As
filed with the Securities and Exchange Commission on November 28, 2016
Registration
No. 333-207117
Registration
No. 333-208127
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Post-Effective
Amendment No. 2
to
FORM
F-1
on
FORM F-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
KITOV
PHARMACEUTICALS HOLDINGS LTD.
(Exact
Name of Registrant as Specified in its Charter)
State
of Israel
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2834
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Not
Applicable
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(State
or Other Jurisdiction of
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(Primary
Standard Industrial
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(I.R.S.
Employer
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Incorporation
or Organization)
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Classification
Code Number)
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Identification
No.)
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One
Azrieli Center, Round Tower, 23
rd
Floor
132
Menachem Begin Road, Tel Aviv 6701101, Israel
+972-3-993-3121
(Address,
including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Puglisi
& Associates
850 Library Avenue, Suite 204
Newark, DE 19715
(302) 738-6680
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies
to:
Perry
Wildes, Adv.
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Rick
A. Werner, Esq.
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Gross,
Kleinhendler,
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Haynes
and Boone, LLP
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Hodak,
Halevy,
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30
Rockefeller Plaza,
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Greenberg
& Co.
One Azrieli Center
Tel Aviv 67021, Israel
Tel: +972 (3) 607-4444
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26th
Floor
New York, New York 10112
(212) 659-7300
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Approximate
date of commencement of proposed sale to the public:
As soon as practicable after effectiveness of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment that specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY
NOTE
The
Registrant filed with the Securities and Exchange Commission (“SEC”) (i) a registration statement on Form F-1 (Registration
No. 333-207117) on September 24, 2015, as subsequently amended by amendments one through four thereto, which was declared effective
by the SEC on November 20, 2015, (ii) a registration statement on Form F-1MEF (Registration No. 333-208127) on November 20, 2015
and became effective upon filing in accordance with Rule 462(b) under the Securities Act of 1933, as amended (the “Securities
Act”), and (iii) a post-effective Amendment to the Registration Statement on Form F-1MEF (Registration No. 333-208127) on
March 18, 2016, which was declared effective by the SEC on March 23, 2016. Pursuant to Rule 429 under the Securities Act, the
prospectuses contained in those previous registration statements (collectively, the “Registration Statement”) have
been combined into the prospectus contained in this post-effective amendment no. 2 to the Registration Statement (this “Post-Effective
Amendment No. 2”) to Form F-1 on Form F-3.
This
Post-Effective Amendment No. 2 is being filed by the Registrant to convert the Registration Statement on Form F-1 into a registration
statement on Form F-3. The information included in this filing updates and supplements the Registration Statement and the prospectus
contained therein. No additional securities are being registered under this Post-Effective Amendment No. 2. Accordingly, this
Post-Effective Amendment No. 2 concerns only the offer and sale of (i) American Depositary Shares (“ADSs”) issuable
upon the exercise of unexercised Series A warrants that were issued to the public investors in connection with the registrant’s
initial public offering on November 25, 2015; and (ii) ADSs issuable upon the exercise of unexercised warrants that were issued
to the representative of the underwriters in connection with the Registrant’s initial public offering, in each case, pursuant
to a prospectus dated November 23, 2015.
All
filing fees payable in connection with the registration of these securities were previously paid in connection with the initial
filing of the Registration Statement.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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PROSPECTUS
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SUBJECT
TO COMPLETION
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DATED
NOVEMBER 28, 2016
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3,464,202
American Depositary Shares
Each
Representing 20 Ordinary Shares
Issuable
upon Exercise of Warrants
This
prospectus relates to 3,464,202 American Depositary Shares, or ADSs, each representing 20 of our ordinary shares no par value
per share,
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(i)
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3,306,257
of which are issuable upon the exercise of unexercised warrants to purchase ADS, currently
listed on The NASDAQ Capital Market under the symbol “KTOVW,” which we refer
to as “Series A warrants” or “public warrants”, issued to public
investors in our initial public offering on November 25, 2015; and
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(ii)
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157,945
of which are issuable upon the exercise of unexercised warrants issued to the representative
of the underwriters in connection with our initial public offering on November 25, 2015,
which we call “representative’s warrants” (and together with the Series
A warrants, the “warrants”),
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in
each case pursuant to a prospectus dated November 23, 2015.
In
order to obtain the ADSs (i) the holders of the public warrants must pay an exercise price of $3.78 per ADS (subject to adjustments
described herein) and (ii) the holders of the representative’s warrants must pay an exercise price of $4.96 per ADS (subject
to adjustments described herein). Each Series A warrant was exercisable immediately upon issuance and will expire November 25,
2020. Each representative’s warrant was exercisable immediately upon issuance on November 25, 2015 and will expire November
25, 2020. We will receive proceeds from the exercise of the warrants (other than in certain permitted instances of cashless exercise
of the warrants) but not from the sale of the underlying ADSs.
Our ordinary shares are currently
traded on the Tel Aviv Stock Exchange, or the TASE, under the symbol “KTOV.” The last reported sale price of our ordinary
shares on the TASE on November 27, 2016 was NIS 0.67, or $0.173, per share (based on the exchange rate reported by the Bank
of Israel on that date, which was NIS 3.871 = $1.00).
Our ADSs and Series A warrants (issued
to public investors in connection with our November 2015 initial public offering and our July 2015 follow-on public offering) are
currently listed on The NASDAQ Capital Market under the symbols “KTOV” and “KTOVW”, respectively. The last
reported sale price of our ADSs and Series A warrants on The NASDAQ Capital Market on November 25, 2016 was $3.58 and $1.5196,
respectively.
We
are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and
will be subject to reduced public company reporting requirements.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 7 of this prospectus
for a discussion of information that should be considered in connection with an investment in our ADSs and warrants.
Neither
the Securities and Exchange Commission, or the SEC, the Israeli Securities Authority, or ISA, nor any state securities commission
has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
The
date of this prospectus is November 28, 2016
Table
of Contents
We
have not authorized anyone to provide information different from that contained in this prospectus, any amendment or supplement
to this prospectus or in any free writing prospectus prepared by us or on our behalf. When you make a decision about whether to
invest in our securities, you should not rely upon any information other than the information in this prospectus and any free
writing prospectus prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of our securities means
that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to
sell or solicitation of an offer to buy the securities being offered hereby in any circumstances under which the offer or solicitation
is unlawful.
For
investors outside of the United States: We have not done anything that would permit this offering or possession or distribution
of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required
to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
The
information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery
of this prospectus or any sale of our securities. Our business, financial condition, results of operations, and prospects may
have changed since that date.
This
prospectus includes statistical, market and industry data and forecasts which we obtained from publicly available information
and independent industry publications and reports that we believe to be reliable sources.
Unless
otherwise indicated, all information contained in this prospectus (i) gives retrospective effect to a consolidation of our share
capital at a ratio of 1:13, which was effected on November 30, 2014, or the Consolidation, so that: (A) each 13 ordinary shares
of Kitov Holdings was consolidated into one ordinary share of Kitov Holdings; and (B) each option (tradable and non-tradable)
outstanding immediately prior to the Consolidation was adjusted by multiplying the number of ordinary shares into which such option
was exercisable by 1/13 (rounded to 0.07692).
PROSPECTUS
SUMMARY
This summary
does not contain all of the information you should consider before investing in our securities. Before making an investment decision,
you should carefully read the entire prospectus and our other filings with the SEC. This summary contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking
statements. Factors that may cause or contribute to such differences include those discussed in “Risk Factors” and
“Forward-Looking Statements” below. Unless the context otherwise requires, all references to (i) “Kitov Holdings,”
refers to Kitov Pharmaceuticals Holdings Ltd., (ii) “we,” “us,” “our,” and similar designations
refer to Kitov Pharmaceuticals Holdings Ltd., together with its wholly-owned subsidiary, Kitov Pharmaceuticals Ltd., and (iii)
“Kitov Pharmaceuticals” refers to Kitov Pharmaceuticals Ltd., the wholly owned subsidiary of Kitov Pharmaceuticals
Holdings Ltd. The terms “shekels”, “Israeli shekels” and “NIS” refer to New Israeli Shekels,
the lawful currency of the State of Israel, the terms “dollar”, “US$” or “$” refer to U.S.
dollars, the lawful currency of the United States and the term “Euro” or “€” refer to the Euro, the
lawful currency of the European Union member states. Unless derived from our financial statements or otherwise indicated, U.S.
dollar translations of NIS amounts and U.S. dollar translations of Euro amounts presented in this prospectus are translated using
the rate of NIS
3.902
to $1.00 and Euro
1.088
to $1.00, respectively, based on the exchange rates reported by the
Bank of Israel on December 31, 2015. We report under International Financial Reporting Standards as issued by the International
Accounting Standards Board.
Our
company
We
are a biopharmaceutical company currently focused on the development of therapeutic candidates for the simultaneous treatment
of two clinical conditions:
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pain
caused by osteoarthritis; and
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hypertension
(high blood pressure), which can be pre-existing or caused by the treatment for osteoarthritis.
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In
particular, we are currently focusing on developing combinations of existing drugs in advanced stages of development. We currently
have two combinations in our pipeline, KIT-301, based on the generic drugs naproxen and isradipine, and KIT-302, based on the
generic drugs celecoxib and amlodipine besylate. Both naproxen and celecoxib are active ingredients of known and approved-for-use
drugs designed primarily to relieve pain caused by osteoarthritis. Celecoxib is the active ingredient in the branded drug “Celebrex®”.
These combinations are designed to simultaneously relieve pain caused by osteoarthritis and treat hypertension, which is one of
the side effects of using non-steroidal anti-inflammatory drugs, or NSAIDs, for treating pain caused by osteoarthritis.
We
are currently focusing on our development efforts for KIT-302, which has recently completed its Phase III clinical study. We are
currently not developing KIT-301, for which we have an active IND, due to our need to allocate resources for advancing the development
of KIT-302. The Science and Technology Committee of our Board of Directors has recently considered whether we should continue
the further development of KIT-301. In the Committee’s view, KIT-301 can be categorized as an inferior earlier generation
combination drug, as compared to KIT-302, and taking into account the progress we have made with KIT-302’s development and
in preparing our anticipated New Drug Application, or NDA, to be submitted to the U.S. Food and Drug Administration, or the FDA,
for KIT-302, the Committee determined to recommend to our Board of Directors to consider removing KIT-301 from our development
pipeline, and if so determined, to also to consider directing management to update the FDA at an appropriate time about any such
discontinuation of development of KIT-301.
In
addition, we may consider the acquisition of therapeutic candidates or existing drug products, at various stages of development,
which are not necessarily related to the treatment of pain caused by osteoarthritis or treatment of hypertension. We currently
have no binding agreements or commitments to complete any transaction for the possible acquisition of new therapeutic candidates,
though we are involved in negotiations with a number of possible candidates. There is no certainty that we will be able to complete
any transactions for the possible acquisition of new therapeutic candidates. We may not be able to identify suitable acquisition
candidates, complete acquisitions or integrate acquisitions successfully. In this regard, acquisitions involve numerous risks,
including difficulties in the integration of the acquired therapeutic candidates and the diversion of management’s attention
from other business concerns. Although we will endeavor to evaluate the risks inherent in any particular transaction, there can
be no assurance that we will properly ascertain all such risks. In addition, acquisitions could result in the incurrence of substantial
additional indebtedness and other expenses or in potentially dilutive issuances of equity securities. There can be no assurance
that difficulties encountered with acquisitions will not have a material adverse effect on our business, financial condition and
results of operations.
