Filed
Pursuant to Rule 424(b)(5)
Registration No. 333-226845
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated August 21, 2018)
4,545,454
Ordinary Shares
We
are offering 4,545,454 of our ordinary shares, NIS 0.03 nominal value per share, or the Shares, to the Israeli institutional investors,
or the Investors, listed under “Plan of Distribution” herein, at a price of $2.75 per Share, pursuant to this prospectus
supplement and the accompanying prospectus and an Order Form, or the Agreement, entered into with each of the Investors. The Form
of the Agreement was filed as an exhibit to a report on Form 6-K on November 28, 2018.
The
aggregate market value of our ordinary shares held by non-affiliates pursuant to General Instruction I.B.5 of Form F-3 is $ 69,512,428
which was calculated based on 23,969,803 of our ordinary shares outstanding and held by non-affiliates as of the date of this
prospectus supplement and a price of $2.90 per share, the closing price of our common shares on November 27, 2018. As a result,
we are currently eligible to offer and sell up to an aggregate of $ 23,170,809 of our ordinary shares pursuant to General Instruction
I.B.5 of Form F-3.
Our
Ordinary Shares are listed on the Nasdaq Capital Market under the symbol “RADA.” On November 27, 2018, the last reported
sale price of our ordinary shares was $2.90 per share.
We
will receive an aggregate of $12,499,998.50 in proceeds from this offering, before expenses.
INVESTING
IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING ON PAGE S-4 AND UNDER SIMILAR HEADINGS
IN THE OTHER DOCUMENTS THAT ARE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
NONE
OF THE U.S. SECURITIES AND EXCHANGE COMMISSION, THE ISRAELI SECURITIES AUTHORITY NOR ANY STATE SECURITIES COMMISSION HAVE APPROVED
OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
We
expect that the Shares offered hereby will be issued to the Investors in book-entry form on or about November 28, 2018.
The
date of this prospectus supplement is November 28, 2018.
TABLE
OF CONTENTS
PROSPECTUS SUPPLEMENT
BASE
PROSPECTUS
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement and the accompanying prospectus dated August 21, 2018 are part of a registration statement that we filed
with the Securities and Exchange Commission, or SEC, utilizing a “shelf” registration process. This prospectus supplement
and the accompanying prospectus relate to the offer by us of our ordinary shares to certain investors. We provide information
to you about this offering of our ordinary shares in two separate documents that are bound together: (1) this prospectus supplement,
which describes the specific details regarding this offering; and (2) the accompanying prospectus, which provides general information,
some of which may not apply to this offering. Generally, when we refer to this “prospectus,” we are referring to both
documents combined. If information in this prospectus supplement is inconsistent with the accompanying prospectus, you should
rely on this prospectus supplement. However, if any statement in one of these documents is inconsistent with a statement in another
document having a later date—for example, a document incorporated by reference in this prospectus supplement or the accompanying
prospectus—the statement in the document having the later date modifies or supersedes the earlier statement as our business,
financial condition, results of operations and prospects may have changed since the earlier dates. You should read this prospectus
supplement, the accompanying prospectus and the documents and information incorporated by reference in this prospectus supplement
and the accompanying prospectus when making your investment decision. You should also read and consider the information in the
documents we have referred you to under the headings “Where You Can Find More Information” and “Information
Incorporated by Reference.”
You
should rely only on information contained in or incorporated by reference into this prospectus supplement and the accompanying
prospectus. We have not, and the placement agent has not, authorized anyone to provide you with information that is different.
We are offering to sell and seeking offers to buy our ordinary shares only in jurisdictions where offers and sales are permitted.
The information contained in this prospectus supplement, the accompanying prospectus and the documents and information incorporated
by reference in this prospectus supplement and the accompanying prospectus are accurate only as of their respective dates, regardless
of the time of delivery of this prospectus supplement or of any sale of our ordinary shares.
Unless
we have indicated otherwise or the context otherwise requires, references in this prospectus and any supplement to this prospectus
to “the Company,” “RADA,” “we,” “us” and “our” refer to RADA Electronic
Industries Ltd., a company organized under the laws of the State of Israel, and its wholly owned subsidiaries. All references
in this prospectus to “dollars” or “$” are to United States dollars, and all references to “Shekels”
or “NIS” are to New Israeli Shekels.
FORWARD-LOOKING
STATEMENTS
This
prospectus supplement, the accompanying prospectus and the documents incorporated in it by reference contain forward-looking statements
which involve known and unknown risks and uncertainties. We include this notice for the express purpose of permitting us to obtain
the protections of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to all such forward-looking
statements. Examples of forward-looking statements include: projections of capital expenditures, competitive pressures, revenues,
growth prospects, product development, financial resources and other financial matters. You can identify these and other forward-looking
statements by the use of words such as “may,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “intends,” “potential” or the negative of such terms,
or other comparable terminology.
Our
ability to predict the results of our operations or the effects of various events on our operating results is inherently uncertain.
Therefore, we caution you to consider carefully the matters described under the caption “Risk Factors” and certain
other matters discussed in this prospectus supplement, the accompanying prospectus, the documents incorporated by reference in
the accompanying prospectus, and other publicly available sources. Such factors and many other factors beyond the control of our
management could cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements that may be expressed or implied by the forward-looking statements.
PROSPECTUS
SUPPLEMENT SUMMARY
This
summary highlights selected information contained elsewhere or incorporated by reference in this prospectus supplement and the
accompanying prospectus. The summary may not contain all the information that you should consider before investing in our ordinary
shares. You should read the entire prospectus supplement and the accompanying prospectus carefully, including “Risk Factors”
contained in this prospectus supplement and the accompanying prospectus and the documents incorporated by reference in the accompanying
prospectus, before making an investment decision. This prospectus supplement may add to, update or change information in the accompanying
prospectus.
RADA
Electronic Industries Ltd.
We
are an Israel-based defense electronics contractor We develop, manufacture and sell defense electronics, including avionics solutions
(including avionics for unmanned aerial vehicles), airborne data/video recording and management systems, tactical land-based radars
for defense forces and border protection systems, and inertial navigation systems. While we continue to sell and support our commercial
aviation products and services, in 2016 we decided to actively pursue the sale of our Chinese subsidiary, Beijing Hua Rui Aircraft
Maintenance and Service, Co., Ltd., known as CACS which is the main platform for our test and repair shop activity.
Corporate
Information
We
were incorporated under the laws of the State of Israel on December 8, 1970. We are a public limited liability company under the
Israeli Companies Law 1999-5759, or the Israeli Companies Law, and operate under this law and associated legislation. Our registered
offices and principal place of business are located at 7 Giborei Israel Street, Netanya 4250407, Israel, and our telephone number
is +972-9-892-1111. Our website address is
www.rada.com
. The information on our website is not incorporated by reference
into this prospectus supplement.
The
Offering
Ordinary
shares offered
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|
4,545,454
|
Offering
price
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$2.75
per share
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|
|
|
Ordinary
shares to be outstanding immediately after the offering
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|
37,516,892
|
|
|
|
Use
of proceeds
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|
We
intend to use the net proceeds from this offering for working capital and other general corporate purposes.
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|
|
|
NASDAQ
Capital Market symbol
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|
“RADA”
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Risk
factors
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|
Investing
in our securities involves a high degree of risk. You should read the “Risk Factors” section of this prospectus
supplement and in the documents incorporated by reference in this prospectus supplement for a discussion of factors to consider
before deciding to invest in our ordinary shares.
|
RISK
FACTORS
Investing
in our securities involves significant risks. Please see the risk factors under the heading “Risk Factors” in our
most recent Annual Report on Form 20-F on file with the SEC, as revised or supplemented by our reports subsequently filed after
the date hereof with the SEC and incorporated by reference in this prospectus supplement. Before making an investment decision,
you should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus
supplement. The risks and uncertainties we have described are not the only ones facing our company. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial may also affect our business operations. The occurrence of any
of these risks might cause you to lose all or part of your investment in the offered securities. The discussion of risks includes
or refers to forward-looking statements; you should read the explanation of the qualifications and limitations on such forward-looking
statements discussed elsewhere in this prospectus supplement.
Risks
Related to the Offering
We
will have broad discretion in how we use the proceeds; we may use the proceeds in ways with which you and other shareholders may
disagree.
We
intend to use the net proceeds from this offering for working capital and other general corporation purposes. Our management will
have broad discretion in the application of the proceeds from this offering and could spend the proceeds in ways that do not necessarily
improve our operating results or enhance the value of our ordinary shares.
If
you purchase ordinary shares sold in this offering, you will experience immediate and substantial dilution in the net tangible
book value of your shares. In addition, we may issue additional equity or convertible debt securities in the future, which may
result in additional dilution to investors.
The
offering price per ordinary share in this offering is considerably more than the net tangible book value per share of our outstanding
ordinary shares. As a result, investors purchasing ordinary shares in this offering will pay a price per share that substantially
exceeds the value of our tangible assets after subtracting liabilities. Investors will incur immediate dilution of $1.62 per share,
based on the public offering price of $2.75 per share and our net tangible book value as of June 30, 2018. For a more detailed
discussion of the foregoing, see the section entitled “Dilution” below. To the extent outstanding options or warrants
are exercised, there will be further dilution to new investors. Furthermore, to the extent we need to raise additional capital
in the future and we issue additional equity or convertible debt securities, our then existing shareholders may experience dilution
and the new securities may have rights senior to those of our ordinary shares offered in this offering.
USE
OF PROCEEDS
We
estimate that the net proceeds from the sale of Shares, after deducting fees and expenses, including a $250,000 finder’s
fee payable to an Israeli broker, will be approximately $12.5 million.
We
intend to use the net proceeds from this offering for working capital and other general corporate purposes. As a result, our management
will have broad discretion to allocate the net proceeds from this offering. Pending application of the net proceeds as described
above, we intend to invest the net proceeds to us from this offering in a variety of capital preservation investments, including
short-term, investment-grade and interest-bearing instruments.
EXPENSES
The
following are the estimated expenses of the issuance and distribution of the Shares being registered under the registration statement
of which this prospectus supplement forms a part, all of which will be paid by us.
SEC registration fee
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$
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*
|
Legal fees and expenses
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$
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20,000.00
|
|
Total
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$
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20,000.00
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|
*
Previously paid
DILUTION
If
you invest in our ordinary shares in this offering, your interest will be diluted to the extent of the difference between the
public offering price per share and the net tangible book value per share after this offering. As of November 27, 2018, we had
32,971,437 ordinary shares outstanding. As of September 30, 2018, our net tangible book was $30.3 million, or $0.92 per share,
based on the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of
our ordinary shares outstanding as of such date. After giving effect to our sale in this offering of 4,545,454 ordinary shares
at the offering price of $2.75 per share, and after estimated offering costs payable by us, our net tangible book value as of
September 30, 2018 would have been $20.7 million, or $1.13 per share. This represents an immediate increase of net tangible book
value of $0.21 per share to our existing shareholders and an immediate dilution of $1.62 per share to investors purchasing shares
in this offering. The following table illustrates this per share dilution.
