Eviation Aircraft (EVTNF) 20-F 2012 FY Annual report (foreign)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

 (Mark One)

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

OR

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

For the fiscal year ended December 31, 2012

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

R.V.B. HOLDINGS LTD.

 (Exact name of Registrant as specified in its charter)

R.V.B. Holdings Ltd.	Israel
(Translation of Registrant’s name into English)	(Jurisdiction of incorporation or organization)

Platinum House, 7 Jabotinsky St., Ramat Gan, 52509 Israel

(Address of principal executive offices)

Ofer Naveh, +972-3-611-4933, 7 Jabotinsky St., Ramat Gan, 52509, 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, par value NIS 1.00 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: 235,685,787 Ordinary Shares, par value NIS 1.00 per share, as of December 31, 2012 (not taking into account 1,040,000 dormant shares of the Registrant which are held by the Registrant).

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

Yes £  No S

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 S

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 S  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 S

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 S

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 o     Item 18 o

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 o    No S

TABLE OF CONTENTS

		Page
INTRODUCTION
PART I
Item 1.	Identity of Directors, Senior Management and Advisors	3
Item 2.	Offer Statistics and Expected Timetable	3
Item 3.	Key Information	3
Item 4.	Information on the Company	10
Item 4A.	Unresolved Staff Comments	17
Item 5.	Operating and Financial Review and Prospects	17
Item 6.	Directors, Senior Management and Employees	21
Item 7.	Major Shareholders and Related Party Transactions	29
Item 8.	Financial Information	31
Item 9.	Offer and Listing	32
Item 10.	Additional Information	33
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 12.	Description of Securities Other than Equity Securities	48
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	48
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	48
Item 15 and 15T.	Controls and Procedures	48
Item 16A.	Audit Committee Financial Expert	49
Item 16B.	Code of Ethics	49
Item 16C.	Principal Accountant Fees and Services	49
Item 16D.	Exemptions from the Listing Standards for Audit Committees	49
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	49
Item 16F.	Change in Registrant’s Certifying Accountant	49
Item 16G.	Corporate Governance	49
Item 16H.	Mine Safety Disclosure	50
PART III
Item 17.	Financial Statements	50
Item 18.	Financial statements	50
Item 19.	Exhibits	50
FINANCIAL STATEMENTS		F-1
SIGNATURE		51

INTRODUCTION

R.V.B. Holdings Ltd. ("RVB") (formerly B.V.R. Systems (1998) Ltd.), 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. RVB (then, BVR) commenced operations as an independent company effective as of January 1, 1998. In November 2009, RVB sold substantially all of its assets and liabilities, including the brand name "B.V.R.", to Elbit Systems Ltd. ("Elbit") and, subsequent to the sale, in January 2010 changed its name to R.V.B. Holdings Ltd. RVB was controlled by Mr. Aviv Tzidon until March 2010, when Greenstone Industries Ltd. ("Greenstone"), purchased from A.O. Tzidon (1999) Ltd. and Aviv Tzidon the control of RVB as of that date. As of January 12, 2012, RVB completed the multi-closing transaction in which it acquired all of E.E.R. Environmental Energy Resources (Israel) Ltd.'s ("EER") shares held by Greenstone and by S.R. Accord Ltd. ("Accord"), and the majority of EER shares held by certain other EER shareholders, and, as of the date of this annual report, holds approximately 79% of EER's share capital (approximately 74% on a fully-diluted basis) and approximately 99% of EER's voting rights (as a result of the Voting Agreement as described below).

The following is the annual report on Form 20-F for the fiscal year ended December 31, 2012 of R.V.B. Holdings Ltd. The terms “we”, “us”, “our”, “the Company” and “RVB”, as used in this annual report, mean R.V.B. Holdings Ltd.  unless otherwise indicated.

All references herein to “dollars” or “US$” are to United States Dollars, and all references to “Shekels” or “NIS” are to New Israeli Shekels.

On August 31, 2011, we completed the EER Transaction (as defined below) following which EER became our subsidiary. RVB had no business activity prior to the EER Transaction and thus does not meet the definition of a "Business" under IFRS 3. In addition, the majority of the shareholders of RVB following the completion of the EER Transaction were former EER shareholders. Therefore, the EER Transaction did not meet the definition of a "Business Combination" under IFRS 3. Thus, although RVB is the legal acquirer, for accounting purposes the EER Transaction was treated as a capital transaction of EER.  See also Note 2v to RVB's financial statements for the year ended December 31, 2012, starting on page F-1 of this annual report.

FORWARD LOOKING STATEMENTS

In addition to historical information, this annual report contains forward-looking statements. Some of the statements discussed in "Item 3.D. Risk Factors" and elsewhere in this report contain forward-looking statements. Statements that use the terms “believe”, “anticipate”, “expect”, “plan”, “intend”, “estimate”, “project” and similar expressions in the affirmative and the negative are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on current assumptions, expectations, estimates and projections with respect to, among others, the financial conditions and business results of EER and RVB. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.  Factors that could cause actual results to differ from our expectations or projections include the risks and uncertainties relating to our business described in this annual report under "Item 3.D. Risk Factors," "Item 5. Operating and Financial Review and Prospects" and elsewhere in this annual report. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof, except as required by applicable law. In addition to the disclosure contained herein, readers should carefully review any disclosure of risks and uncertainties contained in other documents that we file from time to time with the Securities and Exchange Commission (the "SEC").

To the extent that this annual report contains forward-looking statements (as distinct from historical information), we desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and we are therefore including this statement for the express purpose of availing ourselves of the protections of the safe harbor with respect to all forward-looking statements.

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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

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 Operations Data,” and “Statements of Financial Position Data” as of and for each of the years in the five-year period ended December 31, 2012, are derived from the audited consolidated financial statements of the Company and of EER. The consolidated financial statements as of December 31, 2012 and 2011, and for each of the years in the three-year period ended December 31, 2012, are included elsewhere in this annual report. The selected data should be read in conjunction with the consolidated financial statements and the related notes. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by The International Accounting Standards Board (IFRS).

As described above, although RVB is the legal acquirer, for accounting purposes the EER Transaction was treated as a capital transaction of EER and the financial data of previous years (comparative numbers) presented in this annual report is based upon the consolidated financial statements of EER for the years then ended. As of the date of this annual report, we do not have any other business activity aside from EER's business.

For additional information, see "Item 7.B. Related Party Transactions – The EER Transaction" in this annual report.

	Year ended December 31
	2012			2011			2010			2009			2008
Statement of Operations Data:	(US$ in thousands)
Revenues		62			63			-			-			-
Expenses
Operating expenses and facility maintenance		2,952			2,526			2,590			2,962			4,440
Marketing expenses		549			1,200			1,256			1,251			1,557
Administrative and general expenses		1,430			1,759			1,793			1,910			2,246
Other expenses					-			98			-			-
Total expenses		4,931			5,485			5,737			6,123			8,243
Loss from ordinary activities		(4,869	)		(5,422	)		(5,737	)		(6,123	)		(8,243	)
Financing income		428			54			17			29			108
Financing expenses		(60	)		(878	)		(1,917	)		(1,213	)		(900	)
Total financing expenses, net		368			(824	)		(1,900	)		(1,184	)		(792	)
Loss for the year		(4,501	)		(6,246	)		(7,637	)		(7,307	)		(9,035	)
Loss attributable to:
Owners of the Company		(3,615	)		(5,950	)		(7,637	)		(7,307	)		(9,035	)
Non-controlling interests		(886	)		(296	)		-			-			-
		(4,501	)		(6,246	)		(7,637	)		(7,307	)		(9,035	)
Basic and diluted loss per Ordinary Share (in US$)		(0.016	)		(0.029	)		(0.041	)		(0.041	)		(0.050	)
Weighted average number of Ordinary Shares used in basic and
diluted loss per Ordinary Share calculation (*)		231,686			204,861			187,507			179,561			179,561

(*) The number of ordinary shares as of the periods before the completion of the EER Transaction were adjusted according to the exchange ratio (11.65 shares of the Company for each share of EER) applied in the EER Transaction.

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	Year ended December 31,
	2012		2011		2010		2009		2008
	(US$ in thousands)
Consolidated statement of position:
Cash and cash equivalents		2,613		6,751		57		309		579
Fixed assets, net		11,092		12,505		13,967		15,557		17,016
Intangible assets, net		3,110		3,521		3,931		4,342		4,724
Total assets		17,493		23,015		18,695		21,863		23,417
Banks credits and loans		-		603		4,529		4,313		2,008
Shareholders loans and convertible		-		-		8,579		8,265		7,891
Equity attributable to owners of the Company		13,113		17,076		4,236		7,970		12,649
Non-controlling interests		3,428		3,902		-		-		-
Total equity		16,541		20,978		4,236		7,970		12,649

B.  Capitalization and Indebtedness

Not applicable.

C.  Reasons for the Offer and Use of Proceeds

Not applicable.

D.  Risk Factors

Investing in our securities involves significant risk. You should carefully consider the risks described below as well as the other information contained in this annual report before making an investment decision.  Any of the following risks could materially adversely affect our business, financial condition, results of operations and cash flows. In such case, you may lose all or part of your original investment. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or results of operations.

Risks Related to our Business

Our losses and financial position raise significant doubts as to our ability to continue as a going concern

We have incurred recurring losses and negative cash flows from operations that raise substantial doubt about our ability to continue as a going concern. This means that we do not have sufficient funds to finance our operations and working plan for the upcoming twelve months. Management is pursuing additional sources of financing and cash flow to fund its operations and while it has been successful in doing so in the past, there are no assurances that such funding will be attainable in the future. Management has concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon our ability to continue as a going concern. The financial statements do not include, however, any adjustments that might result from the outcome of this uncertainty. If we are unable to obtain adequate capital funding in the future, we may not be able to continue as a going concern, which would have an adverse effect on our business and operations, and investments may decline.

4

We have a history of losses, and expect losses to continue for the foreseeable future. We may not achieve profitability, or we may need to cease our operations if we do not get additional funding

We have incurred net losses in each fiscal year the last five years. We incurred net losses of approximately US$4,501 thousand in 2012, approximately US$6,246 thousand in 2011 and approximately US$7,637 thousand in 2010.

We expect losses to continue for the foreseeable future. The extent of our future operating losses and the timing of becoming profitable are highly uncertain, and we may never achieve or sustain profitability or may need to cease our operations.

The Company requires additional financing which could result in substantial dilution to existing shareholders

The Company is dependent on additional financing to satisfy its ongoing business obligations as mentioned above.  Any transaction involving the issuance of shares and/or preferred stock and/or securities convertible into common stock, and/or other kind of securities could result in dilution, possibly substantial, to present and prospective holders of common stock. These financings may be on terms less favorable to the Company than those obtained previously.

You may have difficulty enforcing a judgment issued by a court in the United States against us in Israel

We are organized under the laws of Israel and our headquarters are in Israel. All of our officers and directors reside outside of the United States. Therefore, you may not be able to enforce any judgment obtained in the United States against us or any of such persons. You may not be able to enforce civil actions under United States securities laws if you file a lawsuit in Israel. In addition, if a foreign judgment is enforced by an Israeli court, it will be payable in Israeli currency.

Currency fluctuations may affect the value of our assets and decrease our earnings

 The devaluation of the U.S. dollar against the NIS may decrease the value of our assets and could impact our business. We anticipate that a significant portion of our and EER's expenses will continue to be denominated in NIS.

If we are considered to be a passive foreign investment company, either presently or in the future, U.S. Holders will be subject to adverse U.S. tax consequences

We will be a passive foreign investment company, or a PFIC, if 75% or more of our gross income in a taxable year, including our pro rata share of the gross income of any company, U.S. or foreign, in which we are considered to own, directly or indirectly, 25% or more of the shares by value, is passive income. Alternatively, we will be considered a PFIC if at least 50% of our assets in a taxable year, averaged over the year and ordinarily determined based on fair market value, including our pro rata share of the assets of any company in which we are considered to own, directly or indirectly, 25% or more of the shares by value, are held for the production of, or produce, passive income. If we were to be a PFIC, and a U.S. Holder does not make an election to treat us as a “qualified electing fund,” or QEF, or a “mark to market” election, “excess distributions” to a U.S. Holder, and any gain recognized by a U.S. Holder on a disposition of our ordinary shares, would be taxed in an unfavorable way. Among other consequences, our dividends would be taxed at the regular rates applicable to ordinary income, rather than the 15% maximum rate applicable to certain dividends received by an individual from a qualified foreign corporation. The tests for determining PFIC status are applied annually and it is difficult to make accurate predictions of future income and assets, which are relevant to the determination of PFIC status. In addition, under the applicable statutory and regulatory provisions, it is unclear whether we would be permitted to use a gross loss from sales (sales less cost of goods sold) to offset our passive income in the calculation of gross income. In light of the uncertainties described above, we have not obtained an opinion of counsel with respect to our PFIC status and no assurance can be given that we will not be a PFIC in any year. If we determine that we have become a PFIC, we will then notify our U.S. Holders and provide them with the information necessary to comply with the QEF rules. If the IRS determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, however, it might be too late for a U.S. Holder to make a timely QEF election, unless the U.S. Holder qualifies under the applicable Treasury regulations to make a retroactive (late) election. U.S. Holders who hold ordinary shares during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. Holders who made a timely QEF or mark-to-market election.

5

Your rights and responsibilities as a shareholder will be governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law

We are incorporated under Israeli law. The rights and responsibilities of the holders of our Ordinary Shares are governed by our amended and restated articles of association ("Articles of Association") and by Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders and to refrain from abusing his power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. See “Item 10.B. Additional Information – Memorandum and Articles of Association”.

Risks Relating to EER

The redesign of our facility in itself may not be sufficient to achieve our development goals.

EER has allocated additional funding (about US$1 million) to redesign the core of the demonstration facility in Y'bllin, together with redefinition of the process operating parameters based on accumulated data from previous trial runs.

While we believe that such redesign will allow a continuous operation of the facility, leading to a "steady state", which will generate a quantitative data characterizing both the process itself, as well as its economics, we have no assurance that we will realize this goal and reach the next stage of development of the PGM Technology.

EER has a history of losses and it may incur future losses and may not achieve profitability

EER is currently focusing on research and development, as well as on the introduction of its technology and penetration into relevant markets. EER has limited operating history and consequently it has incurred net losses in each of the last three fiscal years. EER has incurred net losses of US$4.1 million in 2012, US$6.2 million in 2011 and US$7.6 million in 2010. As of December 31, 2012, EER's accumulated deficit was US$51.5 million.

As of the date of this annual report, EER has no material source of income from the sale of products, licensing or research and development activities. In addition, EER has not yet established and operated a commercial plant which implements its technology. Therefore, EER expects that, at least for the coming years, it will continue to operate with operational losses. EER's losses could continue as EER expands its commercialization efforts, increases its marketing expenses and continues to invest in research and development. Due to the above, the extent of EER's future operating losses and the timing of becoming profitable are uncertain. In addition, EER has limited experience in commercializing its technology and faces a number of challenges with respect to its commercialization efforts, including, among others:

· EER relies on external finance for its business activity, and it may not have adequate financial or other resources;

· EER may not be able to introduce its technology to the relevant markets;

· EER may fail to obtain or maintain regulatory approvals for its facilities and products or may face adverse regulatory or legal actions relating to its facilities and services even if the necessary regulatory approvals are obtained;

· EER may face technical and engineering difficulties relating to the development, scale-up and implementation of its technology;

· EER's research and development activity is conducted in collaboration with third parties, and its success depends on their efforts. In the event that such third parties discontinue their collaboration with EER, that could adversely affect EER's research and development and engineering capabilities;

· EER may not be able to maintain and operate its demonstration facility in Israel, due to, among others, its inability to renew its business license beyond its expiration on June 30, 2013;

· EER depends on a small number of employees who possess both executive and technical expertise, the departure of which may affect its business; and

· EER may face third party claims of intellectual property infringement.

The occurrence of any one or more of these events may limit EER's ability to successfully commercialize its technology, which in turn could prevent EER from generating significant revenues and could harm its business, financial condition and results of operations.

6

RVB, a publicly held company, is subject to certain limitations in its efforts to synergize the operations of RVB and EER

Some transactions between RVB and EER, including any termination of such transactions, will require the approval of EER's board of directors, and, under certain circumstances, may require the approval of the shareholders of EER and are subject to the receipt of applicable permits and approvals. In addition, any dividend or distribution from EER requires the approval of the directors of EER. As such, RVB may be limited in its ability to fully realize the synergies and other benefits of the EER Transaction.

EER relies on external funding for the commercialization of its technology and services.

As part of its business model, EER may enter into joint projects with third parties for the establishment of waste treatment facilities that would implement EER's technology. The estimated cost of establishing such plants ranges between tens of millions to hundreds of millions of U.S. dollars. Therefore, EER's partners, and in some cases EER itself, might need to raise significant funds on a project by project basis. External financing may not be available on a timely basis, at an attractive cost of capital, or at all. In addition, EER and/or its partners may face difficulties in raising funds for their joint projects, since EER's Plasma Gasification-Melting (PGM) technology, has not yet proven itself commercially in the field of municipal solid waste and medical waste and, therefore, senior lenders or equity providers may be reluctant to extend funds for such projects. Moreover, some of EER's target markets have previously been adversely affected by global economic slowdowns and recessions which have led to reduced consumer and governmental spending. Current and future economic slowdowns and recessions may have an adverse effect on EER's and its partners' ability to raise capital or debt at an attractive cost of capital. Consequently, EER and/or its potential partners may face difficulty to raise sufficient funds to take on new projects or establish new plants and thus EER may not be able to introduce its technology to the relevant markets. In addition, any such external financing may be dilutive to us or may require us to grant a lender a security interest in our or EER's assets.

EER will require additional funding for its ongoing operations and for the commercialization of its technology and services

EER's current day to day operations require substantial amounts of financial resources. As of the date of this annual report, EER has no source of income, and it has not yet established and operated a commercial plant which implements its technology. There is no assurance that EER will be able to raise external financing on a timely basis, at an attractive cost of capital, or at all. If adequate external financing on acceptable terms is not available, EER will not be able to continue its operations, develop its technology or market its technology and services.

EER's ability to commercialize its technology is also dependent on collaboration with third parties

EER's business strategy includes entering into cooperative arrangements with third parties for establishing plants and marketing EER's technology and services worldwide. There is no certainty that EER will be able to negotiate such arrangements on acceptable terms, if at all, or that such arrangements will be successful in yielding commercially viable products. If EER is unable to establish such arrangements, it would require additional working capital to undertake such activities on its own and would require extensive marketing expertise that EER does not currently possess. In addition, EER could encounter significant delays in introducing its technology into certain markets or find that penetrating such markets would not be feasible without, or would be adversely affected by the absence of, such arrangements. To the extent that EER enters into such joint venture arrangements, its revenues will depend upon the robustness, stability and efforts of third parties. There is no certainty that any such arrangements will be successful.

EER operates in a competitive market, and its technology has not yet proven itself commercially in the field of solid waste and medical waste

EER's Plasma Gasification-Melting (PGM) technology has been developed to convert solid waste into synthesis gas and products suitable for construction materials or other uses. The core of the technology was developed at the Kurchatov Institute in Russia. This technology has been used for more than two decades for the treatment of low and intermediate level radioactive waste in Russia. The PGM technology is applicable for treatment of, among others, municipal solid waste (MSW), municipal effluent sludge, industrial waste and medical waste. The waste treatment market is a conservative market and new technologies are not easily accepted. Therefore, traditional applied technologies in the treatment of solid waste still enjoy greater market recognition compared to PGM technology and other advanced technologies, and some companies that offer solutions based on these traditional technologies have substantial experience in establishing and operating waste treatment facilities and greater financial capabilities compared to EER. In addition, there is no certainty that potential customers will prefer the technology of EER over the technologies of EER's competitors, either those using traditional technologies or those using other kinds of advanced technologies for waste treatment. Additionally, the development of a more effective or cheaper technology by a competitor will have an adverse effect on EER.

7

Moreover, Plasma based, gasification based and Plasma gasification based technologies are implemented by different companies for the treatment of municipal solid waste (MSW), municipal effluent sludge, industrial waste and medical waste for more than a decade. Some of the prominent competitors in the field of PGM include Thermoselect, Ebara, S4 Energy Solution, Alter NRG and Plasco Energy Group. Most of these companies enjoy greater financial capabilities compared to EER, and some of them are located in Europe or in Canada and the U.S., and thus they are geographically closer to the EER's target markets.

EER faces uncertainty relating to the costs of potential projects and the pricing of its services

EER currently faces uncertainty relating to the pricing and construction costs of solid waste treatment facilities, and its marketing costs. Failure to assess its future costs correctly could result in substantial losses to EER.When calculating the profitability of potential projects, EER makes several assumptions relating to its expected income from waste treatment fees (Tipping Fees) and energy sales, as well is its expected capital and operational costs. These assumptions are based on the existing prices in the relevant markets, and, among others, the existence of certain governmental subsidies and incentive plans for "green" technologies. Price reductions or changes in such governmental subsidies and incentive plans in these markets may affect the profitability of potential projects and may result in losses to EER.

EER may encounter engineering difficulties relating to the scale up its technology

As of the date of this annual report, EER has not yet established and operated a commercial plant that implements its technology. The testing and demonstrations of EER's technology are done mostly in EER's demonstration facility in Israel and are limited in their duration due to the restrictions contained in EER’s operating license. While demonstrations conducted in recent years have proven that EER's technology is feasible for commercial use, EER may face unforeseeable challenges and engineering difficulties and may not be able to successfully scale up its technology for commercial use.

Changes in the legislation, standards and regulations relating to EER’s field of operations may adversely affect its operations and profitability

EER's business activity is regulated by environmental laws and regulations in the markets in which it operates. More specifically, EER's business activity is bound by the provisions of the Israeli Clean Air Law, the Israeli Hazardous Substances Law (and the Hazardous Waste License obtained in connection therewith) and additional environmental laws and regulations. In addition, EER's international business activity is expected to be subject to international and regional conventions and directives, as well as local laws, regulations and standards, relating to environmental, hazard control, medical and radioactive waste treatment, and other aspects that may be related to the establishment and operation of waste treatment facilities. EER spends substantial amounts of cash in order to comply with these regulations. Any changes in legislation, standards and regulations or any policy changes undertaken by various authorities pertaining to environmental protection under the jurisdictions EER operates in could have a significant effect on the activity of EER.

Intellectual property is extremely important to EER's business, and its inability to protect its intellectual property would harm EER's competitive position

As of December 31, 2012, EER has had eight (8) active families of patent applications and patents. In addition to patents, EER relies on confidentiality agreements and similar mechanisms to protect its know-how and intellectual property, the core of which was historically developed at the Kurchatov Institute in Russia. These measures are limited in terms of their effectiveness in protecting EER’s intellectual property and could therefore prove inadequate in limiting unauthorized use of EER’s know-how. Additionally, such measures do not guarantee that other parties may not claim rights in certain know-how that is being used by EER in its research and development activities. There is also no assurance that pending patent applications will be approved, or that any such approved patents will be broad enough to protect EER's technology, or will not be challenged or invalidated by third parties. Nor are there assurances that such patents provide EER with competitive advantages, or that the patents of others will not have an adverse effect on EER's ability to do business.

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EER's business may suffer if EER becomes involved in disputes or protracted negotiations regarding its intellectual property rights or the intellectual property rights of third parties

EER is subject to the risk of adverse claims and litigation alleging infringement by EER of the intellectual property rights of others. There are increasing numbers of patents and patent applications in EER's industry. Third parties may assert infringement claims in the future, alleging infringement by EER's current or future technology or applications. EER may institute or otherwise be involved in litigation to protect its registered patents and/or trade secrets or know-how, challenge the validity of proprietary rights of others or defend against alleged infringement by EER of proprietary rights of others. This type of litigation is costly and diverts management’s attention from its day-to-day responsibilities of running EER's business. In addition, an adverse determination in such litigation could:

· limit the value of EER's trade secrets or know-how;

· subject EER to significant liabilities to third parties;

· require EER to seek licenses from third parties; or

· prevent EER from commercializing and marketing its technology and service, any of which could have a material adverse effect on EER's business, financial condition and results of operations.

EER has received grants from the Office of the Chief Scientist in Israel, and it is therefore obligated to pay certain royalties to the Israeli government from sales of its products, and it is bound by the provisions of the Israeli Research and Development Law

EER has received grants from the government of Israel through the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor, or the Office of the Chief Scientist, for the financing of a portion of its research and development expenditures in Israel, pursuant to the Encouragement of Industrial Research and Development Law, 1984, or the R&D Law. Under the R&D Law, royalties on the revenues derived from sales of products (and related services) developed (in all or in part) according to, or as a result of, the Office of the Chief Scientist funded plans are payable to the Israeli government, at annual rates which are determined under the Encouragement of Industrial Research and Development Regulations (Rate of Royalties and Rules for the Payment thereof), 1996, or the R&D Regulations, up to the aggregate amount of the grants received by the Office of the Chief Scientist, plus annual interest (as defined in the R&D Regulations). Any intellectual property developed using the Office of the Chief Scientist funds must be fully and originally owned by the Israeli company which received such funds. The R&D Law restricts the ability to transfer abroad know-how funded by the Office of the Chief Scientist. Transfer of such know-how to a foreign entity requires prior approval from the Office of the Chief Scientist, and is subject to payment of a redemption fee to the Office of the Chief Scientist calculated according to formulas provided under the R&D Law. As of the date of this annual report, EER has received a total of NIS 1.7 million (approximately US$0.4 million), out which an amount of NIS 1.5 million (approximately US$0.35 million) has not yet been repaid by EER.

If EER transfers outside of Israel know-how and technology, which were developed according to, or as a result of, the Office of the Chief Scientist funded plans, without obtaining the approval of the Office of the Chief Scientist, it may also be subject to criminal charges. In recent years, the government of Israel has accelerated the rate of repayment of the Office of Chief Scientist grants and may further accelerate them in the future. These restrictions on transferring technologies and/or manufacturing outside of Israel continue to apply even after EER have repaid any grants, in whole or in part.

EER's dependence on a single facility, which does not operate continuously, magnifies the risk of an interruption in its business operations

As of the date of this annual report, EER does not own any other facility other than a facility, located near the village of Y'bllin, in Northern Israel (the "Y'bllin Facility").The Y'bllin Facility, according to its permit, can operate only few times a year. The current business license relating to the operation of the Y'bllin Facility, which is subject to certain conditions set forth by the Israeli Ministry of Environmental Protection, is valid until June 30, 2013. The business license must be renewed on an annual basis. In the event that EER is unable to renew its business license, or if EER will not be able to meet the conditions of the new license, it could have a significant effect on its activity. Any event affecting the Y'bllin Facility, including natural disaster, labor stoppages or armed conflict, or EER's lack of financial resources to operate the plant, may disrupt or indefinitely discontinue EER's research and development, operational and marketing capabilities and could significantly impair its business.

Because of EER's small size, it depends on a small number of employees who possess both executive and technical expertise, and the loss of any of these key employees would hurt EER's ability to implement its business strategy and to compete effectively in its target markets

Because of EER's small size and its reliance on employees with either executive or advanced technical skills, its success depends significantly upon the continued contributions of its officers and key personnel. All of EER's key management and technical personnel have unique expertise, which might be in high demand among its competitors, and the loss of any of these individuals could cause EER's business to suffer.

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EER might not be able effectively manage its growth

If the commercialization of EER's technology and services is successful, EER's business will need to grow. Continued growth would subject EER to numerous challenges, including, among others, implementing appropriate operational and financial systems and controls, and increasing and training its manpower within a short period of time to cope with the EER's administrative, marketing, engineering and operational needs. EER's expected growth may place significant demands on its management and require financial and operational resources. If EER is unable to manage its growth, its business, financial condition and results of operations could be harmed.

ITEM 4. Information on the Company

A.  History and Development of the Company

Our legal and commercial name is R.V.B. Holdings Ltd. Our office is located at 7 Jabotinsky St., Ramat Gan 52520, Israel, and our telephone number is +972 (3) 611-4933.