We intend to
seek FDA approval for the commercialization of our therapeutic candidates, and where applicable through the Section 505(b)(2)
regulatory path under the Federal Food, Drug, and Cosmetic Act of 1938, as amended. Where applicable, we also intend to seek corresponding
regulatory paths for approval in other foreign jurisdictions. Our current pipeline consists of two clinical development therapeutic
candidates, KIT-301, which has been cleared for Phase III clinical trials and KIT-302, which has recently successfully completed
its Phase III clinical trial, both of which will be subject to review and approval by the FDA. Upon and subject to receipt of
the requisite approvals, we intend to commercialize our therapeutic candidates through licensing and other commercialization arrangements
with pharmaceutical companies on a global and/or territorial basis. We may also evaluate, on a case by case basis, co-development
and similar arrangements, as well as independent commercialization of our therapeutic candidates.
Developments Since Our NASDAQ Listing
Initial
Public Offering on The NASDAQ Capital Market
On
November 25, 2015, we completed an underwritten public offering of 3,158,900 ADSs, each representing 20 of our ordinary shares,
and public warrants to purchase up to 3,158,900 ADSs. The ADSs and public warrants were issued in a fixed combination of one ADS
and one warrant to purchase one ADS for a combined price to the public of $4.13. In addition, the underwriters of the offering
partially exercised their option to purchase an additional 220,074 warrants to purchase 220,074 ADSs. The public warrants
had an initial per ADS exercise price of $4.13, were exercisable immediately, and have a term of five years from the date of issuance.
The gross proceeds to us from this offering were approximately $13 million, prior to deducting underwriting discounts, commissions
and other offering expenses. The public warrants were subject to “weighted average” ratchet anti-dilution provisions
as set forth in the Warrant Agent Agreement, providing that until November 25, 2016, upon issuances of our ADSs or an equivalent
number of ordinary shares (or securities convertible or exercisable into ADSs or an equivalent number of ordinary shares), subject
to specified exceptions, at a price less than the exercise price then in effect, the exercise price would be reduced based on
the “weighted average” formula set forth in the Warrant Agent Agreement. The “weighted average” ratchet
provision of the public warrants was triggered by our July 5, 2016 follow-on public offering (described below), and upon closing
of the follow-on public offering on July 5, 2016, the exercise price of all the public warrants was reduced in accordance with
its terms to $3.78.
Phase III Clinical
Trial Results
On
December 15, 2015, we announced that the Phase III, double-blind, placebo-controlled clinical trial for our leading drug candidate,
KIT-302, successfully met the primary efficacy endpoint of the trial protocol as approved by the FDA. Data from the trial further
revealed that KIT-302 tended to reduce blood pressure more than the widely used hypertension drug amlodipine besylate when administered
alone. We plan to submit our NDA for marketing approval of KIT-302 with the FDA in the coming months.
The
trial protocol, approved by the FDA through the Special Protocol Assessment process, was designed to quantify the decrease of
hypertension in patients receiving KIT-302. The trial was performed in the U.K. in four groups of twenty-six (26) to forty-nine
(49) patients, with a total of 152 patients. Each patient was treated over a total period of two weeks. Group One was treated
with KIT-302, comprised of celecoxib and amlodipine besylate. Group Two was treated with amlodipine besylate only, one of the
components of KIT-302. Group Three was treated with celecoxib only, the other component of KIT-302. Group Four was treated with
a double placebo. The trial began in June 2014 and was completed in November 2015.
The
primary efficacy end-point of the trial was to show that a combination of the two components of KIT-302, as demonstrated in Group
One, lowers daytime systolic blood pressure by at least 50% of the reduction in blood pressure achieved in patients in Group Two,
who were treated with amlodipine besylate only.
The
trial results showed that in patients treated with amlodipine besylate only, there was a mean reduction in daytime systolic blood
pressure of 8.8 mm Hg. In patients treated with KIT-302, there was a mean reduction in daytime systolic blood pressure of 10.6
mm Hg. Therefore, the primary efficacy endpoint of the study has been successfully achieved with a p value of 0.001.
Additional
data from the trial results showed that favorable blood pressure effects of KIT-302 were present in all blood pressure variables
measured in the study. The data indicated that the blood pressure reduction synergy seen with combining celecoxib and amlodipine,
is seen not only in the study’s primary efficacy endpoint of daytime systolic blood pressure, but was also seen from daytime
diastolic blood pressure measurements and in all other blood pressure variables. After two weeks of treatment, the reduction with
daytime diastolic blood pressure measurements with amlodipine alone was 5.5 mm Hg, while for patients treated with KIT-302's components
the reduction was 7.6 mm Hg. For nighttime systolic blood pressure after two weeks of treatment, the reduction with amlodipine
therapy alone was 6.3 mm Hg, while for patients treated with KIT-302's components the reduction was 10.7 mm Hg. For nighttime
diastolic blood pressure after two weeks of treatment, the reduction with amlodipine besylate alone was 3.1 mm Hg, while for patients
treated with KIT-302's components the reduction was 7.2 mm Hg. Thus, the synergy in blood pressure reduction demonstrated with
KIT-302’s two components was present at all times of day and with both blood pressure measures. Although celecoxib when
combined with amlodipine appears to have a synergistic effect in lowering blood pressure, it appears to have the opposite effect
when administered by itself. While not conclusive, we believe the medical community may take great interest in this study’s
findings and its implications for pain management and hypertension.
On
May 12, 2016, we announced that we received the minutes from the FDA for the pre-NDA submission meeting held during April 2016.
The FDA requested that the clinical study results be reviewed to check and make sure no patients suffered adverse consequences
from the enhanced blood pressure reduction resulting from the synergy of celecoxib and amlodipine. We are unaware of any such
events occurring and intend to include a detailed review in the safety section of our NDA. In addition, to further establish safety,
the FDA requested a literature search related to animal studies of celecoxib and amlodipine be included in the NDA. The FDA also
requested documentation of a clinical need for KIT-302, such as by identifying how many patients receive celecoxib on a chronic
basis. We intend to provide this documentation by using one or more of the various computerized patient care databases or pharmacy
benefit managers. Finally, the FDA requested that the statistical calculation for the primary efficacy endpoint be performed using
an alternate mathematical technique. Our statistician has already conducted this calculation and determined that the primary efficacy
endpoint was successfully met with the new calculation method.
The
final and complete analyses, including the clinical study report, are expected to be completed in December 2016. We plan to submit
our NDA for marketing approval of KIT-302 with the FDA in the coming months.
In addition,
in connection with our Development Services Agreement with Dexcel, pursuant to which Dexcel developed the formulation for KIT-302
and is performing the subsequent stability testing and manufacturing scale-up in quantities adequate for submission of an NDA
to the FDA, Dexcel performed a pilot clinical bioequivalence trial, or the Pilot PK Study, and subsequently performed a final
conclusive pharmacokinetic (PK) bioequivalence (BE) study, or the Final PK Study. The objective of these two studies was to check
the pharmacokinetics of the combination drug in order to show that the blood levels achieved with our combination are equivalent
to those obtained with the individual components. The Pilot PK Study was performed during April and May 2015, after completion
of the formulation of two prototypes of KIT-302; during June 2015, we obtained the successful results of the Pilot PK Study. The
Final PK Study was performed during March and April 2016, and on May 10, 2016 we announced that we, together with Dexcel, had
successfully completed the Final PK Study. The Final PK Study compared the PK of KIT-302 which is a fixed dose combination consisting
of celecoxib (200 mg), indicated for osteoarthritis pain, and amlodipine (10 mg), indicated for high blood pressure, to off-the-shelf
branded 200 mg celecoxib capsules and 10 mg amlodipine tablets. These evaluations were conducted under both fed and fasted conditions.
The results demonstrated that for both the Cmax (the maximum blood level achieved) and Area Under the Curve (the area under the
concentration-time curve for drug levels), the 90% confidence intervals for both the amlodipine and celecoxib components of KIT-302
were documented to be between 80% and 125% of the values obtained with the off-the-shelf drugs, thus meeting the FDA’s standard
for establishing bioequivalence. A similar PK bioequivalence study for KIT-302, containing a lower dosage (2.5 mg) of amlodipine,
was completed during the third quarter of 2016, and showed similar bioequivalence results to those found in the Final PK Study.
On June 28,
2016, we announced that Dexcel had successfully completed an initial stability study for KIT-302. Additional stability studies
required for the NDA are ongoing.
The
Phase III clinical trial for KIT-302 was conducted in medical centers in the United Kingdom on the basis of approvals received
from the British Regulatory Authority (MHRA) and the U.K. ethics committees. It is not currently known whether the European regulatory
authorities will require additional studies in order to grant their approval to market KIT-302 in Europe.
Issuance
of Patent by USPTO
On
May 12, 2016, we announced that our patent application to approve a patent relating to a drug for treating hypertension has received
a notice of allowance for ameliorating the elevation of blood pressure caused by a specific NSAID by the co-administration of
a specific calcium channel blocker. It is possible to pursue claims to additional inventions based on the patent application by
making patent filings prior to issuance of a patent on this patent application, and we have proceeded accordingly. On August 10,
2016, we announced that the United States Patent and Trademark Office (USPTO) issued patent #9,408,837 covering KIT-302. The patent,
entitled “Ameliorating Drug-Induced Elevations In Blood Pressure By Adjunctive Use Of Antihypertensive Drugs,” was
issued on August 9, 2016 and will have a term that can extend to February 28, 2030. We are pursuing additional claims to inventions
described in U.S. Patent #9,408,837.
July
2016 Follow-on Public Offering
On
July 5, 2016, we completed a follow-on public offering of 2,378,823 Class A units, with each Class A unit consisting of one ADS
and a public warrant, as well as 1,150,589 Class B units, with each Class B unit consisting of a non-listed, pre-funded warrant
to purchase one ADS, or a pre-funded warrant, and a public warrant. Each Class A unit was sold at a negotiated price of $3.40
per unit, including the ADS issuance fee of $0.01 per ADS, and each Class B unit was sold at a negotiated price of $3.40 per unit,
including the pre-funded warrant exercise price of $0.01 per full ADS and the ADS issuance fee of $0.01 per ADS. The pre-funded
warrants were exercisable at any time after the date of issuance upon payment of the exercise price and the ADS issuance fee,
and all of these pre-funded warrants have been exercised to-date. The gross proceeds to us from this offering were approximately
$12,000,000, prior to deducting placement agent fees and other estimated offering expenses.
Renal
Function Clinical Trial
Additional data from the Phase III
clinical trial of KIT-302 also suggest beneficial effects on renal (kidney) function, as compared to negative effects on renal
function caused by other NSAIDS. Greater reduction in plasma levels of creatinine was observed in patients in the KIT-302 arm
(-3.22 umol/L) compared to creatinine reduction observed in patients in the amlodipine arm (-2.55 umol/L), suggesting better renal
function. In addition, peripheral edema, a known side effect of calcium channel blockers such as amlodipine, was reported in 15.6%
of patients receiving amlodipine alone, but in only 8.2% of patients receiving KIT-302, suggesting that KIT-302 may protect against
the amlodipine side effect of causing fluid retention by the kidneys. It is recognized that such an effect could explain the synergistic
blood pressure reducing effect of KIT-302 over therapy with amlodipine alone.
