordinary earnings available to the U.S. holder and permit our books and records to be examined to verify such information.
Therefore, we will monitor our PFIC status and make a disclosure to our shareholders if we determine that we have become a PFIC.
If we are a PFIC for any year and you make a request to us in writing at the address on the cover of our latest Annual Report
on Form 20-F, Attention Chief Financial Officer, for the information required to make a QEF election, we will promptly make the
information available to you and comply with any other applicable requirements of the Code.
A
QEF election, once made with respect to us, applies to the tax year for which it was made and to all subsequent tax years, unless
the election is invalidated or the IRS consents to revocation of the election. If you make a QEF election and we cease to be classified
as a PFIC in a subsequent tax year, the QEF election will remain in effect, although it will not be applicable during those tax
years in which we are not classified as a PFIC. Therefore, if we – after ceasing to be classified as a PFIC – again
are classified as a PFIC in a subsequent tax year, the QEF election will be effective and you will again be subject to the rules
described above for U.S. holders making QEF elections in such tax year and any subsequent tax years in which we are classified
as a PFIC. A QEF election also remains in effect even after you dispose of all of your direct and indirect interest in our ordinary
shares. As a result, if you subsequently acquire any of our ordinary shares or an interest in any of our ordinary shares, you
will again be subject to the rules described above for U.S. holders making a QEF election for each tax year in which we are classified
as a PFIC.
Alternatively,
if a U.S. holder elects to “mark-to-market” its ordinary shares, the U.S. holder will generally include in its income
any excess of the fair market value of our ordinary shares at the close of each taxable year over the holder’s adjusted
basis in such ordinary shares. If a U.S. holder makes a valid mark-to-market election with respect to our ordinary shares for
the first taxable year of the U.S. holder in which the U.S. holder holds (or is deemed to hold) our ordinary shares and for which
we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect to its
ordinary shares. A U.S. holder generally will be allowed an ordinary deduction for the excess, if any, of the adjusted tax basis
of the ordinary shares over the fair market value of the ordinary shares as of the close of the taxable year, or the amount of
any net mark-to-market gains recognized for prior taxable years, whichever is less. A U.S. holder’s adjusted tax basis in
the ordinary shares will generally be adjusted to reflect the amounts included or deducted under the mark-to-market election.
Additionally, any gain on the actual sale or other disposition of the ordinary shares generally will be treated as ordinary income.
Ordinary loss treatment also will apply to any loss recognized on the actual sale or other disposition of ordinary shares to the
extent that the amount of such loss does not exceed the net mark-to-market gains previously included with respect to such ordinary
shares. A mark-to-market election applies to the tax year for which the election is made and to each subsequent year, unless our
ordinary shares cease to be marketable, as specifically defined, or the IRS consents to revocation of the election. No view is
expressed regarding whether our ordinary shares are marketable for these purposes or whether the election will be available.
If
a U.S. holder makes either the QEF election or the mark-to-market election, distributions and gain will not be recognized ratably
over the U.S. holder’s holding period or be subject to an interest charge as described above. Further, the denial of basis
step-up at death described above will not apply. If a U.S. holder elects to treat us as a “qualified electing fund,”
gain on the sale of the ordinary shares will be characterized as capital gain. However, U.S. holders making one of these two elections
may experience current income recognition, even if we do not distribute any cash. The elections must be made with the U.S. holder’s
federal income tax return for the year of election, filed by the due date of the return (as it may be extended) or, under certain
circumstances provided in applicable Treasury Regulations, subsequent to that date.
WE
DO NOT INTEND TO PROVIDE THE INFORMATION NECESSARY FOR U.S. HOLDERS TO MAKE QUALIFIED ELECTING FUND ELECTIONS IF WE ARE CLASSIFIED
AS A PFIC. U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS TO DETERMINE WHETHER ANY OF THESE ELECTIONS WOULD BE AVAILABLE AND IF
SO, WHAT THE CONSEQUENCES OF THE ALTERNATIVE TREATMENTS WOULD BE IN THEIR PARTICULAR CIRCUMSTANCES.
Legislation
regarding Medicare Tax
For
taxable years beginning after December 31, 2012, a U.S. holder that is an individual or estate, or a trust that does not fall
into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. holder’s
“net investment income” for the relevant taxable year and (2) the excess of the U.S. Investor’s modified adjusted
gross income for the taxable year over a certain threshold (which, in the case of individuals, will be between US$125,000 and
US$250,000 depending on the individual’s circumstances). A U.S. holder’s “net investment income” may generally
include its dividend income and its net gains from the disposition of shares, unless such dividends or net gains are derived in
the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or
trading activities). If you are a U.S. holder that is an individual, estate or trust, you are urged to consult your tax advisors
regarding the applicability of the Medicare tax to your income and gains in respect of your investment in the shares.
Withholdable
Payments to Foreign Financial Entities and Other Foreign Entities
A
non-U.S. holder may be subject to a U.S. federal withholding tax at a rate of 30% on certain payments made beginning January 1,
2014 to certain non-U.S. entities if certain disclosure requirements related to U.S. accounts maintained by, or the U.S. ownership
of, the non-U.S. holder are not satisfied. Such payments would include U.S.-source dividends and the gross proceeds from the sale
or other disposition of our ordinary shares that can produce U.S.-source dividends. Non-U.S. holders should consult their own
tax advisors regarding the effect, if any, of such withholding taxes on their ownership and disposition of our ordinary shares.
United
States Information Reporting and Backup Withholding
In
general, U.S. holders may be subject to certain information reporting requirements under the Code relating to their purchase and/or
ownership of stock of a foreign corporation such as the Company. Failure to comply with these information reporting requirements
may result in substantial penalties.
