20-F

F  

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

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

OR

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

For the fiscal year ended December 31, 2017

OR

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

OR

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

Date of event requiring this shell company report _______________

Commission file number:  000-29884

EVIATION AIRCRAFT LTD.

 (Exact name of Registrant as specified in its charter)

Eviation Aircraft Ltd.	Israel
(Translation of Registrant’s name into English)	(Jurisdiction of incorporation or organization)

1 Ha’Ofeh Street, Kadima-Tzoran 6092000, Israel

(Address of principal executive offices)

Liza Ohayon, 972-8-913-7914, liza@eviation.co,1 Ha’Ofeh Street, Kadima-Tzoran 6092000, Israel

(Name, Telephone, E-mail and/or Facsimile number and Address of the Registrant’s Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act: None.

Securities registered or to be registered pursuant to Section 12(g) of the Act: Ordinary shares, no par value per share.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

10,694,820ordinary shares, no par value per share, as of December 31, 2017.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐      No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐      No ☒

 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒      No ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Emerging Growth Company ☐

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

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

U.S. GAAP ☐

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

Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant elected to follow.

Item 17 ☐   Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐   No ☒

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CERTAIN TERMS AND CONVENTIONS

In this annual report, unless the context otherwise requires:

§ references to “Eviation,” “we,” “us,” “our,” “our company” and “the Company” refer to Eviation Aircraft Ltd. and its wholly-owned subsidiary, Eviation Tech Ltd, which is sometimes specifically referred to as the “Subsidiary”.

§ references to “U.S. Dollars,” “$” or “dollars” are to U.S. dollars;

§ references to “NIS” or “shekels” are to New Israeli Shekels;

§ references to “Ordinary Shares”, “our shares” and similar expressions refer to our ordinary shares, no par value per share;

§ references to the “articles of association” or “articles” are to our Amended and Restated Articles of Association;

§ references to the “Companies Law” are to the Israeli Companies Law, 5759-1999, as amended;

§ references to the “Exchange Act” are to the Securities Exchange Act of 1934, as amended;

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

Unless derived from our financial statements or otherwise noted, amounts presented in this annual report are translated at the rate of $1.00 = NIS 3.467, the exchange rate between the NIS and the U.S. dollar reported by the Bank of Israel as of December 29, 2017.

This annual report includes other statistical, market and industry data and forecasts, which we obtained from publicly available information and independent industry publications and reports that we believe to be reliable sources. Some data is also based on our good faith estimates which are derived from management’s knowledge of the industry and independent sources. These publicly available industry publications and reports generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness of the information. Although we believe that these sources are reliable and are not aware of any misstatements regarding the industry data presented in this annual report, we have not independently verified the information contained in such publications. Certain estimates and forecasts involve uncertainties and risks and are subject to change based on various factors, including those discussed under the headings “Special Note Regarding Forward-Looking Statements” and “Item 3.D - Risk Factors” in this annual report.

All trademarks, service marks, trade names and registered marks used in this report are trademarks, trade names or registered marks of their respective owners.

Forward Looking Statements

This Annual Report on Form 20-F contains forward-looking statements that are intended to be, and are hereby identified as, forward looking statements for the purposes of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements address, among other things:

● our intended business plans;

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● our ability to raise working capital to realize our business plans;

● the regulatory and competitive landscape of the light aircraft aviation industry;

● the viability and profitability of the light aircraft aviation market which we have newly entered;

● market acceptance of our light electric powered passenger aviation aircraft;

● our expectations regarding our expenses and future revenue;

● the ability to control costs;

● changes in costs and the availability of goods and services;

● our expectations regarding competition as more and larger companies enter our markets and as existing competitors improve or expand their product offerings;

● our anticipated cash needs and our estimates regarding our capital requirement;

● the possibility of future litigation;

● market, economic and political factors in Israel, where our design operations are based, and worldwide;

● our contractors’ technical, professional and financial ability to deliver on and comply with their contractual undertakings towards us and our subsidiary;

● our ability to familiarize ourselves with the light aircraft passenger aviation market, and to track, monitor and manage the projects which we have undertaken; and

● the price and liquidity of our Ordinary Shares.

Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including all the risks discussed below and elsewhere in this report.

We urge you to consider that statements that use the terms “believe”, “expect”, “plan”, “intend”, “estimate”, “anticipate”, “projections”, “forecast”, “may”, “continue”, “should”, “predict”, “potential” or the negative of these terms or similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events. These statements are based on assumptions and are subject to risks and uncertainties. These risk factors and uncertainties include, amongst others, our lack of revenue to date, the impact of a default by us under the secured financing arrangement with our shareholders,uncertainty with respect to our obtaining additional capital that we will require to implement our business plan, consumers’ willingness to adopt a light electric aircraft, the limited operating history upon which to evaluate our business, general worldwide economic conditions and the availability of financing for working capital purposes and to refinance our outstanding indebtedness; and additional risks and uncertainties set forth in this Annual Report, including under the heading “Risk Factors.” Except as required by applicable law, including the federal 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.

Market data and forecasts used in this report have been obtained from independent industry sources that we believe to be reliable. We have not independently verified the data obtained from these sources and we cannot assure you of the accuracy or completeness of the data. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and additional uncertainties accompanying any estimates of future market size.

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FORM 20-F

ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

PART ONE
Item 1.	Identity of Directors, Senior Management and Advisors	6
Item 2.	Offer Statistics and Expected Timetable	6
Item 3.	Key Information regarding Eviation	6
Item 4.	Information on the Company	19
Item 4A.	Unresolved Staff Comments	28
Item 5.	Operating and Financial Review and Prospects	28
Item 6.	Directors, Senior Management and Employees	34
Item 7.	Major Shareholders and Related Party Transactions	46
Item 8.	Financial Information	49
Item 9.	The Offer and Listing	49
Item 10.	Additional Information	50
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 12.	Description of Securities Other Than Equity Securities	63
PART TWO
Item 13.	Defaults, Dividend Arrearages and Delinquencies	64
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	64
Item 15.	Controls and Procedures	64
Item 16A.	Audit Committee Financial Expert	65
Item 16B.	Code of Ethics	65
Item 16C.	Principal Accountant Fees and Services	65
Item 16D.	Exemptions from the Listing Standards for Audit Committees	65
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	65
Item 16F.	Change in Registrant’s Certifying Accountant	66
Item 16G.	Corporate Governance	66
Item 16H.	Mine Safety Disclosure	66
PART THREE
Item 17.	Financial Statements	66
Item 18.	Financial Statements	66
Item 19.	Exhibits	66
Signatures		68
Index to Financial Statements		F-1

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable

ITEM 3. KEY INFORMATION REGARDING EVIATION

A. SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data in conjunction with the section of this annual report entitled “Item 5 - Operating and Financial Review and Prospects” and our consolidated financial statements and the notes thereto included elsewhere in this annual report.

The selected data presented below under the captions “Statement of Comprehensive Loss Data,” for each of the years in the three-year period ended December 31, 2017 and under “Statement of Financial Position Data” as of December 31, 2017 and 2016, are derived from our audited consolidated financial statements appearing elsewhere in this annual report. The selected data should be read in conjunction with the consolidated financial statements and the related notes. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The financial statements were audited by Somekh Chaikin, an independent registered public accounting firm and a member of KPMG International, or “Somekh Chaikin”. The selected consolidated financial data presented below should be read in conjunction with and is qualified entirely by reference to Item 5: “Operating and Financial Review and Prospects” and the Notes to the Financial Statements included in this Annual Report on Form 20-F.

  

As of December 31, 2015, Eviation Aircraft Ltd., formerly known as R.V.B. Holdings Ltd. was under the management of a temporary liquidator, or the Temporary Liquidator, appointed by the District Court of Tel Aviv in Israel at the request of certain creditors of the Company with a mandate to identify and liquidate the Company’s assets. Effective February 2016, the Company was sold to two of our principal shareholders. The financial information below through December 31, 2015 represents the historical results of the waste-disposal management business in which the Company was engaged prior to the sale of the Company by the Temporary Liquidator, which we have classified as discontinued operations. See Item 4 below.

	Year ended December 31,
	2017		2016			2015
	(U.S. dollars in thousands, except share and per share data)
Research and development expenses		1,146		1,829			-
Marketing, administrative and general expenses		747		341			-
Total Expenses		1,893		2,170			-
							-
Operating loss		1,893		2,170
Financing expenses		235		71			-
Loss before taxes on income		2,128		2,241			-
Taxes on income		31		(553	)		-
Loss from continuing operations		2,159		1,688			-
Loss from discontinued operation		-		-			226
Loss for the year		2,159		1,688			226
Loss attributable to:
Owners of the Company		2,159		1,688			201
Non-controlling interests		-		-			25
Loss for the year		2,159		1,688			226
Continued operations
Basic and diluted loss per ordinary share		0.19		0.20			-
Discontinued operation
Basic and diluted loss per ordinary share		-		-			26.43
Weighted average number of ordinary shares used in basic and diluted loss per Ordinary Share calculation		11,505,260		8,494,658			7,605

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	2017			2016			2015
Statement of Financial Position Data:
Cash and cash equivalents		284			858			-
Property and equipment		366			305			-
Total assets		914			1,257			20
Shareholders loans		(781	)		(617	)		-
Equity attributable to owners of the Company (deficit)		(839	)		163			(1,127	)
Non-controlling interests		-			-			173
Total equity (deficit)		(839	)		163			(954	)

B. CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D. RISK FACTORS

The risk factors below relate solely to our current business focus in the area of developing and commercializing a light passenger electric operated propulsion aircraft. You should carefully consider the risks described below and in the other sections of, and the documents we have incorporated by reference into this prospectus before making an investment decision. The risks described below and in the documents we have incorporated by reference into this prospectus are not the only ones facing our company. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our ordinary shares could decline due to any of these risks.

RISKS RELATED TO OUR BUSINESS AND PRODUCTS

We are a start-up company.

The Company’s sole business is conducted by our wholly owned subsidiary, Eviation Tech Ltd., an Israeli start-up company engaged in designing and developing an electric powered light passenger aircraft. We have not generated any revenue since the commencement of our current operation in May 2016. We are currently in the proof of concept stage and intend to test all the components of the enabling core technologies (airframe design, electric drive, battery technology and autonomous flight and sensing systems). Testing will take place on scaled models that are currently undergoing flight tests and on the full-scale prototype, Eviation Alice, currently under construction. We expect to incur significant operating losses for the foreseeable future, and there can be no assurance that we will be able to validate and market products in the future that will generate revenues, or that any revenues generated will be sufficient for us to become profitable or thereafter maintain profitability. While we believe that our available cash resources including proceeds from prior equity investments, equity investments expected to be completed during 2018 and grants from  the Office of the Chief Scientist of the Ministry of National Infrastructures, Energy, Water and Resources of Israel (or the “OCS”) are sufficient to meet our operating requirements in the foreseeable future, the likelihood of success of our business plan must be considered in light of the challenges, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early-stage businesses and the regulatory and competitive environment in which we operate. Startup product development is a highly speculative undertaking, involves a substantial degree of risk, and is a capital-intensive business. If we cannot successfully execute our plan to develop the aviation aircraft, our business may not succeed.

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We have a limited operating history upon which to evaluate our business.

We commenced our current business operations in February 2016. As such, we have a limited history of operations in our industry. Accordingly, it is more difficult to accurately assess growth rate and earnings potential. Our business is dependent upon the implementation of our business plan. Our limited operating history makes it difficult for prospective investors to evaluate our business. Therefore, our operations are subject to all of the risks inherent in the initial expenses, challenges, complications and delays frequently encountered in connection with the early stages of any new business, as well as those risks that are specific to a newly emerging and untried field within the aviation industry, an electric powered light aviation aircraft. Investors should evaluate us in light of the problems and uncertainties frequently encountered by early stage companies attempting, like ours, to develop markets for new products, services, and technologies, such as unforeseen capital requirements, failure of market acceptance, failure to establish business relationships, and competitive disadvantages as against larger and more established companies. If we are unable to successfully address these difficulties as they arise, our future growth and earnings will be negatively affected.

We may be unable to obtain additional capital that we will require to implement our business plan, which could restrict our ability to develop an electric powered light passenger aircraft and implement our business plan.

We have, to date, received a number of equity investments and loans from our controlling shareholders and their affiliates. In addition, an amount of $2 million was advanced to the Company by an investor, pursuant to a Binding Memorandum of Understanding entered into as of February 18, 2018.

However, we will require additional capital to develop an electric powered light passenger aircraft and implement our business plan beyond the development phase. We plan to partner with an established airframe manufacturer to support and fund the process of commercialization of the design of our aircraft. We may not succeed in securing such partnerships. Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:

● Investors’ perception of an aviation company, and demand for its securities;

● conditions of the U.S. and other capital markets in which we may seek to raise funds;

Financing may not be available in amounts or on terms acceptable to us, if at all. In addition, our administrative requirements (such as salaries, insurance, expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) may require a substantial amount of additional capital and cash flow.

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes, which may adversely impact our financial condition. Our ability to obtain needed financing may be further impaired by such factors as the state of the capital markets, our status as a new enterprise without a significant demonstrated operating history or the loss of key management. The failure to maintain, extend, renew or replace any new sources of financing with a comparable arrangement or arrangements that provide similar amounts of liquidity for the Company would have a material negative impact on our overall liquidity, financial and operating results, and we may be required to cease our operations.

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A default by us under the secured financing arrangement with our shareholders would enable them to take control of our assets.

We have outstanding debts to our controlling shareholders. We incurred such debt pursuant to two loan agreements, or the Loan Agreements, entered separately, between our controlling shareholders, and each of the Company and the Subsidiary. Pursuant to the terms of the Loan Agreements, we have granted to Mr. Tzidon and Magic Stones a security interest on all of the assets of the Subsidiary, including its intellectual property as well as the shareholdings of the Subsidiary. A default by us under these Loan Agreements would enable the holders to foreclose on our assets, including our intellectual property. Any foreclosure could force us to substantially curtail or cease our operations.

Our lack of diversification will increase the risk of an investment in the Company, and our financial condition and results of operation may deteriorate if we fail to diversify.

Our business is focused on the regional transportation (or aviation) industry. Larger companies have the ability to manage their risk by diversification. However, we lack and expect to continue to lack diversification, in terms of both the nature and geographic scope of our business. As a result, the impact of factors affecting our industry or the regions in which we operate would likely affect us more than they would were our business more diversified, enhancing our risk profile. If we cannot diversify or expand our operations, our financial condition and results of operations could deteriorate rapidly in the face of such factors.

The success of our business depends upon the continuing contributions of our Chief Executive Officer and other key personnel and our ability to attract highly qualified personnel to expand our business.

We rely and will continue to rely heavily on the services of our CEO, Mr. Omer Bar-Yohay and the active chairman of our Board of Directors and controlling shareholder Aviv Tzidon. Loss of the services of any of such individuals or any other key management and technical personnel could have a material adverse impact on our future operations. Our success is also dependent on our ability to retain key employees and our ability to attract and retain, among others, skilled financial, engineering, technical and managerial personnel to continue the development and commercialization of our products. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employees or consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on our business, financial condition and results of operation. In addition, if we fail to engage qualified personnel, we may be unable to meet our responsibilities as a public reporting company under the rules and regulations of the SEC.

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We may not be able to compete successfully against current and future competitors.

We expect to compete in our proposed businesses with other companies including major companies in the aviation industry, most, if not all of which, have far greater marketing and financial resources and experience than we do. A number of our competitors have long operating histories, large customer bases, substantial financial, technical, sales, marketing and other resources, and strong name recognition. Current and potential competitors have established, and may establish in the future, cooperative relationships among themselves or with third parties. A number of companies may develop and offer products that provide the same or greater functionality than our product. To be competitive, we must respond promptly and effectively to the challenges of technological change, evolving standards and competitors’ innovations. We may not be able to maintain our competitive position against current or potential competitors, especially those in the general aviation market with significantly greater financial, marketing, service, support, technical and other competitive resources. Competitors with greater resources may be able to undertake more extensive marketing campaigns, adopt more aggressive name recognition and pricing policies and make more attractive offers to potential employees, distributors, resellers or other strategic partners. We expect additional competition from other established and emerging companies as the market for light aircrafts continues to develop.

Effective competition could result in price reductions, decreased margins or have other negative implications, any of which could adversely affect our business and chances for success. Our positioning in the marketplace may place a significant strain on our management, operational and financial resources, and increase demand on our systems and controls. Competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of these potential competitors are likely to enjoy substantial competitive advantages, including larger technical staffs, greater name recognition, larger customer bases and substantially greater financial, marketing, technical and other resources. Any pricing pressures, reduced margins or loss of market share resulting from increased competition or our failure to compete effectively could seriously damage our business and chances for success. As we attempt to compete, we may encounter delays or cost overruns or suffer other adverse consequences in implementing new systems when required.

We may be forced to abandon development of the Eviation Alice, which will significantly impair our ability to generate revenues.

We are currently in the proof of concept stage and intend to test all the components of the Eviation Alice enabling core technologies (airframe design, electric drive, battery technology and autonomous flight and sensing systems). Testing will take place on scaled models and on the Eviation Alice prototype that are currently under construction. The results of such testing may not support the claims sought by us. Further, success in the proof of concept stage does not ensure that the later stages of development would be successful, and the results of later testing may not meet our expectation or the results of the proof of concept stage. Any such failure may cause us to abandon the development of the Eviation Alice.

Our future growth is dependent upon consumers’ willingness to adopt light electric aircraft.

Our growth is highly dependent upon the adoption by consumers of light electric aircraft as a viable alternative for regional travel, and we are subject to an elevated risk of any reduced demand for alternative fuel aircraft in general, and light electric aircraft in particular. If the markets for light electric aircraft in North America, Europe and Asia do not develop as we expect, or develop more slowly than we expect, or the Eviation Alice is not accepted by such markets, our business, prospects, financial condition and operating results will be harmed. The market for alternative fuel aircraft is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards.

  

Other factors that may influence the adoption of alternative fuel aircraft, and specifically electric aircraft, include:

● perceptions about electric aircraft quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric aircraft;

● perceptions about airplane safety in general, in particular safety issues that may be attributed to the use of advanced technology;

● the limited range over which electric aircraft may fly on a single battery charge and the effects of weather on this range;

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● the decline of an electric aircraft’s range resulting from deterioration over time in the battery’s ability to hold a charge;

● the availability of service for an electric aircraft;

● concerns about electric grid capacity and reliability, which could derail our present efforts to promote the electric aircraft as a practical solution to an aircraft which require gasoline;

● consumers’ desire and ability to use an electric aircraft in regional trips instead of other alternatives such as trains, buses and cars;

● government regulations and economic incentives promoting fuel efficiency and alternate forms of energy as well as tax and other governmental incentives to purchase and use electric aircraft;

Our business is subject to extensive and costly government regulation.

When completed, Eviation Alice would be subject to extensive regulation and we may never obtain the certification required for its operation. In the United States, the Eviation Alice must comply with Federal Aviation Administration, or the FAA, regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety before it can be certified. The FAA and other foreign regulatory authorities have full discretion over this approval process. We will need to perform significant testing of the Eviation Alice and its systems before we could file an application for certification. We may encounter delays or rejections based upon the FAA regulations, which may delay the commercialization of our product. Failure to obtain FAA certification of the Eviation Alice in a timely manner or at all will severely undermine our business by delaying or halting commercialization of our product, imposing costly procedures and diminishing competitive advantage, and we may be required to cease our operations.

Our business is also subject to various federal, state, and local laws and regulations relating to environmental footprint in emissions, noise and treatment of hazardous materials. The costs incurred to ensure continued environmental compliance with existing or new standards could have a material impact on our results of operations, financial condition or cash flows.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product in certain countries. If we fail to comply with the regulatory requirements in international markets or to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product will be harmed.

Disruptions to our IT systems due to system failures or cybersecurity attacks may impact our operations, result in sensitive customer information being compromised, which would negatively materially affect our reputation and materially harm our business.

Our servers and equipment may be subject to computer viruses, break-ins, and similar disruptions from unauthorized tampering with computer systems. Our systems have been, and are expected to continue to be, the target of malware and other cyber-attacks. Although we have invested in measures to reduce these risks, there can be no assurance that our current information technology (IT) systems are fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats. A cyber-attack that bypasses our IT security systems causing an IT security breach may lead to a material disruption of our IT business systems and/or the loss of business information. A cyber-attack on our systems or networks that impairs our IT systems could disrupt our business operations and our ability to sell our products. Any such event could have a material adverse effect on our business. To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders or shipment of our products, or in theft, destruction, loss, misappropriation or release of our confidential information or our intellectual property, our business, financial condition, results of operations and prospects could be materially adversely affected. 

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We may be subject to legal proceedings and to product liability lawsuits.

Our business exposes us to potential product liability and aerial accidents risks, which are inherent in the testing, manufacturing, and marketing aviation products and services. We could incur substantial costs in connection with product liability or other tortious claims relating to the Eviation Alice or any other of our future products. The Eviation Alice may be involved in aerial accidents, which may cause death, bodily injury and other damages. These accidents may expose us to product liability or other type of tortious lawsuits. If product liability or tortious lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit or to halt the operation of the Eviation Alice, which may result in substantial losses. In addition, such accidents would deter consumers from using our product, which could have a material impact on our results of operations, financial condition or cash flow and may cause us to cease operations. Product liability and aerial accidents insurance are costly, subject to deductibles and coverage limitations, and may not be available in the amounts that we desire for a price we are willing to pay or at all. If, at any time, we are unable to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability or tortious claims, we may be unable to test, market or commercialize our products. In such case or even if we are able to obtain sufficient insurance coverage on reasonable terms, a successful product liability claim or tort claim brought against us in excess of our insurance coverage may cause us to incur substantial liabilities, and, as a result, our business, liquidity and results of operations would be materially adversely affected. In addition, the existence of a product liability claim or tortious claim could affect the market price of our securities.

In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers and directors to manage the Company.

We may be obligated to indemnify our directors and officers.

The Company has agreements with its directors and senior officers which provide, subject to Israeli law, indemnification by the Company of its directors and senior officers for: (a) monetary liability imposed upon a director or officer in favor of a third party by a judgment, including a settlement or an arbitral award confirmed by the court, as a result of an act or omission of such person in his or her capacity as a director or officer of the Company, (b) reasonable litigation expenses, including attorney’s fees, incurred by a director or officer (A) pursuant to an investigation or a proceeding commenced against him or her by a competent authority, provided that (i) it was terminated without an indictment and without having a monetary charge imposed on them in lieu of criminal proceedings (as such terms are defined in the Companies Law); or (ii) it was terminated without the filing of an indictment but with a monetary charge imposed on him or her in lieu of criminal proceedings for a crime that does not require proof of criminal intent; (B) or in connection with a financial sanction, as a result of an act or omission of such person in its capacity as a director or officer of the Company, (c) reasonable litigation expenses, including attorney’s fees, incurred by a director or officer or imposed on him or her by a court, in a proceeding brought against him or her by or on behalf of the Company or by a third party, or in a criminal action in which he or she was acquitted, or in a criminal action which does not require criminal intent in which he was convicted, in each case relating to acts or omissions of such person in its capacity as a director or officer of the Company, (d) expenses, including reasonable litigation expenses and legal fees, incurred by such a director or officer as a result of a proceeding instituted against him in relation to (A) infringements that may result in imposition of financial sanction pursuant to the provisions of Chapter H’3 under the Israeli Securities Law 5728 – 1968 (the “Israeli Securities Law”) or (B) administrative infringements pursuant to the provisions of Chapter H’4 under the Israeli Securities Law or (C) infringements pursuant to the provisions of Chapter I’1 under the Israeli Securities Law; and (e) payments to an injured party of infringement under Section 52ND(a)(1)(a) of the Israeli Securities Law. Payments pursuant to such indemnification obligation may materially adversely affect our financial condition.

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There can be no assurance that we will not be classified as a passive foreign investment company.

Based upon our current and projected income, assets and activities, we do not believe that at this time Eviation is a passive foreign investment company, or a PFIC, for U.S. federal income tax purposes, but there can be no assurance that we will not be classified as such in the future. Such classification may have materially adverse tax consequences for our U.S. shareholders. One method of avoiding such tax consequences is by making a “qualified electing fund” election for the first taxable year in which the Company is a PFIC. However, such an election is conditioned upon our furnishing our U.S. shareholders annually with certain tax information. We do not presently prepare or provide such information, and such information may not be available to our U.S. shareholders if we are subsequently determined to be a PFIC. You are advised to consult with your own tax advisor regarding the particular tax consequences related to the ownership and disposition of our Ordinary Shares under your own particular factual circumstances.

We may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which 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.

Our efforts to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, governing internal control and procedures for financial reporting have resulted in increased general and administrative expenses and a diversion of management time and attention. We expect these efforts to require the continued commitment of significant resources.  During the course of preparing our financial statements as of December 31, 2017, we identified a material weakness in our internal control over financial reporting (see Item 15 “Management's Annual Report on Internal Control over Financial Reporting” below). If our remediation of this material weakness is not effective, we may not be able to report our financial condition or results of operations accurately or on a timely basis.Failure to maintain effective internal control over financial reporting could result in investigations 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 THE INTELLECTUAL PROPERTY UTILIZED IN OUR BUSINESS

If we fail to adequately protect, enforce or secure rights to the patents which we own or that were licensed to us or any patents we may own in the future, the value of our intellectual property would diminish and our business and competitive position would suffer.

Our success, competitive position and future revenues, if any, depend in part on our ability to obtain and successfully leverage intellectual property covering the Eviation Alice, know-how, methods, processes and other technologies, to protect our trade secrets, to prevent others from using our intellectual property and to operate without infringing the intellectual property rights of third parties.

 If patent rights covering our product and methods are not sufficiently broad, they may not provide us with any protection against competitors with similar products and technologies. Furthermore, if the United States Patent and Trademark Office, or the USPTO, or any foreign patent office issue patents to us or our licensors, others may challenge the patents or design around the patents, or the patent office or the courts may invalidate the patents. Thus, any patents we own or license from or to third parties may not provide any protection against our competitors.

We cannot be certain that patents will be issued as a result of any pending applications, and we cannot be certain that any of our issued patents or patents licensed from a third-party will give us adequate protection from competing products. For example, issued patents, including the patents licensed by us, may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope.

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In addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to make our inventions or to file patent applications covering those inventions.

It is also possible that others may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so. The loss of, or our inability to obtain or maintain, any of these technology licenses could delay the introduction of new products or services until equivalent technology, if available, is identified, licensed and integrated. This could harm our business.

In addition to patents and patent applications, we depend upon proprietary know-how to protect our proprietary technology. We require our employees, consultants, advisors and collaborators to enter into confidentiality agreements that limit the disclosure of confidential information to any other parties. We also require our employees and consultants to disclose and assign to us their ideas, developments, discoveries and inventions. These agreements may not, however, provide adequate protection for our know-how or other proprietary information in the event of any unauthorized use or disclosure.

Our commercial success will depend in part on the ability of the licensors of our key technologies to maintain protection of their intellectual property.

Our success will depend in part on the ability of the licensors of key technologies for use in our business to obtain, maintain and enforce patent and other intellectual property rights for the technology and to preserve trade secrets, and on our ability to operate without infringing upon the proprietary rights of third parties. We cannot be certain that our licensors were the first inventors of inventions covered by their patents and patent applications or that they were the first to file. Accordingly, there can be no assurance that licensed patents and patents application used by the Subsidiary are valid or will afford us protection against competitors with similar technologies. Failure to obtain or maintain patent or other intellectual property protection on licensed technology may have a material adverse effect on our competitive position and business prospects. It is also possible that the technology may infringe on third party patents or other intellectual property rights owned by others. If we are found liable for infringement, we may be liable for significant money damages and may encounter significant delays in bringing products and services to market.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

Costly litigation may be necessary to protect our intellectual property rights and we may be subject to claims alleging the violation of the intellectual property rights of others.

We may face significant expense and liability as a result of litigation or other proceedings relating to patents and other intellectual property rights of others. In the event that another party has also filed a patent application or been issued a patent relating to an invention or technology claimed by us in pending applications, we may be required to participate in an interference proceeding declared by the USPTO to determine priority of invention, which could result in substantial uncertainties and costs for us, even if the eventual outcome is favorable to us. We, or our licensors, also could be required to participate in interference proceedings involving issued patents and pending applications of another entity. An adverse outcome in an interference proceeding could require us to cease using the technology or to license rights from prevailing third parties.

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The cost to us of any patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved in our favor, could be substantial and could divert management’s resources and attention. Our ability to enforce our patent protection could be limited by our financial resources and may be subject to lengthy delays. A third party may claim that we are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and activities, such as research, development and the sale of any future products. Such lawsuits are expensive and would consume time and other resources. There is a risk that a court will decide that we are infringing the third party’s patents and will order us to stop the activities claimed by the patents, redesign our products or processes to avoid infringement or obtain licenses (which may not be available on commercially reasonable terms or at all). In addition, there is a risk that a court will order us to pay the other party damages for having infringed their patents.

Moreover, there is no guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities claimed by the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. In addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to our product candidate, technologies or other matters. Any claims of infringement asserted against us, whether or not successful, may have a material adverse effect on us.

We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual property to compete against us.

Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek to enter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize or independently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with the Eviation Alice or any future product. If a dispute arises, a court may determine that the right belongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ, we still face the risk that:

● these agreements may be breached;

● these agreements may not provide adequate remedies for the applicable type of breach;

● our proprietary know-how will otherwise become known; or

● our competitors will independently develop similar technology or proprietary information.

International patent protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have to expend substantial sums and management resources.

Patent law outside the United States may be different than in the United States. Further, the laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States, if at all. A failure to obtain sufficient intellectual property protection in any foreign country could materially and adversely affect our business, results of operations and future prospects. Moreover, we may participate in opposition proceedings to determine the validity of our foreign patents or our competitors’ foreign patents, which could result in substantial costs and divert management’s resources and attention.

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Intellectual property rights do not necessarily address all potential threats to our business competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to acquire or maintain a competitive advantage.

RISKS RELATED TO OUR ISRAELI OPERATIONS

Political, economic, and security conditions in Israel affect our operations and may limit our ability to produce and sell products or provide our services.

We are incorporated under the laws of the State of Israel, where we also maintain our headquarters and our principal research and development and sales and marketing facilities. As a result, political, economic and military conditions affecting Israel directly influence us.

Since its establishment in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. In recent years, these have included hostilities between Israel and Hezbollah in Lebanon, and Israel and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel causing casualties and disruption of economic activities. Recent political uprisings and conflicts in various countries in the Middle East, including Egypt and Syria, are affecting the political stability of those countries. Any armed conflicts, terrorist activities, political instability or hostilities in the region or that involve Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our business, financial condition and results of operations and could make it more difficult for us to raise capital. In addition, Israel faces threats from more distant neighbors, in particular Iran that has threatened to attack Israel. Iran is also believed to have a strong influence among extremist groups in areas that neighbor Israel, such as Hamas in Gaza and Hezbollah in Lebanon. Additionally, the Islamic State of Iraq and Syria (ISIS), a violent jihadist group, is involved in hostilities in Iraq and Syria and its stated purpose is to take control of the Middle East, including Israel.

Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli government has in the past covered the reinstatement value of certain damages that were caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on 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 us in the future.

Furthermore, several countries and companies restrict business with Israel and Israeli companies. Restrictive laws or policies directed towards Israel or Israeli businesses may have an adverse impact on our operations, our financial results or the expansion of our business.

A number of our key personnel in Israel have standing obligations to perform periodic reserve duty in the Israel Defense Forces and are subject to be called up for active military duty at any time. If our key personnel are absent from our business for a significant period of time, we may experience disruptions in our business that could affect the development, sales or technical support of our products. As a result, we might not be able to compete in the market and our results of operations could be harmed.

The anti-takeover effects of Israeli laws may delay or deter a change of control of the Company.

Provisions of Israeli law may delay, prevent or make undesirable a merger or an acquisition of all or a significant portion of our shares or assets. Israeli corporate law regulates acquisitions of shares through tender offers and mergers, requires special approvals for transactions involving significant shareholders and regulates other matters that may be relevant to these types of transactions. These provisions of Israeli law could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders. These provisions may limit the price that investors may be willing to pay in the future for our Ordinary Shares. Furthermore, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders.

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These laws may have the effect of delaying or deterring a change in control of the Company, thereby limiting the opportunity for shareholders to receive a premium for their shares and possibly affecting the price that some investors are willing to pay for the Company’s securities.

All of our directors and officers are non-U.S. residents and enforceability of civil liabilities against them is uncertain.

All of our directors and officers reside outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.

Your rights and responsibilities as our shareholder will be governed by Israeli law, which differs in some respects from the rights and responsibilities of shareholders of United States corporations.

Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in U.S. based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger and approval of related party transactions that require shareholder approval. In addition, a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness towards the company. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.

If we were to lose our foreign private issuer status under the U.S. federal securities laws, we would incur additional expenses associated with compliance with the U.S. securities laws applicable to U.S. domestic issuers.

As a foreign private issuer as such term is defined under U.S. federal securities laws, we are exempt from the rules and regulations under the Exchange Act, related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.

The regulatory and compliance costs to us under U.S. securities laws, if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer, may be significantly higher than the cost we currently incur as a foreign private issuer.

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RISKS RELATING TO OWNERSHIP OF OUR ORDINARY SHARES

Two shareholders control more than 80% of the share capital of the Company.

Each of Mr. Tzidon and Michael Ilan currently beneficially own (excluding warrants) respectively 41.78% and 41.78% of the Company’s outstanding share capital. Accordingly, they alone can make determinations on any matter requiring shareholder approval other than those decisions that require special approval. This concentration of ownership and control can have an adverse effect on our share price. See Item 10, “Memorandum and Articles of Association – Special approval.”

We are unlikely to pay dividends in the foreseeable future and any return on investments may be limited to the value of our Ordinary Shares.

Under the Companies Law, dividends may only be paid out of profits legally available for distribution and provided that there is no reasonable concern that such payment will prevent us from satisfying our existing and foreseeable obligations as they become due. In addition, a competent court may approve, as per a motion to be filed by a company in accordance with the Companies Law requirements, a payment which does not meet the profits test, provided that the court was convinced that there is no reasonable concern that such payment will prevent the company from satisfying its existing and foreseeable obligations as they become due. We do not expect to declare or pay cash dividends in the foreseeable future and intend to retain future earnings, if any, to finance the growth and development of our business. If we do not pay dividends, our ordinary shares may be less valuable because a return on your investment will only occur if our share price appreciates. If we issue additional shares in the future, it will result in the dilution of our existing shareholders.

We are authorized to issue up to 700,000,000 Ordinary Shares. Our Board of Directors may choose to issue some or all of such shares to acquire one or more companies or products and to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of our outstanding ordinary shares. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders.

Trading of our ordinary shares is restricted by the SEC’s penny stock regulations, which may limit a shareholder’s ability to buy and sell our ordinary shares.

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5 million or individuals with a net worth in excess of $1 million or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our ordinary shares.

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FINRA sales practice requirements may also limit a shareholder’s ability to buy and sell our shares.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority, or FINRA, has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our ordinary shares, which may limit your ability to buy and sell our shares and have an adverse effect on the market for our shares.

The market for our ordinary shares is illiquid and the price of our ordinary shares may be negatively impacted by factors that are unrelated to our operations.

Although our ordinary shares are currently listed for quotation on the OTC Pink - Current, or OTCPK, there is no market for our ordinary shares. Even when a market is established and trading begins, trading through the OTCPK is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our shares, in which case it could be difficult for shareholders to sell their shares. The market price of our ordinary shares could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our ordinary shares, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our ordinary shares.

Financing transactions resulting in a large number of newly issued shares that become readily tradable, or other events that cause current shareholders to sell shares, could place further downward pressure on the trading price of our stock. In addition, the lack of a robust resale market may require a shareholder who desires to sell a large number of shares to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.

We will likely issue additional capital shares in the future, which would dilute our existing shareholders.

In the future, we will likely issue all or part of our authorized and unissued securities, including shares of our ordinary shares or securities convertible into or exchangeable for our ordinary shares, resulting in the dilution of the ownership interests of our shareholders. We are authorized under our articles of association to issue up to 700,000,000 ordinary shares.

We may issue additional ordinary shares or securities convertible into or exchangeable for our ordinary share in connection with the hiring of personnel, future acquisitions, future private placements of our securities for capital raising purposes or for other business purposes.

 Any such issuances may dilute the ownership percentages of our shareholders and could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of other derivative securities.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY OVERVIEW OF THE COMPANY

Our legal and commercial name is Eviation Aircraft Ltd. Our executive offices, shipping and service operations are located in Israel, at 1 Ha’Ofeh St., Kadima-Tzoran, Israel, 6092000. Our corporate governance complies with the Companies Law. Our shares are currently quoted on the OTCPK under the symbol EVTNF. Our telephone number is 972-8-913-7914 and our website address is www.eviation.co. The information contained on, or linked from, our website is not a part of this report.

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The Company is an Israeli company that was formed in January 1998 to receive all of the assets and liabilities of the defense related business of BVR Technologies Ltd. in accordance with the terms of a reorganization plan. In November 2009, BVR Technologies Ltd. sold substantially all of its assets and liabilities, to Elbit Systems Ltd., or Elbit, and following the sale changed its name in January 2010 to R.V.B. Holdings Ltd., which was controlled by Mr. Tzidon, one of our principal shareholders. In March 2010, Greenstone Industries Ltd., or Greenstone, purchased a controlling interest in the Company from A.O. Tzidon (1999) Ltd. and Mr. Tzidon.

On April 2, 2015, the Tel Aviv District Court, or the Court, granted Greenstone’s petition, due to the financial and business condition of the Company, to appoint Adv. Mordechai Shalev as the Temporary Liquidator of the Company, with a mandate to identify and liquidate the Company’s assets and to investigate its conduct.

On October 28, 2015, the Temporary Liquidator filed with the Court an agreement for the sale of the Company, or the Acquisition Agreement, by way of a share issuance to Mr. Tzidon and Magic Stones. The Acquisition Agreement was reached following a ‘request for proposals’ (RFP) procedure carried out by the Temporary Liquidator to sell the Company free and clear from all assets and obligations of any kind. The Acquisition Agreement was approved by the Court on February 2, 2016.

The approval of the Acquisition Agreement by the Court had the following consequences: (1) canceling the nominal value of the Company’s shares, such that the Company’s shares would have no nominal value, (2) converting 71,923,175 non-tradable options to purchase ordinary shares of the Company into 71,923,175 ordinary shares of the Company, (3) effectuating a reverse split of the Company’s shares at a ratio of 30,465:1, such that for each 30,465 shares of the Company, the shareholders of the Company received one share, and (4) increasing the share capital of the Company to 700,000,000 ordinary shares with no nominal value.  After giving effect to such actions and prior to the share issuances to Mr. Tzidon and Magic Stones, the total number of issued ordinary shares was 10,000. The reverse split became effective on February 25, 2016.

Pursuant to the Acquisition Agreement, the Company, at the direction of the Temporary Liquidator, issued to Mr. Tzidon and Magic Stones 9,990,000 ordinary shares representing, on the date of issuance, 99.9% of the issued and outstanding share capital of the Company, in consideration for which these shareholders paid NIS 600,000 (approximately $153,000, at the exchange rate in effect at the time of the purchase) to the Temporary Liquidator.

The Board of the Company subsequently identified a new business direction to pursue in the area of aviation transportation via light electrically operated aircrafts. The electric aircraft eco-system that the Company seeks to establish is intended to enable passengers to book an “on demand” flight as a cost-effective solution compared with other available transportation methods of regional travels. The aircraft to be developed is planned to be emissions-free, quiet, high speed, safe and easy to operate, with lower operating and ownership costs. In furtherance thereof, on May 15, 2016, the Company established a new, wholly-owned Israeli subsidiary, Eviation Tech Ltd., for the purpose of developing and commercializing its new business focus. On July 17, 2016, Mr. Tzidon and Magic Stones assigned or otherwise transferred all of their rights relating to the business focus of light aircraft aviation technology to the Subsidiary.

On March 2, 2017, our corporate name change to Eviation Aircraft Ltd. became effective. We adopted our new name as part of our transformation into our new business focus of designing, developing and manufacturing a light electric passenger aircraft and providing supportive services required for an economically viable electric aircraft eco-system. In connection with the Company’s name change, effective March 2, 2017, the Company’s ordinary shares began to be quoted under the ticker symbol EVTNF on the OTCPK. 

On August 23, 2017, we announced that our Board of Directors had approved the sale of up to 6,000,000 Ordinary Shares, no par value, at a price per Ordinary Share of $1.50, for an aggregate purchase price of up to $9 million, or the Investment Amount, pursuant to the terms of a share purchase agreement, described further below.

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A.O. Tzidon and Michael Ilan Management and Investment Ltd., or Michael Ilan Management, have invested a total of approximately $1 million on account of the Investment Amount, and each is entitled to further invest up to a total investment amount of approximately $2.5 million, at additional closings through May 31, 2018. An additional 2 million shares may be sold to other investors.

In December 2017, the Company entered into a Technology Evaluation Agreement with Siemens Aktiengesellschaft, or Siemens, pursuant to which Siemens provided the Company with one electrical propulsion unit for testing and integration with Eviation Alice for a period of 12 months, or the Siemens Agreement.