Although not intended as part of
the information to be included in our new drug application that we expect to submit for the marketing clearance by the FDA of
KIT-302 in early 2017, we have commenced conducting a clinical trial designed to validate and better quantify these potential
beneficial renal effects. The trial analysis may further explain the synergistic antihypertensive effect, where the reduction
in blood pressure demonstrated with KIT-302 was greater than that observed with amlodipine alone. Accordingly, we intend to conduct
a double blind, placebo controlled, clinical trial intended to statistically demonstrate KIT-302’s effects on renal and
vascular function, while providing us with data with respect to KIT-302 in addition to the data of the Phase III clinical trial,
by utilizing a primary efficacy end-point in the Renal Function clinical trial comparable to that of the Phase III clinical trial.
The trial is expected to be performed in the U.K. in three groups of 15 to 45 patients (and a total of 105 patients), with each
patient treated over a total period of two weeks. Group One is receiving a placebo, Group Two is being treated with a standard
drug available in the market for treating hypertension (amlodipine besylate, one of the components of KIT-302), and Group Three
is being treated with the two components of KIT-302 (celecoxib and amlodipine besylate). We expect to complete recruitment of
the patients during the second calendar quarter of 2017 and to receive the interim results of the trial approximately eight weeks
after completion of patient recruitment.
The
renal function clinical trial for KIT-302 will be conducted in medical centers in the United Kingdom on the basis of the approval
of the British Regulatory Authority (MHRA), as well as the approvals of the relevant U.K. ethics committees, which we have already
received.
On September
7, 2016, we entered into an additional Work Order with Java Clinical Research Ltd., or Java, a contract research organization
based in Dublin, Ireland, under our Master Research Services Agreement with Java, the term of which was extended by such Work
Order. Pursuant to the Work Order Java will manage the renal function clinical trial for KIT-302, including preparation and filing
of the requests to the ethics boards and the necessary regulatory bodies of the U.K., recruiting the trial participants, employment
of the primary researchers, identification and evaluation of the medical centers and their subsequent management throughout the
trial period and overall management of the trial process through its completion. We also have directly engaged with third party
medical centers for the performance of our renal function clinical trial being managed by Java. The Master Research Services Agreement
will remain in effect until Java has provided all services through the completion of our renal function clinical trial. The parties
have customary termination rights and either party may terminate the Master Research Services Agreement (or any work thereunder)
upon 60 days’ notice. In addition, on July 26, 2016, we entered into a new services agreement with DABL Limited, or DABL,
an Irish company based in Dublin, Ireland, in the ambulatory blood pressure monitoring technologies field, in connection with
the renal function clinical trial. According to the agreement, DABL will provide protocol consultation services and coordinate
the ambulatory blood pressure monitoring (ABPM) procedures and the analysis of the blood pressure tests during and after our renal
function clinical trial. The services agreement will remain in effect until DABL has provided all services provided for in the
agreement. However, we may terminate the agreement at any time upon 90 days’ notice, and both parties have customary termination
rights. We estimate that the total cost of the agreement with Java, as well the cost of all other service providers with respect
to the renal function clinical trial, will amount to approximately $1.8 million, assuming completion of the clinical trial as
anticipated.
Corporate
information
Kitov
Holdings was incorporated under the laws of the State of Israel (under a previous name) on August 12, 1968 and its ordinary shares
were originally listed for trading on the TASE in 1978. In November 2015, we completed an initial public offering of our ADSs
and Series A warrants on The NASDAQ Capital Market. Our principal executive offices are located at One Azrieli Center, Round Tower,
23
rd
Floor, 132 Menachem Begin Road, Tel Aviv 6701101, Israel, and our telephone number is 972-3-933-3121. Our website
is
www.kitovpharma.com
.
The information contained therein or connected thereto shall not be deemed to be
incorporated into this prospectus or the registration statement of which it forms a part.
THE
OFFERING
Issuer
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Kitov
Pharmaceuticals Holdings Ltd.
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Securities
Offered
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3,464,202
American Depositary Shares, or ADSs, each representing 20 of our ordinary shares no par value per share,
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(i)
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3,306,257
of which are issuable upon the exercise of unexercised public warrants, issued to public
investors in our initial public offering on November 25, 2015; and
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(ii)
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157,945
of which are issuable upon the exercise of unexercised representative's warrants issued to the representative of the underwriters
in connection with our initial public offering on November 25, 2015.
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In
order to obtain the ADSs (i) the holders of the public warrants must pay an exercise
price of $3.78 per ADS (subject to adjustments described herein) and (ii) the holders
of the representative’s warrants must pay an exercise price of $4.956 per ADS (subject
to adjustments described herein).
Each
Series A warrant was exercisable immediately upon issuance and will expire on November 25, 2020. Each representative's
warrant was exercisable immediately upon issuance and will expire on November 25, 2020. We will receive proceeds from
the exercise of the warrants (other than in certain permitted instances of cashless exercise of the warrants) but
not from the sale of the underlying ADSs.
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Ordinary
shares outstanding prior to this offering
(1)
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153,237,209
ordinary shares (such number of ordinary shares would be represented by 7,661,860 of our ADSs)
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Ordinary
shares to be outstanding after this offering
(1)
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222,521,249
ordinary shares (such number of ordinary shares would be represented by 11,126,062 of our ADSs), assuming the exercise
of all unexercised public warrants issued to public investors in our initial public offering and all unexercised representative’s
warrants; 156,396,109 ordinary shares (such number of ordinary shares would be represented by 7,819,805 of our ADSs), assuming
the exercise of all unexercised representative's warrants but not the unexercised public warrants issued to public investors
in our initial public offering; and 219,362,349 ordinary shares (such number of ordinary shares would be represented by 10,968,117
of our ADSs), assuming the exercise of all unexercised public warrants issued to public investors in our initial public offering
but not the unexercised representative's warrants.
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Depositary
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The
Bank of New York Mellon
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The
ADSs
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Each
ADS represents 20 ordinary shares. The depositary will hold the ordinary shares underlying your ADSs. You will have rights
as provided in the deposit agreement. To better understand the terms of the ADSs and warrants, you should carefully read the
“Description of Securities” section of this prospectus. You should also read the deposit agreement and warrant
agent agreement, which are filed as exhibits to the registration statement that includes this prospectus.
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Description
of Warrants
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Each
public warrant entitles the holder to purchase one ADS at a per ADS purchase price of $3.78 at any time through November 25,
2020. Each representative's warrant issued to the representative of the underwriters entitles the holder to purchase one ADS
at a per ADS purchase price of $4.956 at any time through November 25, 2020. In the event that a registration statement covering
ordinary shares underlying the warrants is not effective, and an exemption from registration is not available for the resale
of such ordinary shares underlying the warrants, the holder may, in its sole discretion, exercise warrants and, in lieu of
making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price,
elect instead to receive upon such exercise the net number of ADSs determined according to the formula set forth in the warrant
agreement. The Depositary issuance fee of $0.05 per ADS, as well as other applicable charges and taxes, are due and payable
upon any cashless exercise.
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Use
of proceeds
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Assuming
the exercise of all of the unexercised public warrants issued to public investors in our initial public offering for cash,
we will receive gross proceeds of approximately $12.5 million. Assuming the exercise of all the unexercised representative's
warrants for cash, we will receive gross proceeds of approximately $0.8 million.
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We
intend to use the net proceeds of this offering for general working capital purposes. See “Use of Proceeds” below.
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NASDAQ
Capital Market symbol
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Our
ADSs and our public warrants are currently listed on The NASDAQ Capital Market under the symbols “KTOV” and “KTOVW”,
respectively. Our ordinary shares are currently traded on the TASE under the symbol “KTOV”.
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Risk
factors
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See
“Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully
consider before deciding to invest in our securities.
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(1)
The number of ordinary shares to be outstanding after this offering is based on 153,237,209 ordinary shares outstanding
as of November 27, 2016 (such number of ordinary shares would be represented by 7,661,860 of our ADSs).
Unless
otherwise indicated, all information in this prospectus excludes:
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9,932,523
ordinary shares issuable at a weighted average exercise price of NIS 0.97 (approximately $0.25) per share issuable to holders
of our options issued, as applicable, under our 2013 Option Plan, as amended, or our 2016 Equity Incentive Plan, (such number
of ordinary shares would be represented by 496,626 of our ADSs);
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69,284,040
ordinary shares underlying the ADSs issuable upon exercise of the unexercised Series A warrants and representative's warrants
issued in our initial public offering in November 2015;
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73,411,760
ordinary shares underlying the ADSs issuable upon exercise of the unexercised Series A warrants and placement agent’s
warrants issued as part of our follow-on public offering on July 5, 2016; and
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gives
effect to the Consolidation.
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RISK
FACTORS
Investment
in our ADSs or warrants involves a high degree of risk. You should carefully consider the risks described below and all other
information contained in this prospectus before you decide to buy our ADSs or warrants. If any of the following risks actually
occur, our business, financial condition and results of operations could be materially and adversely affected. In that event,
the trading price of our ordinary shares would likely decline and you might lose all or part of your investment.
Risks
Related to Our Financial Condition and Capital Requirements
We
are a clinical development stage biopharmaceutical company with a history of operating losses. We expect to incur significant
additional losses in the future and may never be profitable.
We
are a clinical development stage biopharmaceutical company, and we are focused on the development of innovative
pharmaceutical products. Our current therapeutic candidates are in the clinical development stage, and have not been approved
for marketing nor are any being marketed or commercialized. Our therapeutic candidates may require additional clinical trials
or other testing before we can obtain the regulatory approvals in order to initiate commercial sales. For professional
considerations and in order to manage our financial and human resources, we are currently advancing the development of our
primary therapeutic candidate, KIT-302. We have incurred losses from commencement of our pharmaceutical research and
development activities through June 30, 2016 of approximately $17.0 million as a result of research and development
activities, clinical trial related activities, listing for trading and fund raising related activities, general
administrative and other expenses. We may incur significant additional losses as we continue to focus our resources on
advancing our therapeutic candidates, including those we may acquire. Our ability to generate revenue and achieve
profitability depends mainly upon our ability, alone or with others, to successfully develop our therapeutic candidates and
obtain the required regulatory approvals in various territories and then commercialize our therapeutic candidates. We may be
unable to achieve any or all of these goals with regard to our therapeutic candidates. As a result, we may never be
profitable or achieve significant or sustained revenues.
Our
limited operating history as a pharmaceutical research and development company makes it difficult to evaluate our business and
prospects.
We
have a limited operating history as a pharmaceutical research and development company, and our operations to date have been limited
primarily to acquiring therapeutic candidates, research and development, raising capital and recruiting scientific and management
personnel and third party partners. We have not yet demonstrated an ability to commercialize or obtain regulatory approval for
any of our therapeutic candidates. Consequently, any predictions about our future performance may not be accurate, and you may
not be able to fully assess our ability to complete development or commercialize our therapeutic candidates, obtain regulatory
approvals, or achieve market acceptance or favorable pricing for our therapeutic candidates.
We
will need to raise additional capital to achieve our strategic objectives of developing and commercializing additional therapeutic
candidates, and our failure to raise sufficient capital would significantly impair our ability to fund our future operations,
develop our therapeutic candidates, attract development or commercial partners and retain key personnel.