Offering price per share
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|
|
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US$
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2.75
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|
|
|
|
|
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|
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Net tangible book value per ordinary share as of September 30, 2018
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US$
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0.92
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|
|
|
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Increase in net tangible book value per ordinary share attributable to this offering
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|
US$
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0.21
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|
|
|
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Pro forma net tangible book value per share after this offering
|
|
|
|
|
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US$
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1.13
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Dilution in net tangible book value per share to purchasers
|
|
|
|
|
|
US$
|
1.62
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|
To
the extent that outstanding exercisable options or warrants are exercised, you may experience further dilution. In addition, we
may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient
funds for our current or future operating plans. To the extent that we raise additional capital by issuing equity or convertible
debt securities, your ownership will be further diluted.
PLAN
OF DISTRIBUTION
We
are offering the Shares directly to the Investors in a proposed takedown from our shelf registration statement pursuant to this
prospectus supplement and the accompanying prospectus. The Shares are being sold to the Investors pursuant to the Agreement dated
November 28, 2018, a form of which was filed as an exhibit to the Company’s Report on Form 6-K filed with the Commission
on November 28, 2018. We will receive an aggregate of approximately $12.5 million before expenses from the sale of the Shares.
The
breakdown of the Shares being purchased by the Investors is as follows:
Name
of Investor
|
|
Number
of Purchased Shares
|
|
|
Price Per
Share ($)
|
|
|
Purchase
Amount ($)
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Psagot
Provident Funds and Pension Ltd.
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1,818,182
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|
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2.75
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|
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5,000,000.50
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Psagot Securities
Ltd.
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1,818,182
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|
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2.75
|
|
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5,000,000.50
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Shotfut Menayot Israel
-
HaPhoenix Amitim Ltd.
|
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909,090
|
|
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2.75
|
|
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2,499,997.50
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|
Confirmations
and definitive prospectus supplements will be distributed to the Investors, informing them of the closing date as to the purchase
and sale of the Shares subject to this prospectus supplement. We currently anticipate that the closing of the purchase and sale
of the Shares will take place on or about November 28, 2018. The Investors will also be informed of the date and manner in which
they must transmit the purchase price for the offered securities. We expect that the Shares initially offered hereby will be issued
to each Investor in book-entry form on or about November 28, 2018.
We have agreed to pay
Barak Capital Underwriting, an Israeli company, a fee of approximately $250,000 (2% of the gross proceeds) in connection
with this offering.
Our
ordinary shares are listed on The Nasdaq Capital Market under the symbol “RADA.”
LEGAL
MATTERS
The
validity of the ordinary shares offered in this offering will be passed upon for us by S. Friedman & Co., Tel Aviv, Israel,
our Israeli counsel. Carter Ledyard & Milburn LLP, New York, New York, will be passing upon matters of United States law for
us with respect to securities offered by this prospectus supplement.
EXPERTS
The
consolidated financial statements of Rada Electronic Industries Ltd., appearing in Rada Electronic Industries Ltd.’s Report
on Form 20-F as filed with the SEC on March 28, 2018, have been audited by Kost Forer Gabbay & Kasierer, a Member of Ernst
& Young Global, independent registered public accounting firm, as set forth in their report thereon, and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on
the authority of such firm as experts in accounting and auditing. The address of Kost Forer Gabbay & Kasierer is 3 Aminadav
St., Tel-Aviv, Israel 6706703.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus supplement is a part of a registration statement on Form F-3 that we filed on August 21, 2018, with the SEC under the
Securities Act. We refer you to this registration statement, for further information about us and the securities offered hereby.
We
file annual and special reports and other information with the SEC (Commission File Number 000-15375). These filings contain important
information that does not appear in this prospectus supplement or the accompanying prospectus
.
For further information
about us, you may read and copy these filings at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington,
D.C. 20549-0102. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330,
and may obtain copies of our filings from the public reference room by calling (202) 551-8090. Our SEC filings are also available
on the SEC Internet site at
http://www.sec.gov,
which contains periodic reports and other information regarding issuers
that file electronically. In addition, we make available, without charge, through our website,
www.rada.com
, electronic
copies of various filings with the SEC, including copies of our Annual Report on Form 20-F. The information on our website is
not and should not be considered part of this prospectus supplement and is not incorporated into this prospectus supplement by
reference.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
SEC allows us to “incorporate by reference” information into this prospectus supplement, which means that we can disclose
important information to you by referring you to other documents which we have filed or will file with the SEC. We are incorporating
by reference in this prospectus supplement the documents listed below and all amendments or supplements we may file to such documents,
as well as any future filings we may make with the SEC on Form 20-F under the Exchange Act, before the time that all of the securities
offered by this prospectus supplement have been sold or de-registered.
●
|
Our
2017 annual report Form 20-F, filed with the SEC on March 28, 2018;
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●
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Our
reports of foreign private issuer on Form 6-K (including exhibits thereto) furnished to the SEC on May 7, 2018, May 23, 2018
(2018 First Quarter Earnings Summary included in Exhibit 99.1 thereto only), June 7, 2018, June 29, 2018 (excluding last paragraph
of Exhibit 99.1 thereto), August 15, 2018 (2018 Second Quarter Earnings Summary included in in Exhibit 99.1 thereto only),
September 27, 2018, November 14, 2018 (Third Quarter Earnings Summary included in Exhibit 99.1 thereto only) and November
28, 2018.
|
●
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Any
future reports on Form 6-K to the extent that we indicate they are incorporated by reference into this registration statement;
|
●
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Any
future annual reports on Form 20-F that we may file with the SEC under the Exchange Act, prior to the termination of any offering
contemplated by the prospectus; and
|
|
|
●
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The
description of our securities contained in Item 1 of our Registration Statement on Form 8-A filed with the SEC on February
4, 1987 under the Exchange Act and any amendment or report filed for the purpose of updating that description.
|
In
addition, we may incorporate by reference into this prospectus supplement our reports on Form 6-K filed after the date of this
prospectus supplement (and before the time that all of the securities offered by this prospectus supplement have been sold or
de-registered) if we identify in the report that it is being incorporated by reference in this prospectus supplement.
We
will provide to each person, including any beneficial owner, to whom this prospectus is delivered, a copy of any or all the information
that has been incorporated by reference in this prospectus but not delivered with this prospectus (and any exhibits specifically
incorporated in such information), at no cost, upon written or oral request to us at the following address:
Rada
Electronics Ltd.
7
Giborei Israel Street
Netanya
4250407, Israel
Tel:
972-9-892-1111
Attn:
Chief Financial Officer
You
should rely only on the information contained or incorporated in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. You should not rely on any other representations. Our affairs may change after
this prospectus or any supplement is distributed. You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents. You should read all information supplementing
this prospectus.
PROSPECTUS
$50,000,000
Ordinary
Shares
Subscription
Rights
Warrants
Units
We
may offer and sell under this prospectus, from time to time, any combination of the securities described in this prospectus, either
individually or in units, in one or more offerings, up to an aggregate of $50,000,000.
Our
Ordinary Shares currently trade on the Nasdaq Capital Market under the symbol “RADA.” On August 14, 2018, the last
reported sale price of our ordinary shares on the Nasdaq Capital Market was $2.68 per share. We have not yet determined whether
any of the other securities that may be offered by this prospectus will be listed on any exchange, inter-dealer quotation system
or over-the-counter market. If we decide to seek listing of any such securities, a prospectus supplement relating to those securities
will disclose the exchange, quotation system or market on which the securities will be listed and the date when we expect trading
to begin.
This
prospectus provides a general description of the securities we may offer. Each time we sell securities, we will provide specific
terms of the securities offered in a supplement to this prospectus. The prospectus supplement may also add, update, or change
information contained in this prospectus. This prospectus may not be used to consummate a sale of securities unless accompanied
by the applicable prospectus supplement. You should read both this prospectus and any prospectus supplement together with additional
information described under the heading “Where You Can Find More Information” and the documents incorporated or deemed
to be incorporated by reference carefully before you make your investment decision.
We
will sell these securities directly to our shareholders or to purchasers or through agents on our behalf or through underwriters
or dealers as designated from time to time. If any agents or underwriters are involved in the sale of any of these securities,
the applicable prospectus supplement will provide the names of the agents or underwriters and any applicable fees, commissions,
or discounts. The prospectus supplement for each offering of securities will describe in detail the plan of distribution for that
offering. For general information about the distribution of securities offered, please see “
Plan of Distribution
”
in this prospectus on page 14.
The
aggregate market value of our outstanding Ordinary Shares held by non-affiliates on July 18, 2018, as calculated in accordance
with General Instruction I.B.5. of Form F-3, was approximately $74.35 million. During the prior 12 calendar month period that
ends on, and includes, the date of this prospectus, we have offered securities with an aggregate market value of approximately
$9.90 million pursuant to General Instruction I.B.5 of Form F-3. Pursuant to General Instruction I.B.5, in no event will we sell
securities pursuant to this prospectus with a value of more than one-third of the aggregate market value of our Ordinary Shares
held by non-affiliates in any 12-month period, so long as the aggregate market value of our Ordinary Shares held by non-affiliates
is less than $75,000,000.
INVESTING
IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING ON PAGE 3 AND UNDER SIMILAR HEADINGS
IN THE OTHER DOCUMENTS THAT ARE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
NONE
OF THE U.S. SECURITIES AND EXCHANGE COMMISSION, THE ISRAELI SECURITIES AUTHORITY OR ANY STATE SECURITIES COMMISSION HAVE APPROVED
OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The
date of this prospectus is
You
should rely only on the information contained or incorporated by reference in this prospectus or any supplement. Neither we nor
the Selling Shareholder have authorized anyone else to provide you with different information. The ordinary shares offered by
this prospectus are being offered only in jurisdictions where the offer is permitted. You should not assume that the information
in this prospectus or any supplement is accurate as of any date other than the date on the front of each document. Our business,
financial condition, results of operations and prospects may have changed since that date.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement we filed with the Securities Exchange Commission, or the SEC. This prospectus and
the documents incorporated by reference herein include important information about us, the securities being offered by us and
other information you should know before investing. Any prospectus supplement may also add, update, or change information in this
prospectus. If there is any inconsistency between the information contained in this prospectus and any prospectus supplement,
you should rely on the information contained in that particular prospectus supplement. This prospectus does not contain all the
information provided in the registration statement we filed with the SEC. You should read this prospectus together with the additional
information about us described in the sections below entitled “Incorporation of Certain Information by Reference”
and “Where You Can Find Additional Information.” You should rely only on information contained in, or incorporated
by reference into, this prospectus. We have not authorized anyone to provide you with information different from that contained
in, or incorporated by reference into, this prospectus. The information contained in this prospectus is accurate only as of the
date on the front cover of the prospectus and information we have incorporated by reference in this prospectus is accurate only
as of the date of the document incorporated by reference. You should not assume that the information contained in, or incorporated
by reference into, this prospectus is accurate as of any other date.