On February 18, 2018, the Company entered into a Binding MOU with an investor, pursuant to which an amount of $2 million was advanced to the Company in two separate installments. For further discussion of the Siemens Agreement and the February 2018 MOU, see “Item 4. Information on the Company – B. Business Overview- Capital Resources”.

B. BUSINESS OVERVIEW

OUR BUSINESS

The Subsidiary was incorporated in Israel on May 15, 2016, for the purpose of developing and commercializing electric propulsion aviation, the Company's new business focus. Through the Subsidiary, we are designing, developing and intend to manufacture a light, electric passenger aircraft, which we refer to as the Eviation Alice, and to provide support services required for an economically viable electric aircraft eco-system.

The viable electric aircraft eco-system is intended to enable passengers to book an “on demand” flight as a cost-effective solution compared with other available transportation methods of regional travels. The Eviation Alice under development will be inexpensive to operate, significantly reducing the cost of travel for passengers. We believe that a passenger aircraft that is cheap to own and operate, quiet, fast and easy to fly, will eventually create a market shift for short haul regional travel.

We are currently in the proof of concept stage and intend to test all the components of the enabling core technologies (airframe design, electric drive, battery technology and autonomous flight and sensing systems). Testing will first take place on scaled models that are currently under construction.

ABOUT EVIATION ALICE

Eviation Alice is designed to be an emissions-free, quiet, high speed, safe and easy to fly aircraft, with lower operating and ownership costs. We expect this aircraft to achieve an over 60% reduction in direct operating costs compared with a similarly sized non-electric aircraft. We also estimate that such cost reduction, combined with the inherently low maintenance costs of electrical drives, will place Eviation Alice in competition with personal automobiles and the various modes of public transportation for destinations exceeding 100 miles.

Eviation Alice is designed to accommodate nine passengers for a maximum travel distance of 800 miles, using electrical power only. It is designed to cruise at over 220 knots (ktas) using only 180 kilowatt (Kw) of power, at a cost per available seat mile, or “CASM”, of under $0.10. If development is successful, this would allow the Eviation Alice to favorably compete in the general aviation market by providing a viable and economically accessible alternative to the regional transportation options of today. In addition, due to the relatively quiet and emission free engine of Eviation Alice, it will be able to utilize many small airfields that were not previously accessible due to environmental regulations.

CORE ENABLING TECHNOLOGIES FOR THE EVIATION ALICE

The Eviation Alice development process includes the following core-enabling technologies that are in different stages of their development cycle:

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Airframe design

We have developed a highly efficient airframe, designed and built from the ground up for electric propulsion. The air frame allows for efficient use of distributed propulsion; low cooling drag and efficient thermal management. The airframe has been extensively tested and analyzed and is expected to fly at scale in the first half of 2018. The first full scale prototype airframe designed for nine passengers is to be constructed throughout 2018 and is expected to be ready for first prototype flight by the fourth quarter of 2018. The construction of the full-scale aircraft has been found eligible for Israeli government support, pursuant to a support and investment agreement entered on December 18, 2016 by and between the Subsidiary and the OCS, or the Support and investment Agreement. For further discussion of the Support and Investment Agreement, see below sub-section “Development Awards” in this Section 4B.

Electrical Propulsion Unit

One highly efficient electrical propulsion unit has been secured as part of the Siemens Agreement. The electrical propulsion unit is being tested and will be integrated as the electric drive system of the aircraft. Siemens is expected to finalize the airworthiness PART 33 certification of its electrical propulsion units within the development period of Eviation Alice.

Battery technology

Eviation Alice will utilize a battery pack consisting of lithium polymer battery cells provided by Kokam Co. Ltd, a South Korean battery manufacturer. The battery cells have proven high energy density, high cycle life and achieved good safety test results in both internal and industrial tests conducted. The battery integration and the electrical and thermal management systems of the battery pack are performed and manufactured by the Subsidiary and include several unique proprietary features and techniques.

Autonomous flight and sensing systems

In addition to the development and manufacturing of Eviation Alice, we are also developing related services and technologies that will demonstrate our vision of the Eviation Alice eco-system. These developments include stand-alone low cost auto-piloting solutions, high volume, machine airspace management, real-time remote assistance and piloting service. These technologies are sub-systems that could be integrated into existing and future general aviation aircrafts as products or services, regardless of the maturity of the Eviation Alice.

Collision Avoidance and Remote Communication

We are developing an obstacle detection and collision warning system, in addition to other optical sensors to assist with full surrounding awareness by the aircraft. This system will also include a machine to machine (M2M) data connection that will allow the plane to communicate with other planes for safe and automated formation flights.

Auto Landing System

We have purchased all rights under a U.S. patent for a high precision electro-optical positioning system. Under the rights obtained, the Subsidiary has completed the conceptual design of a low-cost auto-landing system, currently being developed under contract with Zickel Engineering Ltd. The system prototype was completed during the second half of 2016 and integrated as part of our advanced auto-pilot system. As such, this feature will be integrated into Eviation Alice, and its scale models. The autonomous flight and sensing systems are also intended to be developed as the first stage of our auto-pilot aircraft.

There can be no assurance that our development efforts will prove to be successful.

MARKET OVERVIEW

General Aviation

General aviation, comprising all aircraft other than military aircraft and scheduled commercial airliners, presents an uncommon form of long distance transport.

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According to the 2016 General Aviation Statistical Databook and 2017 Industry Outlook, an annual statistical review issued by the General Aviation Manufacturers Association, the general aviation market includes over 416,000 aircraft worldwide, ranging from two-seat training aircrafts and utility helicopters to intercontinental business jets flying today, most of which are based in the United States and Europe. In the United States., the general aviation fleet flies over 24 million flight hours to more than 5,000 U.S. public airports, while scheduled commercial airlines serve less than 400 airports. The European general aviation fleet can access over 4,200 airports.

The global aviation industry has been growing and developing over the past few years. In 2016, the general aviation industry showed total revenue of more than $24 billion and delivery of 2,262 new aircrafts. A slight increase compared to the previous year is shown in the business jets deliveries, representing the largest market share for business jets since 2007. In comparison, the commercial aviation industry is estimated at $260 billion in new aircraft deliveries each year. Moreover, commercial aviation has grown at roughly 4% in 2017, compared with a 0.5% annual growth rate for general aviation since 2010.

Regional Transportation

According to national household travel surveys conducted in 2001 and 2009, as published by the U.S. National Bureau of Transportation Statistics as summarized in Long Distance Transportation Patterns: Mode Choice, out of the 2.6 billion trips of over 50 miles in distance taken annually by Americans, 2.36 billion trips are of 100-750 miles, making the regional distance account for 91% of the total trips taken, with an estimated total of over $1 trillion spent on this type of travel.

We aim to target trips at a destination distance of 100-749 miles, rendering 50-100 miles as more suitable for a car and trips over 750 miles for main-stream commercial aviation. According to the data provided by the travel survey, a regional-distance trip that accounts for 91% of all trips over 50 miles, and that is currently served almost exclusively by cars (93.1%).

We believe that our focus is on building a plane that will cruise at 4-5 times the speed of a car on a highway, but at a cost per mile that’s closer to a bus or a regional train is possible with electric propulsion. Our proposed aircraft plane design will have two overlapping missions that are at the core of the Eviation business plan – first to compete in the general aviation market, and second to make light aviation a real regional transportation alternative.

Competitive Modes of Travel

The Eviation Alice will compete with light aircraft in the general aviation market and with trains, buses and private automobiles in the regional travel market. Light aircrafts are highly expensive for travel. The CASM (cost per available seat mile) for a light aircraft is estimated at $0.20 to $0.50, not including pilot’s expenses.

According to an AAA 2017 report captioned, “Your Driving Costs”, the driving CASM for a mid-size sedan at full seating capacity in 2017 was $0.12 - $0.20. The average CASM in the commercial aviation industry is $0.13, but additional costs for the customer significantly vary based on competition on routes, so that regional prices in the U.S. commercial aviation industry range between $0.21 and $0.90 per mile traveled. Buses and regional trains are less expensive (CASM of $0.8 - $0.11) but are also very slow in commute. High speed trains are more expensive (CASM of $0.25 - $0.35), and like commercial aviation require a significant investment in infrastructure.

We believe that Eviation Alice adds a unique and inexpensive alternative to the current existing regional transportation options for travel distances of 100-750 miles, while using the existing infrastructure of general aviation, at an estimated CASM of $0.10 or less.

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OUR BUSINESS STRATEGY

Our business plan includes three distinct stages as described below:

1.       Proof of Concept – We are currently in the proof of concept stage and intend to test all the components of the Eviation Alice core enabling technologies (airframe design, electric drive, battery technology and autonomous flight and sensing systems). Testing will initially take place on the scaled models and on the full-scale aircraft once completed. We expect to complete the proof of concept stage by the end of 2018. The expected cost of this stage is approximately $8 million.We are in advanced negotiations with several regional operators in North America and Europe to conclude pre-orders for a number of aircraft to be sold at the production stage. These negotiations are in large measure dependent upon our execution at the Proof of Concept stage.

2.     Certification and Pre-Production - We plan to complete the industrial production design process for Eviation Alice, based on the results of the flight tests for commercialization and type certification of the aircraft. We further intend to collaborate with established airframe manufacturers to support the process of commercialization of the design. We also plan, based on the assessment of the certification process, to complete the development of the transportation service platform and initiate marketing through our early adopter clients (regional operators contacted in the Proof of Concept stage) and independently. This will include first MROs (maintenance repair and overhaul facilities). This stage is planned to be completed by the end of 2020. We estimate the cost of this stage at approximately $40 million.

3.     Full Production and Operations - In the third and final stage, we plan to complete the certification process of the Eviation Alice manufacturing lines, maintenance and operations infrastructure, and partner with manufacturers and marketers for the commercialization of the aircraft, along with additional developed systems and services. We estimate the earliest expected sale of a complete certified Eviation Alice will be in the year 2021, and the ramp up to full production is expected to continue through 2024. The cost of this stage, which is a derivative of future market demand and manufacturing strategy, cannot be estimated at this time.

CAPITAL RESOURCES

Company Loan Agreement

In order to advance the business of the Company, on July 17, 2016, Mr. Tzidon and Magic Stones Gemstone Import and Marketing Ltd., or Magic Stones, entered into the Company Loan Agreement, pursuant to which they advanced a total of $0.5 million to our company for a period of seven years at an annual interest rate equal to the lower of (i) 3.2% per annum, and (ii) the minimum rate required by law to avoid the imputing of tax. As security for such loan, we granted them a lien and security interest on all of the shares of the Subsidiary held by us. The loan may be repaid at any time in minimum increments of $50,000. The proceeds of the loan are to be used for funding our on-going operations. To date, the Company has not repaid any portion of the loan.

Subsidiary Loan Agreement

Additionally, on July 17, 2016, Mr. Tzidon and Magic Stones entered into the Subsidiary Loan Agreement pursuant to which they agreed to provide a credit line of up to $4.5 million for a period of seven years at an annual interest rate equal to the lower of (i) 3.2% per annum, and (ii) the minimum rate required by law to avoid the imputing of tax. Draws on such credit line may be made in increments of not less than $50,000, and outstanding amounts on the credit line may be repaid in increments of not less than $50,000. Accrued interest is payable annually. As security for amounts owing under the credit line, the Subsidiary granted to these shareholders a floating lien and charge on all the assets of the Subsidiary, and a fixed charge on all the intellectual property rights owned by the Subsidiary at any time. An event of default on any loan made to the Company and the credit line granted to the Subsidiary would trigger an event of default under the other debt instrument. As of the date of this report, our Subsidiary has drawn approximately $3.6 million under this facility, of which approximately $0.5 million has been repaid.

August 2017 Share Purchase Agreement

Additionally, on August 23, 2017, A.O. Tzidon, Michael Ilan Management and the Company entered into the August 2017 Share Purchase Agreement pursuant to which A.O. Tzidon and Michael Ilan Management invested a total of approximately $1 million on account of the Investment Amount, and each is entitled to further invest up to a total investment amount of approximately $2.5 million each, at additional closings through May 31, 2018. Under terms of the Share Purchase Agreement, our Board of Directors has approved the sale of up to 6,000,000 of the Company's Ordinary Shares, no par value, at a price per Ordinary Share of $1.50, for an aggregate purchase price of up to $9 million under the Share Purchase Agreement and directed management to seek additional investors to complete an investment round of $9 million.

We used part of the funds from the sale of our Ordinary Shares to repay the debt owed to our controlling shareholders. 

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February 2018 Binding Memorandum of Understanding

On February 18, 2018, the Company entered into a Binding Memorandum of Understanding or MOU with an investor. Pursuant to the MOU, the parties agreed to negotiate a definitive agreement for an equity investment in the Company by the investor of up to $12 million at a price per Ordinary Share of $1.50. This amount, if approved under a definitive agreement, will be paid in up to three installments, or the New Investment. Pursuant to the terms of the MOU, an investor has advanced to the Company an aggregate amount of $2 million on account of the New Investment. The parties are negotiating a definitive agreement, and if such definitive agreement is not entered, we will be required to repay the advance amount promptly upon the closing of an equity investment in the Company of at least $2 million.

The MOU further stipulates that the Investor shall be entitled to receive a warrant of up to 3,000,000 Ordinary Shares of the Company for no additional consideration, exercisable solely upon the Investor having timely paid the Company the entire Investment Amount.

MATERIAL AGREEMENTS

Siemens Agreement

In December 2017, the Company entered into the Siemens Agreement, pursuant to which Siemens provided the Company with one electrical propulsion unit, or EPU, for a 12 month evaluation period free of charge (except for shipping and insurance fees). The EPU is to be integrated into the Eviation Alice at our facility and for the purpose of testing Eviation Alice, including in flight-testing, all for non-military purposes. The Siemens Agreement further provides that the Company is responsible for compliance with any aviation law or any aeronautical admission, certification and approval requirements regarding the installation, commissioning and operation of the EPU integrated into the Eviation Alice.

License and Service Agreement for the manufacturing of the scaled models and electric synergy prime aircraft

On September 1, 2015, our controlling shareholder, Mr. Tzidon, entered on behalf of our Subsidiary into a License and Service Agreement, or LSA, with Mr. John McGinnis, on behalf of himself and on behalf of his companies (collectively, “McGinnis”). Pursuant to the terms of the LSA, our Subsidiary acquired a worldwide exclusive license to a patent and know-how necessary for the completion and utilization of a flying electric Double Boxtail aircraft for use solely in the field of electric powered aircraft (including hybrid electric) above 55 lbs, including the rights to develop, make, commercialize, and import products and processes. Three years after the termination of the LSA, the license will automatically become non-exclusive. As of December 31, 2017, the Company has paid $700,000 for the development and production of scaled demonstrators and additional development and production services relating to a full-scale electric synergy prime aircraft.

As of March 2016, due to a lack of progress in the development and supply of the model or the completion of the synergy prime aircraft, the LSA has in effect been suspended, and could be reinstated in agreement between the parties at any stage. The suspension of the LSA has led us to focus solely on the development of the Eviation Alice and accelerate its construction program as described above.

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As we progress with our development efforts, we intend to enter into joint development and risk-sharing agreements with established OEMs and Tier 1 suppliers or systems. These agreements are intended to further the development of our Eviation Alice and reduce the risks involved in the type certification of a new aircraft.

Administrative Services Agreement for the provision of various services and the lease of office space

On November 30, 2015, our controlling shareholders Mr. Tzidon and Mr. Michael Ilan entered into an Administrative Services Agreement, or ASA, with Phinergy Ltd., a company also controlled by Mr. Tzidon and Mr. Ilan. Pursuant to the ASA, Phinergy provides our Subsidiary with: (i) administrative and general services, including secretarial and management services; (ii) human resource services; (iii) accounting and bookkeeping services, including the services of a chief financial officer; and (iv) office space and office services, including telephone, fax and data communications and cleaning services (the services described in (i) through (iv), collectively, the “Services”). In consideration for these Services, our Subsidiary pays to Phinergy a monthly fee, calculated on the basis of the actual cost to Phinergy of providing the Services, derived as a percentage of the global costs paid by Phinergy for receiving such services for itself and our Subsidiary together. Fees are paid on a quarterly basis in arrears.

INTELLECTUAL PROPERTY

In July 2016, our Subsidiary acquired from Eye Point Ltd., a company owned by our shareholder Mr. Dekel Tzidon, all rights under US patent No. 8,314,928, or the Eye Point Patent. The Eye Point Patent will expire on November 12, 2026. This patent allows us to develop our conceptual design of an auto-landing system.

We also license US Patent No. 8,657,226, owned by McGinnis, pursuant to the LSA. This patent will expire on April 26, 2029. Pursuant to our agreement with McGinnis, any patents and other types of intellectual property developed in the framework of the LSA will be owned by McGinnis and will be added to the license already granted by McGinnis for no additional consideration.

We currently rely upon a combination of trade secrets, patents, copyrights, and trademarks, as well as non-disclosure agreements and invention assignment agreements, to protect our technologies and other proprietary Company information.

Our policy is to require our employees, consultants, advisors and collaborators to execute confidentiality agreements. Additionally, we require our employees and consultants to execute assignment of invention agreements upon the commencement of employment, consulting or advisory relationships. These agreements generally provide that all confidential information developed or made known to a party by us during the course of the party’s association with our Company is to be kept confidential and not to be disclosed to third parties except in specific circumstances. In the case of employees and consultants, the agreements also provide that all inventions conceived by the individuals in the course of their employment or consulting relationship will be our exclusive property.

While our intellectual property rights in the aggregate are important to the operation of our business, we do not believe that our business would be materially affected by the expiration of any particular intellectual property right or termination of any particular intellectual property patent license agreement.

REGULATORY ASPECTS

Our intended business is regulated by the FAA and the Department of Homeland Security. In the United States, we will be required to comply with FAA regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety. When we reach the stage of mass production and deployment of the Eviation Alice, we will also be subject to various federal, state, and local laws and regulations relating to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes. We intend to continuously assess our compliance status and management of environmental matters to ensure our operations are in substantial compliance with all applicable environmental laws and regulations. Investigation, remediation, operation and maintenance costs associated with environmental compliance and management of sites will be a normal, recurring part of our operations. It is reasonably possible that costs we incur to ensure continued environmental compliance could have a material impact on our results of operations, financial condition or cash flows, if additional work requirements or more stringent clean-up standards are imposed by regulators, new areas of soil, air and groundwater contamination are discovered and/or expansions of work scope are prompted by the results of investigations.

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Standards bodies, which are formal and informal associations that seek to establish voluntary, non-governmental product and technology standards, are influential in the United States and abroad. ASTM International (American Society for Testing and Materials International) is an international standards organization that develops and publishes voluntary consensus technical standards for a wide range of materials, products, systems, and services. Some 12,575 ASTM voluntary consensus standards operate globally. We are an active member in F39 and F44 ASTM regulatory committees, helping to define the standards for electric propulsion in aviation.

Since November 2, 2016, we have been an associate member of GAMA, an aviation industry trade association representing general aviation (non-military & non-airliner) aircraft manufacturers and related enterprises, chiefly in the United States.

COMPETITION

Our competitive landscape includes companies that are established airframe manufacturers, and startups building an electric aircraft. In product terms, competing companies are making fixed wing aircrafts, rotorcrafts and combinations thereof. The leader among the established manufacturers is Airbus, which has created the e-fan program and demonstrated manned electric flight of a 2-seat electric trainer in 2014. Other companies include Zunum Aero LLC, a Seattle based startup that intends to build a 10-12 passenger hybrid – electric aircraft that resembles a light business jet and targets the same market segment as we do, and Pipistrel of Slovenia which is already producing a fully electric light aircraft called the pipistrel Alpha Electro. Several American startups are developing an electric Vertical Take Off and Landing (eVTOL) aircraft, that will compete for funding and market share in the future. The leading companies of these to date are Zee Aero LLC and Joby Aviation LLC, both based in California, USA.

It is our view that the efficiency of our Eviation Alice design will make for a unique value proposition for regional distance travel, while the eVTOL capabilities of the competition will make them more expensive and offer a shorter range of flight. In addition, we see an advantage to our all-electric system in reduced maintenance costs.

DEVELOPMENT AWARDS

On December 18, 2016, our Subsidiary signed a Support and Investment Agreement with the OCS. Under the agreement, the Company will develop a passenger electric aircraft. The plan will be performed over 24 months commencing on January 1, 2017. The Subsidiary is entitled to receive up to 50% of the actual costs and up to NIS 3 million (approximately $865,000). As security, the Subsidiary provided a bank guarantee in the amount of NIS 225,000 that will be effective until 3 months after the end of the project. The Subsidiary has registered a lien on a bank deposit in the same amount in favor of the bank providing the guarantee. According to the agreement, the Subsidiary will be required to pay royalties in an amount of 5% on sales of products and services derived from a technology developed using these grants until 100% of the CPI-linked grant and interest is repaid.
 

As of December 31, 2017, the Subsidiary received approximately NIS 1.3 million (approximately $377,000) in respect of actual costs incurred by the Subsidiary. Since January 1, 2018, the Subsidiary has received an additional amount of approximately NIS 413,000 (approximately $118,000).  

RESEARCH AND DEVELOPMENT

Research and development expenses recorded in 2017 amounted to $1,146,000.

SEASONALITY

At present, our operations are not influenced by seasonal effects.

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C. ORGANIZATIONAL STRUCTURE

                See discussion in Section 4A. “Information on the Company” above.

D. PROPERTY, PLANTS AND EQUIPMENT

All of our facilities are leased, and we do not own any real property. Our principal executive offices are located in 1 Ha’Ofeh Street, Kadima-Tzoran, Israel. Our offices are located within a commercial office building on approximately 200 square meters pursuant to a 2-month lease which commenced on December 1, 2015 with six option periods of 12 months each that will be automatically exercised unless we provide termination notice within 90 days before the end of each lease period. We have no material tangible fixed assets apart from our office furnishings and IT system.

On January 9, 2017, we entered into a lease agreement for additional office space and parking spots with Bakarel Ltd., an affiliate of Michael Ilan Management. The lease period commenced on January 1, 2017 for one year with an option to extend the lease period for up to an additional six years. The contract is renewed automatically unless the Company provides a termination notice within 90 days before the end of each year lease period.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis in conjunction with item 3 “selected financial data” and our consolidated financial statements and notes thereto included elsewhere in this annual report. This “operating and financial review and prospects” section contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those set forth under the caption “risk factors” and elsewhere in this report.

A.  OPERATING RESULTS

Summary

In April 2015, at the request of the creditors of the Company, the Tel Aviv District Court appointed a Temporary Liquidator to obtain and realize the Company’s assets and to settle its liabilities. The Temporary Liquidator arranged for the transfer and assumption of all assets and liabilities of the Company to a trust managed by the Temporary Liquidator, and the issuance to Mr. Tzidon and Magic Stones, of 9,990,000 ordinary shares, representing 99.9% of the issued and outstanding share capital of our Company. On February 2, 2016, the Tel Aviv District Court approved the Agreement and the acquisition of the Company thereunder by Mr. Tzidon and Magic Stones.

Following the approval of the Agreement by the Court, the following was implemented (1) canceling the nominal value of the Company’s shares, such that the Company’s shares will not have any nominal value, (2) converting 71,923,175 non-tradeable options to purchase ordinary shares of the Company into 71,923,175 ordinary shares of the Company, (3) effectuating a reverse split of the Company’s shares at a ratio of 30,465:1, such that for each 30,465 shares of the Company, the shareholders of the Company received one share, and (4) increasing the share capital of the Company to 700,000,000 ordinary shares of the Company with no nominal value.  After giving effect to such actions and prior to the share issuances to Mr. Tzidon and Magic Stones, the total number of issued ordinary shares of the Company was 10,000. The reverse split became effective on February 25, 2016.

Following the acquisition of the Company, we embarked through a newly created subsidiary established in May 2016 in the design and development of a light propulsion electrically powered passenger aircraft. We are currently in the proof of concept stage and intend to test all the components of the Eviation Alice core enabling technologies (airframe design, electric drive, battery technology and autonomous flight and sensing systems). Testing will take place on the scaled models and the full-scale aircraft once completed.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standard Board, or IASB.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate our estimates, including those related to income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a further description of our material accounting policies, please read Note 3 to our consolidated financial statements for the year ended December 31, 2017, starting on page F-1 of this annual report.

Results of Operations

Comparison of 2017 and 2016

No revenues were recorded in either 2017 or 2016.

The operating loss for the year ended December 31, 2017 and 2016 was $1,893,000 and $2,170,000, respectively. The decrease in the operating loss for the year ended December 31, 2017 as compared to the year ended December 31, 2016 is primarily attributable to a decrease of approximately $700,000 in research and development expenses offset by an increase of approximately $400,000 in marketing, general and administrative expenses.

Research and development expenses for the year ended December 31, 2017 were $1,146 as compared to $1,829,000 in year ended December 31, 2016. The decrease is mainly due to grants received from the OCS in the amount of $495,000 and a decrease in materials and subcontractors’ expenses of approximately $600,000 resulting from a reduction in non-recurring engineering costs with subcontractors, and the expansion of research and development activities internally. Such decrease was primarily offset by increases in salary and depreciation expenses in a total amount of approximately $400,000.

Marketing expenses for the year ended December 31, 2017 were $321,000 as compared to $80,000 in the year ended December 31, 2016. The increase in marketing expenses is mainly attributable to investment in branding and public relation expenses during 2017 as well as an increase in travel expenses and exhibition costs.

General and administrative expenses for the year ended December 31, 2017 were $426,000 as compared to $261,000 in the year ended December 31, 2016. The increase is primarily attributable to audit and accounting expenses.

Financing expenses, net, for the year ended December 31, 2017 were $235,000, an increase of $164,000 compared to $71,000 in the year ended December 31, 2016.  The increase was mainly related to interest expenses on the drawdowns from the Loan Agreements, offset by exchange rate differences.

Tax expenses in 2017 amounted to $31,000 due to a reversal of income tax benefits recorded in respect of 2017 compared to an income tax benefit of $553,000 in 2016.

No loss from discontinued operations was recorded in 2017 or 2016.

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Comparison of 2016 and 2015

The Company’s legacy waste disposal operations in were discontinued and the comparative results for 2015 were presented in 2016 financial statements as discontinued operations. As such, we believe that a period-to-period analysis will be of limited value in assessing our operations or prospects. Accordingly, the analysis below refers solely to operating results of 2016 as we commenced our new business focus in 2016.

The operating loss for the year ended December 31, 2016 of $2,170,000 was attributable to the expenses incurred in the design and development of our light, electric passenger aircraft - the Eviation Alice.

No revenues were recorded in the year 2016.

Research and development expenses for the year ended December 31, 2016 were $1,829,000 and primarily consisted of salary, materials and subcontractor's payments related to the development of the Eviation Alice, which development commenced in 2016.

Marketing expenses for the year ended December 31, 2016 of $80,000 included primarily professional fees paid to third parties consultants and expenses incurred in connection with travel and lodging undertaken to advance the business of the Company and meet prospective investors, strategic suppliers and customers. General and administrative expenses for the year ended December 31, 2016 were $261,000. The expenses in 2016 are primarily attributable to legal, audit and insurance related expenses.

Financing expenses, net, in 2016 was an immaterial amount and consisted mainly of interest expense on shareholders loan offset by exchange rate differences.

Income tax benefit in 2016 amounted to $553,000 and derived from recording a tax asset which offset a tax provision that was recorded in respect of shareholders loans that were provided on favorable terms.

Loss from discontinued operation

No loss from discontinued operation was recorded in 2016 compared to a loss of $226,000 in 2015 attributable to the Company’s legacy waste disposal operations which ceased in 2015 with the appointment of the Temporary Liquidator by the Court.

Recently Issued Accounting Standards

A number of new standards, amendments to standards and interpretations were not yet in effect for the year ended December 31, 2017, and have not been applied in preparing our consolidated financial statements as of that date. Those standards are not expected to have a material impact on the Company's financial statement.

Impact of Israeli Tax Policies and Government Programs on our Operating Results

Tax regulations have a material impact on our business, particularly in Israel where we have our headquarters. The summary in Item 10.E describes the current tax structure applicable to companies in Israel, with special reference to its effect on us.

Impact of Inflation and Currency Fluctuations

We are exposed to the risk that the NIS, after adjustment for inflation in Israel, will appreciate in relation to the U.S. dollar. In that event, the dollar-measured costs of our operations in Israel will increase and our dollar-measured results of operations will be adversely affected. In 2017, the NIS appreciated against the dollar by approximately 9.8%, while in 2016 this percentage amounted to 1.5%. In 2015 and 2014, the NIS depreciated against the U.S. dollar by approximately 0.3% and 12%, respectively. In the year ended December 31, 2017, the inflation rate in Israel was 0.4%. In 2016, the annual deflation rate in Israel was approximately 0.2%. Therefore, the U.S. dollar cost of our Israeli operations increased in 2016. We cannot predict any future trends in the rate of inflation in Israel and whether the NIS will appreciate against the U.S. dollar or vice versa. Any increase in the rate of inflation in Israel, unless the increase is offset on a timely basis by a devaluation of the NIS in relation to the U.S. dollar, will increase our labor and other costs, which will increase the U.S. dollar cost of our operations in Israel and harm our results of operations.

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Effective Corporate Tax Rate

The Israeli corporate tax rate was 26.5% in 2015, 25% in 2016 and 24% in 2017. Effective January 1, 2018 the corporate tax rate is 23%.

Grants and Participation

For a discussion of the grants received from the OCS and the Company’s repayment obligations thereunder, see Section 4.B “Business Overview -Development Awards” above.

As of December 31, 2017, the Company has an outstanding off-balance sheet contingent obligation to pay royalties to the OCS, including interest, in the amount of approximately $377,000, with respect to the grant under the Support and Investment Agreement.

As of December 31, 2017, the Company has generated no revenue from the technology developed using the OCS grant, and as such is not required to pay any royalties as of the date hereof. 

Conditions in Israel

We are incorporated under the laws of the State of Israel, where we also maintain our headquarters and our research and development and manufacturing facilities. See Item 3D. “Risk Factors – Risks Relating to Our Location in Israel” for a description of governmental, economic, fiscal, monetary or political polices or factors that have materially affected or could materially affect our operations.

B. LIQUIDITY AND CAPITAL RESOURCES

In the year ended December 31, 2017, we had a negative cash flow from operating activities amounting to $1,627,000, mainly due to expenses incurred in the design and development of Eviation Alice. In the year ended December 31, 2016, we had a negative cash flow from operating activities amounting to $1,725,000. The Company’s cash and cash equivalents amounted to $284,000 as of December 31, 2017. As of December 31, 2017, we had $781,000 in long-term debt and $144,000 short-term bank loans.

The loans to the Company and Subsidiary under the Loan Agreements are secured by:

● first ranking fixed charge on the shares of the Subsidiary held by the Company; and

● a floating lien and charge on all of the assets of the Subsidiary, and a specific charge on all of the intellectual property rights owned by the Subsidiary at any time.

We have entered into loan agreements and equity investment agreements with our shareholders. We have additionally received a grant from the OCS. For a discussion of the Loan Agreements and equity investments in the Company, see Section 4.B “Business Overview-Capital Resources” above.

For a discussion of the grant received from the OCS and the Company’s repayment obligations thereunder, see Section 4.B “Business Overview- Development Awards” above.

We finance our activities through short and long-term loans, and issuance and sale of our ordinary shares.

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We have in-balance sheet financial instruments and off-balance sheet contingent commitments. Our in-balance sheet financial instruments consist of our assets and liabilities. Our cash is invested in U.S. dollars and NIS interest bearing deposits with banks. The fair value of our financial instruments is similar to their book value. Our off-balance sheet contingent commitments consist of: (a) royalty commitments that are directly related to our future revenues, (b) lease commitments of our premises and vehicles, and (c) directors’ and officers’ indemnities, in excess of the proceeds received from liability insurance which we obtain.

The Company had negative working capital of $496,000 as of December 31, 2017. Following expected capital infusions in 2018, it is the Company’s belief that it will have sufficient working capital for the Company’s present requirements.

Cash Flows

Cash flows used in operating activities during 2017 amounted to $1,627,000 (and in 2016, $1,725,000). Cash flows during 2017 were mainly used to finance the Company's expenses related the design and development of the Eviation Alice. 

Cash flows used in investment activities during 2017 amounted to $209,000 (and in 2016, $395,000), mainly relating to purchase of fixed assets.

Cash flows provided by financing activities during 2017 amounted to $1,272,000 (and in 2016, $2,965,000) relating to the equity investments in the Company and Loan Agreements.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Research and development expenses consist primarily of costs related to the design and development of our model light passenger aircraft. We charge all research and development expenses to operations as they are incurred. We expect our research and development expense to remain our primary expense in the near future as we continue to develop our prototype.

The Company’s legacy operations in waste disposal management in existence as of December 31, 2015 have been discontinued and have been so recorded in our financials. Accordingly, there is no comparative year-to-year analysis of design and development related expenses as we commenced our new business focus in 2016.

	2017			2016		2015
	(US$ in thousand)
Payroll		741			505		-
Materials and subcontractors		630			1,224		-
Rent and office maintenance		67			46		-
Depreciation		141			31
Other		62			23		-
Less – OCS Grants		(495	)		-		-
Total		1,146			1,829		-

Due to the inherently unpredictable nature of the design and development of a light propulsion passenger aircraft with the desired features, we are unable to estimate with any certainty the costs we will incur in the continued development of the aircraft model.

While we are currently focused on advancing the design and development of the aircraft model, our future research and development expenses will depend on the success of the design and development process, as well as on available resources and the ongoing assessments of commercial potential. In addition, we cannot forecast with any degree of certainty the success of any future commercialization arrangements, when such commercialization arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. See “Item 3. Key Information – D. Risk Factors.”

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As we advance the design and development of the aircraft model and assess the commercial potential of continued development plans, we may modify our plans.

 We expect our research and development expenses to increase from current levels as we continue the design and development of the aircraft. The lengthy process of completing a model aircraft and addressing regulatory requirements requires substantial expenditures. Any failure or delay in completing development of a model aircraft, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Due to the factors set forth above, we are not able to estimate with any certainty when we would recognize any net revenues from our operations.

D. TREND INFORMATION

We are focused primarily on the design and development of a light electric powered passenger aircraft. It is not possible for us to predict with any degree of accuracy the outcome of our research and development or our commercialization success. Our research and development expenditures are our primary expenditures. Increases or decreases in research and development expenditure are primarily attributable to the level and results of our design and development plans and activities relating to the aircraft, our assessment of commercial potential and the amount of expenditure on these activities. As we are still in the development stage with no revenue in 2017 or expected to be generated in the foreseeable future we cannot provide trend information.

E. OFF-BALANCE SHEET ARRANGEMENTS

Not applicable.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table of our material contractual obligations as of December 31, 2017, summarizes the aggregate effect that these obligations are expected to have on our cash flow in the periods indicated (in U.S. thousands of dollars with the exception of per share data):

	Total		Less than I year		1-3 years		3-5 years		More than 5 years
	US$ in thousand
Office Lease obligations		59				59
Employees and institutions in respect of payroll		111		111
Related party		462		462
Accrued interest		116		116
Shareholders loans		3,051								3,051
Total		3,799		689		59		-		3,051

 The foregoing table does not include contingent obligations to pay royalties to the OCS, since the total amount to be paid under the terms of those agreements is a function of future sales.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following table sets forth the name, age and position of each of our executive officers and directors, as of the date of this report. Unless otherwise stated, the address for any of the individuals listed below is c/o Eviation Aircraft Ltd., 1 Ha’Ofeh St., Kadima-Tzoran, Israel, 6092000.

Name	Age	Position
Aviv Tzidon	61	Chairman of the Board of Directors
Omer Bar-Yohay	39	Chief Executive Officer
Liza Ohayon	43	Chief Financial Officer
Dan Halutz (1)	70	Independent Director
Eyal Rosner	53	Director
Avi Toledano	57	Director
Abraham Nahmias	62	Director
Orit Stav (2)	46	External Director
Aviad Pundak Mintz (1)	53	External Director

(1)	Member of our Audit and our Compensation Committees.
(2)	Chairman of our Audit and our Compensation Committees.

Executive Officers

Omer Bar-Yohay was appointed as the Company's Chief Executive Officer on April 3, 2016, and provided services to the Company from September 2015. Mr. Bar-Yohay served in the Israel Defense Forces from 1997 to 2008, and departed from service with the rank of Major. From 2008 to August 2015 Mr. Bar-Yohay served in the office of the Prime Minister of Israel in various managerial positions. Mr. Bar-Yohay holds a BA in History from the Hebrew University in Jerusalem.

Liza Ohayon was appointed as the Company's Chief Financial Officer on April 3, 2016. Ms. Ohayon joined Phinergy Ltd. in July 2015 and serves as its VP Finance and serves as our chief financial officer pursuant to the Administrative Services Agreement with Phinergy Ltd. Phinergy Ltd is controlled by Mr. Tzidon, one of our controlling shareholders. Prior to joining Phinergy, between March 2010 and March 2015, Ms. Ohayon served in several positions with Telit Communications PLC, a global leader in Internet of Things (IoT) enablement, including Tax Director and Corporate Controller. Between April 2001 and September 2009, Ms. Ohayon worked in PriceWaterHouseCoopers Israel and New York and has significant experience in managing and leading assurance engagements with private and public companies from the technology and retail industries. She is also very experienced in supporting startups from inception to maturity. Ms. Ohayon holds a B.A. degree in Business Administration and Accounting awarded by the College of Management Academic Studies in Rishon LeZion, Israel and she is a Certified Public Accountant in Israel.

Directors

Aviv Tzidon, one of our controlling shareholders, was appointed as a director on February 2, 2016 and as the Company’s Chairman of the Board of Directors on April 3, 2016. Since 2008, Mr. Tzidon has served as the Founder and CEO of Phinergy Ltd., an Israeli private company which operates in the green energy industry and develops metal-air energy systems. Mr. Tzidon is an accomplished entrepreneur who founded over ten high-tech companies, three of which were quoted on NASDAQ and another on the Frankfurt stock exchange. Mr. Tzidon is a creative thinker who likes to think "out of the box".  He holds over fifteen granted patents, many of which have led to breakthrough innovations across various industry segments (positioning systems, network protocol, navigation accuracy, virtual studio). These innovations have been implemented into a wide range of products and applications, from air combat training for the military to 3D graphics for TV broadcasting. 

Dan Halutz was appointed as a director in July 17, 2016. Mr. Halutz served as the Chief of Staff of the Israel Defense Forces and commander of the Israeli Air Force from April 2000 to February 2007. From 2008 to 2010, Mr. Halutz was the chairman of the board of Starling Advanced Communications Ltd., a private Israeli company specializing in satellite communications and served as the chief executive officer of Kamor Motors Ltd., an Israeli company traded on the Tel Aviv Stock Exchange, specializing in importing BMW products to Israel and Bulgaria. From June 2013 to December 2016, Mr. Halutz served as the Chairman of Jobookit Holdings Ltd., an Israeli company traded on the Tel Aviv Stock Exchange that specializes in on-line recruitment software. Mr. Haloutz is partnering a few private consulting companies and serves as a board member in Berman Bakery Ltd group which is a private company and in Cyient Israel Ltd., a subsidiary of Cyient, a publicly-traded Indian company. Mr. Halutz holds a B.A. degree in Economics from Tel-Aviv University and has completed an Advanced Management Program course in Harvard University.

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Eyal Rosner was appointed as a director in September 17, 2017. Mr. Rosner has 25 years of investment experience in the Israeli high-tech eco-system, with particular focus on early-stage investment. Since January 2017, Mr. Rosner is the co-founder and managing director of Beyond Mobility a hub and investment fund focused solely on the Israeli smart mobility domain. In 2012 Mr. Rosner founded the Fuel Choices & Smart Mobility Initiative under the Israeli Prime Minister's Office and served as Chairman until December 2016, and has established and led the program that initiated and supported the smart mobility ecosystem in Israel. Previously, Mr. Rosner served as the CEO of the Borovitz Mozes Group (BMG), a $3 billion privately held company controlling various companies including El Al Israel Airlines Ltd., Sonol Israel, Tambour Paints and GES Environmental Solutions, in most of which Mr. Rosner served as a board member and consultant. Previously, Mr. Rosner served as a Vice President of Bankers Trust for five years, where he was responsible for trading and sales in Israel. In 2010, Mr. Rosner was also an advisor to the Government of Israel and the Israeli Space Agency (2010), and served on the board of the Israeli chapter of the Young Presidents Organization (YPO). From 2007 to 2012 Mr. Rosner served as a captain in the Israel Defense Forces Navy after graduating with highest honors at the Naval Academy. Mr. Rosner holds a B.Sc. degree in Computer Science and Economics and an MBA degree, both from Tel Aviv University, and is a graduate of the HBS President Program.

Avi Toledano was appointed as a director on February 2, 2016. Since 2013, Mr. Toledano has focused on investment related activities in real estate. Between November 2006 and March 2013 Mr. Toledano served as a director in Teva Naot. Prior to that, from January 1986 to December 2005, Mr. Toledano was a partner of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, where he focused on mergers and acquisitions. Mr. Toledano holds a B.A. degree in Economics and Accounting from the College of Management Academic Studies and has been a Certified Public Accountant in Israel since 1988.