Our
financial statements for the years ended December 31, 2014 and 2013 contained an explanatory paragraph in the footnotes as to
our ability to continue as a going concern. In November 2015, we closed a public offering of our ADSs and Series A warrants for
an aggregate of approximately $13 million. Prior to this offering we funded our operations primarily through offerings of
our securities on the TASE and private loans. In July 2016, we completed a follow-on public offering of ADSs, non-listed Series
B pre-funded warrants, and Series A warrants, for an aggregate of approximately $12,000,000. We believe our existing cash and
cash equivalents will be sufficient to meet our anticipated cash requirements through at least the next twelve months. Our business
presently generates no revenues, and we plan to continue expending substantial funds in research and development, including clinical
trials. We plan to fund our future operations through commercialization and out-licensing of our therapeutic candidates and either
debt or equity financing. However, we cannot be certain that we will be able to raise capital on commercially reasonable terms
or at all, or that our actual cash requirements will not be greater than anticipated. We may have difficulty raising needed capital
or securing a development or commercialization partner in the future as a result of, among other factors, our lack of revenues
from commercialization of the therapeutic candidates, as well as the inherent business risks associated with our company and present
and future market conditions. In addition, global and local economic and geopolitical conditions may make it more difficult for
us to raise needed capital or secure a development or commercialization partner in the future and may impact our liquidity. If
we are unable to obtain future financing, we may be forced to delay, reduce the scope of, or eliminate one or more of our research,
development or commercialization programs related to our therapeutic candidates, any of which may have a material adverse effect
on our business, financial condition and results of operations. Moreover, to the extent we are able to raise capital through the
issuance of debt or equity securities, it could result in substantial dilution to existing shareholders.
Our
long term capital requirements are uncertain and subject to numerous risks.
We
estimate that so long as no significant revenues are generated from our therapeutic candidates, we will need to raise substantial
additional funds to acquire, develop and/or commercialize both of our current therapeutic candidates and any additional therapeutic
candidates, as our current cash and short-term investments are not sufficient to complete the research and development of both
of our current therapeutic candidates and any additional therapeutic candidates and fund our related expenses. Our long term capital
requirements are expected to depend on many potential factors, including, among others:
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the
regulatory path of each of our therapeutic candidates;
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our
ability to successfully commercialize our therapeutic candidates, including securing commercialization agreements with third
parties and favorable pricing and market share;
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the
progress, success and cost of our clinical trials and research and development programs;
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the
costs, timing and outcome of regulatory review and obtaining regulatory approval of our therapeutic candidates and addressing
regulatory and other issues that may arise post-approval;
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the
costs of obtaining and enforcing our issued patents and defending intellectual property-related claims;
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the
costs of developing sales, marketing and distribution channels; and
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our
consumption of available resources more rapidly than currently anticipated, resulting in the need for additional funding sooner
than anticipated.
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If
we are unable to commercialize or out-license our therapeutic candidates or obtain future financing, we may be forced to delay,
reduce the scope of, or eliminate one or more of our research and development programs related to the therapeutic candidates,
which may have a material adverse effect on our business, financial condition and results of operations.
Risks
Related to Our Business and Regulatory Matters
If
we and/or our potential commercialization partners are unable to obtain FDA or other foreign regulatory authority approval for
our therapeutic candidates, we and/or our potential commercialization partners will be unable to commercialize our therapeutic
candidates.
To
date, we have not marketed, distributed or sold any therapeutic candidate or other product. Our therapeutic candidates are subject
to extensive governmental laws, regulations and guidelines relating to development, clinical trials, manufacturing and commercialization
of drugs. We may not be able to obtain regulatory approval for any of our therapeutic candidates in a timely manner or at all.
Any
material delay in obtaining, or the failure to obtain, required regulatory approvals will increase our costs and materially and
adversely affect our ability to generate future revenues. Any regulatory approval to market a therapeutic candidate may be subject
to limitations on the indicated uses for marketing the therapeutic candidate or may impose restrictive conditions of use, including
cautionary information, thereby limiting the size of the market for the therapeutic candidate. We also are, and will be, subject
to numerous regulatory requirements from both the FDA and foreign state agencies that govern the conduct of clinical trials, manufacturing
and marketing authorization, pricing and third-party reimbursement. Moreover, approval by one regulatory authority does not ensure
approval by other regulatory authorities in separate jurisdictions. Each jurisdiction may have different approval processes and
may impose additional testing requirements for our therapeutic candidates than other jurisdictions. Additionally, the FDA or other
foreign regulatory bodies may change their approval policies or adopt new laws, regulations or guidelines in a manner that delays
or impairs our ability to obtain the necessary regulatory approvals to commercialize our therapeutic candidates.
Clinical
trials may involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not
be predictive of future trial results. We and/or our potential commercialization partners will not be able to commercialize our
therapeutic candidates without completing such trials.
We
have limited experience in conducting and managing the clinical trials that are required to commence commercial sales of our therapeutic
candidates. Clinical trials are expensive, complex, can take many years to complete and have uncertain outcomes. We cannot predict
whether we, independently or through third parties, will encounter problems with any of the completed, ongoing or planned clinical
trials that will cause delays, including suspension of clinical trials, delays in recruiting patients into the clinical trials,
or delay of data analysis or release of the final report. The clinical trials of our therapeutic candidates may take significantly
longer to complete than is estimated. Failure can occur at any stage of the testing, and we may experience numerous unforeseen
events during, or as a result of, the clinical trial process that could delay or prevent commercialization of our current or future
therapeutic candidates.
In
connection with the clinical trials for our therapeutic candidates and other therapeutic candidates that we may seek to develop
in the future, either on our own or through licensing or partnering agreements, we face various risks, including but not limited
to:
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delays
in securing clinical investigators or trial sites for the clinical trials;
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delays
in receiving import or other government approvals to ensure appropriate drug supply;
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delays
in obtaining institutional review board (human ethics committee) and other regulatory approvals to commence a clinical trial;
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negative
or inconclusive results from clinical trials;
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the
FDA or other foreign regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical
studies;
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an
inability to monitor patients adequately during or after treatment;
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problems
with investigator or patient compliance with the trial protocols;
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a
therapeutic candidate may not prove safe or efficacious;
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there
may be unexpected or even serious adverse events and side effects from the use of a therapeutic candidate;
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the
results with respect to any therapeutic candidate may not confirm the positive results from earlier preclinical studies or
clinical trials;
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the
results may not meet the level of statistical significance required by the FDA or other foreign regulatory authorities;
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the
results will justify only limited and/or restrictive uses, including the inclusion of warnings and contraindications, which
could significantly limit the marketability and profitability of the therapeutic candidate;
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the
clinical trials may be delayed or not completed due to the failure to recruit suitable candidates or if there is a lower rate
of suitable candidates than anticipated or if there is a delay in recruiting suitable candidates; and
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changes
to the current regulatory requirements related to clinical trials which can delay, hinder or lead to unexpected costs in connection
with our receiving the applicable regulatory approvals.
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A
number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience
than us, have suffered significant setbacks in advanced clinical trials, even after seeing promising results in earlier clinical
trials. As such, we do not know whether any clinical trials we may conduct will demonstrate adequate efficacy and safety sufficient
to obtain regulatory approval to market our therapeutic candidates. If any of the clinical trials of any therapeutic candidate
do not produce favorable results, our ability to obtain regulatory approval for the therapeutic candidate may be adversely impacted,
which will have a material adverse effect on our business, financial condition and results of operations.
If
we do not establish collaborations for our therapeutic candidates or otherwise raise substantial additional capital, we will likely
need to alter our development and any commercialization plans.
Our
drug development programs and the potential commercialization of our therapeutic candidates will require additional cash to fund
expenses. As such, our strategy includes selectively partnering or collaborating with multiple pharmaceutical and biotechnology
companies to assist us in furthering development and potential commercialization of our therapeutic candidates, in some or all
jurisdictions. We may not be successful in collaborations with third parties on acceptable terms, or at all. In addition, if we
fail to negotiate and maintain suitable development or commercialization agreements, we may have to limit the size or scope of
our activities or we may have to delay one or more of our development or commercialization programs. Any failure to enter into
development or commercialization agreements with respect to the development, marketing and commercialization of any therapeutic
candidate or failure to develop, market and commercialize such therapeutic candidate independently will have an adverse effect
on our business, financial condition and results of operation.
Any
collaborative arrangements that we establish may not be successful or we may otherwise not realize the anticipated benefits from
these collaborations. We do not control third parties with whom we have or may have collaborative arrangements, and we rely on
them to achieve results which may be significant to us. In addition, any future collaboration arrangements may place the development
and commercialization of our therapeutic candidates outside our control, may require us to relinquish important rights or may
otherwise be on terms unfavorable to us.
Our
collaborative arrangements require us to rely on external consultants, advisors, and experts for assistance in several key functions,
including clinical development, manufacturing, regulatory, market research, and intellectual property. We do not control these
third parties, but we rely on them to achieve results, which may be significant to us. Relying upon collaborative arrangements
to develop and commercialize our therapeutic candidates subjects us to a number of risks, including:
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we
may not be able to control the amount and timing of resources that our collaborators may devote to our therapeutic candidates;
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should
a collaborator fail to comply with applicable laws, rules, or regulations when performing services for us, we could be held
liable for such violations;
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our
collaborators may experience financial difficulties or changes in business focus;
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our
collaborators partners may fail to secure adequate commercial supplies of our therapeutic candidates upon marketing approval,
if at all;
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our
collaborators partners may have a shortage of qualified personnel;
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we
may be required to relinquish important rights, such as marketing and distribution rights;
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business
combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s
willingness or ability to complete its obligations under any arrangement;
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under
certain circumstances, a collaborator could move forward with a competing therapeutic candidate developed either independently
or in collaboration with others, including our competitors; and
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collaborative
arrangements are often terminated or allowed to expire, which could delay the development and may increase the cost of developing
our therapeutic candidates.
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If
any of these scenarios materialize, they could have an adverse effect on our business, financial condition or results of operations.
Our
current business model is based largely upon the combination of drugs that have not been previously combined. Unexpected difficulties
or delays in perfecting the combination of such drugs or in successfully marketing such combination drugs could have an adverse
effect on our business, financial condition and results of operations.
We
are currently focused on the development of combinations of existing drugs for the simultaneous treatment of pain caused by osteoarthritis
and hypertension. Since these existing drugs have not previously been combined into one therapeutic agent, we cannot be certain
whether the combination will work as intended. In particular, we do not know whether the combination will be bio-equivalent to
the separate component drugs, and we cannot be certain that the formulation and manufacturing process for the combination drugs
will develop as planned. In addition, we cannot be certain that the market will consider our combination drug to be superior to
treatment with the separate drug components. Any delays in perfecting the combination, the production of the combination, or in
market acceptance of the combination could have an adverse effect on our business, financial condition and results of operations.
In
addition, as part of our strategy for growth, we may consider the acquisition of therapeutic candidates or existing drug products,
at various stages of development, which are not necessarily related to the simultaneous treatment of pain caused by osteoarthritis
and hypertension. However, we may not be able to identify suitable acquisition candidates, complete acquisitions or integrate
acquisitions successfully. In this regard, acquisitions involve numerous risks, including difficulties in the integration of the
acquired therapeutic candidates and the diversion of management’s attention from other business concerns. Although we will
endeavor to evaluate the risks inherent in any particular transaction, there can be no assurance that we will properly ascertain
all such risks. In addition, acquisitions could result in the incurrence of substantial additional indebtedness and other expenses
or in potentially dilutive issuances of equity securities. There can be no assurance that difficulties encountered with acquisitions
will not have a material adverse effect on our business, financial condition and results of operations.