We were incorporated as an Israeli corporation under the name B.V.R. Systems (1998) Ltd. ("BVR"), in January 1998 to receive all of the assets and liabilities of the defense-related business of BVR Technologies Ltd., or BVR-T, in accordance with the terms of a reorganization plan. The reorganization plan was consummated, and BVR commenced operations as of January 1, 1998. In January 2010, we changed our name to R.V.B. Holdings Ltd. Our corporate governance complies with the Israeli Companies Law, 1999, as amended (the "Companies Law").

On July 19, 2009, we entered into an asset purchase agreement with Elbit Systems Ltd., or Elbit, whereby Elbit acquired substantially all of our assets and business for cash consideration of approximately US$34 million and assumed substantially all of our business related liabilities (the "Elbit Transaction"). The sale of our business to Elbit was completed on November 19, 2009.  For more information related to the Elbit Transaction see "Item 10.C. Material Contracts", below.

On March 24, 2010, Greenstone exercised its option to purchase from Aviv Tzidon and A.O. Tzidon (1999) Ltd., a company wholly owned by Aviv Tzidon (collectively: "Tzidon"), the control of the Company. As part of the closing of the option exercised by Greenstone, A.O. Tzidon (1999) Ltd. purchased from HSN General Managers Holdings Limited Partnership (“HSN”) all of its holdings in the Company, namely 20,000,000 of our Ordinary Shares, which constitute part of the shares sold by Tzidon to Greenstone, at a price per share of US$0.215 and an aggregate consideration of US$4,300,000, pursuant to a share purchase agreement between HSN and Tzidon, dated February 6, 2011. On March 15, 2011, pursuant to an agreement entered into by and among Greenstone and Tzidon on December 12, 2010 and the option awarded to Greenstone to purchase up to 65% but not less than 50.14% of our issued share capital as of that date, Tzidon sold to Greenstone: (i) 76,680,848  of our ordinary shares, constituting 65% of our issued and outstanding share capital as of that date (not taking into account 1,040,000 of our dormant shares); and (ii) 1,800,000 options exercisable into 1,800,000 of our ordinary shares (such option expired in November 2011).

On August 22, 2011, our shareholders approved the EER Transaction (following an approval by our audit committee and board of directors), together with a form of additional share purchase agreement, to be entered into between RVB and certain EER shareholders who elect to join the EER Transaction and sell their holdings in EER to RVB, in exchange for RVB shares (the "Additional SPA"). As of January 12, 2012, we completed the multi closings of the EER Transaction and purchased 7,996,210 EER shares from Accord and Greenstone, our controlling shareholder at that date and 8,048,958 EER shares from other EER shareholders and issued a total of 113,825,252 RVB shares. Following such closings, there is one shareholder who holds 200,000 shares of EER (constitutes approximately 1% of EER share capital) other than the Company and Mazal (which is party to the Option Agreement with the Company). For information regarding the EER Transaction and the Additional SPA, see "Item 7.B. Related Party Transactions – The EER Transaction" in this annual report.

From October 1998 until March 2001, our ordinary shares traded on the NASDAQ National Market. Between March 2001 and February 2003, our ordinary shares traded on the NASDAQ Small Cap Market under the symbol BVRSF.  From February 2003 until March 2010 our ordinary shares quoted on the Over the Counter Bulletin Board under the symbol BVRSF.OB. Since March 2010, our ordinary shares have been quoted on the Over the Counter Bulletin Board under the symbol, RVBHF.OB, which reflects our name change to R.V.B. Holdings Ltd.

Capital Expenditures

We had no material capital expenditures during the years 2012, 2011 and 2010. See also "EER's Business Overview" in 4B below.

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4.B.  Business Overview

General

On August 31, 2011, we completed the EER Transaction (on January 12, 2012, both closings of EER Transaction were completed), following which, EER became our subsidiary. For additional information, see "Item 7.B. Related Party Transactions – The EER Transaction" in this annual report.

Below is a description of EER's business. As of the date of this annual report, we do not have any other business activity besides EER's business.

EER's Business Overview

EER was incorporated in Israel in the year 2000, as a private company. EER is in the waste management industry, developing technology for the conversion of certain types of waste into recycled materials or energy via waste to energy technology ("WTE"). Moreover, EER develops technology for treatment of solid waste through Plasma-Gasification-Melting, which is a new, innovative technology to treat solid waste (including, among others, treatment of urban waste, medical waste and radioactive waste that emits low and medium-level radiation) (the "PGM Technology").

In early 2007, EER completed the construction of the Y'bllin Facility. Over the years 2007-2009, several demonstrations were held using the Y'bllin Facility. As part of the working plan of EER, the Board of Directors approved an investment of up to US$1 million in the Y'bllin Facility. The purpose of the investment is to make improvements to the Y'bllin Facility, which primarily involve the replacement of the current processing chamber and preparation of the facility for continuous operation.

 EER's business plan is to sell licenses and equipment for use of PGM Technology, and such transactions are entered into for the purpose of establishing facilities that treat solid waste in different parts of the world and is designed to require EER's expertise in constructing such facilities, As of the date of this annual report, EER is conducting the preliminary stages of their marketing plan and is simultaneously developing and improving its PGM Technology. EER's offices are located in 21 HaMelacha St, Rosh Ha'ayin, Israel. EER's lease at their Rosh Ha'ayin office expires in November of 2018.

EER's Industry

With the rapid growth in the world's population, the waste generation volume is becoming an increasing concern around the world. The world's population is producing approximately 2.5 billion tons of municipal solid waste ("MSW") each year. Certain factors, such as the rate of growth in the general population, improvements in the quality of life and continuous increase in the global GNP, contribute to the accelerated growth in the production of MSW. In order to cope with the constant growth in the production of waste, the global waste management industry is undergoing certain changes, among which the transfer from traditional waste disposal methods to a resource recovery processes. In light of these changes, the development of new technology is required in order to convert certain types of waste into recycled materials or energy.

Nations around the world vary in their progress towards the facilitation of these changes. Countries like Germany, Japan, Denmark and the Netherlands, which are characterized as 'mature markets' already have clear regulatory, fiscal and policy frameworks in place for such matters, and over the last few years, they placed substantial investments in the development of modern waste treatment solutions. On the other hand, some countries, like the U.K., Italy, Spain, Greece, Canada, Australia, as well as some Gulf Arab states and certain countries in East and South-East Asia, are characterized as immature markets. These countries are expected to show rapid growth in the amount of waste treatment over the next ten to fifteen years, due to the increase of new regulations which aim to direct the waste streams from traditional waste treatment methods, such as landfill and incineration, to the alternative technology sector. Other countries, including some EU Member States, some countries in the Middle East, South Africa, Latin America and the Caribbean, are characterized as embryonic markets. In these countries, there is little governmental investment in the development or the adoption of "green" advanced technologies, and the relevant regulation is considered obsolete. The US, one of EER's primary target markets, can be divided into different categories, some U.S. states are mature, some are emerging and some are embryonic.

There are currently three main waste treatment methods, employed by different companies and governments around the world:

· Recycling - Recycling is the process of sorting waste and reusing the items from which utility can still be derived. This method is not always economically feasible, as it requires a substantial amount of resources for sorting waste. In addition, a large portion of waste is not recyclable.

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· Landfill – The use of landfill is the most traditional and common method for waste treatment, which involves disposal of waste by burial in landfill sites. This method, though it is common, is a main factor for pollution of air, ground and underground water. Therefore, in recent years, some countries, such as Germany, Austria, Belgium, the Netherlands, and Switzerland, have banned the disposal of untreated waste in landfills and some other countries have set up time frame for banning landfill operations.

· Waste to Energy (WTE) -The WTE method is divided into three main methods: biological, physical and thermal. The thermal treatment is divided to three main processes: Incineration, thermal gasification/pyrolisys and plasma gasification. The incineration process has a lot of disadvantages, such as the emission of toxic gases and ashes which require additional separate treatment. Therefore, the thermal processes of gasification or plasma gasification are more attractive options since they do not require additional separate treatment and do not bear the disadvantages of incineration.

The Waste to Energy Market

Each year, approximately 170 million tons of municipal solid waste is treated in about 900 waste treatment facilities around the world. The WTE market was estimated to be worth US$7 billion in 2010, and its estimated annual growth is 6-10%. Thus, the WTE market is expected to be worth about US$27 billion in 2021.

The main entrance barriers to the solid waste market include acquisition and development costs, licensing costs, depending on local regulation in each country in which the technology is implemented, facilities establishment costs, large competitors and willingness of finance institutions to finance the establishment of facilities based on new technologies.

The global economic crisis has caused, among other impediments, a decrease in the investments in advanced technologies, including new emerging technologies such as the PGM technology. According to EER's estimation, in spite of the recovery from the crisis during 2009 through 2011, it is still very difficult for EER and its customers to obtain financing for its activity and facilities from private investors and especially from institutional investors. Many companies around the world are in the business of developing advanced technologies for the treatment of solid waste, and such companies can compete with EER in its target markets. Some of these companies use different variations of the plasma gasification technology, and some use other WTE technological solutions.

Below is a description of the main new thermal treatment technologies (NTTT), which EER's competitors are developing:

· Gasification technology - thermal reaction under a deficient supply of oxygen which creates fuel gas, along with heat which supports conversion of the rest of the waste, a process which increases the energetic efficiency.

· Pyrolysis technology - a similar process to the gasification. The waste is first processed in an early process for the creation of refuse-derived fuel.

· Plasma technology - gasification of the materials conducted in the highest temperatures under special conditions.

· Thermal Hydrolysis technology - technology based on "cold incineration". This technology cannot be used for treatment of solid waste.

· Hybrid facilities - facilities which combine different innovative WTE technologies. The PGM technology belongs to this technology.

These are the main advantages of the PGM technology:

· Decreased operating costs due to the combination of three processes into one continuous process.

· Decreased operating costs due to the fact that the pollution level in this technology is lower, compared to other technologies.

· The ability to handle a wide spectrum of waste without the necessity of any preliminary sorting or treatment.

· The solid residue of the process is an environmentally benign material which can be used as raw material in construction.

In addition, Pursuant to EER's estimation, its ability to prove the implementation of the PGM technology by a demonstration facility may provide it a competitive advantage compared to the other NTTT.

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EER's major competitors in the field of waste treatment include:

· Thermoselect – a Swiss origin Pyrolysis/Gasification technology, which has been implemented in Japan by JFE and licensed in the U.S. by IWT. Thermoselct has several commercial installations in Japan that are processing selective portion of MSW and industrial waste.

· JFE – a large Japanese engineering company, active in various waste treatment areas, also with own proprietary solutions.

· Ebara – a Japanese gasification technology with several installations in Japan for MSW.

· Westinghouse (AlterNRG) – Plasma Arc technology, implemented by AlterNRG, a Canadian listed company. There are several installations of AlterNRG in Japan.

· Plasco Energy – a Canadian plasma arc technology company, aiming for MSW conversion. To the best of our knowledge, Plasco Energy has raised significant funds to establish its first commercial facility and to support a vast worldwide business development activity related to waste treatment.

· InEntech (S4) – MIT Plasma technology. Significant funds were invested in the technology so far. Several installations are located in Asia and one in US. It has formed together with Waste Management, a joint venture, for the implementation of its technology.

Other companies in the field include, Nippon Steel (Japan), Entech, S4 Energy Solution, GEM, Enerkem, Nexterra and OE, that mostly have gasification technology for specific waste streams.

Material Agreements

The Kurchatov Institute Agreement

On June 6, 2000, EER Ltd., entered into an agreement with the Kurchatov Institute, which was amended on February 12, 2002 (the “Kurchatov Agreement”) (the agreement and the rights and obligations of EER Ltd. thereunder were later assigned to EER). Under the terms of the Kurchatov Agreement, Kurchatov Institute assigned and transferred to EER Ltd. all then present and future intellectual property rights and know-how related to the Y'bllin Facility (which was designed, manufactured and constructed by EER) and to the Additional Projects (as defined below) (collectively, the "IP Rights"). According to the Kurchatov Agreement, EER shall cover all the expenses related to the assigning, registration and recordation of the IP Rights. According to the Kurchatov Agreement, the Kurchatov Institute shall fully cooperate with EER for the purposes of utilizing the PGM technology with regard to MSW, Medical Waste (“MW”), Low Radio Active Waste (“LRAW”) and PGM Compatible Industrial Waste (“IW”), including, but limited to, the designing and construction of plants and installations by EER Ltd., its licensee(s) and/or other purposes (the "Additional Projects"). Upon EER’s request, the Kurchatov Institute shall assign to EER any know-how or intellectual property rights relating to such technologies to be used outside the territories comprising the former Soviet Union, provided the financial and other legal and reasonable interests of the Kurchatov Institute have been satisfied. The Kurchatov Institute and its affiliates shall exclusively work with EER on all of the aforementioned applications of the PGM Technology, and shall not assist, directly or indirectly, any individual or entity to engage in any activity in the fields of SMW, MW, LRAW and IW. In addition, the Kurchatov Institute undertook to provide EER  its know-how and experienced highly qualified specialists in order to obtain the required scientific and technical qualifications in the works related to the Projects, as will be mutually agreed by the parties. In consideration for Kurchatov Institute’s undertakings under the Kurchatov Agreement, EER shall pay Kurchatov Institute a royalty in the amount of 1% of the purchase price actually received by EER from the sale of the Additional Projects.

The PyroGenesis Agreement

On December 5, 2005, EER entered into an agreement for the purchase of equipment with PyroGenesis Inc. (“PyroGenesis” and the “PyroGenesis Agreement”), under which EER purchased from PyroGenesis a Non-Transferred Arc Plasma Torch System (the “Equipment”) which was installed in the Y'bllin Facility, for an aggregate amount of US$810,000 (the “Purchase Price”). The Purchase price did not include spare and wear parts, and certain other components. Pursuant to the PyroGenesis Agreement, PyroGenesis was provided with a right of first refusal for the supply of any and all future torch systems required by EER.

The Radon Center Agreement

On December 28, 2005, EER entered into an agreement for partnership, R&D collaboration and joint activity with the Radon Center (the “Radon Agreement”), under which the parties agreed to enter into a scientific cooperation, including joint research and experiment development. According to the Radon Agreement, EER may use, from time to time, Radon Center’s test facility for Low Radio Active Waste treatment, in order to perform experiments and demonstrations. The original term of the Radon Agreement was 5 years, and it has not been renewed.

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The Lease Agreement

In July 2012, EER renewed the Lease Agreement (originally entered into in September 2007) with Naser Recycling Ltd. ("Naser"), with respect to the ground on which the Y'bllin Facility is located (the “Lease Agreement”) for a period of five years (the “Lease Period”), and EER has an option to extend the term of the rent for additional five years (the "Option Period"). The monthly rent for the first 18 months of the Lease Period is NIS 40 thousand (approximately US$10 thousand) and NIS 45 thousand (approximately US$11 thousand) for the remaining Lease Period. The monthly rent for the Option Period will be NIS 50 thousand (approximately US$13 thousand). All the amounts mentioned above are linked to the CPI and do not include VAT. The payment of the rent will be paid for each year of lease in advance.In addition to the rent fees and if the Y'bllin Facility becomes a commercial plant, Naser will be entitled to receive certain payments from profits generated by the plant and/or from proceeds of the sale of the plant, as set forth in the Lease Agreement. Pursuant to the terms of the Lease Agreement, the Y'bllin Facility is the property of EER, and EER is responsible for disassembling the Y'bllin Facility and removing it from the property at the end of rental period. It was further agreed that to secure EER’s commitments pursuant to the Lease Agreement, EER gave Naser a bank guarantee in the amount of US$250 thousand.

KTH Agreement

On June 4, 2009, EER entered into a cooperation agreement with KTH, Royal Institute of Technology of Sweden (the “KTH Agreement”). Under the terms of the KTH Agreement, which is valid for a term of 5 years, KTH undertook to provide EER with technical and scientific support in the ongoing development of the PGM process, including full access to laboratories and facilities of KTH. In the event that EER requests KTH to perform any particular project, EER shall send to KTH a specific work order, specifying the tasks to be performed and the consideration to be paid to KTH for performance of such work. The parties agreed that EER shall have and retain all rights and interests in the PGM process. Any publication of work by KTH which is related to or involving the cooperation between the parties shall require the prior written consent of EER.

The SNC Agreement

On September 15, 2010, EER entered into a memorandum of understanding (the “SNC MOU”) with SNC-Lavalin Engineers & Constructors Inc. (“SLE&C”) which, to the best of EER’s knowledge, is a private company and a subsidiary of SNC-Lavalin Group Inc., a company whose shares are listed for trade on the Toronto Stock Exchange, Canada (“SNCL-G”), and among the leading engineering and construction corporations in the world. The SNC MOU establishes methods of cooperation between EER and SLE&C in respect to projects aimed at exploiting PGM Technology. The SNC MOU expired and terminated automatically as of December 31, 2012.

The LOI with Approved Storage & Waste Hauling Inc.

On January 25, 2011, EER entered into a letter of intent with Approved Storage & Waste Hauling Inc. ("ASWH" and the "ASWH LOI"), relating to the formation of a joint venture for an initial pilot project (the "Pilot Project"). According to the ASWH LOI, the Pilot Project will process Regulated Medical Waste in an initial capacity of 15-30 short tons per day. According to its terms, the ASWH LOI expired and was terminated as of December 31, 2012.

Framework Agreement

On May 31, 2012, EER entered into an agreement with a third party located in the U.S. (the “US Company”), for the initial planning and the supply of EER's technology of Plasma-Gasification-Melting Waste-To-Energy (the “Framework Agreement”) in plants (the “Facilities”) located in five states in the U.S. and such other territories as may be agreed between EER and the  U.S.  Company (“Territories”). The Framework Agreement replaces a previously signed letter of intent from March 2011, which is considered null and void.

Under the terms of the Framework Agreement, EER shall produce (directly or with a designated engineering company) a Preliminary Engineering Design Study for a Facility in one of the five states (the “Study” and the “First Project”, respectively), the cost of which shall not exceed US$2.6 million and shall be borne and paid by the U.S. Company, and the parties shall cooperate in advancing the First Project as a municipal solid waste project.

The U.S. Company shall be responsible for obtaining and maintaining all requisite permits, approvals and licenses from any relevant authority in order to establish and operate the First Project and any additional Facility and to provide any technical and financial data required in connection therewith. The U.S. Company will use its best commercial efforts to obtain and secure agreements in principle for providing financing to the First Project (the amount of financing required for the First Project is currently estimated at US$215 million), enter into lease/purchase agreements for the real estate on which the First Project will be erected, prepare and file all relevant requests and enter into Waste Contracts, Power Takeoff Agreements and an Interconnection Agreement.

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The Framework Agreement provides that the U.S. Company and EER will enter into a purchase agreement for the PGM Processing Chamber for the First Project. As the final price of the PGM Processing Chamber for the First Project will only be determined following the detailed planning phase, the parties agreed that in case it varies considerably from the estimated price, the parties shall mutually assess the financial impact on the First Project.

The U.S. Company and EER will also enter into a royalty bearing license agreement for the use of the PGM Technology in the First Project and shall further enter into a services agreement. The royalty rate shall equal 2% - 3.25% of the revenues generated from tipping fees and certain electricity sales of the First Project.

In addition, the U.S. Company shall pay to EER a development services fee for each Facility. The development services fee for the First Project will be in an amount not exceeding US$5.4 million (representing 4% of the First Project equipment and civil works cost estimate).

Under the Framework Agreement, each of EER and the U.S. Company has granted the other certain exclusivity rights (subject to some exceptions) with respect to the Territories.

In addition, EER has agreed to invest US$400,000 in the U.S. Company, in consideration of equity in the U.S. Company, which shall constitute 1.9% of the U.S. Company's fully-diluted capital. The first tranche of the investment was transferred to the U.S. Company but was subsequently returned to EER, since the investment round did not materialize. Since then, and due, inter alia, to the time which has passed, EER has decided to go ahead and modify its Y'bllin Facility at a significant expense, and therefore EER notified the U.S. Company that it will not make the equity investments in the U.S. Company.

The Greenstone-EER Management Service Agreement

On February 13, 2002, EER entered into a management service agreement with Urdan Industries Ltd. (currently Greenstone) (the “Greenstone Agreement”), pursuant to which Greenstone undertook to provide EER with management services, office services, accountant services and office rental in accordance with EER needs. In consideration for such services, EER undertook to pay Greenstone the sum of NIS 20,000 per month (plus VAT) linked to the Consumer Price Index (in this section, the "Management Fees”), as of January 2002 (approximately NIS 25,000 as of the date of this annual report). The term of the Greenstone Agreement was set at one year, at the end of which the agreement was renewed automatically for additional one-year periods, and may be terminated by one month’s notice by either party. Beginning at the end of 2004 up to and until December 31, 2010, services were provided by Accord and Management Fees were paid to them. As of January 1, 2011 up to and until  the completion of the EER Transaction, the services have been provided by Leader Holdings and Investments Ltd. (the former parent company of Greenstone; “Leader”), and the Management Fees were paid to Leader.

Following the completion of the EER Transaction, the Greenstone Agreement was assigned by Leader to Greenstone.

Regarding the management services agreement between the Company and Greenstone, see "Item 7.B. Major Shareholders and Related Party Transactions" below.

The Plazma MOU

In May, 2011, EER and SLE&C,  entered into a memorandum of understanding (the "Plazma MOU") with Zaklad Zagospodarowania Odpadow "PLAZMA" Sp.z. o.o ("Plazma"), a Polish company, pursuant to which EER, SLE&C and Plazma shall cooperate for the purpose of designing, engineering, constructing and operating a waste treatment facility, based on EER's Technology, in Poland. Plazma will work exclusively with EER and SLE&C on the development of the facility, with EER acting as the technology provider and SLE&C as consultant and provider of certain engineering services. Plazma shall be solely responsible for constructing the facility in Poland, including, but not limited to, obtaining finance, obtaining all necessary licenses and regulatory approvals, and preparing a business plan and a financial model for the facility. EER and SLE&C have agreed to assist and provide necessary information during the process. EER has also agreed to consider taking an equity position in the project. According to the Plazma MOU, the parties were to negotiate and enter into a definitive agreement within twelve months of the date of the Plazma MOU. Since the parties did not reach such an agreement the Plazma MOU expired as of May 2012.

The Orgrez Project

During December 2011, EER entered into an agreement with a company based in the Czech Republic regarding a feasibility study work to be performed by EER with regard to the design, engineering, construction and operation of a hazardous waste treatment facility at an estimated cost of approximately US$25 million (the "Orgrez Project"). In consideration for the performance of the study work, EER was entitled to a total sum of US$125,000, payable in three payments. A down payment of US$63,000 was received in December 2011 and recorded as revenue in 2011. An additional payment of US$62,000 was received and recorded as revenue during the reported period.

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The Esh-Dar Agreement

On December 19, 2012, EER entered into an agreement with Esh-Dar Refractories & Insulation Industries Ltd. ("Esh-Dar") under which Esh-Dar will construct a processing chamber at the Y'bllin Facility for a fee of approximately US$540,000, which shall be paid in accordance with the completion of the certain milestones detailed in the agreement between the parties.

Research and Development

EER’s research and development activity is conducted in Israel, at the Royal Institute of Technology of Sweden (under the KTH Agreement), and at SNC (under the SNC Agreement). In 2007, the development stage of the Technology has ended, and EER is currently working on improvements to the Technology.

In 2004, the Chief Scientist Office at the Ministry of Industry, Trade and Labor, approved EER’s request to receive financial assistance for research and development in connection with the products of EER. The approval was conditioned on abiding by the provisions of the Israeli R&D Law, including, among others, payment of royalties from the sale of products developed with the assistance of the Chief Scientist up to a 100% refund of the grant amounts received by EER. Under the terms of the R&D Law, any intellectual property developed using the Office of the Chief Scientist funds must be fully and originally owned by the Israeli company which received such funds. The R&D Law restricts the ability to transfer abroad know-how funded by the Office of the Chief Scientist. Transfer of such know-how to a foreign entity requires a prior approval from the Office of the Chief Scientist, and is subject to payment of a redemption fee to the Office of the Chief Scientist calculated according to formulas provided under the R&D Law.

As of the date of this annual report, EER has received a total of NIS 1.7 million (approximately US$0.4 million), out which an amount of NIS 0.2 million (approximately US$0.05million) has been repaid to date by EER.

Intellectual Property

As of December 31, 2012, EER has had nine active families of patent applications and patents, as describes below:

· Apparatus for Processing Waste. This application generally describes the overall plant, comprising waste input means, a waste processing chamber to hold a column of waste, one or more plasma torches, a control system, and post processing means. A patent has been granted in the U.S., Europe (validated in 13 countries), Israel, India, Japan, Korea, Argentina, Singapore, Taiwan and Hong Kong. The application is awaiting examination in Thailand.

· System and Method for Removing Blockages in a Waste Converting Apparatus. This application repeats the description of the processing chamber and describes the problems of blockage that can arise during operation of the system due to incomplete breakdown of the waste into gaseous and liquid products. A patent has been granted in the U.S., Europe (validated in 10 countries), Israel, India, Korea, Argentina, Singapore, Taiwan, Thailand, and Hong Kong. The application is awaiting examination in Japan.

· Apparatus for Processing Waste with Distribution/Mixing Chamber for Oxidising Fluid. The description and claims are mainly concerned with the shape of the vertical shaft processing chamber, which is constructed such that it does not have a uniform cross-section but is provided with a transition between its upper and lower parts. Patents have been granted in the U.S., Europe (validated in 13 countries), Israel, Argentina, Singapore, Taiwan, Hong Kong, India, Japan, and Korea. The application is awaiting examination in Thailand.

· System and Method for Decongesting Waste Disposal Apparatus. The principal claims in this application are directed towards the presence of a fluxing agent inlet to provide flux to overcome the decongestion problems. A patent has been granted in the US, Europe (validated in 10 countries), Israel, India, Korea, Argentina, Singapore, Taiwan and Hong Kong. Japan and Thailand have been abandoned.

· Recycling System for a Waste Processing Plant. This application is related to the post processing system of the waste processing plant, i.e. to the part of the plant whose job it is to collect and purify the gaseous products that exit the processing chamber so that they can either be stored for reuse or safely released to the atmosphere. A patent has been granted in the US, Israel, China, Korea, Singapore, and Taiwan. The examination has begun in Japan, India, and Europe. The application is awaiting examination in Thailand and Hong Kong.

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· Control System for a Waste Processing Apparatus. This application describes and claims a control system for operating an air lock arrangement used to introduce the waste into the top of the processing chamber. A patent has been granted in the US, Israel, Europe (validated in 13 countries), China, Singapore, Taiwan, Japan and Korea. The examination has begun in India. The application has been abandoned in Hong Kong.

· System for Controlling the Level of Potential Pollutants in a Waste Treatment Plant. This application describes and claims a system placed at the entrance to the waste treatment plant for sorting the waste entering the plant according to the concentration of specified chemicals in the waste. A patent has been granted in the US, Europe (Validation in 4 countries) Israel, Singapore, China, Australia and Taiwan. An examination has begun in Japan. The application is awaiting examination in Canada, India, Korea, and Hong Kong.

· An Improved Plasma Torch for Use in a Waste Processing Chamber. This application describes and claims an improved plasma torch design. The unique feature of the torch is a sleeve that surrounds the portion of the torch that extends into the processing chamber. A patent has been granted in Israel, Europe (validated in 6 countries), and Singapore. The application has been allowed in Australia. The examination has begun in China and Japan. The application is awaiting examination in Canada, Taiwan, US, India, Korea and Hong Kong.