For
example, recently enacted legislation generally requires certain individuals who are U.S. holders to file Form 8938 to report
the ownership of specified foreign financial assets for tax years beginning after March 18, 2010 if the total value of those assets
exceeds an applicable threshold amount (subject to certain exceptions). For these purposes, a specified foreign financial asset
includes not only a financial account (as defined by the Code and applicable Treasury Regulations for these purposes) maintained
by a foreign financial institution, but also any stock or security issued by a non-U.S. person, any financial instrument or contract
held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity, provided
that the asset is not held in an account maintained by a financial institution. The minimum applicable threshold amount is generally
US$50,000 in the aggregate, but this threshold amount varies depending on whether the individual lives in the U.S., is married,
files a joint income tax return with his or her spouse, etc. Certain domestic entities that are U.S. holders may also be required
to file Form 8938 in the near future. U.S. holders are urged to consult with their tax advisors regarding their reporting obligations,
including the requirement to file IRS Form 8938.
Dividend
payments and proceeds from the sale or disposal of ordinary shares may be subject to information reporting to the IRS and possible
U.S. federal backup withholding at the rate of 31%. Certain holders (including, among others, corporations) are generally not
subject to information reporting and backup withholding. A U.S. holder generally will be subject to backup withholding if such
holder is not otherwise exempt and such holder:
fails
to furnish its taxpayer identification number, or TIN, which, for an individual, is ordinarily his or her social security number,
furnishes
an incorrect TIN,
is
notified by the IRS that it is subject to backup withholding because it has previously failed to properly report payments of interest
or dividends, or
fails
to certify, under penalties of perjury, that it has furnished a correct TIN and that the IRS has not notified the U.S. holder
that it is subject to backup withholding.
Any
U.S. holder who is required to establish exempt status generally must file IRS Form W-9 (“Request for Taxpayer Identification
Number and Certification”).
Amounts
withheld as backup withholding may be credited against a U.S. holder’s federal income tax liability. A U.S. holder may obtain
a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the
IRS and furnishing any required information.
THE
DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN OUR ORDINARY
SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
F.
DIVIDENDS AND PAYING AGENTS
–
Not applicable
G.
STATEMENT BY EXPERTS
–
Not applicable
H.
DOCUMENTS ON DISPLAY
All
documents referenced herein concerning us are archived at our principal offices located at:
1
Ha’Ofe St., Kadima-Tzoran, P.O. Box 5062, Israel, 6092000
I.
SUBSIDIARY INFORMATION
–
Not applicable
|
ITEM
11.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Market
risk represents the risk of changes in the value of a financial instrument caused by fluctuations in interest rates, equity prices
and foreign currency exchange rates.
Interest
Rate Risk
As
of December 31, 2015, we have not been involved in transaction of which we were required to pay interest. Hence there was no exposure
to interest rate risk.
Equity
Price Risk
As
of December 31, 2015, we did not have any marketable securities that were recorded at fair value. Hence there was no exposure
to equity price risk.
Foreign
Currency Exchange Risk
We
are exposed to financial market risk associated with changes in foreign currency exchange rates.
As
of December 31, 2015, we had immaterial amounts of restricted cash in New Israeli Shekels (NIS) or in funds linked thereto.
In
addition, most of our expenses are denominated in NIS. Market risk is estimated as the potential increase in fair value resulting
from a hypothetical 5% decrease in the year-end dollar exchange rate. We believe that such a decrease in the dollar exchange rate
in 2015 will not have a material effect on our expenses.
|
ITEM
12.
|
Description
of Securities Other Than Equity Securities
|
Not
applicable.
R.V.B.
HOLDINGS LTD.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
For
the year ended December 31,
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
Note
|
|
$
in thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses and facility
maintenance
|
|
|
|
|
-
|
|
|
|
264
|
|
|
|
2,068
|
|
|
Marketing expenses
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
251
|
|
|
Administrative and general expenses
|
|
|
|
|
166
|
|
|
|
483
|
|
|
|
956
|
|
|
Other expenses
|
|
|
|
|
-
|
|
|
|
884
|
|
|
|
12,415
|
|
|
Total expenses
|
|
|
|
|
166
|
|
|
|
1,631
|
|
|
|
15,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from ordinary
activities
|
|
|
|
|
166
|
|
|
|
1,631
|
|
|
|
15,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
expenses (income), net
|
|
|
|
|
60
|
|
|
|
(35
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
for the year
|
|
|
|
|
226
|
|
|
|
1,596
|
|
|
|
15,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss for the year
|
|
|
|
|
226
|
|
|
|
1,596
|
|
|
|
15,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and total comprehensive loss attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
|
|
201
|
|
|
|
1,316
|
|
|
|
12,583
|
|
|
Non-controlling
interests
|
|
|
|
|
25
|
|
|
|
280
|
|
|
|
3,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226
|
|
|
|
1,596
|
|
|
|
15,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share (in
$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per share
|
|
11
|
|
|
*(26.43
|
)
|
|
|
*(173.04
|
)
|
|
|
*(1,654.56
|
)
|
*
Adjusted to reflect impact of 30,465:1 reverse share split after the reporting period.
The
accompanying notes are an integral part of the consolidated financial statements.
R.V.B.
HOLDINGS LTD.
