ELRNF Elron Ventures Ltd (CE)

Identifying and exploiting investment opportunities in companies with innovative technology and significant exit potential, mainly in the field of medical devices and cyber.

Investing over the long term in order to maximize the possibility of enhancing the Group Companies' value.

Focusing on investments which afford Elron influence and active involvement in their management.

Actively enhancing the Group Companies' value by providing hands-on assistance to their management.

Exploiting opportunities to exit Group Companies.

RDC (50.1%) - See description in section 1.1.4 above.

Pocared Diagnostics Ltd. (55% by Elron, 12% by RDC) ("Pocared") - Pocared is developing a real-time and automated system for infectious diseases diagnosis using optical technology, intended for use by major microbiological laboratories and hospitals, as an alternative to current microbiological practice of bacteria culturing. The system is designed to reduce the average diagnostic time and significantly increase output in comparison with current diagnostic practice.   The system's first application is diagnosis of Urinary Tract Infection .

BrainsGate Ltd. (30%) ("BrainsGate") - BrainsGate is developing a system for treating ischemic stroke. The system operates by electrically stimulating a nerve center located behind the nasal cavity using a miniature implantable electrode, in order to increase blood flow to the brain. The system is intended to significantly lengthen the approved stroke treatment window to 24 hours post-symptom onset, and to provide a more effective treatment than is currently available.

Notal Vision Inc. (21%) ("Notal Vision") - Notal Vision develops, manufactures and provides a system and services for remote monitoring of age-related macular degeneration, or AMD, patients at risk of vision loss, in order to enable early detection of visual changes before the disease progresses to the point of significant vision loss or blindness.

CartiHeal (2009) Ltd. (35%) ("CartiHeal") - Cartiheal is developing an implant for repairing cartilage and osteochondral defects in loadbearing joints, such as the knee. The implant has a unique structure, composed of calcium carbonate with hyaluronic acid. The implant biodegrades in the implantation site, and promotes the repair of cartilage and subchondral bone.

Coramaze Technologies GmbH (28%) ("Coramaze") - Coramaze is a German company developing a device for functional mitral valve regurgitation – backflow in the left side of the heart, caused by an enlarged left ventricle that prevents the valve from closing properly.

Nitinotes Ltd. (14%) ("Nitinotes)   develops an endoscopic gastric sleeve procedure for treatment of obesity.

SixGill Ltd. (22%) ("SixGill") - SixGill   develops and provides an automated system that crawls the Dark Web and extracts information to provide its customers with relevant intelligence and alerts regarding possible or ongoing cyber-attacks against the enterprise .

Alcide IO Ltd. (30%) ("Alcide") - Alcide is developing a security solution for emerging data center environments to enable visibility and security policy enforcement for hybrid data centers.

SecuredTouch Inc. (29% by RDC) ("SecuredTouch") -   SecuredTouch develops and provides   a real time identity verification platform for mobile apps and mobile websites, that profiles users based on their physical behavior with touchscreen devices, allowing for seamless and persistent identity verification.

Cyber Secdo Ltd. (24% by RDC) ("Secdo") - Secdo   operates in the field of automatic detection and investigation of cyber events in organizations through a platform that protects endpoints.

RDSeed Ltd. (100% by RDC) ("RDSeed") - RDSeed invests in early stage companies in cyber, information technology and enterprise software. RDSeed's holdings as of the date of filing this report include:

Cloudyn Software Ltd. (40%) ("Cloudyn"), which provides solutions for the optimization of cloud computing costs and resources;

Open Legacy Technologies Ltd. (45%) ("Open Legacy"), which provides an integration platform, delivering core enterprise applications as digital services (such as for digital banking);

IronScales Ltd. ("IronScales") (27%), which is developing and providing a SaaS solution whose goal is to interactively teach employees how to detect and resist spear phishing attempts.

PlyMedia Israel (2006) Ltd. (23%) ("PlyMedia") - PlyMedia has developed and markets a digital advertising platform for ad networks.

its share in the net losses of Group Companies;

gains or losses from exit transactions or changes in holdings, and revaluation of investments recorded based on fair value;

its corporate activities.

the extent of its investments;

proceeds from exit transactions;

available credit lines or loans;

dividends distributed to shareholders or received from Group Companies.

In the first nine months of 2016, Elron (directly and indirectly) invested approximately $36 million in the Group Companies. For further details see section 1.4 below and Note 3 to the Financial Statements.

Investment in Pocared - In January 2016, Elron and other shareholders invested in Pocared an amount of $5 million (Elron's share was approximately $4.5 million). In July 2016, RDC and other shareholders invested in Pocared a total amount of $10 million (RDC's share was approximately $9 million). In addition, according to the investment agreement, the entire balance of loans granted to Pocared during 2016 and 2015 in the amount of approximately $5.2 million(principal plus accrued interest) was converted into shares (Elron’s share in the loans including interest was approximately $4.8 million). Following the completion of this investment agreement, Elron's consolidated holding in Pocared's outstanding share capital increased from approximately 58% to 67% and from approximately 60% to 68% on a fully diluted basis (effective holding of approximately 61% outstanding share capital and 60% on a fully diluted basis) (for further details see Note 3.A to the Financial Statements)

Investment in BrainsGate - In January 2015, an investment agreement in BrainsGate in the amount of $26 million was signed, with the participation of Medtronic and additional shareholders of BrainsGate, including Elron. The first installment in the amount of $11 million was invested immediately (Elron's share in the first installment was approximately $3.3 million). In July 2016, the second installment was invested in the amount of approximately $15 million (Elron's share in the second installment was approximately $4.6 million) (for further details see Note 3.B to the Financial Statements). Elron's holdings in BrainsGat's share capital did not change following this investment.