Unless
we have indicated otherwise or the context otherwise requires, references in this prospectus and any supplement to this prospectus
to “the Company,” “RADA,” “we,” “us” and “our” refer to RADA Electronic
Industries Ltd., a company organized under the laws of the State of Israel, and its wholly owned subsidiaries. All references
in this prospectus to “dollars” or “$” are to United States dollars, and all references to “Shekels”
or “NIS” are to New Israeli Shekels.
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
This
prospectus, including the information incorporated by reference into this prospectus, contains, and any prospectus supplement
may contain, forward-looking statements within the meaning of the federal securities laws. The use of the words “projects,”
“expects,” “may,” “plans” or “intends,” or words of similar import, identifies
a statement as “forward-looking.” The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking statements are based on the assumption that the Company
will not lose a significant customer or customers or experience increased fluctuations of demand or rescheduling of purchase orders,
that our markets will be maintained in a manner consistent with our historical experience, that our products will remain accepted
within their respective markets and will not be replaced by new technology, that competitive conditions within our markets will
not change materially or adversely, that we will retain key technical and management personnel, that our forecasts will accurately
anticipate market demand, and that there will be no material adverse change in our operations or business. Assumptions relating
to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control.
In addition, our business and operations are subject to substantial risks which increase the uncertainty inherent in the forward-looking
statements. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion
of such information should not be regarded as a representation by us or any other person that our objectives or plans will be
achieved. Factors that could cause actual results to differ from our expectations or projections include the risks and uncertainties
relating to our business described in this prospectus at “Risk Factors.” We caution you to carefully consider these
risks and not to place undue reliance on our forward-looking statements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise, and we assume no responsibility for updating any forward-looking statements.
PROSPECTUS
SUMMARY
You
should read the following summary together with the more detailed information about us, the securities that may be sold from time
to time, and our financial statements and the notes to them, all of which appear elsewhere in this prospectus or in the documents
incorporated by reference in this prospectus.
We
are an Israel-based defense electronics contractor specializing in the development, manufacture, marketing and sales of defense
electronics, including avionics solutions (including avionics for unmanned aerial vehicles) including inertial navigation systems,
airborne data/video recording and management systems, and tactical land-based radars for defense forces and border protection
systems. In addition, while we continue to sell and support our legacy commercial aviation products and services, in 2016 we decided
to actively pursue the sale of our Chinese subsidiary
,
Beijing Hua Rui Aircraft Maintenance and Service, Co., Ltd., known
as CACS, which is the main platform of our test and repair shop activity.
We
were incorporated under the laws of the State of Israel on December 8, 1970. We are a public limited liability company under the
Israeli Companies Law 1999-5759, or the Israeli Companies Law, and operate under this law and associated legislation. Our registered
offices and principal place of business are located at 7 Giborei Israel Street, Netanya 4250407, Israel, and our telephone number
is +972-9-892-1111. Our website address is www.RADA.com. The information on our website is not incorporated by reference into
this prospectus.
RISK
FACTORS
Investing
in our securities involves a high degree of risk and uncertainty. You should carefully consider the risks and uncertainties described
below before investing in our securities. Our business, prospects, financial condition and results of operations could be adversely
affected due to any of the following risks. In that case, the value of our securities could decline, and you could lose all or
part of your investment.
Risks
Related to Our Business and Our Industry
We
have a history of operating losses and although we returned to profitability in 2017, we may not be able to sustain profitable
operations in the future. To the extent that we continue to incur operating losses in the future, we may not have sufficient working
capital to fund our operations.
We
incurred operating losses in three of the five years ended December 31, 2017. Although we achieved an operating profit of $ 2.0
million in the year ended December 31, 2017 and net income of $204,000 in the first quarter of 2018, we may not be able to achieve
or sustain profitable operations in the future or generate positive cash flows from operations. As of March 31, 2018 our accumulated
deficit was $ 76.9 million and we had cash, cash equivalents and short-term bank deposits of $13.4 million, compared to cash,
cash equivalents and short-term bank deposits of $1.2 million as of December 31, 2016. Based on our current operations, we believe
our existing funds will be sufficient to fund our operations in 2018. To the extent that we incur operating losses in the future
or are unable to generate free cash flows from our business, we may not have sufficient working capital to fund our operations
and will be required to obtain additional financing. Such financing may not be available, or if available, may not be on terms
satisfactory to us. If adequate funds are not available to us, our business, and results of operations and financial condition
will be adversely affected.
We
may need to raise additional capital in the future, which may substantially dilute the holdings of our shareholders.
In
order to obtain working capital for our operations and to repay the outstanding debt due to our then principal shareholder, we
completed a follow-on public offering of 3,455,284 ordinary shares, offered at a price to the public of $2.46 per share on July
30, 2015. We then entered into an investment transaction with DBSI Investments Ltd., or DBSI, on May 18, 2016, according to which
we sold 8,510,638 ordinary shares to DBSI for $4 million, reflecting a price per share of $0.47. We also issued to DBSI, without
additional consideration, warrants to purchase 4,255,319 ordinary shares at an exercise price per share of $0.47 (or $2 million
in the aggregate) exercisable for a period of 24 months and warrants to purchase 3,636,363 ordinary shares at an exercise price
per share of $0.55 (or $2 million in the aggregate) exercisable for a period of 48 months. DBSI also agreed to provide our company
with a three-year $3,175,000 convertible loan bearing interest of Libor plus 6%, which was funded on June 16, 2016 and was used
to repay the outstanding convertible loan and accrued interest owed to an entity owned by our former principal shareholder, Mr.
Howard Yeung. In November 2016, we sold 1,904,762 of our ordinary shares to The Phoenix Insurance Company Ltd. and its affiliate,
Shotfut-Menayot-Israel-HaPhoenix Amitim Ltd., two Israeli institutional investors, at a price of $1.05 per share, or approximately
$2 million in the aggregate. At the same time, DBSI invested an additional $1 million in our company through the exercise of 2,127,660
warrants. On August 23, 2017 we sold 4,604,500 of our ordinary shares to Israeli institutional investors, at a price of $2.15
per share, pursuant to prospectus. As of March 2018, DBSI has paid us $4 million to exercise warrants to purchase 7,891,683 ordinary
shares. In August 2017, DBSI converted the convertible loan and purchased 1,322,917 ordinary shares. We may need additional working
capital in the future to fund our operations. Such financing may not be available, or if available, may not be on terms satisfactory
to us. If adequate funds are not available to us, our business, and results of operations and financial condition will be adversely
affected.
Competition
in the market for defense electronics is intense. Our products may not achieve market acceptance, which could adversely affect
our business, financial condition and results of operations.
The
market for our products is highly competitive and we may not be able to compete effectively in our market. Our principal competitors
in the defense electronics market, include Elbit Systems Ltd., United Technologies Aerospace Systems, Honeywell International
Inc., Israel Aerospace Industries Ltd., or IAI, Northrop Grumman Corporation, Sagem Avionics LLC, Thales Group, Zodiac Aerospace
Group and SRC Inc. We expect to continue to face competition from these and other competitors. Most of our competitors are larger
and have substantially greater resources than us, including financial, technological, marketing and distribution capabilities,
and enjoy greater market recognition than we do. These competitors are able to achieve greater economies of scale and may be less
vulnerable to price competition than us. We may not be able to offer our products as part of integrated systems to the same extent
as our competitors or successfully develop or introduce new products that are more cost effective or offer better performance
than those of our competitors. Failure to do so could adversely affect our business, financial condition and results of operations.
We
may not be able to implement our growth strategy which could adversely affect our business, financial condition and results of
operations.
In
line with our growth strategy, we entered into a number of strategic relationships with Embraer S.A., or Embraer, Hindustan Aeronautics
Ltd., or HAL, IAI, Lockheed Martin Corporation, or Lockheed Martin, Boeing Defense, Space & Security, or Boeing, Rafael Advanced
Defense Systems Ltd., or Rafael, IMI Systems Ltd., or IMI, and Leonardo DRS, or DRS and SAZE Technologies LLC., or SAZE, to increase
our penetration into the defense electronics market. We are currently investing and intend to continue to invest significant resources
to develop these relationships and additional new relationships. Should our relationships fail to materialize into significant
agreements or should we fail to work efficiently with these companies, we may lose sales and marketing opportunities and our business,
results of operations and financial condition could be adversely affected.
Our
growth is dependent in part on the development of new products, based on internal research and development. We may not accurately
identify market needs before we invest in the development of a new product. In addition, we might face difficulties or delays
in the development process that will result in our inability to timely offer products that satisfy the market and competing products
may emerge during the development and certification process.
While
we have met with initial success in the introduction of our advanced ground radars for tactical applications such as defense forces
protection and border protection, there can be no assurance that we will succeed in obtaining general market acceptance or that
we will ever recover our investment in this new product family.
We
have developed a number of radar platforms for use in combat vehicles and tactical protection applications for defense forces
and border protection. In December 2014, we announced the first significant order for this product family, a $4.5 million order
from the Israel Ministry of Defense. To date, we have received over $20 million in orders for our ground radar products, but cannot
assure you that our ground radars will achieve broad market acceptance.
Reductions
in defense budgets worldwide may cause a reduction in our revenues, which would adversely affect our business, operating results
and financial condition.
Substantially
all of our revenues are derived from the sale of products with military applications. These revenues totaled approximately $26.1
million, or 100% of our revenues in 2017, $12.8 million, or 100% of our revenues, in the year ended December 31, 2016 and $14.1
million, or 99.9% of our revenues, in the year ended December 31, 2015. The defense budgets of a number of countries have declined
and may be reduced in the future. Declines in defense budgets may result in reduced demand for our products and manufacturing
services. This would result in reduction in our core business’ revenues and adversely affect our business, results of operations
and financial condition.
Unfavorable
national and global economic conditions could have a material adverse effect on our business, operating results and financial
condition.
During
periods of slowing economic activity, our customers may reduce their demand for our products, technology and professional services,
which would reduce our sales, and our business, operating results and financial condition may be adversely affected. The global
and domestic economies continue to face a number of economic challenges, including threatened sovereign defaults, credit downgrades,
restricted credit for businesses and consumers and potentially falling demand for a variety of products and services. These developments,
or the perception that any of them could occur, could result in longer sales cycles, slower adoption of new technologies and increased
price competition for our products and services. We could also be exposed to credit risk and payment delinquencies on our accounts
receivable, which are not covered by collateral.
Significant
portions of our operations are conducted outside the markets in which our products and solutions are manufactured or generally
sold, and accordingly, we often export a substantial number of products into such markets. We may, therefore, be denied access
to potential customers or suppliers or denied the ability to ship products from any of our subsidiaries into the countries in
which we currently operate or wish to operate, as a result of economic, legislative, political and military conditions, including
hostilities and acts of terrorism, in such countries.
We
may also be required in the future to increase our reserves for doubtful accounts. In addition, the fair value of some of our
assets may decrease as a result of an uncertain economy and as a result, we may be required to record impairment charges in the
future. If global economic and market conditions or economic conditions in key markets remain uncertain or weaken further, our
financial condition and operating results may be materially adversely affected.
Sales
of our products are subject to governmental procurement procedures and practices; termination, reduction or modification of contracts
with our customers or a substantial decrease in our customers’ budgets may adversely affect our business, operating results
and financial condition.