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
|
|
|
For
the year ended December 31, 2015
|
|
|
|
|
Share
capital
|
|
|
Premium
on shares
|
|
|
Capital
reserve in respect of share-based payments
|
|
|
Accumulated
losses
|
|
|
Attributable
to owners of the Company
|
|
|
Non-controlling
interests
|
|
|
Total
|
|
|
|
|
$
in thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2015
|
|
|
56,885
|
|
|
|
6,712
|
|
|
|
86
|
|
|
|
(64,609
|
)
|
|
|
(926
|
)
|
|
|
198
|
|
|
|
(728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(201
|
)
|
|
|
(201
|
)
|
|
|
(25
|
)
|
|
|
(226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(201
|
)
|
|
|
(201
|
)
|
|
|
(25
|
)
|
|
|
(226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2015
|
|
|
56,885
|
|
|
|
6,712
|
|
|
|
86
|
|
|
|
(64,810
|
)
|
|
|
(1,127
|
)
|
|
|
173
|
|
|
|
(954
|
)
|
The
accompanying notes are an integral part of the consolidated financial statements.
R.V.B.
HOLDINGS LTD.
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
|
|
|
For
the year ended December 31, 2014
|
|
|
|
|
Share
capital
|
|
|
Premium
on shares
|
|
|
Capital
reserve in respect of share-based payments
|
|
|
Accumulated
losses
|
|
|
Attributable
to owners of the Company
|
|
|
Non-controlling
interests
|
|
|
Total
|
|
|
|
|
$
in thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2014
|
|
|
56,885
|
|
|
|
6,661
|
|
|
|
76
|
|
|
|
(63,293
|
)
|
|
|
329
|
|
|
|
529
|
|
|
|
858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
payment
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
10
|
|
|
Change
in non-controlling interests in respect of change in holding in a subsidiary
|
|
|
-
|
|
|
|
51
|
|
|
|
-
|
|
|
|
-
|
|
|
|
51
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
51
|
|
|
|
10
|
|
|
|
-
|
|
|
|
61
|
|
|
|
(51
|
)
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,316
|
)
|
|
|
(1,316
|
)
|
|
|
(280
|
)
|
|
|
(1,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,316
|
)
|
|
|
(1,316
|
)
|
|
|
(280
|
)
|
|
|
(1,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2014
|
|
|
56,885
|
|
|
|
6,712
|
|
|
|
86
|
|
|
|
(64,609
|
)
|
|
|
(926
|
)
|
|
|
198
|
|
|
|
(728
|
)
|
The
accompanying notes are an integral part of the consolidated financial statements.
R.V.B.
HOLDINGS LTD.
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
|
|
|
For
the year ended December 31, 2013
|
|
|
|
|
Share
capital
|
|
|
Premium
on shares
|
|
|
Capital
reserve in respect of share-based payments
|
|
|
Accumulated
losses
|
|
|
Attributable
to owners of the Company
|
|
|
Non-controlling
interests
|
|
|
Total
|
|
|
|
|
$
in thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2013
|
|
|
56,885
|
|
|
|
6,874
|
|
|
|
64
|
|
|
|
(50,710
|
)
|
|
|
13,113
|
|
|
|
3,428
|
|
|
|
16,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
payment
|
|
|
-
|
|
|
|
-
|
|
|
|
12
|
|
|
|
-
|
|
|
|
12
|
|
|
|
-
|
|
|
|
12
|
|
|
Change
in non-controlling interests in respect of change in holding in a subsidiary
|
|
|
-
|
|
|
|
(213
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(213
|
)
|
|
|
213
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
(213
|
)
|
|
|
12
|
|
|
|
-
|
|
|
|
(201
|
)
|
|
|
213
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,583
|
)
|
|
|
(12,583
|
)
|
|
|
(3,112
|
)
|
|
|
(15,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,583
|
)
|
|
|
(12,583
|
)
|
|
|
(3,112
|
)
|
|
|
(15,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2013
|
|
|
56,885
|
|
|
|
6,661
|
|
|
|
76
|
|
|
|
(63,293
|
)
|
|
|
329
|
|
|
|
529
|
|
|
|
858
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
R.V.B.
HOLDINGS LTD.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
For
the year ended on December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
$
in thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activity
|
|
|
|
|
|
|
|
|
|
|
Loss for the year
|
|
|
(226
|
)
|
|
|
(1,596
|
)
|
|
|
(15,695
|
)
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
1,435
|
|
|
|
13,094
|
|
|
Interest accrued on loans and others,
net
|
|
|
75
|
|
|
|
64
|
|
|
|
(13
|
)
|
|
Share-based payments
|
|
|
-
|
|
|
|
10
|
|
|
|
12
|
|
|
|
|
|
75
|
|
|
|
1,509
|
|
|
|
13,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in accounts receivable
|
|
|
166
|
|
|
|
49
|
|
|
|
379
|
|
|
Decrease in accounts
payable and accruals
|
|
|
(131
|
)
|
|
|
(578
|
)
|
|
|
(83
|
)
|
|
|
|
|
35
|
|
|
|
(529
|
)
|
|
|
296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activity (*)
|
|
|
(116
|
)
|
|
|
(616
|
)
|
|
|
(2,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investment activity
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted bank
deposit
|
|
|
-
|
|
|
|
154
|
|
|
|
(11
|
)
|
|
Increase in restricted cash
|
|
|
(19
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Proceeds from sales of fixed assets
|
|
|
123
|
|
|
|
84
|
|
|
|
-
|
|
|
Investment in
fixed assets
|
|
|
-
|
|
|
|
-
|
|
|
|
(647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investment activity
|
|
|
104
|
|
|
|
238
|
|
|
|
(658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
shareholders loans
|
|
|
-
|
|
|
|
288
|
|
|
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activity
|
|
|
-
|
|
|
|
288
|
|
|
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash
and cash equivalents
|
|
|
(12
|
)
|
|
|
(90
|
)
|
|
|
(2,511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of cash
and cash equivalents at the start of the year
|
|
|
12
|
|
|
|
102
|
|
|
|
2,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
of cash and cash equivalents at end of the year
|
|
|
-
|
|
|
|
12
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
Including cash interest payments in the amount of
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
Including cash interest receipts in the amount of
|
|
|
-
|
|
|
|
2
|
|
|
|
20
|
|
The
accompanying notes are an integral part of the consolidated financial statements
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – GENERAL
|
|
a.
|
R.V.B.