Abraham Nahmias was appointed as a director on February 2, 2016.   Mr. Nahmias has been a senior partner in Nahmias Grinberg Shachar C.P.A. (Isr.) since January 1985. Mr. Nahmias possesses more than 20 years of experience as a director in several public companies in a broad range of fields. He currently serves as a chairman of the board of directors of Allium Medical Solutions Ltd. (since 2014) and as a director in Nano Dimension Ltd. (since 2014), in Orad Ltd. (since 2011), and in Cellect Biomed Ltd. (since 2014). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University and has been a Certified Public Accountant in Israel since January 1981.

Orit Stav was appointed as a director on February 2, 2016. Ms. Stav is an experienced investment manager with more than 15 years of experience in the venture capital and private equity industries, as well as in the technology sector.  Ms. Stav currently serves as a professional board member in seven public companies (I.B.I Investment House Ltd., Elbit Vision Systems Ltd., Aran Research & Development Ltd., Israel Canada Ltd., O.R.T Technologies Ltd., HBL Hadasit Bio Technology, and Prior-Tech Ltd.). Ms. Stav is a Managing Partner in Israel Innovation Partner, a consultant firm for investments in technology startups.  From January 2006 to March 2010, Ms. Stav represented Siemens Venture Capital (SVC) in Israel and was responsible for all of Siemens’ investments in Israel. Prior to joining SVC, from January 1998 to May 2005 Ms. Stav was a partner at Platinum Neurone Ventures, an Israeli venture capital fund where she led investments from seed stage to successful exits and was responsible for two M&A transactions. She has gained experience working with entrepreneurs, represented the fund as a board member in portfolio companies and worked with leading international VCs. Ms. Stav holds a MBA degree from Hertfordshire University, UK, and a B.A. degree (Economics and Management) from Tel Aviv University.

Aviad Pundak-Mintz was appointed as a director on February 2, 2016. Mr. Pundak-Mintz serves as a Venture Partner at Canaan Partners Israel VC fund since its inception in 2014. Previously he was Venture Partner and General Partner at Gemini Israel Funds. Mr. Pundak-Mintz joined Gemini Israel Funds in 1999 and specialized in the area of enterprise software and SaaS. He has led numerous investments in the space and is considered one of the most successful and prolific early stage investors in Israel. 

He draws on his start-up, venture capital and scientific background to make seed investments as an Angel, at CPI and previously at Gemini. He served as the Acting Chief Executive Officer of Sphera Corporation during 2003 performing a turnaround where he streamlined the operations of Sphera, lead it to record revenues and recruited a CEO and helped sell the company to Parallels. Prior to becoming a venture capitalist, Mr. Pundak-Mintz held a number of positions in business development and marketing at Nexus Telecommunications (NASDAQ: PNTR) and at ECI telecom where Mr. Pundak-Mintz’ team developed the first SDH system in the world. 

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Mr. Pundak-Mintz was a Director of BlazeMeter from 2012 until it was sold to Computer Associates in 2016. He was a director at dbMotion Ltd. from 2005 until it was sold to Allscripts (NASDAQ: MDRX) in 2013. He was an investor in a management buy-out and adviser to CEO of Optitex until it was sold to EFI (NASDAQ: EFII) in 2016. He was an investor and observer in Teads (previously wikio) sold to Altice in 2017. He was also a board member at Traiana sold to ICAP (LON: NXG), ItemField sold to Informatica (NASDAQ: INFA) Diligent sold to IBM (NASDAQ: IBM) and Neocleus sold to Intel (NASDAQ INTC).   

  Mr. Pundak-Mintz served in the Israeli Navy as a project engineer for naval underwater systems. Mr. Pundak-Mintz is a frequent speaker in Israel and Europe on venture capital and high technology topics. He holds an M.B.A. degree from INSEAD and studied Computer Vision at the Weizmann Institute. Mr. Pundak-Mintz also holds a B.Sc. degree, with honors, in electrical engineering and a B.A. degree in mathematics, with distinction, from Ohio State University.

Arrangements for Election of Directors and Members of Management; Family Relationships

There are no arrangements or understandings with major shareholders, customers, suppliers or others related to the election of our Board of Directors or the appointment of members of our senior management. Mr. Dekel Tzidon, the brother of one of our controlling shareholders Aviv Tzidon, is a director in our Subsidiary. There are no other family relationships among any directors or members of our senior management.

B. COMPENSATION

Compensation of Officers and Directors

The following table presents the total compensation paid to or accrued on behalf of all of our directors and officers as a group for the year ended December 31, 2017:

	Salaries, Directors' fees, Service fees, Commissions and Bonus		Pension, Retirement and Similar benefits
All directors and officers as a group (9 persons)	$	252,373	$	38,670

Compensation Requirements under Israeli Law

Compensation Policy

In December 2012, an amendment to the Companies Law, or Amendment 20, became effective, requiring public companies to appoint a compensation committee. See “Compensation Committee” below for information concerning our Compensation Committee.

Pursuant to Amendment 20, we are required to adopt a compensation policy regarding the terms of office and employment of office holders, including compensation, severance and other benefits, exemptions from liability, insurance and indemnification. The Compensation Policy must be based on the considerations, must include the provisions and needs to reference the matters which are detailed in the Companies Law. An “office holder” is defined in the Companies Law as a general manager, chief executive officer, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of the foregoing positions without regard to such person’s title, a director and a manager directly subordinate to the chief executive officer.

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According to the Companies Law, a compensation policy must be approved by the Board of Directors of the company following the recommendations of the Compensation Committee, and must also be approved by a majority of the company’s shareholders, provided that (i) such majority includes at least a majority of the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, who are present and voting, or (ii) the non-controlling shareholders and shareholders who do not have a personal interest in the matter who were present and voted against the policy hold two percent or less of the voting power of the company. We expect to adopt a compensation policy in the near future.

The Compensation Policy must be approved by the Board of Directors and the Company’s shareholders every three years. In the event that the Compensation Policy is not approved by the Company’s shareholders, the Compensation Committee and the Board of Directors may still approve the policy, if the Compensation Committee and the Board of Directors determine, based on specified reasons and following further discussion of the matter that the Compensation Policy is in the best interests of the Company.

Changes to existing terms of office and employment of office holders (other than directors), only requires the approval of the Compensation Committee, if the Compensation Committee determines that the revised terms are not substantially different from the existing terms.

Pursuant to Amendment 20, any arrangement between a company and an office holder (other than a director or the chief executive officer) as to his or her terms of office and employment must be in line with the company’s Compensation Policy and requires the approval of such company’s Compensation Committee and Board of Directors. However, under certain circumstances and conditions, the compensation committee and the Board of Directors may approve an arrangement that deviates from the company’s compensation policy, provided that such arrangement is approved by the Compensation Majority of the company’s shareholders. The Board of Directors and the compensation committee of a company may, under special circumstances and for specified reasons, approve such an arrangement even if the shareholders did not approve it, following a re-discussion of the matter in which, among other things, any shareholders’ objections were examined.

Directors

Pursuant to Amendment 20, any arrangement between a company and a director as to his or her terms of office and employment must be in compliance with the Compensation Policy and requires the approval of the Compensation Committee, the Board of Directors and the shareholders by a simple majority. In absence of a compensation policy, any such arrangement will require the approval of the Compensation Majority.

Under the Companies Law and regulations promulgated pursuant thereto, the compensation payable to external directors and independent directors is subject to certain further limitations. The independent director and the external directors are entitled to mandatory cash compensation as provided in regulations adopted under the Companies Law. Our other directors are not entitled to any cash compensation.

On October 15, 2016, the Company granted options to purchase 37,500 ordinary shares of the Company to each of the Company's directors at an exercise price of $1.00 per share, with a vesting commencement date of September 26, 2016, under the Company’s 2016 Equity Incentive Plan. In addition, on December 11, 2017, the Company granted options to purchase 37,500 ordinary shares of the Company to Mr. Eyal Rosner, at an exercise price of $1.00 per share, with a vesting commencement date of December 11, 2017, under the 2016 Equity Incentive Plan. The options are scheduled to vest in four annual installments from the vesting commencement date, as follows: 10,000 options on each of the first, second and third anniversaries of the vesting commencement date and 7,500 on the fourth anniversary of the vesting commencement date, subject to option holder’s continuing to be a director of the Company or any affiliate thereof through such dates. Notwithstanding the above, the vesting of the options may accelerate so that all shares subject to the option will be fully vested and exercisable immediately prior to the occurrence of any of the following corporate transaction: (i) A merger, acquisition, reorganization or consolidation in which the Company is not the surviving entity; (ii) the sale, transfer, exchange or other disposition of all or substantially all of the shares or assets of the Company.

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The Company does not have any contracts with any of its non-employee or non-consultant directors that would provide for benefits upon termination of service.

Chief Executive Officer

Pursuant to Amendment 20, any arrangement between a company and its chief executive officer as to his or her terms of office and employment must be in line with the Compensation Policy and requires the approval of the Compensation Committee, the Board of Directors and the Company’s shareholders by the Compensation Majority.

Under certain circumstances and conditions, the Compensation Committee and the Board of Directors may approve an arrangement that deviates from the Compensation Policy provided it is approved by the shareholders by the Compensation Majority. In addition, under certain circumstances, a company may be exempt from receiving the shareholders’ approval with respect to the terms of office and employment of a candidate for chief executive officer if the compensation committee has determined for specified reasons that shareholder approval would prevent the engagement, provided that the compensation terms are in-line with the Compensation Policy.

Set forth below is the compensation of our management in the year ended December 31, 2017:

Chief Executive Officer – Mr. Omer Bar-Yohay

On April 3, 2016, the Board of the Company appointed Mr. Omer Bar-Yohay as the Chief Executive Officer of the Company and the Subsidiary.

On July 17, 2016, the Audit Committee and the Board approved the terms of employment of Mr. Bar-Yohay as the Chief Executive Officer of the Subsidiary effective as of July 1, 2016. On August 15, 2016, the Audit Committee and the Board ratified the compensation package for Mr. Bar-Yohay and on September 26, 2016, our shareholders ratified the compensation package for Mr. Omer Bar-Yohay.

Monthly Salary:

A gross monthly base salary of NIS 50,000 (approximately $14,000), plus customary benefits, which include managers’ insurance, education fund, travel expenses and long-term disability insurance.

Chief Financial Officer - Ms. Liza Ohayon

Our Chief Financial Officer is employed by Phinergy Ltd. and serves as our chief financial officer pursuant to an Administrative Services Agreement with Phinergy Ltd. We do not directly compensate our chief financial officer for services rendered; our Subsidiary pays to Phinergy a monthly fee, calculated on the basis of the actual cost plus markup to Phinergy, of providing the contracted for services, including those of our chief financial officer, derived as a percentage of the global costs paid for Phinergy for receiving such services for itself and our Subsidiary together.

Summary Compensation Table

The following table outlines the compensation granted to our most highly compensated office holders, including directors, during or with respect to the year ended December 31, 2017.

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For purposes of the table and the summary below, “compensation” includes base salary, discretionary and non-equity incentive bonuses, equity-based compensation, payments accrued or paid in connection with retirement or termination of employment, and personal benefits and perquisites such as car and social benefits paid to or earned by each listed executive during the year ended December 31, 2017.

Name	Position	Salary1			Bonus		Value of Equity Awards		Other Compensation		Total
Omer Bar-Yohay	CEO	$	207,866			-		-		-	$	207,866
Liza Ohayon2	CFO	$	60,020			-		-		-	$	60,020
Orit Stav	External Director	$	7,881	3		-	$	1,992		-	$	9,873
Aviad Pundak-Mintz	External Director	$	7,726	3		-	$	1,992		-	$	9,718
Dan Halutz	Independent Director	$	7,551	3		-	$	1,992		-	$	9,543

¹ Includes managers' insurance and pension funds, payments to the National Insurance Institute, advanced education funds, vacation allowance and other customary benefits.

² Our Chief Financial Officer (Ms. Liza Ohayon) is employed by Phinergy Ltd. and serves as our chief financial officer pursuant to an Administrative Services Agreement our Company has with Phinergy Ltd. We do not directly compensate our chief financial officer for services rendered. Our subsidiary, Eviation Tech Ltd., pays to Phinergy a monthly fee, calculated on the basis of the actual cost plus markup to Phinergy of providing the contracted-for services, including those of our Chief Financial Officer, derived as a percentage of the global costs paid to Phinergy for receiving such services for itself and our subsidiary together.

³ Not including VAT, at 17%.

C. BOARD PRACTICES

Appointment and Terms of Office

Under the Companies Law and our articles of association, the supervision of the management of our business is vested in our Board of Directors. There must be at least three and not more than nine directors on the board of the Company including at least two external directors and one independent director. Any single shareholder of the Company holding at least twenty five percent (25%) of the issued shares of the Company may appoint, dismiss and replace two directors, to the extent such single shareholder exists. One director is appointed by the directors serving on the board, provided that such director has first been classified by the Audit Committee as independent in accordance with the provisions of the Law. As long as the number of directors serving on the board is less than the maximum number of directors, the Board can act to fill vacancies in the board up to the maximum number of directors, provided that (i) each shareholder holding at least thirty percent (30%) of the issued and outstanding share capital of the Company has agreed in writing to such appointment, and (ii) such appointment has not been opposed by two or more directors. If there is no single shareholder holding at least 30% and if the number of directors serving on the Board is less than the maximum number of directors, the shortfall number of directors of the Company (up to the maximum number of directors) shall be elected at each Annual Meeting by a simple majority and shall hold office until the end of the next Annual Meeting unless their office is vacated prior thereto in accordance with the provisions of the articles of association and the Companies Law.The provisions regarding the appointment of external directors are governed by the Companies Law. Directors serve until the next Annual General Meeting, unless their offices are vacated earlier under any relevant provision of our articles of association.

Alternate Directors

Our articles of association provide that a director may appoint, by written notice to us, any individual to serve as an alternate director. Currently, no alternate directors have been appointed. Under the Companies Law, (i) a director of a company whose articles of association permit the appointment of an alternate director to the board, may appoint another director as an alternate director to a committee of the board, provided that the alternate director is not already a member of such committee and further provided that if the appointing director is an external director, the alternate director shall possess the financial and accounting expertise or the professional qualification (as described under “External Directors” below) possessed by the appointing director, and (ii) an external director may not appoint an alternate director except as set forth in clause (i).

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External Directors

Under the Companies Law, companies incorporated under the laws of Israel whose shares have been offered to the public in or outside of Israel are required to appoint at least two external directors. The law provides that a person may not be appointed as an external director if the person or the person’s relative, partner, employer or any entity under the person’s control, has, as of the date of the person’s appointment to serve as external director, or had, during the two years preceding that date, any affiliation with the company or any entity controlling, controlled by or under common control with the company. The term “affiliation” includes:

● an employment relationship with the company;

● a business or professional relationship with the company maintained on a regular basis;

● control of the company; and

● service as an office holder, except where the director was appointed as such for serving as an external director of a company that was contemplating becoming a publicly held company.

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

External directors are to be elected by a majority vote at a shareholders’ meeting, provided that either:

1. At least a majority of the shares of non-controlling shareholders and shareholders who do not have a personal interest voted at the meeting (disregarding votes abstained), vote in favor of election of the director; or

2.  the total number of shares of non-controlling shareholders voted against the election of the director does not exceed two percent of the aggregate voting rights in the company.

The initial term of an external director will be three years and may be extended for an additional three years. Each committee of a company’s Board of Directors will be required to include at least one external director and the audit committee of a company’s Board of Directors is required to include all of the external directors.

An external director is entitled to compensation as provided in regulations adopted under the Companies Law and is otherwise prohibited from receiving any other compensation, directly or indirectly, in connection with service provided as an external director. 

Under regulations recently promulgated under the Companies Law, at least one of the external directors serving on a company’s Board of Directors is required to have “financial and accounting expertise” and the other external director or directors are required to have “professional qualification”. The Companies Law further provides that to the extent at the time of nomination of an external director to the board, all of the directors of a company (excluding directors affiliated with a controlling shareholder) are of a certain gender, the external director nominated for appointment to the board at such time shall be of the opposite gender.

Ms. Orit Stav has financial and accounting expertise as defined by the Companies Law.

Mr. Aviad Pundak-Mintz has professional qualification as defined by the Companies Law.

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The recently promulgated regulations set out the conditions and criteria for a director qualifying as having a “financial and accounting expertise” or a “professional qualification”. A director with financial and accounting expertise is a director who, due to his education, experience and skills, possesses capabilities relating to and an understanding of business and accounting matters and financial statements, which enable him to understand in depth the company’s financial statements and to initiate a debate regarding the manner in which the company’s financial information is presented. A director who meets certain professional qualifications is a director who satisfies one of the following requirements: (i) the director holds an academic degree in either economics, business administration, accounting, law or public administration, (ii) the director either holds another academic degree or has obtained other high education in the company’s primary field of business or in an area that is relevant to his position, (iii) the director has at least five (5) years of experience serving in one of the following capacities or an aggregate of at least five (5) years of experience in two or more of the following capacities: (a) a senior business management position of a company with a substantial scope of business, (b) a senior position in the primary field of business of the company or (c) a senior public administration position. A proposed external director must submit to the company a declaration as to his or her compliance with the requirements for his or her election as an external director (including with respect to such person’s financial and accounting expertise or professional qualification). 

The Board of Directors should determine the minimum number of directors having financial and accounting expertise in addition to the external directors. In determining such number, the Board of Directors shall consider, among other things, the type and size of the company and the scope and complexity of its operations. 

Fiduciary Duties of Office Holders:

The Companies Law codifies the fiduciary duties that “office holders,” including directors and executive officers, owe to a company. An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act at a level of care that a reasonable office holder in the same position would employ under the same circumstances. This includes the duty to utilize reasonable means to obtain (i) information regarding the business feasibility of a given action brought for his or her approval or performed by him or her by virtue of his or her position; and (ii) all other information of importance pertaining to the foregoing actions. The duty of loyalty requires that an office holder act in good faith and for the benefit of the company, including (i) avoiding any conflict of interest between the office holder’s position in the company and any other position he or she holds or his or her personal affairs; (ii) avoiding any competition with the company’s business, (iii) refraining from exploiting any business opportunity of the company in order to receive personal gain for the office holder or others, and (iv) disclosing to the company any information or documents relating to the company’s affairs that the office holder has received by virtue of his or her position as an office holder.

Disclosure of Personal Interests of an Office Holder; Approval of Transactions with Office Holders:

The Companies Law requires that an office holder promptly, and no later than at the first board meeting at which such transaction is considered, disclose any personal interest that he or she may have and all related material information known to him or her and any documents in his or her possession, in connection with any existing or proposed transaction relating to the company. In addition, if the transaction is an extraordinary transaction, namely, (i) a transaction other than in the ordinary course of business; (ii) a transaction that is not on market terms; or (ii) a transaction likely to have a material impact on the company’s profitability, assets or liabilities, the office holder must also disclose any personal interest held by the office holder’s spouse, siblings, parents, grandparents, descendants, spouse’s descendants and the spouses of any of the foregoing (“relatives”), or by any corporation in which the office holder or a relative is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager.

Under the Companies Law, all arrangements as to compensation of office holders who are not directors require approval by the Board of Directors, and exculpation, insurance and indemnification of, or an undertaking to, indemnify an office holder who is not a director requires both Board of Directors and compensation committee approval. The compensation of office holders who are directors must be approved by our Compensation Committee, Board of Directors and shareholders, in that order. Until such time as we adopt a Compensation Policy, the requisite shareholder approval for compensation of office holders who are directors shall be the Compensation Majority.

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Some other transactions, actions and arrangements involving an office holder (or a third party in which an office holder has an interest) must be approved by the Board of Directors or as otherwise provided for in a company’s articles of association, however, a transaction that is beneficial for the company’s may not be approved. In some cases, such a transaction must be approved by the audit committee and by the Board of Directors itself, and under certain circumstances shareholder approval may be required. Generally, in all matters in which a director has a personal interest he or she shall not be permitted to vote on the matter or be present in the meeting in which the matter is considered, except in case of a transaction that is not extraordinary or for presenting the proposed transaction, if the chairman of the audit committee or Board of Directors (as applicable) determines it necessary. Should a majority of the audit committee or of the Board of Directors have a personal interest in the matter, then: (a) all of the directors are permitted to vote on the matter and attend the meeting at which the matter is considered; and (b) the matter requires approval of the shareholders at a general meeting.

Audit Committee  

Under the Companies Law, the Board of Directors of any publicly traded company must appoint an audit committee, comprised of at least three directors including all of the external directors but excluding: (a) the chairman of the Board of Directors; (b) any controlling shareholder or relative of a controlling shareholder; or (c) any director employed by the company or who provides services to the company on a regular basis. Additionally, each company must certify that it has, and will continue to have, at least one member of the audit committee who has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. Our audit committee currently consists of Ms. Orit Stav, Mr. Aviad Pundak Mintz and Mr. Dan Halutz. The chairperson of the audit committee is Ms. Orit Stav.

 The roles of our audit committee under the Companies Law include identifying irregularities in the management of the Company’s business and approving related party transactions as required by law. The responsibilities of the audit committee under the Nasdaq rules include, among other things, evaluating the independence of a company’s auditors. 

Our audit committee oversees (in addition to the Board of Directors) the accounting and financial reporting processes of the Company and audits of our financial statements, including the integrity of our financial statements, compliance with legal and regulatory requirements, our independent auditors’ qualifications, independence, compensation and performance, and the performance of our internal audit function. Our audit committee is also required to (i) find deficiencies in the business management of the Company and propose to our Board of Directors ways to correct such deficiencies; (ii) determine whether certain related party actions and transactions are “material” or “extraordinary” in connection with their approval procedures; (iii) approve related-party transactions as required by Israeli law; and (iv) establish whistle blower procedures (including in respect of the protections afforded to whistle blowers). Additional duties of our audit committee are (i) to establish procedures to be followed in respect of non-extraordinary related party transactions with a controlling shareholder which may include, where applicable, the establishment of a competitive process for such transaction, under the supervision of the audit committee, or whomever it designates for this purpose, in accordance with criteria determined by the audit committee, (ii) to establish procedures for approving certain related party transactions with a controlling shareholder, which having been determined by the audit committee not to be extraordinary transactions, were also determined by the audit committee not to be negligible transactions; and (iii) such other duties as may be directed by our Board of Directors. The audit committee may consult from time to time with our independent auditors and internal auditor with respect to matters involving financial reporting and internal accounting controls.

The audit committee must observe the independence of our auditors and has the authority and responsibility to nominate for shareholder approval, evaluate and, where appropriate, replace our independent auditors. 

In discharging its oversight role, our audit committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the company and the power to retain independent counsel, auditors or other experts for this purpose.

Under the Sarbanes-Oxley Act of 2002, the audit committee is responsible for the appointment, compensation, retention and oversight of the work of the Company’s external auditors. However, under Israeli law, the appointment of external auditors requires the approval of the shareholders of the Company. Accordingly, the appointment of the external auditors is approved and recommended to the shareholders by the audit committee and ratified by the shareholders.

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Compensation Committee:

Our Board of Directors has established a compensation committee, which offers recommendations to the Board of Directors regarding equity compensations issues (with the Board of Directors also approving compensation of our executive officers). The compensation committee also makes recommendations to our Board of Directors in connection with the terms of employment of our chief executive officer and all other executive officers.

Under the Companies Law, a company’s compensation committee is responsible for: (i) making recommendations to the Board of Directors with respect to the approval of the compensation policy applicable to the company’s office holders and any extensions thereto; (ii) providing the Board of Directors with recommendations with respect to the adoption of and any amendments or updates to the Compensation Policy and periodically reviewing the implementation thereof; (iii) reviewing and approving arrangements with respect to the terms of office and employment of office holders; and (iv) determining whether or not to exempt a transaction with a candidate for chief executive officer from shareholder approval.

Our compensation committee currently consists of Ms. Orit Stav, Mr. Aviad Pundak Mintz and Mr. Dan Halutz. The chairperson of the compensation committee is Ms. Orit Stav.

Internal Auditor

Under the Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of the audit committee. The role of the internal auditor is, among other things, to examine whether a company’s actions comply with applicable law and orderly business procedure. Under the Companies Law, the internal auditor may not be an interested party, an office holder, or a relative of an interested party or of an office holder, nor may the internal auditor be the company’s independent auditor or its representative. An “interested party” is defined in the Companies Law as: (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person or entity who has the right to designate one or more directors or to designate the chief executive officer of the company, or (iii) any person who serves as a director or as a chief executive officer of the company.

Ezra-Yehuda-Rosenblum Consulting, Control & Risk Management Firm serves as our internal auditor.

Duties of Shareholders

Under the Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising its rights and performing its obligations to the company and other shareholders, including, among other things, voting at general meetings of shareholders on the following matters:

• An amendment to the articles of association;

• an increase in the company’s authorized share capital;

• a merger; and

• the approval of related party transactions and acts of office holders that require shareholder approval.

A shareholder also has a general duty to refrain from discriminating against other shareholders.

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The remedies generally available upon a breach of contract will also apply to a breach of the above-mentioned duties, and in the event of discrimination against other shareholders, additional remedies are available to the injured shareholder.

In addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power with respect to a company, have a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account.

Israeli Securities Authority Administrative Enforcement:

Under the Israeli Securities Law, the Israeli Securities Authority, or the ISA, may take certain administrative enforcement actions against a company or a person, including a director, officer or shareholder of a company, if performing certain transgressions designated in the Israeli Securities Law.  The ISA is also authorized to impose fines on any person or company breaching certain provisions designated under the Companies Law.

D. EMPLOYEES

As of December 31, 2015 we had not directly engaged any employees.

As of December 31, 2016 we had, through our Subsidiary 6 employees in Israel, all of which were engaged in design and development.

As of December 31, 2017 we had, through our Subsidiary, 9 employees in Israel, of which 8 were engaged in design and development.

We believe that our relations with our employees are satisfactory. We have not experienced a collective labor dispute or a strike.

Israeli labor laws are applicable to all of our employees in Israel.

We are not a party to any collective bargaining agreements and our employees are not represented by any labor union. However, certain provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including the Manufacturers’ Association of Israel) are applicable to all Israeli employees by order of the Israeli Ministry of Labor and Welfare. These provisions principally concern the length of the workday and the workweek, minimum wages for workers, contributions to pension funds, insurance for work-related accidents, procedures for dismissing employees, determination of severance pay and other conditions of employment. These provisions are modified from time to time.

Israeli labor laws subject employers to increased liability, including monetary sanctions and criminal liability, in cases of violations of certain labor laws and certain violations by contractors providing maintenance, security and cleaning services.

Our Israeli employees are covered by pension insurance policies according to law requirement. Israeli employees and employers are required to pay predetermined sums to the Israeli National Insurance Institute which amounts also include, since January 1, 1995, payments for national health insurance.

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E. SHARE OWNERSHIP

As of April 17, 2018, shares, options and warrants held by our officers and directors, then consisting of nine persons, are as follows:

Name (5)	Number of Ordinary Shares Beneficially owned (1)			Percentage of Outstanding Ordinary Shares (2)
Aviv Tzidon, Chairman of the Board		6,130,875			49.61	%	(3)
Omer Bar-Yohay, Chief Executive Officer		999,000			9.34	%
Liza Ohayon, Chief Financial Officer		-			-
Dan Halutz, Independent Director		10,000	(4)		-	%
Eyal Rosner, Director		-			-
Avi Toledano, Director		10,000	(4)		-	%
Abraham Nahmias, Director		10,000	(4)		-	%
Orit Stav, External Director		10,000	(4)		-	%
Aviad Pundak Mintz, External Director		10,000	(4)		-	%
Directors and Officers as a Group (9 persons)		7,179,875			57.87	%	(3)

1.	Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.  Ordinary Shares relating to options and warrants currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person.
2.	Based on 10,694,820 ordinary shares outstanding as of April 17, 2018.
3.	Such percentage reflects warrants to purchase up to 1,652,590 ordinary shares granted to A.O. Tzidon (1999) Ltd. pursuant to the August 2017 Share Purchase Agreement.
4.	Except for Messrs. Bar-Yohay and Tzidon, each of our directors and officers beneficially owns less than 1% of our outstanding shares.
5.	Each shareholder’s address is c/o Eviation Aircraft Ltd., 1 Ha’Ofeh St., Kadima-Tzoran, Israel, 6092000

Equity Incentive Plan

The purpose of the 2016 Equity Incentive Plan, or the Plan, is to enable us to attract and retain qualified persons as employees, officers, directors, consultants and advisors and to motivate such persons by providing them with an equity participation in the Company. On September 26, 2016, the Company’s shareholders approved the adoption of the Plan, reserving 1,000,000 Ordinary Shares for purchase by the employees, directors, consultants and service providers of the Company, and its subsidiaries under the Plan.

The Plan is administered by the Board of Directors, which has broad discretion, subject to certain limitations, to determine the persons entitled to receive options.

Under the Plan, the terms and conditions under which options are granted and the number of shares subject thereto shall be determined by the Board of Directors. The Board of Directors also has discretion to determine the nature of the consideration to be paid upon the exercise of an option under the Plan. Such consideration generally may consist of cash, check or wire transfer or, at the discretion of the Board of Directors, consideration received by the Company under a broker-assisted sale and remittance program acceptable to the Board of Directors or a combination of the above.

The Ordinary Shares acquired upon exercise of an option are subject to certain restrictions on transfer, sale or hypothecation. Options are exercisable and restrictions on disposition of shares lapse pursuant to the terms of the individual agreements under which such options were granted or shares issued.

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The Company has elected to designate the Plan under the “capital gains” track of Section 102 of Israeli Income Tax Ordinance 5721-1961 (the “Tax Ordinance”), designed to afford qualified optionees certain tax benefits under the Tax Ordinance (a “Section 102 Plan”). Pursuant to the election made by the Company, capital gains derived by optionees arising from the sale of shares pursuant to the exercise of options granted to them under the Plan, will be subject to a flat capital gains tax rate of 25% (instead of the gains being taxed as salary income at the employee’s marginal tax rate). However, as a result of this election, the Company is not allowed to claim the amounts credited to such employees as a benefit when the related capital gains tax is payable by them, as an expense for tax purposes. The Company may change its election from time to time, as permitted by the Tax Ordinance. There are various conditions that must be met in order to qualify for these benefits, including the registration of the options in the name of a trustee (the “Trustee”) for each of the employees who is granted options. Generally, each option, and any Ordinary Shares acquired upon the exercise of the option, must be held by the Trustee for a period commencing on the date of grant and ending no earlier than 24 months from the date of grant.

As of March 31, 2018, we had 262,500optionsoutstanding under the Plan (of which 60,000optionsare exercisable) at an exercise price of $1.00 per ordinary share.

ITEM 7. MAJOR SHAREHOLDERS AND INTERESTED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

We are not directly or indirectly owned or controlled by another corporation or by any foreign government.

The following table sets forth, as of April 17, 2018, to the best of the Company’s knowledge, information regarding the beneficial ownership by all shareholders who own beneficially more than 5% of our Ordinary Shares. Except where indicated, to the best of the Company’s knowledge based on information provided by the owners or disclosed in public regulatory filings in the United States, in accordance with the applicable law, the beneficial owners of the shares listed below have sole investment and voting power with respect to those shares. Applicable percentage ownership in the following table is based on 10,694,820 shares outstanding as of April 17, 2018.

The shareholders’ holdings reflect their voting rights. The Company’s major shareholders do not have different voting rights than other shareholders, with respect to their shares.

	Shares Beneficially Owned1
Name and Address2	Outstanding Shares		Warrant Shares1			Total Shares		Percentage
Aviv Tzidon4		4,120,875		10,000	3		4,130,875		33.43	%
A.O. Tzidon (1999) Ltd.1		347,410		1,652,590			2,000,000		16.20	%
Magic Stones Gemstone Import and Marketing Ltd.		4,120,875					4,120,875		33.38	%
Michael Ilan Management and Investment Ltd.1,5		347,410		1,652,590			2,000,000		16.20	%
Omer Bar-Yohay		999,000					999,000		9.34	%
Dekel Tzidon6		749,250					749,250		7.01	%
Directors and Officers as a group(consisting of 9 persons)7		5,467,285		1,712,590			7,179,875		57.87	%

¹Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.  Ordinary Shares relating to options and warrants currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person.

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²Each shareholder’s address is c/o Eviation Aircraft Ltd., 1 Ha’Ofeh St., Kadima-Tzoran, Israel, 6092000.

³Options to purchase Ordinary Shares were granted to each of our non-executive directors, pursuant to our shareholders’ approvals on September 26, 2016 and December 11, 2017.

⁴Aviv Tzidon is the beneficial owner of 347,410 Ordinary Shares and warrants to purchase 1,652,590 Ordinary Shares held by A.O. Tzidon (1999) Ltd.

⁵Michael Ilan is the beneficial owner of 4,120,875 Ordinary Shares held by Magic Stones. and 347,410 Ordinary Shares and warrants to purchase 1,652,590 Ordinary Shares held by Michael Ilan Management.

⁶ Dekel Tzidon is the brother of Aviv Tzidon.

⁷Except for Messrs. Bar-Yohay and Tzidon, each of our directors and officers beneficially owns less than 1% of our outstanding shares.

On February 2, 2016, Mr. Tzidon and Magic Stones acquired 99.9% of the Company following court approval of the Acquisition Agreement.

The changes in holdings (excluding warrants) of the major shareholders over the last three years are detailed, to the best of our knowledge or based on the respective shareholder’s public filings, in the table below:

Holdings as of:	December 31, 2015		December 31, 2016		December 31, 2017		April 17, 2018
Aviv Tzidon		-		4,120,875		4,120,875		4,120,875
A.O. Tzidon (1999) Ltd.		-		-		347,410		347,410
Magic Stones Gemstone Import and Marketing Ltd.		-		4,120,875		4,120,875		4,120,875
Michael Ilan Management and Investment Ltd.		-		-		347,410		347,410
Omer Bar-Yohay		-		999,000		999,000		999,000
Dekel Tzidon		-		749,250		749,250		749,250

As of April 17, 2018, there were 26record holders of Ordinary Shares, of which 6 were registered with addresses in the United States, representing approximately 0.07% of the outstanding Ordinary Shares. However, the number of record holders in the United States is not representative of the number of beneficial holders, nor is it representative of where such beneficial holders are resident since many of the Ordinary Shares are held of record by brokers and other nominees.

B. RELATED PARTY TRANSACTIONS

August 2017 Share Purchase Agreement

For a discussion of the August 2017 Share Purchase Agreement, see sub-section “Capital Resources” in Section 4.B “Business Overview” above.

Registration Rights Agreement

On August 17, 2017, in connection with the August 2017 Share Purchase Agreement, the Company entered into a Registration Rights Agreement with A.O. Tzidon and Michael Ilan Management and Investment Ltd. Pursuant to such agreement, A.O. Tzidon and Michael Ilan Management and Investment Ltd. received certain incidental and shelf registration rights. For further discussion of the Registration Rights Agreement, see our Current Report on Form 6-K, filed with the SEC on August 23, 2017.

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Administrative Services Agreement for the provision of various services and the lease of office space

See: “Item 4. Information on the Company – B. Business Overview- Material Agreements”.

Insurance

Our articles of association provide that, subject to the provisions of the Companies Law, we may enter into a contract for the insurance of the liability of any of our office holders for acts that he or she performed in his or her capacity as an office holder in relation to:

● A breach of his/her duty of care to us or to another person;

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

● a financial liability imposed upon him/her in favor of another person.

We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue and obtain such insurance and pay all premiums thereunder to the fullest extent permitted by the Companies Law. Under the Companies Law, an Israeli company may not exempt an office holder from liability for a breach of his duty of loyalty, but may exempt in advance an office holder from his liability to the company, in whole or in part, for a breach of his duty of care.

Indemnification of Office Holders

Our articles of association provide that we may indemnify an office holder against:

● A financial liability imposed on an office holder in favor of another person by any judgment, including a judgment given as a result of a settlement or an arbitrator’s award which has been confirmed by a court in respect of an act performed by the office holder;

● reasonable litigation expenses, including attorneys` fees, expended by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment (as defined in the Companies Law) was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability as a substitute for the criminal proceeding (as defined in the Companies Law) was imposed upon him or her as a result of such investigation or proceeding or if such financial liability was imposed, it was imposed with respect to an offence that does not require proof of criminal intent; and

● reasonable litigation costs, including attorney’s fees, expended by an office holder or which were imposed on an office holder by a court in proceedings filed against the office holder by the Company or in its name or by any other person or in a criminal charge in respect of which the office holder was acquitted or in a criminal charge in respect of which the office holder was convicted for an offence which did not require proof of criminal intent.

Our articles of association also include:

● Authorization to undertake, in advance, to indemnify an office holder, provided that the undertaking is limited to specified events which the Board of Directors believes are anticipated and limited in amount determined by the Board of Directors to be reasonable under the circumstances; and

● authorization to indemnify retroactively an office holder.

On September 26, 2016, our shareholders approved entering into indemnification agreements with all then-existing and future directors and office holders of the Company.

Under the terms of the indemnification agreement, the total amount of indemnification for each applicable case (including all matters connected therewith), shall not exceed $ 1 million (in addition to any amounts paid under an insurance coverage).

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C. INTEREST OF EXPERT AND COUNSEL

Not applicable.

ITEM 8. FINANCIAL INFORMATION

See Item 18.

Legal Proceedings

We are currently not aware of any pending of threatened legal actions in which the Company is involved.

Dividend Distribution Policy

The Company does not currently have a dividend policy. The declaration and payment of any cash dividends in the future will be determined by the Board of Directors in light of the conditions existing at that time. This will include our earnings and financial condition. We may only pay cash dividends in any fiscal year, out of “profits”, as defined under the Israeli Companies Law. Currently we have no profits.

B. SIGNIFICANT CHANGES

Not applicable.

ITEM 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

Share Price History

Our Ordinary Shares were traded on the Nasdaq Capital Market until February 2003 under the ticker symbol BVRSF. Our Ordinary Shares were delisted from the Nasdaq Capital Market after we failed to comply with its required listing standards. Our Ordinary Shares traded on the Over-the-Counter Bulletin Board under the symbol “BVRSF.OB” from February 2003 until March 2010. Following the change of our ticker symbol, on March 2, 2010 our Ordinary Shares began trading on the Over-the-Counter Bulletin Board under the symbol “RVBHF”. On May 1, 2014, our Ordinary Shares began trading on the OTCPK under the symbol “RVBHF”, and since March 2, 2017, our Ordinary Shares have been quoted on OTCPK under the symbol “EVTNF”.

According to the website of the OTCPK, the Company’s Ordinary Shares have not traded since February 22, 2016. In light of the lack of trading and the effect of the 30,465 for 1 reverse split effected on February 25, 2016, the Company believes that the listed share price $30.465 per share and the high and low of $30.005 per share indicated on the OTC Pink website do not reflect a reasonable trading price of the Company’s Ordinary Shares.

B.  PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

On May 1, 2014, our Ordinary Shares began trading on the OTCPK under the symbol “RVBHF”, and since March 2, 2017, our Ordinary Shares have been quoted on OTCPK under the symbol “EVTNF”.

D.  SELLING SHAREHOLDERS

Not applicable.

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E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

We are a public company registered under the Companies Law as Eviation Aircraft Ltd., registration number 52-004362-1.

Pursuant to Article 4.2 of our articles of association, our objective is any purpose stated in the Company’s memorandum of association and to engage in any lawful activity.

On December 11, 2017, our shareholders approved an amendment and restatement of our articles of association.

Set forth below is a summary of certain provisions of our Memorandum of Association (“Memorandum”) and articles of association. This summary is not complete and should be read together with our Memorandum and articles of association, incorporated by reference hereto.

Board of Directors

Under the Companies Law and our articles of association, our Board of Directors may exercise all powers and take all actions that are not required under the Companies Law or under our articles of association to be exercised or taken by another corporate body, including the power to borrow money for the purposes of our Company. Our directors are not subject to any age limit requirement, nor are they disqualified from serving on our Board of Directors because of a failure to own a certain amount of our shares.

Dividend and Liquidation Rights

The holders of the ordinary shares are entitled to their proportionate share of any cash dividend, share dividend or dividend in kind declared with respect to our ordinary shares on or after the date of this annual report. We may declare dividends out of profits legally available for distribution. Under the Companies Law, a company may distribute a dividend only if the distribution does not create a reasonable risk that the company will be unable to meet its existing and anticipated obligations as they become due. Furthermore, a company may only distribute a dividend out of the company’s profits, as defined under the Companies Law. If the company does not meet the profit requirement, a court may allow it to distribute a dividend, as long as the court is convinced that there is no reasonable risk that such distribution might prevent the company from being able to meet its existing and anticipated obligations as they become due.

Under the Companies Law, the declaration of a dividend does not require the approval of the shareholders of a company unless the company’s articles of association provide otherwise. Our articles of association provide that the board of directors may declare and distribute dividends without the approval of the shareholders. In the event of our liquidation, holders of our ordinary shares have the right to share ratably in any assets remaining after payment of liabilities, in proportion to the paid-up par value of their respective holdings.

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These rights may be affected by the grant of preferential liquidation or dividend rights to the holders of a class of shares that may be authorized in the future.

Voting, Shareholder Meetings and Resolutions

Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders. This right may be changed if shares with special voting rights are authorized in the future.

Our articles of association and the laws of the State of Israel do not restrict the ownership or voting of ordinary shares by non-residents of Israel.

