ELRON ELECTRONIC INDUSTRIES LTD. (Exact Name of Registrant As Specified in Its Charter and Translation of Registrant’S Name Into English) ______
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________ FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 Commission File No. 0-11456 ______________ ELRON ELECTRONIC INDUSTRIES LTD. (Exact name of Registrant as Specified in Its Charter and Translation of Registrant’s Name Into English) ______________ ISRAEL (Jurisdiction of Incorporation or Organization) 3 Azrieli Center, 42nd Floor, Tel-Aviv, Israel 6702301 (Address of Principal Executive Offices) ______________ Yaron Elad, Vice-President & Chief Financial Officer Telephone: (972) 3-607-5555, Facsimile: (972) 3-607-5556 3 Azrieli Center, 42nd Floor, Tel-Aviv, Israel 6702301 (Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: None Securities registered or to be registered pursuant to Section 12(g) of the Act: Title of each class Ordinary shares, nominal value 0.003 New Israeli Shekels 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 29,743,767 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 ☐ Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: US 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 has elected to follow. Item 17 ☐ Item 18 ☐ If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 2 TABLE OF CONTENTS Page No. PART I Item 1. Identity of Directors, Senior Management and Advisers 6 Item 2. Offer Statistics and Expected Timetable 6 Item 3. Key Information 6 Item 4. Information on the Company 28 Item 4A. Unresolved Staff Comments 58 Item 5. Operating and Financial Review and Prospects 59 Item 6. Directors, Senior Management and Employees 87 Item 7. Major Shareholders and Related Party Transactions 109 Item 8. Financial Information 115 Item 9. The Offer and Listing 118 Item 10. Additional Information 119 Item 11. Quantitative and Qualitative Disclosures About Market Risk 146 Item 12. Description of Securities Other than Equity Securities 146 PART II Item 13. Defaults, Dividend Arrearages and Delinquencies 146 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 146 Item 15. Controls and Procedures 146 Item 16. [Reserved] 147 Item 16A. Audit Committee Financial Expert 147 Item 16B. Code of Ethics 147 Item 16C. Principal Accountant Fees and Services 148 Item 16D. Exemptions from the Listing Standards for Audit Committees 148 Item 16E. Purchases of Equity Securities by the Issuer and Associate Purchasers 148 Item 16F. Change in Registrant's Certifying Accountant 148 Item 16G. Corporate Governance 148 Item 16H Mine Safety Disclosure 148 PART III Item 17. Financial Statements 149 Item 18. Financial Statements 149 Item 19. Exhibits 149 3 Introduction As used in this annual report on Form 20-F (this "Annual Report"), the terms "we," "us," "our," the "Company" and "Elron" refer to Elron Electronic Industries Ltd. unless otherwise indicated. For the purpose of this Annual Report, the terms "group companies" and "companies in our group" collectively refer to subsidiaries, associates and other companies in which we have direct or indirect holdings through our wholly-owned subsidiaries, Elbit Ltd., or Elbit, and DEP Technology Holdings Ltd., or DEP, including DEP's 50.1% subsidiary, RDC Rafael Development Corporation Ltd., or RDC, and RDC's wholly owned subsidiary, R.D.Seed Ltd., or RDSeed. Our ownership interests in our group companies reflected in this Annual Report represent our beneficial ownership interests in the outstanding shares of these companies as of December 31, 2016 unless otherwise expressly indicated. Our outstanding beneficial ownership interests in the preferred shares of these companies are represented on an as-converted-basis, unless otherwise indicated. Except where expressly otherwise stated herein, our beneficial ownership interests do not take into account dilution due to the exercise of options or other convertible instruments and accordingly are subject to change as a result of the exercise of such options. Furthermore our fully diluted holdings do not take into account options or convertible loans when the amount of shares to be received upon their exercise or conversion, as applicable, is not known in advance. We have also indicated our direct holding and our share in the holding of RDC and RDSeed in a group company where applicable. The references in this Annual Report to the Statement of Financial Position items are as of December 31, 2016 unless otherwise indicated. Please be advised that in order to make our disclosure more consistent with the information disclosed in our previous Annual Report and with our annual report in Hebrew prepared in accordance with Israeli securities laws and regulations, being filed simultaneously with this Annual Report (see also "Item 4.A – History and Development of the Company”), certain information not required by this Annual Report on Form 20-F has been included. Cautionary Note Regarding Forward-Looking Statements This Annual Report includes certain "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and within the meaning of Section 32A of the Israeli Securities Law, 1968. The use of the words "projects," "expects," "may," "plans" or "intends," or words of similar import, identify a statement as "forward-looking." There can be no assurance, however, that actual results will not differ materially from our expectations or projections. Factors that could cause actual results to differ from our expectations or projections include the risks and uncertainties described in this Annual Report under "Item 3 – Key Information – Risk Factors," as well as those discussed elsewhere in this Annual Report and in our other filings with the United States Securities and Exchange Commission (the "SEC"). Any forward-looking statements contained in this Annual Report speak only as of the date of this Annual Report, and we caution investors and potential investors not to place undue reliance on these statements. We undertake no obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the risk factors in "Item 3 – Key Information – Risk Factors" of this Annual Report. 4 Group Companies Holdings Diagram The following is a diagram of our holdings in our group companies as of December 31, 2016, including the group operating companies held through our subsidiaries, DEP, RDC and RDSeed directly indicating our percentage interests in the outstanding share capital of those of our group companies in which the aggregate amounts invested by us are at least $1 million (reflecting our holding in ordinary shares and preferred shares on an as converted basis and not on a fully diluted basis): 5 (1) In February 2017, our holding in Coramaze increased to approximately 30% following an investment by us and other shareholders. See Item 4.A below for further details. (2) In March 2017, our holding in Nitinotes increased to approximately 24% following the second installment in accordance with the investment agreement. See Item 4.A below for further details. (3) In February 2017, our holding in Alcide decreased to approximately 26% following an investment by us, new investors, and other shareholders. See Item 4.A below for further details. (4) We acquired our holding in AudioBurst Ltd., or AudioBurst, as part of our investment in PlyMedia (2006) Ltd., or Plymedia. (5) In February 2017, RDC's holding in Secdo decreased to approximately 22% following the increase of its funding round by $2 million. See Item 4.A below for further details. (6) In February 2017, RDC's holding in Open Legacy decreased to approximately 40% following the increase of its funding round by approximately $2.3 million.