Holdings Ltd. (formerly B.V.R Systems (1998) Ltd.) (the "Company") was incorporated
under the laws of the State of Israel in January 1998 under the name “
B.V.R.
Systems (1998) Ltd.
”. The Company underwent a corporate name change on January
12, 2010.
|
The
Company’s ordinary shares are traded in the United States on the OTC Market, Pink tier, under the symbol RVBHF.
On
April 2, 2015, following a creditor petition to the Tel Aviv District Court due to the financial and business condition of the
Company, the Court appointed a temporary liquidator for the Company.
On
February 2, 2016, the Tel-Aviv District Court approved a creditors arrangement for the sale of the Company, free of any assets
and liabilities (including the Company’s investment and ownership interest in E.E.R. Environmental Energy Resources (Israel)
Ltd.’s (“EER”)) to new shareholders. Upon the approval of the court the Company emerged from the liquidation
status through the issuance of ordinary shares, which represented 99.9% of the issued and outstanding share capital of the Company
(the “Issuance”) to the new shareholders in consideration of NIS 600,000 (approximately $153 thousands) that were
paid to the liquidator. The Company emerged from the liquidation free of any assets and liabilities, and any such assets and liabilities
were removed from its statement of financial position, with the net amount charged as a capital contribution by the new shareholders.
Pursuant
to the arrangement, the following was agreed and executed: (1) cancelling the nominal value of the Company’s shares, such
that the Company’s shares will not have any nominal value, (2) converting 71,923,175 non-tradable options to purchase ordinary
share of the Company into 71,923,175 ordinary shares, no par value of the Company, (3) implementing a reverse split of the Company’s
shares at a ratio of 30,465:1 (i.e., for each 30,465 shares of the Company, the shareholders of the Company will receive one (1)
share), and (4) increasing the registrar share capital of the Company to 700,000,000 ordinary shares of the Company with no nominal
value. The reverse split became effective on February 25, 2016. All share and per share data were retroactively adjusted to reflect
the reverse share split.
Upon
completion of the above, the Company issued to the purchasers of the Company 9,990,000 ordinary shares of the Company, which represented
99.9% of the issued and outstanding share capital of the Company.
See
additional disclosure relating to subsequent events in Note 12.
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – GENERAL (continued):
|
|
The
Company
|
-
|
R.V.B.
Holdings Ltd.
|
|
|
The
Group
|
-
|
The
Company and its Subsidiary (as defined below)
|
|
|
Subsidiary
|
-
|
A
company in which the Company is exposed, or has rights to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee, and its financial statements are consolidated with
those of the Company.
|
|
|
Related
parties
|
-
|
As
defined in IAS 24.
|
|
|
Greenstone
|
|
Greenstone
Industries Ltd., a significant shareholder until the appointment of a temporary liquidator to the Company.
|
|
|
CPI
|
-
|
The
Consumer Price Index, as published by the Central Bureau of Statistics.
|
|
|
Dollar
|
-
|
A
United States dollar
|
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
|
|
a.
|
Statement
of compliance
|
These
consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standard Board (IASB).
|
|
b.
|
Basis
for the preparation of the financial statements:
|
The
consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial
instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost
is generally based on the fair value of the consideration given in exchange for assets.
The
principal accounting policies are set out below.
|
|
(1)
|
Functional
currency and operating currency:
|
The
currency of the main economic environment in which the Group operates is the US dollar (hereinafter – "the functional
currency").
|
|
(2)
|
Translation
of transactions that are not in the functional currency
|
In
the preparation of the financial statements, transactions carried out in currencies other than the Company's functional currency
(hereinafter – "foreign currency") are recorded at the exchange rates in effect on the dates of the transaction.
At each reporting period, monetary items stated in foreign currency are translated according to the exchange rates in effect at
that date; non-monetary items that are measured in terms of historical cost are translated according to the exchange rates in
effect at the time of the transaction in connection with the non-monetary item.
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
|
|
(3)
|
The
method of recording exchange rate differences
|
Exchange
rate differences (primarily in respect of monetary balances that are not in the functional currency) are recognized in the income
statement in the period in which they occurred.
|
|
d.
|
Cash
and cash equivalents
|
Cash
and cash equivalents include all highly liquid investments, which include short-term bank deposits (up to three months from date
of deposit) that are not restricted as to withdrawal or use and the period to maturity of which did not exceed three months at
time of investment.
|
|
e.
|
Consolidated
financial statements
|
The
consolidated financial statements incorporate the financial statements of the Company and entity controlled by the Company (its
subsidiary).
Control
is achieved when the Company:
|
|
●
|
has
power over the investee;
|
|
|
●
|
is
exposed, or has rights, to variable returns from its involvement with the investee; and
|
|
|
●
|
has
the ability to use its power to affect its returns.
|
Income
and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive
income from the effective date of acquisition and up to the effective date of disposal, as appropriate.
When
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with
those used by the other members of the Group.
All
intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
|
|
(2)
|
Non-controlling
interest
|
Total
comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this
results in the non-controlling interests having a deficit balance.
Changes
in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted
for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect
the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners
of the Company.
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
|
|
f.
|
Non-current
assets held for sale:
|
Non-current
assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available
for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal
group) and its sale is highly probable.
Management
must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the
date of classification.
Non-current
assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair
value less selling costs.
|
|
g.
|
Financial
liabilities and equity instruments issued by the Company:
|
|
|
(1)
|
Classification
as a financial liability or an equity instrument
|
Non-derivative
financial instruments are classified as either financial liabilities or as equity instruments in accordance with the substance
of the contractual arrangement.