We
rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including, but not
limited to, failing to meet established deadlines for the completion of such clinical trials.
We
do not have the ability independently to conduct clinical trials for our product candidates, and we rely on third parties, such
as contract research organizations, medical institutions, contract laboratories, current and potential development or commercialization
partners, clinical investigators and independent study monitors, to perform this function. Our reliance on these third parties
for clinical development activities reduces our control over these activities. Furthermore, these third parties may also have
relationships with other entities, some of which may be our competitors. Although we have, in the ordinary course of business,
entered into agreements with these third parties, we continue to be responsible for confirming that each of our clinical trials
is conducted in accordance with its general investigational plan and protocol. Moreover, the FDA requires us to comply with regulations
and standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical
trials to assure that data and reported results are credible and accurate and that the trial participants are adequately protected.
Our reliance on third parties does not relieve us of these responsibilities and requirements. To date, we believe our contract
research organizations and other similar entities with which we are working have performed well. However, if these third parties
do not successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them. Although
we believe that there are a number of other third-party contractors we could engage to continue these activities, it may result
in a delay of the affected trial and additional costs. Accordingly, we may be delayed in obtaining regulatory approvals for our
therapeutic candidates and may be delayed in our efforts to successfully commercialize our therapeutic candidates for targeted
diseases.
In
addition, we rely substantially on third-party data managers for the clinical trial data that we present to regulatory authorities
in order to obtain marketing authorizations. Although we attempt to audit and control the quality of third party data, we cannot
guarantee the authenticity or accuracy of such data, nor can we be certain that such data has not been fraudulently generated.
There is no assurance that these third parties will pass FDA or regulatory audits, which could delay or prohibit regulatory approval.
If
third parties do not manufacture our therapeutic candidates in sufficient quantities, in the required timeframe, and at an acceptable
cost, clinical development and commercialization of our therapeutic candidates would be delayed.
We
do not currently own or operate manufacturing facilities, and we rely, and expect to continue to rely, on third parties to manufacture
clinical and commercial quantities of our therapeutic candidates. Our reliance on third parties includes our reliance on them
for quality assurance related to regulatory compliance. Our current and anticipated future reliance upon others for the manufacture
of our therapeutic candidates may adversely affect our future profit margins, if any, and our ability to develop therapeutic candidates
and commercialize any therapeutic candidates on a timely and competitive basis.
We
may not be able to maintain our existing or future third party manufacturing arrangements on acceptable terms, if at all. If for
some reason our existing or future manufacturers do not perform as agreed or expected, or our existing or future manufacturers
otherwise terminate their arrangements with us, we may be required to replace them. Although we are not substantially dependent
upon our existing manufacturing agreements since we could replace them with other third party manufacturers, we may incur added
costs and delays in identifying, engaging, qualifying and training any such replacements.
We
rely on third party contract vendors to manufacture and supply us with high quality active pharmaceutical ingredients, or API,
in the quantities we require on a timely basis
.
We
currently do not manufacture any API ourselves. Instead, we rely on third-party vendors for the manufacture and supply of our
APIs that are used to formulate our therapeutic candidates. While there are many potential API suppliers in the market, if these
suppliers are incapable or unwilling to meet our current or future needs on acceptable terms or at all, we could experience a
delay in conducting additional clinical trials of our therapeutic candidates and incur additional costs.
While
there may be several alternative suppliers of API in the market, we have not conducted extensive investigation into the quality
or availability of their APIs. In addition we may acquire therapeutic candidates which already have long term commitments to a
specific API supplier. As a result, we can provide no assurances that supply sources will not be interrupted from time to time.
Changing API suppliers or finding and qualifying new API suppliers can be costly and take a significant amount of time. Many APIs
require significant lead time to manufacture. There can also be challenges in maintaining similar quality or technical standards
from one manufacturing batch to the next.
If
we are not able to find stable, reliable supplies of our API, we may not be able to produce enough supplies of our therapeutic
candidates, which could affect our business, financial condition and results of operation.
We
anticipate continued reliance on third-party manufacturers if we are successful in obtaining marketing approval from the FDA and
other regulatory agencies for any of our therapeutic candidates.
To
date, our therapeutic candidates have been manufactured in relatively small quantities by third-party manufacturers for formulation
development, clinical trials, for purposes of submission to the FDA of our NDA for KIT-302, and for other therapeutic candidates
which may be developed in the future for preclinical and clinical trials, as may be required. If the FDA or other regulatory agencies
approve any of our therapeutic candidates for commercial sale, we expect that we would continue to rely, at least initially, on
third-party manufacturers to produce commercial quantities of our approved therapeutic candidates. These manufacturers may not
be able to successfully increase the manufacturing capacity for any of our approved therapeutic candidates in a timely or economic
manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review
and approve. If they are unable to successfully increase the manufacturing capacity for a therapeutic candidate, or we are unable
to establish alternative manufacturing capabilities, the commercial launch of any approved therapeutic candidates may be delayed
or there may be a shortage in supply.
We
and our third-party manufacturers are, and will be, subject to regulations of the FDA and other foreign regulatory authorities.
We
and our contract manufacturers are, and will be, required to adhere to laws, regulations and guidelines of the FDA and other foreign
regulatory authorities setting forth Current Good Manufacturing Practices. These laws, regulations and guidelines cover all aspects
of the manufacturing, testing, quality control and recordkeeping relating to our therapeutic candidates. We and our manufacturers
may not be able to comply with applicable laws, regulations and guidelines. We and our manufacturers are and will be subject to
unannounced inspections by the FDA, state regulators and similar foreign regulatory authorities outside the U.S. Our failure,
or the failure of our third-party manufacturers, to comply with applicable laws, regulations and guidelines could result in the
imposition of sanctions on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing
approval of our therapeutic candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls
of our therapeutic candidates, operating restrictions and criminal prosecutions, any of which could significantly and adversely
affect regulatory approval and supplies of our therapeutic candidates and materially and adversely affect our business, financial
condition and results of operations.
Even
if we obtain regulatory approvals, our therapeutic candidates will be subject to ongoing regulatory review. If we fail to comply
with continuing U.S. and applicable foreign laws, regulations and guidelines, we could lose those approvals, and our business
would be seriously harmed.
Even
if our therapeutic candidates receive regulatory approval, we or our potential commercialization partners, as applicable, will
be subject to ongoing reporting obligations, including pharmacovigilance, and the therapeutic candidates and the manufacturing
operations will be subject to continuing regulatory review, including inspections by the FDA and other foreign regulatory authorities.
The results of this ongoing review may result in the withdrawal of a therapeutic candidate from the market, the interruption of
the manufacturing operations or the imposition of labeling or marketing limitations. Since many more patients are exposed to drugs
following their marketing approval, serious but infrequent adverse reactions that were not observed in clinical trials may be
observed during the commercial marketing of the therapeutic candidate. In addition, the manufacturer and the manufacturing facilities
that we or our potential commercialization partners use or will use to produce any therapeutic candidate will be subject to periodic
review and inspection by the FDA and other foreign regulatory authorities. Later discovery of previously unknown problems with
any therapeutic candidate, manufacturer or manufacturing process, or failure to comply with rules and regulatory requirements,
may result in actions such as:
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restrictions
on such therapeutic candidate, manufacturer or manufacturing process;
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warning
letters from the FDA or other foreign regulatory authorities;
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withdrawal
of the therapeutic candidate from the market;
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suspension
or withdrawal of regulatory approvals;
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refusal
to approve pending applications or supplements to approved applications that we or our potential commercialization partners
submit;
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voluntary
or mandatory recall;
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refusal
to permit the import or export of our therapeutic candidates;
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product
seizure or detentions;
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injunctions
or the imposition of civil or criminal penalties; or
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If
we, or our current or potential commercialization partners, suppliers, third party contractors or clinical investigators are slow
to adapt, or are unable to adapt, to changes in existing regulatory requirements or the adoption of new regulatory requirements
or policies, we or our potential commercialization partners may lose marketing approval for any of our therapeutic candidates
if any of our therapeutic candidates are approved, resulting in decreased or lost revenue from milestones, product sales or royalties.
Modifications
to our therapeutic candidates, or to any other therapeutic candidates that we may acquire or develop in the future, may require
new regulatory clearances or approvals or may require us or our current or potential development and commercialization partners,
as applicable, to recall or cease marketing these therapeutic candidates until clearances are obtained
.
Modifications
to our therapeutic candidates, after they have been approved for marketing, if at all, or to any other pharmaceutical product
or medical device that we may develop in the future, may require new regulatory clearance or approvals, and, if necessitated by
a problem with a marketed product, may result in the recall or suspension of marketing of the previously approved and marketed
product until clearances or approvals of the modified product are obtained. The FDA and other foreign regulatory authorities require
pharmaceutical product and device manufacturers initially to make and document a determination of whether or not a modification
requires a new approval, supplement or clearance. A manufacturer may determine in conformity with applicable laws, regulations
and guidelines that a modification may be implemented without pre-clearance by the FDA or other foreign regulatory authorities;
however, the FDA or other foreign regulatory authorities can review a manufacturer’s decision and may disagree. The FDA
or other foreign regulatory authorities may also on their own initiative determine that a new clearance or approval is required.
If the FDA or other foreign regulatory authorities require new clearances or approvals of any pharmaceutical product for which
we or our current or potential development and commercialization partners previously received marketing approval, we or our current
or potential development and commercialization partners may be required to recall such therapeutic candidate and to stop marketing
the therapeutic candidate as modified, which could require us or our current or potential development and commercialization partners
to redesign the therapeutic candidate and cause a material adverse effect on our business, financial condition and results of
operations.
While
we have negotiated a special protocol assessment, or SPA, agreement with the FDA relating to the Phase III clinical trial protocol
for KIT-302, and have received minutes of a pre-NDA submission meeting with the FDA, this agreement and these minutes do not guarantee
approval of KIT-302 or any other particular outcome from the final regulatory review of the study or the drug candidate.
We
have reached an agreement with the FDA to conduct the Phase III clinical trial for KIT-302 pursuant to an SPA agreement. The FDA’s
SPA process is designed to facilitate the FDA’s review and approval of drugs by allowing the FDA to evaluate the proposed
design and size of Phase III trials that are intended to form the primary basis for determining a therapeutic candidate’s
efficacy. Upon specific request by a clinical trial sponsor, the FDA will evaluate the protocol and respond to a sponsor’s
questions regarding, among other things, primary efficacy endpoints, trial design and data analysis plans, within 45 days of receipt
of the request. The FDA ultimately assesses whether the protocol design and planned analysis of the trial are acceptable to support
regulatory approval of the therapeutic candidate with respect to its effectiveness and safety against the indication studied.