Our
products are primarily sold to governmental agencies, governmental authorities and government-owned companies, many of which have
complex and time-consuming procurement procedures. A substantial time often elapses from the time we begin marketing a product
until we actually sell that product to a particular customer. In addition, our sales to governmental agencies, authorities and
companies are directly affected by these customers’ budgetary constraints and the priority given in their budgets to the
procurement of our products. A decrease in governmental funding for our customers’ budgets would adversely affect our results
of operations. This risk is heightened during periods of global economic slowdown. Accordingly, governmental purchases of our
systems, products and services may decline in the future as the governmental purchasing agencies may terminate, reduce or modify
contracts or subcontracts if:
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requirements or budgetary constraints change;
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cancel multi-year contracts and related orders if funds become unavailable;
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they
shift spending priorities into other areas or for other products; or
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they
adjust contract costs and fees on the basis of audits.
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Any
such event may have a material adverse effect on us.
Further,
our business with the State of Israel and other governmental entities is, in general, subject to delays in funding and performance
of contracts and the termination for convenience (among other reasons) of contracts or subcontracts with governmental entities.
The termination, reduction or modification of our contracts or subcontracts with the Government of Israel in the event of change
in requirements, policies or budgetary constraints would have an adverse effect on our business, operating results and financial
condition.
If
we do not receive the governmental approvals necessary for the export of our products, our revenues may decrease. Similarly
,
if our suppliers and partners do not receive government approvals necessary to export their products or designs to us, our
revenues may decrease and we may fail to implement our growth strategy.
Israel’s
defense export policy regulates the sale of our systems and products. Current Israeli policy encourages export to approved customers
of defense systems and products, such as ours, as long as the export is consistent with Israeli government policy. A license is
required to initiate marketing activities. We are also required to obtain a specific export license for any hardware exported
from Israel. We may not be able to receive all the required permits and licenses for which we may apply in the future. If we do
not receive the required permits for which we apply, our revenues may decrease.
We
are subject to laws regulating export of “dual use” items (items that are typically sold in the commercial market,
but that also may be used in the defense market) and defense export control legislation. Additionally, our participation in governmental
procurement processes in Israel and other countries is subject to specific regulations governing the conduct of the process of
procuring defense contracts. Furthermore, solicitations for procurements by governmental purchasing agencies in Israel and other
countries are governed by laws, regulations and procedures relating to procurement integrity, including avoiding conflicts of
interest and corruption in the procurement process. We may not be able to respond quickly and effectively to changing laws and
regulations and any failure to comply with such laws and regulations may subject us to significant liability and penalties.
We
depend on sales to key customers and the loss of one or more of our key customers would result in a loss of a significant amount
of our revenues, which would adversely affect our business, financial condition and results of operations.
A
significant portion of our revenues is derived from a small number of customers. During the years ended December 31, 2017 and
2016, 74% and 83% of our revenues, respectively, were attributable to seven customers. We anticipate that a significant portion
of our future revenues will continue to be derived from sales to a small number of customers. No assurances can be given that
our customers will continue to purchase our products, that we will be successful in any bid for new contracts to provide such
products, or that if we are granted subsequent orders, such orders would be of a scope comparable to the sales that we have experienced
to date. If our principal customers do not continue to purchase products from us at current levels or if we do not retain such
customers and we are not able to derive sufficient revenues from sales to new customers to compensate for their loss, our revenues
would be reduced and adversely affect our business, cash flows, financial condition and results of operations.
We
depend on suppliers of components for our products and if we are unable to obtain these components when needed, we could experience
delays in the manufacturing of our products and our financial results could be adversely affected.
We
acquire most of the components for the manufacturing of our products from suppliers and subcontractors, most of whom are located
in Israel and the United States. A number of these suppliers are currently the sole source of one or more components upon which
we are dependent. Suppliers of some of the components for manufacturing require us to place orders with significant lead-time
to assure supply in accordance with our manufacturing requirements. Delays in supply may significantly hurt our ability to fulfill
our contractual obligations and may significantly hurt our business and result of operations. In addition, we may not be able
to continue to obtain such components from these suppliers on satisfactory commercial terms. Temporary disruptions of our manufacturing
operations would ensue if we were required to obtain components from alternative sources, which may have an adverse effect on
our financial results.
Rapid
technological changes may adversely affect the market acceptance of our products and could adversely affect our business, financial
condition and results of operations.
The
defense electronics market in which we compete is subject to technological changes, introduction of new products, change in customer
demands and evolving industry standards. Our future success will depend upon our ability to keep pace with technological developments
and to timely address the increasingly sophisticated needs of our customers by supporting existing and new technologies and by
developing and introducing enhancements to our current products and new products. We may not be successful in developing and marketing
enhancements to our products that will respond to technological change, evolving industry standards or customer requirements.
In addition, we may experience difficulties that could delay or prevent the successful development, introduction and sale of such
enhancements and such enhancements may not adequately meet the requirements of the market and may not achieve any significant
degrees of market acceptance. If release dates of our new products or enhancements are delayed or, if when released, they fail
to achieve market acceptance, our business, operating results and financial condition may be adversely affected.
We
enter into fixed-price contracts that could expose us to losses in the event we fail to properly estimate our costs.
We
enter into firm fixed-price contracts. If our initial cost estimates are incorrect, we can lose money on these contracts. Because
many of these contracts involve new technologies, unforeseen events, such as technological difficulties and other cost overruns,
can result in the contract pricing becoming less favorable or even unprofitable to us and have an adverse impact on our financial
results.
Breaches
of network or information technology security
,
natural disasters or terrorist attacks could have an adverse effect
on our business.
Cyber-attacks
or other breaches of network or IT security, natural disasters, terrorist acts or acts of war may cause equipment failures or
disrupt our systems and operations. We may be subject to attempts to breach the security of our networks and IT infrastructure
through cyber attack, malware, computer viruses and other means of unauthorized access. The potential liabilities associated with
these events could exceed the insurance coverage we maintain. Our inability to operate our facilities as a result of such events,
even for a limited period of time, may result in significant expenses or loss of market share to other competitors in the defense
electronics market. In addition, a failure to protect the privacy of customer and employee confidential data against breaches
of network or IT security could result in damage to our reputation. To date, we have not been subject to cyber-attacks or other
cyber incidents which, individually or in the aggregate, resulted in a material impact to our operations or financial condition.
We
are subject to risks associated with international operations; we generate a significant portion of our sales from customers located
in countries that may be adversely affected by political or economic instability and corruption.
We
are aviation and defense company with worldwide operations. Although 79% of our sales are in Israel and North America, we expect
to derive an increasing portion of our sales and future growth from other regions such as Latin America, India and Central and
Eastern Europe, which may be more susceptible to political or economic instability. In addition, in many less-developed markets,
we rely heavily on third-party representatives, consultants and other agents for business development, marketing and distribution
of our products. Many of these third-parties do not have internal compliance resources comparable to ours. Business activities
in many of these markets have historically been more susceptible to corruption. If our efforts to screen third party agents and
detect cases of potential misconduct fail, we could be held responsible for the noncompliance of these third parties under applicable
laws and regulations, which may adversely affect our reputation and our business, financial condition or results of operations.
Exports
accounted for 76% of our revenues in 2017, 43% of our revenues in 2016 and 57% of our revenues in 2015. Our reliance on export
sales subjects us to many risks inherent in engaging in international business, including:
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Limitations
and disruptions resulting from the imposition of government controls;
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in regulatory requirements;
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Export
license requirements;
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Economic
or political instability;
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Trade
restrictions;
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Changes
in tariffs;
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Currency
fluctuations;
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Longer
receivable collection periods and greater difficulty in accounts receivable collection;
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Greater
difficulty in safeguarding intellectual property;
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Difficulties
in managing overseas subsidiaries and international operations; and
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Potential
adverse tax consequences.
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We
may not be able to sustain or increase revenues from international operations and may encounter significant difficulties, in connection
with the sale of our products in international markets. Any of those events may adversely affect our business, operating results
and financial condition.
Significant
political developments could have a materially adverse effect on us. In the United States, potential or actual changes in fiscal,
defense appropriations, tax and labor policies could have uncertain and unexpected consequences that may materially impact our
business, results of operations and financial condition. In the U.K., “Brexit,” the referendum in which voters approved
an exit from the European Union, or E.U., could lead to legal uncertainty and potentially divergent national laws and regulations
which could adversely affect our business and financial condition. While the U.K. and the E.U. are expected to reach an agreement
by 2019 regarding the U.K.’s formal exit from the E.U., political changes in the U.K. following the “Brexit”
referendum and other factors leave it unclear when exactly the U.K. will exit and on what terms.
In
addition, as a company registered with the SEC, we are subject to the regulations imposed by the Foreign Corrupt Practices Act,
or FCPA, which generally prohibits registrants and their intermediaries from making improper payments to foreign officials, for
the purpose of obtaining or keeping business or obtaining an improper business benefit. We have adopted proactive procedures to
promote compliance with the FCPA, but we may be held liable for actions taken by our strategic or local partners or agents even
though these partners may not themselves be subject to the FCPA. Any determination that we have violated the FCPA could materially
and adversely affect our business, results of operations, and cash flows.
Currency
exchange rate fluctuations in the world markets in which we conduct business could have a material adverse effect on our business,
results of operations and financial condition.
Most
of our revenues are in dollars or are linked to the dollar, while a portion of our expenses, principally salaries and related
personnel expenses, are incurred in other currencies, particularly in NIS. Therefore, our costs in such other currencies, as expressed
in dollars, are influenced by the exchange rate between the dollar and the relevant currency. We are also exposed to the risk
that the rate of inflation in Israel will exceed the rate of depreciation of the NIS in relation to the dollar or that the timing
of this depreciation lags behind inflation in Israel. This would have the effect of increasing the dollar cost of our operations.
In the past, the NIS exchange rate with the dollar and other foreign currencies has fluctuated, generally reflecting inflation
rate differentials. We cannot predict any future trends in the rate of inflation in Israel or the rate of depreciation or appreciation
of the NIS against the dollar. If the dollar cost of our operations in Israel increases, our dollar-measured results of operations
will be adversely affected. We engage in currency hedging transactions intended to partly reduce the effect of fluctuations in
foreign currency exchange rates on our results of operations. However, such transactions may not materially reduce the effect
of fluctuations in foreign currency exchange rates on our results of operations.
Claims
that our products infringe upon the intellectual property of third parties may require us to incur significant costs, enter into
licensing agreements or license substitute technology.
Third
parties may assert infringement claims against us or claims that we have violated a patent or infringed on a copyright, trademark
or other proprietary right belonging to them. Any infringement claim, even one without merit, could result in the expenditure
of significant financial and managerial resources to defend against the claim. Moreover, a successful claim of product infringement
against us or a settlement could require us to pay substantial amounts or obtain a license to continue to use the technology that
is the subject of the claim, or otherwise restrict or prohibit our use of the technology. We might not be able to obtain a license
from the third party asserting the claim on commercially reasonable terms, if at all. We also may not be able to obtain a license
from another provider of suitable alternative technology to permit us to continue offering the product. Infringement claims asserted
against us could have a material adverse effect on our business, operating results and financial condition.