An
equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of direct issuing costs.
Financial
liabilities of the Company are measured in accordance with their classification as other financial liabilities, at amortized cost
(not at fair value through profit and loss).
|
|
(2)
|
Other
financial liabilities
|
Other
financial liabilities (credit, loans, and accounts payable) are initially measured at fair value, net of transaction costs. The
value of these financial liabilities is not materially different than their fair value.
|
|
h.
|
Leasing
of real estate by the Company
|
Payments
made under operating leases were recognized in the statement of income on a straight-line basis over the term of the lease.
A
provision is recognized if, as a result of a past event, the group has a present legal or constructive obligation, and it is probable
that an outflow of economic benefits, which can be estimated reliably, will be used to settle the obligation.
The
amount recognized as a provision, reflects management's best estimate of the amount required in order to settle the obligation
on the balance sheet date, whilst taking into account the risks and uncertainties connected with the obligation. When the provision
is measured using the forecasted cash flows in order to settle the liability, the book value of the provision is the current value
of the forecasted cash flows.
Share-based
payments to employees and others that provide similar services, which are settled in equity instruments of the Group, are measured
at fair value on the grant date. On the grant date, the Company measures the fair value of the granted equity instruments by using
the Black and Scholes model.
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
If
the equity instruments granted to them have not vested until these employees have completed a defined period of service, have
met performance conditions or defined market conditions are met, the Company recognizes the share-based payment transactions in
its financial statements over the vesting period against an increase in its shareholders' equity, under "Capital reserve
in respect of share-based payment". At each balance sheet date, the Company estimates the number of equity instruments that
are expected to vest. Any change in the estimate relative to previous periods is recognized in the income statement over the remaining
vesting period.
In
view of losses for tax purposes accrued by the Company and given the fact that as of the reporting date there was no certainty
as to the realization of these losses in the foreseeable future, the Company does not recognize deferred taxes in respect of carry-forward
losses and in respect of temporary differences in the value of certain revenues and expenses, between the financial reporting
and the reporting for tax purposes.
|
|
(1)
|
Post-employment
benefits
|
The
Company has defined contribution plans in accordance with Section 14 of the Israeli Severance Pay Law. In respect of these plans,
the actuarial and economic risks are not imposed on the Company. In said plans, during the employment period, an entity makes
fixed payments to a separate entity without having a legal or constructive obligation to make additional payments if the fund
has not accumulated sufficient amounts. Deposits with the defined contribution plan are included as an expense at the date of
the deposit, parallel to receiving services from the employee. The Company makes deposits with pension funds and insurance companies
in respect of its liabilities to pay severance pay to some of its employees on a current basis.
|
|
(2)
|
Short-term
employee benefits
|
Short-term
employee benefits include wages, vacation days, sick leave, recreation and deposits with the National Insurance Institute, which
are paid within one year of the period in which the employee provides the related service. These benefits are recognized as an
expense upon the provision of services.
The
Company presents basic and diluted loss per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share
options granted to employees and others (See Note 11).
|
|
n.
|
Exchange
rates and linkage basis:
|
|
|
(1)
|
Balances
in or linked to foreign currency are presented according to the representative exchange
rate published by the Bank of Israel at the balance sheet date.
|
|
|
(2)
|
Balances
linked to the CPI are presented according to the CPI for the last month of the reporting
period.
|
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
|
|
(3)
|
Data
in respect of changes in the CPI and the dollar's exchange rate are as presented as follows:
|
|
|
|
|
The
dollar
|
|
|
CPI
in Israel
|
|
|
|
|
|
Exchange
rate
|
|
|
Actual
CPI
|
|
|
Known
CPI
|
|
|
|
|
|
(NIS
to 1 $)
|
|
|
Points
|
|
|
Points
|
|
|
|
Date of the financial
statements
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
3.902
|
|
|
|
112.9
|
|
|
|
112.8
|
|
|
|
As of December 31, 2014
|
|
|
3.889
|
|
|
|
114.0
|
|
|
|
114.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate
of change
|
|
|
Change
in %
|
|
|
|
For the year ended December 31, 2015
|
|
|
0.33
|
|
|
|
(1.0
|
)
|
|
|
(1.1
|
)
|
|
|
For the year ended December 31, 2014
|
|
|
12.04
|
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
|
|
For the year ended December 31, 2013
|
|
|
(7.02
|
)
|
|
|
1.8
|
|
|
|
1.9
|
|
NOTE
3 – SUBSIDIARY
EER
was incorporated in Israel on May 21, 2000, as a private company limited by shares. EER owns know-how and rights in the field
of solid waste treatment through the use of Plasma-Gasification-Melting (PGM) technology (the “PGM Technology” or
the “Technology”).
In
early 2007, EER completed the construction of a facility in Yblin, Israel (containing systems similar to those found in a commercial
facility) to make use of the Technology for the treatment of municipal waste (the "Yblin Facility"). The Yblin Facility,
according to its permit, could have been operated only few times a year. Over the years 2007-2009, several demonstrations were
held using the Yblin Facility.
During
June 2013, EER also conducted an additional trial operation of the Ybllin Facility that included, among others, a test of the
capabilities of new improvements that were implemented in Yblin Facility.
On
July 29, 2013 the board of directors of the Company has decided to cease the operation of the demonstration facility in Ybllin
owned by EER. and to implement a significant cost reduction plan in the Company and in EER. Following the aforementioned decision,
on October 31, 2013, the Board decided to act to dismantle the facility and to sell the systems and equipment. Regarding an agreement,
signed on February 11, 2015, whereby the parties have agreed to terminate the lease agreement, and on the evacuation of EER from
the property and the sale of most of assets by EER, see 9a(1) below.