Government Regulations

The Encouragement of Industrial Research and Development Law, 1984

EER has received grants from the government of Israel through the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor, or the OCS, for the financing of a portion of its research and development expenditures in Israel, pursuant to the R&D Law. Under the R&D Law, royalties on the revenues derived from sales of products (and related services) developed (in all or in part) according to, or as a result of, the OCS funded plans are payable to the Israeli government, at annual rates which are determined under the R&D Regulations, up to the aggregate amount of the grants received by the OCS, plus annual interest (as defined in the R&D Regulations). Any intellectual property developed using the OCS funds must be fully and originally owned by the Israeli company which received such funds. The R&D Law restricts the ability to transfer abroad know-how funded by the OCS. Transfer of such know-how to a foreign entity requires prior approval from the OCS, and is subject to payment of a redemption fee to the OCS calculated according to formulas provided under the R&D Law. As of the date of this annual report, EER has received a total of NIS 1.7 million (approximately US$0.4 million), out which an amount of NIS 1.5 million (approximately US$0.35 million) has not yet been repaid by EER.

4.C.  Organizational Structure

We currently own approximately 79% of EER's share capital and approximately 99% of its voting rights (as a result of the Voting Agreement as described below) , which, as of the date of this annual report, is our only subsidiary. Greenstone beneficially owns approximately 35.88% of our outstanding share capital (excluding 1,040,000 dormant shares held by us).

4.D.  Property, Plant and Equipment

We currently do not have any material fixed assets. EER, our subsidiary owns the Y'bllin Facility. EER is leasing the ground on which the Y'bllin Facility is located. The Y'bllin Facility is capable of treating up to 20 metric tons of solid waste per day. According to the terms of Y'bllin Facility's current business license, the plant is allowed to treat unsorted municipal solid waste. As of the date of this annual report, the plant does not produce any commercial products. For additional information, see "Item 3.D. Risk Factors – Risks relating to EER – EER's dependence on a single facility, which does not operate continuously, magnifies the risk of an interruption in its business operations", in this annual report.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

General

The following operating and financial review and prospects should be read in conjunction with “Item 3.A Selected Financial Data” and our consolidated financial statements and accompanying notes appearing elsewhere in this annual report. Our financial statements have been prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board or IFRS, which differ in certain respects from U.S. Generally Accepted Accounting Principles, or U.S. GAAP.  Following our January 1, 2008 adoption of IFRS, we are no longer required to reconcile our financial statements prepared in accordance with IFRS to U.S. GAAP.

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On August 31, 2011, we completed the EER Transaction following which EER has become our subsidiary. As of January 12, 2012, we completed the multi closings of the EER Transaction and as of the date of this annual report, we hold approximately 79% of EER's share capital and approximately 99% of EER's voting rights (as a result of the Voting Agreement as described below).

Since RVB had no business activity as of the date of the closing of the EER Transaction, and thus did not meet the definition of a "Business" under IFRS 3, and since the majority of the shareholders of RVB following the closing of the EER Transaction were former shareholders of EER, the EER Transaction did not meet the definition of a "Business Combination" under IFRS 3. For accounting purposes, the EER Transaction was treated as a capital transaction of EER.

Critical Accounting Policies

The preparation of the consolidated 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. These are management’s best estimates based on experience, various facts, external circumstances, reasonable assumption and historical data.  Actual results could differ from those estimates.

Following is a discussion of the accounting policies that involve a high degree of judgment and the methods of their application. For a further description of RVB's material accounting policies, please read Notes 2 and 4 to RVB's financial statements for the year ended December 31, 2012, starting on page F-1 of this annual report.

Property, Plant and Equipment

Property, plant and equipment (currently, only the Y'bllin Facility) represent a significant proportion of the asset base of the Company. Therefore, the estimates and assumptions made to determine their carrying value and related depreciation are critical to RVB's financial position and performance.

The useful lives of these assets are determined by management at the time the asset is acquired and reviewed at least annually for appropriateness. The useful lives are based on historical experience as well as anticipation of future events, which may impact their life, such as changes in technology.

Intangible Assets

Intangible assets with finite useful lives (acquisition and development costs of know-how to implement new technology for the treatment of solid waste, bio-medical waste and low and intermediate radioactive waste) are carried at cost less accumulated amortization and accumulated impairment losses. The know-how is depreciated over a period of 12.5 years, based on the remaining useful life of the main patent registered thereto as of the date of commencement of depreciation.

Impairment of Long-Lived Assets

The Company periodically evaluates the net realizable value of long-lived assets, including other intangible assets and tangible fixed assets, relying on a number of factors, including business plans and projected future cash flows.

Assets that are subject to amortization are tested for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

Management continuously reviews the likelihood of recovery of intangible assets (know-how) it has developed in accordance with the forecasted income from these assets, which is determined based on economic assessments made by the Company and/or external consultants.

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5.A.  Operating Results

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

The loss for 2012 amounted to US$4.5 million decreasing US$1.7 million from the US$6.2 million loss in 2011, mainly due to decrease of marketing and financial expenses.

Revenues

The revenues for 2012 amounted to US$62 million derived from the study work produced by EER in connection with the Orgrez Project as described above.

Operating Expenses and Facility Maintenance

Operating and facility maintenance expenses in 2012 amounted to US$2.9 million increasing US$0.4 million from the US$2.5 million in 2011, mainly due to expenses regarding the improvements in the Y'bllin Facility as mentioned above.

Marketing Expenses

Marketing expenses in 2012 amounted to US$0.5 million, decreasing US$0.7 million from the US$1.2 million in 2011, mainly due to efficiency measures taken by the Company.

General and Administrative Expenses

General and administrative expenses in 2012 amounted to US$1.4 million decreasing US$0.4 million from the US$1.8 million in 2011, mainly due to efficiency measures taken by the Company.

Financing Expenses, Net

Financing income, net, in 2012 amounted to US$0.4 million compared to financing expenses, net, of US$0.8 million in 2011. The financing expenses during 2011 were mainly regarding EER shareholders debts and loans which have been converted to EER shares at the closing date of the EER transaction (August 31, 2011)..

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

The loss for 2011 amounted to US$6.2 million, decreasing US$1.4 million from the US$7.6 million loss in 2010, mainly due to decrease of financial expenses.

Revenues

The revenues for 2011 amounted to US$0.06 million derived from the study work produced by EER in connection with the Orgrez Project as described above.

Operating Expenses and Facility Maintenance

Operating and facility maintenance expenses in 2011 amounted to US$2.5 millions similar to US$2.6 million in 2010. It should be noted that during these years the Y'bllin Facility was not operating.

Marketing Expenses

Marketing expenses in 2011 amounted to US$1.2 million, similar to US$1.3 million in 2010.

General and Administrative Expenses

General and administrative expenses in 2011 amounted to US$1.8 million, similar to 2010.

Financing Expenses, Net

Financing expenses, net, in 2011 amounted to US$0.8 million compared to financing expenses, net, of US$1.9 million in 2010. The decrease in financing expenses during 2011 was mainly due to the conversion of all of EER shareholders' debts and loans to EER shares at the closing date of the EER transaction.

Impact of Inflation and Devaluation on Results of Operations, Liabilities and Assets

The following table presents information about the rate of inflation in Israel, the rate of devaluation of the NIS against the dollar, and the rate of inflation in Israel adjusted for the devaluation:

Year ended December  31	Israeli inflation % rate		Devaluation of the NIS rate %			Israeli inflation adjusted for devaluation %
2008		3.8		(1.1	)		4.9
2009		3.9		(0.7	)		4.6
2010		2.7		(6	)		8.7
2011		2.2		7.7			(5.5	)
2012		1.6		(2.3	)		3.9

Devaluation of the NIS in relation to the dollar has the effect of reducing the dollar amount of any of our expenses or liabilities payable in NIS, unless those expenses or payables are linked to the dollar or to another currency.  This devaluation also has the effect of decreasing the dollar value of any asset that consists of NIS or receivables payable in NIS, unless the receivables are linked to the dollar or to another currency. Conversely, any increase in the value of the NIS in relation to the dollar has the effect of increasing the dollar value of any unlinked NIS assets and the dollar amounts of any unlinked NIS liabilities and expenses.

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Because exchange rates between the NIS and the dollar fluctuate continuously, exchange rate fluctuations as recently experienced in Israel and, particularly larger periodic devaluations or revaluations, will have an impact on our profitability and period-to-period comparisons of our results.

We currently conduct our business in Israel and a significant portion of our expenses are in NIS.  We therefore expect to continue to be affected by changes in the prevailing NIS/U.S. dollar exchange rate in the future.  Further as we are exploring business opportunities around the world, our investment in prospective businesses may be denominated in non U.S. dollar currencies, and due to the fluctuations in the exchange rates in recent years, we cannot anticipate the impact that the prevailing exchange rate will have on our future investments.

The effects of foreign currency re-measurements are reported in our consolidated financial statements in the statement of operations.

Effective Corporate Tax Rate

The Israeli corporate tax rate applicable to Israeli resident companies in 2011 was 24% and has been increased to 25% in 2012.

5.B.  Liquidity and Capital Resources

Cash flows used in operating activities during 2012 amounted to US$3.3 million. Cash flows during 2012 were mainly used to finance EER’s current expenses.

Cash flows used in investment activities during 2012 amounted to US$0.4 million, mainly relating to an increase in restricted bank deposits. Cash flows used in financing activities during 2012 amounted to US$0.5 million. Cash flows during the reporting period were mainly used for the repayment of bank loans.

As of the date of this annual report, EER has no material revenues and has negative cash flows from operating activities and continued current losses and therefore is reliant on potential investments to the Company. The Company does not have sufficient funds to finance its operations and working plan for the upcoming twelve months. Management is pursuing additional sources of financing and cash flow to fund its operations and while it has been successful in doing so in the past, there are no assurances that such funding will be attainable in the future. Management has concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon our ability to continue as a going concern.

5.C.  Research and Development, Patents and Licenses

EER devotes significant time, efforts and financial resources to research and development activity which is conducted in collaboration with third parties. EER’s research and development activity is conducted in Israel, at the Royal Institute of Technology of Sweden (under the KTH Agreement),. Also, as of December 31, 2012, EER has had 8 active families of patent applications and patents.

For more information regarding our research and development activities, see “Item 4.B. – Research and Development” in this annual report.

5.D.  Trend Information

Not applicable.

5.E.  Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements which have or are reasonably likely to have a material current or future effect on the financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources of our Company.

5.F.  Tabular Disclosure of Contractual Obligations

As of December 31, 2012, we had no contractual obligations of the type required to be disclosed in this section.

5.G.  Safe Harbor

All information included in Item 5.E of this Item is deemed to be a “forward-looking statement” as that term is defined in the statutory safe harbors, except for historical facts.  The safe harbor provided in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) shall apply to all forward-looking information provided in Item 5.E of this Item.

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ITEM 6.  Directors, Senior Management and Employees

6.A.  Directors and Senior Management

The following table lists the name, age and position held by our executive officers and directors, as of April 21, 2013:

Name	Age	Position
Giora Gutman	58	Chief Executive Officer
Yair Fudim	64	Director and Chairman of the Board of Directors
Menachem (Moti) Menashe	53	Director
Jonathan Regev(1)	48	External Director
Alicia Rotbard(1)	63	External Director
Gedaliah Shelef(1)	78	Independent Director
Ofer Naveh	41	Chief Financial Officer

_________________

(1)  Member of the Company's audit committee

Giora Gutman is serving as chief executive officer of our Company and EER since March 2013.Mr. Giora Gutman joined EER in April, 2012 as a special consultant. Mr. Gutman previously served as the chief executive officer and founder of Mekorot Development and Enterprises Ltd., a subsidiary of Israel National Water Company, a water and sewage technology and infrastructure company. He also previously served as chief executive officer of Baran Engineering and Projects Ltd., a global provider of engineering, technology and construction solutions. Prior to his work with Baran Group Ltd., Mr. Gutman was the chief executive officer and plant manager at Haifa Chemicals South Ltd., a global leading supplier of potassium nitrate for agriculture and industry. Mr. Gutman has a degree in mechanical engineering from Ben Gurion University.

Yair Fudim is serving as a director of our Company since March 2011 and was appointed the chairman of our board of directors in February 2013. Mr. Fudim has been serving as Chief Executive Officer of Leader Holdings & Investments Ltd. since April 1991 and as Chief Executive Officer of Greenstone Industries Ltd. since February 2010 till March 2013 and since then as the chairman of the board of Greenstone. Mr. Fudim has served as chairman of the board of directors of Leader Capital Markets Ltd., and has been a member of the board of directors of the following companies, among others: Zmiha Investment House Ltd, Yelin Lapidot Holdings ltd., Leader Hanpakot (1993) Ltd., Leader Financial Analysis (1999) Ltd., Leader Trust Company Ltd., Leader & Co Investment House Ltd., Leader & Co Finance (2001) Ltd., Leader & Co Capital Ltd., Leader Financial Assets Management (2005) Ltd., Leader & Co Asset Management Ltd., Leader Resources Ltd., Leader Resources Trustees Ltd., Leader Real Estate (2006) Ltd.,., E.E.R. Environmental Energy Resources (Israel) Ltd., Yariv Assets and Holdings (1980) Ltd., Zimmcor Alubin (1973) Ltd., RonRom Consulting Services Ltd. Mr. Fudim holds a B.A. in Economics and an MBA from the Hebrew University of Jerusalem.

Menachem (Moti) Menasheis serving as a director of our Company since March 2013. Mr. Menashe has served as a senior vice president at Upswing Capital Ltd. since 2006. He serves in a number of capacities for companies controlled by Upswing Capital Ltd., including Zmiha Investment House Ltd. (Chief Executive Officer); Intercolony Investments Ltd. (Chief Executive Officer and Director); Yaad Industrial Representation Ltd. (Director of Business Development and Director); Ultra Equity Investments Ltd. (Director); and Greenstone Industries Ltd. (Director).

Alicia Rotbard is serving as our external director since July 2008. In 1989 Ms. Rotbard founded DOORS Information Systems, Inc. and she served as its Chief Executive Officer until 2002. Since 1989 she has served as President and Chief Executive Officer of Quality Computers Ltd. and from 1980 to 1985, she served as Deputy General Manager of the Tel-Aviv Stock Exchange, managing its computer department and operations.  Ms. Rotbard holds a B.Sc. in Mathematics and Physics from the Hebrew University of Jerusalem.

Jonathan Regev is serving as our external director since April 2010. From 2007 to October 2012,, Mr. Regev has been serving as Chief Executive Officer of Abnet Communications Ltd.  From 2004 to 2006, Mr. Regev served as the Chief Financial Officer of Oblicore Inc.  From 2000 to October 2004, Mr. Regev worked at Amdocs Management Limited in various positions including as Chief Operating Officer and Chief Financial Officer of Amdocs' CRM Division. From 1998 to 2000, Mr. Regev worked as the Director of Corporate Treasury, Budget Control and Chief Financial Officer Deputy of Nilit Ltd. From 1995 to 1997 he worked as the Controller and Director of Corporate Economics of the Strauss Group in Israel and from 1992 to 1995, Mr. Regev worked as Head of Industrial Control and Economic Department of the Manufacturing Division of Tadiran Electrical Appliances Ltd.  Mr. Regev holds an M.A. in Economics from the Technion-Israel Institute of Technology and a Bs. in Physics from the Tel Aviv University.

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Gedaliah Shelefis serving as a director of our Company since March 2011 and was classified by the Company as an independent director on January 2012. Mr. Shelef has served as executive director of Environmental System Ltd. since 1991. Mr. Shelef has served as a professor emeritus of the Technion-Israel Institute of Technology (the "Technion") since 2004. From 1968 to 1971 Mr. Shelef served as Chief Sanitary Engineer and Head of the Division of Environmental Health of the Ministry of Health, Israel. From 1990 to 1992 Mr. Shelef served as a member of the advisory committee of the U.S. Environmental Protection Agency. From 1981 to 2004 Mr. Shelef served as head of the Environmental Laboratory and Research Group at the Technion. From 1972 to 1992 Mr. Shelef served as a member of the board of director or the board of governors of the following companies and institutes, among others: National Building Research Institute (1988-1990) and Tahal Consulting Engineers Ltd. (1989-1993), Coastal and Marine Engineering Research Institute of the Technion and the Port Authority (1985-1990), Transportation Research Institute of the Technion and the Ministry of Transportation (1985-1990), Technion (1983-1985), International Association of Water Pollution Research (1976-1980), Israel Oceanographic and Limnological Research Company Ltd (1971-1976). Mr. Shelef holds a Ph.D. in Hydraulics and Sanitary Engineering from the University of California, Berkley (1968).

Ofer Naveh is serving as Chief Finance Officer (CFO) of our Company since November 2011. Mr. Naveh serves as the Director of Finance of Greenstone Industries Ltd. and served as the Director of Finance of Polar Communications Ltd. till April 1, 2012. From 2005 to 2010, Mr. Naveh served as a controller of S.R Accord Technologies Ltd. From 2000 to 2005, Mr. Naveh served as an Audit Manager in KPMG Somekh Chaikin. Mr. Naveh is a member of the board of directors of the following companies: S.R Accord Ltd., and Zimkor Alubin (1973) Ltd. Mr. Naveh holds a B.A. in Accounting and Business from The College of Management Academic Studies and a M.A. in Law from Bar-Ilan University.

6.B.  Compensation

 For his service to the Company as chief executive officer, which began in January 2012 and terminated in February 2013, Ofer Sandelson, was granted compensation valued at approximately US$244 thousand including related expenses, as well as US$64 thousand share based payments. Aside from the compensation provided to Mr. Sandelson, no other compensation was paid or is payable to persons who served as our executive officers.

During 2012, members of our board of directors, other than our external directors and independent director, did not receive cash compensation for their service on the board of directors or any committee of the board of directors. The total amount paid or payable to our external directors and independent director for the year ended December 31, 2012 was approximately US$68 thousand.

In March, 2011, our audit committee and board of directors resolved that, as of the date of Ms. Rotbard election as an external director of the Company, the Company’s external directors (Alicia Rotbard and Jonathan Regev) shall be paid the maximum amount allowed under the Companies Regulations (Rules regarding Compensation and Expense Reimbursement of External Directors), 2000 (the "Regulations"), currently, an annual fee of approximately NIS 47 thousand and a participation fee of approximately NIS 2.5 thousand per meeting. 

On March 27, 2011, our  audit committee and board of directors approved, in accordance with the Israeli Companies Regulations (Relieves for Transactions with Interested Parties), 2000, that  Mr. Gedaliahu Shelef shall be entitled to compensation equal to the "Maximum Amount" under the Regulations.

On August 22, 2011, our shareholders approved (following the approval of our audit committee and board of directors), among others: (i) the grant to each of our directors, Gedaliah Shelef, Alicia Rotbard and Jonathan Regev, options to purchase 900,000 ordinary shares of the Company, with an exercise price of US$0.2145 per (adjusted for future dividend). The options are granted under the 2011 Plan; and (ii) the grant to Yair Fudim, of options to purchase RVB shares representing, on a Fully Diluted Basis (as defined in the Management Agreement between RVB and Greenstone, dated July 14, 2011 (the "Management Agreement"), i.e. assuming exercise of the Put Option (as defined below) by Mazal Resources B.V. ("Mazal") and excluding: (i) options granted to directors, officers and employees of RVB or its affiliates or EER, after the execution of the Services Agreement between RVB, Mr. Moshe Stern and M. Stern Holding Ltd. ("Stern Holding"), a company under Mr. Stern's control, dated July 3, 2011 ("the "Services Agreement"); (ii) options granted to Greenstone pursuant to the Management Agreement; and (iii) options granted pursuant to the Services Agreement ("Fully Diluted Basis")), approximately 0.3% of RVB's issued and outstanding share capital as of the date of the grant, with an exercise price of US$0.2145 per share (adjusted for future dividend). The options shall become vested and exercisable, in accordance with the Vesting Schedule (as defined below). Such options to purchase ordinary shares of the Company were granted on January 5, 2012, following the completion of the multi-closing EER Transaction.

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On March 18, 2013, the  board of directors of our Company approved, following the approval of its compensation and audit committees, in accordance with the Israeli Companies Regulations (Relieves for Transactions with Interested Parties) of 2000, the compensation terms of Mr. Yair Fudim, the chairman of the board of directors and Mr. Moti Menashe, a member of the board of directors, as follows: Mr. Fudim and Mr. Menashe shall be entitled to compensation equal to the "maximum amount" under the Regulations for companies similarly classified based on their shareholding equity, which is the currently paid compensation to other members of the board of directors of RVB. Namely - an annual fee of approximately NIS 47 thousand and a participation fee of approximately NIS 2.5 thousand per meeting. 

For information regarding options to purchase our ordinary shares, issued to certain officers and members of our board of directors, see "Item 6.E. Directors, Senior Management and Employees - Share Ownership" below.

6.C.  Board Practices

Our Articles of Association provide for a board of directors of not less than two and no more than nine members and shall include at least two external directors.  Each director, with the exception of the external directors, is elected to serve until the next annual general meeting of shareholders, and so long as an annual general meeting is not convened, unless their office is vacated prior thereto in accordance with the provisions of our Articles of Association and the Companies Law.

The Companies Law provides that a person, who is, directly or indirectly subordinated to the chief executive officer of a public company, may not serve as the chairman of its board of directors. In addition, neither the chief executive officer nor his relative is eligible to serve as chairman of the board of directors (and vice versa), unless such nomination was approved by a majority of the company’s shareholder for terms not exceeding three years each, and either: (i) such majority included at least two thirds of the voting shareholders (the votes of abstaining shareholders shall not be included in the number of the said total votes) which are not controlling shareholders and have no personal interest in the decision; or (ii) the aggregate number of shares voting against the proposal did not exceed 2% of company voting shareholders.

Our Articles of Association provide that any director may, by written notice, appoint another person to serve as an alternate director and may cancel such appointment.  According to the Companies Law, a person may not serve as an alternate director if such a person is not qualified to be appointed as a director, or a person who is already serving or as an alternate director. To our knowledge, no director currently has appointed any other person as an alternate director.

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 no less than two external directors.  The Companies Law provides that a person may not be appointed as an external director if the person is a relative of a controlling shareholder or if the person or the person’s relative, partner, employer or anyone to whom that person is subordinate to, whether directly or indirectly, 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, any entity controlling the company, any relative of the company's controlling shareholder or any entity controlled by the company or by its controlling entity; and in the event that the company does not have a controlling shareholder or a shareholder holding 25% or more of the voting rights in the company - any affiliation to the chairman of the board of directors, to the general manager (chief executive officer), to a shareholder holding 5% or more of the company's shares or voting rights, or to the senior financial officer as of the date of the person’s appointment. The term “affiliation” under the Companies Law includes:

· an employment relationship;

· a business or professional relationship maintained on a regular basis;

· control; and

· service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the public if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.

Without derogating from the above, a person may not serve as an external director if the person or the person’s relative, partner, employer, someone to whom he is subordinated, directly or indirectly, or any entity under the person’s control has business or professional relationship with an entity which an affiliation with is prohibited as detailed above, even if such relationship is not ordinarily (excluding negligible relationship). In addition, a person who received compensation other than the compensation permitted by the Companies Law may not serve as an external director.

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The term “relative” is defined as a spouse, sibling, parent, grandparent, descendant, spouse’s descendant, spouse’s sibling and spouse’s parent and the spouse of each of the foregoing.

The term “office holder” is defined as a general manager, chief business manager, deputy general manager, vice general manager, or any other person assuming the responsibilities of any of the foregoing positions, without regard to such person’s title, director or manager directly subordinate to the general manager.

No person can serve as an external director if the person’s position or other business creates, or may create, a conflict of interests with the person’s responsibilities as a director or may otherwise interfere with the person’s ability to serve as a director.  If at the time an external director is appointed all current members of the board of directors, who are not controlling shareholders or their relatives, are of the same gender, then the external director to be appointed must be of the other gender.  In addition, a person who is a director of a company may not be elected as an external director of another company if, at that time, a director of the other company is acting as an external director of the first company. A person cannot be appointed as an external director if he is an employee of the Israel Securities Authority or of the Israeli stock exchange.

A person shall be qualified to serve as an external director only if he or she possesses accounting and financial expertise or certain professional qualifications. At least one external director must possess accounting and financial expertise and the other external directors are to possess professional qualifications as defined by regulations to the Companies Law.  Financial and accounting expertise require such external director to possess a high level of understanding in business matters, such that he or she can read and understand financial statements in depth and be able to raise issues with respect to the manner in which the financial data is presented therein. A company's board of directors is to determine such candidate's qualifications based on his or her education, experience and skills regarding financial and control matters in companies of similar size and in a similar industry and knowledge of preparation and approval of financial statements under the Companies Law and the Israeli Securities Law, 1968.

The regulations promulgated under the Companies Law define an external director with requisite professional qualifications as a director who satisfies one of the following requirements: (1) the director holds an academic degree in either economics, business administration, accounting, law or public administration, (2) the director either holds an academic degree in any other field or has completed another form of higher education in the company’s primary field of business or in an area which is relevant to his or her office as an external director in the company, or (3) the director has at least five years of experience serving in any one of the following, or at least five years of cumulative experience serving in two or more of the following capacities: (a) a senior business management position in a company with a substantial scope of business, (b) a senior position in the company’s primary field of business or (c) a senior position in public administration.

According to the Companies Law, the board of directors of a public company must establish the minimum number of board members that are to have accounting and financial expertise while considering, inter alia, the nature of the company, its size, the scope and complexity of its operations and the number of directors.

Until the lapse of two years from termination of office, a company, its controlling shareholder or a corporation controlled by the controlling shareholder may not grant that former external director, nor his spouse or children, any benefits, either directly or indirectly, including the prohibition to engage one of the persons above to serve as an office holder at the company or at a corporation controlled by the controlling shareholder, nor employ or receive services from that person, either directly or indirectly, including through a corporation controlled by that person.  The abovementioned prohibition also applies for a relative who is not the former external director's spouse or children - until the lapse of one year period from the date that the external director has ceased to act as an external director.

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

· The total number of votes for the appointment of the external directors, excluding abstentions, shall include the votes of at least a majority of the shares represented at the meeting in person or by proxy, which are not held by controlling shareholders of the company nor by shareholders who have a personal interest in the appointment (excluding a personal interest which did not result from the shareholder��s relationship with the controlling shareholder); or

· The total number of votes against the appointment of the external directors, among the non-controlling shareholders of the company, shall not exceed 2% of the aggregate voting rights in the company.

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An external director is entitled to compensation and reimbursement of expenses as provided in regulations promulgated under the Companies Law and is otherwise prohibited from receiving any compensation, directly or indirectly, in connection with services provided as an external director, except for certain exculpation, indemnification and insurance provided by the company, as specifically allowed by the Companies Law.

An independent director is defined as an external director or a director who meets the following conditions and who is appointed or classified as such according to the Companies Law: (i) the conditions for his or her appointment as an external director (as described above) are satisfied and the audit committee approves the director having satisfied such conditions; and (ii) he or she has not served as a director of the company for over nine consecutive years with any interruption of up to two years of his or her service not being deemed a disruption to the continuity of his or her service. An independent director is entitled to compensation and reimbursement of expenses similar to such entitlement of an external director, as stated above.

We compensate our two external directors and our independent director in accordance with regulations promulgated under the Companies Law.

The initial term of an external director is three years and may be extended, subject to certain circumstances and conditions, for two additional terms of three years. An external director may be removed by the same special majority of the shareholders required for his or her election, if he or she ceases to meet the statutory qualifications for appointment or if he or she violates his or her fiduciary duty to the company. An external director may also be removed by order of an Israeli court if the court finds that the external director is permanently unable to exercise his or her office, has ceased to meet the statutory qualifications for his or her appointment, has violated his or her fiduciary duty to the company, or has been convicted by a court outside Israel of certain offenses detailed in the Companies Law.

If the vacancy of an external directorship causes a company to have fewer than two external directors, the company’s board of directors is required under the Companies Law to call a special general meeting of the company’s shareholders as soon as possible to appoint such number of new external directors so that the company thereafter has two external directors.

Each committee of a company’s board of directors, which exercises board powers, is required to include at least one external director and the audit committee must include all of the company’s external directors and one of which should be its chairman.

At the Company's annual general meeting held on July 10, 2008, we appointed Ms. Alicia Rotbard to serve as external director and on August 22, 2011, our annual general meeting of shareholders re-appointed Ms. Rotbard to serve as external director. In April 2010, pursuant to the decision of an extraordinary meeting of shareholders, we appointed Jonathan Regev as an external director of the Company. On January 5, 2012, our board of directors, following the approval of our audit committee, approved the classification of Prof. Gedaliah Shelef as an independent director under the Companies Law.