We
are required to comply with “conflict minerals” rules which impose costs on us, may make our supply chain more complex,
and could adversely impact our business.
We
are subject to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act,
that will require us to perform due diligence, disclose and report whether our products contain conflict minerals. President Trump’s
administration has indicated that the Dodd-Frank Act will be under further scrutiny and some of the provisions of the Dodd-Frank
Act may be revised, repealed or amended. In April 2017, the SEC announced that it was suspending enforcement of portions of the
conflict minerals regulations enacted under the Dodd-Frank Act following a ruling by the U.S. Court of Appeals for the District
of Columbia Circuit. The implementation of these requirements and any changes effected by the Trump administration could adversely
affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products. In
addition, we will likely incur additional costs to comply with the disclosure requirements, including costs related to conducting
diligence procedures to determine the sources of conflict minerals that may be used in or necessary to the production of our products
and, if applicable, potential changes to our products, processes or sources of supply as a consequence of such verification activities.
It is also possible that we may face reputational harm if we determine that certain of our products contain minerals not determined
to be conflict-free or if we are unable to alter our products, processes or sources of supply to avoid use of such materials.
Furthermore, we may encounter challenges in satisfying those customers that require that all of the components of our products
be certified as conflict free, and if we cannot satisfy these customers, they may choose a competitor’s products.
We
may fail to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which could
have an adverse effect on our financial results and the market price of our ordinary shares.
The
Sarbanes-Oxley Act of 2002 imposes certain duties on us and our executives and directors. Our efforts to comply with the requirements
of Section 404(a) of the Sarbanes-Oxley Act of 2002 governing internal controls and procedures for financial reporting, which
started, in connection with our 2007 Annual Report on form 20-F, have resulted in increased general and administrative expense
and a diversion of management time and attention, and we expect these efforts to require the continued commitment of significant
resources. We may identify material weaknesses or significant deficiencies in our assessments of our internal controls over financial
reporting. Failure to maintain effective internal controls over financial reporting could result in investigation or sanctions
by regulatory authorities and could have a material adverse effect on our operating results, investor confidence in our reported
financial information and the market price of our ordinary shares.
Risk
Factors Related to Our Ordinary Shares
Because
one of our shareholders, DBSI, holds approximately 27.4% of our outstanding shares, investors may not be able to affect the outcome
of shareholder votes.
DBSI
currently beneficially owns 9,001,634 of our ordinary shares, or approximately 27.4% of our outstanding shares. For as long as
DBSI, or any shareholder, holds a significant interest in our company, it may have the ability to exercise a controlling influence
over our business and affairs, including any determinations with respect to potential mergers or other business combinations involving
us, our acquisition or disposition of assets, our incurrence of indebtedness, our issuance of any additional ordinary shares or
other equity securities, our repurchase or redemption of ordinary shares and our payment of dividends. Similarly, as long as DBSI
has a controlling interest in our company, it will have the power to determine or significantly influence the outcome of matters
submitted to a vote of our shareholders, including the power to elect all of the members of our board of directors (except external
directors, within the meaning of Israeli law), or prevent an acquisition or any other change in control of us. Because the interests
of our controlling shareholders may differ from the interests of our other shareholders, actions taken by it with respect to us
may not be favorable to our other shareholders.
If
we fail to maintain compliance with NASDAQ’s continued listing requirements, our shares may be delisted from the NASDAQ
Capital Market.
To
continue to be listed on the NASDAQ Capital Market, we need to satisfy a number of conditions, including minimum shareholders’
equity of at least $2.5 million and a minimum closing bid price per share of $1.00. On October 1, 2015, we received notification
from NASDAQ for not maintaining a minimum bid price of US$1.00 per share for 30 consecutive business days (Listing Rule 5550(a)
(2)). We were given 180 calendar days, or until March 29, 2016, to regain compliance. On March 30, 2016, we received notification
from NASDAQ that we are eligible for an additional 180 calendar days to regain compliance. Following a reverse split of our ordinary
shares, on September 29, 2016, we regained compliance with Listing Rule 5550(a)(2) and our shares continued to be listed on the
NASDAQ Capital Market.
If
in the future, our share price drops again and remains under $1.00 for 30 consecutive business days, and if we are ultimately
delisted from NASDAQ, trading in our ordinary shares would be conducted on a market where an investor would likely find it significantly
more difficult to dispose of, or to obtain accurate quotations as to the value of, our ordinary shares.
Our
share price has been volatile in the past and may decline in the future.
Our
ordinary shares have experienced significant market price and volume fluctuations in the past and may experience significant market
price and volume fluctuations in the future in response to factors such as the following, some of which are beyond our control:
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Quarterly
variations in our operating results;
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Operating
results that vary from the expectations of securities analysts and investors;
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Changes
in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
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Announcements
of technological innovations or new products by us or our competitors;
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Announcements
by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
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Changes
in the status of our intellectual property rights;
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Announcements
by third parties of significant claims or proceedings against us;
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Additions
or departures of key personnel;
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Future
sales of our ordinary shares;
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Delisting
of our shares from the NASDAQ Capital Market; and
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Stock
market price and volume fluctuations.
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Domestic
and international stock markets often experience extreme price and volume fluctuations. Market fluctuations, as well as general
political and economic conditions, such as a recession or interest rate or currency rate fluctuations or political events or hostilities
in or surrounding Israel, could adversely affect the market price of our ordinary shares.
In
the past, securities class action litigation has often been brought against companies following periods of volatility in the market
price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial
costs and divert management’s attention and resources both of which could have a material adverse effect on our business
and results of operations.
Substantial
future sales of our ordinary shares by our principal shareholders may depress our share price.
If
our principal shareholders, sell substantial amounts of their ordinary shares or if the perception exists that our principal shareholders
may sell a substantial number of our ordinary shares, the market price of our ordinary shares may fall. Any substantial sales
of our shares in the public market also might make it more difficult for us to sell equity or equity related securities in the
future at a time and on terms we deem appropriate.
We
do not intend to pay dividends.
We
have never declared or paid cash dividends on our ordinary shares and do not expect to do so in the foreseeable future. The declaration
of dividends is subject to the discretion of our board of directors and will depend on various factors, including our operating
results, financial condition, future prospects and any other factors deemed relevant by our board of directors. You should not
rely on an investment in our company if you require dividend income from your investment in our company. The success of your investment
will likely depend entirely upon any future appreciation of the market price of our ordinary shares, which is uncertain and unpredictable.
There is no guarantee that our ordinary shares will appreciate in value or even maintain the price at which you purchased your
ordinary shares.
We
may be classified as a passive foreign investment company, or PFIC, which would subject our U.S. investors to adverse tax rules.
U.S.
holders of our ordinary shares may face income tax risks. We have been advised that we may have been a “passive foreign
investment company” (“PFIC”) for the 2017 taxable year. Our treatment as a PFIC could result in a reduction
in the after-tax return to U.S. Holders (as defined further below) of our ordinary shares and would likely cause a reduction in
the value of such shares. A foreign corporation will be treated as a PFIC for U.S. federal income tax purposes if either (1) at
least 75% of its gross income for any taxable year consists of certain types of “passive income,” or (2) at least
50% of the average value of the corporation’s gross assets produce, or are held for the production of, such “passive
income.” For purposes of these tests, “passive income” includes dividends, interest, gains from the sale or
exchange of investment property and rents and royalties other than rents and royalties that are received from unrelated parties
in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance
of services does not constitute “passive income.” If we are treated as a PFIC, U.S. Holders of ordinary shares would
be subject to a special adverse U.S. federal income tax regime with respect to the income derived by us, the distributions they
receive from us, and the gain, if any, they derive from the sale or other disposition of their ordinary shares. In particular,
dividends paid by us, if any, would not be treated as “qualified dividend income,” eligible for preferential tax rates
in the hands of non-corporate U.S. shareholders. Since PFIC status depends upon the composition of our income and the market value
of our assets from time to time, even if we were not a PFIC in 2017, there can be no assurance that we will not become a PFIC
in any future taxable year.
Risks
Relating to Our Location in Israel
Political,
economic and military instability in Israel may disrupt our operations and negatively affect our business condition, harm our
results of operations and adversely affect our share price.
We
are incorporated under the laws of, and our principal executive offices and manufacturing and research and development facilities
are located in the State of Israel. As a result, political, economic and military conditions affecting Israel directly influence
us. Any major hostilities involving Israel, a full or partial mobilization of the reserve forces of the Israeli army, the interruption
or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial
condition of Israel could adversely affect our business, financial condition and results of operations.
Conflicts
in North Africa and the Middle East, including in Egypt and Syria which border Israel, have resulted in continued political uncertainty
and violence in the region. Efforts to improve Israel’s relationship with the Palestinian Authority have failed to result
in a permanent solution, and there have been numerous periods of hostility in recent years. In addition, relations between Israel
and Iran continue to be seriously strained, especially with regard to Iran’s nuclear program. Such instability may affect
the local and global economy, could negatively affect business conditions and, therefore, could adversely affect our operations.
To date, these matters have not had any material effect on our business and results of operations; however, the regional security
situation and worldwide perceptions of it are outside our control and there can be no assurance that these matters will not negatively
affect our business, financial condition and results of operations in the future.
Furthermore,
we could be adversely affected by the interruption or reduction of trade between Israel and its trading partners. Some countries,
companies and organizations continue to participate in a boycott of Israeli companies and others doing business with Israel or
with Israeli companies. As a result, we are precluded from marketing our products to these countries, companies and organizations.
Foreign government defense export policies towards Israel could also make it more difficult for us to obtain the export authorizations
necessary for our activities. Also, over the past several years there have been calls in Europe and elsewhere to reduce trade
with Israel. Restrictive laws, policies or practices directed towards Israel or Israeli businesses may have an adverse impact
on our operations, our financial results or the expansion of our business.
Our
results of operations may be negatively affected by the obligation of our personnel to perform military service.
Some
of our employees in Israel are obligated to perform annual military reserve duty and are subject to being called for active duty
under emergency circumstances. If a military conflict or war arises, these individuals could be required to serve in the military
for extended periods of time. Our operations could be disrupted by the absence for a significant period of one or more of our
executive officers or key employees or a significant number of other employees due to military service. Any disruption in our
operations could adversely affect our business.
We
may not be able to enforce covenants not-to-compete under current Israeli law.
We
have non-competition agreements with most of our employees, many of which are governed by Israeli law. These agreements generally
prohibit our employees from competing with us or working for our competitors for a specified period following termination of their
employment. However, Israeli courts are reluctant to enforce non-compete undertakings of former employees and tend, if at all,
to enforce those provisions for relatively brief periods of time in restricted geographical areas and only when the employee has
unique value specific to that employer’s business and not just regarding the professional development of the employee. Any
such inability to enforce non-compete covenants may cause us to lose any competitive advantage resulting from advantages provided
to us by such confidential information.
We
may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could
result in litigation and adversely affect our business.