Investment in Open Legacy – In October 2016, subsequent to the reporting date, an investment agreement with new investors and Open Legacy's shareholders, including RDSeed, in the amount of $4 . 5 million was completed (RDSeed's share in this amount was approximately $2 . 3 million). Following this investment, RDSeed's holding in Open Legacy's outstanding shares increased to approximately 45% (for further details see Note 3.E to the Financial Statements).

New Investment in SixGill -   In April 2016, Elron completed its first investment in SixGill   in the amount of $2.5 million as part of a $3 million financing round together with another SixGill shareholder. Following this investment, Elron holds approximately 22% of SixGill's outstanding shares (for further details see Note 3.F to the Financial Statements).

New Investment in SecuredTouch - In May 2016, RDC completed its first investment in SecuredTouch, in the amount of $2.2 million as part of a $2.5 million financing round together with other SecuredTouch shareholders. Following this investment, RDC holds approximately 29% of SecuredTouch's outstanding shares (for further details see Note 3.G to the Financial Statements).

New Investment in Alcide - In June 2016, Elron completed its first investment in Alcide   in the amount of $1.5 million. Following this investment, Elron holds approximately 30% of Alcide's outstanding shares (for further details see Note 3.H to the Financial Statements).

New Investment in Nitinotes - In September 2016, Elron signed its first investment agreement in Nitinotes, together with other shareholders of Nitinotes, in the amount of $4.1 million, in three installments (Elron's share is $3 million), upon completion of which Elron will hold approximately 36% of Nitinotes's outstanding shares. The first installment in the amount of $1 million was invested immediately (Elron's share in the first installment was approximately $0.8 million). Following the first installment Elron holds 14% of Nitinotes's outstanding shares (for further details see Note 3.I to the Financial Statements).

New Investment in Secdo - In September 2016, RDC completed its first investment in Secdo, in the amount of $4 million, as part of a $6 million financing round together with other Secdo's shareholders. Following this investment, RDC holds approximately 24% of Secdo's outstanding shares (for further details see Note 3.J to the Financial Statements).

BrainsGate's FDA Trial - Further to Item 4B of Elron's 2015 Annual Report and as conveyed to Elron by BrainsGate, in May 2016, the Data Safety and Monitoring Board ("DSMB") of BrainsGate's study conducted an interim analysis of the results of 600 patients, after their follow-up period ended in April 2016. The purpose of the interim analysis was to support the continuation of the study according to the current format or to cease the study. Based on the interim analysis, the DSMB unanimously recommended to continue with the study in its current format. BrainsGate is continuing to recruit patients for the study and as of the date of filing this report, has recruited approximately 681 patients.

Pocared's FDA Trial - Further to Item 4B of Elron's 2015 Annual Report, as conveyed to Elron by Pocared in March 2016 regarding its FDA trial, the examination of the trial results conducted by Pocared revealed that there was a malfunction in some of the calibration components of its systems, which led to incorrect results. The source of the malfunction was identified and its substance was examined, inter alia, by running raw data collected in the trial on a system with properly calibrated components, and the results thereof met Pocared's expectations. Pocared has taken steps to prevent the recurrence of the malfunction and is preparing to conduct a new trial, the aim of which is to demonstrate the efficiency and performance of the system for the purposes of submission to the FDA, similar to the aims of the current trial which was stopped. Pocared is expected to conduct the new trial during 2017.

CartiHeal's trial - Further to Item 4B of Elron's 2015 Annual Report, in October 2016, CartiHeal received an approval from the FDA for the commencement of the trial, subject to certain conditions .

Dividend - On March 10, 2016, the Board of Directors resolved to make an application to the Court for a dividend distribution of $15 million, constituting an amount of $0.504307 per share, not out of the Company's profits, pursuant to Section 303 of the Israeli Companies Law, 1999. In June 2016, the Court approved the distribution of this dividend. On August 29, 2016, in accordance with the approval of the Court, the Company's Board of Directors approved the distribution of a dividend in the amount of $15 million, not out of the Company's profits. On September 26, 2016 the dividend was distributed to the Company's shareholders.

As of the date of filing this report, Elron's and RDC's non-consolidated liquid resources amounted to approximately $35.0 million and $52.4 million, respectively. These amounts include Elron's and RDC's short term bank deposits in the amounts of $2 million and $8 million, respectively and other short term investments in securities by Elron in the amount of approximately $25.2 million. As of the date of filing this report, Elron and RDC have no debt.

A $8.7 million net gain recorded in the third quarter (net of non-controlling interest) due to the sale of  Kyma Medical Technologies Ltd. ("Kyma", sold in September 2015) ($10.3 million before tax);

A $4.0 million gain recorded in the third quarter due to an increase in the fair value of Jordan Valley Semiconductors Ltd. ("Jordan Valley", the sale was completed in October 2015).

A $10.1 million gain recorded in the first quarter due to the initial consolidation of Pocared.