Exculpation, Insurance and Indemnification of Directors and Officers

Under the Companies Law, an Israeli company may not exempt an office holder from liability with respect to a breach of his fiduciary duty, but may exempt in advance an office holder from his or her liability to the company, in whole or in part, with respect to a breach of his duty of care, provided, that the company is so permitted under its articles of association.

Office Holder Insurance

Our Articles of Association provide that, subject to the provisions of the law, we may enter into a contract for the insurance of the liability of any of our office holders with respect to:

· a breach of his or her duty of care to us or to another person;

· a breach of his or her fiduciary duty to us, provided that the office holder acted in good faith and had reasonable basis to believe that the act would not harm us; or

· a monetary obligation imposed on him or her in favor of another person.

Any other matter in respect of which it is permitted or will be permitted under applicable law to insure the liability of an Office Holder in the Company, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities Law.

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Indemnification of Office Holders

Our Articles of Association provide that we may indemnify an office holder against:

· a monetary obligation imposed on him or her or incurred by him or her in favor of another person pursuant to a judgment, including a judgment given in settlement or a court approved settlement or an arbitrator’s award concerning an act performed in his or her capacity as an office holder;

· reasonable legal fees, including attorney’s fees, incurred by the office holder in consequence of an investigation or proceeding filed against him by an authority that is authorized to conduct such investigation or proceeding, provided that such investigation or proceeding (i) concludes without the filing of an indictment against the office holder or (ii) concluded with the imposition of a monetary payment on the office holder in lieu of criminal proceedings, but the criminal offense in question does not require the proof of criminal intent, all within the meaning of the Law or in connection with a financial sanction;

· reasonable litigation costs, including attorneys’ fees, incurred by the office holder or charged to him or her by a court, in proceedings we institute against him or her or instituted on our behalf or by another person, or in a criminal charge from which he or she was acquitted, or a criminal charge in which he or she was convicted for a criminal offense that does not require proof of intent, in each case relating to an act performed in his or her capacity as an office holder; and

· any other obligation or expense in respect of which it is permitted or will be permitted under the statutes to indemnify an office holder, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities Law.

· In addition, our Articles of Association provide that we may give an advance undertaking to indemnify and may retroactively indemnify an office holder therein with respect to certain matters as detailed in the Articles of Association.

Limitations on Insurance and Indemnification.

The Companies Law provides that a company may not indemnify an office holder nor enter into an insurance contract which would provide coverage for any monetary liability incurred as a result of any of the following:

· a breach by the office holder of his or her fiduciary duty unless the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

· a breach by the office holder of his or her duty of care if the breach was done intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

· any act or omission done with the intent to derive an illegal personal benefit; or

· any fine levied against the office holder.

In addition, under the Companies Law, indemnification of, and procurement of insurance coverage for, our office holders must be approved by our audit committee and our board of directors and, in specified circumstances, by our shareholders.

We have obtained liability insurance for our directors and officers.

Audit Committee

Our audit committee is comprised of Jonathan Regev, Alicia Rotbard and Prof. Gedaliah Shelef. The audit committee is responsible, among other things, to assist the board of directors in fulfilling its responsibility for oversight of the quality and integrity of accounting, auditing and financial reporting practices of the Company. Under the Companies Law, the board of directors of a public company must establish an audit committee. The audit committee must consist of at least three directors, must include all of the company’s external directors and the majority of its members must be "independent" (as defined above). The chairman of the audit committee must be an external director. The following  individuals may not be members of the audit committee: (i) the chairman of the board of directors, (ii) any director employed by the company, its controlling shareholder or by an entity controlled by the controlling shareholder, (iii) a director who regularly provides services to the company, its controlling shareholder or any entity controlled by the controlling shareholder, (iv) any director whose main source income comes from the company's controlling shareholder, or (v) the company's controlling shareholders or any of their relatives. The members of the audit committee are also required to meet the independence requirements established by the SEC in accordance with the requirements of the Sarbanes-Oxley Act. Whoever is disqualified from serving as member of the audit committee may not be present at the audit committee meetings, unless the chairman of the audit committee determined that such person is required to be present at the meeting or if such person applies to one of the exemptions under the Companies Law.

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Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting and internal control functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. The audit committee also oversees the audit efforts of our independent accountants and takes those actions as it deems necessary to satisfy itself that the accountants are independent of management. The audit committee is also responsible for evaluating the Company's internal audit program and the performance of the Company's internal auditor and the resources at his/her disposal and creating procedures relating to the employees' complaints regarding deficiencies in the administration of the Company. Under the Companies Law, the audit committee is required to identify deficiencies in the management of the company, including by consulting with the internal auditor or the independent accountants, and recommending remedial actions to the board of directors, and is responsible for reviewing and approving certain related party transactions, as described below. The audit committee may not approve such a related party transaction unless at the time of approval a quorum is presented at the meeting at which the approval was granted. The quorum for the audit committee is the majority of the members of the audit committee, provided that the majority of the independent directors are present and at least one of which is an external director.

The audit committee is also responsible for the determination of whether certain related party actions and transactions are "material" or "extraordinary" for purposes of the requisite approval procedures; assess the scope of work and compensation of the company's independent accountant; and to assess the company's internal audit system and the performance of its internal auditor.

Compensation Committee

Amendment No. 20 to the Companies Law, which became effective as of December, 2012, established new regulations relating to the terms of office and employment of directors and officers in public companies and companies that have publicly issued debentures (“Public Companies”). Following the amendment, Public Companies are required to appoint a compensation committee, in accordance with the guidelines set forth in the amendment.

The compensation committee consists of at least three members. All of the external directors must serve on the committee and constitute a majority of its members. The chairman of the compensation committee must be an external director. The remaining members must be directors who qualify to serve as members of the audit committee (as stated in item above). In accordance with the guidelines set by the amendment, our compensation committee is currently composed of three members, Jonathan Regev, Alicia Rotbard and Prof. Gedaliah Shelef Mr. Regev and Ms. Rotbard are the external directors serving on the board of directors. Mr. Regev also serves as the chairman of the compensation committee. Prof. Shelef is the independent director that sits on the board of directors.

As per the Companies Law, the roles of the compensation committee are, among others, as follows:

(1) to recommend to the board of directors with regards to the compensation policy for directors and officers, and recommend to the board of directors once every three years regarding extension of the compensation policy that had been approved for a period of more than three years;

(2) to recommend to the board of directors regarding the update of the compensation policy, from time to time, and examine its implementation;

(3) to decide whether to approve the terms of office and employment of directors and officers that require approval of the compensation committee; and

(4) to decide, in certain circumstances, whether to exempt the approval of terms of office of a CEO from the requirements of shareholders approval.

In addition to the roles mentioned above our compensation committee also makes recommendations to our Board regarding the awarding of employee options.

In accordance with the provisions of the amendment, within 9 months of the effective date of the amendment (i.e., no later than September 12, 2013), a compensation policy must be adopted by the Company. A compensation policy must be approved by the board of directors after receiving and considering the recommendations of the compensation committee. In addition, the compensation policy requires the approval of the general meeting of the shareholders. In Public Companies, shareholder approval requires one of the following: (i) the majority of shareholder votes counted at general meeting including the majority of all of the votes of those shareholders who are non controlling shareholders and do not have a personal interest in the approval of the compensation policy, who participate at the meeting (excluding abstentions) or (ii) the total number of votes against the proposal among the shareholders mentioned in paragraph (i) does exceed two percent (2%) of the voting rights in the company. Under special circumstances, the board of directors may approve the compensation policy despite the objection of the shareholders on the condition that the compensation committee and then the board of directors decide, on the basis of detailed arguments and after discussing again the compensation policy, that approval of the compensation policy, despite the objection of the meeting of shareholders, is for the benefit of the company. As of the date of this annual report, we have not adopted yet a compensation policy. For more information regarding Amendment 20, see Item 10.B.  Memorandum and Articles of Association.

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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.  Our internal auditor is Mr. Yehuda Ezra, C.P.A (Isr) of Ezra Yehuda-Rozenblum, Consulting, Control and Risk Management Ltd. 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 general manager (chief executive officer) of the company, or (iii) any person who serves as a director or as the general manager (chief executive officer) of the company.

D.  Employees

During the years 2010 through 2012, only Ofer Sandelson, the former chief executive officer of the Company was employed by the Company. For more information, see "Item 6.B. Compensation."

EER, our only subsidiary, employs 15 employees in Israel.

In January 2012, our board of directors approved the appointment of Mr. Ofer Sandelson as the Company's Chief Executive Officer (CEO) as of January 8, 2012. . On November 18, 2012, Mr. Ofer Sandelson notified the Company that he has decided to terminate his employment with the Company and with its subsidiary company EER. In accordance with Mr. Sandelson employment agreement with the Company and EER, he terminated his employment upon three months prior notice (during February 2013).

We are subject, like all Israeli employers, to labor laws and regulations in Israel. These laws principally concern matters like paid annual vacation, paid sick days and other conditions of employment. In addition, Israeli law generally requires severance pay, which may be funded by managers’ insurance described below (or by other funds), upon the retirement or death of an employee or termination of employment, subject to the provisions of the law.  Provisions for severance pay amount to approximately 8.33% of wages. Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute, which is broadly parallel to the United States Social Security Administration.  These amounts also include payments by the employee for national health insurance.  The total payments to the National Insurance Institute are equal to approximately 16.25% of the wages (up to a specified amount), of which the employee contributes approximately 66% and the employer contributes approximately 34%. As above stated, currently we have no employees.

We and any Israeli employees we may employ in the future will be subject to certain provisions of the general collective bargaining agreements between the Histadrut, the General Federation of Labor in Israel, and the Coordination Bureau of Economic Organizations, including the Industrialists Association, by order of the Israel Ministry of Labor and Welfare.

6.E.  Share Ownership

As of April 8, 2013 none of our directors and executive officers beneficially own more than 1% of our outstanding equity securities.

Beneficial ownership of shares is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Ordinary shares that are subject to warrants or options that are presently exercisable or exercisable within 60 days of the date of April 8, 2013 are deemed to be outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage of any other person.

Employee Share Option Plan

On June 29, 2011, our board of directors approved our 2011 Share Option Plan (the "2011 Plan"). Under the 2011 Plan, we may grant to any of our and our affiliates' (i.e. present or future companies that either control or controlled by RVB) employees, officers and directors options to purchase our ordinary shares. The total number of the shares reserved for issuance under the 2011 Plan was set up to be 5% of the issued and outstanding share capital of RVB as of January 1 of each year. The options under the 2011 Plan shall become vested and exercisable, in accordance with the following vesting schedule: (i) 33% of the options shall vest on the first anniversary of the date of grant; and (ii) 8.375% of the options shall vest on the last business day of each subsequent fiscal quarter following the first anniversary of the date of grant, such that any option shall become fully vested and exercisable by the third anniversary of the date of grant (the "Vesting Schedule").

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In January 2012, following the approval of the Company's audit committee and board of directors, our Company granted to seven of its and  EER's employees options to purchase 25,793,156 ordinary shares of the Company with an exercise price of US$0.2145 per share (adjusted for future dividend), (including 10,000,000 options to the Company's CEO), according to the 2011 Plan. In November 2012, the Company granted to additional three of EER's employees options to purchase 1,148,593 ordinary shares of the Company, according to the 2011 Plan.

As of the date of this annual report, there are outstanding options to purchase up to 13,786,337 of our ordinary shares in aggregate, held by our directors, officers and employees (as well as EER's employees).

Item 7. Major Shareholders and Related Party Transactions

7.A.         Major Shareholders

The following table sets forth certain information regarding the beneficial ownership of our Ordinary Shares as of April 21, 2013 by each person or entity known to own beneficially more than 5% of our outstanding ordinary shares based on information provided to us by the holders or disclosed in public filings with the Securities and Exchange Commission.

Name	Number of Ordinary Shares Beneficially Owned		Percentage of Outstanding Ordinary Shares(1)
Greenstone Industries Ltd.(2) 7 Jabotinsky St. Ramat Gan, 52509, Israel		86,731,038		35.88	%
Bank Leumi le-Israel B.M. (3) 34 Yehuda Halevi St. P.O. Box 2 Tel Aviv, 65546, Israel		19,111,111		8.25	%
EBN Korea Ltd. (4) Seoul Center Building 91-1 Sogong-Dong Jung-Gu, Seoul M5 100-070		15,231,571		6.57	%
Makoto Takahashi(5) 3-1-2-511, Shinyokohama, Kohokuku, Yokohama, Japan		23,445,975		10.12	%
Mazal Resources B.V. (6) Rietlandpark, 125 DT Amsterdam P7 1019		52,425,000		18.45	%

(1) Based on 231,685,787ordinary shares of RVB outstanding as of April 15, 2013 (not taking into account 1,040,000 dormant shares held by RVB).

(2) The information is based on Amendment no. 9 to Schedule 13D filed by Greenstone, on March 25, 2013. The total number of RVB shares beneficially owned by Greenstone (i.e. 86,731,038), consists of (i) 76,680,848 RVB shares held by Greenstone; (ii) 10,050,190RVB shares issuable under an option granted to Greenstone. Greenstone has sole dispositive power solely with respect to items (i) and (ii) above.

(3) The information is based on Schedule 13G filed by Bank Leumi le-Israel B.M on February 14, 2014.

(4) The information is based on Schedule 13G filed by EBN Korea Ltd. on March 7, 2012.

(5) The information is based on Schedule 13G filed by Mr. Makoto Takahashi, on January 23, 2012. Mr. Takahashi beneficially holds the ordinary shares of RVB through the following companies: (i) Capital Catalyzer Japan Ltd. which holds 4,045,183 ordinary shares of the RVB, (ii) EER Japan Inc. which holds 6,465,750 ordinary shares of RVB, and (iii) Alma Inc. which holds 12,935,042 ordinary shares of RVB. Mr. Takahashi is the owner of 50% of the outstanding shares of EER Japan Inc. and of 20% of the outstanding shares of Alma Inc., and is, therefore, considered a controlling shareholder of such companies. Catalyzer Japan Ltd is a wholly-owned subsidiary of Alma Inc.

(6) The information is based on Amendment no. 6 to Schedule 13D filed by Mazal Resources B.V. on December 13, 2011. Mazal has a put option to sell ordinary shares of EER to RVB in exchange for issuing 52,425,000 ordinary shares of RVB. As of the date of its report, Mazal didn't own any shares of R.V.B.

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As of April 8, 2013, there were a total of 2 registered holders of our ordinary shares with addresses in the United States (other than CEDE & Co.). Such United States holders were, as of such date, the registered holders of 2,773,075 ordinary shares representing approximately 1.20% of our outstanding share capital. The number of registered 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 these ordinary shares were held by a U.S. nominee company, CEDE & Co., which held approximately 16.76% of our outstanding ordinary shares as of said date.

7.B.  Related Party Transactions

The EER Transaction

On August 22, 2011, our shareholders approved the EER Transaction (following an approval by our audit committee and board of directors), together with the Additional SPA. At that meeting, our shareholders also approved the grant to Mr. Yair Fudim, of options to purchase ordinary shares of the Company representing, on a Fully Diluted Basis, approximately 0.3% of the Company's issued and outstanding share capital as of the date of grant, with an exercise price of US$0.2145 per share (adjusted for future dividend), which shall become vested and exercisable in accordance with the Vesting Schedule. These options were granted on January 5, 2012.

On January 12, 2012, we completed the multi-closing EER Transaction and purchased all of the EER shares held by Greenstone and Accord and the majority of EER shares held by certain other EER shareholders. Following such closings there is one shareholder who holds 200,000 shares of EER (constitutes approximately 1% of EER share capital) other than the Company and Mazal (which is side to the Option Agreement with the Company).

Below is description of the EER Transaction, including a summary of the terms and conditions of the EER Share Purchase Agreement, the Option Agreement, the Voting Agreement (as defined below) and the Services Agreement, and the actions that took place at the Closing Date of the EER transaction on August 31, 2011 (the "Closing Date") in connection therewith:

(i) At the Closing Date, pursuant to the EER Share Purchase Agreement, we acquired all of EER's shares held by Greenstone (6,274,760 ordinary shares of EER), for a total cash consideration of US$15,686,900. In addition, we acquired all of EER’s share capital held by Accord (1,721,450 ordinary shares of EER), in exchange for 20,054,893 RVB shares (each EER share was exchanged for 11.65 ordinary RVB shares);

(ii) The EER Share Purchase Agreement provided that we would cause Bank Leumi L’Israel Ltd. to release Greenstone, Accord and S.R. Accord Technologies Ltd., from all their obligations according to guarantees provided by them to the bank. As of the date of this annual report, the loan has been fully paid and these guarantees have been released.

(iii) In addition, pursuant to the EER Share Purchase Agreement, we were provided with the opportunity, until the lapse of 24 months following the Closing Date, to make an investment from time to time in EER’s share capital in an aggregate amount of up to US$8,000,000 by purchasing EER ordinary shares at a price of US$2.5 per share. Since the closing date and until December 31, 2012, the Company has made an investment in a total amount of approximately US$5 million. Subsequent to December 31, 2012, the Company invested in EER's share capital an additional amount of approximately US$1 million;

(iv) Pursuant to the Option Agreement between the Company and Mazal, dated July 3, 2011 (the "Option Agreement"), we granted Mazal an option to sell to RVB or to whom RVB may direct, no later than December 31, 2016, Mazal’s holdings in EER, in exchange of RVB shares at the same exchange ratio applied for the purchase of EER's shares pursuant to the Share Purchase Agreement (the "Put Option"), and Mazal granted us the option to buy all of Mazal's holdings in EER, upon the occurrence of certain reorganization events on or prior to December 31, 2016 (the "Call Option"). The terms and conditions of the Option Agreement applies, where applicable, to the 150,000 options to purchase EER shares, which EER granted to EER’s former CEO, Mr. Stern, in June 2011;

(v) Pursuant to the Voting Agreement between Greenstone and Mazal, dated July 3, 2011 (the "Voting Agreement"), Greenstone and Mazal agreed to coordinate the voting of RVB shares held by such parties, including with respect to the appointment of directors to the board of directors of RVB. The Voting Agreement was terminated as of November 29, 2011 pursuant to a termination agreement between Greenstone and Mazal, dated November 29, 2011;

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(vi) Pursuant to the Shareholders' Agreement, Mazal undertook to vote its EER shares in the same manner as then voted on such matter by RVB and/or as instructed by RVB in its sole discretion. The Shareholders' Agreement also contains certain provisions concerning rights of first refusal, pursuant to which, if Mazal proposes transfer in any way any of the Mazal EER shares, to one or more third parties except to a permitted transferee, then RVB shall have a right of first refusal with respect to such transfer;

(vii) Pursuant to the Management Agreement, Greenstone provides RVB with management and accounting services, for a total consideration of NIS 25,000 per month plus VAT, and, in addition, 10,050,190 options to purchase ordinary shares of the Company representing, on a Fully Diluted Basis, approximately 3.5% of the Company's issued and outstanding share capital as of the date of grant, with an exercise price of US$0.2145 per share (adjusted for future dividend), exercisable in accordance with the Vesting Schedule. The options described in this paragraph, which number was set upon the additional closing of the Additional SPA dated January 12, 2012 at 10,050,190 were granted on such closing date with an exercise price of US$0.2145 per share (adjusted for future dividends), exercisable in accordance with the Vesting Schedule. During the reported period, Greenstone notified the Company that it waives the total consideration of the management fees due from September 1, 2012.; and

(viii) Pursuant to the Services Agreement, Stern Holding undertook to provide business development services to RVB, for a total consideration of NIS 50,000 per month plus VAT, as well as certain expenses. The Services Agreement was terminated as of November 1, 2011 pursuant to a termination agreement by and among the parties, dated November 29, 2011.

Following the completion of the EER Transaction, EER has become our subsidiary.

For information regarding options to purchase our ordinary shares, issued to certain officers and members of our board of directors, see "Item 6.B. Directors, Senior Management and Employees - Compensation" above.

Directors’ and Officers’ Liability Insurance

On March 13, 2013, the Company’s board of directors approved, following the approval of the Company's audit and compensation committees, an extension of the Company’s directors’ and officers’ liability insurance (“D&O insurance policy”) until March 24, 2014, pending the approval of our shareholders at next general meeting of the shareholders Pursuant to terms of the D&O insurance policy, as extended, the insurance coverage will be for an aggregate amount of US$7.5 million and the total annual premium shall be US$35,800. In addition, the insurance coverage, as extended, covers events related to EER as well. [The Company’s audit committee and board of directors determined that the D&O insurance policy complies with the terms of Section 1B of the Israeli Companies Regulations (Relieves for Transactions with Interested Parties), 2000 and that the terms of the amended insurance policy are in accordance with market terms and will not substantially affect the Company’s profitability, assets or obligations.

7.C.  Interests of Experts and Counsel

Not applicable.

ITEM 8. Financial Information

8.A.  Consolidated Statements and Other Financial Information

The Financial Statements required by this item are found at the end of this annual report, beginning on page F-1.

Legal Proceedings

HarTech Settlement Agreement

In May 2009, we initiated legal action in Tel Aviv District Court against HarTech Systems Limited ("HarTech"), HarTech Technologies Limited, Mr. Ofer Har, and three employees of the HarTech companies (the "Defendants") for infringement of our intellectual property rights relating to our simulation and live training software. Our action sought to enjoin the Defendants from further breach of our intellectual property rights.  Our initial claim requested damages for infringement in the amount of approximately US$2.5 million (NIS 10 million) as well as additional costs and injunctive relief.

In June 2009, we requested that the court require the Defendants to deposit the source code of the disputed intellectual property in escrow.  The source code was deposited in escrow in exchange for a bank guarantee of approximately US$13,000 (NIS 50,000).

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In August 2009, HarTech filed a counterclaim seeking recovery for non-payment of fees due under a consulting agreement between the Company and HarTech in the amount of approximately US$241,000  (NIS 907,000) as well as damages to the Defendant's reputation, stemming from our lawsuit, in the amount of approximately US$660,000 (NIS 2,500,000).

In January 2011, we entered into a settlement agreement with HarTech and the Defendants whereby the parties settled all claims against one another, and pursuant to which, HarTech will pay us an aggregate amount of US$180,000 in two equal installments, the first have been paid on June 1, 2011 and the second installment was paid in June 2012.

Dividend Policy

We have no dividend policy.

B.  Significant Changes

There have been no material changes in our financial position since December 31, 2012 except as otherwise disclosed in this annual report.

ITEM 9. The Offer and Listing

A.  Offer and Listing Details

Our Ordinary Shares are quoted on the Over the Counter Bulletin Board under the symbol RVBHF.OB.

The following table sets forth, for the periods indicated, the range of high and low sales prices of our Ordinary Shares:

	High		Low
Yearly highs and lows
2008
Year ending December 31, 2008	US$	0.20	US$	0.11
2009
Year ending December 31, 2009	US$	0.26	US$	0.05
2010
Year ending December 31, 2010	US$	0.18	US$	0.05
2011
Year ending December 31, 2011	US$	0.20	US$	0.04
2012
Year ending December 31, 2012	US$	0.22	US$	0.01
Quarterly highs and lows
2011
First Quarter	US$	0.18	US$	0.09
Second Quarter	US$	0.18	US$	0.12
Third Quarter	US$	0.20	US$	0.02
Fourth Quarter	US$	0.14	US$	0.01
2012
First Quarter	US$	0.12	US$	0.01
Second Quarter	US$	0.22	US$	0.06
Third Quarter	US$	0.18	US$	0.03
Fourth Quarter	US$	0.05	US$	0.01
2013
First Quarter	US$	0.09	US$	0.01
Monthly highs and lows
March 2013	US$	0.03	US$	0.01
February 2013	US$	0.04	US$	0.01
January 2013	US$	0.09	US$	0.01
December 2012	US$	0.04	US$	0.01
November 2012	US$	0.03	US$	0.01
October 2012	US$	0.05	US$	0.02

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9.B. Plan of Distribution

Not applicable.

9.C. Markets

Our Ordinary Shares were traded on the Nasdaq Capital Market until February, 2003 under the ticker symbol BVRSF.  Our Ordinary Shares were then delisted from the Nasdaq Capital Market after we failed to comply with its required listing standards. Our Ordinary Shares traded on the Over-the-Counter Bulletin Board under the symbol “BVRSF.OB” from February, 2003 until March 2010.  Following the Elbit Transaction and our name change to R.V.B. Holdings Ltd, we changed our ticker symbol and on March 2, 2010, our Ordinary Shares began trading on the Over-the-Counter Bulletin Board under the symbol "RVBHF.OB".

9.D. Selling Shareholders

Not applicable.

9.E. Dilution

Not applicable.

9.F. Expenses of the Issue

Not applicable.

ITEM 10. Additional Information

10.A. Share Capital

Not applicable.

10.B. Memorandum and Articles of Association

Objects and Purposes

We are a public company registered under the Companies Law as R.V.B. Holdings Ltd (formerly B.V.R. Systems (1998) Ltd.), registration number 52-004362-1.  Pursuant to Article 4.2 of our Articles of Association, our objective is any purpose stated in the Company's memorandum of association and to engage in any lawful activity.

Transactions Requiring Special Approval

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

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

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

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

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

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

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

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

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

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

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

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

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

· not in the ordinary course of business;

· not on market terms; or

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

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

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

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

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

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

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

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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 the purpose of approving transactions with controlling shareholders, the term also includes any shareholder that holds 25% or more of the voting rights in a public company if no other shareholder owns more than 50% of the voting rights in the company. For purposes of determining the holding percentage stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company’s approval are deemed as joint holders.

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

Compensation of Officers and Directors

Amendment No. 20 to the Companies Law ("Amendment No. 20"), which recently came into effect, adopted new procedures relating to the approval of executive compensation and the formulation of compensation policies in Israeli public companies (including companies that issued only debentures to the public). Pursuant to Amendment No. 20, Israeli public companies are required to establish a compensation committee and adopt a policy regarding the compensation and terms of employment of their directors and officers. For information on the composition, roles and objectives of the compensation committee pursuant to the Companies Law and our compensation committee charter, see Item 6C. Board Practices –Board of Directors' Committees – Compensation Committee.

Pursuant to Companies Law following Amendment No. 20, the compensation policy must be approved by company's board of directors following its approval by the compensation committee. The compensation policy also requires the approval of the general meeting of the shareholders, which approval must satisfy one of the following (the "Majority Requirement"): (i) the majority should include at least a majority of the shares of the voting shareholders who are non controlling shareholders or do not have a personal interest in the approval of the compensation policy (in counting the total votes of such shareholders, abstentions shall not be taken into account) or (ii) the total number of votes against the proposal among the shareholders mentioned in paragraph (i) does not exceed two percent of the aggregate voting power in the company. Under certain circumstances and subject to certain exceptions, the board of directors may approve the compensation policy despite the objection of the shareholders, provided that the compensation committee and the board of directors determines that it is for the benefit of the company, following an additional discussion and based on detailed arguments.

The Companies Law provides that the compensation policy must be re-approved every three years, in the manner described above. Moreover, the board of directors is responsible for reviewing from time to time the compensation policy and deciding whether or not there are any circumstances that require an adjustment to the company's compensation policy. When approving the compensation policy, the relevant organs must take into consideration the goals and objectives listed in the Companies Law, and include reference to specific issues listed in the Companies Law. Such issues include, among others (the "Compensation Policy Mandatory Criteria"): (i) the relevant person’s education, qualifications, professional experience and achievements; (ii) such person's position within the company, the scope of his responsibilities and previous compensation arrangements with the company; (iii) the proportionality of such person's compensation in relation to the average and median pay of other employees in the company, including contract workers, and the impact of the differences between such person's compensation and the other employees' compensation on the labor relations in the company; (iv) the authority, at the board of director's sole discretion, to lower any variable compensation components or set a maximum limit (cap) on the actual value of the non-cash variable components, when paid; and (v) in the event that the terms of engagement include any termination payments - the term of employment of the departing person, the company’s performance during that term, and the departing person’s contribution to the performance of the company.