A
significant portion of our intellectual property has been developed by our Israeli employees in the course of their employment
for us. Under the Israeli Patent Law, 5727-1967, or Israeli Patent Law, inventions conceived by an employee during the term and
as part of the scope of his or her employment with a company are regarded as “service inventions,” which belong to
the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The
Israeli Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation
and Royalties Committee, or C&R Committee, a body constituted under the Israeli Patent Law, shall determine whether the employee
is entitled to remuneration for his inventions. The C&R Committee (decisions of which have been upheld by the Israeli Supreme
Court) has held that employees may be entitled to remuneration for their service inventions despite having specifically waived
any such rights. Further, the C&R Committee has not yet set specific guidelines regarding the method for calculating this
remuneration or the criteria or circumstances under which an employee’s waiver of his right to remuneration will be disregarded.
We generally enter into intellectual property assignment agreements with our employees pursuant to which such employees assign
to us all rights to any inventions created in the scope of their employment or engagement with us. Although our employees have
agreed to assign to us service invention rights and have specifically waived their right to receive any special remuneration for
such assignment beyond their regular salary and benefits, we may face claims demanding remuneration in consideration for assigned
inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current or
former employees, or be forced to litigate such claims, which could negatively affect our business.
Service
and enforcement of legal process on us and our directors and officers may be difficult to obtain.
Service
of process upon our directors and officers and the Israeli experts named in this prospectus, most of who reside outside the U.S.,
may be difficult to obtain within the U.S. Furthermore, since substantially most our assets, our directors and officers and the
Israeli experts named in this prospectus are located outside the U.S., any judgment obtained in the U.S. against us or these individuals
or entities may not be collectible within the U.S.
There
is doubt as to the enforceability of civil liabilities under the Securities Act and the Securities Exchange Act in original actions
instituted in Israel. However, subject to certain time limitations and other conditions, Israeli courts may enforce final judgments
of U.S. courts for liquidated amounts in civil matters, including judgments based upon the civil liability provisions of those
Acts.
The
rights and responsibilities of our shareholders are governed by Israeli law and differ in some respects from those of a typical
U.S. corporation.
We
are incorporated under Israeli law and the rights and responsibilities of holders of our ordinary shares are governed by our 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
in exercising his or her rights and fulfilling his or her obligations 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. Israeli law provides that these duties are applicable to shareholder votes at the general meeting with respect to, among
other things, amendments to a company’s articles of association, increases in a company’s authorized share capital,
mergers and actions and transactions involving interests of officers, directors or other interested parties which require the
shareholders’ approval. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that he
or she possesses the power to determine the outcome of a vote at a meeting of our shareholders, or who has, by virtue of the company’s
articles of association, the power to appoint or prevent the appointment of an office holder in the company, or any other power
with respect to the company, has a duty of fairness toward the company. However, Israeli law does not define the substance of
this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that
govern shareholder behavior.
Israeli
government programs and tax benefits may be terminated or reduced in the future.
We
participate from time to time in programs of the Israeli Innovation Authority (formerly the Office of the Chief Scientist) of
the Israeli Ministry of Economy, or Innovation Authority, for which we receive funding for the development of technologies and
products. The benefits available under these programs depend on meeting specified conditions. If we fail to comply with these
conditions, we may be required to pay additional penalties, make refunds and may be denied future benefits. From time to time,
the government of Israel has discussed reducing or eliminating the benefits available under these programs, and therefore these
benefits may not be available to us in the future at their current levels or at all.
As
a foreign private issuer whose shares are listed on the NASDAQ Capital Market, we may follow certain home country corporate governance
practices instead of certain NASDAQ requirements.
As
a foreign private issuer whose shares are listed on the NASDAQ Capital Market, we are permitted to follow certain home country
corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules. Among other things, as a foreign
private issuer we may follow home country practice with regard to the composition of the board of directors, director nomination
procedure, and quorum at shareholders’ meetings. In addition, we may follow our home country law, instead of the NASDAQ
Stock Market Rules, which require that we obtain shareholder approval for certain dilutive events such as for the establishment
or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain
transactions other than a public offering involving issuances of a 20% or more interest in the company, and certain acquisitions
of the stock or assets of another company. A foreign private issuer that elects to follow a home country practice instead of NASDAQ
requirements must submit to NASDAQ in advance a written statement from an independent counsel in such issuer’s home country
certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private
issuer must disclose in its annual reports filed with the SEC each such requirement that it does not follow and describe the home
country practice followed by the issuer instead of any such requirement. Accordingly, our shareholders may not be afforded the
same protection as provided under NASDAQ’s corporate governance rules.
CAPITALIZATION
AND INDEBTEDNESS
Our
capitalization and indebtedness will be set forth in a prospectus supplement to this prospectus or in a report on Form 6-K subsequently
furnished to the SEC and specifically incorporated herein by reference.
USE
OF PROCEEDS
Except
as otherwise provided in the applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities
covered by this prospectus for general corporate purposes, which may include working capital expenditures, acquisitions and investments.
Additional information on the use of net proceeds from the sale of securities covered by this prospectus may be set forth in the
prospectus supplement relating to the specific offering.
DIVIDEND
POLICY
We
have never declared or paid any cash dividend on our ordinary shares. We currently intend to retain any future earnings and do
not expect to pay any dividends in the foreseeable future. Any further determination to pay dividends on our ordinary shares will
be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results
of operations, capital requirements, general business conditions, and other factors that our board of directors considers relevant.
MARKET
FOR OUR ORDINARY SHARES
The
table below sets forth the high and low sales prices of our ordinary shares, as reported by the NASDAQ Capital Market during the
indicated periods. All of the share price information provided below has been adjusted to give effect to a 1 share for 2 shares
reverse share split effected on September 14, 2016
.
Period
|
|
High
|
|
|
Low
|
|
Last six calendar months
|
|
|
|
February 2018
|
|
$
|
2.14
|
|
|
$
|
1.93
|
|
March 2018
|
|
|
2.49
|
|
|
|
2.08
|
|
April 2018
|
|
|
2.63
|
|
|
|
2.20
|
|
May 2018
|
|
|
2.57
|
|
|
|
2.36
|
|
June 2018
|
|
|
3.08
|
|
|
|
2.56
|
|
July 2018
|
|
|
3.11
|
|
|
|
2.90
|
|
August 2018 (until August 14)
|
|
|
2.83
|
|
|
|
2.65
|
|
|
|
|
|
|
|
|
|
|
Financial quarters
during the past two years
|
|
|
|
|
|
|
|
|
Second Quarter 2016
|
|
|
|
|
|
|
|
|
Third Quarter 2016
|
|
|
1.50
|
|
|
|
0.93
|
|
Fourth Quarter 2016
|
|
|
1.28
|
|
|
|
1.00
|
|
First Quarter 2017
|
|
|
1.35
|
|
|
|
1.12
|
|
Second Quarter 2017
|
|
|
1.94
|
|
|
|
1.04
|
|
Third Quarter 2017
|
|
|
3.58
|
|
|
|
1.83
|
|
Fourth Quarter 2017
|
|
|
3.67
|
|
|
|
2.86
|
|
First Quarter 2018
|
|
|
3.09
|
|
|
|
1.93
|
|
Second Quarter 2018
|
|
|
3.08
|
|
|
|
2.20
|
|
Third Quarter 2018 (until August 14)
|
|
|
3.11
|
|
|
|
2.65
|
|
|
|
|
|
|
|
|
|
|
Five most recent
full financial years
|
|
|
|
|
|
|
|
|
2017
|
|
|
3.67
|
|
|
|
1.04
|
|
2016
|
|
|
1.50
|
|
|
|
0.56
|
|
2015
|
|
|
5.80
|
|
|
|
0.70
|
|
2014
|
|
|
11.94
|
|
|
|
2.60
|
|
2013
|
|
|
4.20
|
|
|
|
2.10
|
|
PLAN
OF DISTRIBUTION
We
may sell the securities being offered hereby in any one or more of the following methods from time to time:
|
●
|
to
or through one or more underwriters on a firm commitment or best efforts basis;
|
|
|
|
|
●
|
to
or through dealers, who may act as agents or principals, including a block trade (which may involve crosses) in which a broker
or dealer so engaged will attempt to sell as agent but may position and resell a portion of the block as principal to facilitate
the transaction;
|
|
|
|
|
●
|
through
agents;
|
|
|
|
|
●
|
through
privately negotiated transactions;
|
|
|
|
|
●
|
directly
to purchasers, including our affiliates;
|
|
|
|
|
●
|
purchases
by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this prospectus;
|
|
|
|
|
●
|
exchange
distributions and/or secondary distributions;
|
|
|
|
|
●
|
ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
|
|
|
|
|
●
|
to
one or more underwriters for resale to the public or to investors;
|
|
|
|
|
●
|
in
“at the market offerings,” to or through a market maker or into an existing trading market, on an exchange or
otherwise;
|
|
|
|
|
●
|
transactions
not involving market makers or established trading markets, including direct sales or privately negotiated transactions;
|
|
|
|
|
●
|
transactions
in options, swaps or other derivatives that may or may not be listed on an exchange or
|
|
|
|
|
●
|
in
any combination of these methods of sale.
|
The
prospectus supplement with respect to any offering of our securities will set forth the terms of the offering, including:
|
●
|
the
name or names and addresses of any underwriters, dealers or agents;
|
|
|
|
|
●
|
the
purchase price of the securities and the proceeds to us from the sale;
|
|
|
|
|
●
|
any
underwriting discounts and commissions or agency fees and other items constituting underwriters’ or agents’ compensation;
|
|
●
|
the
public offering price;
|
|
|
|
|
●
|
any
discounts or concessions allowed or reallowed or paid to dealers;
|
|
|
|
|
●
|
any
securities exchanges or markets on which such securities may be listed. And
|
|
|
|
|
●
|
any
delayed delivery arrangements.
|
The
distribution of the securities may be effected from time to time in one or more transactions at a fixed price or prices, which
may be changed, at market prices prevailing at the time of sale, at prices related to the prevailing market prices or at negotiated
prices, or in a combination of any of the above noted pricing methods.
If
securities are sold by means of an underwritten offering, we will execute an underwriting agreement with an underwriter or underwriters,
and the names of the specific managing underwriter or underwriters, as well as any other underwriters, and the terms of the transaction,
including commissions, discounts and any other compensation of the underwriters and dealers, if any, will be set forth in the
prospectus supplement which will be used by the underwriters to sell the securities. If underwriters are utilized in the sale
of the securities, the securities will be acquired by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at fixed public offering prices or at varying prices determined
by the underwriters at the time of sale. Maximum compensation to any underwriters, dealers or agents will not exceed any applicable
Financial Industry Regulatory Authority, or FINRA, limitations. In particular, in compliance with the guidelines of FINRA, the
aggregate maximum fees or other items of value to be received by any FINRA member or independent broker-dealer will not exceed
8% of the gross proceeds of any offering pursuant to this registration statement.