All agreements and disagreements between the FDA and the sponsor regarding an SPA agreement must be clearly documented in an SPA
letter or the minutes of a meeting between the sponsor and the FDA. Nevertheless, an SPA agreement does not guarantee approval
of a therapeutic candidate, and approval will require that the data will convince the FDA of the safety, efficacy and need for
the therapeutic candidate. Even if the FDA agrees to the design, execution and analysis proposed in protocols reviewed under the
SPA process, the FDA may revoke or alter its agreement in certain circumstances. In particular, an SPA agreement is not binding
on the FDA if public health concerns emerge that were unrecognized at the time of the SPA agreement, other new scientific concerns
regarding product safety or efficacy arise, the sponsor company fails to comply with the agreed upon trial protocols, or the relevant
data, assumptions or information provided by the sponsor in a request for the SPA change or are found to be false or omit relevant
facts. In addition, even after an SPA agreement is finalized, the SPA agreement may be modified, and such modification will be
deemed binding on the FDA review division, except under the circumstances described above, if the FDA and the sponsor agree in
writing to modify the protocol and such modification is intended to improve the study. The FDA retains significant latitude and
discretion in interpreting the terms of the SPA agreement and the data and results from any study that is the subject of the SPA
agreement. A revocation or alteration in our existing SPA agreement could significantly delay or prevent approval of our application.
Our SPA agreement with the FDA does not ensure that KIT-302 will receive marketing approval or that the approval process will
be faster than conventional regulatory procedures. Further, we cannot assure you that the reported results of our Phase
III clinical trial of KIT-302, and the minutes of a pre-NDA submission meeting with the FDA which we received in May 2016, will
result in any FDA approval for KIT-302. While we believe that our Phase III clinical trial has been completed in accordance
with the SPA agreement, and that the data generated met the endpoints that have been agreed in the SPA agreement to represent
adequate evidence of effectiveness, and while we anticipate that we will be able to satisfactorily provide the additional information
requested by the FDA as part of the minutes we received following the pre-NDA submission meeting, if the FDA revokes or alters
its agreement under the SPA agreement, or if the FDA interprets the data collected from the clinical trial differently than we
do, or if the FDA is not satisfied with the additional information we submit to them, the FDA may not deem the data sufficient
to support an application for regulatory approval, which could materially adversely affect our business, financial condition and
results of operations.
We
depend on our ability to identify and acquire or in-license therapeutic candidates to achieve commercial success.
Our
therapeutic candidates were all acquired by us from third parties. We evaluate internally and with external consultants each potential
therapeutic candidate. However, there can be no assurance as to our ability to accurately or consistently select therapeutic candidates
that have the highest likelihood to achieve commercial success.
Our
business could suffer if we are unable to attract and retain key employees or directors.
The
loss of the services of members of senior management or other key personnel could delay or otherwise adversely impact the successful
completion of our planned clinical trials or the commercialization of our therapeutic candidates or otherwise affect our ability
to manage our company effectively and to carry out our business plan. We do not maintain key-man life insurance for any of our
personnel. Although we have entered into employment or consultancy agreements with all of the members of our senior management
team, members of our senior management team may resign at any time. High demand exists for senior management and other key personnel
in the pharmaceutical industry. There can be no assurance that we will be able to continue to retain and attract such personnel.
Our
growth and success also depend on our ability to attract and retain additional highly qualified scientific, technical, business
development, marketing, managerial and finance personnel. We experience intense competition for qualified personnel, and the existence
of non-competition agreements between prospective employees and their former employers may prevent us from hiring those individuals
or subject us to liability from their former employers. In addition, if we elect to independently commercialize any therapeutic
candidate, we will need to expand our marketing and sales capabilities. While we attempt to provide competitive compensation packages
to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we
have, making it difficult for us to compete successfully for key personnel. Compensation packages for certain of our senior office
holders are subject to approval of our compensation committee and board of directors and in certain instances of our shareholders
as well. We may not be able to achieve the required corporate approvals for proposed compensation packages, further making it
difficult for us to compete successfully with privately owned companies in order to attract and retain key personnel. If we cannot
attract and retain sufficiently qualified technical employees on acceptable terms, we may not be able to develop and commercialize
competitive therapeutic candidates. Further, any failure to effectively integrate new personnel could prevent our business from
successfully growing.
We
are an international business, and we are exposed to various global and local risks that could have an adverse effect on our business
.
We
operate our business in multiple international jurisdictions. Such operations could be affected by changes in foreign exchange
rates, capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property
legal protections and remedies, trade regulations and procedures and actions affecting approval, production, pricing, and marketing
of, reimbursement for and access to, our products, as well as by political unrest, unstable governments and legal systems and
inter-governmental disputes. Any of these changes could adversely affect our business.
Risks
Related to Our Industry
Even
if our therapeutic candidates receive regulatory approval or do not require regulatory approval, they may not become commercially
viable products.
Even
if our therapeutic candidates are approved for commercialization, they may not become commercially viable products. For example,
if we or our potential commercialization partners receive regulatory approval to market a therapeutic candidate, approval may
be subject to limitations on the indicated uses or subject to labeling or marketing restrictions which could materially and adversely
affect the marketability and profitability of the therapeutic candidate. In addition, a new therapeutic candidate may appear promising
at an early stage of development or after clinical trials but never reach the market, or it may reach the market but not result
in sufficient product sales, if any. A therapeutic candidate may not result in commercial success for various reasons, including:
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difficulty
in large-scale manufacturing, including yield and quality;
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low
market acceptance by physicians, healthcare payers, patients and the medical community as a result of lower demonstrated clinical
safety or efficacy compared to other products, prevalence and severity of adverse side effects, or other potential disadvantages
relative to alternative treatment methods;
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insufficient
or unfavorable levels of reimbursement from government or third-party payers, such as insurance companies, health maintenance
organizations and other health plan administrators;
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infringement
on proprietary rights of others for which we or our potential commercialization partners have not received licenses;
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incompatibility
with other therapeutic candidates;
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other
potential advantages of alternative treatment methods and competitive forces that may make it more difficult for us to penetrate
a particular market segment;
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ineffective
marketing and distribution support;
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lack
of significant competitive advantages over existing products on the market;
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lack
of cost-effectiveness; or
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timing
of market introduction of competitive products.
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Physicians,
various other health care providers, patients, payers or the medical community in general may be unwilling to accept, utilize
or recommend any of our approved therapeutic candidates. If we are unable, either on our own or through third parties, to manufacture,
commercialize and market our proposed formulations or therapeutic candidates when planned, or develop commercially viable therapeutic
candidates, we may not achieve any market acceptance or generate revenue.
The
market for our therapeutic candidates is rapidly changing and competitive, and new drug delivery mechanisms, drug delivery technologies,
new drugs and new treatments which may be developed by others could impair our ability to maintain and grow our business and remain
competitive.
The
pharmaceutical and biotechnology industry is highly competitive, and we face significant competition from many pharmaceutical,
biopharmaceutical and biotechnology companies that are researching and marketing products designed to address the indications
for which we are currently developing therapeutic candidates or for which we may develop therapeutic candidates in the future.
There are various other companies that currently market or are in the process of developing products that address all of the indications
or diseases treated by our therapeutic candidates.
New
drug delivery mechanisms, drug delivery technologies, new drugs and new treatments that have been developed or that are in the
process of being developed by others may render our therapeutic candidates noncompetitive or obsolete, or we may be unable to
keep pace with technological developments or other market factors. Some of these technologies may have an entirely different approach
or means of accomplishing similar therapeutic effects compared to our therapeutic candidates. Technological competition from pharmaceutical
and biotechnology companies, universities, governmental entities and others is intense and is expected to increase. Many of these
entities have significantly greater research and development capabilities, human resources and budgets than we do, as well as
substantially more marketing, manufacturing, financial and managerial resources. These entities represent significant competition
for us. Acquisitions of, or investments in, competing pharmaceutical or biotechnology companies by large corporations could increase
such competitors’ financial, marketing, manufacturing and other resources.
The
potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our formulations or
therapeutic candidates, even if commercialized. Many of our targeted diseases and conditions can also be treated by other medications
or drug delivery technologies. These treatments may be widely accepted in medical communities and have a longer history of use.
The established use of these competitive drugs may limit the potential for our therapeutic candidates to receive widespread acceptance
if commercialized.
If
third-party payers do not adequately reimburse customers for any of our therapeutic candidates that are approved for marketing,
they might not be purchased or used, and our revenues and profits will not develop or increase.
Our
revenues and profits will depend heavily upon the availability of adequate reimbursement for the use of our approved therapeutic
candidates, if any, from governmental or other third-party payers, both in the U.S. and in foreign markets. Reimbursement by a
third-party payer may depend upon a number of factors, including the third-party payer’s determination that the use of an
approved therapeutic candidate is:
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a
covered benefit under its health plan;
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safe,
effective and medically necessary;
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appropriate
for the specific patient;
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cost-effective,
including compared to approved alternate therapies; and
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neither
experimental nor investigational.
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Obtaining
reimbursement approval for a therapeutic candidate from each government or other third-party payer is a time-consuming and costly
process that could require us or our current or potential development and commercialization partners to provide supporting scientific,
clinical and cost-effectiveness data for the use of our therapeutic candidates to each payer. Even when a payer determines that
a therapeutic candidate is eligible for reimbursement, the payer may impose coverage limitations that preclude payment for some
uses that are approved by the FDA or other foreign regulatory authorities. Reimbursement rates may vary according to the use of
the therapeutic candidate and the clinical setting in which it used, may be based on payments allowed for lower-cost products
that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary
constraints or imperfections in Medicare, Medicaid or other data used to calculate these rates.
In
the U.S., there have been, and we expect that there will continue to be, federal and state proposals to constrain expenditures
for medical products and services which may affect payments for our therapeutic candidates in the U.S. We believe that legislation
that reduces reimbursement for our therapeutic candidates could adversely impact how much or under what circumstances healthcare
providers will prescribe or administer our therapeutic candidates, if approved. This could materially and adversely impact our
business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market our therapeutic
candidates, if approved. At this stage, we are unable to estimate the extent of the direct or indirect impact of any such federal
and state proposals.
Further,
the Centers for Medicare and Medicaid Services frequently change product descriptors, coverage policies, product and service codes,
payment methodologies and reimbursement values. Third-party payers often follow Medicare coverage policy and payment limitations
in setting their own reimbursement rates, and both the Centers for Medicare and Medicaid Services and other third-party payers
may have sufficient market power to demand significant price reductions.
Legislative
or regulatory reform of the healthcare system in the United States may harm our future business
.
On
March 23, 2010, President Obama signed the “Patient Protection and Affordable Care Act” (P.L. 111-148) and on March
30, 2010, the President signed the “Health Care and Education Reconciliation Act” (P.L. 111-152), collectively commonly
referred to as the “Healthcare Reform Law.” The Health Reform Law included a number of new rules regarding health
insurance, the provision of health care, and conditions to reimbursement for healthcare services provided to Medicare and Medicaid
patients. Through the rule making process, substantial changes have been and continue to be made to the current system for paying
for healthcare in the United States, including changes made in order to extend medical benefits to those who lack insurance coverage.
Extending coverage to a large population could substantially change the structure of the health insurance system and the methodology
for reimbursing medical services and drugs. This legislation is one of the most comprehensive and significant reforms ever experienced
by the United States in the healthcare industry and is expected to have meaningful ramifications on tens of millions of citizens
in the United States. This legislation is expected to impact the scope of healthcare insurance, the insurance refunds from the
insurance companies and possibly also the costs of medical products. Additionally, the Healthcare Reform Law’s provisions
are designed to encourage providers to find cost savings in their clinical operations. Pharmaceuticals represent a significant
portion of the cost of providing care. Through modified reimbursement rates and other incentives, the United States government
is requiring that providers identify the most cost-effective services, supplies and pharmaceuticals. This environment has caused
changes in the purchasing habits of providers and resulted in specific attention to the pricing negotiation, product selection
and utilization review surrounding pharmaceuticals. To the extent that our therapeutic candidates are at some point reimbursable
by U.S. federal government programs, this attention may result in our therapeutic candidates being chosen less frequently or the
pricing being substantially lowered. However, the effect of the legislation is difficult to predict and, at this stage, we are
unable to estimate the full extent of the direct and/or indirect impact of the legislation on us.