In addition, the Companies Law provides that the following matters shall be included in the compensation policy (the "Compensation Policy Mandatory Provisions"): (i) the award of variable components must be based on long term and measurable performance criteria (other than non-material variable components, which may be based on non measurable criteria taking into account the relevant person's contribution to the performance of the company); (ii) the company must set a ratio between fixed and variable pay, set a cap on the payment of any cash variable compensation components as of the payment of such components, and set a cap on the maximum cash value all non-cash variable components as of their grant date; (iii) the compensation policy must include a provision requiring the relevant person to return to the company any compensation that was awarded on the basis of financial figures that were subsequently restated; (iv) equity based variable compensation components should have an appropriate minimum vesting periods, which should be linked to long term performance objectives; and (v) the company must set a clear limit on termination payments.

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Amendment No. 20 also introduced new procedures for the approval of compensation arrangements with officers and directors of Israeli public companies (including companies that issued only debentures to the public). Pursuant to the Companies Law following Amendment No. 20, any transaction with an office holder (except directors and the CEO of the company) with respect to such office holder's compensation arrangements and terms of engagement, requires the approval of the compensation committee and the board of directors. Such transaction must be consistent with the provisions of the company's compensation policy, provided that the compensation committee and the board of directors may, under special circumstances, approve such transaction that is not in accordance with the company's compensation policy, if both of the following conditions are met: (i) the compensation committee and the board of directors discussed the transaction in light of the roles and objectives of the compensation committee (see "Item 6C. Board Practices –Board of Directors' Committees – Compensation Committee.) and after taking into consideration the Compensation Policy Mandatory Criteria and including in such transaction the Compensation Policy Mandatory Provisions; and (ii) the company's shareholders approved the transaction, provided that in public companies the approval must satisfy the Majority Requirement. Notwithstanding the above, the compensation committee and the board of directors may, under special circumstances, approve such transaction even if the shareholders' meeting objected to its approval, provided that (i) both the compensation committee and the board of directors re-discussed the transactions and decided to approve it despite the shareholder's objection, based on detailed arguments, and (ii) the company is not a 'Public Pyramid Held Company'. For the purpose hereof, a "Public Pyramid Held Company" is a public company that is controlled by another public company (including companies that issued only debentures to the public), which is also controlled by another public company (including companies that issued only debentures to the public) that has a controlling shareholder.

Transactions between public companies (including companies that have issued only debentures to the public) and their chief executive officer, with respect to his or hers compensation arrangement and terms of engagement, require the approval of the compensation committee, the board of directors and the shareholder's meeting, provided that the approval of the shareholders' meeting must satisfy the Majority Requirement. Notwithstanding the above, the compensation committee and the board of directors may, under special circumstances, approve such transaction with the CEO even if the shareholders' meeting objected to its approval, provided that (i) both the compensation committee and the board of directors re-discussed the transactions and decided to approve it despite the shareholder's objection, based on detailed arguments, and (ii) the company is not a Public Pyramid Held Company. Such transaction with the CEO must be consistent with the provisions of the company's compensation policy, provided that the compensation committee and the board of directors may, under special circumstances, approve such transaction that is not in accordance with the company's compensation policy, if both of the following conditions are met: (i) the compensation committee and the board of directors discussed the transaction in light of the roles and objectives of the compensation committee (see "Item 6C. Board Practices –Board of Directors' Committees – Compensation Committee" in this annual report) and after taking into consideration the Compensation Policy Mandatory Criteria and including in such transaction the Compensation Policy Mandatory Provisions; and (ii) the company's shareholders approved the transaction, provided that in public companies the approval must satisfy the Majority Requirement. In addition, the compensation committee may determine that such transaction with the CEO nominee does not have to be approved by the shareholders of the company, provided that: (i) the CEO nominee is independent based on criteria set forth in the Companies Law; (ii) the compensation committee determined, based on detailed arguments, that bringing the transaction to the approval of the shareholders may compromise the chances of entering into the transaction; and (iii) the terms of the transaction is consistent with the provisions of the company's compensation policy. Under the Companies Law, non material amendments of transactions relating to the compensation arrangement or terms of engagement of office holders (including the CEO), require only the approval of the compensation committee.

With respect to transactions relating to the compensation arrangement and terms of engagements of directors in public companies (including companies that have issued only debentures to the public), the Companies Law following Amendment No. 20 provides that such transaction shall be subject to the approval of the compensation committee, the board of directors and the shareholders' meeting. Such transaction must be consistent with the provisions of the company's compensation policy, provided that the compensation committee and the board of directors may, under special circumstances, approve such transaction that is not in accordance with the company's compensation policy, if both of the following conditions are met: (i) the compensation committee and the board of directors discussed the transaction in light of the roles and objectives of the compensation committee (see "Item 6C. Board Practices –Board of Directors' Committees – Compensation Committee" in this annual report) and after taking into consideration the Compensation Policy Mandatory Criteria and including in such transaction the Compensation Policy Mandatory Provisions; and (ii) the company's shareholders approved the transaction, provided that in public companies the approval must satisfy the Majority Requirement.

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Amendment No. 20 became effective on December 12, 2012. Under Amendment No. 20, Israeli public companies must adopt a compensation policy within nine months from the date on which the amendment became effective, i.e. September 12, 2013. During this period, extensions of existing terms of engagement with directors and officers of Israeli public companies are not subject to the provisions of Amendment No. 20, provided that they are extended as-is without any modification. As of the date of this annual report, we have not yet adopted a compensation policy in accordance with the provisions of Amendment No. 20.

Directors’ Borrowing Powers

Our board of directors may from time to time, in its discretion, cause the Company to raise or borrow or secure the payment of any sum or sums of money for the purposes of the Company. Such borrowing powers may be exercised by a majority of the board of directors in accordance with our Articles of Association.

Rights attached to our Shares

Dividend Rights. Our Board of Directors may decide on a distribution, subject to the provisions set forth under the Companies Law and our Articles of Association.  Under the Companies Law, dividends may be paid out of net earnings, as calculated under that law, for the two years preceding the distribution of the dividend and retained earnings, provided that there is no reasonable concern that the dividend will prevent the company from satisfying its existing and foreseeable obligations as they become due.

Voting Rights. Holders of Ordinary Shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders.  These voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future.  The Ordinary Shares do not have cumulative voting rights in the election of directors.  As a result, holders of Ordinary Shares that represent more than 50% of the voting power have the power to elect all the directors to the exclusion of the remaining shareholders.

Liquidation Rights. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of Ordinary Shares in proportion to their respective holdings.  This liquidation right may be affected by the grant of preferential dividends or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

Redemption Provisions. We may, subject to applicable law, issue redeemable preference shares and redeem the same.

Capital Calls. Under our memorandum of association and the Companies Law, the liability of our shareholders is limited to the par value of the shares held by them.

Preemptive, First Refusal and Co-Sale Rights. All outstanding Ordinary Shares are validly issued, fully paid and non-assessable and do not have preemptive rights, rights of first refusal or co-sale rights.

Transfer of Shares. Fully paid Ordinary Shares are issued in registered form and may be transferred pursuant to our Articles of Association, unless such transfer is restricted or prohibited by another instrument and subject to applicable securities laws.

Modification of Rights

Unless otherwise provided by our Articles of Association, rights attached to any class may be modified or abrogated by a resolution adopted in a general meeting approved by an ordinary majority of the voting power represented at the meeting in person or by proxy and voting thereon, subject to the sanction of a resolution passed by an ordinary majority of the shares of such class present and voting as a separate general meeting of the holders of such class.

Shareholders’ Meetings and Resolutions

The quorum required for an ordinary 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 outstanding voting shares, unless otherwise required by applicable rules.  A meeting adjourned for lack of a quorum generally is adjourned to one day thereafter at the same time and place or any other day, time and place as the board may designate. At such reconvened meeting the required quorum consists of any number shareholders present in person or by proxy.

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Under the Companies Law and our Articles of Association, all resolutions of our shareholders require a simple majority of the shares present, in person or by proxy, and voting on the matter.

Under the Companies Law, each and every shareholder has a duty to act in good faith in exercising his rights and fulfilling his obligations towards us and other shareholders, and to refrain from abusing its power in the company, such as in voting in the general meeting of shareholders on the following matters:

· any amendment to the articles of association;

· an increase of our authorized share capital;

· a merger; or

· approval of certain actions and transactions that require shareholder approval.

In addition, each and every shareholder has the general duty to refrain from depriving other shareholders of their rights.

The remedies generally available upon a breach of contract will also apply to a breach of the shareholder duties mentioned above, 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 any other power with respect to a company, is under 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.

Our annual general meetings are held once in every calendar year at such time (within a period of not more than fifteen months after the last preceding annual general meeting) and at such place as determined by our board.  All general meetings other than annual general meetings are called special meetings.  Our board may, whenever it thinks fit, convene a special meeting at such time and place as it determines, and shall be obligated to do so upon a requisition in writing in accordance with the Companies Law.

Limitation on Owning Securities

The ownership of our Ordinary Shares by nonresidents of Israel is not restricted in any way by our memorandum of association and Articles of Association or the laws of the State of Israel, except for citizens of countries, which are in a state of war with Israel, who may not be recognized as owners of our Ordinary Shares.

Acquisitions under Israeli Law

Merger

The Companies Law permits merger transactions if such merger was approved by each of the merging companies' board of directors and, unless certain requirements described under the Companies Law are met, a majority of each merging companies shareholders.

The board of directors of a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion there exists a reasonable concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors, taking into account the financial condition of the merging companies.  If the board of directors has determined that such a concern exists, it may not approve a proposed merger.  Following the approval of the board of directors of each of the merging companies, the board of directors of the merging companies must jointly prepare a merger proposal for submission to the Israeli Registrar of Companies.

For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares voting at the shareholders meeting (excluding abstentions) that are held by parties other than the other party to the merger, any person who holds 25% or more of the means of control of the other party to the merger or any one on their behalf including their relatives or corporations controlled by any of them, vote against the merger. In addition, if the target entity has more than one class of shares, the merger must be approved by each class of shareholders.

If the transaction would have been approved but for the separate approval of each class of shares or the exclusion of the votes of certain shareholders as provided above, a court may still rule that the company has approved the merger upon the request of holders of at least 25% of the voting rights of a company. The court will not approve such merger unless the court holds that the merger is fair and reasonable, taking into account the appraisal of the merging companies’ value and the consideration offered to the shareholders.

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Under the Companies Law, each merging company must send a copy of the proposed merger plan to its secured creditors. Unsecured creditors are entitled to receive notice of the merger, as provided by the regulations promulgated under the Companies Law.  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 the target company. The court may also give instructions in order to secure the rights of creditors.

In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed with the Israeli Registrar of Companies and 30 days from the date that shareholder approval of both merging companies was obtained.

Full Tender Offer

A person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the target company’s issued and outstanding share capital, is required by the Companies Law, to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company.

A person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of the issued and outstanding shares of the same class.

If the shareholders who do not respond to or accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class of shares, and more than half of the shareholders who do not have a personal interest in the offer accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, a tender offer will be accepted if the shareholders who do not accept it hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares.

If the shareholders who did not respond or accept the tender offer hold at least 5% of the issued and outstanding share capital of the company or of the applicable class of shares, the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.

Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition the Israeli court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined by the court. However, under certain conditions, the offeror may determine in the terms of the tender offer that an offeree who accepted the offer will not be entitled to petition the Israeli court as described above.

The description above regarding a full tender offer shall also apply, with necessary changes, when a full tender offer is accepted and the offeror has also offered to acquire all of the company’s securities.

Special Tender Offer

The Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of at least 25% of the voting rights in the company.  This rule does not apply if there is already another holder of at least 25% of the voting rights in the company.

Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company.

These requirements do not apply if the acquisition (i) occurs in the context of a private offering, provided that the shareholders meeting approved the acquisition as a private offering whose purpose is to give the acquirer at least 25% of the voting rights in the company if there is no person who holds at least 25% of the voting rights in the company, or as a private offering whose purpose is to give the acquirer 45% of the voting rights in the company, if there is no person who holds 45% of the voting rights in the company; (ii) was from a shareholder holding at least 25% of the voting rights in the company and resulted in the acquirer becoming a holder of at least 25% of the voting rights in the company; or (iii) was from a holder of more than 45% of the voting rights in the company and resulted in the acquirer becoming a holder of more than 45% of the voting rights in the company.

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The special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the special tender offer is accepted by a majority of the votes of those offerees who gave notice of their position in respect of the offer; in counting the votes of offerees, the votes of a holder of control in the offeror, a person who has personal interest in acceptance of the special tender offer, a holder of at least 25% of the voting rights in the company, or any person acting on their or on the offeror’s behalf, including their relatives or companies under their control, are not taken into account.

In the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer or shall abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons for its abstention.

An office holder in a target company who, in his or her capacity as an office holder, performs an action the purpose of which is to cause the failure of an existing or foreseeable special tender offer or is to impair the chances of its acceptance, is liable towards the potential purchaser and shareholders for damages resulting from his actions, unless such office holder acted in good faith and had reasonable grounds to believe he or she was acting for the benefit of the company.  However, office holders of the target company may negotiate with the potential purchaser in order to improve the terms of the special tender offer, and may further negotiate with third parties in order to obtain a competing offer.

In case a special tender offer was accepted, offerees who did not respond to the special offer or had objected to the special tender offer may accept the offer within four days of the last day set for the acceptance of the offer.

In the event that a special tender offer is accepted, then the purchaser or any person or entity controlling it and any corporation controlled by them shall refrain from making a subsequent tender offer for the purchase of shares of the target company and may not execute a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.

10.C.  Material Contracts

Elbit Transaction

On July 19, 2009, we entered into an Asset Purchase Agreement with Elbit Systems Ltd., whereby Elbit acquired substantially all of our assets and business for a cash consideration of approximately US$34 million and to assume substantially all of our business related liabilities.  The purchase price of US$34 million was based on the assumption that the purchased projects were balanced, or consistent with the presented stage of execution.

As at the closing date of the transaction, there were certain assets that were unable to be transferred to Elbit (“Non-Transferable Assets and Liabilities”). Therefore we entered into an agreement with Elbit, regarding such Non-transferable Assets and Liabilities which stipulates that until such Non-transferable Assets and Liabilities are able to be transferred to Elbit, we shall provide Elbit with the benefit of each of the non-transferable assets and Elbit shall satisfy or perform any liability, back-to-back with our obligations. Both parties agreed that Elbit shall be responsible for the fulfillment of the undertaking under any contract with respect to non-transferable assets and shall provide the products and/or services, via the Company. As of the date hereof there is one agreement that is subject to this back-to-back agreement.

EER Transaction

For a summary of the EER Transaction, see:  “Item 7.B. – Major Shareholders and Related Party Transactions – Related Party Transactions.”

10.D. Exchange Controls

Under current Israeli regulations, we may pay dividends or other distributions in respect of our Ordinary Shares either in non-Israeli or Israeli currencies.  If we make these payments in Israeli currency, they will be freely converted into non-Israeli currencies at the rate of exchange prevailing at the time of conversion.  Because exchange rates between the NIS and the dollar continuously fluctuate, a U.S. shareholder will be subject to the risk of currency fluctuations between the date when we declare NIS-denominated dividends and the date we pay them in NIS.  See “— Item 3. Key Information — D. Risk Factors.”

Non-residents of Israel may freely hold and trade our securities pursuant to the general permit issued under the Israeli Currency Control Law, 1978.  Neither our memorandum of association, Articles of Association nor the laws of the State of Israel restrict the ownership of our Ordinary Shares by non-residents in any way, except with respect to citizens of countries which are in a state of war with Israel.

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10.E.  Taxation

HOLDERS OF OUR ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE UNITED STATES, ISRAELI OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ORDINARY SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN, STATE OR LOCAL TAXES.

Israeli Tax Considerations and Government Programs

The following is a summary of the current tax structure applicable to companies in Israel, with special reference to its effect on us. The following also contains a discussion of certain Israeli and United States tax consequences to purchasers of our Ordinary Shares and certain Israeli Government programs benefiting us.  To the extent that the discussion is based on new tax legislation that has not been subject to judicial or administrative interpretation, there can be no assurance that the views expressed in the discussion will be accepted by the tax authorities in question.  The discussion is not intended, and should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations.

General Corporate Tax Structure

Israeli companies are generally subject to corporate tax at a rate of 25% in 2012.

Capital Gains Tax on Sales of Our Ordinary Shares

Capital gains tax is imposed on the disposal of capital assets by an Israeli resident and on the disposal of such assets by a non- Israel resident, if those assets are either: (i) located in Israel; (ii) shares or rights to shares in an Israeli resident company, or (iii) represent, directly or indirectly, rights to assets located in Israel. The Israeli Income Tax Ordinance, 1961 [new version] (the "Ordinance") distinguishes between “Real Capital Gain” and “Inflationary Surplus”. The Real Capital Gain on the disposition of a capital asset is the amount of total capital gain in excess of Inflationary Surplus. Inflationary Surplus is generally computed on the basis of the increase in the Israeli Consumer Price Index between the date of purchase and the date of disposal of the capital asset.

Real Capital Gain generated by a company is generally subject to tax at the corporate tax rate (25% in 2012). As of 2012, the Real Capital Gain accrued by individuals on the sale of our ordinary shares will be taxed at the rate of 25%. However, if the individual shareholder is a “Controlling Shareholder” (i.e.,  a person who holds, directly or indirectly, alone or together with another, 10% or more of one of the Israeli resident company’s “means of control” (including,  among others, the right to company profits, voting rights, the right to the company’s liquidation proceeds and the right to appoint a company director) at the time of sale or at any time during the preceding 12 month period)), such gain will be taxed at the rate of 30%.

Individual and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income - 25% for corporations in 2012 and a marginal tax rate of up to 48% for individuals in 2012 (50% in 2013).

Notwithstanding the foregoing, capital gains generated from the sale of our securities by a non-Israeli shareholder may be exempt under the Ordinance from Israeli taxes provided that all the following cumulative conditions are met: (i) the securities were purchased upon or after the registration of the securities on a stock exchange (this requirement generally does not apply to shares purchased on or after January 1, 2009); (ii) the seller of the securities does not have a permanent establishment in Israel to which the generated capital gain is attributable; and (iii) if the seller is a corporation, less than 25% of its means of control are held, directly and indirectly, by Israeli resident shareholders. In addition, the sale of the securities may be exempt from Israeli capital gain tax under the provisions of an applicable tax treaty. For example, the Convention between the Government of the United States of America and the Government of Israel with respect to Taxes on Income (the “Israel-U.S. Double Tax Treaty ”) exempts U.S. residents from Israeli capital gains tax in connection with such sale, provided that: (i) the U.S. resident owned, directly or indirectly, less than 10% of the Israeli resident company’s voting power at any time within the 12-month period preceding such sale; (ii) the seller, if an individual, has been present in Israel for less than 183 days (in the aggregate) during the taxable year; and (iii) the capital gain from the sale was not generated through a permanent establishment of the U.S. resident in Israel.

Either the purchaser of the securities, the stockbrokers who effected the transaction or the financial institution holding the traded securities through which the payment to the seller is made is obligated, subject to the above-referenced exemptions, to withhold tax on the Real Capital Gains resulting from a sale of securities at the rate of 25% in 2012 in respect of a corporation and/or an individual.

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A detailed return, including a computation of the tax due, must be filed and an advance payment must be paid on January 31 and June 30 of each tax year for sales of securities traded on a stock exchange made in the 6 months period prior to each of the aforementioned filing dates. However, if all tax due was withheld at source according to applicable provisions of the Ordinance and the regulations promulgated thereunder, the return does not need to be filed and no advance payment is required. Capital gains are also reportable on an annual income tax return.

Taxation of Dividends

As of January 1, 2012, a distribution of dividends from income derived during any period for which the Israeli company is not entitled to reduced tax rates applicable to an Approved Enterprise/Benefited Enterprise/ Preferred Enterprise under the Law for the Encouragement of Capital Investments-1959, to an Israeli resident individual, will generally be subject to tax at a rate of 25%. However, a 30% tax rate will apply if the dividend recipient is a “Controlling Shareholder” (as defined above) at the time of distribution or at any time during the preceding 12 months period. If the recipient of the dividend is an Israeli resident corporation, such dividend will be exempt from tax in Israel provided that the income from which such dividend was distributed was derived or accrued within Israel.

The aforementioned rates may be reduced by an applicable double tax treaty. Thus, under the Israel – U.S. Double Tax Treaty the following rates will apply in respect of dividends distributed by an Israeli resident company to a U.S. resident: (i) if the U.S. resident is a corporation which holds during that portion of the taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting stock of the Israeli resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation for such prior taxable year (if any) consists of certain type of interest or dividends – the tax rate is 12.5%, (ii) if both the conditions mentioned in section (i) above are met and the dividend is paid from an Israeli resident company's income which was entitled to a reduced tax rate applicable to an Approved Enterprise/ Benefited Enterprise/Preferred Enterprise – the tax rate is 15%, and (iii) in all other cases, the tax rate is 25%. The aforementioned rates under the Israel U.S. Double Tax Treaty will not apply if the dividend income has been derived through a permanent establishment of the U.S. resident in Israel.

         Our company is obligated to withhold tax, upon the distribution of a dividend attributed to an Approved Enterprise's/Privileged Enterprise's/Preferred Enterprise's income, from the amount distributed, at the following rates: (i) Israeli resident corporations – 15%, (ii) Israeli resident individuals – 15%, and (iii) non-Israeli residents – 15% (4% under the Ireland Track), subject to a reduced tax rate under the provisions of an applicable double tax treaty. If the dividend is distributed from an income not attributed to the Approved Enterprise/Privileged Enterprise/Preferred Enterprise, the following withholding tax rates will apply: (a) for securities which are registered and held by a clearing corporation: (i) Israeli resident corporations – 0%, (ii) Israeli resident individuals – 25%/30% (the 30% tax rate shall apply if the dividend recipient is a “Controlling Shareholder” (as defined above) at the time of the distribution or at any time during the preceding 12 months period), and (iii) non-Israeli residents - 25%, subject to a reduced tax rate under the provisions of an applicable double tax treaty; (b) in all other cases: (i) Israeli resident corporations – 0%, (ii) Israeli resident individuals – 25%/30% (the 30% tax rate shall apply if the dividend recipient is a “Controlling Shareholder” (as defined above) at the time of the distribution or at any time during the preceding 12 months period), and (iii) non-Israeli residents - 25%/30% as referred to above with respect to Israeli resident individuals, subject to a reduced tax rate under the provisions of an applicable double tax treaty.

United States Federal Income Tax Considerations

The following discussion describes certain material United States (“U.S.”) federal income tax consequences of the purchase, ownership and disposition of our ordinary shares.

For purposes of this discussion, a “U.S. holder” is a beneficial owner of ordinary shares who or which is any of the following for U.S. federal income tax purposes:

· a citizen or resident of the U.S. or someone treated as a U.S. citizen or resident of the U.S.;

· a corporation (or another entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof, or the District of Columbia;

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

· a trust, if (a) a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (b) the trust was in existence and treated as a U.S. person on August 20, 1996 and has a valid election in effect under applicable Treasury Regulations (as defined below) to be treated as a U.S. person.

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This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income tax considerations that may be relevant to a decision to purchase, hold or dispose of the Company’s ordinary shares. This summary generally considers only U.S. holders that will own the ordinary shares as capital assets and does not consider the U.S. tax consequences to a person that is not a U.S. holder or the tax treatment of persons who hold the ordinary shares through a partnership or other pass-through entity. In addition, the possible application of U.S. federal estate or gift taxes or any aspect of state, local or non-U.S. tax laws is not considered. This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated under the Code by the U.S. Treasury Department (including proposed and temporary regulations) (the “Treasury Regulations”), rulings, current administrative interpretations and official pronouncements by the Internal Revenue Service (the “IRS”), and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, with a retroactive effect. Such changes could materially and adversely affect the tax consequences described below. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular U.S. holder based on the holder’s particular circumstances, such as,

· persons who own, directly, indirectly or constructively, 10% or more (by voting power or value) of our outstanding voting shares;

· persons who hold the ordinary shares as part of a hedging, straddle or conversion transaction;

· persons whose functional currency is not the U.S. dollar;

· persons who acquire their ordinary shares in a compensatory transaction;

· broker-dealers;

· insurance companies;

· regulated investment companies;

· real estate investment companies;

· traders who elect to mark-to-market their securities;

· tax-exempt organizations;

· banks or other financial institutions;

· U.S. expatriates; and

· persons subject to the alternative minimum tax.

HOLDER RELIANCE ON TAX STATEMENTS

THIS SUMMARY OF MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. EACH HOLDER SHOULD CONSULT ITS TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO IT OF AN INVESTMENT IN THE ORDINARY SHARES, INCLUDING THE EFFECTS OF APPLICABLE UNITED STATES FEDERAL INCOME TAX LAWS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE UNITED STATES FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY FOREIGN, STATE OR LOCAL JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

Availability of Reduced Tax Rates

Recent U.S. legislation increased to 20% the maximum U.S. Federal income tax rate on certain long-term capital gains and on qualifying dividends. Long-term capital gains from the sale of our ordinary shares may be eligible for this rate, although the actual rates may be higher due to the phase out of certain tax deductions, exemptions and credits. Subject to the discussion below, dividends, if any, may also be eligible for this 20% maximum rate on long-term capital gains, provided that we do not constitute a passive foreign investment company (a “PFIC”). However, tax rates are subject to change, especially given the uncertain economic conditions in the United States and the size of the federal deficit. U.S. holders should consult their tax advisors.

Distributions on the Ordinary Shares

We currently do not intend to pay dividends for at least the next several years. However, if we make any distributions of cash or other property to a U.S. holder of our ordinary shares, the amount of the distribution for U.S. federal income tax purposes will equal the amount of cash and the fair market value of any property distributed and will also include the amount of Israeli taxes withheld, if any, as described above under “Taxation of Dividends”. In general (and subject to the PFIC rules discussed below), any distribution paid by us on the ordinary shares to a U.S. holder will be treated as dividend income if the distribution does not exceed our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. If holding period and other requirements are met, dividends paid to non-corporate U.S. holders in taxable years beginning after December 31, 2012 should generally qualify for the reduced maximum tax rate of 20% as long as our common shares remain “readily tradable on an established securities market in the United States,” provided that we are not considered a PFIC (as discussed below) in the taxable year in which the dividend is paid or in any preceding taxable year. The amount of any distribution which exceeds these earnings and profits will be treated first as a non-taxable return of capital, reducing the U.S. holder’s tax basis in its ordinary shares to the extent thereof, and then as capital gain, and as long-term capital gain if the U.S. holder’s holding period exceeds one year, from the deemed disposition of the ordinary shares (subject to the PFIC rules discussed below). Corporate holders generally will not be allowed a deduction for dividends received on the ordinary shares.

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A dividend paid by us in NIS will be included in the income of U.S. holders at the U.S. dollar value of the dividend, based upon the spot rate of exchange in effect on the date of the distribution. U.S. holders will have a tax basis in NIS for U.S. federal income tax purposes equal to that U.S. dollar value. Any subsequent gain or loss resulting from exchange rate fluctuations between the day the dividend was included in the income of U.S. holders and the day the NIS are converted into U.S. dollars or are otherwise disposed of, will be taxable as ordinary income, gain or loss from U.S. sources.

Dividends paid by us generally will be foreign source “passive income” for U.S. foreign tax credit purposes or, in the case of a U.S. holder that is a financial services entity, “financial services income.” U.S. holders may elect to claim as a foreign tax credit against their U.S. federal income tax liability the Israeli income tax withheld from dividends received on the ordinary shares. The Code provides limitations on the amount of foreign tax credits that a U.S. holder may claim. U.S. holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income tax withheld, but only for a year in which these U.S. holders elect to do so for all foreign income taxes. The rules relating to foreign tax credits are complex (and may also be impacted by the tax treaty between the United States and Israel), and you should consult your tax advisor to determine whether and if you would be entitled to this credit.