Under the Companies Law, an annual meeting of our shareholders should be held once every calendar year, but no later than 15 months from the date of the previous annual meeting. The quorum required under our articles of association for a general meeting of shareholders consists of at least two shareholders present in person or by proxy holding in the aggregate at least 25% of the voting power. According to our articles of association, a meeting adjourned for lack of a quorum generally is adjourned to the following day, at the same time and place or any time and place as the board of directors designates in a notice to the shareholders. At the adjourned meeting, if a legal quorum is not present after 30 minutes from the time specified for the commencement of the adjourned meeting, then the meeting shall take place regardless of the number of members present and in such event, the required quorum shall consist of any number of shareholder's present in person or by proxy.

Most shareholders’ resolutions, including resolutions to:

o amend our articles of association (except as set forth below);

o make changes in our capital structure such as a reduction of capital, increase of capital or share split, merger or consolidation;

o authorize a new class of shares;

o elect directors, other than external directors; or

o appoint auditors

will be deemed adopted if approved by the holders of a majority of the voting power represented at a shareholders’ meeting, in person or by proxy, and voting on that resolution.

Notices

Under the Companies Law, shareholders’ meetings generally require prior notice of at least 21 days, or 35 days if the meeting is adjourned for the purpose of voting on any of the following matters:

(1) appointment and removal of directors;

(2) approval of certain matters relating to the fiduciary duties of office holders and of certain transactions with interested parties;

(3) approval of certain mergers; and

(4) any other matter in respect of which the articles of association provide that resolutions of the general meeting may be approved by means of a voting document.

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Modification of Class Rights

The Companies Law provides that, unless otherwise provided by the articles of association, the rights of a particular class of shares may not be adversely modified without the vote of a majority of the affected class at a separate class meeting.

Election of Directors

See “Board Practices” above.

Approval of Specified Related Party Transactions

Transactions Requiring Special Approval

The Companies Law requires that an office holder disclose to the company any personal interest that he or she may have, and all related material information known to him or her, in connection with any existing or proposed transaction by the company. The disclosure must be made promptly and in any event, no later than the board of directors meeting in which the transaction is first discussed. If the transaction is an extraordinary transaction, the office holder must also disclose any personal interest held by his or her relative.

An “office holder” is defined in the Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, any person assuming the responsibilities of any of the foregoing positions without regard to such person’s title and a director or any manager who is directly subject to the general manager.

 The Companies Law imposes a duty of care and a fiduciary duty on all office holders of a company. The duty of care requires an office holder to act with the level of care which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care includes a duty to use reasonable means to obtain:

· information on the appropriateness of a given act or action to be approved or performed by the officer holder by virtue of his or her position; and

· all other important information pertaining to such an act or action.

The fiduciary duty requires an office holder to act in good faith for the interests of the company and includes a duty to:

· refrain from any conflict of interest between the performance of the office holder’s duties in the company and his or her personal affairs;

· refrain from any activity that is competitive with the company;

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

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

Each person listed in the table under “Item 6 – Directors, Senior Management and Employees – A. Directors and Senior Management” is an office holder.

Under the Companies Law, a “personal interest” is defined as the personal interest of a person in an action or in a transaction of the company, including the personal interest of such person’s relative or the interest of any other corporate body in which the person and/or such person’s relative is a director or general manager, a 5% shareholder or holds 5% or more of the voting rights, or has the right to appoint at least one director or the general manager, but excluding a personal interest stemming solely from the fact of holding shares in the company. A personal interest also includes a personal interest of a person who votes according to a proxy of another person, even if the other person has no personal interest, and a personal interest of a person who gave a proxy to another person to vote on his behalf – all whether the discretion how to vote lies with the person voting or not.

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

· not in the ordinary course of business;

· not on market terms; or

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

Under the Companies Law, once an office holder complies with the above disclosure requirement, the board of directors may approve the transaction, unless the company’s articles of association provide otherwise. A transaction that is adverse to the company’s interest may not be approved. If the transaction is (i) an extraordinary transaction with an office holder or a third party in which the office holder has a personal interest, or (ii) an engagement by the company with an office holder who is not a director regarding his or her service and terms of employment, including an undertaking to indemnify, exculpate or insure such office holder, then it must be approved by the audit committee, before the board approval. In the event that an amendment is made to an existing engagement with an office holder, such amendment does not require board approval to the extent that it is immaterial to the existing engagement. Transaction between a company and its directors regarding such directors' service and terms of employment, including with respect to exculpation, indemnification or insurance, including compensation for non-directorial duties in the company, require the approval of each of the audit committee, the board of directors and the shareholders, in that order.

Extraordinary transactions of a public company with its controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest, and the terms of engagement of the company, directly or indirectly, with a controlling shareholder or a controlling shareholder’s relative (including through a corporation controlled by a controlling shareholder), regarding the company’s receipt of services from the controlling shareholder, and if such controlling shareholder is also an office holder or an employee of the company, regarding his or her terms of engagement and employment, require the approval of the audit committee, the board of directors and the shareholders of the company. The shareholders’ approval must satisfy either of the following criteria:

The majority must include a majority of the total votes of shareholders who are present and voting at the meeting and who have no personal interest in the transaction (the votes of abstaining shareholders shall not be included in the number of the said total votes); or

the total of opposition votes, among the shareholders who are present at the meeting and who have no personal interest in the transaction, shall not exceed 2% of the aggregate voting rights in the company.

In addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three years, requires the abovementioned approval every three years; unless, with respect to transactions not involving the receipt of services or compensation, the audit committee has determined that a longer term is reasonable under the circumstances.

A person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not be present at this meeting or vote on this matter. However, if the chairman of the board of directors or the chairman of the audit committee has determined that the presence of an office holder with a personal interest is required, such office holder may be present at the meeting. Notwithstanding the foregoing, a director who has a personal interest may be present at the meeting and vote on the matter if a majority of the directors or members of the audit committee have a personal interest in the approval of such transaction. If a majority of the directors have a personal interest in a transaction, such transaction requires approval of the shareholders of the company.

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Under the Companies Law, the disclosure requirements which apply to an office holder also apply to a controlling shareholder of a public company. A shareholder is presumed to have “control” of the company and thus to be a controlling shareholder of the company if the shareholder holds 50% or more of the “means of control” of the company. “Means of control” is defined as (1) the right to vote at a general meeting of a company or a corresponding body of another corporation; or (2) the right to appoint directors of the corporation or its general manager. For approving transactions with controlling shareholders, the term also includes any shareholder that holds 25% or more of the voting rights in a public company if no other shareholder owns more than 50% of the voting rights in the company. For purposes of determining the holding percentage stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company’s approval are deemed as joint holders.

The Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument in a vote regarding a transaction with a controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to indicate so will result in the invalidation of that shareholder’s vote.

For information concerning the direct and indirect personal interests of certain of our office holders and principal shareholders in certain transactions with us, see “Item 7.B. – Major Shareholders and Related Party Transactions – Related Party Transactions.”

Rights, Preferences and Restrictions on Shares

Modifications of Share Rights

Under our articles of association, the rights attached to any class may be varied by adoption of the necessary amendment of the Company’s articles of association, provided that the holders of the majority of the shares of such class represented at a meeting of the shareholders of such class. Our articles of association require for quorum at a meeting of a particular class of shares the presence of two shareholders holding at least 25% of the voting power of that class. Our articles of association may be amended by majority of the voting power of our Company represented at a shareholders meeting and voting thereon, except that the provisions of our articles of association relating to mergers and acquisitions can only be amended by a vote of 75% of the voting power of our Company represented at a meeting and voting thereon.

Shareholders Meetings and Resolutions

We are required to hold an annual general meeting of our shareholders once every calendar year, but no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as extraordinary general meetings. Our board of directors may call extraordinary general meetings whenever it sees fit, at such time and place, within or without the State of Israel, as it may be determined. In addition, the Companies Law provides that the board of directors of a public company is required to convene an extraordinary meeting upon the request of (a) any two directors of the company or one quarter of the company’s board of directors or (b) one or more shareholders holding, in the aggregate, (i) five percent of the outstanding shares of the company and one percent of the voting power in the company or (ii) five percent of the voting power in the company.

The quorum required by our articles of association for a meeting of shareholders consists of at least two shareholders present in person or by proxy who hold or represent between them at least 25% of the voting power in our Company. A meeting adjourned for lack of quorum is adjourned to the following day at the same time and place or any time and place as the board decides. At such reconvened meeting, the required quorum consists of any number of shareholders present in person or by proxy.

Limitation on Ownership of Securities

The ownership and voting of our ordinary shares by non-residents of Israel are not restricted in any way by our articles of association or by the laws of the State of Israel, except for shareholders who are subjects of countries, which are enemies of the State of Israel.

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Change of Control:

Under the Israeli Companies Law, a merger is generally required to be approved by the shareholders and Board of Directors of each of the merging companies. Shareholder approval is not required if the company that will not survive is controlled by the surviving company. Additionally, the law provides some exceptions to the shareholder approval requirement in the surviving company. If the share capital of the company that will not be the surviving company is divided into different classes of shares, the separate approval of each class is also required, unless determined otherwise by the court. A majority of votes approving the merger shall suffice, unless the company (like ours) was incorporated in Israel prior to the enactment of Israeli Companies Law, in which case a majority of 75% of the voting power is needed in order to approve the merger. Additionally, unless the court determines otherwise, a merger will not be approved if it is objected to by a majority of the shareholders present at the meeting, after excluding the shares held by the other party to the merger, by any person who holds 25% or more of the other party to the merger and by the relatives of and corporations controlled by these persons. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties of the merger. Also, a merger can be completed only after all approvals have been submitted to the Israeli Registrar of Companies and provided that 30 days have elapsed since shareholder approval was received and 50 days have elapsed from the time that a proposal for approval of the merger was filed with the Registrar by each merging company.

The Israeli Companies Law also provides that an acquisition of shares in a public company must be made by means of a tender offer if, as a result of the acquisition, the purchaser would become a holder of 25% or more of the voting power at general meetings. This rule does not apply if there is already another holder of 25% or more of the voting power at general meetings. Similarly, the Israeli Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if, as a result of the acquisition, the purchaser would become a holder of more than 45% of the voting power of the company. This rule does not apply if someone else already holds 45% of the voting power of the company. An acquisition from a 25% or 45% holder, which turns the purchaser into a 25% or 45% holder respectively, does not require a tender offer. An exception to the tender offer requirement may also apply when the additional voting power is obtained by means of a private placement approved by the general meeting of shareholders.

Under the Israeli Companies Law, a person may not acquire shares in a public company if, after the acquisition, he will hold more than 90% of the shares or more than 90% of any class of shares of that company, unless a tender offer is made to purchase all of the shares or all of the shares of the particular class. The Israeli Companies Law also provides that as long as a shareholder in a public company holds more than 90% of the company’s shares or of a class of shares, that shareholder shall be precluded from purchasing any additional shares. If such tender offer is accepted and less than 5% of the shares of the company are not tendered, and a majority of the offeree shareholders not having a personal interest accepted the offer, all of the shares will transfer to the ownership of the acquirer. Similarly, all of the shares will transfer to the ownership of the acquirer in the event that less than 2% of the shares of the company are not tendered. The Companies Law provides for appraisal rights if any shareholder files a request in court within six months following the consummation of a full tender offer. However, the acquirer may stipulate in the tender offer that any shareholder tendering his shares will not be entitled to appraisal rights. If ownership in all of the shares is not transferred to the acquirer as described above, then the acquirer may not acquire shares in the tender offer that will cause his shareholding to exceed 90% of the outstanding shares.

Changes in Capital

Our articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution passed by a majority of the voting power of our Company present, in person or by proxy, at a general meeting and voting on such change in the capital. In addition, certain transactions, which have the effect of reducing capital, such as the declaration and payment of dividends under certain conditions and the issuance of shares for less than their nominal value, require a resolution of the board of directors and court approval.

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C. MATERIAL CONTRACTS

All material contracts have been described in detail throughout this form, wherever applicable.

D. EXCHANGE CONTROLS

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

E. TAXATION

The following is a summary of the material Israeli tax consequences, Israeli foreign exchange regulations and certain Israeli government programs affecting the Company.

To the extent that the discussion is based on new tax or other legislation that has not been subject to judicial or administrative interpretation, there can be no assurance that the views expressed in the discussion will be accepted by the tax or other authorities in question. The discussion is not intended, and should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations.

Israeli Tax Considerations

The following is a description of material tax consequences regarding the ownership and disposition of our Ordinary Shares under Israeli tax laws to which our shareholders may be subject. The information below does not apply to specific persons or cover specific situations. Therefore, you are advised to consult your own tax advisor as to particular tax consequences unique to you related to an investment in our Ordinary Shares including the effects of applicable Israeli or foreign or other tax laws and possible changes in the tax laws.

To the extent that the discussion is based on legislation yet to be judicially or administratively interpreted, we cannot assure you that the views we express herein will accord with any such interpretation in the future.

Tax Consequences Regarding Disposition of Our Ordinary Shares

Israeli law generally imposes a capital gains tax in Israel on capital gain derived from the sale of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on capital gain if derived in Israel.  Capital gain is treated as derived in Israel if the sold assets, including shares in Israeli companies, by non-residents of Israel, are either among others (i) located in Israel; (ii) are shares or a right to a share in an Israeli resident corporation; or (iii) represent, directly or indirectly, rights to assets located in Israel.

As of January 1, 2012, the tax rate generally applicable to capital gains derived from the sale of shares of an Israeli resident company, whether listed on a stock market or not, is 25% for Israeli individuals, unless such shareholder claims a deduction for financing expenses in connection with such shares, in which case the gain will generally be taxed at a rate of 30%. Additionally, if such shareholder is considered a “Significant Shareholder” at any time during the 12-month period preceding such sale, i.e. such shareholder holds directly or indirectly, including with others, at least 10% of any means of control in the company, the tax rate shall be 30%. However, the foregoing tax rates may not apply to: (i) dealers in securities in Israel, which would be subject to Israeli tax at the rates applicable to their business income (at the corporate tax rate for a corporation (24% in 2017 and 23% in 2018) and the marginal tax rate for an individual of up to 47% in 2017 and in 2018); and (ii) shareholders who acquired their shares prior to an initial public offering (that which may be subject to a different tax arrangement).

As of January 1, 2003, nonresidents of Israel are exempt from capital gains tax in relation to the sale of our shares for so long as (i) the capital gains are not accrued or derived by the nonresident shareholder’s permanent enterprise in Israel; (ii) the shares were not acquired from the seller's relative as defined for Israeli tax purposes and the provisions of Part Five 2 “ of the Israeli Tax Ordinance (Restructuring and Merger) or the provisions of section 70 of the Real Estate Taxation Law did not apply on the shares; or (iii) the shares are not tradable on the Israeli stock exchange on the day of the sale.

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However, non-Israeli corporations will not be entitled to the foregoing exemption if an Israeli resident (i) has a controlling interest of 25% or more in such non-Israeli corporation; or (ii) is the beneficiary of, or is entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. Furthermore, the above exemption would not be available to non-Israeli residents dealing in securities in Israel, which would be subject to Israeli tax at the rates applicable to their business income (at the corporate tax rate for a corporation (24% in 2017 and 23% in 2018) and the marginal tax rate for an individual of up to 47% in 2017 and in 2018).

In addition, a sale of our securities may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty.

U.S.-Israel Tax Treaty

Pursuant to the treaty between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, as amended, or the “U.S. - Israel Tax Treaty”, the sale, exchange or disposition of Ordinary Shares by a person who (i) holds the Ordinary Shares as a capital asset; (ii) qualifies as a resident of the United States within the meaning of the U.S.-Israel Tax Treaty; and (iii) is entitled to claim the benefits afforded to such resident by the U.S.-Israel Tax Treaty generally will not be subject to Israeli capital gains tax, unless either such resident holds, directly or indirectly, shares representing 10% or more of the voting power of a company during any part of the 12-month period preceding such sale, exchange or disposition, subject to certain conditions, or the capital gains from such sale, exchange or disposition can be allocated to a permanent establishment in Israel. In the event that the exemption shall not be available, the sale, exchange or disposition of Ordinary Shares would be subject to such Israeli capital gains tax to the extent applicable; however, under the U.S.-Israel Tax Treaty, such residents may be permitted to claim a credit for such taxes against U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate to state or local taxes. 

Taxes Applicable to Dividends distributed

Non-residents of Israel are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary Shares at the rate of 25%, which will be withheld at source, unless a different rate is provided in a tax treaty between Israel and the shareholder’s country of residence. However, if the non-resident shareholder is a “Controlling Shareholder” such dividend will be taxed at the rate of 30% unless a different rate is provided in a tax treaty between Israel and the shareholders country of residence. 

Under the U.S.-Israel Tax Treaty, the maximum rate of tax withheld in Israel on dividends paid to a holder of our Ordinary Shares who is a U.S. resident (within the meaning of the U.S.-Israel Tax Treaty) is 25%. Furthermore, the maximum rate of withholding tax on dividends, which are paid to a U.S. corporation holding 10% or more of our outstanding voting capital during the part of the tax year that precedes the date of the payment of the dividend and during the whole of its prior tax year, is 12.5%. This reduced rate will not apply if more than 25% of our gross income consists of interest or dividends, other than dividends or interest received from a subsidiary corporation in which 50% or more of the outstanding shares of the voting shares are owned by the Company. In order to obtain such a reduced tax rate, it is necessary to submit an application to the tax-assessing officer.

Israeli resident individuals are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary Shares, other than bonus shares (share dividends) or stock dividends, at the rate of 25%. However, if the individual shareholder is a “Controlling Shareholder” such dividend will be taxed at the rate of 30%. Dividends paid on our Ordinary Shares to Israeli companies are exempt from such tax, except for dividends distributed from income derived outside of Israel, the gross amount of which is generally subject to the 25% tax rate.

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Excess Tax

As of January 1, 2013, shareholders who are individuals and are subject to tax in Israel, whether as an Israeli resident or a non-Israeli resident, are also subject to an additional tax on annual taxable income exceeding NIS 640,000 (linked to the Israeli consumer price index) (NIS 640,000 in 2017 and 641,880 in 2018) at a rate of 3%. For this purpose taxable income will include, inter alia, income from capital gains, dividend distributions and interest. These additional tax payments are subject to the provisions of any applicable tax treaty.

General Corporate Tax Structure in Israel

The Israeli corporate tax rate was 26.5%, 25% and 24% in 2015, 2016 and 2017, respectively. Effective January 1, 2018 the corporate tax rate in Israel is 23%. 

Foreign Exchange Regulations

Under the Foreign Exchange Regulations an Israeli company may calculate its tax liability in U.S. Dollars under certain conditions. The tax liable income, as calculated in U.S. Dollars is translated into NIS according to the exchange rate as of December 31 of each year.

United States Federal Income Tax Considerations

The following is a general discussion of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares. This description addresses only the U.S. federal income tax considerations that may be relevant to U.S. Holders (as defined below) who hold our ordinary shares as capital assets. This summary is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated thereunder, judicial and administrative interpretations thereof and the U.S. - Israel Tax Treaty, all as in effect on the date hereof and all of which are subject to change either prospectively or retroactively or to differing interpretations. There can be no assurance that the U.S. Internal Revenue Service, or IRS, will not take a different position concerning the tax consequences of the acquisition, ownership or disposition of our ordinary shares or that such a position would not be sustained. This discussion does not address all tax considerations that may be relevant to a U.S. Holder of ordinary shares. In addition, this description does not account for the specific circumstances of any particular investor, such as:

● Broker-dealers;

● financial institutions or financial services entities;

● certain insurance companies;

● investors liable for alternative minimum tax;

● regulated investment companies, real estate investment trusts, or grantor trusts;

● dealers or traders in securities, commodities or currencies;

● tax-exempt organizations;

● retirement plans;

● S corporations:

● pension funds;

● certain former citizens or long-term residents of the United States;

● non-resident aliens of the United States or taxpayers whose functional currency is not the U.S. dollar;

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● persons who hold ordinary shares through partnerships or other pass-through entities;

● persons who acquire their ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation for services;

● direct, indirect or constructive owners of investors that actually or constructively own at least 10% of the total combined voting power of our shares or at least 10% of our shares by value; or

● investors holding ordinary shares as part of a straddle, appreciated financial position, a hedging transaction or conversion transaction.

If a partnership or an entity treated as a partnership for U.S. federal income tax purposes owns our ordinary shares, the U.S. federal income tax treatment of a partner in such a partnership will generally depend upon the status of the partner and the activities of the partnership. A partnership that owns our ordinary shares and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of holding and disposing of ordinary shares.

This summary does not address the effect of any U.S. federal taxation (such as estate and gift tax) other than U.S. federal income taxation. In addition, this summary does not include any discussion of state, local or non-U.S. taxation.

For purposes of this summary, the term “U.S. Holder” means a person that is eligible for the benefits of the U.S. - Israel Tax Treaty and is a beneficial owner of ordinary shares who is, for U.S. federal income tax purposes:

● An individual who is a citizen or a resident of the United States;

● a corporation or other entity taxable as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision thereof;

● an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

● a trust if the trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over the trust’s administration and (2) one or more U.S. persons have the authority to control all of the substantial decisions of the trust.

Unless otherwise indicated, it is assumed for the purposes of this discussion that the Company is not, and will not become, a “passive foreign investment company” for U.S. federal income tax purposes. See “—Passive Foreign Investment Companies” below.

Taxation of Distributions

Subject to the discussion below under the heading “—Passive Foreign Investment Companies,” the gross amount of any distributions received with respect to our ordinary shares, including the amount of any Israeli taxes withheld therefrom, will constitute dividends for U.S. federal income tax purposes when such distribution is actually or constructively received, to the extent such distribution is paid out of our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. Because we do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that the entire amount of any distribution will generally be reported as dividend income to you. Dividends are included in gross income at ordinary income rates, unless such dividends constitute “qualified dividend income,” as set forth in more detail below. Distributions in excess of our current and accumulated earnings and profits would be treated as a non-taxable return of capital to the extent of your adjusted tax basis in our ordinary shares and any amount in excess of your tax basis would be treated as gain from the sale of ordinary shares. See “—Sale, Exchange or Other Disposition of Ordinary Shares” below for a discussion of the taxation of capital gains. Our dividends would not qualify for the dividends-received deduction generally available to corporations under section 243 of the Code.

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Dividends that we pay in NIS, including the amount of any Israeli taxes withheld therefrom, will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day such dividends are received, regardless of whether the payment is in fact converted into U.S. dollars. A U.S. Holder who receives payment in NIS and converts NIS into U.S. dollars at an exchange rate other than the rate in effect on such day may have a foreign currency exchange gain or loss that would generally be treated as U.S.-source ordinary income or loss. U.S. Holders should consult their own tax advisors concerning the U.S. tax consequences of acquiring, holding and disposing of NIS.

Subject to complex limitations, some of which vary depending upon the U.S. Holder’s circumstances, any Israeli withholding tax imposed on dividends paid with respect to our ordinary shares, may be a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or, alternatively, for deduction against income in determining such tax liability). Israeli taxes withheld in excess of the applicable rate allowed by the U.S. - Israel Tax Treaty (if any) will not be eligible for credit against a U.S. Holder’s federal income tax liability. The limitation on foreign income taxes eligible for credit is calculated separately with respect to specific classes of income. Dividends paid with respect to our common stock generally will be treated as foreign-source passive category income or, in the case of certain U.S. Holders, general category income for U.S. foreign tax credit purposes. Further, there are special rules for computing the foreign tax credit limitation of a taxpayer who receives dividends subject to a reduced tax rate. A U.S. Holder may be denied a foreign tax credit with respect to Israeli income tax withheld from dividends received on our ordinary shares if such U.S. Holder fails to satisfy certain minimum holding period requirements or to the extent such U.S. Holder’s position in ordinary shares is hedged. An election to deduct foreign taxes instead of claiming a foreign tax credit applies to all foreign taxes paid or accrued in the taxable year. The rules relating to the determination of the foreign tax credit are complex. You should consult with your own tax advisors to determine whether and to what extent you would be entitled to this credit.

Subject to certain limitations (including the PFIC rules discussed below), “qualified dividend income” received by a non-corporate U.S. Holder may be subject to tax at the lower long-term capital gain rates (currently, a maximum rate of 20%). Distributions taxable as dividends paid on our ordinary shares should qualify for a reduced rate if we are a “qualified foreign corporation,” as defined in Code section 1(h)(11)(C). We will be a qualified foreign corporation if either: (i) we are entitled to benefits under the U.S. - Israel Tax Treaty or (ii) our ordinary shares are readily tradable on an established securities market in the United States and certain other requirements are met. We believe that we are entitled to benefits under the U.S. - Israel Tax Treaty.  The rate reduction does not apply unless certain holding period requirements are satisfied, nor does it apply to dividends received from a PFIC (see discussion below), in respect of certain risk-reduction transactions, or in certain other situations. U.S. Holders of our ordinary shares should consult their own tax advisors regarding the effect of these rules in their particular circumstances.

Sale, Exchange or Other Disposition of Ordinary Shares

Subject to the discussion of the PFIC rules below, if you sell or otherwise dispose of our ordinary shares (other than with respect to certain non-recognition transactions), you will generally recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other disposition and your adjusted tax basis in our ordinary shares, in each case determined in U.S. dollars. Such gain or loss will generally be capital gain or loss and will be long-term capital gain or loss if you have held the ordinary shares for more than one year at the time of the sale or other disposition. Long-term capital gain realized by a non-corporate U.S. Holder is generally eligible for a preferential tax rate (currently at a maximum of 20%). In general, any gain that you recognize on the sale or other disposition of ordinary shares will be U.S.-source for purposes of the foreign tax credit limitation; losses will generally be allocated against U.S. source income. Deduction of capital losses is subject to certain limitations under the Code.

In the case of a cash basis U.S. Holder who receives NIS in connection with the sale or disposition of our ordinary shares, the amount realized will be based on the U.S. dollar value of the NIS received with respect to the ordinary shares as determined on the settlement date of such exchange. A cash basis U.S. Holder who receives payment in NIS and converts NIS into U.S. dollars at a conversion rate other than the rate in effect on the settlement date may have a foreign currency exchange gain or loss, based on any appreciation or depreciation in the value of NIS against the U.S. dollar, which would be treated as ordinary income or loss.

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An accrual basis U.S. Holder may elect the same treatment of currency exchange gain or loss required of cash basis taxpayers with respect to a sale or disposition of our ordinary shares that are traded on an established securities market, provided that the election is applied consistently from year to year. Such election may not be changed without the consent of the IRS. In the event that an accrual basis U.S. Holder does not elect to be treated as a cash basis taxpayer (pursuant to the Treasury regulations applicable to foreign currency transactions), such U.S. Holder is required to calculate the value of the proceeds as of the “trade date” and may have a foreign currency gain or loss for U.S. federal income tax purposes in the event of any difference between the U.S. dollar value of NIS prevailing on the trade date and on the settlement date. Any such currency gain or loss generally would be treated as U.S.- source ordinary income or loss and would be subject to tax in addition to the gain or loss, if any, recognized by such U.S. Holder on the sale or disposition of such ordinary shares.

Passive Foreign Investment Companies

We may have been a PFIC for U.S. federal income tax purposes for the 2017 taxable year. If we were a PFIC for any taxable year during which a U.S. Holder owned ordinary shares, certain adverse consequences could apply to the U.S. Holder. Specifically, unless a U.S. Holder makes one of the elections mentioned below, gain recognized by the U.S. Holder on a sale or other disposition of ordinary shares would be allocated ratably over the U.S. Holder’s holding period for the ordinary shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the resulting tax liability. Further, any distribution in excess of 125% of the average of the annual distributions received by the U.S. Holder on our ordinary shares during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, would be subject to taxation as described immediately above. Certain elections (such as a qualified electing fund election) may be available to U.S. Holders and may result in alternative tax treatment. U.S. Holders should consult their tax advisors as to the availability and consequences of these elections with respect to their ordinary shares.

In addition, if we were a PFIC for a taxable year in which we pay a dividend or the prior taxable year, the favorable dividend rates discussed above with respect to dividends paid to certain non-corporate U.S. Holders would not apply. If we were a PFIC for any taxable year in which a U.S. Holder owned our shares, the U.S. Holder would generally be required to file annual returns with the IRS on IRS Form 8621.

WE DO NOT INTEND TO PROVIDE THE INFORMATION NECESSARY FOR U.S. HOLDERS TO MAKE QUALIFIED ELECTING FUND ELECTIONS IF WE ARE CLASSIFIED AS A PFIC. U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS TO DETERMINE WHETHER ANY RELEVANT ELECTIONS WOULD BE AVAILABLE AND IF SO, WHAT THE CONSEQUENCES OF THE ALTERNATIVE TREATMENTS WOULD BE IN THEIR PARTICULAR CIRCUMSTANCES.

Additional Tax on Investment Income

In addition to the income taxes described above, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds may be subject to a 3.8% Medicare contribution tax on net investment income, which includes dividends and capital gains from the sale or exchange of our ordinary shares.

Backup Withholding and Information Reporting

Payments in respect of our ordinary shares may be subject to information reporting to the IRS and to U.S. backup withholding tax at the rate (currently) of 24%. Backup withholding will not apply, however, if you (i) fall within certain exempt categories and demonstrate the fact when required or (ii) furnish a correct taxpayer identification number and make any other required certification.

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s U.S. tax liability. A U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.

61

U.S. citizens and individuals taxable as resident aliens of the United States that (i) own “specified foreign financial assets” (as defined in Section 6038D of the Code and the regulations thereunder) with an aggregate value in a taxable year in excess of certain thresholds (as determined under rules in Treasury regulations) and (ii) are required to file U.S. federal income tax returns generally will be required to file an information report with respect to those assets with their tax returns. IRS Form 8938 has been issued for that purpose. “Specified foreign financial assets” include any financial accounts maintained by foreign financial institutions, foreign stocks held directly, and interests in foreign estates, foreign pension plans or foreign deferred compensation plans. Under those rules, our ordinary shares, whether owned directly or through a financial institution, estate, pension, or deferred compensation plan, would be “specified foreign financial assets.” Under Treasury regulations, the reporting obligation applies to certain U.S. entities that hold, directly or indirectly, specified foreign financial assets. Penalties can apply if there is a failure to satisfy this reporting obligation. In addition, in the event a U.S. Holder that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Holder for the related tax year may not close until three years after the date that the required information is filed. A U.S. Holder is urged to consult the U.S. Holder’s tax advisor regarding the reporting obligation.

Any U.S. Holder who acquires more than $100,000 of our ordinary shares or holds 10% or more of our ordinary shares by vote or value may be subject to certain additional U.S. information reporting requirements.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN OUR ORDINARY SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

We are subject to certain of the reporting requirements of the Exchange Act, as applicable to “foreign private issuers” as defined in Rule 3b-4 under the Exchange Act.  As a foreign private issuer, we are exempt from certain provisions of the Exchange Act.  Accordingly, our proxy solicitations are not subject to the disclosure and procedural requirements of Regulation 14A under the Exchange Act, and transactions in our equity securities by our officers and directors are exempt from reporting and the “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act.  In addition, we are not required under the Exchange Act to file periodic reports and financial statements as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.  However, we file with the Securities and Exchange Commission an annual report on Form 20-F containing financial statements audited by an independent accounting firm.  We also submit to the Securities and Exchange Commission reports on Form 6-K containing (among other things) press releases and unaudited financial information.  We post our annual report on Form 20-F on our website (http://www.gilat.com) promptly following the filing of our annual report with the Securities and Exchange Commission. The information on our website is not incorporated by reference into this annual report.

This annual report and the exhibits thereto and any other document we file pursuant to the Exchange Act may be inspected without charge and copied at prescribed rates at the Securities and Exchange Commission public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.  You may obtain information on the operation of the Securities and Exchange Commission’s public reference room in Washington, D.C. by calling the Securities and Exchange Commission at 1-800-SEC-0330.  The Exchange Act file number for our Securities and Exchange Commission filings is 000-21218.

62

The Securities and Exchange Commission maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the Securities and Exchange Commission using its EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system.

The documents concerning the Company that are referred to in this annual report may be inspected at the Company’s offices located at: 1 Ha’Ofeh St., Kadima-Tzoran, Israel, 6092000.

I. SUBSIDIARY INFORMATION

Not applicable.

ITEM 11. Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of changes in the value of a financial instrument caused by fluctuations in interest rates, equity prices and foreign currency exchange rates. We do not engage in trading market-risk instruments or purchase hedging or “other than trading” instruments that are likely to expose us to market risk, whether interest rate, commodity price or equity price risk.

Interest Rate Risk

Our cash and cash equivalents consist of cash in bank accounts. The primary objectives of our investment activities are to preserve principal and provide liquidity without significantly increasing risk. We do not enter into investments for trading or speculative purposes. The loans under the Loan Agreements are subject to interest of the lower of 3.2% per annum or the minimum rate required by the Israeli tax law (in 2017, 2.56%). Due to the initial measurement of the shareholders loans at fair value with an implied annual interest of 34%, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of the shareholders loan or cash balances for the periods presented.

Equity Price Risk

As of December 31, 2017, we did not have any marketable securities that were recorded at fair value. Hence there was no exposure to equity price risk.

Foreign Currency Exchange Risk

We are exposed to financial market risk associated with changes in foreign currency exchange rates.

As of December 31, 2017, we had approximately $268,000 of cash and restricted cash in New Israeli Shekels (NIS) and approximately $3,000 of cash in Euro currency.

For the year ended December 31, 2017, the majority of our operating expenses other than payroll are expected to be denominated in U.S. dollars. We therefore have not had material foreign currency risk associated with cost-based activities other than payroll. Therefore, our results of operations are minimally subject to fluctuations from changes in foreign currency rates. We believe the exposure to foreign currency fluctuation from operating expenses is immaterial at this time, as the related costs do not constitute a significant portion of our total expenses. As we grow operations, our exposure to foreign currency risk will likely become more significant. For the years ended December 31, 2016 and 2017, we did not enter into any foreign currency exchange contracts. For our non-U.S dollar expenses a hypothetical 10% weakening in the value of the U.S. Dollar relative to the NIS would have resulted in an increase in operating expenses of approximately $108,000  for the year ended December 31, 2017.

ITEM 12. Description of Securities Other Than Equity Securities

                Not applicable.

63

PART II

ITEM 13. Defaults, Dividend Arrearages and Delinquencies

None.

ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

ITEM 15. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions to be made regarding required disclosure. Our management has evaluated the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) of the Exchange Act) as of December 31, 2017. Based on such review, our management concluded that our disclosure controls and procedures were not effective as of December 31, 2017.

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f) and 15d-15(f).

Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Our management, including the chief executive officer and chief financial officer, conducted an evaluation, pursuant to Rule 13a-15(c) promulgated under the Exchange Act, of the effectiveness, as of the end of the period covered by this Annual Report, of its internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Due to our limited resources and number of employees, there are insufficient personnel to perform certain controls with respect to the company's financial reporting process.

 Based on the results of this evaluation, management concluded that as at December 31, 2017 our internal control over financial reporting was not effective due to the material weakness in internal controls described above.

We are considering retaining the services of additional personnel to perform the required controls and is committed to take the necessary action to implement effective internal controls.

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the Dodd-Frank Act, passed in 2010, which eliminated the requirements for non-accelerated filers.

64

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16A. Audit Committee Financial Expert

Our Board of Directors has determined that Ms. Orit Stav qualifies as an audit committee financial expert, as defined by the rules of the SEC. In addition, Ms. Orit Stav is independent, as such term is defined in Rule 10A-3(b)(1) under the Exchange Act.

ITEM 16B. Code of Ethics

On May 15, 2017, our Company adopted a code of ethics, which applies to all employees, officers and directors, including our principal executive officer or CEO and our principal financial officer or CFO or other persons performing similar functions. Copies of our code of ethics are available free of charge at our offices upon request.

ITEM 16C. Principal Accountant Fees and Services

The following table presents fees for professional audit services rendered by Somekh Chaikin for the audit of the Company’s consolidated annual financial statements for the year ended December 31, 2017 and 2016 and for other services rendered as well as for tax return preparation.  As further discussed below in Item 16F, the Board selected Somekh Chaikin as its independent auditor commencing on the year ending December 31, 2016. In 2017 and 2016, other than as stated below, no audit related fees were charged by Somekh Chaikin to the Company.

	2017		2016
	(In thousand)
Audit Fees (1)	$	30	$	30
Tax Fees (2)	$	5	$	5

(1)	Audit fees consist of fees for professional services rendered for the audit of the Company’s consolidated financial statements and review of financial statements and services normally provided by the independent auditor in connection with statutory and regulatory filings or engagements.
(2)	Tax fees are the aggregate fees for services rendered by our auditors related to tax compliance in connection with the preparation of tax returns.

Pre-Approval Policies and Procedures

The audit committee approves all audits, audit-related services, tax services and other services provided by our independent auditors. Any services provided by our independent auditors that are not specially included within the scope of the audit must be pre-approved by our audit committee prior to any engagement.

ITEM 16D. Exemptions from the Listing and Standards of Audit Committees

Not applicable.

ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Purchases of Equity Securities by the Issuer

None.

Purchases of Equity Securities by an Affiliated Purchaser

The Company (or anyone acting on its behalf) did not purchase any of the Company’s securities in 2017.

65

Item 16F. Change in Registrant’s Certifying Accountant   

Not applicable 

Item 16G. Corporate Governance

Not applicable.

Item 16H. Mine Safety Disclosure

Not applicable.

PART III

ITEM 17. Financial Statements

Not applicable.

ITEM 18. Financial Statements

See Pages F-1 through F-25 of this Annual Report.

ITEM 19. Exhibits

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

Exhibit No.	Description
1.1	Memorandum of Association of Registrant (incorporated by reference to Exhibit 1.1 to the Company’s Annual Report on Form 20-F, filed on September 7, 2011);
1.2	Articles of Association (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 6-K, filed on August 23, 2017);
10.1	License and Service Agreement, dated September 1, 2015, by our controlling shareholder Mr. Tzidon, on behalf of the Subsidiary, with Mr. John McGinnis, on behalf of himself and on behalf of his companies, Synergy Aircraft LLC, and MC Squared Design USA (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);
10.2	Administrative Services Agreement, dated November 30, 2016, by Mr. Tzidon and Mr. Michael Ilan (beneficial owner of Magic Stones), on behalf of the Subsidiary, with Phinergy Ltd., a company controlled by Mr. Tzidon and Mr. Ilan (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);
10.3	Patent Purchase Agreement, dated July 2016, between the Subsidiary and Eye Point Ltd., a company owned by Mr. Dekel Tzidon, transferring all rights under U.S. patent No. 8,314,928 (incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);

66

10.4	Loan and Security Agreement, dated July 17, 2016, between the Company, and Mr. Tzidon and Magic Stones (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);
10.5	Loan and Security Agreement, dated July 17, 2016, between the Subsidiary, and Mr. Tzidon and Magic Stones (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);
10.6	Assignment and Assumption Agreement, dated July 17, 2016, between the Subsidiary, and Mr. Tzidon and Magic Stones (incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);
10.7	Service Agreement, dated July 17, 2016, between the Company and the Subsidiary, for providing CEO services by the Subsidiary to the Company (incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);
10.8	Employment Agreement, dated July 1, 2016, between the Subsidiary and Omer Bar-Yohay (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);
10.9	The Company’s 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 20-F, filed on May 16, 2017);
10.10	Share Purchase Agreement, dated August 17, 2017, between the Company, A.O. Tzidon (1999) Ltd. and Michael Ilan Management and Investments Ltd. (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 6-K, filed on August 23, 2017);
10.11	Registration Rights Agreement, dated August 17, 2017, between the Company, A.O. Tzidon (1999) Ltd. and Michael Ilan Management and Investments Ltd. (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 6-K, filed on August 23, 2017);
10.12*	Binding Memorandum of Understanding, dated February 18, 2018;
10.13*	Technology Evaluation Agreement, dated December 12, 2017, between the Company and Siemens Aktiengesellschaft;
12.1 *	Certification of principal executive officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended;
12.2 *	Certification required of principal financial officer by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended;
13.1 *	Certification of principal executive officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002;
13.2 *	Certification of principal financial officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ;
16B*	Code of Ethics.

* Filed herewith

67

SIGNATURE

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

EVIATION AIRCRAFT LTD.
By:	/s/ Omer Bar-Yohay
Name:	Omer Bar-Yohay
Title:	Chief Executive Officer

By:	/s/ Liza Ohayon
Name:	Liza Ohayon
Title:	Chief Financial Officer

Date:  April 27, 2018

68

EVIATION AIRCRAFT LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2017

EVIATION AIRCRAFT LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2017

TABLE OF CONTENTS

	Page
REPORT OF INDEPENDENT REGISTERED  PUBLIC ACCOUNTING FIRM	F - 2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statements of Financial Position	F - 3
Consolidated statements of Comprehensive Loss	F - 4
Consolidated statements of changes in Equity (deficit)	F - 5
Consolidated statements of Cash Flows	F - 6
Notes to Consolidated Financial Statements	F - 7 - F - 25

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

Eviation Aircraft Ltd.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Eviation Aircraft Ltd. and its subsidiary (hereafter - "the Group") as of December 31, 2017 and 2016, the related consolidated statements of comprehensive loss, changes in equity (deficit) and cash flows for each of the years in the three‑year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2017, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB).