These
structural changes could entail modifications to the existing system of private payors and government programs (such as Medicare,
Medicaid and State Children’s Health Insurance Program), creation of a government-sponsored healthcare insurance source,
or some combination of both, as well as other changes. Restructuring the coverage of medical care in the United States could impact
the reimbursement for prescribed drugs and pharmaceuticals, such as those we and our development and/or commercialization partners
are currently developing. If reimbursement for our approved therapeutic candidates, if any, is substantially reduced in the future,
or rebate obligations associated with them are substantially increased, our business could be materially and adversely impacted.
Extending
medical benefits to those who currently lack coverage will likely result in substantial cost to the United States federal government,
which may force significant additional changes to the healthcare system in the United States. Much of the funding for expanded
healthcare coverage may be sought through cost savings. While some of these savings may come from realizing greater efficiencies
in delivering care, improving the effectiveness of preventive care and enhancing the overall quality of care, much of the cost
savings may come from reducing the cost of care. Cost of care could be reduced by decreasing the level of reimbursement for medical
services or products (including those pharmaceuticals currently being developed by us or our development and/or commercialization
partners), or by restricting coverage (and, thereby, utilization) of medical services or products. In either case, a reduction
in the utilization of, or reimbursement for, any therapeutic candidate for which we receive marketing approval in the future could
have a materially adverse effect on our financial performance.
Several
States and private entities initially mounted legal challenges to the healthcare reform legislation, and they continue to litigate
various aspects of the legislation. On July 26, 2012, the United States Supreme Court generally upheld the healthcare reform legislation
as constitutional. However, the Supreme Court held that the legislation improperly required the States to expand their Medicaid
programs to cover more individuals. As a result, the States have a choice as to whether they will expand the numbers of individuals
covered by their respective State Medicaid programs. Some States have determined that they will not expand their Medicaid programs
and will develop other cost saving and coverage measures to provide care to currently uninsured residents. Many of these efforts
to date have included the institution of Medicaid managed care programs. The manner in which these cost saving measures are implemented
could have a materially adverse effect on our financial performance. Further, the healthcare regulatory environment has seen significant
changes in recent years and is still in flux. Following the recent elections in the United States of America, the presumptive
President-Elect, a Republican, has indicated that he, working together with Congress, the majority members of both houses of which
will be from the Republican Party, will promote the repeal of all or part of Healthcare Reform Law. We cannot predict the impact
on our business of future legal challenges to the healthcare reform legislation, as currently enacted, or other changes to the
current laws and regulations which may be revised in the future.
We
are subject to additional federal and state laws and regulations relating to our business, and our failure to comply with those
laws could have a material adverse effect on our results of operations and financial conditions.
In
the event that we were to market products in the United States, we would be subject to additional healthcare regulation and enforcement
by the federal government and the states in which we conduct or will conduct our business. The laws that may affect our ability
to operate include, but are not limited to, the following:
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the
federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving,
offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual
for, or the purchase, order or recommendation of, any good or service for which payment may be made under government healthcare
programs such as the Medicare and Medicaid programs;
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the
federal Anti-Inducement Law (also known as the Civil Monetary Penalties Law), which prohibits a person from offering or transferring
remuneration to a Medicare or State health care program beneficiary that the person knows or should know is likely to influence
the beneficiary’s selection of a particular provider, practitioner or supplier of any item or service for which payment
may be made, in whole or in part, by Medicare or a State health care program;
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the
Ethics in Patient Referrals Act of 1989, commonly referred to as the Stark Law, which prohibits physicians from referring
Medicare or Medicaid patients for certain designated health services where that physician or its family member has a financial
relationship with the entity providing the designated health service, unless an exception applies;
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federal
false claims laws that prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented,
claims for payment from Medicare, Medicaid or other government healthcare programs that are false or fraudulent;
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federal
criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating
to healthcare matters; and
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state
law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or
services reimbursed by any third-party payer, including commercial insurers.
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Further,
the recently enacted Healthcare Reform Law, among other things, amends the intent requirement of the federal anti-kickback and
criminal healthcare fraud statutes. A person or entity can now be found guilty of fraud or an anti-kickback violation without
actual knowledge of the statute or specific intent to violate it. In addition, the Healthcare Reform Law provides that the government
may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statue constitutes
a false or fraudulent claim for purposes of the False Claims Act (
31 U.S.C.
3729
–
3733
).
Possible sanctions for violation of these anti-kickback laws include monetary fines, civil and criminal penalties, exclusion from
Medicare, Medicaid and other government programs and forfeiture of amounts collected in violation of such prohibitions. Any violations
of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in
a material adverse effect on our reputation, business, results of operations and financial condition.
The
Healthcare Reform Law also imposes reporting requirements on certain medical devices and pharmaceutical manufacturers, among others,
to make annual public disclosures of certain payments or other transfers of value to physicians and teaching hospitals and ownership
or investment interests held by physicians or their immediate family members. Failure to submit required information may result
in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing
failures”), for all payments, transfers of value or ownership or investment interests that are not reported. Manufacturers
were required to begin data collection on August 1, 2013 and report such data to the Centers for Medicare & Medicaid Services
(CMS) by March 31 each year. CMS made the data publicly available on its searchable database beginning in September 2014.
In
addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing,
medical directorships, and other purposes. Some states, such as California, Massachusetts and Vermont, mandate implementation
of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians,
and some states limit or prohibit such gifts.
The
scope and enforcement of these laws is uncertain and subject to change in the current environment of healthcare reform, especially
in light of the lack of applicable precedent and regulations. We cannot predict the impact on our business of any changes in these
laws. Federal or state regulatory authorities may challenge our current or future activities under these laws. Any such challenge
could have a material adverse effect on our reputation, business, results of operations, and financial condition. Any state or
federal regulatory review of us, regardless of the outcome, would be costly and time-consuming.
We
could be exposed to significant drug product liability claims, which could be time consuming and costly to defend, divert management
attention and adversely impact our ability to obtain and maintain insurance coverage.
The
clinical trials that we conduct, and the testing, manufacturing, marketing and commercial sale of our therapeutic candidates,
involve and will involve an inherent risk that significant liability claims may be asserted against us. We currently have a clinical
trial liability policy that includes coverage for our clinical trials. Should we decide to seek additional insurance against such
risks before our product sales commence, there is a risk that such insurance will be unavailable to us, or if it can be obtained
at such time, that it will be available only at an unaffordable cost. Even if we obtain insurance, it may prove inadequate to
cover claims or litigation costs, especially in the case of wrongful death claims. Product liability claims or other claims related
to our therapeutic candidates, regardless of their outcome, could require us to spend significant time and money in litigation
or to pay significant settlement amounts or judgments. Any successful product liability or other claim may prevent us from obtaining
adequate liability insurance in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance
coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the
commercialization of our products and therapeutic candidates. A product liability claim could also significantly harm our reputation
and delay market acceptance of our therapeutic candidates.
Unfavorable
global economic conditions could adversely affect our business, financial condition or results of operations.
Our
results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.
An economic downturn could result in a variety of risks to our business, including weakened demand for our therapeutic candidates
and our inability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also
strain our partners and suppliers, possibly resulting in supply disruption, or cause future customers to delay making payments
for our products. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic
climate and financial market conditions could adversely impact our business.
Our
business involves risks related to handling regulated substances which could severely affect our ability to conduct research and
development of our therapeutic candidates.
In
connection with our current or potential development and commercialization partners’ research and clinical development activities,
as well as the manufacture of materials and therapeutic candidates, we and our current or potential development and commercialization
partners are subject to foreign, federal, state and local laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, biological specimens and wastes.
We and our current or potential development and commercialization partners may be required to incur significant costs to comply
with environmental and health and safety regulations in the future. Our research and clinical development, as well as the activities
of our manufacturing and current or potential development and commercialization partners, both now and in the future, may involve
the controlled use of hazardous materials, including but not limited to certain hazardous chemicals. We cannot completely eliminate
the risk of accidental contamination or injury from these materials. In the event of such an occurrence, we could be held liable
for any damages that result and any such liability could exceed our resources.
Risks
Related to Intellectual Property and Legal Proceedings
We
may be unable to adequately protect or enforce our rights to intellectual property, causing us to lose valuable rights. Loss of
patent rights may lead us to lose market share and potential profits.
Our
success depends, in part, on our ability, and the ability of our current or potential development and commercialization partners
to obtain patent protection for our therapeutic candidates, maintain the confidentiality of our trade secrets and know how, operate
without infringing on the proprietary rights of others and prevent others from infringing our proprietary rights.
We
try to protect our proprietary position by, among other things, filing U.S., European, and other patent applications related to
our therapeutic candidates, inventions and improvements that may be important to the continuing development of our therapeutic
candidates.
Because
the patent position of pharmaceutical companies involves complex legal and factual questions, we cannot predict the validity and
enforceability of any patents we may obtain with certainty. Our competitors may independently develop drug delivery technologies
or products similar to ours or design around or otherwise circumvent any patents that may be issued to or licensed by us. Our
pending patent applications, and those that we may file in the future or those we may license from third parties may not result
in patents being issued. If these patents are issued, they may not provide us with proprietary protection or competitive advantages.
The degree of future protection to be afforded by our proprietary rights is uncertain because legal means afford only limited
protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
Patent
rights are territorial; thus, the patent protection we have sought will only extend, if issued, to those countries, if any, in
which we will be issued patents. Even so, the laws of certain countries do not protect our intellectual property rights to the
same extent as do the laws of the U.S. and the European Union. Competitors may successfully challenge any of our patents, produce
similar drugs or products that do not infringe such patents, or produce drugs in countries where we have not applied for patent
protection or that do not respect such patents. Furthermore, it is not possible to know the scope of claims that will be allowed
in published applications and it is also not possible to know which claims of granted patents, if any, will be deemed enforceable
in a court of law.
After
the completion of development and registration of any future patents, third parties may still act to manufacture or market our
therapeutic candidates in infringement of our patent protected rights. Such manufacture or marketing of our therapeutic candidates
in infringement of any patent-protected rights is likely to cause us damage and lead to a reduction in the prices of our therapeutic
candidates, thereby reducing our potential profits.
We
may invest a significant amount of time and expense in the development of our therapeutic candidates only to be subject to significant
delay and patent litigation before they may be commercialized. In addition, due to the extensive time needed to develop, test
and obtain regulatory approval for our therapeutic candidates, any patents that may be issued that protect our therapeutic candidates
may expire early during commercialization. This may reduce or eliminate any market advantages that such patents may give us. Following
patent expiration, we may face increased competition through the entry of generic products into the market and a subsequent decline
in market share and profits.
If
we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others
to compete against us.