Sale or Exchange of the Ordinary Shares

Upon the sale or exchange of the ordinary shares (subject to the PFIC rules discussed below), a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or exchange and the U.S. holder’s tax basis in the ordinary shares. The gain or loss recognized on the sale or exchange of the ordinary shares generally will be long-term capital gain or loss if the U.S. holder’s holding period of the ordinary shares is more than one year at the time of the disposition.

Gain or loss recognized by a U.S. holder on a sale or exchange of ordinary shares generally will be treated as U.S. source income or loss for U.S. foreign tax credit purposes. Under the tax treaty between the United States and Israel, gain derived from the sale, exchange or other disposition of ordinary shares by a holder who is a resident of the U.S. for purposes of the treaty and who sells the ordinary shares within Israel may be treated as foreign source income for U.S. foreign tax credit purposes.

Passive Foreign Investment Companies

In general, a foreign (i.e., non-U.S.) corporation will be a PFIC for any taxable year in  which, after applying the relevant look-through rules with respect to the income and assets of its subsidiaries, either (1) 75% or more of its gross income in the taxable year is “passive income,” or (2) assets held for the production of, or that produce, passive income comprise 50% or more of the average of its total asset value in the taxable year. For purpose of the income test, passive income includes dividends, interest, royalties, rents, annuities and net gains from the disposition of assets, which produce passive income. For purposes of the assets test, assets held for the production of passive income includes assets held for the production of, or that produce dividends, interest, royalties, rents, annuities, and other income included in the income test. In determining whether we meet the assets test, cash is considered a passive asset and the total value of our assets generally will be treated as equal to the sum of the aggregate fair market value of our outstanding stock plus our liabilities. If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income. The income test is conducted at the taxable year-end. The asset test is conducted on a quarterly basis and the quarterly results are then averaged together.

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If a corporation is treated as a PFIC for any year during a U.S. holder’s holding period and the U.S. holder does not timely elect to treat the corporation as a “qualified electing fund” under Section 1295 of the Code or elect to mark its ordinary shares to market (both as described below), any gain on the disposition of the shares will be treated as ordinary income, rather than capital gain, and the holder will be required to compute its tax liability on that gain, as well as on dividends and other distributions, as if the income had been earned ratably over each day in the U.S. holder’s holding period for the shares. The portion of the gain and distributions allocated to prior taxable years in which a corporation was a PFIC will be ineligible for any preferential tax rate otherwise applicable to any “qualified dividend income” or capital gains, and will be taxed at the highest ordinary income tax rate in effect for each taxable year to which this portion is allocated. An interest charge will be imposed on the amount of the tax allocated to these taxable years. A U.S. holder may elect to treat a corporation as a qualified electing fund only if the corporation complies with requirements imposed by the IRS to enable the shareholder and the IRS to determine the corporation’s ordinary income and net capital gain. Additionally, if a corporation is a PFIC, a U.S. holder who acquires shares in the corporation from a decedent will be denied the normally available step-up in tax basis to fair market value for the shares at the date of death and instead will have a tax basis equal to the decedent’s tax basis if lower than fair market value. These adverse tax consequences associated with PFIC status could result in a material increase in the amount of tax that a U.S. holder would owe and an imposition of tax earlier than would otherwise be imposed and additional tax form filing requirements. Unless otherwise provided by the IRS, if a corporation is classified as a PFIC, a U.S. holder will generally be required to file an informational return annually to report its ownership interest in such entity.

Available Elections. If we become a PFIC for any taxable year, U.S. holders should consider whether or not to elect to treat us as a “qualified electing fund” or to elect to “mark-to-market” their ordinary shares in order to mitigate the adverse tax consequences of PFIC status.

If a U.S. holder makes a qualified electing fund election (a “QEF election”) for its ordinary shares that is effective from the first taxable year that the U.S. holder holds our ordinary shares and during which we are a PFIC, the electing U.S. holder will avoid the adverse consequences of our being classified as a PFIC but will instead be required to include in income a pro rata share of our net capital gain, if any, and other earnings and profits (“ordinary earnings”) as long-term capital gains and ordinary income, respectively, on a current basis, in each case whether or not distributed, in the taxable year of the U.S. holder in which or with which our taxable year ends. A subsequent distribution of amounts that were previously included in the gross income of U.S. holders should not be taxable as a dividend to those U.S. holders who made a QEF election. In the event we incur a net loss for a taxable year, such loss will not be available as a deduction to an electing U.S. holder, and may not be carried forward or back in computing our net capital gain or ordinary earnings in other taxable years. The tax basis of the shares of an electing U.S. holder generally will be increased by amounts that are included in income, and decreased by amounts distributed but not taxed as dividends, under the QEF rules described above. In order to make (or maintain) a QEF election, the U.S. holder must annually complete and file IRS Form 8621. In addition, we must make certain information regarding our net capital gains and ordinary earnings available to the U.S. holder and permit our books and records to be examined to verify such information. Therefore, we will monitor our PFIC status and make a disclosure to our shareholders if we determine that we have become a PFIC. If we are a PFIC for any year and you make a request to us in writing at the address on the cover of our latest Annual Report on Form 20-F, Attention Chief Financial Officer, for the information required to make a QEF election, we will promptly make the information available to you and comply with any other applicable requirements of the Code.

A QEF election, once made with respect to us, applies to the tax year for which it was made and to all subsequent tax years, unless the election is invalidated or the IRS consents to revocation of the election. If you make a QEF election and we cease to be classified as a PFIC in a subsequent tax year, the QEF election will remain in effect, although it will not be applicable during those tax years in which we are not classified as a PFIC. Therefore, if we – after ceasing to be classified as a PFIC – again are classified as a PFIC in a subsequent tax year, the QEF election will be effective and you will again be subject to the rules described above for U.S. holders making QEF elections in such tax year and any subsequent tax years in which we are classified as a PFIC. A QEF election also remains in effect even after you dispose of all of your direct and indirect interest in our ordinary shares. As a result, if you subsequently acquire any of our ordinary shares or an interest in any of our ordinary shares, you will again be subject to the rules described above for U.S. holders making a QEF election for each tax year in which we are classified as a PFIC.

Alternatively, if a U.S. holder elects to “mark-to-market” its ordinary shares, the U.S. holder will generally include in its income any excess of the fair market value of our ordinary shares at the close of each taxable year over the holder’s adjusted basis in such ordinary shares. If a U.S. holder makes a valid mark-to-market election with respect to our ordinary shares for the first taxable year of the U.S. holder in which the U.S. holder holds (or is deemed to hold) our ordinary shares and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect to its common shares. A U.S. holder generally will be allowed an ordinary deduction for the excess, if any, of the adjusted tax basis of the ordinary shares over the fair market value of the ordinary shares as of the close of the taxable year, or the amount of any net mark-to-market gains recognized for prior taxable years, whichever is less. A U.S. holder’s adjusted tax basis in the ordinary shares will generally be adjusted to reflect the amounts included or deducted under the mark-to-market election. Additionally, any gain on the actual sale or other disposition of the ordinary shares generally will be treated as ordinary income. Ordinary loss treatment also will apply to any loss recognized on the actual sale or other disposition of ordinary shares to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included with respect to such ordinary shares. A mark-to-market election applies to the tax year for which the election is made and to each subsequent year, unless our ordinary shares cease to be marketable, as specifically defined, or the IRS consents to revocation of the election. No view is expressed regarding whether our ordinary shares are marketable for these purposes or whether the election will be available.

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If a U.S. holder makes either the QEF election or the mark-to-market election, distributions and gain will not be recognized ratably over the U.S. holder’s holding period or be subject to an interest charge as described above. Further, the denial of basis step-up at death described above will not apply. If a U.S. holder elects to treat us as a “qualified electing fund,” gain on the sale of the ordinary shares will be characterized as capital gain. However, U.S. holders making one of these two elections may experience current income recognition, even if we do not distribute any cash. The elections must be made with the U.S. holder’s federal income tax return for the year of election, filed by the due date of the return (as it may be extended) or, under certain circumstances provided in applicable Treasury Regulations, subsequent to that date.

A NUMBER OF SPECIFIC RULES AND REQUIREMENTS APPLY TO BOTH THE QEF ELECTION AND THE MARK-TO-MARKET ELECTION, AND YOU ARE URGED TO CONSULT YOUR TAX ADVISOR CONCERNING OUR PFIC STATUS AND THE VARIOUS ELECTIONS YOU CAN MAKE.

New Legislation regarding Medicare Tax

For taxable years beginning after December 31, 2012, a U.S. holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. holder’s “net investment income” for the relevant taxable year and (2) the excess of the U.S. Investor’s modified adjusted gross income for the taxable year over a certain threshold (which, in the case of individuals, will be between US$125,000 and US$250,000 depending on the individual’s circumstances). A U.S. holder’s “net investment income” may generally include its dividend income and its net gains from the disposition of shares, unless such dividends or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). If you are a U.S. holder that is an individual, estate or trust, you are urged to consult your tax advisors regarding the applicability of the Medicare tax to your income and gains in respect of your investment in the shares.

Withholdable Payments to Foreign Financial Entities and Other Foreign Entities

A non-U.S. holder may be subject to a U.S. federal withholding tax at a rate of 30% on certain payments made beginning January 1, 2014 to certain non-U.S. entities if certain disclosure requirements related to U.S. accounts maintained by, or the U.S. ownership of, the non-U.S. holder are not satisfied. Such payments would include U.S.-source dividends and the gross proceeds from the sale or other disposition of our common stock that can produce U.S.-source dividends. Non-U.S. holders should consult their own tax advisors regarding the effect, if any, of such withholding taxes on their ownership and disposition of our common stock.

United States Information Reporting and Backup Withholding

In general, U.S. holders may be subject to certain information reporting requirements under the Code relating to their purchase and/or ownership of stock of a foreign corporation such as the Company. Failure to comply with these information reporting requirements may result in substantial penalties.

For example, recently enacted legislation generally requires certain individuals who are U.S. holders to file Form 8938 to report the ownership of specified foreign financial assets for tax years beginning after March 18, 2010 if the total value of those assets exceeds an applicable threshold amount (subject to certain exceptions). For these purposes, a specified foreign financial asset includes not only a financial account (as defined by the Code and applicable Treasury Regulations for these purposes) maintained by a foreign financial institution, but also any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity, provided that the asset is not held in an account maintained by a financial institution. The minimum applicable threshold amount is generally US$50,000 in the aggregate, but this threshold amount varies depending on whether the individual lives in the U.S., is married, files a joint income tax return with his or her spouse, etc. Certain domestic entities that are U.S. holders may also be required to file Form 8938 in the near future. U.S. holders are urged to consult with their tax advisors regarding their reporting obligations, including the requirement to file IRS Form 8938.

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Dividend payments and proceeds from the sale or disposal of ordinary shares may be subject to information reporting to the IRS and possible U.S. federal backup withholding at the rate of 31%. Certain holders (including, among others, corporations) are generally not subject to information reporting and backup withholding. A U.S. holder generally will be subject to backup withholding if such holder is not otherwise exempt and such holder:

· fails to furnish its taxpayer identification number, or TIN, which, for an individual, is ordinarily his or her social security number,

· furnishes an incorrect TIN,

· is notified by the IRS that it is subject to backup withholding because it has previously failed to properly report payments of interest or dividends, or

· fails to certify, under penalties of perjury, that it has furnished a correct TIN and that the IRS has not notified the U.S. holder that it is subject to backup withholding.

Any U.S. holder who is required to establish exempt status generally must file IRS Form W-9 (“Request for Taxpayer Identification Number and Certification”).

Amounts withheld as backup withholding may be credited against a U.S. holder’s federal income tax liability. A U.S. holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information.

10.F. Dividends and Paying Agents

Not applicable.

10.G. Statements by Experts

Not applicable.

10.H. Documents on Display

We are subject to the informational requirements of the Exchange Act, applicable to foreign private issuers and fulfill the obligation with respect to such requirements by filing reports with the Securities and Exchange Commission. You may read and copy any document we file with the Securities and Exchange Commission without charge at the Securities and Exchange Commission’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material may be obtained by mail from the Public Reference Branch of the Securities and Exchange Commission at such address, at prescribed rates. Please call the Securities and Exchange Commission at l-800-SEC-0330 for further information on the public reference room. In addition, certain of the Company’s reports filed or furnished with the Securities and Exchange Commission are available on-line at www.sec.gov.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing 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 periodic reports and financial statements with the Securities and Exchange Commission as frequently or as promptly as United States companies whose securities are registered under the Exchange Act.  A copy of each report submitted in accordance with applicable United States law is available for public review at our principal executive offices.

10.I. Subsidiary Information

Not applicable.

47

ITEM 11.        Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of changes in the value of a financial instrument caused by fluctuations in interest rates, equity prices and foreign currency exchange rates.

Interest Rate Risk

We are subject to market risk from exposure to changes in interest rates relating to borrowings under our loan agreements. The interest rate on these borrowings is based on LIBOR.

Assuming that interest rates would have increased (decreased) by 2% and other parameters remained constant, the effect would be that the Company's loss for the year ended on December 31, 2012 would have increased (decreased) by approximately US$52 thousand.

Equity Price Risk

As of December 31, 2012, 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, 2012, we had immaterial amounts of cash in New Israeli Shekels (NIS) or in funds linked thereto.

In addition, most of our expenses are denominated in NIS. Market risk is estimated as the potential increase in fair value resulting from a hypothetical 5% decrease in the year-end dollar exchange rate. Assuming such a decrease in the dollar exchange rate, the total of our expenses would increase by approximately US$0.1 million.

ITEM 12.       Description of Securities Other Than Equity Securities

Not applicable.

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 the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our CEO and CFO to allow timely decisions to be made regarding required disclosure. Our management, including our CEO and our CFO, 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, 2012. Based on such review, our CEO and our CFO have concluded that our disclosure controls and procedures were effective as of December 31, 2012.

Management's Annual Report on Internal Control over Financial Reporting

Our management, including our CEO and CFO are 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 over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (IFRS). Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Our management, including our CEO and CFO assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this annual report. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Their assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting.

Based on that assessment, our management concluded that as of December 31, 2012 the Company’s internal control over financial reporting was effective.

48

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.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting identified with the evaluation thereof that occurred during the period covered by this annual report that have materially affected, or are reasonable likely to materially affect our internal control over financial reporting.

ITEM 16A.     Audit Committee Financial Expert

Our board of directors has determined that Alicia Rotbard is our audit committee financial expert and is independent as defined by the applicable SEC regulations.

ITEM 16B.     Code of Ethics

Our company has adopted a code of ethics, which applies to all employees, officers and directors, including our CEO and our principal accounting officer or CFO or other persons performing similar functions. Copies of our code of ethics are available free of charge at our executive offices upon request.

ITEM 16C.     Principal Accountant Fees and Services

The following table presents fees for professional audit services rendered by Brightman Almagor Zohar & Co., an independent registered accounting firm and a member firm of Deloitte Touche Tohmatsu (“Brightman Almagor Zohar & Co.”) for the audit of the Company’s consolidated annual financial statements for the years ended December 31, 2012 and for other services rendered as well as for tax return preparation.  In 2011 and 2012, no audit related fees were charged under than stated above by Brightman Almagor Zohar & Co. to the Company.

	2011		2012
	(In thousands)		(In thousands)
Audit Fees (1)	$	38	$	38
Tax Fees (2)	$	2	$	2

(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 consist of tax compliance fees for the preparation of original and amended tax returns, claims for refunds and tax advice.

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

No purchases of our equity securities were made in 2011 by an affiliated purchaser.

Item 16F.       Change in Registrant’s Certifying Accountant

None.

Item 16G.       Corporate Governance

Not applicable.

49

Item 16H.       Mine Safety Disclosure

Not applicable.

PART III

ITEM 17.        Financial Statements

Not applicable.

ITEM 18.        Financial Statements

 (i)              Consolidated Financial Statements of RVB as of and for the year ended December 31, 2012 (filed herewith);

 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 Registrant's shell company report on Form 20-F, filed on September 7, 2011);
1.2	Articles of Association (incorporated by reference to Exhibit 1.2 to the Registrant's shell company report on Form 20-F, filed on September 7, 2011);
4.1	Share Purchase Agreement among the Registrant, Greenstone Industries Ltd., S.R. Accord Ltd., Mazal Resources B.V. and E.E.R. Environmental Energy Resources (Israel) Ltd., dated July 3, 2011 (incorporated by reference to Appendix A of Exhibit 99.1 to the Registrant's Form 6-K, filed on July 20, 2011);
4.2	Form of additional Share Purchase Agreement between the Registrant and certain E.E.R. Environmental Energy Resources (Israel) Ltd. shareholders (incorporated by reference to Appendix B of Exhibit 99.1 to the Registrant's Form 6-K, filed on July 20, 2011);
4.3	Option Agreement between the Registrant and Mazal Resources B.V., dated July 3, 2011(incorporated by reference to Appendix C of Exhibit 99.1 to the Registrant's Form 6-K, filed on July 20, 2011);
4.4	Voting Agreement between Greenstone Industries Ltd. and Mazal Resources B.V., dated July 3, 2011 (incorporated by reference to Exhibit 99.3 to the Registrant's Form 6-K, filed on July 20, 2011);
4.5	Termination Agreement between Greenstone Industries Ltd. and Mazal Resources B.V., dated November 29, 2011 (incorporated by reference to Exhibit 4.5 to the Registrant's annual report on Form 20-F, filed on April 30, 2012);
4.6	Translation of a Services Agreement between the Registrant, Mr. Moshe Stern and M. Stern Holding Ltd., dated July 3, 2011 (incorporated by reference to Exhibit 99.4 to the Registrant's Form 6-K, filed on July 20, 2011);
4.7	Translation of a Termination of Services Agreement between the Registrant, Mr. Moshe Stern and M. Stern Holding Ltd., dated November 29, 2011 (incorporated by reference to Exhibit 4.7 to the Registrant's annual report on Form 20-F, filed on April 30, 2012);
4.8	Management Agreement between the Registrant and Greenstone, dated July 14, 2011 (incorporated by reference to Exhibit 99.5 to the Registrant's Form 6-K, filed on July 20, 2011);
4.9	Shareholders' Agreement between the Registrant and Mazal, dated July 3, 2011 (incorporated by reference to Exhibit 99.6 to the Registrant's Form 6-K, filed on July 20, 2011);
4.10	The Registrant's 2011 Share Option Plan (incorporated by reference to Exhibit 4.9 to the Registrant's shell company report on Form 20-F, filed on September 7, 2011);
4.11	Form of Indemnification Agreement (incorporated by reference to Appendix G of Exhibit 99.1 to the Registrant's Form 6-K, filed on July 20, 2011);
8.1	List of Subsidiaries ( incorporated by reference to Exhibit 8.1 to the Registrant's annual report on Form 20-F, filed on April 30, 2012);
12.1	Certification of Chief Executive officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith);
12.2	Certification required of Chief Financial officer by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith);
13.1	Certification of Chief Executive officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith);
13.2	Certification of Chief Financial officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith);

50

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.

R.V.B. HOLDINGS LTD.
By:	/s/ Giora Gutman
	Name: Giora Gutman
	Title: Chief Executive Officer

By:	/s/ Ofer Naveh
	Name: Ofer Naveh
	Title: Chief Financial Officer

Date:  April 29, 2013

51

R.V.B. HOLDINGS LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2012

R.V.B. HOLDINGS LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2012

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 income	F-4
Consolidated statements of changes in equity	F-5 - F-7
Consolidated statements of cash flows	F-8 - F-9
Notes to consolidated financial statements	F-10 - F-43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of directors and Shareholders of

R.V.B. HOLDINGS LTD.

We have audited the accompanying consolidated statements of financial position of R.V.B. Holdings Ltd. and its subsidiary (hereafter - "the group") as of December 31,2012 and 2011 and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2012. These consolidated financial statements are the responsibility of the Group's management and Board of Directors.  Our responsibility is to express anopinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control over financial reporting. Accordingly, we express no such opinion. Anaudit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2012 and 2011 and the results of its operations, changes in equity and cash flows for each of the three years in the period ended December 31, 2012, in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1d to the financial statements, the Company has incurred recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1d. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Brightman Almagor Zohar & Co.

Brightman Almagor Zohar & Co.

Certified Public Accountants (Isr.)

A member firm of Deloitte ToucheTohmatsu Limited

Tel Aviv, March 13, 2013.

F - 2

R.V.B. HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

		As of December 31
		2012		2011
	Note	$ in thousand
Assets
Current assets
Cash and cash equivalents	5		2,613		6,751
Accounts receivable	6		412		238
Total current assets			3,025		6,989
Non-current assets
Restricted bank deposit	14a(1)		266		-
Fixed assets, net	8		11,092		12,505
Intangible assets, net	9		3,110		3,521
Total non-current assets			14,468		16,026
Total assets			17,493		23,015
Liabilities and equity
Current liabilities
Loans from banks and others	11		-		603
Accounts payable and accruals	10		369		630
Total current liabilities			369		1,233
Non-current liabilities
Loans from banks	11		-		102
Options at fair value through profit and loss	7c(3)		-		158
Liability to the Office of the Chief Scientist	14b		418		411
Liability in respect of dismantling and vacating fixed assets	2h		165		133
Total non-current liabilities			583		804
Equity attributable to owners of the Company	15		13,113		17,076
Non-controlling interests			3,428		3,902
Total equity			16,541		20,978
Total liabilities and equity			17,493		23,015

Yitzhak Apeloig Director Ofer Naveh CFO

Approval date of the financial statements: March 13, 2013.

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

F - 3

R.V.B. HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		For the year ended December 31
		2012			2011			2010
	Note	$ in thousand
Revenues	14a (9)		62			63			-
Expenses
Operating expenses and facility maintenance	17		2,952			2,526			2,590
Marketing expenses	18		549			1,200			1,256
Administrative and general expenses	19		1,430			1,759			1,793
Other expenses			-			-			98
Total expenses			4,931			5,485			5,737
Loss from ordinary activities			(4,869	)		(5,422	)		(5,737	)
Financing income	20		428			54			17
Financing expenses	20		(60	)		(878	)		(1,917	)
Total financing expenses, net			368			(824	)		(1,900	)
Loss for the year			(4,501	)		(6,246	)		(7,637	)
Total comprehensive loss for the period			(4,501	)		(6,246	)		(7,637	)
Loss and total comprehensive loss attributable to:
Owners of the Company			(3,615	)		(5,950	)		(7,637	)
Non-controlling interests			(886	)		(296	)		-
			(4,501	)		(6,246	)		(7,637	)
Loss per share (in $)
Basic and diluted loss per share	16		(0.016	)		(0.029	)		(0.041	)

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

F - 4

R.V.B. HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	For the year ended December 31, 2012
	Share capital		Premium on shares			Capital reserve in respect of share-based payments		Accumulated losses			Attributable to owners of the Company			Non-controlling interests			Total
	$ in thousand
Balance as of January 1, 2012		42,364		21,807			-		(47,095	)		17,076			3,902			20,978
Changes during 2012
Share-based payment		-		-			64		-			64			-			64
Issue of ordinary shares		14,521		(14,521	)		-		-			-			-			-
Change in non-controlling interests in respect of change in holding in a subsidiary		-		(412	)		-		-			(412	)		412			-
		14,521		(14,933	)		64		-			(348	)		412			64
Loss for the year		-		-			-		(3,615	)		(3,615	)		(886	)		(4,501	)
Total comprehensive loss for the year		-		-			-		(3,615	)		(3,615	)		(886	)		(4,501	)
Balance as of December 31, 2012		56,885		6,874			64		(50,710	)		13,113			3,428			16,541

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

F - 5

R.V.B. HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	For the year ended December 31, 2011
	Share capital		Premium on shares			Receipts on account of options			Capital reserve from transactions with shareholders			Capital reserve in respect of share-based payments and equity component of convertible loans			Accumulated losses			Attributable to owners of the Company			Non-controlling interests			Total
	$ in thousand
Balance as of January 1, 2011		4,906		34,078			173			161			6,063			(41,145	)		4,236			-			4,236
Changes during 2011
Share-based payment		-		-			-			-			1,220			-			1,220			-			1,220
Termination of employee options		-		2,852			-			-			(2,852	)		-			-			-			-
Equity component of convertible loans		-		1,013			-			-			-			-			1,013			-			1,013
Conversion of shareholder's debts		1,445		15,128			-			(161	)		(3,393	)		-			13,019			-			13,019
Issuance of ordinary shares – EER Transaction		25,692		(20,862	)		(173	)		-			(1,038	)		-			3,619			4,117			7,736
Change in non-controlling interests in respect of change in holding in a subsidiary		-		(81	)		-			-			-			-			(81	)		81			-
		27,137		(1,950	)		(173	)		(161	)		(6,063	)		-			18,790			4,198			22,988
Loss for the year		-		-			-			-			-			(5,950	)		(5,950	)		(296	)		(6,246	)
Total comprehensive loss for the year		-		-			-			-			-			(5,950	)		(5,950	)		(296	)		(6,246	)
Balance as of December 31, 2011		32,043		32,128			-			-			-			(47,095	)		17,076			3,902			20,978

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

F - 6

R.V.B. HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)

	For the year ended December 31, 2010
	Share capital		Premium on shares			Receipts on account of options		Capital reserve from transactions with shareholders		Capital reserve in respect of share-based payments and equity component of convertible loans		Accumulated losses			Total
	$ in thousand
Balance as of January 1, 2010		12		35,786			-		161		5,519		(33,508	)		7,970
Changes during 2010
Distribution of bonus shares		4,777		(4,777	)		-		-		-		-			-
Issuance of shares		117		2,538			173		-		-		-			2,828
Share-based payment		-		-			-		-		518		-			518
Equity component of convertible loans		-		531			-		-		16		-			547
Share-based paymnt in respect of guarantees received from shareholders		-		-			-		-		10		-			10
		4,894		(1,708	)		173		-		544		-			3,903
Loss for the year		-		-			-		-		-		(7,637	)		(7,637	)
Total comprehensive loss for the year		-		-			-		-		-		(7,637	)		(7,637	)
Balance as of December 31, 2010		4,906		34,078			173		161		6,063		(41,145	)		4,236

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

F - 7

R.V.B. HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the year ended on December 31
	2012			2011			2010
	$ in thousand
Cash flows from operating activity
Loss for the year		(4,501	)		(6,246	)		(7,637	)
Adjustments required to present cash flows from operating activity (Appendix A)		1,233			3,703			4,364
Net cash used in operating activity (*)		(3,268	)		(2,543	)		(3,273	)
Cash flows from investment activity
Increase in restricted bank deposit		(300	)		-			-
Investment in fixed assets		(60	)		(2	)		(2	)
Net cash used in investment activity		(360	)		(2	)		(2	)
Cash flows from financing activity
EER Transaction (Note 7d(1))		-			7,977			-
Repayment of bank loans		(510	)		(204	)		-
Issuance of shares		-			-			3,023
Proceeds from shareholders loans		-			1,466			-
Net cash provided by financing activity		(510	)		9,239			3,023
Increase (decrease) in cash and cash equivalents		(4,138	)		6,694			(252	)
Balance of cash and cash equivalents at the start of the year		6,751			57			309
Balance of cash and cash equivalents at end of the year		2,613			6,751			57
(*)  Including cash interest payments in the amount of		19			22			55
(*)  Including cash interest receipts in the amount of		36			51			7

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

F - 8

R.V.B. HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Appendix A – Adjustments required to present the cash flows from operating activity

	For the year ended on December 31
	2012			2011			2010
	$ in thousand
Income and expenses not involving cash flows:
Depreciation and amortization		1,884			1,874			1,906
Increase in liabilities in respect of employee benefits		-			-			15
Interest accrued on loans and others, net		8			706			1,153
Financing income regarding a short term loan		(204	)		-			-
Transformation of loan into grant		-			701			391
Loss (profit) arising on financial liabilities at fair value through profit or loss		(158	)		(52	)		15
Bonus in respect of options to shareholders in connection with the provision of a guarantee		-			432			704
Share-based payments		64			422			518
		1,618			4,083			4,702
Changes in asset and liability items:
Increase in accounts receivable		(124	)		(14	)		(8	)
Decrease in accounts payable and accruals		(261	)		(366	)		(330	)
		(385	)		(380	)		(338	)
		1,233			3,703			4,364

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

F - 9

NOTE1 - GENERAL

a. R.V.B. Holdings Ltd. (formerly B.V.R Systems (1998) Ltd.) (the "Company") is an Israeli company incorporated in Israel(the Company changed its name on January 12, 2010).