Basis for Opinion

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

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

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

/s/ Somekh Chaikin

Somekh Chaikin

Certified Public Accountants (Isr.)

Member Firm of KPMG International

We have served as the Company’s auditor since 2016.

Tel Aviv, April 24, 2018

F - 2

EVIATION AIRCRAFT LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

			As of December 31,
			2017			2016
	Note		$ in thousand
Assets
Current assets
Cash and cash equivalents				284			858
Accounts receivable		5		192			35
Total current assets				476			893
Non-current assets
Property and equipment		6		366			305
Long-term restricted bank deposits				72			59
Total  non-current assets				438			364
Total assets				914			1,257
Liabilities and equity
Current liabilities
Bank loan		7		144			-
Related parties		8		462			321
Trade payables				81			23
Accounts payable and accruals		9		285			133
Total current liabilities				972			477
Non - Current liabilities
Shareholders loans		10		781			617
Total non-current liabilities				781			617
Equity (deficit)		14
Share capital				64,639			63,597
Capital reserves				3,179			3,064
Accumulated losses				(68,657	)		(66,498	)
Total Equity (deficit)				(839	)		163
Total liabilities and equity (deficit)				914			1,257

/s/ Aviv Tzidon	/s/ Omer Bar Yohay	/s/ Liza Ohayon
Aviv Tzidon Chairman of the Board	Omer Bar Yohay Chief Executive Officer	Liza Ohayon Chief Financial Officer

Approval date of the financial statements: April 24 ,2018.

The accompanying notes are an integral part of the consolidated financial statements.

F - 3

EVIATION AIRCRAFT LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

			For the year ended December 31,
			2017		2016		2015
	Note		$ in thousand
Research and development expenses, net		16		1,146	1,829		-
Marketing, administrative and general expenses		17		747	341		-
Total expenses				1,893	2,170		-
Operating loss				1,893	2,170		-
Financing expenses		18		235	71		-
Loss before taxes on income				2,128	2,241		-
Taxes on income		12		31	(553	)	-
Loss from continuing operations				2,159	1,688		-
Loss from discontinued operation		4		-	-		226
Loss for the year				2,159	1,688		226
Attributable to:
Owners of the Company				2,159	1,688		201
Non-controlling interests				-	-		25
Loss for the year				2,159	1,688		226
Continued operations (in $)
Basic and diluted loss per share		15		0.19	0.20		-
Discontinued operation (in $)
Basic and diluted loss per share		15		-	-		26.43

The accompanying notes are an integral part of the consolidated financial statements.

F - 4

EVIATION AIRCRAFT LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

	Share capital		Capital reserves		Accumulated losses			Attributable to owners of the Company			Non-controlling interests			Total
	$ in thousand
Balance as of January 1, 2015		63,597		86		(64,609	)		(926	)		198			(728	)
Comprehensive loss for the year		-		-		(201	)		(201	)		(25	)		(226	)
Balance as of December 31, 2015		63,597		86		(64,810	)		(1,127	)		173			(954	)
Changes during the year
Capital contribution by shareholders*		-		1,127		-			1,127			(173	)		954
Share based payment		-		9		-			9			-			9
Shareholders transaction reserve, net of tax		-		1,842		-			1,842			-			1,842
Comprehensive loss for the year		-		-		(1,688	)		(1,688	)		-			(1,688	)
Balance as of December 31, 2016		63,597		3,064		(66,498	)		163			-			163
Changes during the year
Issuance of share capital and warrants		1,042		-		-			1,042			-			1,042
Share based payment		-		14		-			14			-			14
Shareholders transaction reserve, net of tax		-		101		-			101			-			101
Comprehensive loss for the year		-		-		(2,159	)		(2,159	)		-			(2,159	)
Balance as of December 31, 2017		64,639		3,179		(68,657	)		(839	)		-			(839	)

*See note 4.

The accompanying notes are an integral part of the consolidated financial statements.

F - 5

EVIATION AIRCRAFT LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

			For the year ended on December 31,
			2017			2016		2015
	Note		$ in thousand
Cash flows from operating activity
Loss for the year				(2,159	)	(1,688	)	-
Adjustments for:
Income tax				31		(553	)	-
Depreciation				141		31		-
Financial expense, net				232		69		-
Share-based payments				14		9		-
				418		(444	)	-
Increase in accounts receivable				(157	)	(35	)	-
Increase in trade payables				58		23		-
Increase in accounts payable and accruals				72		98		-
Increase in related parties balance				141		321		-
				114		407		-
Net cash used in operating activity				(1,627	)	(1,725	)	-
Cash flows from investment activity
Increase in restricted bank deposit				(7	)	(59	)	-
Investment in property and equipment				(202	)	(336	)	-
Net cash used in investment activity				(209	)	(395	)	-
Cash flows from financing activity
Issuance of share capital and warrants				1,042		-		-
Proceeds from capital contribution and shareholders' loans				639		2,965		-
Repayment of shareholders' loans				(553	)	-		-
Proceed from bank's loan				144		-		-
Net cash provided by financing activity				1,272		2,965		-
Cash flows above include cash flows in respect of discontinued operation as follows:		4
Net cash used operating activity				-		-		(116	)
Net cash provided by investment activity				-		-		104
Net cash flows used in discontinued operation				-		-		(12	)
Exchange differences on balances of cash and cash equivalents				(10	)	13		-
(Decrease)/increase in cash and cash equivalents				(574	)	858		(12	)
Balance of cash and cash equivalents at the start of the year				858		-		12
Balance of cash and cash equivalents at end of the year				284		858		-
Non-cash transaction: Contribution by shareholders – See note 4.

The accompanying notes are an integral part of the consolidated financial statements

F - 6

EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE1 -     GENERAL

EVIATION AIRCRAFT Ltd. (formerly R.V.B. Holdings Ltd.) (the "Company") was incorporated under the laws of the State of Israel. The name change was in effect at March 2, 2017. The address of the Company’s registered office is 1 Ha’Ofe St., Kadima-Tzoran, Israel, 6092000.

The Company’s ordinary shares are traded in the United States on the OTC Market, Pink tier, under the symbol EVTNF (formerly  RVBHF). See note 4 relating to creditors arrangement and discontinued operation in February 2016.

On May 15, 2016, the Company established a new, wholly-owned Israeli subsidiary company under the name “Eviation Tech Ltd.” (the “Subsidiary”) for the purpose of developing and commercializing electric propulsion aviation, the Company's new business focus (the “Aviation Business”).

As of December 31, 2017, the Company had cash and cash equivalent balance of $284 thousand and deficit in equity of $839 thousand. On July 17, 2016, the Group entered into loan and security agreements with certain shareholders for a total amount of $5 million. As of the date of these financial statements, the Group received approximately $3.6 million of the loans and the Group has under these agreements an additional $1.4 million in unutilized credit availability.  On February 18, 2018 the Company entered into a binding memorandum of understanding (the “MOU”) with a new investor in respect of investment of up to $12 million. The investor had paid an amount of $0.5 million on January 11, 2018 and an additional amount of $1.5 million on March 30, 2018 on account of the investment. See also note 19. The Company's management believes that its available cash resources, including the shareholder credit facilities, the amount received in advance from the new investor and remaining budget approved in the program from the OCS toward the design and development of the aircraft (see note 13(a)(2)), are sufficient to meet its operating requirements for at least 12 months from the reporting period. Management has the ability to reduce its expenses if needed, so it can continue to meet its liabilities.

NOTE   2 -   BASIS OF PREPERATION

a. Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB). The consolidated financial statements were authorized for issue by the Company Board of Directors on April 24, 2018.

b. Functional currency:

(1) Functional currency

The currency of the main economic environment in which the Group operates is the US dollar (the "functional currency").

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE   2 -   BASIS OF PREPERATION (continued):

(2) Translation of transactions that are not in the functional currency   In the preparation of the financial statements, transactions carried out in currencies other than the Company's functional currency (the "foreign currency") are recorded at the exchange rates in effect on the dates of the transaction.   At each reporting period, monetary items stated in foreign currency are translated according to the exchange rates in effect at that date; non-monetary items that are measured in terms of historical cost are translated according to the exchange rates in effect at the time of the transaction in connection with the non-monetary item.

 (3) The method of recording exchange rate differences   Exchange rate differences (primarily in respect of monetary balances that are not in the functional currency) are recognized in the income statement in the period in which they occurred.

c. Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for deferred tax assets and liabilities.

d. Use of estimates and judgments

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The preparation of accounting estimates used in the preparation of the Group’s financial statements requires management of the Company to make assumptions regarding circumstances and events that involve considerable uncertainty. Management of the Company prepares the estimates on the basis of past experience, various facts, external circumstances, and reasonable assumptions according to the pertinent circumstances of each estimate. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Determination of fair value

Preparation of the financial statements requires the Group to determine the fair value of certain assets and liabilities. Further information about the assumptions that were used to determine fair value is included in note 10 on shareholders loans and note 14d on share based compensation.

When determining the fair value of an asset or liability, the Group uses observable market data as much as possible. There are three levels of fair value measurements in the fair value hierarchy that are based on the data used in the measurement, as follows:

•          Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly

•          Level 3: inputs that are not based on observable market data (unobservable inputs).

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE   2 -   BASIS OF PREPERATION (continued):

e. Risk management policy

The operations of the Group expose it to various financial risks, such as a market risk (including a currency risk, fair value risk regarding interest rate and price risk), credit risk, liquidity risk and cash flow risk for the interest rate. The comprehensive risk-management policy of the Group focuses on actions to limit the potential negative impacts on financial performance of the Group to a minimum. The Group does not typically use derivative financial instruments in order to hedge exposures.

Risk management is performed by the Group’s Chief Executive Officer in accordance with the policy approved by the Board of Directors.

The Group does not have a significant concentration of credit risks. The cash and cash equivalents of the Group are deposited in Israeli banking corporation. In the estimation of the Group’s management, the credit risk for these financial instruments is low.

NOTE   3 -   SIGNIFICANT ACCOUNTING POLICIES:

a. Basis of consolidation

(1) General

The consolidated financial statements incorporate the financial statements of the Company and an entity controlled by the Company (its subsidiary).

Control is achieved when the Company:

· has power over the investee;

· is exposed, or has rights, to variable returns from its involvement with the investee; and

· has the ability to use its power to affect its returns. Substantive rights held by the Group and others are taken into account when assessing control.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Transactions with non-controlling interests while retaining control are accounted for as equity transactions. Any difference between the consideration paid or received and the change in non-controlling interests is included in the owners’ share in equity of the Company directly in retained earnings.

(2) Non-controlling interest

Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE   3 -   SIGNIFICANT ACCOUNTING POLICIES (continued):

Non-controlling interests comprise the equity of a subsidiary that cannot be attributed, directly or indirectly, to the parent company and they include additional components such as: the equity component of convertible debentures of subsidiaries, share-based payments that will be settled with equity instruments of subsidiaries and share options of subsidiaries.

b. Cash and cash equivalents

Cash and cash equivalents include all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit) that are not restricted as to withdrawal or use and the period to maturity of which did not exceed three months at time of investment.

c. Property and equipment:

Property and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.

Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset, or other amount substituted for cost, less its residual value.

The cost of replacing part of a fixed asset item and other subsequent expenses are capitalized if it is probable that the future economic benefits associated with them will flow to the Group and their cost can be measured reliably. The carrying amount of the replaced part of a fixed asset item is derecognized. The costs of day-to-day servicing are recognized in profit or loss as incurred.

Depreciation is calculated at annual rates as follows:

	%
Equipment, computers and systems	33
Leasehold improvements	The shorter of the lease term and the useful life
Lab Equipment	20
Office furniture	20

d. Long term restricted deposits

Long-term restricted deposits are deposits which are expected to be restricted for more than a year, as of the date of the statement of financial position.

e. Financial liabilities and equity instruments issued by the Company:

(1) Classification as a financial liability or an equity instrument

Non-derivative financial instruments are classified as either financial liabilities or as equity instruments in accordance with the substance of the contractual arrangement.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of direct issuing costs.

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE   3 -   SIGNIFICANT ACCOUNTING POLICIES (continued):

(2) Other financial liabilities   Other financial liabilities (credit, loans and accounts payable) are initially measured at fair value, net of transaction costs. Subsequent to the initial recognition loans are measured at amortized cost using the effective interest method.  The value of these financial liabilities is not materially different than their fair value other than the loans received from certain of the Company’s Shareholders. These loans were initially recorded at fair value and the remaining amount of cash received was classified as an equity instrument reflecting the favorable terms of these loans. Financial liabilities are derecognized when the obligation of the Group, as specified in the agreement, expires or when it is discharged or cancelled.

f. Leasing of real estate by the Company

Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease.

g. Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation, and it is probable that an outflow of economic benefits, which can be estimated reliably, will be used to settle the obligation.

The amount recognized as a provision, reflects management's best estimate of the amount required in order to settle the obligation on the balance sheet date, whilst taking into account the risks and uncertainties connected with the obligation. When the provision is measured using the forecasted cash flows in order to settle the liability, the book value of the provision is the present value of the forecasted cash flows.

h. Share-based payments

Share-based payments to employees, directors and others that provide similar services, which are settled in equity instruments of the Group, are measured at fair value on the grant date. On the grant date, the Company measures the fair value of the granted equity instruments by using the Black and Scholes model.

If the equity instruments granted to them have not vested until these employees and directors have completed a defined period of service, have met performance conditions or defined market conditions are met, the Company recognizes the share-based payment transactions in its financial statements over the vesting period against an increase in its shareholders' equity, under "Capital reserves" in respect of share based payments.

At each balance sheet date, the Company estimates the number of equity instruments that are expected to vest. Any change in the estimate relative to previous periods is recognized in the income statement over the remaining vesting period.

i. Taxes on income

In view of losses for tax purposes accrued by the Company and given the fact that as of the reporting date there was no certainty as to the realization of these losses in the foreseeable future, the Company recognized deferred tax asset in respect of carry-forward losses only to the extent of deferred tax liability, see note 12.

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE   3 -    SIGNIFICANT ACCOUNTING POLICIES (continued):

j. Employee benefits:

(1) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss in the periods during which related services are rendered by employees.

Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

(2) Short-term employee benefits

Short-term employee benefits include wages, vacation days, sick leave, recreation and deposits with the National Insurance Institute of Israel, which are paid within approximately one year of the period in which the employee provides the related service. These benefits are recognized as an expense upon the provision of services.

k. Research and development expenditures

Research expenditures are recognized in the consolidated statements of comprehensive loss when incurred.

An intangible asset arising from development or from the development phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliably the expenditure attributable to the intangible asset during its development.

Research expenditures are recognized in the consolidated statements of comprehensive loss when incurred.

As the Company does not meet the criteria aforementioned, development expenditures are recognized in the consolidated statements of comprehensive loss when incurred

l. Government grants

Government grants are recognized initially at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Unconditional government grants are recognized when the Group is entitled to receive them. Grants that compensate the Group for expenses incurred are presented as a deduction from the corresponding expense.

Grants from the OCS in respect of research and development projects are accounted for as forgivable loans according to IAS 20. Grants received from the OCS are recognized as a liability according to their fair value on the date of their receipt, unless on that date it is reasonably certain that the amount received will not be refunded. The amount of the liability is reexamined each period, and any changes in the present value of the cash flows discounted at the original interest rate of the grant are recognized in profit or loss. The difference between the amount received and the fair value on the date of receiving the grant is recognized as a deduction of research and development expenses.

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE   3 -   SIGNIFICANT ACCOUNTING POLICIES (continued):

m. Loss per share

The Company presents basic and diluted loss per share data for its ordinary shares. Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is determined by adjusting the loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees and others (See note 15).

n. Discontinued operations

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been discontinued from the start of the earliest comparative period.

o. Transactions with controlling shareholder

Assets and liabilities included in a transaction with a controlling shareholder are measured at fair value on the date of the transaction. As the transaction is on the equity level, the Company includes the difference between the fair value and the consideration from the transaction in its equity.

p. Exchange rates and linkage basis:

(1) Balances in or linked to foreign currency are presented according to the representative exchange rate published by the Bank of Israel at the balance sheet date.

(2) Balances linked to the CPI are presented according to the CPI for the last month of the reporting period.

(3) Data in respect of changes in the CPI and the dollar's exchange rate are as presented as follows:

	The dollar			CPI in Israel
	Exchange rate			Actual CPI			Known CPI
	(NIS to 1 $)			Points			Points
Date of the financial statements
As of December 31, 2017		3.467			113.05			112.93
As of December 31, 2016		3.845			112.6			112.6
Rate of change	Change in %
For the year ended December 31, 2017		(9.83	)		0.40			0.30
For the year ended December 31, 2016		(1.46	)		(0.20	)		(0.30	)
For the year ended December 31, 2015		0.33			(1.0	)		(1.1	)

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE   3 -   SIGNIFICANT ACCOUNTING POLICIES (continued):

q. New standards and interpretations not yet adopted:

Standard/interpretation/ amendment	The requirements of the publication	Effective date and transitional provisions	Expected effects
IFRS 9(2014),Financial Instruments	IFRS 9 (2014) replaces the current guidance in IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 (2014) includes revised guidance on the classification and measurement of financial instruments, a new ‘expected credit loss’ model for calculating impairment for most financial assets, and new guidance and requirements with respect to hedge accounting.	IFRS 9 (2014) is effective for annual periods beginning on or after January 1, 2018 with early adoption being permitted.	The Group is  still examining the effects of applying IFRS 9 (2014) on the financial statements.
IFRS 16, Leases	IFRS 16 replaces IAS 17, Leases and its  related interpretations. For lessees, the standard presents a unified model for the accounting treatment of most  leases according to which the lessee has to recognize an asset and liability in respect of the lease in its financial statements.	IFRS 16 is applicable for annual  periods as of January 1, 2019, with the possibility of early adoption, so long as the company has also early adopted IFRS 15, Revenue from Contracts with Customers.	The Group is still examining the effects of applying IFRS 16, on the financial statements.

NOTE 4 -      CREDITORS ARRANGMENT AND DISCONTINUED OPERATION

In 2013, the Company's Board of Directors has decided to cease the operation of the Y’bllin demonstration facility owned by EER, formerly a subsidiary of the Company that owned

know-how and rights in the field of solid waste treatment. As of February 2015, the Company completed the evacuation from the Y’bllin facility, the sale of the systems and equipment and ceased all operations.

On April 2, 2015, following a creditor petition to the Tel-Aviv District Court due to the financial and business condition of the Company, the Court appointed a temporary liquidator for the Company and its subsidiary.

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 -      CREDITORS ARRANGMENT AND DISCONTINUED OPERATION (continued):

On February 2, 2016, the Tel-Aviv District Court approved a creditors arrangement for the sale of the Company, free of any assets and liabilities (including the Company’s investment and ownership interest in EER) to new shareholders.

Upon the approval of the Court the Company emerged from the liquidation status through the issuance of ordinary shares, which represented 99.9% of the issued and outstanding share capital of the Company to the new shareholders in consideration of NIS 600,000 (approximately $153 thousand) that were paid to the liquidator. The Company emerged from the liquidation free of any assets and liabilities, and any such assets and liabilities were removed from its statement of financial position, with the net amount of $954 thousand charged as a capital contribution by the new shareholders.

Pursuant to the arrangement, the following was agreed and executed: (1) cancelling the nominal value of the Company’s shares, such that the Company’s shares will not have any nominal value, (2) converting 71,923,175 non-tradable options to purchase ordinary share of the Company into 71,923,175 ordinary shares, no par value of the Company, (3) implementing a reverse split of the Company’s shares at a ratio of 30,465:1 (i.e., for each 30,465 shares of the Company, the shareholders of the Company will receive one (1) share), and (4) increasing the registrar share capital of the Company to 700,000,000 ordinary shares of the Company with no nominal value. The reverse split became effective on February 25, 2016.

Upon completion of the above, the Company issued to the purchasers of the Company 9,990,000 ordinary shares of the Company, which represented 99.9% of the issued and outstanding share capital of the Company. In May 2016, the Company started developing its Aviation Business and all prior activity was classified as discontinued operation.

NOTE 5 –     ACCOUNTS RECEIVABLE:

	As of December 31,
	2 0 1 7		2 0 1 6
	$ in thousand
Government institutions		180		28
Prepaid expenses		12		7
		192		35

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – PROPERTY AND EQUIPMENT:

	Equipment, computers and systems			Leasehold improvements			Lab equipment			Office furniture		Total
	$ in thousand
Cost
Balance as at January 1, 2016		-			-			-			-		-
Additions		295			36			4			1		336
Balance as at December 31, 2016		295			36			4			1		336
Additions		147			53			-			2		202
Balance as at December 31, 2017		442			89			4			3		538
Depreciation
Balance as at January 1, 2016		-			-			-			-		-
Depreciation for the year		(30	)		(1	)		-			-		(31	)
Balance as at December 31, 2016		(30	)		(1	)		-			-		(31	)
Depreciation for the year		(132	)		(8	)		(1	)		-		(141	)
Balance as at December 31, 2017		(162	)		(9	)		(1	)		-		(172	)
Carrying amounts
At December 31, 2016		265			35			4			1		305
At December 31, 2017		280			80			3			3		366

NOTE 7 –    BANK LOAN:

On December 21, 2017 the Company received a loan in the amount of NIS 500 thousand ($144 thousand) for a period of 3 months which was extended on a weekly basis until repaid on April 16, 2018. The loan bears annual interest of 5.4% and is secured by a private guarantee from Mr. Aviv Tzidon and the Company's CEO.

NOTE 8 –    RELATED PARTIES TRANSACTIONS:

a. On November 30, 2015, Mr. Aviv Tzidon (hereinafter "Mr. Tzidon") and Mr. Michael Ilan (beneficial owner of Magic Stones-Gemstone Import and marketing Ltd. (hereinafter "Magic Stones") entered on behalf of the Subsidiary in formation into an Administrative Services Agreement with Phinergy Ltd., a company also controlled by Mr. Tzidon and Mr. Ilan – the “ASA”.

Pursuant to the ASA, Phinergy provides the Subsidiary with: (i) administrative and general services, including secretarial and management services; (ii) human resource services; (iii) accounting and bookkeeping services; and (iv) office space and office services, including telephone, fax and data communications and cleaning services, see note 13a(1) (the services described in (i) through (iv), collectively – the “Services”). In consideration for these Services, the Subsidiary is required to pay a monthly fee, calculated on the basis of the actual cost to Phinergy of providing the Services, derived as a percentage of the global costs paid for Phinergy for receiving such services for itself and the Subsidiary together.

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 –    RELATED PARTIES TRANSACTIONS (continued):

The amount recorded in 2017 in respect of the Service was approximately $136 thousand (2016 - $711 thousand).

The balance of related parties transactions as of December 31, 2017 represent the unpaid balance under the ASA, which was paid to Phinergy on April 17, 2018.

b. On July 17, 2016, the Company's Board of Directors (the “Board”) approved the acquisition, assumption and acceptance by the Subsidiary of all of the assets acquired and obligations created by Mr. Tzidon and Magic Stones on behalf of the Subsidiary, and the transfer to the Subsidiary of all of the contracts, licenses, material goods, intellectual property and expertise that had been acquired by the two shareholders for and on behalf of the Subsidiary prior to such date.    The transfer to the Subsidiary of all of aforesaid assets was made at their deemed acquisition cost of approximately $1.4 million representing an arm's length price, pursuant to an Assignment and Assumption Agreement between each of the shareholders and the Subsidiary.    The transfer of the assets and liabilities was deemed borrowed by the Subsidiary under the loan and security agreement (see note 10).  The payment of $1.4 million includes certain expenses and in addition partial payments made in respect of the following assigned contracts:

· On September 1, 2015, Mr. Tzidon entered on behalf of the Subsidiary into a license and service agreement with Mr. John McGinnis, on behalf of himself and on behalf of his companies (collectively, “McGinnis”), for a worldwide exclusive license to a patent and know-how necessary for the completion and utilization of a flying electric Double Boxtail aircraft for use solely in the field of electric powered aircraft.  The license will automatically become non-exclusive after three years from the termination of the agreement.  As of December 31, 2016 , the Subsidiary paid US $700 thousand for the development and production of scaled demonstrators and additional development and production services relating to a full scale electric synergy prime aircraft.   According to the terms of the agreement, the Subsidiary will not be the owners of the physical embodiment of the full scale electric Synergy prime aircraft or its intellectual property.

In addition, the Subsidiary can select to continue to engage McGinnis for additional development projects in the future.

Due to a lack of progress in the development and supply of the model or the completion of the Synergy Prime Aircraft, the agreement has in effect been suspended, and could be reinstated in agreement between the parties in any stage.

· On February 5, 2016, the Subsidiary (as an entity that was then in formation) entered into a “Memorandum of Understandings” with Laminar Research LLC (the “Laminar MOU”) for the development of an air traffic control algorithm and its implementation on subscale aircraft models.  The Laminar MOU comprises several steps of development by Laminar, for a total payment by the Subsidiary of $180,000.

The Subsidiary receives an irrevocable, royalty-free license for a limited number of copies of the finished software products. As of December 31, 2016, out of the $180,000 the Company paid $135,000 and the remaining $45,000 is pending completion of stage 4 as defined in the agreement to the satisfaction of the Company.

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 –    RELATED PARTIES TRANSACTIONS (continued):

c. In July 2016, the Subsidiary acquired from Eye Point Ltd., a company owned by one of the Company's shareholders, Mr. Dekel Tzidon, all rights under US patent No. 8,314,928 (the “Eye Point Patent”) for a total amount of $38,000. The Eye Point Patent will expire on November 12, 2026. This patent allowed the Company to develop conceptual design of an auto-landing system.

NOTE 9 –    ACCOUNTS PAYABLE AND ACCRUALS:

Composed as follows:

	As of December 31,
	2 0 1 7		2 0 1 6
	$ in thousand
Employees and institutions in respect of payroll (*)		111		75
Accrued Interest		116		35
Accrued expenses		58		23
		285		133
(*) See also note 11.

NOTE 10  –  SHAREHOLDERS LOANS:

On July 17, 2016, the Company entered a loan and security agreement with two of its shareholders Mr. Tzidon and Magic Stones  pursuant to which they loaned a total of $500 thousand to the Company for a period of seven years.

As security for such loan, the Company granted to Mr. Tzidon and Magic Stones a specific lien and security interest on all of the shares of the Subsidiary held by the Company. The proceeds of the loan are to be used for funding the on-going operations of the Company.

Additionally, on the same date, the Subsidiary entered a loan and security agreement with the same shareholders pursuant to which they granted the Subsidiary a credit facility of up to $4.5 million for a period of seven years from the date of the agreement. As security for amounts owing under the credit facility, the Subsidiary granted to these shareholders a floating lien and charge on all of the assets of the Subsidiary, and a specific charge on all of the intellectual property rights owned or hereafter acquired by the Subsidiary.

Both loans accrue interest at an annual interest rate equal to the lower of 3.2% per annum, and the minimum rate required by the Israeli tax law to avoid the imputing of tax (2017 and 2016 -2.56%). Accrued interest is payable annually.

As of December 31, 2017, the Company and the Subsidiary received $500 thousand and approximately $3.1 million, respectively, and the accrued interest amount on both loans is approximately $116 thousand. On August 24, 2017, following the investment made in the Company, see note 14c., the Subsidiary repaid an amount of approximately $553 thousand.

The fair value of the shareholders loans was initially measured in the amount of $570 thousand and classified under category Level III. An amount of $1,842 thousand (net of $553 thousand of taxes) was initially attributed as shareholders equity in respect of the favorable interest rate provided to the Company by its shareholders. The deferred tax liability created with respect of the loan was offset against a deferred tax asset created with respect of the Group’s carried forward losses. 

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EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10  –  SHAREHOLDERS LOANS (continued):

The loan was valued as contingent claim on the Company's assets, the inputs used in the determination of fair value required significant management judgment or estimation, these inputs considered the implied value of the Company’s assets based on the Company's shareholders loan which reflects all the investments made in the Company as of that day, resulting with an implied annual interest rate of 34%.

Subsequent measurement of the fair value of the shareholders loan as of December 31,2017 was $757 thousand (2016 - $602 thousand). The balance of amount attributed as shareholders equity as of December 31, 2017 and 2016 was $1,943 thousand and $1,842 thousand  (net of $522 thousand and $553 thousand of taxes), respectively.

NOTE 11 –   POST- EMPLOYMENT BENEFITS:

                            Plans in respect of severance pay

The Severance Pay Law in Israel requires the Company and its subsidiaries to pay severance pay upon dismissal of an employee or upon termination of employment in other certain circumstances.  In principle, the Severance Pay Law in Israel stipulates that the severance pay amount equals the employee's last salary multiplied by the amount of years in which the employee was employed.

The Group applies Section 14 of the Israeli Severance Pay Act of, 1963, to its employeespursuant to which it is exempt from any severance pay liability, subject to it making certain monthly contributions to employees' pension plans. The Group will not have a legal or constructive obligation to make additional payments if the plan does not have sufficient assets to pay the entire employee benefits relating to the employee's service during the current period and in previous periods.

NOTE 12 –   INCOME TAX:

a. Taxable income of Israeli companies is subject to tax at the rate of 26.5% in 2015, 25% in 2016 and 24% in 2017.

On January 4, 2016, the Israeli Parliament's Plenum approved by a second and third reading the Bill for Amending the Income Tax Ordinance (No. 217) (Reduction of Corporate Tax Rate), 2015, which consists of the reduction of the corporate tax rate from 26.5% to 25%, starting January 1, 2016.

On December 22, 2016, the Israeli Parliament's Plenum approved by a second and third reading the Economic Efficiency Law (Legislative Adjustments for Achieving Budget Objectives in the years 2017 and 2018) - 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. The first step will be to a rate of 24% as from January 2017 and the second step will be to a rate of 23% as from January 2018.

Current taxes for the reported periods are calculated according to the tax rates presented above.

b. The Company received final tax assessments (including assessments considered as final) through the tax year 2012

c. As at December 31, 2017, the Company has carried forward tax losses in the amount of approximately NIS 119 million (approximately $34 million). Its Subsidiary has carried forwards losses in the amount of NIS 13.8 million (approximately $4 million).

F - 19

EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 –   INCOME TAX (continued):

d. Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of carried forward tax losses in the amount of $36,037 thousand as of December 31,2017 (2016-$30,673 thousand) except for deferred tax asset which recognized up to the deferred tax liability amount recorded in respect of the shareholders loan, see note 10.

Deferred tax assets have not been recognized in respect of tax losses since it is not probable that future taxable profit will be available against which the Group can utilize the benefits. The tax losses do not expire under current tax legislation in Israel.

e. Deferred taxes are calculated according to the tax rate anticipated to be in effect on the date of reversal. See note 10 regarding the deferred taxes.

f. Reconciliation between the theoretical tax on the pre-tax profit and the tax expense:

	Year ended December 31
	2017			2016
	$ in thousand
Loss before taxes on income		2,128			2,241
Primary tax rate of the Company		24	%		25	%
Tax  calculated according to the Company’s primary tax rate		(511	)		(560	)
Additional tax (tax saving) in respect of:
Non-deductible expenses		11			4
Current year tax losses and benefits for which deferred
taxes were not created		531			52
Creation of deferred taxes for tax losses and benefits from
previous years for which deferred taxes were not created in
the past		-			(49	)
Income tax expenses (income) from continuing operations		31			(553	)

F - 20

EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – COMMITMENTS AND CONTIGENT LIABILITIES:

Commitments:

 (1) Lease agreements   The Company sub leased office space from a related party. The lease period commenced on December 1, 2015 for two months with 6 option periods of 12 months each that will be exercised automatically unless the Company will provide a 90 days early termination notice before the end of each year lease period. The minimum rent payment recognized as an expense in the year ended on December 31, 2017 was $36 thousand (2016 - $46 thousand). Minimum rentals payable under non-cancellable lease agreement as of December 31, 2017, amount of approximately $37 thousand (2016 - $33 thousand).
On January 9, 2017, the Company signed an additional lease agreement with another related party who is the owner of the same building in which the Company sub leased the office in 2015 for additional office space and parking spots. The lease period commenced on January 1, 2017 for one year with an option to extend the lease period for up to additional 6 years. The contract is renewed automatically unless the Company provide a 90 days early termination notice before the end of each year lease period. The minimum rent payment recognized as an expense in the year ended on December 31, 2017 was $19 thousand (2016 - 0). Minimum rentals payable under non- cancellable lease agreement as of December 31, 2017, amount to approximately $22 thousand (2016 - 0).

(2) OCS   On December 18, 2016, the Subsidiary signed a Support and Investment Agreement with the Office of the Chief Scientist of the Ministry of National Infrastructures, Energy, Water and Resources of Israel (the “OCS”) under the pilot and demonstration project.  Under the agreement, the Company will develop a passenger's electric aircraft. The plan will be performed during 24 months commencing on January 1, 2017. The Subsidiary is entitled to receive up to 50% of the actual costs and up to NIS 3 million (approximately $ 865 thousand). As a security, the Subsidiary provided a bank guarantee in the amount of NIS 225 thousand that will be effective until 3 months after the end of the project. The Subsidiary has recorded a lien on a bank deposit in the same amount in favor of the bank providing the guarantee.   According to the agreement, the Subsidiary will be required to pay royalties in an amount of 5% on sales of products and services derived from a technology developed using these grants until repayment of the entire CPI-linked grant plus interest at a rate determined by the general accountant at the Israeli Ministry of Finance.   As of December 31, 2017, the Subsidiary received approximately NIS 1.3 million (approximately $ 377thousand) in respect of actual costs incurred by it. An additional amount of approximately NIS 413 thousand (approximately $118 thousand) was received until the date of this report.

F - 21

EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -   SHAREHOLDERS' EQUITY:

a. As discussed in Note 4, on February 2, 2016, the Company:

(1) canceled the nominal value of the Company’s shares, such that the Company’s shares will not have any nominal value,

(2) converted 71,923,175 non-tradable options to purchase ordinary share of the Company into 71,923,175 ordinary shares of the Company,

(3) conducted a reverse split of the Company’s shares at a ratio of 30,465:1 (i.e., for each 30,465 shares of the Company, the shareholders of the Company will receive one (1) share), which reverse split became effective on February 25, 2016; and

(4)           increased the share capital of the Company to 700,000,000 ordinary shares with no par value.

b. The authorized ordinary shares of the Company as of December 31, 2017 and 2016 was 700,000,000 shares.

The issued and outstanding ordinary shares of the Company as of December 31, 2017 and 2016 was 10,694,820 and 10,000,000 shares, respectively.

The holders of ordinary shares are entitled to receive dividends and are entitled to one vote per share at general meetings of the Company.

c. On August 17, 2017, the Company signed a share purchase agreement with A.O.Tzidon Ltd. and Michael Ilan Management and Investment Ltd. (the “Investors”). According to the agreement the Company shall issue to the Investors ordinary shares at a price per share of $1.5 for an aggregate purchase price of $1 million. In addition, at any time prior to May 31, 2018, each of the Investors may purchase additional ordinary shares at the same price per share and up to an aggregate amount of $2.5 million.

On August 24, 2017, each of the Investors purchased 347,410 ordinary shares.

d. Share-based compensation

All options granted under the Company’s previous stock option plan of 2011 were transferred to the temporary liquidator as part of the liquidation. In February 2016, the options were canceled as part of the sale of the Company to the new shareholders as described in note 4 above.

On July 17, 2016, the Board of Directors approved the adoption of the "2016 Equity Incentive Plan" (the “Incentive Plan”) and approved to reserve 1,000,000 ordinary shares (no par value) for issuance to employees, officers, directors, consultants and certain other service providers of the Company and the Company's affiliates.

On October 15, 2016, the Company granted options to purchase 37,500 ordinary shares of the Company to each of the Company's then directors (262,500 options in total) at an exercise price of $1.00 per share.

On December 11, 2017, the Company's shareholders approved the grant of  options to purchase 37,500 ordinary shares of the Company to one of the Company's directors at an exercise price of $1.00 per share.

All granted options have contractual life of 10 years and shall vest in four annual installments from the vesting commencement date as follows: 10,000 options on each of the first, second and third anniversaries of the vesting commencement date ,7,500 on the fourth anniversary of the vesting commencement date, so that four (4) years following the vesting commencement date, all options will be fully vested and exercisable, subject to the option holder’s continuing to be a director of the Company or any affiliate thereof through such dates.

F - 22

EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -   SHAREHOLDERS' EQUITY (continued):

Notwithstanding the above, the vesting of the options may accelerate so that all shares subject to the option will be fully vested and exercisable immediately prior to the occurrence of any of the following corporate transactions: (i) A merger, acquisition, reorganization or consolidation in which the Company is not the surviving entity; (ii) The sale, transfer, exchange or other disposition of all or substantially all of the shares or assets of the Company.

The fair value of employee share options is measured using the Black-Scholes (B&S model) formula. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility for companies in similar stage of development, expected dividends, and the risk-free interest rate (based on US dollar government debentures). Service and non-market performance conditions are not taken into account in determining fair value.

The following table lists the inputs to the B&S model used for the fair value measurement of equity-settled share options granted for the above plan:

	Year ended December 31,
	2017			2016
Share price	$	0.82		$	0.24
Dividend yield (%)		0			0
Expected volatility of the share prices (%)		100	%		100	%
Risk-free interest rate (%)		1.4%-2.8	%		1.36%-1.58	%
Expected life of share options (years)		5.5-7			5.5-7

The following table lists the number of share options, the weighted average exercise prices of share options and movement in option plans during the current year:

	Year ended December 31, 2017							Year ended December 31, 2016
	Number of options			Weighted average exercise price (USD)		Weighted- average remaining contractual term (in years)		Number of options		Weighted average exercise price (USD)		Weighted- average remaining contractual term (in years)
Outstanding at the beginning of the year		262,500			1.00		9.8		-		-		-
Granted		37,500			1.00		-		262,500		1.00		-
Forfeited and expired		(37,500	)		1.00		-		-		-		-
Outstanding at the end of the year		262,500			1.00		9.0		262,500		1		9.8
Exercisable at the end of the year		60,000			1.00		8.8		-		-		-

The Company recorded amount of approximately $14 thousand as share based payment compensation expenses in 2017 ( 2016 - $9 thousand).

F - 23

EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 –  LOSS PER ORDINARY SHARE:

The following table summarizes information related to the computation of basic and diluted loss per ordinary share for the years indicated:

	Year ended December 31,
	2017		2016		2015
	$ in thousand
Loss attributable to ordinary shares		2,159		1,688		201

	Shares
Weighted average number of ordinary shares used in
basic and diluted loss per ordinary share calculation		11,505,260	8,494,658	7,605
	$
Continued operations (in $)
Basic and diluted loss per ordinary share		0.19	0.20	-
Discontinued operation (in $)
Basic and diluted loss per ordinary share		-	-	26.43

In the year ended December 31, 2017 and December 31, 2016, all stock options and warrants were excluded from the calculation of diluted net loss per share attributable to ordinary shares because their effect would have been anti-dilutive for the period.

NOTE 16 – RESEARCH AND DEVELOPMENT EXPENSES, NET:

	Year ended December 31,
	2017			2016
	in thousand $
Payroll		741			505
Materials and subcontractors		630			1,224
Rent and office maintenance		67			46
Depreciation		141			31
Other		62			23
		1,641			1,829
Less – OCS grants		(495	)		-
		1,146			1,829

F - 24

EVIATION AIRCRAFT LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 –  MARKETING, ADMINISTRATIVE AND GENERAL EXPENSES:

	Year ended December 31,
	2017		2016
	$ in thousand
Payroll		43		9
Professional fees		324		244
Travels		93		33
Director fees*		37		22
Insurance		14		22
Other		236		11
		747		341

*Including share based compensation expenses.

NOTE 18 –  FINANCIAL EXPENSES:

Financial expenses consists of:

	Year ended December 31,
	2017		2016
	$ in thousand
Interest on shareholders loans		229		82
Exchange rate expenses (income), net		3		(13	)
Bank fees		3		2
Financial expenses		235		71

NOTE 19 –  SUBSEQUENT EVENT:

In February 2018 the Company entered into a binding memorandum of understanding (the “MOU”) with a new investor in respect of an investment of up to $12 million at a price per Ordinary Share of $1.50, to be paid in up to three installments.

The MOU includes certain principles, including that the investor shall be entitled to receive a warrant for the purchase of up to 3,000,000 Ordinary Shares of the Company for no additional consideration, exercisable solely upon the investor having timely paid the Company the entire investment amount.

On January 11, 2018 and March 30, 2018, the Company received an amount of $0.5 million and $1.5 million, respectively, as an advance on account of the investment from the new investor. As of the date of these financial statements, the parties are still negotiating a definitive agreement.

In case the Company and the investor will not reach a definitive agreement, the Company shall pay the amounts received as an advance on account of the investment to the investor promptly upon the Company closing an equity investment in the Company of at least $2 million.

F - 25

EX-10.12

Exhibit 10.12

STRICTLY PRIVATE AND CONFIDENTIAL

Binding Memorandum of Understanding

This Binding Memorandum of Understanding (“MOU”) is made and entered into as of February 18, 2018 (the “Effective Date”),by and between Eviation Aircraft Ltd., an Israeli company (the “Company”) and Udi Sheleg of 59 Redington road, London, UK (“Udi”) (the Company and the Investor shall together be referred to herein as the “Parties”).