NOTE
4 – ASSETS AND LIABILITIES OF A SUBSIDIARY HELD FOR SALE:
|
|
a.
|
EER
assets and liabilities are presented as held for sale following the decision of the temporary
liquidator to sell EER’s assets as part of the liquidation process. At December
31, 2015 the disposal group comprised of liabilities only, in the total amount of $159
thousand, which comprises of accrued management fees to a related party in the amount
of $138 thousand, trade payables in the amount of $7 thousand and liabilities to employees
and institutions in respect of payroll in the amount of $14 thousand.
|
|
|
b.
|
The
Company does not have any income and expenses that were recognized directly in other
comprehensive income and relate to non-current assets and disposal groups held for sale.
|
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5 – LINE OF CREDIT FROM A RELATED PARTY:
In
October and January 2014, RVB and Greenstone entered into two credit line agreements of up to NIS 1 million each. The term of
each of such credit line was six months and the outstanding principal amount under these credit lines originally was not bearing
any interest and was linked to the changes in the CPI. In the annual meeting of the shareholders of the Company held on May 14,
2014, the shareholders approved an additional credit line from Greenstone in the amount of up to NIS 600,000. Any outstanding
balance under this credit line will bear an annual interest of 10%. In addition, the shareholders approved that the term of the
previous loans received from Greenstone in the aggregate principal amount of NIS 2 million shall be extended and such loans shall
be subject to similar terms as the new credit line, as of the date of the shareholders' approval.
As
of December 31, 2015 the Company received a total amount of NIS 2.6 million (approximately $669 thousand) and the balance including
interest is approximately NIS 3 million (approximately $772 thousand). See note 1 regarding the Company emerging from the liquidation
status subsequent to the reporting date free of any liabilities.
NOTE
6 – ACCOUNTS PAYABLE AND ACCRUALS:
Composed
as follows:
|
|
|
|
As
of December 31,
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
$
in thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutions, net
|
|
|
-
|
|
|
|
10
|
|
|
|
Trade payables
|
|
|
43
|
|
|
|
43
|
|
|
|
Accrued expenses
|
|
|
-
|
|
|
|
82
|
|
|
|
Employees and
institutions in respect of payroll (*)
|
|
|
-
|
|
|
|
44
|
|
|
|
|
|
|
43
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) See also note 7.
|
NOTE
7 – POST- EMPLOYMENT BENEFITS
Plans
in respect of severance pay
The
Severance Pay Law in Israel requires the Company and its subsidiaries to pay severance pay upon dismissal of an employee or upon
termination of employment in other certain circumstances. In principle, the Severance Pay Law in Israel stipulates that the severance
pay amount equals the employee's last salary multiplied by the amount of years in which the employee was employed.
The
Group applies Section 14 of the Israeli Severance Pay Act of, 1963
,
to most of its employees pursuant to which it is exempt
from any severance pay liability, subject to it making certain monthly allocations to employees' pension plans. The Group will
not have a legal or constructive obligation to make additional payments if the plan does not have sufficient assets to pay the
entire employee benefits relating to the employee's service during the current period and in previous periods.
NOTE
8 – INCOME TAX
|
|
a.
|
Taxable
income of Israeli companies is subject to tax at the rate of 25% in 2013, and 26.5% in
2014 and 2015. In January 2016, the regular tax rate in Israel was reduced to 25% as
from 2016.
|
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
8 – INCOME TAX (continued):
On
December 22, 2016, the Israeli Parliament's Plenum approved by a second and third reading the Economic Efficiency Law (Legislative
Adjustments for Achieving Budget Objectives in the years 2017 and 2018) - 2016, by which, inter alia, the corporate tax rate would
be reduced from 25% to 23% in two steps. The first step will be to a rate of 24% as from January 2017 and the second step will
be to a rate of 23% as from January 2018.
|
|
b.
|
The
Company received final tax assessments (including assessments considered as final) through
to the tax year 2011.
|
|
|
c.
|
As
at December 31, 2015 the Company has carried forward tax losses in the amount of approximately
NIS 116 million (approximately $30 million).
|
|
|
d.
|
In
view of the losses for tax purposes and since the Company does not anticipate any taxable
income in the foreseeable future, the Company has not recorded deferred tax assets in
respect of carry forward losses.
|
NOTE
9 – COMMITMENTS AND CONTINGENT LIABILITIES
|
|
(1)
|
Lease
agreement of EER
|
On
February 11, 2015, EER entered into an agreement to terminate a then existing lease agreement. Under the Agreement, the parties
have agreed to terminate the lease, and on the evacuation of EER from the property and the sale of certain assets by EER to the
lessor for $ 123 thousand plus VAT in several installments. Additionally, the lessor has agreed to terminate EER’s bank
guarantee commitment of $ 128 thousand.
|
|
(2)
|
Management service
agreements
|
According
to a management service agreement between EER and one of the Company’s main shareholder’s, this main shareholder undertook
to provide EER with management services, office services, accounting services and office rental in accordance with EER needs.
In consideration for such services, EER undertook the payment of approximately NIS 25,000. The agreement was terminated during
2015.
As
at December 31, 2015 the accrued unpaid management fee was approximately $138 thousand to that shareholder. See note 1 regarding
the Company emerging from the liquidation status subsequent to the reporting date free of any liabilities.
|
|
b.
|
Contingent
liabilities:
|
|
|
(1)
|
During
2004 the Israeli Office of the Chief Scientist (the "OCS") approved EER's application
to obtain financial assistance for conducting research and development in connection
with EER's products. The approval was contingent on the Company's compliance with the
provisions of the Israeli Law of Encouragement of Research and Development in Industry,
1984, and on fulfillment of the terms of the approval that include,
inter alia
,
the payment of royalties in respect of revenues from products developed with the assistance
of the OCS.
|
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
9 – COMMITMENTS AND CONTINGENT LIABILITIES (continued):
As
of the balance sheet date, EER has received grants in the amount of NIS 1.7 million, the liability in respect thereof was recorded
in full in accordance with IAS 20 (before its amendment in 2008).