The Company’s ordinary shares are traded in the United States on the Over the Counter Bulletin Board (OTCBB) under the symbol RVBHF.OB.

b. In July 2011, the Company entered ,among others, into the following agreements, in connection with the purchase of E.E.R. Environmental Energy Resources (Israel) Ltd.'s ("EER") shares by the Company: (i) a share purchase agreement by and among the Company, Greenstone Industries Ltd. ("Greenstone"), S.R Accord Ltd. ("Accord"), Mazal Resources B.V. ("Mazal") and EER (the "EER Share Purchase Agreement"); (ii) an option agreement between the Company and Mazal (the "Option Agreement"); (iii) a shareholders' agreement between the Company and Mazal (the "Shareholders Agreement");  (collectively, the "EER Transaction").

As of the date of these Financial Statements RVB holds 79% of EER's share capital and 99% of EER's voting rights.

For additional information regarding the EER Transaction, see Note 7b.

c. Description of EER and its operations:

EER was incorporated in Israel on May 21, 2000, as a private company limited by shares. EER owns know-how and rights in the field of solid waste treatment through the use of Plasma-Gasification-Melting (PGM) technology, an innovative approach to waste treatment, which can be implemented, among others, for the treatment of municipal waste, medical waste and low and intermediate level radioactive waste (the “PGM Technology” or the “Technology”).

In early 2007, EER completed the construction of a facility in Yblin, Israel (containing systems similar to those found in a commercial facility) to make use of the Technology for the treatment of municipal waste (the "Yblin Facility").  The Yblin Facility, according to its permit, can operate only few times a year. At the start of 2008, the Company began depreciating the facility after a successful first year of trial running.

Over the years 2007-2009, several demonstrations were held using the Yblin Facility.

As part of the working plan of EER, the Board of Directors approved an investment of up to US$ 1 million in EER's Yblin Facility. The purpose of the investment is implementing improvements in Yblin Facility which mainly include the replacement of the current processing chamber and preparation of the facility for continuous operation.

F - 10

NOTE1 – GENERAL (continued):

d. The Going Concern Assumption

The Company has incurred recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. At December 31, 2012, the Company had cash and cash equivalents in a total amount of $2,613 thousands. The Company's negative cash flow from operations for the year ended on December 31, 2012 was in a total amount of $3,268 thousands.

The Group does not have sufficient funds to finance its operations and working plan for the upcoming twelve months as they fall due.

In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. The Company's ability to continue its operations and fund its liabilities is dependent on its ability to secure additional financing and cash flow.

Management is pursuing such additional sources of financing and cash flow to fund its operations and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the future. The management has concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the company’s ability to continue as a going concern.

These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

e. Definitions:

The Company	-	R.V.B. Holdings Ltd.
The Group	-	The Company and its Subsidiaries (as defined below)
Subsidiaries	-	Companies in which the Company holds 50% or more of its voting rights or have the right to appoint half or more of the members of the Board of Directors, and the financial statements of which are consolidated with those of the Company.
Related parties	-	As defined in IAS 24.
CPI	-	The Consumer Price Index, as published by the Central Bureau of Statistics.
Dollar	-	A United States dollar

F - 11

NOTE   2 - SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and its interpretations published by the International Accounting Standards Board (“IASB”). 

b. Presentation of the statement of financial position

The Company’s assets and liabilities in the statement of financial position are classified according to current and non-current items. The Company’s operating cycle period is 12 months.

c. Basis for the preparation of the financial statements:

The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The principal accounting policies are set out below.

d. Analysis of the expenses recognized in profit and loss

The Company’s expenses in the statement of comprehensive income are presented based on the function of expenses within the entity.

e. Foreign currency:

(1) Functional currency and operating currency:

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

(2) Translation of transactions that are not in the functional currency

In the preparation of the financial statements, transactions carried out in currencies other than the Company's functional currency (hereinafter – "foreign currency") are recorded at the exchange rates in effect on the dates of the transaction. At each reporting period, monetary items stated in foreign currency are translated according to the exchange rates in effect at that date; non-monetary items that are measured in terms of historical cost are translated according to the exchange rates in effect at the time of the transaction in connection with the non-monetary item.

(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.

F - 12

NOTE  2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

f. 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.

g. Consolidated financial statements

(1) General

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

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

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

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

(2) Non-controlling interest

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

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.

(3) Regarding the accounting treatment of the EER transaction see note 1d above.

F - 13

NOTE  2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

h. Fixed assets:

A fixed asset is a tangible item, which is held for use in manufacture or the supply of goods or services, or rent for others, which is forecasted to be used for more than one period. The Company presents its fixed asset items according to the cost model.

Under the cost model, fixed asset items are presented in the balance sheet at cost (net of received investment grants), net of accumulated depreciation and less accumulated impairment losses. The cost includes the cost of acquisition of the asset as well as costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Any component of a fixed-asset item having a cost that is significant in relation to the total cost of the asset shall be depreciated separately. The depreciation is carried out systematically over the estimated useful life of the asset by the straight line method from the time at which the asset is ready for its intended use. In the opinion of the Company's management, no significant residual value is expected at the end of the useful life.

The annual rates of depreciation are as follows:

	Useful life	Depreciation rates
		%
Buildings	12.5	8
Construction and miscellaneous	12.5	8
Plasma, compressors and bellows	12.5	8
Machinery and equipment	12.5	8
Pipelines	12.5	8
Crane and reactor	12.5	8
Faucets and electricity	10	10
Steam boilers	5	20
Furniture and office equipment	3-17, mainly 3	6-33 (mainly 33%)

The depreciation method and the useful life of an asset are reviewed by the Company's management at the end of each financial year. Changes are treated as changes in estimates and accounted for prospectively.

Profit or loss created as a result of the sale or retirement of an asset is determined according to the difference between the proceeds from the sale of this asset and its book value, and carried to the statement of income.

The cost of replacing a part of a fixed asset item is recognized as an increase in the book value of that item when incurred, if it is expected that the future financial benefit embodied in the items will flow to the Group and that its cost can be measured reliably. Routine maintenance costs are expensed when incurred.

F - 14

NOTE  2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

h. Fixed assets (continued):

Liability in respect of costs for dismantling and removing an item and restoring the site on which the asset is located:

The cost of a fixed-asset item includes, among others, costs to dismantle and remove the item and to restore the site on which the asset is located, for which the Company incurred an obligation, when the item was purchased or as a result of the use of this item during a certain period, that is not for the purpose of manufacturing inventory during that period.

· Changes in said liability regarding the end of the period of depreciation of the item will be deducted from or added to the asset during the period in which they occurred.

· Changes in said liability deriving from the passage of time are recognized in the statement of income as a financing cost as incurred.

i. Intangible assets except for goodwill:

Intangible assets are identifiable non-monetary assets that lack a physical entity.

The Company has intangible assets with a definite life.

Intangible assets with a definite useful life are amortized on the straight line basis over its estimated useful life subject to impairment tests. The change in the useful life assessment of an intangible asset with a finite life is accounted for prospectively.

The useful life during which intangible assets with a finite useful life (know-how) are amortized is 12.5 years, based, among others, on the period of the registered patent on said know-how.

The Company's intangible costs are recognized and measured in accordance with the way they were created, as follows:

An intangible asset that has been created internally, as a result of the Company's development activities (or the development stage of an internal project) in respect of know-how for the treatment of waste is recognized, net of investments and participation grants, when all the conditions below have been met:

(1) There is a technical feasibility that the asset will be completed, thus making it available for use or sale;

(2) The company intends to complete the asset  and use it or sell it;

(3) The company is capable of completing the asset and using or selling it;

(4) The asset is expected to generate future economic benefits;

(5) The company has available technical, financial and other resources for completing the development of the asset and for using or selling the asset; and

(6) The development costs that are attributed to the asset can be reliably measured.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

F - 15

NOTE  2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

i. Intangible assets except for goodwill (continued):

Intangible assets that were created internally are amortized using the straight line method over their useful life, and are presented at cost, less amortization and any accumulated impairment losses.

Concerning the grants received from the Chief Scientist and royalties paid in respect thereof, see note 2n.

j. Impairment of intangible assets except for goodwill :

The company reviews - at each balance sheet date - whether any events have occurred or changes in circumstances have taken place, which might indicate that there has been an impairment of fixed assets and intangible assets. When such indicators of impairment are present, the company estimates the recoverable amount of the assets in order to measure the amount of impairment loss that was created, if any. When it is not possible to assess the recoverable amount of a single asset, the group estimates the recoverable value of the cash-generating unit to which that asset belongs.

The recoverable amount is measured in relation to the Company’s value, which is derived from investments in the Company’s capital and/or valuations based on economic assessments made by the Company and/or external consultants.

k. Financial assets:

(1) General

Financial assets are recognized in the balance sheet when the Company becomes a party to the contractual terms of the instrument. Where the purchase or sale of an investment is effected under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, the investment is recognized and derecognized on a trade (the date on which the Company undertook to buy or sell an asset).

Investments in financial instruments are initially measured at fair value plus transaction costs, except for those financial assets classified at fair value through profit or loss, where the transaction costs are carried to the income statement.

The Company's financial assets are loans and receivables. The classification is dependent on the nature and purpose of holding the financial asset and is determined at the initial date of recognition of the financial asset.

As for the publication of IFRS 9 "Financial Instruments", see note 3b.

 (2) Loans and receivables

Deposits, loans and other receivables with fixed or determinable payments that are not quoted in an active market, are classified as loans and receivables. The value of these financial assets is not materially different than their fair value.

F - 16

NOTE  2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

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

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

Financial liabilities of the Company are measured in accordance with their classification as other financial liabilities, at amortized cost (not at fair value through profit and loss).

 (2) Options to purchase Company shares

a. Proceeds from the issuance of options to purchase Company shares, which confer upon their holder the right to acquire a fixed number of ordinary shares in return for a fixed amount of cash, are presented in shareholders’ equity under “Receipts on account of options”.

b. Proceeds from the issuance of options to purchase Company shares, which confer upon their holder the right to acquire a fixed number of ordinary shares in return for a variable amount of cash, are presented under current liabilities, and are classified as liabilities at fair value through profit and loss. In this respect, an exercise amount linked to the Consumer Price Index or to foreign currency is considered a variable amount.  Regarding the accounting treatment of financial liabilities at fair value through profit and loss, see note 2l.(4).

 (3) Financial liabilities at fair value through profit and loss

A financial liability is classified at fair value through profit and loss if it is held for trading purposes or designated as a financial liability at fair value through profit and loss.

The Company’s financial liabilities, which are included in this category, include options for the purchase of Company shares at an exercise price linked to the Consumer Price Index and/or foreign currency and derivative equity instruments of the Company.

A financial liability is classified as held for trading purposes if:

(1) It was primarily created for the purpose of repurchase in the near future; or

(2) It constitutes part of a portfolio of identifiable financial instruments, which are jointly managed by the Company, which have a proven pattern of generating profits in a short period; or

(3) It is a non-designated derivative, which is effective as a hedging instrument.

Financial liabilities at fair value through profit and loss are presented at fair value. Each profit or loss arising from changes in fair value is recognized in profit and loss. The net profit or loss, which is recognized in the statement of income, includes interest paid in respect of the financial liability. On the date of initial recognition, transaction costs are included in the statement of income.

F - 17

NOTE  2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

l. Financial liabilities and equity instruments issued by the Company (continued):

(4) Other financial liabilities

Other financial liabilities (credit, loans, and accounts payable) are initially measured at fair value, net of transaction costs. The value of these financial liabilities is not materially different than their fair value.

m. 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.

n. Government grants and grants from the office of the Chief Scientist

Grants received from the Chief Scientist (prior to the Amendment to IAS 20), which EER is required to repay with the addition of interest payments, provided the conditions associated with the grant are met, and which do not constitute forgivable loans, are recognized on the date of initial recognition, the amount to be repaid is presented as a liability at its nominal value without reflecting the benefit that arises from the capitalization of the grant at a capitalization rate that reflects the level of risk of the research and development project.

o. 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 current value of the forecasted cash flows.

When the entire amount or a portion thereof, which is required to settle the commitment at the balance sheet date is expected to be recovered by a third party, the Group recognizes the asset, in respect of said recovery, up to the amount of the recognized provision, only when it is virtually certain that the indemnification will be received and that it can be reliably measured.

p. Share-based payments:

Share-based payments to employees and others that provide similar services, which are settled in equity instruments of the Group, are measured at fair value on the grant date. On the grant date, the Company measures the fair value of the granted equity instruments by using the Black and Scholes model. If the equity instruments granted to them have not vested until these employees have completed a defined period of service, have met performance conditions or defined market conditions are met, the company recognizes the share-based payment transactions in its financial statements over the vesting period against an increase in its shareholders' equity, under "Capital reserve in respect of share-based payment". At each balance sheet date, the Company estimates the number of equity instruments that are expected to vest. Any change in the estimate relative to previous periods is recognized in the income statement over the remaining vesting period.

F - 18

NOTE  2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

p. Share-based payments (continued):

In share-based payment transactions that are settled in equity instruments, which relate to a guarantee provided by the shareholders, the expense in respect of the guarantee received and the corresponding increase in the shareholders' equity are presented at the value of the equity instruments granted on the date the guarantee was provided, by using the Black and Scholes model, and is recognized in the income statement over the period of the guarantee.

q. 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 does not recognize deferred taxes in respect of carry-forward losses and in respect of temporary differences in the value of certain revenues and expenses, between the financing reporting and the reporting for tax purposes.

r. Employee benefits:

(1) Post-employment benefits

In accordance with labor laws and labor agreements in Israel and in line with the Company's practices, the Company is required to pay severance pay to dismissed employees, and in some cases, to employees that resign from their employment voluntarily.

The Company has defined contribution plans in accordance with Section 14 of the Israeli Severance Pay Law. In respect of these plans, the actuarial and economic risks are not imposed on the Company. In said plans, during the employment period, an entity makes fixed payments to a separate entity without having a legal or constructive obligation to make additional payments if the fund has not accumulated sufficient amounts. Deposits with the defined contribution plan are included as an expense at the date of the deposit, parallel to receiving services from the employee. The Company makes deposits with pension funds and insurance companies in respect of its liabilities to pay severance pay to some of its employees on a current basis.

(2) Short-term employee benefits

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

s. Earnings (loss) per share

The Company presents basic and diluted earnings (loss) per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees and others (See Note 17).

F - 19

NOTE  2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

t. 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's			CPI in Israel
	Exchange rate			Actual CPI		Known CPI
	(NIS to 1 $)			Points		Points
Date of the financial statements
As of December 31, 2012		3.733			112.1		111.9
As of December 31, 2011		3.821			110.3		110.3
Rate of change	Change in %
For the year ended December 31, 2012		(2.30	)		1.6		1.4
For the year ended December 31, 2011		7.66			2.2		2.5
For the year ended December 31, 2010		(5.99	)		2.7		2.3

u. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

Rendering of services

Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract.

v. Accounting treatment of the EER Transaction:

Although in the EER Transaction, mentioned in note 7b below, the Company is the legal purchaser of the rights in EER, the Company had no business activity ("Shell Company") as of the date of the EER transaction and thus does not meet the definition of a Business under IFRS 3, and since the majority of the shareholders of the Company after the completion of transaction (including the completion of the Additional SPA) are former shareholders of EER, this transaction does not meet the definition of a 'Business Combination' under IFRS 3. For accounting purposes the transaction is treated as a capital transaction of EER.

Accordingly, among others, comparative numbers for the year ended December 31, 2010, are based upon the consolidated financial statements of the legal subsidiary, EER for the year ended December 31, 2010.

See also note 7d.

F - 20

NOTE 3 – NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS):

a. New and revised IFRS applied with no material effect on the consolidated financial statements:

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2012 that would be expected to have a material impact on the group.

b. New and revised IFRS in issue but not yet effective:

(1) IFRS 9, "Financial Instruments"

IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

IFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

At this stage the Group's management is unable to estimate the effect of this interpretation on its financial position and operating results.

(2) The Group has not applied the following new and revised IFRS that have been issued but are not yet effective. None of these are expected to have a material impact on the consolidated financial statements of the Group:

§ Amendments to IFRS 7, "Disclosures – Transfers of Financial Assets"; "Offsetting Financial Assets and Financial Liabilities"

§ IFRS 10, "Consolidated Financial Statements"

§ IFRS 11, "Joint Arrangements"

§ IFRS 12, "Disclosure of Interests in Other Entities"

§ IFRS 13, "Fair Value Measurement"

§ IAS 32, "Financial Instruments: Presentation"

§ Amendments to IAS 1, "Presentation of Items of Other Comprehensive Income"

§ IAS 19 (as revised in 2011), "Employee Benefits"

§ IAS 27 (as revised in 2011), "Separate Financial Statements"

§ IAS 28 (as revised in 2011, "Investments in Associates and Joint Ventures"

F - 21

NOTE 4 – CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF   ESTIMATION UNCERTAINTY:

In the Company's accounting policy, which is described in note 2 above, the Company is required in certain cases to use accounting judgment regarding estimates and assumptions in connection with the book value of assets and liabilities that are not necessarily found in other sources. The related estimates and assumptions are based on past experience and other factors which are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Accordingly:

(1) Management continuously reviews the likelihood of recovery of intangible assets (know-how) it has developed, in accordance with the forecasted income from these assets, which is determined based on economic assessments made by the Company and/or external consultants.

(2) Each annual reporting period, the management reviews the estimated useful life of the Yblin facility it owns. This assessment also takes into account the Company’s estimates regarding the likelihood of renewal of the lease agreements for the land on which the said facility is located, see note 8, an estimate which remained unchanged in 2012.

NOTE 5 – CASH AND CASH EQUIVALENTS

Composed as follows:

	As of December 31
	2 0 1 2		2 0 1 1
	$ in thousand
In Dollars		2,382		6,392
In New Israel Shekels (NIS)		231		359
		2,613		6,751

NOTE 6 – ACCOUNTS RECEIVABLE

Composed as follows:

	As of December 31
	2 0 1 2		2 0 1 1
	$ in thousand
Institutions		79		28
Employees		2		17
Prepaid expenses		141		103
Restricted bank deposit		53		-
Advances to suppliers		137		-
Income receivable		-		90
		412		238

F - 22

NOTE 7 – SUBSIDIARY

a. General

As of December 31, 2011 the Company's only subsidiary is EER.

As mentioned in note 7b(1) below, as of January 12, 2012, RVB completed the multi-closing of EER Transaction in which it acquired all of EER shares held by Greenstone and Accord, and the majority of EER shares held by certain other EER shareholders, and holds 79% of EER's share capital (74% on a fully-diluted basis) and 99% of EER's voting rights.

Regarding the accounting treatment of the EER transaction see note 7b below.

b. The EER Transaction

Below is a description of the EER Transaction, including a summary of the terms and conditions of the EER Share Purchase Agreement, the Option Agreement, the Voting Agreement and the Services Agreement, and the actions that took place at the closing of the EER transaction on August 31, 2011, (the "Closing Date") in connection therewith:

(1) At the Closing Date, pursuant to the EER Share Purchase Agreement, the Company acquired all of EER's shares held by Greenstone (6,274,760 ordinary shares of EER), for a total cash consideration of US$ 15,686,900. In addition, the Company acquired all of EER’s share capital held by Accord (1,721,450 ordinary shares of EER), in exchange for 20,054,893 ordinary shares of the Company (each EER share was exchanged for 11.65 ordinary shares of the Company);

On October 11, 2011 an initial closing of an Additional SPA was completed with certain EER shareholders. At this closing, the Company issued a total of 38,066,489 ordinary shares of the Company in exchange for a total of 3,267,510 EER shares from these certain EER shareholders.

On January 12, 2012, an additional closing of the Additional SPA with other EER shareholders who elected to become parties to the Additional SPA was completed. At this additional closing the Company issued a total of 55,703,870 ordinary shares of the Company, in exchange for 4,781,448 EER shares of these certain EER shareholders.

(2) In addition, pursuant to the EER Share Purchase Agreement, the Company was provided with the opportunity, before the lapse of 24 months following the Closing Date, to make an investment from time to time in EER’s share capital in an aggregate amount of up to US$ 8,000,000 by purchasing EER ordinary shares at a price per share of US$ 2.5. Since the closing date and until December 31, 2012 the Company has made an investment in a total amount of approximately $5 million. Subsequent to the financial statements date the Company has invested in EER's share capital an additional amount of approximately $0.6 million ;

F - 23

NOTE 7 – SUBSIDIARY (continued)

b. The EER Transaction (continued)

(3) Pursuant to the Option Agreement, the Company granted Mazal an option to sell to the Company or to whom the Company may direct, no later than December 31, 2016, Mazal’s holdings in EER, in exchange for shares of the Company at the same exchange ratio applied for the purchase of EER's shares pursuant to the Share Purchase Agreement (the "Put Option"), and Mazal granted the Company the option to buy all of Mazal's holdings in EER, upon the occurrence of certain reorganizational events on or prior to December 31, 2016 (the "Call Option").

The terms and conditions of the Option Agreement shall apply, where applicable, to 150,000 options to purchase EER shares, which EER granted to EER's former CEO, on June 2011;

(4) Pursuant to the Shareholders Agreement, Mazal undertook to vote with its EER shares in the same manner as then voted on such matter by the Company and/or as instructed by the Company in its sole discretion. The Shareholders Agreement also contains certain provisions concerning rights of first refusal, pursuant to which, if Mazal proposes transfer in any way any of the Mazal EER shares, to one or more third parties except to a permitted transferee, then the Company shall have a right of first refusal with respect to such transfer;

(5) Pursuant to the Management Agreement, Greenstone will provide the Company with management and accounting services, for a total consideration of NIS 25,000 per month plus VAT, and in addition, 10,050,190 options to purchase ordinary shares of the Company, with an exercise price of US$ 0.2145 per share (adjusted for future dividends), which shall become vested and exercisable in accordance with the Vesting Schedule (see note 15d(2) below). The parameters used in the calculation of the fair value of the options are a share price of $0.09, an exercise price of US$0.2145 per share, the expected volatility of companies operating in this field - 32%, the life of the option – 5 years and a risk-free interest of 1%; The fair value of these options is immaterial. During the reported period Greenstone noticed the Company that it waives the total consideration of the management fees valid from September 1, 2012.

c. Additional information regarding EER

(1) As mentioned above, at the closing date of the SPA, and as one of its closing conditions, all of EER's debts to its shareholders in a total amount of approximately $13 million have been converted into shares of EER (this amount includes a repayment by Greenstone of EER's debt of approximately US$2.25 million to the Union Bank of Israel Ltd.).

(2) The Board of Directors of EER approved, on several different dates, allotments of options to shareholders, employees and officers of EER (in this note – “the options”).

As of the date of these financial statements there are options (part of which can be exercised immediately and part of which over vesting periods) that were allotted to employees, officers and others, which confer approximately 6% (including options granted to U-Trend as described in note 7c(3) below) of the fully-diluted share capital of EER.

F - 24

NOTE 7 – SUBSIDIARY (continued)

c. Additional information regarding EER (continued)

(3) On July 22, 2010 an agreement was signed between EER and U-Trend (hereinafter – "the investment agreement" and "U-Trend", respectively).

According to the investment agreement U-Trend invested in EER a total of NIS 4 million (approximately $1.1 million) against the allotment of 400,000 shares of EER and 800,000 non-marketable options (each option shall be exercisable until July 31, 2014 to one share of EER for an exercise price of NIS 12.5, unlinked).

As of December 31, 2012 and 2011 the fair value of the option is $0 and approximately $158 thousand, respectively.

d. Assets and liabilities recognised at the date of the EER transaction

(1) As described in note 2v above, for accounting purposes the EER transaction is treated as a capital transaction of EER.

Following are the assets and liabilities of the Company recognised at the date of the EER transaction:

	August 31,2011
	$ in thousand
Current assets
Cash and cash equivalents		7,977
Trade and other receivables		141
Current liabilities
Short term loan		(192	)
Accounts payable and accruals		(190	)
		7,736

 (2) The non-controlling interest (21.7% ownership interest in EER at the closing date) recognised was $ 4,117 thousand.

F - 25

NOTE 8  – FIXED ASSETS

Composition and changes:

	Furniture &		Yblin
	equipment		Facility (*)		Total
	$ in thousand
Cost
As of January 1, 2012		200		18,979		19,179
Changes in the accounting year -
Additions		12		48		60
As of December 31, 2012		212		19,027		19,239
As of January 1, 2011		198		18,979		19,177
Changes in the accounting year -
Additions		2		-		2
As of December 31, 2011		200		18,979		19,179
Accumulated depreciation
As of January 1, 2012		174		6,500		6,674
Changes in the accounting year -
Additions		5		1,468		1,473
As of December 31, 2012		179		7,968		8,147
As of January 1, 2011		171		5,039		5,210
Changes in the accounting year -
Additions		3		1,461		1,464
As of December 31, 2011		174		6,500		6,674
Depreciated cost:
As of December 31, 2012		33		11,059		11,092
As of December 31, 2011		26		12,479		12,505
The cost as of December 31, 2012 and 2011 includes:
Capitalized expenses		-		2,348		2,348
Offset of a grant from the Chief Scientist of:		-		271		271

(*) As of January 1, 2008 and after completing the year of trial running of the Yblin facility for the treatment of solid waste ("the facility"), EER began depreciating the facility as stated in Note 2h.

F - 26

NOTE 9 –INTANGIBLE ASSETS

a. Composition and changes:

	Know-how for
	The Implement of
	waste treatment
	technology
	$ in thousand
Cost
As of January 1, 2012		5,164
Changes in the accounting year -
Additions		-
As of December 31, 2012		5,164
As of January 1, 2011		5,164
Changes in the accounting year -
Additions		-
As of December 31, 2011		5,164
Accumulated depreciation
As of January 1, 2012		1,643
Changes in the accounting year -
Additions		411
As of December 31, 2012		2,054
As of January 1, 2011		1,233
Changes in the accounting year -
Additions		410
As of December 31, 2011		1,643
Depreciated cost as of December 31, 2012		3,110
Depreciated cost as of December 31, 2011		3,521

b. The depreciation of intangible assets is presented in the statement of comprehensive income under administrative and general expenses.

F - 27

NOTE 9 –INTANGIBLE ASSETS (continued):

c. Material intangible assets:

The balance includes acquisition and development costs of know-how to implement new technology for the treatment of solid waste, bio-medical waste and low and intermediate radioactive waste.

As of January 1, 2008 and after completing one year of trial running of the Yblin facility for the treatment of solid waste ("the facility") the Company began depreciating the know-how, as stated in note 2h.

The know-how is depreciated over a period of 12.5 years, based on the remaining useful life of the main patent registered thereto as of the date of commencement of depreciation.

The Company has numerous patents in respect of the said know-how.

d. Additional information:

For additional information, including the review of impairment of other intangible assets, see notes 2i and 2k.

For information on liens see note 23.

NOTE 10 – ACCOUNTS PAYABLE AND ACCRUALS:

Composed as follows:

	As of December 31
	2 0 1 2		2 0 1 1
	$ in thousand
Institutions, net		-		334
Trade payables (*) (mainly in NIS)		114		70
Accrued expenses		100		76
Employees and institutions in respect of payroll (**)		146		102
Related parties		9		48
		369		630

(*) The average credit period provided by suppliers is Net 30, in respect of which the Groupdoes not pay interest. The Group usually pays its suppliers within the credit period.

(**) See also note 12.