WHEREAS, the Parties are negotiating an equity investment in the Company by a company in a trust of which Udi’s family is a beneficiary (“Timon”) of up to $12,000,000(the “Investment”);

WHEREAS, Timon has advanced an amount of $500,000 to the Company, on account of the Investment (the “Previous Advance”), as acknowledged by the Company in its letter to Timon dated January 11, 2018 (the “Previous Advance Letter”);

NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. The Investment

The Company and Timon shall negotiate in good faith a definitive agreement for the Investment (the “Definitive SPA”),according to the following principles:

1.1.      The Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, up to 8,000,000 Ordinary Shares of no par value of the Company (the “Purchased Shares”),at a price per share of $1.50 (the “Price Per Share”),for an aggregate purchase price of $ 12,000,000.

1.2.      Upon the closing of the Definitive SPA (the “Closing”),Timon shall be issued 333,333 Purchased Shares against the payment of the Previous Advance and 1,000,000 Purchased Shares against the payment of the New Advance (as defined below).

1.3.      The remaining Purchased Shares (6,666,667) shall be purchased by Timon in future installments, based on a schedule to be determined in the Definitive SPA, with the last Installment to be paid by June 30, 2019 (the “Installments”).

1.4.      The Installments shall be accelerated upon the Company entering into a term sheet (or an equivalent thereof) for an equity investment in the Company of at least $2,500,000, at a price per Ordinary Share of at least $2.00, such agreement to be done after consulting with and subject to the approval of Timon if occurs before June 2019.

1.5.      At Closing, the Investor shall be entitled to receive a warrant in a form to be provided by the Company, for the purchase of up to 3,000,000 Ordinary Shares for no consideration, exercisable solely upon the Investor having timely affected all Installments (i.e. having timely funded the entire Investment).

1.6.      The Investment shall be used by the Company as determined by the Board of the Company.

2. The New Advance

2.1.      The Investor shall advance to the Company an amount of $1,500,000, as an additional advance on account of the Investment (the “New Advance”)by no later than March 15, 2018. The advance shall be made by wire transfer to the Company’s bank account the details of which shall be provided to the Investor in writing.

2.2.       To the extent the Company and the Investor fail to enter into the Definitive SPA by March 30, 2018, then the Company shall pay the Previous Advance and the New Advance to the Investor promptly upon the Company closing an equity investment in the Company of at least $2,000,000.

2.3.       The aforementioned shall be detailed in a separate Advance letter from the Company to Timon, which will supersede anything to the contrary in the Previous Advance Letter.

3. Expenses

Each Party shall bear the costs and expenses incurred by it in connection with this MOU.

4. Governing law and jurisdiction

This MOU shall be governed by, and construed in accordance with, the laws of the State of Israel (without giving effect to the principles of conflicts of laws). The competent courts of Tel Aviv shall have exclusive jurisdiction over any disputes arising hereof.

5. Miscellaneous

5.1.      No party may assign, subcontract or otherwise transfer any of its rights or obligations under this MOU to any third party, without the prior written consent of all other parties hereto, and any purported assignment or transfer without such prior written consent shall be null and void, save for that the Company acknowledges and understands that Udi is advising Timon on this transaction and that the SPA is to be negotiated and signed by and between the Company and Timon,

5.2.      This MOU constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes any prior preliminary indications of interest, agreements, understandings, commitments or arrangements, oral or written, with respect thereto. This MOU shall not be modified except by a written instrument signed by all Parties.

5.3.      Notices under this MOU shall be sent by email or registered mail to the relevant Party’s address as provided from time to time.

5.4.      In the event that any provision of this MOU is held by a competent court or tribunal to be invalid or unenforceable, that provision shall be construed, limited, modified or deleted, to the extent necessary to eliminate any invalidity or unenforceability, and the remaining provisions of this MOU remain in full force and effect.

5.5.      None of the provisions of this MOU are intended to provide any rights or remedies to any person other than the parties hereto and their respective successors and assigns (if any), except that the Investor may effect the Investment through Timon Ltd. or any other company controlled by the Investor.

5.6.      This MOU may be executed in counterparts, which shall together be considered one and the same instrument.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

2

IN WITNESS WHEREOF, this MOU has been duly executed as of the date stated above.

Eviation Aircraft Ltd.		Udi Sheleg
Name:	Aviv TziDon	Date: 18. 02. 2018
Title:	Chairman
Date:	18. 02. 2018

Eviation Aircraft Ltd

P.C. NO 520043621

Omer Bar-Yohay

CEO

18. 02. 2018

[Eviation – Binding MOU with Udi Sheleg – February 2018]

3

EX-10.13

Exhibit 10.13

Technology Evaluation Agreement

This Technology Evaluation Agreement (hereinafter: “Agreement”) is made by and between

Siemens Aktiengesellschaft

Department CT N47P AIR

eAircraft

Otto-Hahn-Ring 6

81739 München

Germany

(hereinafter: “Siemens”)

and

EViation Aircraft Ltd

2 Ha’Ofe street

Qadima-Tzoran 60920

Israel

(hereinafter: “Customer”)

(Siemens and Customer hereinafter each a “Party” and collectively: “Parties”)

subject to the following terms and conditions:

Background and goals

Siemens develops and manufactures electrical propulsion units for aviation. Customer develops and manufactures aircrafts - in particular an electrically powered 9-seat commuter airplane - for which it wishes to test the electrical propulsion unit from Siemens, with such testing being conducted by Customer under its sole responsibility. Therefore Siemens shall hand an electrical propulsion unit over to customer for a limited period of time to enable Customer to evaluate and test the technology for Customer’s purposes consistent with the agreed-to protocol set forth in this Agreement. Customer shall test the electrical propulsion unit and implement it into a Customer aircraft as described in Annex 1 (hereinafter “Aircraft”) on its own account and risk for non-military testing purposes. Customer shall report to Siemens the testing data.

C O N F I D E N T I A L

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1. Handover of the electrical propulsion unit for testing purposes

1.1. The Parties agree that Siemens shall deliver one electrical propulsion unit free of charge which consists of a certain number of separate components according to the specification in Annex 2 (hereinafter: “EPU”) to Customer on 20.12.2017 (begin of shipment date) according to Incoterms ex Works for a period of 12 months (“Test Period”) at Customer’s cost and risk. It shall be Customer’s responsibility to import the EPU into Israel and to comply with all required import declarations and other formalities and obtain all import permits, if any. Siemens shall retain all right, title and interest in the EPU throughout the Test Period.

1.2. Customer may only use the EPU on engine test benches, for integration of the EPU into the Aircraft at Customer facility and for testing the Aircraft incorporating the EPU (including flight testing), all for non-military purposes. Customer shall carry out all such testing activities (including ground testing and test flights) (“Testing Activities”) with the Aircraft free of charge, under its sole responsibility.

1.3. The Parties agree that under this Agreement Customer shall only receive the limited right to use the EPU during the Test Period subject to the following conditions:

1.3.1. While Siemens has a certified quality management system according to ISO EN 9001:2008 both Parties are aware that Siemens has no admission as development and/or production organisation in accordance with aviation law/regulations for the EPU. Currently the EPU is neither certified nor approved as an aircraft engine or other aircraft equipment, consequently the EPU has no type approval certificate and was designed and manufactured by an organisation that is not approved under aviation legislation, such as regulation (EU) No. 748/2012 (Part 21J Design Organisation or Part 21G Production Organisation). Siemens did not perform any tests other than documented in Annex 5.

1.3.2. Therefore Customer takes full responsibility for all duties relating to any aviation law or any aeronautical admission, certification and approval requirements regarding installation, commissioning and operation of the EPU in its Aircraft - this expressly includes the full responsibility and duties with regard to aviation law for the EPU developed and manufactured by Siemens. Customer in particular confirms that it will under the applicable aviation law be able to incorporate the EPU into its Aircraft for use in test flights. Siemens does not bear any additional cost relating to any regulatory admissions and testing procedures.

1.3.3. Customer shall not disassemble, break up, alter, transform or reverse-engineer the EPU or permit any third party from attempting to do so on its behalf.

1.3.4. Customer shall keep Siemens informed of the exact location and facility where the EPU is stored or used.

C O N F I D E N T I A L

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1.3.5. Customer shall not present or disclose the EPU or any documents related to the EPU or this Agreement including but not limited to the Annexes to this Agreement or its working principles to any third party, nor grant access to the EPU to any third party nor share any information related to any technical solution in the EPU as those solutions are created and owned by Siemens. Customer may not assign its rights under this Agreement, transfer this Agreement to third Parties, or lease the EPU or deliver it for use or testing lo third parties, or share its use with third parties, in full or in parts, and may not either alienate or encumber the EPU.

1.3.6. Siemens undertakes to provide Customer with the EPU operating manuals as per Annexes 3 and 4. Customer undertakes to ensure that its staff knows and understands the safety instructions contained therein. Only employees designated by Customer who have received a safety and handling briefing by Siemens are authorized to handle and operate the EPU for the performance of Testing Activities. Customer and Siemens will separately agree on the location and volume of safety and handling briefings and the rales for these.

1.4. Siemens shall deliver the documentation of the tests performed by Siemens on the EPU as set out in Annex 5.

1.5. Siemens will provide the EPU to Customer free of charge for the above mentioned testing period. Unless agreed otherwise in writing, packaging, freight, insurance and any other additional charges (such as storage, inspections by third parties) as well as operation costs are payable by Customer.

1.6. Siemens will provide initial setup and installation support on site, at a rate of EUR1200 before taxes per day, plus per diem and travel costs for a period of 3-5 days prior to the first hardware test, payable upon invoice.

1.7. Siemens may not assign its rights under this Agreement or transfer this Agreement to a third party without the prior written consent of Customer which consent shall not be unreasonably withheld. Notwithstanding the foregoing, Siemens will not require Customer’s consent if the proposed assignment is to Siemens’ parent, wholly owned subsidiary or affiliate or affiliate’s successor organization (whether as a result of reorganization, restructuring or sale of substantially all of a party’s assets).

1.8. When personnel of Siemens is required to perform services at the facilities of Customer, Customer shall make available at no charge office space, computer, software, telephone service and related equipment as necessary for the performance of the services subject to such limitations (as to, for example, security, safety and systems integrity) as are generally appropriate in such circumstances. Any personnel working at and/or visiting (e.g. for training purposes) the facilities of the other Party shall adhere to usual and reasonable safety requirements of that other Party. Customer will support Siemens regarding all required formal and/or authority related requirements.

2. Testing, maintenance and incident management of the EPU

2.1. Siemens hereby informs Customer and Customer hereby acknowledges and accepts that:

2.1.1. the EPU has no type approval certificate and was designed and manufactured by an organisation that is not approved under aviation legislation standards, such as VO (EU) No. 748/2012 (Part 21J Design Organisation or Part 21G Production Organisation)

C O N F I D E N T I A L

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2.1.2. Siemens only warrants that the technical characteristics of the EPU defined and itemised in Annex 2 are valid only subject to the conditions stated in the delivered test reports; the Parties also considered this when agreeing on the delivery of the EPU for testing free of charge under this Agreement.

2.1.3. except for the foregoing, the EPU is provided to Customer “as is” with no warranties of any kind. Siemens makes no other warranties, express or implied, including, without limitation, warranties of merchantability or fitness for a particular purpose, course of dealing and usage of trade.

2.2. Customer hereby undertakes to perform the Testing Activities subject to the following conditions:

Customer shall notify the contact person named in Paragraph 8.1 of this AGREEMENT in writing or per e-mail accordingly at least 2 days in advance before each testing phase. Customer will not carry out Testing Activities without the prior consent of Siemens, which shall not be unreasonably withheld. The EPU may not be used for any other purpose, in particular not beyond any testing environment or for ordinary flights.

Customer shall ensure that any person getting exposed to the EPU (i) is aware that it is a non-certified and not finally tested EPU (ii) has the ability and knowledge to handle this kind of EPUs and (iii) has participated in the safety and handling briefing as per Clause 1.3.5 above.

Customer shall report to Siemens the testing data. The Parties agree on a price for this testing data amounting to € 500 per end-of phase engineering report. Payment is due 30 days after issuance of a corresponding invoice.

Customer shall not operate the EPU outside of the stated limits as set out as per Annex 2, 3 and 4.

2.3. By signing this Agreement, Customer declares that it has read and understood the contents of the documentation of the tests performed by Siemens on the EPU as set out in Annex 5 and the propulsion system operation manuals as set out in Annexes 3 and 4 and is aware of the facts and regulations set out therein.

2.4. Siemens may at any time check the EPU and its testing and operation and is entitled to witness testing. Customer shall provide Siemens with all the data resulting from the performance of the Testing Activities and deliver the complete test documentation related to the EPU to Siemens after completion of the tests. The Parties intend to analyze the performance data and review and discuss the results, including the potential follow-on designs. Testing Activities shall be made under the authority and sole responsibility of Customer. If any aviation legislation requirements or obligations apply, Customer shall adhere to all these requirements and obligations and is fully legally responsible with this regard.

2.5. Only personnel duly qualified and authorized by Siemens may carry out maintenance activities on the EPU. The specified maintenance intervals as per Annex 5 must be adhered to. In case a maintenance interval is exceeded, the EPU may no longer be operated.

2.6. In case of incidents related to the EPU Customer is only permitted to measures with respect to the EPU and system integrity if necessary to ensure the safety of personnel and materials. Customer will immediately inform Siemens in the case of incidents, stating the precise nature of the incident. Unless directed otherwise in writing, Customer will secure the premises and the EPU and wait for arrival of qualified Siemens personnel, to enable Siemens to fully witness, document and participate in analysis of the incident.

C O N F I D E N T I A L

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3. Liability and insurance

3.1. The Parties agree and expressly acknowledge that:

3.1.1. Customer shall be liable for testing the EPU at its own risks and shall at the end of each testing phase provide complete information about each test to Siemens.

3.1.2. Customer shall solely be responsible for any and all damages, deterioration or theft of the EPU and shall bear all costs relating to the EPU during the storage of the EPU and performance of the Testing Activities. This protection by Customer shall not include any normal wear and tear or deterioration sustained through testing consistent with the testing requirements set forth herein and Siemens hereby waives the right of any compensation for such damages or deterioration.

3.1.3. In case the EPU contains batteries, the Parties declare that the batteries are dangerous goods, which must be handled, transported, stored, used and charged accordingly. The relevant safety standards regarding batteries are attached as Annexes 6 and 7. Customer shall be liable for proper handling, transporting, storing, using and charging the batteries at its own risk.

3.2. Siemens shall be liable for bodily injuries and for intentional acts or omissions pursuant to the applicable law.

3.3. To the extent permitted by law, Siemens hereby excludes any liability regarding (i) the EPU (or any part thereof including, where applicable, the batteries as well) including but not limited to damages caused by the EPU, infringement of third party rights or the quality or performance of the EPU, whether to Customer or to third parties, considering that the EPU shall be delivered only for testing purposes and free of charge and (ii) services performed by Siemens under this Agreement. To the extent permitted by law, Customer hereby undertakes to indemnify and hold Siemens and its affiliates fully harmless in case of any third party claims (including claims by any competent authorities) which may be brought against Siemens or its affiliates in connection with the supply and/or use of the EPU further to this Agreement.

In no event shall Siemens be liable for special, incidental, consequential, punitive or tort damages, as well as any damages resulting from loss of use, loss of data, loss of profits or loss of business arising out of or in connection with this Agreement whether or not Siemens has been advised of the possibility of such damages.

3.4. No limitation contained in this Agreement on the liability of Siemens shall apply to the extent that such liability is mandatory under the applicable law.

4. Subcontractors

Customer shall not involve any subcontractors in the testing of the EPUs without the prior written approval of Siemens with the exemption of freelancers and design contractors which regularly work on the premises of Customer and are under the control of Customer. Customer shall ensure that all approved subcontractors will strictly adhere to the terms and conditions of this Test Agreement and in particular are bound by a confidentiality agreement providing at least the same level of confidentiality as this Agreement and will strictly adhere to all safety measures relating to the EPU testing under this Agreement. Customer shall at all times remain liable for the acts, omissions and performance of any approval subcontractors used to perform the EPU testing under this Agreement.

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5. Intellectual property rights

5.1. The Parties agree and Customer expressly acknowledges that Siemens shall retain all right, title and interest in and to all of its information relating to the EPU or the documentation or an embedded software contained in the EPU (whether protected or not) provided by Siemens under this Agreement. Customer shall have no right to use such information other than for Testing Activities. Customer is granted a non-exclusive license - non-transferrable, non- sublicenseable - regarding the embedded software contained in the EPU for the Test Period for the Testing Activities. Contained Open Source software components or third party software components respectively license texts are listed in Annex 8 (“ReadMe-file”) – Siemens provides Customer with Annex 8 as soon as possible before delivery of the EPU which Customer herewith acknowledges.

5.2. Customer shall exclusively own all right, title and interests in and to results achieved by Customer under this Agreement relating directly or indirectly, fully or partially to the Aircraft (“Aircraft Results”), whenever created, regardless of the stage of development reached with Customer’s right to use and exploit them in any desired way.

If the Aircraft Results consist of inventions or protectable ideas/proposals for which statutory rights can be applied, Customer, at its sole discretion, may use such inventions or protectable ideas/proposals for any technical use and to file for patents and other statutory protection in any country in its own name as it sees fit, and to maintain or abandon those rights at any time. The intellectual property rights (such as patents) arising on the basis of any such registration shall belong to Customer.

Siemens retains no right whatsoever to use and/or exploit Aircraft Results. Siemens shall not be entitled to disclose Aircraft Results to third parties (whereby Siemens affiliates shall not be deemed third parties) except as expressly set forth in this Agreement. Customer has the right to unrestrictedly disclose the Aircraft Results.

5.3. Siemens shall exclusively own all right, title and interests in and to results achieved by Customer under this Agreement relating directly or indirectly, fully or partially to the EPU (“EPU Results”), whenever created, regardless of the stage of development reached with Siemens’ right to use and exploit them in any desired way. In the event that for legal reasons exclusive right, title and interests in, and to the EPU Results become not vested in Siemens according to the preceding sentence, Customer shall assign and hereby agrees to assign to Siemens all rights, title and interest in and to such EPU Results that way that Siemens gets the rights as described in the preceding sentence.

If the EPU Results consist of copyrights or any other proprietary rights and Siemens legally cannot become the owner of such rights, Customer shall irrevocably grant to Siemens and hereby irrevocably grants to Siemens the unrestricted, exclusive, world-wide, royalty free, perpetual, sublicenseable, transferable right to use the EPU Results in their original or in any modified form in any known way. This scope of license includes all fields of use, for example without limiting the generality of the foregoing, the right of – either Siemens or a third party – to copy, make available, publish, distribute in any medium in physical or non-physical form, exploit, translate, transform, modify, as well as the right of online-use in all communication networks (Internet etc.) - and/or use in fixed and mobile data networks and end devices. Furthermore, the right to use as described above includes the right to use the EPU in any unknown way. As far as the EPU Results contain software programs, the foregoing rights of use are granted for both object code and source code of the software.

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If the EPU results consist of inventions or protectable ideas/proposals for which statutory rights can be applied, Customer shall inform Siemens promptly in writing and in sufficient detail to base an application for an intellectual property right on this information.

Siemens, at its sole discretion, may use such inventions or protectable ideas/proposals for any technical use and to file for patents and other statutory protection in any country in its own name as it sees fit, and to maintain or abandon those rights at any time. The intellectual property rights (such as patents) arising on the basis of any such registration shall belong to Siemens.

Customer retains no right whatsoever to use and/or exploit EPU Results. Customer shall not be entitled to disclose EPU Results except as expressly set forth in this Agreement. Siemens has the right to unrestrictedly disclose the EPU Results.

6. Insurance

Customer shall obtain and maintain property insurance for the EPU with coverage of at least € 100.000,- according to conditions approved in writing by Siemens, where the beneficiary shall be Siemens. Siemens shall provide Customer with the documentation to be forwarded to the insurer to insure coverage. Customer will forward to the insurer only information expressly provided by Siemens for that purpose.

Customer hereby confirms to Siemens that it possesses adequate third-party insurance for its activities pursuant to this Agreement, including in particular test flights with the Aircraft incorporating the EPU. Upon request Customer shall provide Siemens with documentary evidence of such insurance coverage.

7. Termination, return of the EPU

7.1. This Agreement shall terminate if:

7.1.1. The EPU is proven to be destroyed; or

7.1.2. Either Party terminates the Agreement with a written notice without cause to the other Party at any time (the other Party may not claim compensation or indemnity based on the termination). In particular Siemens has the right to terminate this agreement if potential security issues occur or as soon as a new version of the EPU is available for customer.

7.2. The acceptance of any non-contractual performance by Siemens or non-enforcement of any contractual rights by Siemens shall not mean waiver of any right or claim of Siemens to which it is entitled arising from the breach of contract, whether by law or otherwise (including this Agreement).

7.3. In case this Agreement terminates or is terminated for any reason or upon conclusion of the Test Period, Customer shall immediately return the EPU to Siemens, unless otherwise defined in this Agreement or by Siemens. If the Agreement is terminated by Siemens, the date of termination shall in each case be the date of termination indicated by Siemens in the notice of termination. In case Customer disputes the termination of this Agreement for any reason Customer shall not withhold the return of the EPU.

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Customer shall at its sole cost and risk return the EPU to Siemens. On returning the EPU, Customer shall ship it to Siemens according to Incoterms CIP with a transportation insurance of € 100.000. The exact location for the return will be communicated by Siemens to Customer in due course.

8. Contact persons

8.1. Siemens’ contact person:

Name, position: Olaf OttoAddress:Telephone: Email:

In technical questions:Name, position: Anton DilcherAddress:Telephone: Email:

8.2. Customer’s contact person:

Name, position:Address:Telephone: Email:

In technical questions:Name, position: Guy ZolelAddress:Telephone: Email:

8.3. The Parties undertake to ensure that they shall permanently have a person authorized to receive mail (representative) at their respective mailing addresses as stated above during the entire term of this Agreement from the date of signing of this Agreement.

The Parties agree to regard any mutual communication on the performance of this Agreement as written if they engage in it via their respective email addresses as stated above provided that they may not amend this Agreement in such way.

9. Confidentiality, data protection

The Parties shall use any documents, know-how, data or other information provided by the other party (“Information”) exclusively for the purpose of this Agreement and keep the same confidential subject to the following. The Parties may disclose Information to employees of the receiving party and to third parties who reasonably need to know such Information for the purpose of this Agreement provided such employees and third parties are bound by substantially equivalent confidentiality obligations. The Party disclosing Information shall be held liable for a breach of such obligations by its employees or a third party.

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This confidentiality obligation shall not apply to Information which

a) is or becomes part of the public domain other than by fault of the receiving Party;

b) is disclosed to the receiving Party in good faith by a third party who is entitled to make such disclosure;

c) is developed independently by the receiving party without reliance on Information;

d) was known to the receiving Party prior to its disclosure by the other Party; or

e) is required to be disclosed by law (subject to the receiving Party’s obligation to notify the disclosing Party in a timely manner of such requirement).

This confidentiality obligation shall survive the expiration or termination of this Agreement for 5 years.

Siemens and the Customer shall comply with the statutory provisions relating to protection of personal data. The Customer is obliged to create the prerequisites required by law (e.g. to obtain declaration of consents) to enable Siemens to perform services without any breach of law. The Customer is advised to take appropriate measures – as far as possible – to prevent access of Siemens to personal data or trade secrets of the Customer while providing services. In the event that it cannot be prevented that Siemens is granted access to personal data of the Customer, the Customer is obliged to inform Siemens in due time before the services are performed. The Customer and Siemens shall then agree on the actions to be taken.

Customer will provide Siemens designated and designed labelling on the outside of the plane in format and placement to be discussed.

10. Export control

If the Customer transfers the Works (hardware and/ or software and/ or technology as well as corresponding documentation and/ or works and services, regardless of the mode of provision, and/ or including all kinds of technical support) provided by Siemens to a third party worldwide, the Customer shall comply with all applicable national and international (re-) export control regulations. In any event the Customer shall comply with the (re-) export control regulations of the Federal Republic of Germany, of the European Union and of the United States of America.

If required to conduct export control checks, the Customer, upon request by Siemens, shall promptly provide Siemens with all information pertaining to a particular end customer, destination and intended use of the Woks provided by Siemens, as well as any export control restrictions existing.

The Customer shall indemnify and hold harmless Siemens from and against any claim, proceeding, action, fine, loss, cost and damages arising out of or relating to any non-compliance with export control regulations by the Customer, and the Customer shall compensate Siemens for all losses and expenses resulting therefrom, unless such non-compliance was not caused by the fault of the Customer. This provision does not imply a change in the statutory burden of proof.

Siemens shall not be obliged to fulfill this Agreement if such fulfillment is prevented by any impediments arising out of national or international foreign trade or customs requirements or any embargoes or other sanctions.

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Siemens shall further not be obliged to fulfill this Agreement if Siemens or any of its affiliates would be exposed to, or adversely affected by, detrimental measures, penalties, loss of privileges or any other acts or omissions of government, governmental or other public authorities including any entities acting on their behalf (or threats thereof), or any subcontractor or sub-supplier rejects delivery due to the same reasons.

11. Force Majeure

A “Force Majeure Event” means any event which is beyond the reasonable control of a Party or its subcontractors, which could not have been prevented by good industry practice and which results in a party, its affiliates or any of its sub-contractors or sub-suppliers (the “Affected Party”) being unable to perform or being delayed in performing in whole or in part its obligations under this Agreement. Force Majeure Events include, among others, acts of war, riot, civil commotion, terrorism, natural disaster, epidemic, strikes, lock-outs, attacks on Siemens’ IT systems (such as virus attacks, hacker attacks), non-issuance of licenses, permits, or approvals, or any other act or failure to act by any public authority, or embargos or any other trade sanctions imposed by the European Union (EU) or the United States of America (U.S.) or any public authority within EU or U.S. territory or by the United Nations which, upon sole discretion of Siemens, may expose Siemens or any of its affiliates to sanctions, penalties, loss of privileges or other acts or omissions of public authorities detrimental to Siemens or any of its affiliates, or any subcontractor or sub-supplier rejecting delivery due to reasons like those as stated herein, acts or omissions of public authorities including any entities acting on their behalf (or threats thereof), or any subcontractor or sub-supplier rejects delivery due to the same reasons.

If a Force Majeure Event occurs, the Affected Party will be deemed not to be in breach of its obligations under this Agreement for so long as and to the extent necessary to overcome the effects of the Force Majeure Event.

The Affected Party shall notify the other party as soon as reasonably practicable of the Force Majeure Event and of its affected obligations.

If one or more Force Majeure Events and their effect last for a period of 180 days in aggregate either party may terminate this Agreement by giving to the other a written notice of termination with regard to the part of the works not yet provided. With regard to the part of the works not yet provided, Siemens shall be entitled to reimbursement from the Customer of its unavoidable costs related to such termination.

12. Taxes

12.1. Gross-up tax clause

All prices and payments relating to services to be performed by Siemens as set out in the Agreement are exclusive of any taxes, customs and import duties, levies, and charges of any kind whatsoever applicable in Israel. Any such taxes, customs and import duties, levies, and charges shall be borne by Customer unless specifically mentioned hereinafter. If the compensation referred to herein is subject to withholding taxes in Israel as per Israel’s tax law, Customer is only allowed to withhold the maximum amount of tax as provided in the Income tax law of Israel (... %). If Siemens is entitled to a withholding tax exemption or reduction in Israel, the Customer is obliged to use all reasonable efforts to support Siemens during the process of tax exemption respectively tax reduction. Customer is obliged to verify the criteria of such formal requirements and communicate any deficiencies to Siemens in advance and in written form in order to give Siemens the possibility to timely satisfy such formal deficiencies. In any case, Customer is obliged to promptly provide Siemens with the official tax receipt, which confirms the withholding tax payment on behalf of Siemens.

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12.2. Tax deduction restricted to tax treaty rate

All prices and payments relating to supplies/ services to be performed by Siemens as set out in the Agreement are exclusive of any indirect taxes, customs and import duties, levies, and charges of any kind whatsoever applicable in Israel. Any such taxes, customs and import duties, levies, and charges that may be imposed on or paid by Siemens shall be borne by Customer. Any sums to be paid to Siemens under the Contract shall be net of any indirect taxes, duties, levies imposed in Israel that might be levied or withheld on payments made by Customer to Siemens. Should any such taxes be levied or withheld by Customer on payments due to Siemens, then Customer shall gross up the net payments to Siemens by such an amount necessary to ensure that Siemens receives a net amount equal to the full amount it would have received had such taxes not been withheld.

12.3. Reverse charge process

If the reverse charge process should apply, Customer shall pay respective VAT amount to the responsible tax authorities in Israel.

13. Dispute settlement, applicable law

13.1. This Agreement and any dispute or claim arising out of, or in connection with, it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the substantive laws of Switzerland. The UN Convention on Contracts for the International Sale of Goods shall not apply.

13.2. If a dispute arises out of or in connection with this Agreement, the responsible representatives of the Parties shall attempt, in fair dealing and good faith, to settle such dispute. Upon request of a Party, a senior management representative of each Party shall participate in the negotiations. Each Party shall be entitled to terminate these attempts by written notification to the other Party(-ies) at any time.

Nothing in this Clause shall limit the right of the Parties to seek relief intended to preserve the status quo or interim measures in any court of competent jurisdiction or arbitral tribunal.

13.3. The Parties shall attempt to agree on a procedure for alternative dispute resolution (“ADR”) and the applicable procedural rules (including time limits) within 14 calendar days after a termination notice under Clause 17.2 has been received by the other side. If the Parties fail to agree on such procedure each Party shall be entitled to refer the dispute to arbitration pursuant to Clause 17.4.

13.4. All disputes arising out of or in connection with the Contract which are not resolved pursuant to Clause 13.2 and 13.3 including any question regarding the termination or any subsequent amendment of this Agreement shall be finally settled in accordance with the Rules of Arbitration of the International Chamber of Commerce (“ICC”). If the value of the total matter in dispute, including the value of any counterclaims, is less than € 1,000,000, the tribunal shall consist of one arbitrator and if the value of the total matter in dispute is € 1,000,000 or more the tribunal shall consist of three arbitrators. If the tribunal consists of three arbitrators, each Party shall nominate one arbitrator for confirmation by the ICC. Both arbitrators shall agree on the third arbitrator, within 30 days after their appointment. Should the two arbitrators fail to reach agreement on the third arbitrator within the thirty-day period, the ICC shall select and appoint the third arbitrator.

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The seat of arbitration shall be Zurich, Switzerland. The language to be used in the arbitration proceeding shall be English. Any order for the production or disclosure of documents shall be limited to the documents on which each Party specifically relies in its submission(s).

Upon request of a Party, the arbitral tribunal shall order any claiming or counterclaiming Party to provide security for the legal and other costs of any other Party related to that claim or counterclaim, by way of bank guarantee or in any other manner and upon such terms as the arbitral tribunal considers appropriate.

14. Miscellaneous provisions

14.1. The Parties regulate their legal relationship under this Agreement in detail by this Agreement and the provisions in this Agreement shall be effective from the date of the last signature. The Parties conclude this Agreement for a fixed term of 12 months a defined in Article 1.1. In the case of any difference between any previous Agreement and this Agreement, the provisions in this Agreement shall prevail.

14.2. The annexes to this Agreement shall constitute its integral part thereof. Customer declares that it was aware of and hereby accepts the terms and conditions in this Agreement. Customer declares that the terms and conditions in this Agreement do not differ from the ordinary contractual practices or any contractual stipulation previously applied by the Parties. In the case of any difference between this Agreement and the annexes, the former shall prevail. The general terms of contract of the Parties, if any, shall not be applicable. The Parties agree that the customs and practices that they used in the past or that are regularly used in the given (lease) sector in similar agreements by them or by other parties will not be incorporated to this Agreement. The Parties agree that sector custom and practices will not be applied under this Agreement, as their content cannot be determined with sufficient certainty.

14.3. Each Party may only carry out communication activities or make statements about this Agreement, in particular any technical (including research, development, and testing) information related to this Agreement, whether in the printed or electronic press, on television, on the radio, on the internet, or in any other form of communication accessible to any third party or the public, with the prior written approval of the other Party, which shall be considered granted if no response is given within 48 hours. The logo of Siemens and/or of Customer or any image, figure, symbol, etc. referring to both the companies may only be used with respect to this Agreement with the prior written consent of the other Party. Any press release or public statement, opinion, and the use of the logo of Siemens and/or of Customer or of any of their image, figure, symbol, etc. referring to Siemens and/or to Customer made without the approval of the other Party shall constitute a serious breach of contract. Prior written approval shall never be unreasonably withheld from both the Parties.

14.4. Customer hereby expressly waives, in the widest scope permitted by law, the right to enforce any compensation or other claim against the executive officers of Siemens with respect to this Agreement. The executive officers of Siemens may directly refer to such limitation of liability.

14.5. The Parties shall each bear their own costs arising in connection with this Agreement unless expressly stated otherwise in the Agreement.

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14.6. This Agreement may only be amended, extended and terminated in a duly signed written form.

14.7. This Agreement is valid once both Parties have signed the Agreement and transmitted the signatures via a scanned email to the other Party. The Parties will exchange the signed documents promptly after signature.

14.8. If any provision of this Agreement is prohibited or declared invalid or unenforceable by any court or tribunal of competent jurisdiction, this shall not affect the validity or enforceability of any other provision. The Parties shall use their reasonable efforts to substitute such provision by a legal, valid or enforceable one with the same or a similar result.

14.9. Siemens, its affiliates, employees and representatives are independent contractors of Customer and nothing herein shall be construed as creating any other relationship.

14.10. The Confidentiality, Intellectual Property, Liability, Termination, Export Control and Trade Regulations, General Provisions along with all any indemnification obligations and any provision, which contemplates performance or observance subsequent to termination or expiration shall survive termination or expiration of this Agreement.

Annexes to this Agreement:

Annex 1:	Customer aircraft
Annex 2:	SP260DX EPU System Description
Annex 3:	Operating and safety instruction - SP260DX E-Motor
Annex 4:	Operating and safety instruction – MAF Inverter
Annex 5:	Motor test report
Annex 6:	MSDS for battery cells
Annex 7:	MSDS for battery modules
Annex 8:	ReadMe-file (handed over before delivery of the EPU)

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IN WITNESS WHEREOF, the Parties jointly read, interpreted and duly signed this Agreement, made in English, in 2 (two) original copies, 1 for Customer and 1 for Siemens

Siemens Aktiengesellschaft

Place, Date:

München, 12. 12. 2017
Name:	Name:
OLAF OTTO	Tim Grage
(print)	(print)
Title:	Title:
HEAD OF SALES & BD	Com Head eAircraft

EViation Aircraft Ltd

Place, Date:

Dec. 10th, 2017
Kadima- Tzoran, 60920, Isreal
Name:
OMER BAR - YOHAY
(print)
Title:
CEO

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EX-12.1

Exhibit 12.1

Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

I, Omer Bar-Yohay, certify that:

1. I have reviewed this annual report on Form 20-F of Eviation Aircraft Ltd. (the “Company”).

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: April 27, 2018

/s/ Omer Bar-Yohay

Omer Bar-Yohay,

Chief Executive Officer

EX-12.2

Exhibit 12.2

Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

I, Liza Ohayon, certify that:

1. I have reviewed this annual report on Form 20-F of Eviation Aircraft Ltd. (the “Company”).

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: April 27, 2018

/s/ Liza Ohayon

Liza Ohayon,

Chief Financial Officer

EX-13.1

Exhibit 13.1

Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934.

In connection with the Annual Report on Form 20-F of Eviation Aircraft Ltd., a company organized under the laws of the State of Israel (the “Company”), for the period ending December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Omer Bar-Yohay certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1. The Report fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

By:

/s/ Omer Bar-Yohay

Omer Bar-Yohay

Chief Executive Officer

Date: April 27, 2018

EX-13.2

Exhibit 13.2

Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934.

In connection with the Annual Report on Form 20-F of Eviation Aircraft Ltd., a company organized under the laws of the State of Israel (the “Company”), for the period ending December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Liza Ohayon certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1. The Report fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

By:

/s/ Liza Ohayon

Liza Ohayon

Chief Financial Officer

Date: April 27, 2018

EX-16.B

Exhibit 16B

Eviation Aircraft Ltd.

CODE OF ETHICS

Eviation Aircraft Ltd. and its subsidiary Eviation Tech Ltd., companies organized under the laws of the State of Israel (collectively, the “Company” or “Eviation”), is committed to the highest standards of ethical business conduct. Consistent with this goal, the Board of Directors has adopted this Code of Ethics (this “Code”) for the Officers, Directors and employees, to promote honest and ethical conduct; full, fair, accurate, timely and understandable disclosure; and compliance with applicable governmental rules and regulations. The Chief Executive Officer and Chief Financial Officer are expected to adhere to this Code. Any other executives who are deemed Senior Financial Officers subject to this Code will be designated by and informed of such designation by the Company from time to time. This Code shall constitute the “Code of Ethics” contemplated by Section 406 of the Sarbanes-Oxley Act of 2002 and is in addition to, and does not supersede, any other applicable policies or codes that the Company may adopt from time to time.

This Code may be amended from time to time by the Board of Directors.

Originally Adopted by the Board of Directors on May 15, 2017.

1.          Build Trust and Credibility

The success of our business is dependent on the trust and confidence we earn from our employees, customers and shareholders. We gain credibility by adhering to our commitments, displaying honesty and integrity and reaching company goals solely through honorable conduct. It is easy to say what we must do, but the proof is in our actions. Ultimately, we will be judged on what we do.

When considering any action, it is wise to ask: will this build trust and credibility for Eviation? Will it help create a working environment in which Eviation can succeed over the long term? Is the commitment I am making one I can follow through with? The only way we will maximize trust and credibility is by answering “yes” to those questions and by working every day to build our trust and credibility.

2.          Respect for the Individual

We all deserve to work in an environment where we are treated with dignity and respect. Eviation is committed to creating such an environment because it brings out the full potential in each of us, which, in turn, contributes directly to our business success. We cannot afford to let anyone’s talents go to waste.

Eviation is an equal employment/affirmative action employer and is committed to providing a workplace that is free of discrimination of all types from abusive, offensive or harassing behavior. Any employee who feels harassed or discriminated against should report the incident to his or her manager or to human resources.

3.          Create a Culture of Open and Honest Communication

At Eviation, everyone should feel comfortable to speak his or her mind, particularly with respect to ethics concerns. Managers have a responsibility to create an open and supportive environment where employees feel comfortable raising such questions. We all benefit tremendously when employees exercise their power to prevent mistakes or wrongdoing by asking the right questions at the right times.

Eviation will investigate all reported instances of questionable or unethical behavior. In every instance where improper behavior is found to have occurred, the Company will take appropriate action. We will not tolerate retaliation against employees who raise genuine ethics concerns in good faith.

For your information, Eviation's whistleblower policy is attached hereto as Exhibit A.

Employees are encouraged, in the first instance, to address such issues with their managers, as most problems can be resolved swiftly. If for any reason that is not possible or if an employee is not comfortable raising the issue with his or her manager, Eviation's CEO does operate with an open-door policy.

4.          Set Tone at the Top

Management has the added responsibility for demonstrating, through their actions, the importance of this Code. In any business, ethical behavior does not simply happen; it is the product of clear and direct communication of behavioral expectations, modeled from the top and demonstrated by example. Again, ultimately, our actions are what matters.

To make our Code work, managers must be responsible for promptly addressing ethical questions or concerns raised by employees and for taking the appropriate steps to deal with such issues. Managers should not consider employees’ ethics concerns as threats or challenges to their authority, but rather as another encouraged form of business communication. At Eviation, we want the ethics dialogue to become a natural part of daily work.

5.          Uphold the Law

Eviation's commitment to integrity begins with complying with laws, rules and regulations where we do business. Further, each of us must have an understanding of the company policies, laws, rules and regulations that apply to our specific roles. If we are unsure of whether a contemplated action is permitted by law or Eviation policy, we should seek the advice from the resource expert. We are responsible for preventing violations of law and for speaking up if we see possible violations.

Because of the nature of our business, and our status as a public company, some legal requirements warrant specific filings, disclosure and adherence.

The employees covered by this Code will:

· Promote full, fair, accurate, timely and understandable disclosure in the reports and documents that the Company files with, or submits to, the United States Securities and Exchange Commission (the “SEC”) and any other government agency, and in other public communications made by the Company and to promptly bring to the attention of the Company’s Audit Committee any material information of which they may become aware that affects the disclosures made by the Company in its public filings or otherwise, and to otherwise assist the Audit Committee in fulfilling its responsibilities.

· Promptly bring to the attention of the Audit Committee any information they may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data or; or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s financial reporting, internal control over financial reporting, disclosures or internal controls.

Inside Information

Employees, officers and directors of Eviation may not purchase or otherwise trade in securities of the Company or any other corporation, directly or indirectly, while in possession of “material” non-public information about Eviation or such other corporation. Material non-public information is any information which could reasonably be expected to affect the price of a share or that a reasonable investor would find relevant in the total mix of information. If an employee, officer or director is considering buying or selling shares based on material non-public information he or she possesses through his or her work at Eviation, he or she should assume that such information is material.