In
August 2010 EER paid royalties of NIS 169 thousand to the OCS. In February 2012 and January 2013 EER paid additional royalties
of NIS 17 thousand to the OCS.
In
light of the financial situation of the Company as mentioned in note 1a above, the Company recorded, during the year of 2013,
a profit in the amount of approximately $429 thousand for canceling the remaining obligations for royalties' payments to the OCS,
in light of the fact that the Company doesn't anticipate revenues from products developed with the assistance of the OCS.
On
December 31,2014 a shareholder filed a preliminary motion regarding the disclosure of documents before filing a motion to permit
him to file a derivative action against the Company.
On
May 13, 2015 following a petition of the Temporary Liquidator, the Tel Aviv District Court, Economic Division, ordered a stay
for such proceeding due to the appointment of a Temporary Liquidator and instructed the court clerk to close the file. As of the
date of this report, there have no developments in this matter.
NOTE
10 – SHAREHOLDERS' EQUITY
|
|
a.
|
As
discussed in Note 1, In February 2, 2016, the Company:
|
|
|
(1)
|
canceled
the nominal value of the Company’s shares, such that the Company’s shares
will not have any nominal value,
|
|
|
(2)
|
convert
71,923,175 non-tradable options to purchase ordinary share of the Company into 71,923,175
ordinary shares of the Company,
|
|
|
(3)
|
conduct
a reverse split of the Company’s shares at a ratio of 30,465:1 (i.e., for each
30,465 shares of the Company, the shareholders of the Company will receive one (1) share),
which reverse split became effective on February 25, 2016 and
|
|
|
(4)
|
increase the share
capital of the Company to 700,000,000 ordinary shares of the Company with no par value.
|
|
|
b.
|
The
authorized ordinary shares of the Company as of December 31, 2015 and 2014 was 13,130
shares.
|
The
issued and outstanding ordinary shares of the Company as of December 31, 2015 and 2014 was 7,639 shares.
The
holders of ordinary shares are entitled to receive dividends and are entitled to one vote per share at general meetings of the
Company.
|
|
c.
|
Share-based
compensation
|
|
|
1.
|
The
following note was not adjusted according to the reverse split of the Company’s
shares discussed above.
|
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
10 – SHAREHOLDERS' EQUITY (continued):
|
|
2.
|
On
June 29, 2011, the Company's board of directors approved a share options plan (the "2011
Plan"). Under the 2011 Plan, the Company granted, during 2012, options to employees.
|
|
|
3.
|
On
August 22, 2011, the Company's shareholders approved (following the approval of the Company's
audit committee and board of directors), among others: (i) the grant to each of the Company's
directors, Gedaliah Shelef, Alicia Rotbard and Jonathan Regev, options to purchase 900,000
ordinary shares of the Company, with an exercise price of US$0.2145 per share (adjusted
for future dividend).
|
The
options were granted under the 2011 Plan; and (ii) the grant to Yair Fudim, of options to purchase shares of the Company representing,
on a fully diluted basis, approximately 0.3% of the Company's issued and outstanding share capital as of the date of the grant
(actually 861,445 were granted), with an exercise price of US$ 0.2145 per share (adjusted for future dividend). The options shall
become vested and exercisable, in accordance with the Vesting Schedule. The options described in this paragraph were granted in
January 2012.
The
parameters used in the calculation of the fair value of the options described above, are a share price of $0.09 (regarding Yair
Fudim) and 0.04$ (regarding the other directors), an exercise price of US$0.2145 per share, the expected volatility of companies
operating in this field - 32%, the life of the option – 5 years and a risk-free interest of 1%. The fair value of these
options is immaterial.
|
|
4.
|
All
the above mentioned options were transferred to the temporary liquidator as part of the
liquidation. In February 2016, the options were canceled as part of the sale of the company
to the new shareholders as described in note 1a above.
|
NOTE
11 – LOSS PER ORDINARY SHARE
The
following table summarizes information related to the computation of basic and diluted loss per Ordinary Share for the years indicated:
|
|
|
|
Year
ended December 31,
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
$
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
attributable to ordinary shares
|
|
|
(201
|
)
|
|
|
(1,316
|
)
|
|
|
(12,583
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of ordinary shares used in basic and diluted loss per Ordinary Share calculation
|
|
|
*7,605
|
|
|
|
*7,605
|
|
|
|
*7,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per ordinary share
|
|
|
*(26.43
|
)
|
|
|
*(173.04
|
)
|
|
|
*(1654.56
|
)
|
*
Adjusted to reflect impact of 30,465:1 reverse share split after the reporting period.
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
12 – SUBSEQUENT EVENTS
|
|
a.
|
On
May 15, 2016, the Company established a new, wholly-owned Israeli subsidiary company
under the name “EViation Tech Ltd.” (“the subsidiary”) for the
purpose of developing and commercializing electric propulsion aviation, the Company's
new business focus (the “Aviation Business”).
|
|
|
b.
|
On
July 17, 2016, the Company entered a loan and security agreement with two of its shareholders
Aviv Tzidon and Magic Stones - Gemstone Import and Marketing Ltd. (hereinafter “Aviv”
and “Magic Stones”) pursuant to which they loaned a total of $500,000 to
the Company for a period of seven years. As security for such loan, the Company granted
to Aviv and Magic Stones a specific lien and security interest on all of the shares of
the subsidiary held by the Company. The proceeds of the loan are to be used for funding
the on-going operations of the Company.
|
Additionally,
on the same date the subsidiary entered a loan and security agreement with the same shareholders pursuant to which they granted
the subsidiary a credit facility of up to $4,500,000 for a period of seven years. As security for amounts owing under the credit
facility, the subsidiary granted to the these shareholders a floating lien and charge on all of the assets of the subsidiary,
and a specific charge on all of the intellectual property rights owned or hereafter acquired by the subsidiary.