F - 28

NOTE 11 – LOANS FROM BANKS AND OTHERS

Composition of financial liabilities measured at amortized cost:

	Current liabilities				Non-current liabilities				Total
	As of December 31				As of December 31				As of December 31
	2 0 1 2		2 0 1 1		2 0 1 2		2 0 1 1		2 0 1 2		2 0 1 1
	$ in thousand
Banks  loans (1)		-		408		-		102		-		510
Other  loan (2)		-		195		-		-		-		195
Total financial liabilities measured at amortized cost		-		603		-		102		-		705

(1) See note 14a (2).

(2) A loan in the amount of $120 thousand (principal) which its maturity date was on October 2005. According to the management assessment based, among others, the time elapsed from the maturity date, the Company wrote-off the balance of this loan during the reported period.

NOTE 12 – EMPLOYEE BENEFITS

a. Composed as follows:

	As of December 31
	2 0 1 2		2 0 1 1
	$ in thousand
Short-term employee benefits:
Payroll, wages and social benefits		110		79
Short-term vacation		36		23
		146		102

b. Post-employment benefits:

(1) Defined contribution plan:

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.

F - 29

NOTE 12 – EMPLOYEE BENEFITS (continued)

b. Post-employment benefits (continued):

(1) Defined contribution plan (continued):

The Group applies to most of its employees Section 14 to the Israeli Severance Pay Act of, 1963, pursuant to which it is exempt from any severance pay liability, subject to it making certain monthly allocations to employees' pension plans, The Group deposits 81/3% of the monthly salary of its employees. 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.

(2) Additional information:

Paid vacation days

In accordance with the Israeli Annual Vacation Act of, 1951, the Group's employees are entitled to several paid vacation days in respect of each year of employment. Pursuant to said law, the number of vacation days per year to which each employee is entitled is determined in accordance with the seniority of said employee.

An employee is entitled, with the consent of the Company, to use the vacation days and accumulate up to 60 vacation days.

An employee terminating his employment before using his accumulated vacation leave is entitled to payment in respect of the balance of vacation leave.

NOTE 13 – INCOME TAX

a. Amendments to the Income Tax Ordinance

(1) On July 23, 2009, the Israeli Law for Economic Efficiency (Legislative Amendments for Implementation of the Economic Plan for the years 2009 and 2010), 2009 (hereinafter – “the Arrangements law”), was published. Pursuant to the Arrangements law, corporate tax rates of 27%, 26% and 25% applicable to companies in the years 2008, 2009 and 2010, respectively, will be gradually reduced from 24% in the tax year 2011 to 18% in the tax year 2016.

(2) On September 26, 2011 the Israeli social-economic reform committee headed by Professor Manuel Trachtenberg published its recommendations. On December 6, 2011, following the tax reform recommendations of the Trachtenberg Committee, the Knesset passed several changes to the Income Tax Ordinance regarding the reduction of tax burden (Legislative Amendments).

The main features of the new law regarding corporate income tax are as follows:

1. The planned gradual reduction of personal income tax rates and corporate income tax rates from 2012 is abolished.

2. The corporate income tax rate is increased to 25% in 2012.

3. The capital gains tax rates and betterment tax rate are increased to 25% in 2012.

F - 30

NOTE 13 – INCOME TAX (continued)

b. The Company and EER received final tax assessments (including assessments considered as final) through to the tax year 2007.

c. The Company has carried forward tax losses in the amount of approximately NIS 115 million (approximately $31 million).

EER has carried forward tax losses in the amount of approximately NIS 200 million (approximately $54 million).

d. In view of the lossesfor tax purposes and since the Company and EER does not anticipate any taxable income in the foreseeable future, the Company and EER have not recorded deferred tax assets in respect of carry forward losses.

NOTE 14 – COMMITMENTS AND CONTIGENT LIABILITIES

a. Commitments:

 (1) Lease agreements

a. In July 2012, EER entered into a new lease agreement with Naser Recycling Ltd. ("Naser"), with respect to the ground on which the Yblin Facility is located (the "Lease Agreement") for a period of five years (the "Lease Period") and EER has an option to extend the term of the rent for an additional five years (the "Option period"). The monthly rent for the first 18 months of the Lease Period is NIS 40 thousands (approximately $10 thousands) and NIS 45 thousands (approximately $11 thousands) for the remaining Lease Period. The monthly rent for the Option Period will be NIS 50 thousands (approximately $13 thousands). All the amounts mentioned above are linked to the CPI and do not include VAT. The payment of the rent will be paid for each year of lease in advance.

In addition to the rent fees and if the Yblin plant becomes a commercial plant, Naser will be entitled to receive certain payments from profits generated by the plant and/or from proceeds of the sale of the plant, as set forth in the Lease Agreement.

Pursuant to the terms of the Lease Agreement, the Yblin Facility is the property of EER, and EER is responsible for disassembling the Yblin Facility and removing it from the property at the end of rental period.

It was further agreed that to secure EER's commitments pursuant to the Lease Agreement, EER gave Naser a bank guarantee in the amount of $250 thousand.

b. In November 2011, EER entered into a rent agreement for its offices in Rosh Ha'ayin (replacing its previous offices) for a period of 7 years, including option periods, untill November 14, 2018.  The annual rent and maintenance fees are in the amount of NIS 150,000 (approximately $40 thousand) linked to the CPI and an increase of 4% per year from the third year forward.

Until November 2011 EER rented offices in Ramat-Gan and paid annual rent and maintenance fees in the amount of NIS 250 thousands linked to the CPI (approximately $70 thousands).

F - 31

NOTE 14– COMMITMENTS AND CONTIGENT LIABILITIES (continued):

a. Commitments (continued):

(2) Debt agreement with Bank Leumi

On March 15, 2011, EER signed an agreement with Bank Leumi Le-Israel B.M. ("The Bank"), which regulates the repayment of certain debts and obligations of EER to the bank in the amount of $2.3 million in connection with loans provided to it and to which the guarantors have guaranteed their repayment (“the debt agreement”).

As part of the debt agreement, the guarantors paid the bank a total sum of approximately $1.4 million.

The loan in an amount of approximately $0.7 million was in dollars and was provided for a period of 24 months. The interest rate on the loan was LIBOR + 2.85% per annum. The loan principal was repayable in quarterly payments which the last payment was paid on December, 2012.

 (3) The Kurchatov Institute Agreement

On June 6, 2000, EER entered into an agreement with the Kurchatov Institute, which was amended on February 12, 2002 (the “Kurchatov Agreement”). Under the terms of the Kurchatov Agreement, Kurchatov Institute assigned and transferred to EER all then present and future intellectual property rights and know-how related to the Yblin Facility (which was designed, manufactured and constructed for EER by Kurchatov Institute's subsidiary under a separate agreement) and to the Additional Projects (as defined below) (collectively, the "IP Rights"). According to the Kurchatov Agreement, EER shall cover all the expenses related to the assigning, registration and recordation of the IP Rights.

According to the Kurchatov Agreement, the Kurchatov Institute shall fully cooperate with EER for the purposes of utilizing the PGM technology with regard to Municipal Solid Waste ("MSW"), Medical Waste (“MW”), Low and intermediate Radio Active Waste (“LRAW”) and PGM Compatible Industrial Waste (“IW”), including, but not only, for the designing and construction of plants and installations by EER, its licensee(s) and/or other purposes (the "Additional Projects"). Upon EER’s request, the Kurchatov Institute shall assign to EER any know-how or intellectual property rights relating to such technologies to be used outside the territories comprising the former Soviet Union, provided the financial and other legal and reasonable interests of the Kurchatov Institute have been satisfied. The Kurchatov Institute and its affiliates shall exclusively work with EER on any of the aforementioned applications of the PGM Technology, and shall not assist, directly or indirectly, any individual or entity to engage in any activity in the fields of MSW, MW, LRAW and IW. In addition, the Kurchatov Institute undertook to provide EER its know-how and experienced highly qualified specialists in order to obtain the required scientific and technical qualifications in the works related to the Projects, as was mutually agreed by the parties. In consideration for Kurchatov Institute’s undertakings under the Kurchatov Agreement, EER shall pay Kurchatov Institute a royalty in the amount of 1% of the purchase price actually received by EER from the sale of the Additional Projects.

F - 32

NOTE 14 – COMMITMENTS AND CONTIGENT LIABILITIES (continued):

a. Commitments (continued):

(4) The SNC Agreement

On September 15, 2010, EER entered into a memorandum of understanding (the “SNC MOU”) with SNC-Lavalin Engineers & Constructors Inc. (“SLE&C”) which, to the best of EER’s knowledge, is a private company and a subsidiary of SNC-Lavalin Group Inc., a company whose shares are listed for trade on the Toronto Stock Exchange, Canada (“SNCL-G”), and who are among the leading engineering and construction corporations in the world. The SNC MOU establishes methods of cooperation between EER and SLE&C in respect to projects aimed at exploiting PGM Technology. The SNC MOU has been terminated automatically on December 31, 2012.

(5) Management service agreements

a. On February 13, 2002, EER entered into a management service agreement with Urdan Industries Ltd. (currently Greenstone) (the “Greenstone Agreement”), pursuant to which Greenstone undertook to provide EER with management services, office services, accounting services and office rental in accordance with EER needs. In consideration for such services, EER undertook to pay Greenstone the sum of NIS 20,000 per month (plus VAT) linked to the Consumer Price Index (in this section – “the management fees”), as of January 2002 (approximately NIS 25,000 as of the date of this report). The term of the management agreement was set at one year, at the end of which the agreement will be renewed automatically for additional one-year periods, and may be terminated by one month’s notice by either party. From the end of 2004 to December 31, 2010, services were provided by Accord and management fees were paid to them, and as of January 1, 2011 the services are provided by Leader Holdings and Investments Ltd (the parent company of Greenstone; “Leader”), and the management fees have been paid to Leader.

Following the completion of the EER Transaction, this management agreement was assigned by Leader to Greenstone.

b. Regarding the management service agreement between the Company and Greenstone see note 7b(5) above.

(6) D&O insurance

On March 23, 2012, the Company obtained directors’ and officers’ liability insurance for its officers and directors (“D&O insurance policy”) with coverage in an aggregate amount of $5 million until March 23, 2013 for a total premium of $ 28,000. This D&O insurance policy was reviewed and approved by the Company’s audit committee and the Board of Directors and was subject to the approval of the Company’s shareholder’s. At the 2012 Annual General Meeting of the shareholders of the Company, held on May 7, 2012, the D&O insurance policy was approved and ratified by the Company's shareholders.

F - 33

NOTE 14 – COMMITMENTS AND CONTIGENT LIABILITIES (continued):

a. Commitments (continued):

(6) D&O insurance (continued)

On September 10, 2012, the Company’s audit committee and Board of Directors approved an amendment to the D&O insurance policy. Pursuant to this amendment, the insurance coverage will be increased from an aggregate amount of $5 million to an aggregate amount of $7.5 million (for the remaining of the policy tenure, until March 23, 2013), the premium will be increased by approximately $8 thousands (on an annual basis) to an aggregate amount of approximately $36 thousands, and the insurance coverage shall be extended to cover events related to EER, the Company’s subsidiary, for the period prior to the acquisition of EER shares by the Company. At the General Meeting of the shareholders of the Company, held on November 21, 2012 the amendment of the D&O insurance policy was approved and ratified by the Company's shareholders.

(7) The LOI with Approved Storage & Waste Hauling Inc.

On January 25, 2011, EER entered into a letter of intent with Approved Storage & Waste Hauling Inc. ("ASWH" and the "ASWH LOI"), relating to the formation of a joint venture for an initial pilot project (the "Pilot Project"). According to the ASWH LOI, the Pilot Project will process Regulated Medical Waste in an initial capacity of 15-30 short tons per day. According to its terms, the ASWH LOI has terminated on December 31, 2012.

(8) Framework Agreement

On May 31, 2012, EER entered into an agreement with a third party located in the U.S. (the "US Company"), for the initial planning and the supply of EER's technology of Plasma-Gasification-Melting Waste-To-Energy (the “Framework Agreement") in plants (the “Facilities”) located in five states in the U.S. and such other territories as may be agreed between EER and the US Company ("Territories"). The Framework Agreement replaces a previously signed letter of intent from March 2011, which is considered null and void.

Under the terms of the Framework Agreement, EER shall produce (directly or with a designated engineering company) a Preliminary Engineering Design Study for a Facility in one of the five states (the “Study” and the "First Project”, respectively), the cost of which shall not exceed US$2.6 million and shall be borne and paid by the US Company, and the parties shall cooperate in advancing the First Project as a municipal solid waste project.

F - 34

NOTE 14 – COMMITMENTS AND CONTIGENT LIABILITIES (continued):

a. Commitments (continued):

(8) Framework Agreement (continued)

The US Company shall be responsible for obtaining and maintaining all requisite permits, approvals and licenses from any relevant authority in order to establish and operate the First Project and any additional Facility and to provide any technical and financial data required in connection therewith. The US Company will use its best commercial efforts to obtain and secure agreements in principal for providing financing to the First Project (the amount of financing required for the First Project is currently estimated at US$ 215 million), enter into lease/purchase agreements for the real estate on which the First Project will be erected, prepare and file all relevant requests and enter into Waste Contracts, Power Takeoff Agreements and an Interconnection Agreement.

The Framework Agreement provides that the US Company and EER will enter into a purchase agreement for the PGM Processing Chamber for the First Project. As the final price of the PGM Processing Chamber for the First Project will only be determined following the detailed planning phase, the parties agreed that in case it varies considerably from the estimated price, the parties shall mutually assess the financial impact on the First Project.

The US Company and EER will also enter into a royalty bearing license agreement for the use of the PGM Technology in the First Project and shall further enter into a services agreement. The royalty rate shall equal 2% - 3.25% of the revenues generated from tipping fees and certain electricity sales of the First Project.

In addition, the US Company shall pay to EER a development services fee for each Facility. The development services fee for the First Project will be in an amount not exceeding $ 5.4 million (representing 4% of the First Project equipment and civil works cost estimate).

Under the Framework Agreement, each of EER and the US Company has granted the other certain exclusivity rights (subject to some exceptions) with respect to the Territories.

In addition, EER has agreed to invest $400,000  in the US Company, in consideration of equity in the US Company, which shall constitute 1.9% of the US Company's fully-diluted capital. The first tranche was transferred to the US Company but was subsequently returned to EER, since the investment round did not materialize. Since then, and due, inter alia, to the time which has passed, EER has decided to go ahead and modify its plant in Yblin Israel at a large expense, and therefore EER notified the US Company that it will not make the equity investments in the US Company.

(9) During December 2011 EER entered into an agreement with a company from the Czech Republic regarding a feasibility study work to be performed by EER with regard to the design, engineering, construction and operation of a hazardous waste treatment facility at an estimated cost of approximately $ 25 million.

In consideration for the performance of the study work, EER was entitled to a total sum of US $125,000. A down payment of US $ 63,000 received in December 2011 and was recorded as revenue in 2011.

An additional payment of US $ 62,000 was received and recorded as revenue during the reported period.

F - 35

NOTE 14 – COMMITMENTS AND CONTIGENT LIABILITIES (continued):

b. Contingent liabilities:

During 2004 the Israeli office of the Chief Scientist approved EER's application to obtain financial assistance for conducting research and development in connection with EER's products. The approval was contingent on the Company's compliance with the provisions of the Israeli Law of Encouragement of Research and Development in Industry, 1984, and on fulfillment of the terms of the approval that include, inter alia, the payment of royalties in respect of revenues from products developed with the assistance of the Chief Scientist.

As of the balance sheet date, EER has received grants in the amount of NIS 1.7 million, the liability in respect thereof was recorded in full in accordance with IAS 20 (before its amendment in 2008).

In August 2010 EER paid royalties of NIS 169 thousands to the office of the Chief Scientist.

In February 2012 and January 2013 EER paid additional royalties of NIS 17 thousands to the office of the Chief Scientist.

See also note 2n.

NOTE 15 - SHAREHOLDERS' EQUITY

a. The Company’s ordinary shares are traded in the United States on the Over the Counter Bulletin Board (OTCBB) under the symbol RVBHF.OB.

b.

	Issued and Outstanding
	December 31
	2012		2011
	Number of shares
Balance as of January 1		177,021,917		118,900,535
Issuance of shares (*)		55,703,870		58,121,382
Balance as of December 31		232,725,787		177,021,917

Ordinary shares of NIS 1.00 par value each

(*) See also note 1c.

The authorized ordinary shares of the Company as of December 31, 2012 and 2011 was 400,000,000 shares with a value of NIS 1.00 per share.

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. Treasury stock

In January 2011 the Company purchased 1,040,000 shares of the Company from its former employees.

The rights attached to these Company shares are suspended until their re-issuance (dormant shares).

F - 36

NOTE 15 - SHAREHOLDERS' EQUITY (continued)

d. Share-based compensation

1. In 2009, the Company granted a third party, an option to purchase 3,000,000 Ordinary Shares of the Company, at an exercise price per share of $0.18, exercisable for a period of five years. As of December 31, 2012, this option is still outstanding.

2. On June 29, 2011, the Company's board of directors approved a share options plan (the "2011 Plan"). Under the 2011 Plan, the Company may grant to any of its and its affiliates' (i.e. present or future company that either controls or is controlled by the Company) employees, officers and directors options to purchase ordinary shares of the Company. The options under the 2011 Plan shall become vested and exercisable, in accordance with the following vesting schedule: (i) 33% of the options shall vest on the first anniversary of the date of grant; and (ii) 8.375% of the options shall vest on the last business day of each subsequent fiscal quarter following the first anniversary of the date of grant, such that all options shall become vested and exercisable by the third anniversary of the date of grant (the "Vesting Schedule").

The options, granted under 2011 plan are allocated on behalf of the participant to a Trustee - under the provisions of the 102 Capital Gains Track and will be held by the Trustee for the period stated in Section 102 of the Israeli Income Tax Ordinance, 1961, as amended and the Israeli Income Tax Regulations (Tax Relieves in Allocation of Shares to Employees), 2003.

On January 2012, following the approval of the Company's audit committee and board of directors, the Company granted to seven of its and its affiliates employees options to purchase 25,793,156 ordinary shares of the Company with an exercise price of US$ 0.2145 per share (adjusted for future dividend), (including 10,000,000 options to the Company's CEO), according to the 2011 plan.  On November 2012 the Company granted to additional three of its affiliate employees options to purchase 1,148,593 ordinary shares of the Company, according to the 2011 plan.

3. On August 22, 2011, the Company's shareholders approved (following the approval of the Company's audit committee and board of directors), among others: (i) the grant to each of the Company's directors, Gedaliah Shelef, Alicia Rotbard and Jonathan Regev, options to purchase 900,000 ordinary shares of the Company, with an exercise price of US$0.2145 per share (adjusted for future dividend). The options were granted under the 2011 Plan; and (ii) the grant to Yair Fudim, of options to purchase shares of the Company representing, on a fully diluted basis, approximately 0.3% of the Company's issued and outstanding share capital as of the date of the grant (actually 861,445 were granted), with an exercise price of US$ 0.2145 per share (adjusted for future dividend). The options shall become vested and exercisable, in accordance with the Vesting Schedule. The options described in this paragraph were granted in January 2012.

The parameters used in the calculation of the fair value of the options described above, are a share price of $0.09 (regarding Yair Fudim) and 0.04$ (regarding the other directors), an exercise price of US$0.2145 per share, the expected volatility of companies operating in this field - 32%, the life of the option – 5 years and a risk-free interest of 1%. The fair value of these options is immaterial.

4. Regarding options granted to Greenstone pursuant to the Management Agreement see note 7b (5) above.

5. Regarding options granted to Mazal pursuant to the Option Agreement see note 7b (3) above.

F - 37

NOTE 16 – 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,
	2012			2011			2010
	$ thousands
Loss attributable to Ordinary Shares		(3,615	)		(5,950	)		(7,637	)

	Shares (thousands)
Weighted average number of Ordinary Shares used in
basic and diluted loss per Ordinary Share calculation (*)		231,686		204,861		187,507
	$
Basic and diluted loss per Ordinary Share		(0.016	)	(0.029	)	(0.041	)

(*) The number of shares as of the periods before the completion of the EER Transaction were adjusted according to the exchange ratio (11.65 shares of the Company for each share of EER) applied in the EER Transaction.

The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share:

· Options granted to Greenstone pursuant to the Management Agreement see note 7b (5) above.

· Options granted to Mazal pursuant to the Option Agreement see note 7b (3) above.

· Additional options see note 15d above.

NOTE 17 – OPERATING EXPENSES AND FACILITY MAINTENANCE:

Composed as follows:

	For the year ended December 31
	2012		2011		2010
	$ in thousand
Payroll and related expenses		745		671		648
Share-based payment		-		-		19
Car maintenance		67		68		86
Professional services		110		29		149
Maintenance of the facility's site		554		285		186
Depreciation and amortization (*)		1,472		1,464		1,495
Other		4		9		7
Total operating and facility maintenance results		2,952		2,526		2,590

(*) See also notes 8 and 9 regarding the depreciation of the Yblin facility and know-how.

F - 38

NOTE 18 – MARKETING EXPENSES AND BUSINESS DEVELOPMENT:

Composed as follows:

	For the year ended December 31
	2012		2011		2010
	$ in thousand
Payroll and related expenses		244		109		121
Share-based payment		32		211		245
Loan which became a grant		-		351		196
Management fees (see note 22)		-		101		132
Car maintenance		3		1		3
Professional services		198		340		471
Overseas travel		69		84		61
Advertising		3		3		27
Total marketing expenses		549		1,200		1,256

NOTE 19 – ADMINISTRATIVE AND GENERAL EXPENSES:

Composed as follows:

	For the year ended December 31
	2012		2011		2010
	$ in thousand
Payroll and related expenses		175		85		110
Share-based payment		32		211		254
Loan which became a grant		-		351		196
Management fees (see note 22)		132		240		209
Car maintenance		35		12		25
Professional services		353		252		248
Office maintenance		146		150		233
Depreciation and amortization		411		410		411
Taxes (*)		31		47		2
Other		115		1		105
Total administrative and general expenses		1,430		1,759		1,793

(*) See also note 13.

F - 39

NOTE 20 – FINANCING INCOME (EXPENSES), NET:

Composed as follows:

	For the year ended December 31
	2012			2011			2010
	$ in thousand
Financing expenses
Long-term loans		-			(83	)		(98	)
Short-term loans		(13	)		(795	)		(1,759	)
Others		(47	)		-			(60	)
		(60	)		(878	)		(1,917	)
Financing income
Long-term loans		-			3			11
Short-term loan (see note 11)		204			-			-
Options at fair value through profit and loss (note 7c(3))		158			-			-
Short-term deposits		66			51			6
		428			54			17
		368			(824	)		(1,900	)

NOTE 21 – FINANCIAL INSTRUMENTS:

a. Capital management policy

The Company's capital structure consists of debt, which includes the loans described in note 11, credit from banks and other credit providers and the shareholders' equity, which includes issued share capital, capital reserve and retained earnings as described in the statement of changes in equity.

b. The main accounting policies

Details on the main accounting policies and the adopted accounting methods, including the terms for recognition, the measurement basis and the basis for recognizing revenue and expenses in connection with each group of financial assets, financial liabilities and capital instruments, are set forth in note 2.

c. Groups of financial instruments:

	As of December 31
	2 0 1 2		2 0 1 1
	$ in thousand
Financial assets
Loans and receivables (including cash and cash equivalents)		3,150		6,886
Financial liabilities
Financial liabilities measured at amortized cost		952		1,879
Financial liabilities at fair value through profit and loss		-		158

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NOTE 21 – FINANCIAL INSTRUMENTS (continued):

d. Objectives and policies concerning risk management

The Company's activities expose it to risks associated with various financial instruments, such as: market risks (including currency risks and risk of cash flows in respect of interest rates. The Company's risk management plan focuses on activities to minimize any potential adverse effects on the Company's financial performance.

Risk management is carried out by the Company's finance division in accordance with a policy determined from time to time by the board of directors. The finance division identifies and assesses financial risks. The board of directors lays down principles for the overall risk management, as well as sets the specific policy for certain exposure to risks, such as exchange rate risks, interest rate risks and credit risks.

e. Currency risk:

The Company also operates in currencies that are not its functional currency (dollar), mainly NIS, and it is exposed to currency risks as a result of changes in exchange rates of different currencies, mainly that of the NIS. The currency risk primarily emanates from current expenses in foreign currency (NIS).

During 2012 there was no change in the Company’s exposure to currency risk or in the way the Group manages or measures the risk.

The carrying values of financial assets and liabilities in foreign currency are set forth in notes 5, 6, 10, and 14b.

f. Interest rate risk:

The Group is exposed to an interest rate risk since Group companies extend and take loans at floating interest rates.

The Group's exposure to interest rates on financial assets and liabilities are described in the section on liquidity risk management which is set forth below.

During 2011 there was a material change in the Group’s exposure to interest rate riskas a result of the conversion of EER's shareholders loans as mentioned above. As at December 31, 2012 the Group has no loans from banks and/or others.

g. Liquidity risk management

The ultimate responsibility for liquidity risk management lays with the Board of Directors, which has outlined an appropriate work plan for the management of liquidity risks based on management's requirements for short-term, medium-term and long-term financing and liquidity. The Group manages liquidity risk by maintaining bank measures, loan measures and by continuously monitoring present and forecasted cash flows. See also note 1.

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NOTE 22 – TRANSACTIONS WITH INTERESTED PARTIES AND RELATED PARTIES

a. Transactions with interested parties and related parties:

(1) On January 2012, the board of directors of the Company approved the appointment of Mr. Ofer Sandelson as the Company's Chief Executive Officer (CEO) as of January 8, 2012. On November 18, 2012, Mr. Ofer Sandelson has notified the Company that he has decided to terminate his employment with the Company and with its subsidiary company EER. In accordance with Mr. Sandelson employment agreement with the Company and EER, he terminated his employment upon three months prior notice (during February 2013). Regarding options granted to Mr. Sandelson see note 15 above.

(2) In February 2002 EER and Greenstone entered into an agreement (in this section – “the management agreement”) for the provision of management services to EER, office services, accounting services and office space, in accordance with the Company’s needs as they shall be from time to time (in this section – “the services’). In return for the services, EER has undertaken to pay a total of NIS 20,000 a month (plus VAT) linked to the CPI (in this section – “the management fees”), as of January 2002. The term of the management agreement was set at one year, at the end of which the agreement would be renewed automatically for additional one-year periods, and may be terminated by one month’s notice by either party. From the end of 2004 to December 31, 2010, services were provided by Accord and management fees were paid to it, and as of January 1, 2011 the services were provided by Leader Holdings and Investments Ltd (the parent company of Greenstone; “Leader”), and the management fees were paid to Leader.

Since September 1, 2011 Greenstone is entitled to the management fees from EER.

(3) Regarding the Management Agreement between the Company and Greenstone including options granted to Greenstone, see note 7b (5).

(4) Regarding options granted to director's of the Company see note 15d(4).

b. The amounts recorded in respect of transactions with interested parties and related parties are presented below:

	For the year ended December 31
	2012		2011		2010
	$ in thousand
Management fees to EER's former CEO
(excluding share-based payment)		-		232		264
Loan to EER's former CEO which became a grant		-		702		392
Payroll and related expenses - CEO		244		-		-
Management fees to Accord/ Leader		-		54		77
Management fees to Greenstone		132		55		-
Share-based payment		7		422		444
Financing expenses		-		959		1,562
Financing income		158		3		11

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NOTE 22 – TRANSACTIONS WITH INTERESTED PARTIES AND RELATED PARTIES (continued):

c. Balances with interested parties and related parties:

	As of December 31
	2 01 2		2 01 1
	$ in thousand
Accounts payable and accruals (see note 11)		9		48

d. For additional information, see also notes 7 and 14.

e. Remuneration of key executives:

	For the year ended December 31
	2 0 1 2		2 0 1 1		2 0 1 0
	$ in thousand
Short-term benefits		244		530		697
Share-based payment		7		422		485
		251		952		1,182

NOTE 23 – LIENS AND COLLATERAL

As for a bank guarantee given by EER to secure its commitments pursuant to the lease agreementsee note 14a(1).

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