Our
securities may be offered to the public either through underwriting syndicates represented by managing underwriters or directly
by the managing underwriters. If any underwriter or underwriters are utilized in the sale of the securities, unless otherwise
indicated in the prospectus supplement, the underwriting agreement will provide that the obligations of the underwriters are subject
to conditions precedent and that the underwriters with respect to a sale of securities will be obligated to purchase all of those
securities if they purchase any of those securities.
We
may grant to the underwriters options to purchase additional securities to cover over-allotments, if any, at the public offering
price with additional underwriting discounts or commissions. If we grant any over-allotment option, the terms of any over-allotment
option will be set forth in the prospectus supplement relating to those securities.
If
a dealer is utilized in the sales of securities in respect of which this prospectus is delivered, we will sell those securities
to the dealer as principal. The dealer may then resell those securities to the public at varying prices to be determined by the
dealer at the time of resale. Any reselling dealer may be deemed to be an underwriter, as the term is defined in the Securities
Act of the securities so offered and sold. The name of the dealer and the terms of the transaction will be set forth in the related
prospectus supplement.
Offers
to purchase securities may be solicited by agents designated by us from time to time. Any agent involved in the offer or sale
of the securities in respect of which this prospectus is delivered will be named, and any commissions payable by us to the agent
will be set forth, in the applicable prospectus supplement. Unless otherwise indicated in the prospectus supplement, any agent
will be acting on a reasonable best efforts basis for the period of its appointment. Any agent may be deemed to be an underwriter,
as that term is defined in the Securities Act of the securities so offered and sold.
Offers
to purchase securities may be solicited directly by us and the sale of those securities may be made by us directly to institutional
investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale
of those securities. The terms of any sales of this type will be described in the related prospectus supplement.
We
also may sell directly to investors through subscription rights distributed to our shareholders on a pro rata basis. In connection
with any distribution of subscription rights to shareholders, if all of the underlying securities are not subscribed for, we may
sell the unsubscribed securities directly to third parties or may engage the services of one or more underwriters, dealers or
agents, including standby underwriters, to sell the unsubscribed securities to third parties.
Underwriters,
dealers, agents and remarketing firms may be entitled under relevant agreements entered into with us to indemnification by us
against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”),
that may arise from any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission to
state a material fact in this prospectus, any supplement or amendment hereto, or in the registration statement of which this prospectus
forms a part, or to contribution with respect to payments which the agents, underwriters or dealers may be required to make. We
may use underwriters, dealers, agents and remarketing firms with whom we have a material relationship. We will describe in the
prospectus supplement, naming the underwriter, dealers, agents and/or remarketing firm and the nature of any such relationship.
If
so indicated in the prospectus supplement, we will authorize underwriters or other persons acting as our agents to solicit offers
by institutions to purchase securities from us pursuant to contracts providing for payments and delivery on a future date. Institutions
with which contracts of this type may be made include commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all cases those institutions must be approved by us. The
obligations of any purchaser under any contract of this type will be subject to the condition that the purchase of the securities
shall not at the time of delivery be prohibited under the laws of the jurisdiction to which the purchaser is subject. The underwriters
and other persons acting as our agents will not have any responsibility in respect of the validity or performance of those contracts.
One
or more firms, referred to as “remarketing firms,” may also offer or sell the securities, if the prospectus supplement
so indicates, in connection with a remarketing arrangement upon their purchase. Remarketing firms will act as principals for their
own accounts or as agents for the Company or any of its subsidiaries. These remarketing firms will offer or sell the securities
in accordance with a redemption or repayment pursuant to the terms of the securities.
The
prospectus supplement will identify any remarketing firm and the terms of its agreement, if any, with the Company or any of its
subsidiaries and will describe the remarketing firm’s compensation. Remarketing firms may be deemed to be underwriters in
connection with the securities they remarket. Remarketing firms may be entitled under agreements that may be entered into with
the Company or any of its subsidiaries to indemnification by the Company or any of its subsidiaries against certain civil liabilities,
including liabilities under the Securities Act, and may engage in transactions with or perform services for the Company or any
of its subsidiaries in the ordinary course of business.
Disclosure
in the prospectus supplement of our use of delayed delivery contracts will include the commission that underwriters and agents
soliciting purchases of the securities under delayed contracts will be entitled to receive in addition to the date when we will
demand payment and delivery of the securities under the delayed delivery contracts. These delayed delivery contracts will be subject
only to the conditions that we describe in the prospectus supplement.
In
connection with the offering of securities, persons participating in the offering, such as any underwriters, may purchase and
sell securities in the open market. These transactions may include over-allotment and stabilizing transactions and purchases to
cover syndicate short positions created in connection with the offering. Stabilizing transactions consist of bids or purchases
for the purpose of preventing or retarding a decline in the market price of the securities, and syndicate short positions involve
the sale by underwriters of a greater number of securities than they are required to purchase from any issuer in the offering.
Underwriters also may impose a penalty bid, whereby selling concessions allowed to syndicate members or other broker-dealers in
respect of the securities sold in the offering for their account may be reclaimed by the syndicate if the securities are repurchased
by the syndicate in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market
price of the securities, which may be higher than the price that might prevail in the open market, and these activities, if commenced,
may be discontinued at any time.
An
underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordance
with Regulation M under the Securities Exchange Act of 1934. Overallotment involves sales in excess of the offering size, which
create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids
do not exceed a specified maximum. Short covering transactions involve purchases of the securities in the open market after the
distribution is completed to cover short positions. Penalty bids permit the underwriter to reclaim a selling concession from a
dealer when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. These
activities may cause the price of our securities to be higher than it would otherwise be on the open market. The underwriter may
discontinue any of these activities at any time.
All
securities we offer, other than ordinary shares, will be new issues of securities, with no established trading market. Underwriters
may make a market in these securities, but will not be obligated to do so and may discontinue market making at any time without
notice. We cannot guarantee the liquidity of the trading markets for any securities.
Under
applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to the ordinary shares for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution.
DESCRIPTION
OF ORDINARY SHARES
Our
registered share capital consists of a single class of ordinary shares, par value NIS 0.03 per share. As of the date hereof, our
authorized share capital consisted of
100,000,000 ordinary shares
ordinary shares,
and there were 32,908,836 of our ordinary shares issued and outstanding.
All
our issued and outstanding ordinary shares are fully paid and non-assessable and are issued in registered form. Our ordinary shares
do not have preemptive rights and there are no sinking fund provisions applicable to our ordinary shares.
The
following summary description of our capital stock summarizes general terms and provisions that apply to the capital stock. Because
this is only a summary, it does not contain all of the information that may be important to you. This summary is subject to and
qualified in its entirety by reference to our memorandum of association and articles of association, as amended, each of which
are on file with the SEC. See “Where You Can Find More Information.”
Purposes
and Objects of the Company
We
are registered with the Israeli Companies Registry and have been assigned company number 52-003532-0. Section 2 of our memorandum
of association provides that we were established for the purpose of engaging in the business of providing services of planning,
development, consultation and instruction in the electronics field. In addition, the purpose of our company is to perform various
corporate activities permissible under Israeli law.
On
February 1, 2000, the Israeli Companies Law, 5759-1999, or the Companies Law, came into effect and superseded most of the provisions
of the Israeli Companies Ordinance (New Version), 5743-1983, except for certain provisions which relate to liens, bankruptcy,
dissolution and liquidation of companies. Under the Israeli Companies Law, as recently amended, various provisions, some of which
are detailed below, overrule the current provisions of our articles of association.
The
Powers of the Directors
Under
the provisions of the Companies Law, and our articles of association, a director cannot participate in a meeting nor vote on a
proposal, arrangement or contract in which he or she is materially interested. In addition, our directors cannot vote compensation
to themselves or any members of their body without the approval of our compensation committee and our shareholders at a general
meeting. The authority of our directors to enter into borrowing arrangements on our behalf is not limited, except in the same
manner as any other transaction by us.
Under
our articles of association, retirement of directors from office is not subject to any age limitation and our directors are not
required to own shares in our company in order to qualify to serve as directors.
Rights
Attached to Shares
Our
registered share capital consists of a single class of ordinary shares, par value NIS 0.03 per share. As of the date hereof, our
authorized share capital consisted of
100,000,000 ordinary shares
ordinary shares,
and there were 32,908,836 of our ordinary shares issued and outstanding. All outstanding ordinary shares are validly issued, fully
paid and non-assessable. The rights attached to the ordinary shares are as follows:
Dividend
rights.
Holders of our ordinary shares are entitled to the full amount of any cash or share dividend subsequently declared.
The board of directors may declare interim dividends and propose the final dividend with respect to any fiscal year only out of
the retained earnings, in accordance with the provisions of the Israeli Companies Law. Our articles of association provide that
the declaration of a dividend requires approval by an ordinary resolution of the shareholders, which may decrease but not increase
the amount proposed by the board of directors.
Voting
rights.
Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders.
Such voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential
rights that may be authorized in the future.
An
ordinary resolution, such as a resolution for the declaration of dividends, requires approval by the holders of a majority of
the voting rights represented at the meeting, in person, by proxy or by written ballot and voting on the matter. Under our articles
of association, a special resolution, such as amending our memorandum of association or articles of association, approving any
change in capitalization, winding-up, authorization of a class of shares with special rights, or other changes as specified in
our articles of association, requires approval of a special majority, representing the holders of no less than 75% of the voting
rights represented at the meeting in person, by proxy or by written ballot, and voting on the matter.
Pursuant
to our articles, the directors, except for the external directors, shall be elected at the Annual General Meeting by the vote
of the holders of a majority of the voting power represented at such meeting in person or by proxy and voting on the election
of directors, and each director shall generally serve until the Annual General Meeting next following the Annual General Meeting
at which such director was appointed, or his earlier vacation of office or removal pursuant to articles. Except with respect to
the removal of external directors, the shareholders shall be entitled to remove any director(s) from office, by a simple majority
of the voting power of the Company represented at the meeting in person or by proxy and voting thereon. All of the members of
our Board of Directors (except the external directors) may be reelected upon completion of their term of office.
Rights
to share in the company’s profits.
Our shareholders have the right to share in our profits distributed as a dividend
and any other permitted distribution.
Rights
to share in surplus in the event of liquidation.
In the event of our liquidation, after satisfaction of liabilities to creditors,
our assets will be distributed to the holders of ordinary shares in proportion to the nominal value of their holdings. This right
may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential
rights that may be authorized in the future.
Liability
to capital calls by the company.
Under our memorandum of association and the Israeli Companies Law, the liability of our shareholders
is limited to the par value of the shares held by them.
Changing
Rights Attached to Shares
According
to our articles, in order to change the rights attached to any class of shares, unless otherwise provided by the terms of the
class, such change must be adopted by a general meeting of the shareholders and by a separate general meeting of the holders of
the affected class with a simple majority of the voting power participating in such meeting.
Annual
and Special General Meetings
The
board of directors must convene an annual meeting of shareholders at least once every calendar year, within 15 months of the last
annual meeting. Depending on the matter to be voted upon, notice of at least 21 days or 35 days prior to the date of the meeting
is required. Our board of directors may, in its discretion, convene additional meetings as “special general meetings.”