If family or friends of an employee, officer or director ask for advice about buying or selling Eviation shares, such employee, officer or director should not provide any advice. U.S. Federal law and Eviation policy prohibits any employee, officer or director from “tipping” others (including, but not limited to, family or friends) regarding material, non-public information that such employee, officer or director learns about Eviation or any other publicly-traded company in the course of his or her employment. Beyond disciplinary action, a violation of this policy may lead to civil and criminal penalties against the employee, officer or director. The same penalties apply to “tipping,” regardless of whether the employee, officer or director derives any benefit from the trade.

For additional information, employees, officers and directors should refer to Eviation's management and legal counsel. Employees, officers and directors who have any questions about specific securities transactions should obtain additional guidance in advance of the transaction from Eviation's legal counsel.

We have adopted an insider trading policy with regard to the trading of the Company’s Shares which is attached hereto as Exhibit B.

Competition

We are dedicated to ethical, fair and vigorous competition. We will sell Eviation products and services based on their merit, superior quality, functionality and competitive pricing. We will make independent pricing and marketing decisions and will not improperly cooperate or coordinate our activities with our competitors. We will not offer or solicit improper payments or gratuities in connection with the purchase of goods or services for Eviation or the sales of its products or services, nor will we engage or assist in unlawful boycotts of particular customers.

Proprietary Information

It is important that we respect the property rights of others. We will not acquire or seek to acquire improper means of a competitor’s trade secrets or other proprietary or confidential information. We will not engage in unauthorized use, copying, distribution or alteration of software or other intellectual property.

Selective Disclosure

We will not selectively disclose (whether in one-on-one or small discussions, meetings, presentations, proposals or otherwise) any material nonpublic information with respect to Eviation, its securities, business operations, plans, financial condition, results of operations or any development plan. We should be particularly vigilant when making presentations or proposals to customers to ensure that our presentations do not contain material nonpublic information.

Health and Safety

Eviation is dedicated to maintaining a healthy and safe environment. If employees shall feel, for some reason, that their health, safety, well-being or personal comfort is being jeopardized, at-risk or compromised, they shall feel free to notify their direct manager.

6.          Avoid Conflicts of Interest

Conflicts of Interest

We must avoid any relationship or activity that might impair, or even appear to impair, our ability to make objective and fair decisions when performing our jobs. At times, we may be faced with situations where the business actions we take on behalf of Eviation may conflict with our own personal or family interests. We owe a duty to Eviation to advance its legitimate interests when the opportunity to do so arises. We must never use Eviation property or information for personal gain or personally take for ourselves any opportunity that is discovered through our position with Eviation.

Here are some other ways in which conflicts of interest could arise:

1. Being employed (you or a close family member) by, or acting as a consultant to, a competitor or potential competitor, supplier or contractor, regardless of the nature of the employment, while you are employed with Eviation.

2. Hiring or supervising family members or closely related persons.

3. Serving as a board member for an outside commercial company or organization.

4. Owning or having a substantial interest in a competitor, supplier or contractor.

5. Having a personal interest, financial interest or potential gain in any Eviation transaction.

6. Placing company business with a firm owned or controlled by an Eviation employee or his or her family.

7. Accepting gifts, discounts, favors or services from a customer/potential customer, competitor or supplier, unless equally available to all Eviation employees.

Determining whether a conflict of interest exists is not always easy to do. Employees with a conflict of interest question should seek advice from management. Before engaging in any activity, transaction or relationship that might give rise to a conflict of interest, employees must seek review from their managers.

Gifts, Gratuities and Business Courtesies

Eviation is committed to competing solely on a merit of our products and services. We should avoid any actions that create a perception that favorable treatment of outside entities by Eviation was sought, received or given in exchange for personal business courtesies. Business courtesies include gifts, gratuities, meals, refreshments, entertainment or other benefits from persons or companies with whom Eviation does or may do business. We will neither give nor accept business courtesies that constitute, or could reasonably be perceived as constituting, unfair business inducements that would violate law, regulation or policies of Eviation or customers, or would cause embarrassment or reflect negatively on Eviation's reputation.

Accepting Business Courtesies

Most business courtesies offered to us in the course of our employment are offered because of our positions at Eviation. We should not feel any entitlement to accept and keep a business courtesy. Although we may not use our position at Eviation to obtain business courtesies, and we must never ask for them, we may accept unsolicited business courtesies that promote successful working relationships and good will with the firms that Eviation maintains or may establish a business relationship with.

Employees who award contracts or who can influence the allocation of business, who create specifications that result in the placement of business or who participate in negotiation of contracts must be particularly careful to avoid actions that create the appearance of favoritism or that may adversely affect the company’s reputation for impartiality and fair dealing. The prudent course is to refuse a courtesy from a supplier when Eviation is involved in choosing or reconfirming a supplier or under circumstances that would create an impression that offering courtesies is the way to obtain Eviation business.

Meals, Refreshments and Entertainment

We may accept occasional meals, refreshments, entertainment and similar business courtesies that are shared with the person who has offered to pay for the meal or entertainment, provided that:

§ They are not inappropriately lavish or excessive.

§ The courtesies are not frequent and do not reflect a pattern of frequent acceptance of courtesies from the same person or entity.

§ The courtesy does not create the appearance of an attempt to influence business decisions, such as accepting courtesies or entertainment from a supplier whose contract is expiring in the near future.

§ The employee accepting the business courtesy would not feel uncomfortable discussing the courtesy with his or her manager or co-worker or having the courtesies known by the public.

Gifts

Employees may accept unsolicited gifts, other than money, that conform to the reasonable ethical practices of the marketplace, including:

§ Flowers, fruit baskets and other modest presents that commemorate a special occasion.

§ Gifts of nominal value, such as calendars, pens, mugs, caps and t-shirts (or other novelty, advertising or promotional items).

Generally, employees may not accept compensation, honoraria or money of any amount from entities with whom Eviation does or may do business. Tangible gifts (including tickets to a sporting or entertainment event) that have a market value greater than $100 may not be accepted unless approval is obtained from management.

Employees with questions about accepting business courtesies should talk to their managers.

Offering Business Courtesies

Any employee who offers a business courtesy must assure that it cannot reasonably be interpreted as an attempt to gain an unfair business advantage or otherwise reflect negatively upon Eviation. An employee may never use personal funds or resources to do something that cannot be done with Eviation's resources. Accounting for business courtesies must be done in accordance with approved company procedures.

Other than to our government customers, for whom special rules apply, we may provide nonmonetary gifts (i.e., company logo apparel or similar promotional items) to our customers. Further, management may approve other courtesies, including meals, refreshments or entertainment of reasonable value, provided that:

§ The practice does not violate any law or regulation or the standards of conduct of the recipient’s organization.

§ The business courtesy is consistent with industry practice, is infrequent in nature and is not lavish.

§ The business courtesy is properly reflected on the books and records of Eviation.

7.          Set Metrics and Report Results Accurately

Accurate Public Disclosures

We will make certain that all disclosures made in financial reports and public documents are full, fair, accurate, timely and understandable. This obligation applies to all employees, including all financial executives, with any responsibility for the preparation for such reports, including drafting, reviewing and signing or certifying the information contained therein. No business goal of any kind is ever an excuse for misrepresenting facts or falsifying records.

Employees should inform Executive Management if they learn that information in any filing or public communication was untrue or misleading at the time it was made, or if subsequent information would affect a similar future filing or public communication.

Corporate Recordkeeping

We create, retain and dispose of our company records as part of our normal course of business in compliance with all Eviation policies and guidelines, as well as all regulatory and legal requirements.

All corporate records must be true, accurate and complete, and company data must be promptly and accurately entered into our books, in accordance with Eviation's and other applicable accounting principles.

We must not improperly influence, manipulate or mislead any unauthorized audit, nor interfere with any auditor engaged to perform an internal independent audit of Eviation's books, records, processes or internal controls.

8.          Promote Substance Over Form

At times, we are all faced with decisions we would rather not have to make and issues we would prefer to avoid. Sometimes, we hope that if we avoid confronting a problem, it will simply go away.

At Eviation, we must have the courage to tackle the tough decisions and make difficult choices, secure in the knowledge that Eviation is committed to doing the right thing. At times, this will mean doing more than simply what the law requires. Merely because we can pursue a course of action does not mean we should do so.

Although Eviation's guiding principles cannot address every issue or provide answers to every dilemma, they can define the spirit in which we intend to do business and should guide us in our daily conduct.

Accountability

Each of us is responsible for knowing and adhering to the values and standards set forth in this Code and for raising questions if we are uncertain about company policy. If we are concerned whether the standards are being met or are aware of violations of the Code, we must contact the management.

Eviation takes seriously the standards set forth in the Code, and violations are cause for disciplinary action up to and including termination of employment.

9.          Be Loyal

Confidential and Proprietary Information

Integral to Eviation's business success is our protection of confidential company information, as well as nonpublic information entrusted to us by employees, customers and other business partners. Confidential and proprietary information includes such things as pricing and financial data, customer names/addresses or nonpublic information about other companies, including current or potential supplier and vendors. We will not disclose confidential and nonpublic information without a valid business purpose and proper authorization.

Use of Company Resources

Company resources, including time, material, equipment and information, are provided for company business use. Nonetheless, occasional personal use is permissible as long as it does not affect job performance or cause a disruption to the workplace.

Employees and those who represent Eviation are trusted to behave responsibly and use good judgment to conserve company resources. Managers are responsible for the resources assigned to their departments and are empowered to resolve issues concerning their proper use.

Generally, we will not use company equipment such as computers, copiers and fax machines in the conduct of an outside business or in support of any religious, political or other outside daily activity, except for company-requested support to nonprofit organizations. We will not solicit contributions nor distribute non-work related materials during work hours.

In order to protect the interests of the Eviation network and our fellow employees, Eviation reserves the right to monitor or review all data and information contained on an employee’s company-issued computer or electronic device, the use of the Internet or Eviation's intranet. We will not tolerate the use of company resources to create, access, store, print, solicit or send any materials that are harassing, threatening, abusive, sexually explicit or otherwise offensive or inappropriate.

Questions about the proper use of company resources should be directed to your manager.

Media Inquiries

Eviation is hoping to become a high-profile company in our community, and from time to time, employees may be approached by reporters and other members of the media. In order to ensure that we speak with one voice and provide accurate information about the company, we should direct all media inquiries to the CFO. No one may issue a press release without first consulting with the CFO.

10.        Do the Right Thing

Several key questions can help identify situations that may be unethical, inappropriate or illegal. Ask yourself:

§ Does what I am doing comply with the Eviation guiding principles, Code of Conduct and company policies?

§ Have I been asked to misrepresent information or deviate from normal procedure?

§ Would I feel comfortable describing my decision at a staff meeting?

§ How would it look if it made the headlines?

§ Am I being loyal to my family, my company and myself?

§ What would I tell my child to do?

§ Is this the right thing to do?

11.        Information and Resources

CEO

Omer Bar-Yohay,

omer@eviation.co

CFO

Liza Ohayon

liza@eviation.co

Exhibit A - Whistleblower Policy

Exhibit B – Insider Trading Policy

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2017 shares
Document And Entity Information
Entity Registrant Name	Eviation Aircraft Ltd.
Entity Central Index Key	0001064411
Document Type	20-F
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding	10,694,820
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2017

XML

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 284	$ 858
Accounts receivable	192	35
Total current assets	476	893
Non-current assets
Property and equipment	366	305
Long-term restricted bank deposits	72	59
Total non-current assets	438	364
Total assets	914	1,257
Current liabilities
Bank loan	144
Related parties	462	321
Trade payables	81	23
Accounts payable and accruals	285	133
Total current liabilities	972	477
Non - Current liabilities
Shareholders loans	781	617
Total non-current liabilities	781	617
Equity (deficit)
Share capital	64,639	63,597
Capital reserves	3,179	3,064
Accumulated losses	(68,657)	(66,498)
Total Equity (deficit)	(839)	163
Total liabilities and equity (deficit)	$ 914	$ 1,257

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Profit or loss [abstract]
Research and development expenses, net	$ 1,146	$ 1,829
Marketing, administrative and general expenses	747	341
Total expenses	1,893	2,170
Operating loss	1,893	2,170
Financing expenses	235	71
Loss before taxes on income	2,128	2,241
Taxes on income	31	(553)
Loss from continuing operations	2,159	1,688
Loss from discontinued operation			226
Loss for the year	2,159	1,688	226
Attributable to:
Owners of the Company	2,159	1,688	201
Non-controlling interests			25
Loss for the year	$ 2,159	$ 1,688	$ 226
Continued operations (in $)
Basic and diluted loss per share	$ 0.19	$ 0.20
Discontinued operation (in $)
Basic and diluted loss per share			$ 26.43

XML

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) - USD ($) $ in Thousands		Share capital [Member]	Capital reserves [Member]	Accumulated losses [Member]	Attributable to owners of the Company [Member]	Non-controlling interests [Member]	Total
Balance at Dec. 31, 2014		$ 63,597	$ 86	$ (64,609)	$ (926)	$ 198	$ (728)
Changes during the year
Comprehensive loss for the year				(201)	(201)	(25)	(226)
Balance at Dec. 31, 2015		63,597	86	(64,810)	(1,127)	173	(954)
Changes during the year
Capital contribution by shareholders	[1]		1,127		1,127	(173)	954
Share based payment			9		9		9
Shareholders transaction reserve, net of tax			1,842		1,842		1,842
Comprehensive loss for the year				(1,688)	(1,688)		(1,688)
Balance at Dec. 31, 2016		63,597	3,064	(66,498)	163		163
Changes during the year
Issuance of share capital and warrants		1,042			1,042		(1,042)
Share based payment			14		14		14
Shareholders transaction reserve, net of tax			101		101		101
Comprehensive loss for the year				(2,159)	(2,159)		(2,159)
Balance at Dec. 31, 2017		$ 64,639	$ 3,179	$ (68,657)	$ (839)		$ (839)

[1] See note 4.

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activity
Loss for the year		$ (2,159)	$ (1,688)	$ (226)
Adjustments for:
Income tax		31	(553)
Depreciation		141	31
Financial expense, net		232	69
Share-based payments		14	9
Total, Adjustments		418	(444)
Increase in accounts receivable		(157)	(35)
Increase in trade payables		58	23
Increase in accounts payable and accruals		72	98
Increase in related parties balance		141	321
Increase decrease in operating capital		114	407
Net cash used in operating activity		(1,627)	(1,725)
Cash flows from investment activity
Increase in restricted bank deposit		(7)	(59)
Investment in property and equipment		(202)	(336)
Net cash used in investment activity		(209)	(395)
Cash flows from financing activity
Issuance of share capital and warrants		1,042
Proceeds from capital contribution and shareholders' loans		639	2,965
Repayment of shareholders' loans		(553)
Proceed from bank's loan		144
Net cash provided by financing activity		1,272	2,965
Cash flows above include cash flows in respect of discontinued operation as follows:
Net cash used operating activity	[1]			(116)
Net cash provided by investment activity				104
Net cash flows used in discontinued operation				(12)
Exchange differences on balances of cash and cash equivalents		(10)	13
(Decrease)/increase in cash and cash equivalents		(574)	858	(12)
Balance of cash and cash equivalents at the start of the year		858		12
Balance of cash and cash equivalents at end of the year		$ 284	$ 858

[1] Including cash interest receipts in the amount of

XML

GENERAL

12 Months Ended

Dec. 31, 2017

Disclosure of general [Abstract]

GENERAL

NOTE1 -     GENERAL

EVIATION AIRCRAFT Ltd. (formerly R.V.B. Holdings Ltd.) (the "Company") was incorporated under the laws of the State of Israel. The name change was in effect at March 2, 2017. The address of the Company’s registered office is 1 Ha’Ofe St., Kadima-Tzoran, Israel, 6092000.

The Company’s ordinary shares are traded in the United States on the OTC Market, Pink tier, under the symbol EVTNF (formerly  RVBHF). See note 4 relating to creditors arrangement and discontinued operation in February 2016.

On May 15, 2016, the Company established a new, wholly-owned Israeli subsidiary company under the name “Eviation Tech Ltd.” (the “Subsidiary”) for the purpose of developing and commercializing electric propulsion aviation, the Company's new business focus (the “Aviation Business”).

As of December 31, 2017, the Company had cash and cash equivalent balance of $284 thousand and deficit in equity of $839 thousand. On July 17, 2016, the Group entered into loan and security agreements with certain shareholders for a total amount of $5 million. As of the date of these financial statements, the Group received approximately $3.6 million of the loans and the Group has under these agreements an additional $1.4 million in unutilized credit availability.  On February 18, 2018 the Company entered into a binding memorandum of understanding (the “MOU”) with a new investor in respect of investment of up to $12 million. The investor had paid an amount of $0.5 million on January 11, 2018 and an additional amount of $1.5 million on March 30, 2018 on account of the investment. See also note 19. The Company's management believes that its available cash resources, including the shareholder credit facilities, the amount received in advance from the new investor and remaining budget approved in the program from the OCS toward the design and development of the aircraft (see note 13(a)(2)), are sufficient to meet its operating requirements for at least 12 months from the reporting period. Management has the ability to reduce its expenses if needed, so it can continue to meet its liabilities.

XML

BASIS OF PREPERATION

12 Months Ended

Dec. 31, 2017

Disclosure of basis of preparation [Abstract]

BASIS OF PREPERATION

NOTE   2 -   BASIS OF PREPERATION

a. Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB). The consolidated financial statements were authorized for issue by the Company Board of Directors on April 24, 2018.

b. Functional currency:

(1) Functional currency

The currency of the main economic environment in which the Group operates is the US dollar (the "functional currency").

(2) Translation of transactions that are not in the functional currency   In the preparation of the financial statements, transactions carried out in currencies other than the Company's functional currency (the "foreign currency") are recorded at the exchange rates in effect on the dates of the transaction.   At each reporting period, monetary items stated in foreign currency are translated according to the exchange rates in effect at that date; non-monetary items that are measured in terms of historical cost are translated according to the exchange rates in effect at the time of the transaction in connection with the non-monetary item.

 (3) The method of recording exchange rate differences   Exchange rate differences (primarily in respect of monetary balances that are not in the functional currency) are recognized in the income statement in the period in which they occurred.

c. Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for deferred tax assets and liabilities.

d. Use of estimates and judgments

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The preparation of accounting estimates used in the preparation of the Group’s financial statements requires management of the Company to make assumptions regarding circumstances and events that involve considerable uncertainty. Management of the Company prepares the estimates on the basis of past experience, various facts, external circumstances, and reasonable assumptions according to the pertinent circumstances of each estimate. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Determination of fair value

Preparation of the financial statements requires the Group to determine the fair value of certain assets and liabilities. Further information about the assumptions that were used to determine fair value is included in note 10 on shareholders loans and note 14d on share based compensation.

When determining the fair value of an asset or liability, the Group uses observable market data as much as possible. There are three levels of fair value measurements in the fair value hierarchy that are based on the data used in the measurement, as follows:

•          Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly

•          Level 3: inputs that are not based on observable market data (unobservable inputs).

e. Risk management policy

The operations of the Group expose it to various financial risks, such as a market risk (including a currency risk, fair value risk regarding interest rate and price risk), credit risk, liquidity risk and cash flow risk for the interest rate. The comprehensive risk-management policy of the Group focuses on actions to limit the potential negative impacts on financial performance of the Group to a minimum. The Group does not typically use derivative financial instruments in order to hedge exposures.

Risk management is performed by the Group’s Chief Executive Officer in accordance with the policy approved by the Board of Directors.

The Group does not have a significant concentration of credit risks. The cash and cash equivalents of the Group are deposited in Israeli banking corporation. In the estimation of the Group’s management, the credit risk for these financial instruments is low.

XML

SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2017

Disclosure of significant accounting policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE   3 -   SIGNIFICANT ACCOUNTING POLICIES:

a. Basis of consolidation

(1) General

The consolidated financial statements incorporate the financial statements of the Company and an entity controlled by the Company (its subsidiary).

Control is achieved when the Company:

· has power over the investee;

· is exposed, or has rights, to variable returns from its involvement with the investee; and

· has the ability to use its power to affect its returns. Substantive rights held by the Group and others are taken into account when assessing control.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Transactions with non-controlling interests while retaining control are accounted for as equity transactions. Any difference between the consideration paid or received and the change in non-controlling interests is included in the owners’ share in equity of the Company directly in retained earnings.

(2) Non-controlling interest

Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Non-controlling interests comprise the equity of a subsidiary that cannot be attributed, directly or indirectly, to the parent company and they include additional components such as: the equity component of convertible debentures of subsidiaries, share-based payments that will be settled with equity instruments of subsidiaries and share options of subsidiaries.

b. Cash and cash equivalents

Cash and cash equivalents include all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit) that are not restricted as to withdrawal or use and the period to maturity of which did not exceed three months at time of investment.

c. Property and equipment:

Property and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.

Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset, or other amount substituted for cost, less its residual value.

The cost of replacing part of a fixed asset item and other subsequent expenses are capitalized if it is probable that the future economic benefits associated with them will flow to the Group and their cost can be measured reliably. The carrying amount of the replaced part of a fixed asset item is derecognized. The costs of day-to-day servicing are recognized in profit or loss as incurred.

Depreciation is calculated at annual rates as follows:

	%
Equipment, computers and systems	33
Leasehold improvements	The shorter of the lease term and the useful life
Lab Equipment	20
Office furniture	20

d. Long term restricted deposits

Long-term restricted deposits are deposits which are expected to be restricted for more than a year, as of the date of the statement of financial position.

e. Financial liabilities and equity instruments issued by the Company:

(1) Classification as a financial liability or an equity instrument

Non-derivative financial instruments are classified as either financial liabilities or as equity instruments in accordance with the substance of the contractual arrangement.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of direct issuing costs.

(2) Other financial liabilities   Other financial liabilities (credit, loans and accounts payable) are initially measured at fair value, net of transaction costs. Subsequent to the initial recognition loans are measured at amortized cost using the effective interest method.  The value of these financial liabilities is not materially different than their fair value other than the loans received from certain of the Company’s Shareholders. These loans were initially recorded at fair value and the remaining amount of cash received was classified as an equity instrument reflecting the favorable terms of these loans. Financial liabilities are derecognized when the obligation of the Group, as specified in the agreement, expires or when it is discharged or cancelled.

f. Leasing of real estate by the Company

Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease.

g. Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation, and it is probable that an outflow of economic benefits, which can be estimated reliably, will be used to settle the obligation.

The amount recognized as a provision, reflects management's best estimate of the amount required in order to settle the obligation on the balance sheet date, whilst taking into account the risks and uncertainties connected with the obligation. When the provision is measured using the forecasted cash flows in order to settle the liability, the book value of the provision is the present value of the forecasted cash flows.

h. Share-based payments

Share-based payments to employees, directors and others that provide similar services, which are settled in equity instruments of the Group, are measured at fair value on the grant date. On the grant date, the Company measures the fair value of the granted equity instruments by using the Black and Scholes model.

If the equity instruments granted to them have not vested until these employees and directors have completed a defined period of service, have met performance conditions or defined market conditions are met, the Company recognizes the share-based payment transactions in its financial statements over the vesting period against an increase in its shareholders' equity, under "Capital reserves" in respect of share based payments.

At each balance sheet date, the Company estimates the number of equity instruments that are expected to vest. Any change in the estimate relative to previous periods is recognized in the income statement over the remaining vesting period.

i. Taxes on income

In view of losses for tax purposes accrued by the Company and given the fact that as of the reporting date there was no certainty as to the realization of these losses in the foreseeable future, the Company recognized deferred tax asset in respect of carry-forward losses only to the extent of deferred tax liability, see note 12.

j. Employee benefits:

(1) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss in the periods during which related services are rendered by employees.

Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

(2) Short-term employee benefits

Short-term employee benefits include wages, vacation days, sick leave, recreation and deposits with the National Insurance Institute of Israel, which are paid within approximately one year of the period in which the employee provides the related service. These benefits are recognized as an expense upon the provision of services.

k. Research and development expenditures

Research expenditures are recognized in the consolidated statements of comprehensive loss when incurred.

An intangible asset arising from development or from the development phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliably the expenditure attributable to the intangible asset during its development.

Research expenditures are recognized in the consolidated statements of comprehensive loss when incurred.

As the Company does not meet the criteria aforementioned, development expenditures are recognized in the consolidated statements of comprehensive loss when incurred

l. Government grants

Government grants are recognized initially at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Unconditional government grants are recognized when the Group is entitled to receive them. Grants that compensate the Group for expenses incurred are presented as a deduction from the corresponding expense.

Grants from the OCS in respect of research and development projects are accounted for as forgivable loans according to IAS 20. Grants received from the OCS are recognized as a liability according to their fair value on the date of their receipt, unless on that date it is reasonably certain that the amount received will not be refunded. The amount of the liability is reexamined each period, and any changes in the present value of the cash flows discounted at the original interest rate of the grant are recognized in profit or loss. The difference between the amount received and the fair value on the date of receiving the grant is recognized as a deduction of research and development expenses.

m. Loss per share

The Company presents basic and diluted loss per share data for its ordinary shares. Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is determined by adjusting the loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees and others (See note 15).

n. Discontinued operations

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been discontinued from the start of the earliest comparative period.

o. Transactions with controlling shareholder

Assets and liabilities included in a transaction with a controlling shareholder are measured at fair value on the date of the transaction. As the transaction is on the equity level, the Company includes the difference between the fair value and the consideration from the transaction in its equity.

p. Exchange rates and linkage basis:

(1) Balances in or linked to foreign currency are presented according to the representative exchange rate published by the Bank of Israel at the balance sheet date.

(2) Balances linked to the CPI are presented according to the CPI for the last month of the reporting period.

(3) Data in respect of changes in the CPI and the dollar's exchange rate are as presented as follows:

	The dollar			CPI in Israel
	Exchange rate			Actual CPI			Known CPI
	(NIS to 1 $)			Points			Points
Date of the financial statements
As of December 31, 2017		3.467			113.05			112.93
As of December 31, 2016		3.845			112.6			112.6
Rate of change	Change in %
For the year ended December 31, 2017		(9.83	)		0.40			0.30
For the year ended December 31, 2016		(1.46	)		(0.20	)		(0.30	)
For the year ended December 31, 2015		0.33			(1.0	)		(1.1	)

q. New standards and interpretations not yet adopted:

Standard/interpretation/ amendment	The requirements of the publication	Effective date and transitional provisions	Expected effects
IFRS 9(2014),Financial Instruments	IFRS 9 (2014) replaces the current guidance in IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 (2014) includes revised guidance on the classification and measurement of financial instruments, a new ‘expected credit loss’ model for calculating impairment for most financial assets, and new guidance and requirements with respect to hedge accounting.	IFRS 9 (2014) is effective for annual periods beginning on or after January 1, 2018 with early adoption being permitted.	The Group is  still examining the effects of applying IFRS 9 (2014) on the financial statements.
IFRS 16, Leases	IFRS 16 replaces IAS 17, Leases and its  related interpretations. For lessees, the standard presents a unified model for the accounting treatment of most  leases according to which the lessee has to recognize an asset and liability in respect of the lease in its financial statements.	IFRS 16 is applicable for annual  periods as of January 1, 2019, with the possibility of early adoption, so long as the company has also early adopted IFRS 15, Revenue from Contracts with Customers.	The Group is still examining the effects of applying IFRS 16, on the financial statements.

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CREDITORS ARRANGEMENT AND DISCONTINUED OPERATION

12 Months Ended

Dec. 31, 2017

Disclosure of creditors arrangement and discontinued operation [Abstract]

CREDITORS ARRANGEMENT AND DISCONTINUED OPERATION

NOTE 4 -      CREDITORS ARRANGMENT AND DISCONTINUED OPERATION

In 2013, the Company's Board of Directors has decided to cease the operation of the Y’bllin demonstration facility owned by EER, formerly a subsidiary of the Company that owned

know-how and rights in the field of solid waste treatment. As of February 2015, the Company completed the evacuation from the Y’bllin facility, the sale of the systems and equipment and ceased all operations.

On April 2, 2015, following a creditor petition to the Tel-Aviv District Court due to the financial and business condition of the Company, the Court appointed a temporary liquidator for the Company and its subsidiary.

On February 2, 2016, the Tel-Aviv District Court approved a creditors arrangement for the sale of the Company, free of any assets and liabilities (including the Company’s investment and ownership interest in EER) to new shareholders.

Upon the approval of the Court the Company emerged from the liquidation status through the issuance of ordinary shares, which represented 99.9% of the issued and outstanding share capital of the Company to the new shareholders in consideration of NIS 600,000 (approximately $153 thousand) that were paid to the liquidator. The Company emerged from the liquidation free of any assets and liabilities, and any such assets and liabilities were removed from its statement of financial position, with the net amount of $954 thousand charged as a capital contribution by the new shareholders.

Pursuant to the arrangement, the following was agreed and executed: (1) cancelling the nominal value of the Company’s shares, such that the Company’s shares will not have any nominal value, (2) converting 71,923,175 non-tradable options to purchase ordinary share of the Company into 71,923,175 ordinary shares, no par value of the Company, (3) implementing a reverse split of the Company’s shares at a ratio of 30,465:1 (i.e., for each 30,465 shares of the Company, the shareholders of the Company will receive one (1) share), and (4) increasing the registrar share capital of the Company to 700,000,000 ordinary shares of the Company with no nominal value. The reverse split became effective on February 25, 2016.

Upon completion of the above, the Company issued to the purchasers of the Company 9,990,000 ordinary shares of the Company, which represented 99.9% of the issued and outstanding share capital of the Company. In May 2016, the Company started developing its Aviation Business and all prior activity was classified as discontinued operation.

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ACCOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2017

Trade and other current receivables [abstract]

ACCOUNTS RECEIVABLE

NOTE 5 –     ACCOUNTS RECEIVABLE:

	As of December 31,
	2 0 1 7		2 0 1 6
	$ in thousand
Government institutions		180		28
Prepaid expenses		12		7
		192		35

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PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2017

Disclosure of detailed information about property, plant and equipment [abstract]

PROPERTY AND EQUIPMENT, NET

NOTE 6 –    PROPERTY AND EQUIPMENT:

	Equipment, computers and systems			Leasehold improvements			Lab equipment			Office furniture		Total
	$ in thousand
Cost
Balance as at January 1, 2016		-			-			-			-		-
Additions		295			36			4			1		336
Balance as at December 31, 2016		295			36			4			1		336
Additions		147			53			-			2		202
Balance as at December 31, 2017		442			89			4			3		538
Depreciation
Balance as at January 1, 2016		-			-			-			-		-
Depreciation for the year		(30	)		(1	)		-			-		(31	)
Balance as at December 31, 2016		(30	)		(1	)		-			-		(31	)
Depreciation for the year		(132	)		(8	)		(1	)		-		(141	)
Balance as at December 31, 2017		(162	)		(9	)		(1	)		-		(172	)
Carrying amounts
At December 31, 2016		265			35			4			1		305
At December 31, 2017		280			80			3			3		366

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BANK LOAN

12 Months Ended

Dec. 31, 2017

Disclosure of bank loan [Abstract]

BANK LOAN

NOTE 7 –    BANK LOAN:

On December 21, 2017 the Company received a loan in the amount of NIS 500 thousand ($144 thousand) for a period of 3 months which was extended on a weekly basis until repaid on April 16, 2018. The loan bears annual interest of 5.4% and is secured by a private guarantee from Mr. Aviv Tzidon and the Company's CEO.

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RELATED PARTIES TRANSACTIONS

12 Months Ended

Dec. 31, 2017

Disclosure of transactions between related parties [abstract]

RELATED PARTY TRANSACTIONS

NOTE 8 –    RELATED PARTIES TRANSACTIONS:

a. On November 30, 2015, Mr. Aviv Tzidon (hereinafter "Mr. Tzidon") and Mr. Michael Ilan (beneficial owner of Magic Stones-Gemstone Import and marketing Ltd. (hereinafter "Magic Stones") entered on behalf of the Subsidiary in formation into an Administrative Services Agreement with Phinergy Ltd., a company also controlled by Mr. Tzidon and Mr. Ilan – the “ASA”.

Pursuant to the ASA, Phinergy provides the Subsidiary with: (i) administrative and general services, including secretarial and management services; (ii) human resource services; (iii) accounting and bookkeeping services; and (iv) office space and office services, including telephone, fax and data communications and cleaning services, see note 13a(1) (the services described in (i) through (iv), collectively – the “Services”). In consideration for these Services, the Subsidiary is required to pay a monthly fee, calculated on the basis of the actual cost to Phinergy of providing the Services, derived as a percentage of the global costs paid for Phinergy for receiving such services for itself and the Subsidiary together.

The amount recorded in 2017 in respect of the Service was approximately $136 thousand (2016 - $711 thousand).

The balance of related parties transactions as of December 31, 2017 represent the unpaid balance under the ASA, which was paid to Phinergy on April 17, 2018.

b. On July 17, 2016, the Company's Board of Directors (the “Board”) approved the acquisition, assumption and acceptance by the Subsidiary of all of the assets acquired and obligations created by Mr. Tzidon and Magic Stones on behalf of the Subsidiary, and the transfer to the Subsidiary of all of the contracts, licenses, material goods, intellectual property and expertise that had been acquired by the two shareholders for and on behalf of the Subsidiary prior to such date.    The transfer to the Subsidiary of all of aforesaid assets was made at their deemed acquisition cost of approximately $1.4 million representing an arm's length price, pursuant to an Assignment and Assumption Agreement between each of the shareholders and the Subsidiary.    The transfer of the assets and liabilities was deemed borrowed by the Subsidiary under the loan and security agreement (see note 10).  The payment of $1.4 million includes certain expenses and in addition partial payments made in respect of the following assigned contracts:

· On September 1, 2015, Mr. Tzidon entered on behalf of the Subsidiary into a license and service agreement with Mr. John McGinnis, on behalf of himself and on behalf of his companies (collectively, “McGinnis”), for a worldwide exclusive license to a patent and know-how necessary for the completion and utilization of a flying electric Double Boxtail aircraft for use solely in the field of electric powered aircraft.  The license will automatically become non-exclusive after three years from the termination of the agreement.  As of December 31, 2016 , the Subsidiary paid US $700 thousand for the development and production of scaled demonstrators and additional development and production services relating to a full scale electric synergy prime aircraft.   According to the terms of the agreement, the Subsidiary will not be the owners of the physical embodiment of the full scale electric Synergy prime aircraft or its intellectual property.

In addition, the Subsidiary can select to continue to engage McGinnis for additional development projects in the future.

Due to a lack of progress in the development and supply of the model or the completion of the Synergy Prime Aircraft, the agreement has in effect been suspended, and could be reinstated in agreement between the parties in any stage.

· On February 5, 2016, the Subsidiary (as an entity that was then in formation) entered into a “Memorandum of Understandings” with Laminar Research LLC (the “Laminar MOU”) for the development of an air traffic control algorithm and its implementation on subscale aircraft models.  The Laminar MOU comprises several steps of development by Laminar, for a total payment by the Subsidiary of $180,000.

The Subsidiary receives an irrevocable, royalty-free license for a limited number of copies of the finished software products. As of December 31, 2016, out of the $180,000 the Company paid $135,000 and the remaining $45,000 is pending completion of stage 4 as defined in the agreement to the satisfaction of the Company.

c. In July 2016, the Subsidiary acquired from Eye Point Ltd., a company owned by one of the Company's shareholders, Mr. Dekel Tzidon, all rights under US patent No. 8,314,928 (the “Eye Point Patent”) for a total amount of $38,000. The Eye Point Patent will expire on November 12, 2026. This patent allowed the Company to develop conceptual design of an auto-landing system.

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ACCOUNTS PAYABLE AND ACCRUALS

12 Months Ended

Dec. 31, 2017

Trade and other current payables [abstract]

ACCOUNTS PAYABLE AND ACCRUALS

NOTE 9 –    ACCOUNTS PAYABLE AND ACCRUALS:

Composed as follows:

	As of December 31,
	2 0 1 7		2 0 1 6
	$ in thousand
Employees and institutions in respect of payroll (*)		111		75
Accrued Interest		116		35
Accrued expenses		58		23
		285		133
(*) See also note 11.

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SHAREHOLDERS LOANS

12 Months Ended

Dec. 31, 2017

Disclosure of shareholder loan [Abstract]

SHAREHOLDERS LOAN

NOTE 10  –  SHAREHOLDERS LOANS:

On July 17, 2016, the Company entered a loan and security agreement with two of its shareholders Mr. Tzidon and Magic Stones  pursuant to which they loaned a total of $500 thousand to the Company for a period of seven years.

As security for such loan, the Company granted to Mr. Tzidon and Magic Stones a specific lien and security interest on all of the shares of the Subsidiary held by the Company. The proceeds of the loan are to be used for funding the on-going operations of the Company.

Additionally, on the same date, the Subsidiary entered a loan and security agreement with the same shareholders pursuant to which they granted the Subsidiary a credit facility of up to $4.5 million for a period of seven years from the date of the agreement. As security for amounts owing under the credit facility, the Subsidiary granted to these shareholders a floating lien and charge on all of the assets of the Subsidiary, and a specific charge on all of the intellectual property rights owned or hereafter acquired by the Subsidiary.

Both loans accrue interest at an annual interest rate equal to the lower of 3.2% per annum, and the minimum rate required by the Israeli tax law to avoid the imputing of tax (2017 and 2016 -2.56%). Accrued interest is payable annually.

As of December 31, 2017, the Company and the Subsidiary received $500 thousand and approximately $3.1 million, respectively, and the accrued interest amount on both loans is approximately $116 thousand. On August 24, 2017, following the investment made in the Company, see note 14c., the Subsidiary repaid an amount of approximately $553 thousand.

The fair value of the shareholders loans was initially measured in the amount of $570 thousand and classified under category Level III. An amount of $1,842 thousand (net of $553 thousand of taxes) was initially attributed as shareholders equity in respect of the favorable interest rate provided to the Company by its shareholders. The deferred tax liability created with respect of the loan was offset against a deferred tax asset created with respect of the Group’s carried forward losses. 

The loan was valued as contingent claim on the Company's assets, the inputs used in the determination of fair value required significant management judgment or estimation, these inputs considered the implied value of the Company’s assets based on the Company's shareholders loan which reflects all the investments made in the Company as of that day, resulting with an implied annual interest rate of 34%.

Subsequent measurement of the fair value of the shareholders loan as of December 31,2017 was $757 thousand (2016 - $602 thousand). The balance of amount attributed as shareholders equity as of December 31, 2017 and 2016 was $1,943 thousand and $1,842 thousand  (net of $522 thousand and $553 thousand of taxes), respectively.

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POST- EMPLOYMENT BENEFITS

12 Months Ended

Dec. 31, 2017

Disclosure of defined benefit plans [abstract]

POST- EMPLOYMENT BENEFITS

NOTE 11 –   POST- EMPLOYMENT BENEFITS:

                            Plans in respect of severance pay

The Severance Pay Law in Israel requires the Company and its subsidiaries to pay severance pay upon dismissal of an employee or upon termination of employment in other certain circumstances.  In principle, the Severance Pay Law in Israel stipulates that the severance pay amount equals the employee's last salary multiplied by the amount of years in which the employee was employed.

The Group applies Section 14 of the Israeli Severance Pay Act of, 1963, to its employeespursuant to which it is exempt from any severance pay liability, subject to it making certain monthly contributions to employees' pension plans. The Group will not have a legal or constructive obligation to make additional payments if the plan does not have sufficient assets to pay the entire employee benefits relating to the employee's service during the current period and in previous periods.

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INCOME TAX

12 Months Ended

Dec. 31, 2017

Disclosure of income tax [Abstract]

INCOME TAX

NOTE 12 –   INCOME TAX:

a. Taxable income of Israeli companies is subject to tax at the rate of 26.5% in 2015, 25% in 2016 and 24% in 2017.

On January 4, 2016, the Israeli Parliament's Plenum approved by a second and third reading the Bill for Amending the Income Tax Ordinance (No. 217) (Reduction of Corporate Tax Rate), 2015, which consists of the reduction of the corporate tax rate from 26.5% to 25%, starting January 1, 2016.

On December 22, 2016, the Israeli Parliament's Plenum approved by a second and third reading the Economic Efficiency Law (Legislative Adjustments for Achieving Budget Objectives in the years 2017 and 2018) - 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. The first step will be to a rate of 24% as from January 2017 and the second step will be to a rate of 23% as from January 2018.

Current taxes for the reported periods are calculated according to the tax rates presented above.

b. The Company received final tax assessments (including assessments considered as final) through the tax year 2012

c. As at December 31, 2017, the Company has carried forward tax losses in the amount of approximately NIS 119 million (approximately $34 million). Its Subsidiary has carried forwards losses in the amount of NIS 13.8 million (approximately $4 million).

d. Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of carried forward tax losses in the amount of $36,037 thousand as of December 31,2017 (2016-$30,673 thousand) except for deferred tax asset which recognized up to the deferred tax liability amount recorded in respect of the shareholders loan, see note 10.