Both
loans accrue interest at an annual interest rate equal to the lower of 3.2% per annum, and the minimum rate required by the Israeli
tax law to avoid the imputing of tax (currently 3.2%). Accrued interest is payable annually.
An
event of default on any one of the loans made to the Company and the credit facility granted to the Subsidiary will trigger an
event of default under the other of such loan and credit facility.
|
|
c.
|
On
July 17, 2016, the Company's board of directors (the “Board”) approved the
acquisition, assumption and acceptance by the subsidiary of all of the assets acquired
and obligations created by Aviv and Magic Stones on behalf of the subsidiary, and the
transfer to the subsidiary of all of the contracts, licenses, material goods, intellectual
property and expertise that had been acquired by the two shareholders for and on behalf
of the subsidiary prior to such date. The transfer to the subsidiary of all of aforesaid
assets was made at their deemed acquisition cost of approximately $1.4 million representing
arm's length price, pursuant to an Assignment and Assumption Agreement between each of
the shareholders and the subsidiary (the “Assignment and Assumption Agreement”).
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The
cost of the acquisition was deemed borrowed by the subsidiary under the loan and security agreement. The payment of $1.4 million
includes among others partial payments made in respect of the following assigned contracts:
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On
September 1, 2015, Aviv Tzidon entered on behalf of the subsidiary into a license and
service agreement with Mr. John McGinnis, on behalf of himself and on behalf of his companies
(collectively, “McGinnis”), for a worldwide exclusive license to a patent
and know-how necessary for the completion and utilization of a flying electric Double
Boxtail aircraft for use solely in the field of electric powered aircraft. The license
will automatically become non-exclusive after three years from the termination of the
agreement. Pursuant to the terms of the agreement, the subsidiary agreed to pay US $300,000
for the development and production of four flying, unmanned, scaled demonstrators and
US $500,000 for the development and production of a full scale electric synergy prime
aircraft.
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According
to the terms of the agreement, the subsidiary will not be the owners of the physical embodiment of the full scale electric Synergy
prime aircraft or its intellectual property.
R.V.B.
HOLDINGS LTD.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
12 – SUBSEQUENT EVENTS (continued):
In
addition, the subsidiary will pay an aggregate of $2,000,000 over the next four years subject to development milestones agreed
with McGinnis as stipulated in the agreement.
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On
November 30, 2015, Aviv Tzidon and Mr. Michael Ilan (beneficial owner of Magic Stones)
entered on behalf of the subsidiary into an administrative services agreement with Phinergy
Ltd., a company also controlled by them. In consideration for these services, the subsidiary
will pay a monthly fee that will be calculated based on the actual cost to Phinergy.
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On
February 5, 2016, the subsidiary (as an entity in formation) entered a “Memorandum
of Understandings” with Laminar Research LLC (Laminar MOU") for the development
of an air traffic control algorithm and its implementation on subscale aircraft models.
The Laminar MOU comprises several steps of development by Laminar, for a total payment
by the subsidiary of $180,000. The subsidiary receives an irrevocable, royalty-free license
for a limited number of copies of the finished software products.
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d.
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On
July 17, 2016, the board of directors approved the adoption of the "2016 Equity
Incentive Plan" ("Incentive Plan") and approve to reserve 1,000,000 ordinary
shares (no par value) for issuance to employees, officers, directors, consultants and
certain other service providers of the Company and Company's affiliates. In October 15,
2016, the Company granted options to purchase 37,500 ordinary shares of the Company to
each of the Company's director at an exercise price of $1.00 per share. The options shall
vest in four annual installments as follows: 10,000 options on each of the first, second
and third anniversaries of the grant date and 7,500 on the fourth anniversary of the
grant date, so that four (4) years following the vesting commencement date, all options
will be fully vested and exercisable, subject to option holder’s continuing to
be a director of the Company or any affiliate thereof through such dates. Notwithstanding
the above, the vesting of the options may accelerate so that all shares subject to the
option will be fully vested and exercisable immediately prior to the occurrence of any
of the following corporate transaction: (i) A merger, acquisition, reorganization or
consolidation in which the Company is not the surviving entity; (ii) The sale, transfer,
exchange or other disposition of all or substantially all of the shares or assets of
the Company.
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e.
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On
December 18, 2016, the subsidiary signed a Support and Investment Agreement with the
Office of the Chief Scientist of the Ministry of National Infrastructures, Energy, Water
and Resources of Israel under the pilot and demonstration project. Under the agreement,
the Company will develop passenger's electric aircraft. The plan will be performed during
24 months commencing on January 1, 2017. The subsidiary is entitled to receive up to
50% of the actual costs and up to NIS 3 million (approximately $780 thousand). As a security,
the subsidiary provided a bank guarantee in the amount of NIS 225 thousand that will
be effective until 3 months after the end of the project. The subsidiary is expected
to record a lien on a bank deposit in the same amount in favor of the bank providing
the guarantee. According to the agreement, the subsidiary will be required to pay royalties
in an amount of 5% on sales of products and services derived from a technology developed
using these grants until 100% of the CPI-linked grant plus an interest rate determined
by the general accountant at the Israeli Ministry of Finance office is repaid.
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