In addition, the board of directors must convene a special general meeting upon the demand of two of the directors, 25% of the
nominated directors, one or more shareholders having at least 5% of the outstanding share capital and at least 1% of the voting
power in the company, or one or more shareholders having at least 5% of the voting power in the company.
Quorum
The
quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in person or represented
by proxy who hold or represent, in the aggregate, at least one-third of the voting rights of the issued share capital. A meeting
adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place or any
time and place as the directors designate in a notice to the shareholders. At the reconvened meeting, the required quorum consists
of any two shareholders present in person or by proxy.
Limitations
on the Rights to Own Securities in Our Company
Neither
our memorandum of association or our articles of association nor the laws of the State of Israel restrict in any way the ownership
or voting of shares by non-residents, except with respect to subjects of countries which are in a state of war with Israel.
The
transfer agent and registrar for our ordinary shares is American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn,
NY 11219.
DESCRIPTION
OF WARRANTS
We
may issue warrants to purchase ordinary shares and/or debt securities in one or more series together with other securities or
separately, as described in the applicable prospectus supplement. Below is a description of certain general terms and provisions
of the warrants that we may offer. Particular terms of the warrants will be described in the warrant agreements and the prospectus
supplement for the warrants.
The
applicable prospectus supplement will contain, where applicable, the following terms of and other information relating to the
warrants:
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the
specific designation and aggregate number of, and the price at which we will issue, the warrants;
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the
currency or currency units in which the offering price, if any, and the exercise price are payable;
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the
designation, amount, and terms of the securities purchasable upon exercise of the warrants;
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if
applicable, the exercise price for ordinary shares and the number of ordinary shares to be received upon exercise of the warrants;
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if
applicable, the exercise price for our debt securities, the amount of debt securities to be received upon exercise, and a
description of that series of debt securities;
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the
date on which the right to exercise the warrants will begin and the date on which that right will expire or, if you may not
continuously exercise the warrants throughout that period, the specific date or dates on which you may exercise the warrants;
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whether
the warrants will be issued in fully registered form or bearer form, in definitive or global form, or in any combination of
these forms, although, in any case, the form of a warrant included in a unit will correspond to the form of the unit and of
any security included in that unit;
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any
applicable material U.S. federal income tax consequences;
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the
identity of the warrant agent for the warrants and of any other depositaries, execution or paying agents, transfer agents,
registrars, or other agents;
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the
proposed listing, if any, of the warrants or any securities purchasable upon exercise of the warrants on any securities exchange;
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if
applicable, the date from and after which the warrants and the ordinary shares and/or debt securities will be separately transferable;
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if
applicable, the minimum or maximum amount of the warrants that may be exercised at any other time;
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information
with respect to book-entry procedures, if any;
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the
anti-dilution provisions of the warrants, if any;
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any
redemption or call provisions;
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whether
the warrants are to be sold separately or with other securities as parts of units; and
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any
additional terms of the warrants, including terms, procedures, and limitations relating to the exchange and exercise of the
warrants.
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DESCRIPTION
OF SUBSCRIPTION RIGHTS
We
may issue subscription rights to purchase our ordinary shares. These subscription rights may be issued independently or together
with any other security offered hereby and may or may not be transferable by the shareholder receiving the subscription rights
in such offering. In connection with any offering of subscription rights, we may enter into a standby arrangement with one or
more underwriters or other purchasers pursuant to which the underwriters or other purchasers may be required to purchase any securities
remaining unsubscribed for after such offering.
The
prospectus supplement relating to any subscription rights we offer, if any, will, to the extent applicable, include specific terms
relating to the offering, including some or all of the following:
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the
price, if any, for the subscription rights;
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the
exercise price payable for each ordinary share upon the exercise of the subscription rights;
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the
number of subscription rights to be issued to each shareholder;
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the
number and terms of the shares ordinary shares which may be purchased per each subscription right;
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the
extent to which the subscription rights are transferable;
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any
other terms of the subscription rights, including the terms, procedures and limitations relating to the exchange and exercise
of the subscription rights;
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the
date on which the right to exercise the subscription rights shall commence, and the date on which the subscription rights
shall expire;
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the
extent to which the subscription rights may include an over-subscription privilege with respect to unsubscribed securities;
and
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if
applicable, the material terms of any standby underwriting or purchase arrangement which may be entered into by us in connection
with the offering of subscription rights.
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The
description in the applicable prospectus supplement of any subscription rights we offer will not necessarily be complete and will
be qualified in its entirety by reference to the applicable subscription right agreement, which will be filed with the SEC if
we offer subscription rights. For more information on how you can obtain copies of the applicable subscription right agreement
if we offer subscription rights, see the sections entitled “Where You Can Find More Information” and “Incorporation
of Information by Reference”. We urge you to read the applicable subscription right agreement and any applicable prospectus
supplement in their entirety.
DESCRIPTION
OF UNITS
We
may, from time to time, issue units comprised of one or more of the other securities that may be offered under this prospectus,
in any combination.
Each
unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder
of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is
issued may provide that the securities included in the unit may not be held or transferred separately at any time, or at any time
before a specified date.
Any
applicable prospectus supplement will describe:
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the
material terms of the units and of the securities comprising the units, including whether and under what circumstances those
securities may be held or transferred separately;
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any
material provisions relating to the issuance, payment, settlement, transfer or exchange of the units or of the securities
comprising the units; and
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any
material provisions of the governing unit agreement that differ from those described above.
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The
description in the applicable prospectus supplement of any units we offer will not necessarily be complete and will be qualified
in its entirety by reference to the applicable unit agreement, which will be filed with the SEC if we offer units. For more information
on how you can obtain copies of the applicable unit agreement if we offer warrants, see the sections entitled “Where You
Can Find More Information” and “Incorporation of Information by Reference”. We urge you to read the applicable
unit agreement and any applicable prospectus supplement in their entirety.
FOREIGN
EXCHANGE CONTROLS AND OTHER LIMITATIONS
Israeli
law and regulations do not impose any material foreign exchange restrictions on non-Israeli holders of our ordinary shares.
Non-residents
of Israel who purchase our securities will be able to convert dividends, if any, thereon, and any amounts payable upon our dissolution,
liquidation or winding up, as well as the proceeds of any sale in Israel of our securities to an Israeli resident, into freely
repairable dollars, at the exchange rate prevailing at the time of conversion, provided that the Israeli income tax has been withheld
(or paid) with respect to such amounts or an exemption has been obtained.
TAXATION
The
material Israeli and U.S. federal income tax consequences relating to the purchase, ownership and disposition of any securities
offered by the prospectus will be set forth in a supplement to this prospectus.
OFFERING
EXPENSES
We
estimate the following expenses in connection with this prospectus:
SEC Registration Fee
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$
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4,594
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Legal fees and expenses
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12,500
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Accountants’ fees and expenses
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4,000
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Miscellaneous
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5,000
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Total
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$
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26,094
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LEGAL
MATTERS
The
validity of the securities being offered by this prospectus and any accompanying prospectus supplement and other legal matters
concerning this offering relating to Israeli law will be passed upon for us by S. Friedman & Co., Tel Aviv, Israel. Carter
Ledyard & Milburn LLP, New York, New York, will be passing upon matters of United States law for us with respect to securities
offered by this prospectus and any accompanying prospectus supplement.
EXPERTS
The
consolidated financial statements incorporated in this prospectus by reference from our 2017 Form 20-F, as amended, have been
audited by Kost Forer Gabbay & Kasierer, a Member of Ernst & Young Global, Independent Registered Public Accounting Firm,
as set forth in their reports thereon incorporated herein by reference.
ENFORCEABILITY
OF CIVIL LIABILITIES
We
are incorporated in Israel, all of our executive officers and directors and the Israeli experts named herein are non-residents
of the United States, and a substantial portion of our assets and the assets of such persons are located outside the United States.
For further information regarding enforceability of civil liabilities against us and certain other persons, see the risk factor
that begins with “Service and enforcement of legal process” under the heading “Risk Factors.”
AUTHORIZED
REPRESENTATIVE
Our
authorized representative in the United States for this offering as required pursuant to Section 6(a) of the Securities Act is
our subsidiary, RADA Sensors Inc., 8403 Colesville Rd., Suite 1100, Silver Spring, MD 20910.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus is a part of a registration statement on Form F-3 that we filed with the SEC under the Securities Act of 1933. We refer
you to this registration statement, for further information about us and the securities offered hereby.
We
file annual and special reports and other information with the Securities and Exchange Commission (Commission File Number 0-15375).
These filings contain important information that does not appear in this prospectus. For further information about us, you may
read and copy these filings at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0102.
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330, and may obtain
copies of our filings from the public reference room by calling (202) 551-8090. Our SEC filings are also available on the SEC
Internet site at http://www.sec.gov, which contains periodic reports and other information regarding issuers that file electronically.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
Commission allows us to “incorporate by reference” information into this prospectus, which means that we can disclose
important information to you by referring you to other documents which we have filed or will file with the Commission. We are
incorporating by reference in this prospectus the documents listed below and all amendments or supplements we may file to such
documents, as well as any future filings we may make with the Commission on Form 20-F under the Exchange Act before the time that
all of the securities offered by this prospectus have been sold or de-registered.
The
following documents furnished or filed with the SEC are incorporated in this prospectus by reference:
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Our
2017 Form 20-F, filed with the SEC on March 28, 2018;
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Our
reports of foreign private issuer on Form 6-K (including exhibits thereto) furnished to the SEC on May 7, 2018, May 23, 2018
(2018 First Quarter Summary section of Exhibit 99.1 thereto only), June 7, 2018 and June 29, 2018 (excluding last paragraph).
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Any
future reports on Form 6-K to the extent that we indicate they are incorporated by reference into this registration statement;
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Any
future annual reports on Form 20-F that we may file with the SEC under the Exchange Act, prior to the termination of any offering
contemplated by the prospectus; and
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The
description of our securities contained in Item 1 of our Registration Statement on Form 8-A filed with the SEC on February
4, 1987 under the Exchange Act and any amendment or report filed for the purpose of updating that description.
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Certain
statements in and portions of this prospectus update and replace information in the above listed documents incorporated by reference.
Likewise, statements in or portions of a future document incorporated by reference in this prospectus may update and replace statements
in and portions of this prospectus or the above listed documents.
We
will provide to each person, including any beneficial owner, to whom this prospectus is delivered, a copy of any or all the information
that has been incorporated by reference in this prospectus but not delivered with this prospectus (and any exhibits specifically
incorporated in such information), at no cost, upon written or oral request to us at the following address:
RADA
Electronics Ltd.
7
Giborei Israel Street
Netanya
4250407, Israel
Tel:
972-9-892-1111
Attn:
Chief Financial Officer
You
may also obtain information about us by visiting our website at www.RADA.com. Information contained in our website is not part
of this prospectus.
You
should rely only on the information contained or incorporated in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. You should not rely on any other representations. Our affairs may change after
this prospectus or any supplement is distributed. You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents. You should read all information supplementing
this prospectus.
4,545,454
Ordinary Shares
PROSPECTUS
SUPPLEMENT
November
28, 2018
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