Deferred tax assets have not been recognized in respect of tax losses since it is not probable that future taxable profit will be available against which the Group can utilize the benefits. The tax losses do not expire under current tax legislation in Israel.

e. Deferred taxes are calculated according to the tax rate anticipated to be in effect on the date of reversal. See note 10 regarding the deferred taxes.

f. Reconciliation between the theoretical tax on the pre-tax profit and the tax expense:

	Year ended December 31
	2017			2016
	$ in thousand
Loss before taxes on income		2,128			2,241
Primary tax rate of the Company		24	%		25	%
Tax  calculated according to the Company’s primary tax rate		(511	)		(560	)
Additional tax (tax saving) in respect of:
Non-deductible expenses		11			4
Current year tax losses and benefits for which deferred
taxes were not created		531			52
Creation of deferred taxes for tax losses and benefits from
previous years for which deferred taxes were not created in
the past		-			(49	)
Income tax expenses (income) from continuing operations		31			(553	)

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COMMITMENTS AND CONTINGENT LIABILITIES

12 Months Ended

Dec. 31, 2017

Disclosure of commitments and contingent liabilities [Abstract]

COMMITMENTS AND CONTINGENT LIABILITIES

NOTE 13 – COMMITMENTS AND CONTIGENT LIABILITIES:

Commitments:

 (1) Lease agreements   The Company sub leased office space from a related party. The lease period commenced on December 1, 2015 for two months with 6 option periods of 12 months each that will be exercised automatically unless the Company will provide a 90 days early termination notice before the end of each year lease period. The minimum rent payment recognized as an expense in the year ended on December 31, 2017 was $36 thousand (2016 - $46 thousand). Minimum rentals payable under non-cancellable lease agreement as of December 31, 2017, amount of approximately $37 thousand (2016 - $33 thousand).   On January 9, 2017, the Company signed an additional lease agreement with another related party who is the owner of the same building in which the Company sub leased the office in 2015 for additional office space and parking spots. The lease period commenced on January 1, 2017 for one year with an option to extend the lease period for up to additional 6 years. The contract is renewed automatically unless the Company provide a 90 days early termination notice before the end of each year lease period.The minimum rent payment recognized as an expense in the year ended on December 31, 2017 was $19 thousand (2016 - 0). Minimum rentals payable under non- cancellable lease agreement as of December 31, 2017, amount to approximately $22 thousand (2016 - 0).

(2) OCS   On December 18, 2016, the Subsidiary signed a Support and Investment Agreement with the Office of the Chief Scientist of the Ministry of National Infrastructures, Energy, Water and Resources of Israel (the “OCS”) under the pilot and demonstration project.  Under the agreement, the Company will develop a passenger's electric aircraft. The plan will be performed during 24 months commencing on January 1, 2017. The Subsidiary is entitled to receive up to 50% of the actual costs and up to NIS 3 million (approximately $ 865 thousand). As a security, the Subsidiary provided a bank guarantee in the amount of NIS 225 thousand that will be effective until 3 months after the end of the project. The Subsidiary has recorded a lien on a bank deposit in the same amount in favor of the bank providing the guarantee.   According to the agreement, the Subsidiary will be required to pay royalties in an amount of 5% on sales of products and services derived from a technology developed using these grants until repayment of the entire CPI-linked grant plus interest at a rate determined by the general accountant at the Israeli Ministry of Finance.   As of December 31, 2017, the Subsidiary received approximately NIS 1.3 million (approximately $ 377thousand) in respect of actual costs incurred by it. An additional amount of approximately NIS 413 thousand (approximately $118 thousand) was received until the date of this report.

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SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2017

Disclosure of classes of share capital [abstract]

SHAREHOLDERS' EQUITY

NOTE 14 -   SHAREHOLDERS' EQUITY:

a. As discussed in Note 4, on February 2, 2016, the Company:

(1) canceled the nominal value of the Company’s shares, such that the Company’s shares will not have any nominal value,

(2) converted 71,923,175 non-tradable options to purchase ordinary share of the Company into 71,923,175 ordinary shares of the Company,

(3) conducted a reverse split of the Company’s shares at a ratio of 30,465:1 (i.e., for each 30,465 shares of the Company, the shareholders of the Company will receive one (1) share), which reverse split became effective on February 25, 2016; and

(4)           increased the share capital of the Company to 700,000,000 ordinary shares with no par value.

b. The authorized ordinary shares of the Company as of December 31, 2017 and 2016 was 700,000,000 shares.

The issued and outstanding ordinary shares of the Company as of December 31, 2017 and 2016 was 10,694,820 and 10,000,000 shares, respectively.

The holders of ordinary shares are entitled to receive dividends and are entitled to one vote per share at general meetings of the Company.

c. On August 17, 2017, the Company signed a share purchase agreement with A.O.Tzidon Ltd. and Michael Ilan Management and Investment Ltd. (the “Investors”). According to the agreement the Company shall issue to the Investors ordinary shares at a price per share of $1.5 for an aggregate purchase price of $1 million. In addition, at any time prior to May 31, 2018, each of the Investors may purchase additional ordinary shares at the same price per share and up to an aggregate amount of $2.5 million.

On August 24, 2017, each of the Investors purchased 347,410 ordinary shares.

d. Share-based compensation

All options granted under the Company’s previous stock option plan of 2011 were transferred to the temporary liquidator as part of the liquidation. In February 2016, the options were canceled as part of the sale of the Company to the new shareholders as described in note 4 above.

On July 17, 2016, the Board of Directors approved the adoption of the "2016 Equity Incentive Plan" (the “Incentive Plan”) and approved to reserve 1,000,000 ordinary shares (no par value) for issuance to employees, officers, directors, consultants and certain other service providers of the Company and the Company's affiliates.

On October 15, 2016, the Company granted options to purchase 37,500 ordinary shares of the Company to each of the Company's then directors (262,500 options in total) at an exercise price of $1.00 per share.

On December 11, 2017, the Company's shareholders approved the grant of  options to purchase 37,500 ordinary shares of the Company to one of the Company's directors at an exercise price of $1.00 per share.

All granted options have contractual life of 10 years and shall vest in four annual installments from the vesting commencement date as follows: 10,000 options on each of the first, second and third anniversaries of the vesting commencement date ,7,500 on the fourth anniversary of the vesting commencement date, so that four (4) years following the vesting commencement date, all options will be fully vested and exercisable, subject to the option holder’s continuing to be a director of the Company or any affiliate thereof through such dates.

Notwithstanding the above, the vesting of the options may accelerate so that all shares subject to the option will be fully vested and exercisable immediately prior to the occurrence of any of the following corporate transactions: (i) A merger, acquisition, reorganization or consolidation in which the Company is not the surviving entity; (ii) The sale, transfer, exchange or other disposition of all or substantially all of the shares or assets of the Company.

The fair value of employee share options is measured using the Black-Scholes (B&S model) formula. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility for companies in similar stage of development, expected dividends, and the risk-free interest rate (based on US dollar government debentures). Service and non-market performance conditions are not taken into account in determining fair value.

The following table lists the inputs to the B&S model used for the fair value measurement of equity-settled share options granted for the above plan:

	Year ended December 31,
	2017			2016
Share price	$	0.82		$	0.24
Dividend yield (%)		0			0
Expected volatility of the share prices (%)		100	%		100	%
Risk-free interest rate (%)		1.4%-2.8	%		1.36%-1.58	%
Expected life of share options (years)		5.5-7			5.5-7

The following table lists the number of share options, the weighted average exercise prices of share options and movement in option plans during the current year:

	Year ended December 31, 2017							Year ended December 31, 2016
	Number of options			Weighted average exercise price (USD)		Weighted- average remaining contractual term (in years)		Number of options		Weighted average exercise price (USD)		Weighted- average remaining contractual term (in years)
Outstanding at the beginning of the year		262,500			1.00		9.8		-		-		-
Granted		37,500			1.00		-		262,500		1.00		-
Forfeited and expired		(37,500	)		1.00		-		-		-		-
Outstanding at the end of the year		262,500			1.00		9.0		262,500		1		9.8
Exercisable at the end of the year		60,000			1.00		8.8		-		-		-

The Company recorded amount of approximately $14 thousand as share based payment compensation expenses in 2017 ( 2016 - $9 thousand).

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LOSS PER ORDINARY SHARE

12 Months Ended

Dec. 31, 2017

Earnings per share [abstract]

LOSS PER ORDINARY SHARE

NOTE 15 –  LOSS PER ORDINARY SHARE:

The following table summarizes information related to the computation of basic and diluted loss per ordinary share for the years indicated:

	Year ended December 31,
	2017		2016		2015
	$ in thousand
Loss attributable to ordinary shares		2,159		1,688		201

	Shares
Weighted average number of ordinary shares used in
basic and diluted loss per ordinary share calculation		11,505,260	8,494,658	7,605
	$
Continued operations (in $)
Basic and diluted loss per ordinary share		0.19	0.20	-
Discontinued operation (in $)
Basic and diluted loss per ordinary share		-	-	26.43

In the year ended December 31, 2017 and December 31, 2016, all stock options and warrants were excluded from the calculation of diluted net loss per share attributable to ordinary shares because their effect would have been anti-dilutive for the period.

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RESEARCH AND DEVELOPMENT EXPENSES NET

12 Months Ended

Dec. 31, 2017

Disclosure of research and development expense, net [Abstract]

RESEARCH AND DEVELOPMENT EXPENSES, NET

NOTE 16 – RESEARCH AND DEVELOPMENT EXPENSES, NET:

	Year ended December 31,
	2017			2016
	in thousand $
Payroll		741			505
Materials and subcontractors		630			1,224
Rent and office maintenance		67			46
Depreciation		141			31
Other		62			23
		1,641			1,829
Less – OCS grants		(495	)		-
		1,146			1,829

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MARKETING, ADMINISTRATIVE AND GENERAL EXPENSES

12 Months Ended

Dec. 31, 2017

Disclosure of marketing, administrative and general expenses [Abstract]

MARKETING, ADMINISTRATIVE AND GENERAL EXPENSES

NOTE 17 –  MARKETING, ADMINISTRATIVE AND GENERAL EXPENSES:

	Year ended December 31,
	2017		2016
	$ in thousand
Payroll		43		9
Professional fees		324		244
Travels		93		33
Director fees*		37		22
Insurance		14		22
Other		236		11
		747		341

*Including share based compensation expenses.

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FINANCIAL EXPENSES

12 Months Ended

Dec. 31, 2017

Disclosure of financial expenses [Abstract]

FINANCIAL EXPESNES

NOTE 18 –  FINANCIAL EXPENSES:

Financial expenses consists of:

	Year ended December 31,
	2017		2016
	$ in thousand
Interest on shareholders loans		229		82
Exchange rate expenses (income), net		3		(13	)
Bank fees		3		2
Financial expenses		235		71

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SUBSEQUENT EVENT

12 Months Ended

Dec. 31, 2017

Subsequent Event

SUBSEQUENT EVENT

NOTE 19 –  SUBSEQUENT EVENT:

In February 2018 the Company entered into a binding memorandum of understanding (the “MOU”) with a new investor in respect of an investment of up to $12 million at a price per Ordinary Share of $1.50, to be paid in up to three installments.

The MOU includes certain principles, including that the investor shall be entitled to receive a warrant for the purchase of up to 3,000,000 Ordinary Shares of the Company for no additional consideration, exercisable solely upon the investor having timely paid the Company the entire investment amount.

On January 11, 2018 and March 30, 2018, the Company received an amount of $0.5 million and $1.5 million, respectively, as an advance on account of the investment from the new investor. As of the date of these financial statements, the parties are still negotiating a definitive agreement.

In case the Company and the investor will not reach a definitive agreement, the Company shall pay the amounts received as an advance on account of the investment to the investor promptly upon the Company closing an equity investment in the Company of at least $2 million.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2017

Disclosure of significant accounting policies [Abstract]

Basis of consolidation

a. Basis of consolidation

(1) General

The consolidated financial statements incorporate the financial statements of the Company and an entity controlled by the Company (its subsidiary).

Control is achieved when the Company:

· has power over the investee;

· is exposed, or has rights, to variable returns from its involvement with the investee; and

· has the ability to use its power to affect its returns. Substantive rights held by the Group and others are taken into account when assessing control.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Transactions with non-controlling interests while retaining control are accounted for as equity transactions. Any difference between the consideration paid or received and the change in non-controlling interests is included in the owners’ share in equity of the Company directly in retained earnings.

(2) Non-controlling interest

Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Non-controlling interests comprise the equity of a subsidiary that cannot be attributed, directly or indirectly, to the parent company and they include additional components such as: the equity component of convertible debentures of subsidiaries, share-based payments that will be settled with equity instruments of subsidiaries and share options of subsidiaries.

Cash and cash equivalents

b. Cash and cash equivalents

Cash and cash equivalents include all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit) that are not restricted as to withdrawal or use and the period to maturity of which did not exceed three months at time of investment.

Property and equipment, net

c. Property and equipment:

Property and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.

Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset, or other amount substituted for cost, less its residual value.

The cost of replacing part of a fixed asset item and other subsequent expenses are capitalized if it is probable that the future economic benefits associated with them will flow to the Group and their cost can be measured reliably. The carrying amount of the replaced part of a fixed asset item is derecognized. The costs of day-to-day servicing are recognized in profit or loss as incurred.

Depreciation is calculated at annual rates as follows:

	%
Equipment, computers and systems	33
Leasehold improvements	The shorter of the lease term and the useful life
Lab Equipment	20
Office furniture	20

Long term restricted deposits

d. Long term restricted deposits

Long-term restricted deposits are deposits which are expected to be restricted for more than a year, as of the date of the statement of financial position.

Financial liabilities and equity instruments issued by the Company

e. Financial liabilities and equity instruments issued by the Company:

(1) Classification as a financial liability or an equity instrument

Non-derivative financial instruments are classified as either financial liabilities or as equity instruments in accordance with the substance of the contractual arrangement.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of direct issuing costs.

(2) Other financial liabilities   Other financial liabilities (credit, loans and accounts payable) are initially measured at fair value, net of transaction costs. Subsequent to the initial recognition loans are measured at amortized cost using the effective interest method.  The value of these financial liabilities is not materially different than their fair value other than the loans received from certain of the Company’s Shareholders. These loans were initially recorded at fair value and the remaining amount of cash received was classified as an equity instrument reflecting the favorable terms of these loans. Financial liabilities are derecognized when the obligation of the Group, as specified in the agreement, expires or when it is discharged or cancelled.

Leasing of real estate by the Company

f. Leasing of real estate by the Company

Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease.

Provisions

g. Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation, and it is probable that an outflow of economic benefits, which can be estimated reliably, will be used to settle the obligation.

The amount recognized as a provision, reflects management's best estimate of the amount required in order to settle the obligation on the balance sheet date, whilst taking into account the risks and uncertainties connected with the obligation. When the provision is measured using the forecasted cash flows in order to settle the liability, the book value of the provision is the present value of the forecasted cash flows.

Share-based payments

h. Share-based payments

Share-based payments to employees, directors and others that provide similar services, which are settled in equity instruments of the Group, are measured at fair value on the grant date. On the grant date, the Company measures the fair value of the granted equity instruments by using the Black and Scholes model.

If the equity instruments granted to them have not vested until these employees and directors have completed a defined period of service, have met performance conditions or defined market conditions are met, the Company recognizes the share-based payment transactions in its financial statements over the vesting period against an increase in its shareholders' equity, under "Capital reserves" in respect of share based payments.

At each balance sheet date, the Company estimates the number of equity instruments that are expected to vest. Any change in the estimate relative to previous periods is recognized in the income statement over the remaining vesting period.

Taxes on income

i. Taxes on income

In view of losses for tax purposes accrued by the Company and given the fact that as of the reporting date there was no certainty as to the realization of these losses in the foreseeable future, the Company recognized deferred tax asset in respect of carry-forward losses only to the extent of deferred tax liability, see note 12.

Employee benefits

j. Employee benefits:

(1) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss in the periods during which related services are rendered by employees.

Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

(2) Short-term employee benefits

Short-term employee benefits include wages, vacation days, sick leave, recreation and deposits with the National Insurance Institute of Israel, which are paid within approximately one year of the period in which the employee provides the related service. These benefits are recognized as an expense upon the provision of services.

Research and development expenditures

k. Research and development expenditures

Research expenditures are recognized in the consolidated statements of comprehensive loss when incurred.

An intangible asset arising from development or from the development phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliably the expenditure attributable to the intangible asset during its development.

Research expenditures are recognized in the consolidated statements of comprehensive loss when incurred.

As the Company does not meet the criteria aforementioned, development expenditures are recognized in the consolidated statements of comprehensive loss when incurred

Government grants

l. Government grants

Government grants are recognized initially at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Unconditional government grants are recognized when the Group is entitled to receive them. Grants that compensate the Group for expenses incurred are presented as a deduction from the corresponding expense.

Grants from the OCS in respect of research and development projects are accounted for as forgivable loans according to IAS 20. Grants received from the OCS are recognized as a liability according to their fair value on the date of their receipt, unless on that date it is reasonably certain that the amount received will not be refunded. The amount of the liability is reexamined each period, and any changes in the present value of the cash flows discounted at the original interest rate of the grant are recognized in profit or loss. The difference between the amount received and the fair value on the date of receiving the grant is recognized as a deduction of research and development expenses.

Loss per share

m. Loss per share

The Company presents basic and diluted loss per share data for its ordinary shares. Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is determined by adjusting the loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees and others (See note 15).

Discontinued operations

n. Discontinued operations

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been discontinued from the start of the earliest comparative period.

Transactions with controlling shareholder

o. Transactions with controlling shareholder

Assets and liabilities included in a transaction with a controlling shareholder are measured at fair value on the date of the transaction. As the transaction is on the equity level, the Company includes the difference between the fair value and the consideration from the transaction in its equity.

Exchange rates and linkage basis

p. Exchange rates and linkage basis:

(1) Balances in or linked to foreign currency are presented according to the representative exchange rate published by the Bank of Israel at the balance sheet date.

(2) Balances linked to the CPI are presented according to the CPI for the last month of the reporting period.

(3) Data in respect of changes in the CPI and the dollar's exchange rate are as presented as follows:

	The dollar			CPI in Israel
	Exchange rate			Actual CPI			Known CPI
	(NIS to 1 $)			Points			Points
Date of the financial statements
As of December 31, 2017		3.467			113.05			112.93
As of December 31, 2016		3.845			112.6			112.6
Rate of change	Change in %
For the year ended December 31, 2017		(9.83	)		0.40			0.30
For the year ended December 31, 2016		(1.46	)		(0.20	)		(0.30	)
For the year ended December 31, 2015		0.33			(1.0	)		(1.1	)

New standards and interpretations not yet adopted

q. New standards and interpretations not yet adopted:

Standard/interpretation/ amendment	The requirements of the publication	Effective date and transitional provisions	Expected effects
IFRS 9(2014),Financial Instruments	IFRS 9 (2014) replaces the current guidance in IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 (2014) includes revised guidance on the classification and measurement of financial instruments, a new ‘expected credit loss’ model for calculating impairment for most financial assets, and new guidance and requirements with respect to hedge accounting.	IFRS 9 (2014) is effective for annual periods beginning on or after January 1, 2018 with early adoption being permitted.	The Group is  still examining the effects of applying IFRS 9 (2014) on the financial statements.
IFRS 16, Leases	IFRS 16 replaces IAS 17, Leases and its  related interpretations. For lessees, the standard presents a unified model for the accounting treatment of most  leases according to which the lessee has to recognize an asset and liability in respect of the lease in its financial statements.	IFRS 16 is applicable for annual  periods as of January 1, 2019, with the possibility of early adoption, so long as the company has also early adopted IFRS 15, Revenue from Contracts with Customers.	The Group is still examining the effects of applying IFRS 16, on the financial statements.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of significant accounting policies [Abstract]

Schedule of Useful Life of Assets at Annual Depreciation Rates

Depreciation is calculated at annual rates as follows:

	%
Equipment, computers and systems	33
Leasehold improvements	The shorter of the lease term and the useful life
Lab Equipment	20
Office furniture	20

Schedule of Exchange Rates and Linkage Basis

Data in respect of changes in the CPI and the dollar's exchange rate are as presented as follows:

	The dollar			CPI in Israel
	Exchange rate			Actual CPI			Known CPI
	(NIS to 1 $)			Points			Points
Date of the financial statements
As of December 31, 2017		3.467			113.05			112.93
As of December 31, 2016		3.845			112.6			112.6
Rate of change	Change in %
For the year ended December 31, 2017		(9.83	)		0.40			0.30
For the year ended December 31, 2016		(1.46	)		(0.20	)		(0.30	)
For the year ended December 31, 2015		0.33			(1.0	)		(1.1	)

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ACCOUNTS RECEIVABLE (Tables)

12 Months Ended

Dec. 31, 2017

Trade and other current receivables [abstract]

Schedule of Accounts Receivable

	As of December 31,
	2 0 1 7		2 0 1 6
	$ in thousand
Government institutions		180		28
Prepaid expenses		12		7
		192		35

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PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2017

Property And Equipment Tables

Schedule of Property, Plant and Equipment, Net

	Equipment, computers and systems			Leasehold improvements			Lab equipment			Office furniture		Total
	$ in thousand
Cost
Balance as at January 1, 2016		-			-			-			-		-
Additions		295			36			4			1		336
Balance as at December 31, 2016		295			36			4			1		336
Additions		147			53			-			2		202
Balance as at December 31, 2017		442			89			4			3		538
Depreciation
Balance as at January 1, 2016		-			-			-			-		-
Depreciation for the year		(30	)		(1	)		-			-		(31	)
Balance as at December 31, 2016		(30	)		(1	)		-			-		(31	)
Depreciation for the year		(132	)		(8	)		(1	)		-		(141	)
Balance as at December 31, 2017		(162	)		(9	)		(1	)		-		(172	)
Carrying amounts
At December 31, 2016		265			35			4			1		305
At December 31, 2017		280			80			3			3		366

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ACCOUNTS PAYABLE AND ACCRUALS (Tables)

12 Months Ended

Dec. 31, 2017

Trade and other current payables [abstract]

Schedule of Accounts Payable and Accruals Composition

Composed as follows:

	As of December 31,
	2 0 1 7		2 0 1 6
	$ in thousand
Employees and institutions in respect of payroll (*)		111		75
Accrued Interest		116		35
Accrued expenses		58		23
		285		133
(*) See also note 11.

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INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of income tax [Abstract]

Schedule of Reconciliation Between Theoretical Tax on The Pre-tax Profit and Tax Expense

Reconciliation between the theoretical tax on the pre-tax profit and the tax expense:

	Year ended December 31
	2017			2016
	$ in thousand
Loss before taxes on income		2,128			2,241
Primary tax rate of the Company		24	%		25	%
Tax  calculated according to the Company’s primary tax rate		(511	)		(560	)
Additional tax (tax saving) in respect of:
Non-deductible expenses		11			4
Current year tax losses and benefits for which deferred
taxes were not created		531			52
Creation of deferred taxes for tax losses and benefits from
previous years for which deferred taxes were not created in
the past		-			(49	)
Income tax expenses (income) from continuing operations		31			(553	)

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SHAREHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of classes of share capital [abstract]

Schedule Fair Value Measurement of Equity-settled Share Options Granted

The following table lists the inputs to the B&S model used for the fair value measurement of equity-settled share options granted for the above plan:

	Year ended December 31,
	2017			2016
Share price	$	0.82		$	0.24
Dividend yield (%)		0			0
Expected volatility of the share prices (%)		100	%		100	%
Risk-free interest rate (%)		1.4%-2.8	%		1.36%-1.58	%
Expected life of share options (years)		5.5-7			5.5-7

Schedule of Share Options Activity

The following table lists the number of share options, the weighted average exercise prices of share options and movement in option plans during the current year:

	Year ended December 31, 2017							Year ended December 31, 2016
	Number of options			Weighted average exercise price (USD)		Weighted- average remaining contractual term (in years)		Number of options		Weighted average exercise price (USD)		Weighted- average remaining contractual term (in years)
Outstanding at the beginning of the year		262,500			1.00		9.8		-		-		-
Granted		37,500			1.00		-		262,500		1.00		-
Forfeited and expired		(37,500	)		1.00		-		-		-		-
Outstanding at the end of the year		262,500			1.00		9.0		262,500		1		9.8
Exercisable at the end of the year		60,000			1.00		8.8		-		-		-

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LOSS PER ORDINARY SHARE (Tables)

12 Months Ended

Dec. 31, 2017

Earnings per share [abstract]

Schedule of Loss Per Ordinary Share

The following table summarizes information related to the computation of basic and diluted loss per ordinary share for the years indicated:

	Year ended December 31,
	2017		2016		2015
	$ in thousand
Loss attributable to ordinary shares		2,159		1,688		201

	Shares
Weighted average number of ordinary shares used in
basic and diluted loss per ordinary share calculation		11,505,260	8,494,658	7,605
	$
Continued operations (in $)
Basic and diluted loss per ordinary share		0.19	0.20	-
Discontinued operation (in $)
Basic and diluted loss per ordinary share		-	-	26.43

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RESEARCH AND DEVELOPMENT EXPENSES (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of research and development expense, net [Abstract]

Schedule of Research And Development Expenses

	Year ended December 31,
	2017			2016
	in thousand $
Payroll		741			505
Materials and subcontractors		630			1,224
Rent and office maintenance		67			46
Depreciation		141			31
Other		62			23
		1,641			1,829
Less – OCS grants		(495	)		-
		1,146			1,829

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MARKETING, ADMINISTRATIVE AND GENERAL EXPENSES (Tables)

12 Months Ended

Dec. 31, 2017

Marketing Administrative And General Expenses Tables

Schedule of Marketing Administrative And General Expenses

	Year ended December 31,
	2017		2016
	$ in thousand
Payroll		43		9
Professional fees		324		244
Travels		93		33
Director fees*		37		22
Insurance		14		22
Other		236		11
		747		341

*Including share based compensation expenses.

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FINANCIAL EXPENSES (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of financial expenses [Abstract]

Schedule of Financial Expenses

Financial expenses consists of:

	Year ended December 31,
	2017		2016
	$ in thousand
Interest on shareholders loans		229		82
Exchange rate expenses (income), net		3		(13	)
Bank fees		3		2
Financial expenses		235		71

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GENERAL (Details) - USD ($) $ in Thousands		1 Months Ended	12 Months Ended
	Jan. 11, 2018	Mar. 30, 2018	Dec. 31, 2017	Feb. 28, 2018	Feb. 18, 2018	Dec. 31, 2016	Jul. 17, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement Line Items [Line Items]
Cash and cash equivalent			$ 284			$ 858			$ 12
Equity (deficit) attributable to owners of the Company			839
Loan and security agreements							$ 5,000
Proceeds from loan			3,600
Amount of untilized credit availability			$ 1,400
New Investor [Member]
Statement Line Items [Line Items]
Investment				$ 12,000	$ 12,000
Received amount	$ 500	$ 1,500

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SIGNIFICANT ACCOUNTING POLICIES (Schedule of Useful Life of Assets at Annual Depreciation Rates) (Details)	12 Months Ended
	Dec. 31, 2017
Equipment, computers and systems [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Depreciation percentage on straight-line basis over the useful life of the assets (in %)	33 %
Leasehold improvements [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Depreciation percentage on straight-line basis over the useful life of the assets (in %)	The shorter of the lease term and the useful life
Lab Equipment [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Depreciation percentage on straight-line basis over the useful life of the assets (in %)	20 %
Office furniture [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Depreciation percentage on straight-line basis over the useful life of the assets (in %)	20 %

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SIGNIFICANT ACCOUNTING POLICIES (Schedule of Exchange Rates and Linkage Basis) (Details)	Dec. 31, 2017 Points	Dec. 31, 2016 Points	Dec. 31, 2015
Exchange rate of one Dollar [Member]
Disclosure of detailed information about financial instruments [line items]
Exchange rate	3.467	3.845
Percentage Increase (Decrease) during the year ended	(9.83%)	(1.46%)	0.33%
Actual CPI [Member]
Disclosure of detailed information about financial instruments [line items]
Exchange rate	113.05	112.6
Percentage Increase (Decrease) during the year ended	0.40%	(0.20%)	(1.00%)
Known CPI [Member]
Disclosure of detailed information about financial instruments [line items]
Exchange rate	112.93	112.6
Percentage Increase (Decrease) during the year ended	0.30%	(0.30%)	(1.10%)

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CREDITORS ARRANGEMENT AND DISCONTINUED OPERATION (Details) ₪ in Thousands, $ in Thousands	1 Months Ended
	Feb. 25, 2016 USD ($) shares	Feb. 25, 2016 ILS (₪) shares	Feb. 02, 2016 USD ($) shares	Dec. 31, 2017 shares	Dec. 31, 2016 shares
Percentage of ordinary shares issued and outstandings share capital by shareholder				99.90%
Amount of shareholders consideration | $	$ 153
Net amount charged on capital contribution by shareholders | $			$ 954
Conversion of non-tradable options to purchase ordinary share	71,923,175	71,923,175
Reverse split	30,465	30,465
Increasing registrar share capital	700,000,000	700,000,000		700,000,000	700,000,000
Issuance of ordinary shares				10,694,820	10,000,000
Ordinary shares [Member]
Issuance of ordinary shares			9,990,000
NIS [Member]
Amount of shareholders consideration | ₪		₪ 600

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ACCOUNTS RECEIVABLE (Schedule of Accounts Receivable) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Trade and other current receivables [abstract]
Government institutions	$ 180	$ 28
Prepaid expenses	12	7
Accounts receivable	$ 192	$ 35

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PROPERTY AND EQUIPMENT (Schedule of Property, Plant and Equipment, Net) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	$ 305
Ending balance	366	$ 305
Cost [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	336
Additions amount	202	336
Ending balance	538	336
Cost [Member] | Equipment, computers and systems [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	295
Additions amount	147	295
Ending balance	442	295
Cost [Member] | Leasehold improvements [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	36
Additions amount	53	36
Ending balance	89	36
Cost [Member] | Lab Equipment [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	4
Additions amount		4
Ending balance	4	4
Cost [Member] | Office furniture [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	1
Additions amount	2	1
Ending balance	3	1
Depreciation [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(31)
Depreciation for the year	(141)	(31)
Ending balance	(172)	(31)
Depreciation [Member] | Equipment, computers and systems [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(30)
Depreciation for the year	(132)	(30)
Ending balance	(162)	(30)
Depreciation [Member] | Leasehold improvements [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(1)
Depreciation for the year	(8)	(1)
Ending balance	(9)	(1)
Depreciation [Member] | Lab Equipment [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance
Depreciation for the year	(1)
Ending balance	(1)
Depreciation [Member] | Office furniture [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance
Depreciation for the year
Ending balance
Carrying amount [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	305
Ending balance	366	305
Carrying amount [Member] | Equipment, computers and systems [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	265
Ending balance	280	265
Carrying amount [Member] | Leasehold improvements [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	35
Ending balance	80	35
Carrying amount [Member] | Lab Equipment [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	4
Ending balance	3	4
Carrying amount [Member] | Office furniture [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	1
Ending balance	$ 3	$ 1

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BANK LOAN (Details)	Dec. 21, 2017 USD ($)	Dec. 21, 2017 ILS (₪)	Jul. 17, 2016 USD ($)
Statement Line Items [Line Items]
Loan amount			$ 5,000,000
Aviv Tzidon [Member] | Chief Executive Officer [Member]
Statement Line Items [Line Items]
Loan amount	$ 144
Aviv Tzidon [Member] | NIS [Member] | Chief Executive Officer [Member]
Statement Line Items [Line Items]
Loan amount | ₪		₪ 500
Percentage of annual interest	5.40%	5.40%

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RELATED PARTIES TRANSACTIONS (Details) - USD ($) $ in Thousands		1 Months Ended		12 Months Ended
	Feb. 05, 2016	Jul. 31, 2016	Jul. 17, 2016	Dec. 31, 2017	Dec. 31, 2016
Disclosure of transactions between related parties [line items]
Loan received			$ 5,000
Expenses in respect of services provided				$ 136	$ 711
Subsidiaries [Member]
Disclosure of transactions between related parties [line items]
Loan from shareholders to subsidiary			$ 1,400
Amount paid for development and production	$ 180				700
Paritial amount paid for subsidiary					135
Remaining amount paid for subsidiary					$ 45
Subsidiary Acquired		$ 38

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ACCOUNTS PAYABLE AND ACCRUALS (Schedule of Accounts Payable and Accruals Composition) (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
Trade and other current payables [abstract]
Employees and institutions in respect of payroll	[1]	$ 111	$ 75
Accrued Interest		116	35
Accrued expenses		58	23
Accounts payable and accruals		$ 285	$ 133

[1] See also note 11.

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SHAREHOLDERS LOANS (Details) - USD ($) $ in Thousands		12 Months Ended
	Jul. 17, 2016	Dec. 31, 2017	Dec. 31, 2016	Aug. 24, 2017
Disclosure of fair value measurement of assets [line items]
Interest rate		34.00%
Loans and receivables		$ 500
Additional receivables				$ 553
Fair value of the shareholders loan		757	$ 602
Shareholders transaction reserve, net of tax		1,943	1,842
Taxes on income		522	$ 553
Level 3 [Member]
Disclosure of fair value measurement of assets [line items]
Fair value of the shareholders loan	$ 570
Aviv and Magic Stones [Member]
Disclosure of fair value measurement of assets [line items]
Debt face amount	$ 500
Loan term	7 years
Line of credit facility	$ 4,500
Subsidiary [Member]
Disclosure of fair value measurement of assets [line items]
Amount received from shareholders		3,100
Accrued interest		$ 116
Subsidiary [Member] | Top of range [Member]
Disclosure of fair value measurement of assets [line items]
Interest rate	3.20%
Subsidiary [Member] | Bottom of range [Member]
Disclosure of fair value measurement of assets [line items]
Interest rate	2.56%	2.56%

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INCOME TAX (Narrative) (Details) ₪ in Thousands, $ in Thousands		12 Months Ended
	Jan. 04, 2016	Dec. 31, 2018	Dec. 31, 2017 USD ($)	Dec. 31, 2017 ILS (₪)	Dec. 31, 2016 USD ($)	Dec. 31, 2015
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Income tax rate			24.00%	24.00%	25.00%	26.50%
Carried forward tax losses			$ 34,000
Unrecognized deferred tax assets			36,037		$ 30,673
Subsidiaries [Member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Carried forward tax losses			$ 4,000
NIS [Member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Income tax rate	25.00%
Carried forward tax losses | ₪				₪ 119,000
NIS [Member] | Subsidiaries [Member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Carried forward tax losses | ₪				₪ 13,800
NIS [Member] | Changes in tax rates or tax laws enacted or announced [Member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Income tax rate		23.00%	24.00%	24.00%

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INCOME TAX (Reconciliation Between Theoretical Tax on The Pre-tax Profit and Tax Expense) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of income tax [Abstract]
Loss before taxes on income	$ 2,128	$ 2,241
Primary tax rate of the Company	24.00%	25.00%	26.50%
Tax calculated according to the Company's primary tax rate	$ (511)	$ (560)
Additional tax (tax saving) in respect of:
Non-deductible expenses	11	4
Current year tax losses and benefits for which deferred taxes were not created	531	52
Creation of deferred taxes for tax losses and benefits from previous years for which deferred taxes were not created in the past		(49)
Income tax expenses (income) from continuing operations	$ 31	$ (553)

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COMMITMENTS AND CONTINGENT LIABILITIES (Details) ₪ in Thousands, $ in Thousands	4 Months Ended		12 Months Ended			24 Months Ended
	Apr. 26, 2018 USD ($)	Apr. 26, 2018 ILS (₪)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 ILS (₪)	Dec. 31, 2016 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2018 ILS (₪)
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Minimum Rent Payment			$ 36		$ 46
Future Minimum Lease Payments			37		33
Future Minimum Lease Payments under non-cancellable			$ 22		0
Maximum grant to be received						$ 865
Percentage of actual cost			50.00%	50.00%
Percentage of sales on product and services as royelty			5.00%	5.00%
Subsidiaries [Member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Received actual costs			$ 377
Additional amount received	$ 118
Related Parties [Member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Minimum Rent Payment			$ 19		$ 0
NIS [Member] | Subsidiaries [Member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Amount of bank guarantees | ₪				₪ 225
Received actual costs | ₪				₪ 1,300
Additional amount received | ₪		₪ 413
NIS [Member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Maximum grant to be received | ₪							₪ 3,000

XML

SHAREHOLDERS' EQUITY (Narrative) (Details) $ / shares in Units, $ in Thousands			1 Months Ended			12 Months Ended
	Dec. 11, 2017 $ / shares shares	Oct. 15, 2016 $ / shares shares	May 31, 2018 USD ($)	Aug. 17, 2017 USD ($) $ / shares	Feb. 25, 2016 shares	Dec. 31, 2021 shares	Dec. 31, 2020 shares	Dec. 31, 2019 shares	Dec. 31, 2018 shares	Dec. 31, 2017 USD ($) shares yr	Dec. 31, 2016 USD ($) shares yr	Dec. 31, 2015 USD ($)	Aug. 24, 2017 shares	Jul. 17, 2016 shares
Disclosure of terms and conditions of share-based payment arrangement [line items]
Conversion of non-tradable options to purchase ordinary share					71,923,175
Reverse split					30,465
Ordinary shares, Authorized					700,000,000					700,000,000	700,000,000
Issuance of ordinary shares										10,694,820	10,000,000
Ordinary shares, Outstanding										10,694,820	10,000,000
Options granted										37,500	262,500
The weighted average remaining contractual life for the share options | yr										9.0	9.8
Share based payment compensation | $										$ 14	$ 9
Director [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Option grant to purchase ordinary shares	37,500	37,500
Exercise price of option | $ / shares	$ 1.00	$ 1.00
2016 Equity Incentive Plan [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Issuance of ordinary shares														1,000,000
Investors [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Proceeds from issuance of ordinary shares | $			$ 2,500
First Installment [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Number of option vested									10,000
Second Installment [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Number of option vested								10,000
Third Installment [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Number of option vested							10,000
Fourth Installment [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Number of option vested						7,500
Investors [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Issuance of ordinary shares													347,410
Share price | $ / shares				$ 1.5
Proceeds from issuance of ordinary shares | $				$ 1,000

XML

SHAREHOLDERS' EQUITY (Schedule Fair Value Measurement of Equity-settled Share Options Granted) (Details)	12 Months Ended
	Dec. 31, 2017 USD ($) yr	Dec. 31, 2016 USD ($) yr
Disclosure of terms and conditions of share-based payment arrangement [line items]
Share price | $	$ 0.82	$ 0.24
Dividend yield (%)	0.00%	0.00%
Expected volatility of the share prices (%)	100.00%	100.00%
Bottom of range [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Risk-free interest rate (%)	1.40%	1.36%
Expected life of share options (years)	5.5	5.5
Top of range [Member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Risk-free interest rate (%)	2.80%	1.58%
Expected life of share options (years)	7	7

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SHAREHOLDERS' EQUITY (Schedule of Share Options Activity) (Details)	12 Months Ended
	Dec. 31, 2017 USD ($) shares yr	Dec. 31, 2016 USD ($) shares yr
Disclosure of classes of share capital [abstract]
Outstanding at the beginning of the year | shares	262,500
Granted | shares	37,500	262,500
Forfeited and expired | shares	(37,500)
Outstanding at the end of the year | shares	262,500	262,500
Exercisable at the end of the year | shares	60,000
Weighted average exercise price outstanding at the beginning of the year | $	$ 1
Granted | $	1	1
Forfeited and expired | $	1
Weighted average exercise price outstanding at the ending of the year | $	1	1
Weighted average exercise price Exercisable at the end of the year | $	$ 1
Weighted- average remaining contractual term (in years) | yr	9.0	9.8
Weighted- average remaining contractual term exercisable at the end of the year | yr	8.8

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LOSS PER ORDINARY SHARE (Schedule of Loss Per Ordinary Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Earnings per share [abstract]
Loss attributable to ordinary shares	$ 2,159	$ 1,688	$ 201
Weighted average number of ordinary shares used in basic and diluted loss per ordinary share calculation	11,505,260	8,494,658	7,605
Continued operations Basic and diluted loss per ordinary share	$ 0.19	$ 0.20
Discontinued operation Basic and diluted loss per ordinary share			$ 26.43

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RESEARCH AND DEVELOPMENT EXPENSES (Schedule of Research And Development Expenses) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of research and development expense, net [Abstract]
Payroll	$ 741	$ 505
Materials and subcontractors	630	1,224
Rent and office maintenance	67	46
Depreciation	141	31
Other	62	23
Research and development expenses, gross	1,641	1,829
Less - OCS grants	(495)
Research and development expenses	$ 1,146	$ 1,829

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MARKETING, ADMINISTRATIVE AND GENERAL EXPENSES (Schedule of Marketing Administrative And General Expenses) (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Marketing Administrative And General Expenses Tables
Payroll		$ 43	$ 9
Professional fees		324	244
Travels		93	33
Director fees	[1]	37	22
Insurance		14	22
Other		236	11
Marketing, administrative and general expenses		$ 747	$ 341

[1] Including share based compensation expenses.

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FINANCIAL EXPENSES (Schedule of Financial Expenses) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Financing expenses:
Interest on shareholders loans	$ 229	$ 82
Exchange rate expenses (income), net	3	(13)
Bank fees	3	2
Financial expense	$ 235	$ 71

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SUBSEQUENT EVENT (Details) - New Investor [Member] - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended
	Jan. 11, 2018	Mar. 30, 2018	Feb. 28, 2018	Feb. 18, 2018
Statement Line Items [Line Items]
Investment			$ 12,000	$ 12,000
Price per share			$ 1.50
Receive warrant for purchase of up to ordinary shares			3,000,000
Received amount	$ 500	$ 1,500
Amount payment for closing equity investment		$ 2,000