In
addition to filing patents, we generally try to protect our trade secrets, know-how and technology by entering into confidentiality
or non-disclosure agreements with parties that have access to it, such as our current or potential development and commercialization
partners, employees, contractors and consultants. We also enter into agreements that purport to require the disclosure and assignment
to us of the rights to the ideas, developments, discoveries and inventions of our employees, advisors, research collaborators,
contractors and consultants while we employ or engage them. However, these agreements can be difficult and costly to enforce or
may not provide adequate remedies. Any of these parties may breach the confidentiality agreements and willfully or unintentionally
disclose our confidential information, or our competitors might learn of the information in some other way. The disclosure to,
or independent development by, a competitor of any trade secret, know-how or other technology not protected by a patent could
materially adversely affect any competitive advantage we may have over any such competitor.
To
the extent that any of our employees, advisors, research collaborators, contractors or consultants independently develop, or use
independently developed, intellectual property in connection with any of our projects, disputes may arise as to the proprietary
rights to this type of information. If a dispute arises with respect to any proprietary right, enforcement of our rights can be
costly and unpredictable and a court may determine that the right belongs to a third party.
Legal
proceedings or third-party claims of intellectual property infringement and other legal challenges may require us to spend substantial
time and money and could prevent us from developing or commercializing our therapeutic candidates. An adverse result in these
infringements and other legal challenges could have a material adverse effect on our business, results of operations and financial
condition.
The
development, manufacture, use, offer for sale, sale or importation of our therapeutic candidates may infringe on the claims of
third-party patents or other intellectual property rights. The nature of claims contained in unpublished patent filings around
the world is unknown to us, and it is not possible to know which countries patent holders may choose for the extension of their
filings under the Patent Cooperation Treaty, or other mechanisms. We may also be subject to claims based on the actions of employees
and consultants with respect to the usage or disclosure of intellectual property learned at other employers. The cost to us of
any intellectual property litigation or other infringement proceeding, even if resolved in our favor, could be substantial. Some
of our competitors may be able to sustain the costs of such litigation or proceedings more effectively because of their substantially
greater financial resources. Uncertainties resulting from the initiation and continuation or defense of intellectual property
litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Intellectual
property litigation and other proceedings may also absorb significant management time. Consequently, we are unable to guarantee
that we will be able to manufacture, use, offer for sale, sell or import our therapeutic candidates in the event of an infringement
action.
In
the event of patent infringement claims, or to avoid potential claims, we may choose or be required to seek a license from a third
party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable
terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which could potentially limit our
competitive advantage. Ultimately, we could be prevented from commercializing a therapeutic candidate or be forced to cease some
aspect of our business operations if, as a result of actual or threatened patent infringement or other claims, we are unable to
enter into licenses on acceptable terms. This inability to enter into licenses could harm our business significantly.
From
time to time, we may be involved in various lawsuits and legal proceedings other than intellectual property infringement actions,
concerning such laws as corporate and securities laws, business laws, product liability laws, and environmental laws. On December
3, 2015, we announced that we received a lawsuit and motion to approve the lawsuit as a class action lawsuit pursuant to the Class
Action Lawsuits Law 5766-2006 (Motion) which was filed against us and our directors at the Tel Aviv District Court (Economic Division).
The Motion asserts claims for damages to the holders of our securities listed on the TASE, arising due to the initial public offering
of our securities in the U.S. during November 2015. This Motion could result in significant legal defense costs and high punitive
damage payments. Although we maintain directors’ and officers’ liability insurance, with an extension to cover the
Company as well, the insurance companies may reject our claims for coverage under the policy or the coverage may not be adequate
to cover future claims. Additionally, we may be unable to maintain our existing directors’ and officers’ liability
insurance in the future at satisfactory rates or adequate amounts. We have been advised by our attorneys that the likelihood of
the Company not incurring any financial obligation as a result of the class action exceeds the likelihood that the Company will
incur a financial obligation. At this preliminary stage however, we are unable, with any degree of certainty, to make any other
evaluations or any other assessments with respect to the Motion's probability of success or the scope of potential exposure, if
any. For more information see "Legal Proceedings" below.
It
is difficult to foresee the results of legal actions and proceedings currently involving us or those which may arise in the future,
and an adverse result in these matters could have a material adverse effect on our business, results of operations and financial
condition. In addition, any legal or administrative proceedings which we are subject to could require the significant involvement
of our senior management, and may divert management attention from our business and operations.
We
may be subject to other patent-related litigation or proceedings that could be costly to defend and uncertain in their outcome.
In
addition to infringement claims against us, we may in the future become a party to other patent litigation or proceedings before
regulatory agencies, including interference or re-examination proceedings filed with the U.S. Patent and Trademark Office (USPTO)
or opposition proceedings in other foreign patent offices regarding intellectual property rights with respect to our therapeutic
candidates, as well as other disputes regarding intellectual property rights with our current and potential development and commercialization
partners, or others with whom we have contractual or other business relationships. Post-issuance oppositions are not uncommon
and we and our current and potential development and commercialization partners will be required to defend these opposition procedures
as a matter of course. Opposition procedures may be costly, and there is a risk that we may not prevail.
Risks
Related to our Operations in Israel
We
conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability
in Israel and its region.
We
are incorporated under the laws of the State of Israel, our principal offices are located in central Israel and some of our officers,
employees, consultants and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel
and the surrounding region may directly affect our business. Since the establishment of the State of Israel in 1948, a number
of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption
or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations and results
of operations and could make it more difficult for us to raise capital. In 2008, 2012, and again in the summer of 2014, Israel
was engaged in an armed conflict with Hamas, a militia group and political party operating in the Gaza Strip, and during the summer
of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party.
These conflicts involved missile strikes against civilian targets in various parts of Israel, and negatively affected business
conditions in Israel. Political uprisings and civil resistance demonstrations in various countries in the Middle East, including
Egypt and Syria, have affected the political stability of those countries. It is not clear how this instability, will develop
and how it will affect the political and security situation in the Middle East. This instability may lead to deterioration of
the political relationships that exist between Israel and these countries, and have raised concerns regarding security in the
region and the potential for armed conflict. The tension between Israel and Iran or extremist groups in the region, such as Hamas
in Gaza and Hezbollah in Lebanon, may escalate in the future and turn violent, which could affect the Israeli economy generally
and us in particular. Any armed conflicts, terrorist activities or political instability in the region could adversely affect
business conditions and could harm our results of operations. Parties with whom we may do business have sometimes declined to
travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary. The
conflict situation in Israel could cause situations where medical product certifying or auditing bodies could not be able to visit
manufacturing facilities of our subcontractors in Israel in order to review our certifications or clearances, thus possibly leading
to temporary suspensions or even cancellations of our product clearances or certifications. The conflict situation
in Israel could also result in parties with whom we have agreements involving performance in Israel claiming that they are
not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.
Our
commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the
Middle East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist
attacks or acts of war, we cannot assure you that this government coverage will be maintained. Any losses or damages incurred
by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely
negatively affect business conditions and could harm our results of operations.
Further,
in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict
business and trade activity with the State of Israel and with Israeli companies, and additional countries may impose restrictions
on doing business with Israel and Israeli companies if hostilities in the region continue or intensify. Such restrictions may
seriously limit our ability to sell our products to customers in those countries.
Any
of the factors set forth above may have an adverse impact on our operating results, financial condition or the expansion of our
business.
Provisions
of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or an
acquisition of, our company, or an acquisition of a significant portion of our shares, which could prevent a change of control,
and negatively affect the price of our ordinary shares.
Israeli
corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special
approvals for certain transactions involving directors, officers or significant shareholders and regulates other matters that
may be relevant to these types of transactions. These provisions of Israeli law may delay, prevent or make difficult an acquisition
of us, which could prevent a change of control and therefore depress the price of our shares, See –the section titled “Merger”
under the description of our Ordinary Shares for more information.
Furthermore,
Israeli tax considerations may make potential transactions unappealing to us or to our shareholders, especially for those shareholders
whose country of residence does not have a tax treaty with Israel which exempts such shareholders from Israeli tax. For example,
Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli
tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions,
including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of
shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions,
the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares
has occurred.
Our
amended and restated articles of association also contain provisions that could delay or prevent changes in control or changes
in our management. These provisions include matters in connection with the election and removal of directors, such as our staggered
board of directors, the size of the our board of directors, the terms of office of our directors and the special majority of our
voting rights required to amend such provision in our amended and restated articles of association. See the sections titled “Board
of Directors” and “Acquisitions under Israeli Law” for additional information.
These
and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, or an acquisition
of a significant portion of our shares, even if such an acquisition or merger would be beneficial to us or to our shareholders.
Because
a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed
by currency fluctuations and inflation.
Our
reporting and functional currency is the U.S. dollar. Most of the royalty payments from potential development and commercialization
partners are expected to be payable in U.S. dollars, and we expect our revenues from future licensing agreements to be denominated
mainly in U.S. dollars or in Euros. We pay a portion of our expenses in U.S. dollars; however, a portion of our expenses, related
to salaries of the employees in Israel and payment to part of the service providers in Israel, are paid in NIS and in other currencies.
In addition, a portion of our financial assets is held in NIS. As a result, we are exposed to currency fluctuation risks. For
example, if the NIS strengthens against the U.S. dollar, our reported expenses in U.S. dollars may be higher than anticipated.
In addition, if the NIS weakens against the U.S. dollar, the U.S. dollar value of our financial assets held in NIS will decline.
It
may be difficult to enforce a U.S. judgment against us and our officers and directors in Israel or the U.S., or to serve process
on our officers and directors.
We
are incorporated in Israel. Most of our executive officers and directors reside outside of the U.S., and all of our assets and
most of the assets of our executive officers and directors are located outside of the U.S. Therefore, a judgment obtained against
us or such executive officers and our directors in the U.S., including one based on the civil liability provisions of the U.S.
federal securities laws, may not be collectible in the U.S. and may not be enforced by an Israeli court. It may also be difficult
for you to affect service of process on these persons in the U.S. or to assert U.S. securities law claims in original actions
instituted in Israel. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and
not United States law is applicable to the claim. If United States law is found to be applicable, the content of applicable United
States law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of
procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described
above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect
any damages awarded by either a U.S. or foreign court.
Your
obligations and responsibilities as a shareholder will be governed by Israeli law which may differ in some respects from the obligations
and responsibilities of shareholders of U.S. companies. Israeli law may impose obligations and responsibilities on a shareholder
of an Israeli company that are not imposed upon shareholders of corporations in the U.S.
We
are incorporated under Israeli law. The obligations and responsibilities of the holders of our ordinary shares are governed by
our amended and restated articles of association and Israeli law. These obligations and responsibilities differ in some respects
from the obligations and responsibilities of shareholders in typical U.S.-based 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 its power
in the company, including, among other things, in voting at the general meeting of shareholders on matters such as amendments
to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions
and related party transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses the power
to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in
the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the implications
of these provisions that govern shareholders’ actions. These provisions may be interpreted to impose additional obligations
and responsibilities on holders of our ordinary shares and/or ADSs that are not typically imposed on shareholders of U.S. corporations.
Claims
for indemnification by our directors and officers may reduce our available funds to satisfy successful shareholder claims against
us and may reduce the amount of money available to us.
The
Companies Law and our amended and restated articles of association permit us to indemnify our directors and officers for acts
performed by them in their capacity as directors and officers. The Companies Law and our amended and restated articles of association
provide that a company may not exempt or indemnify a director or an office holder nor enter into an insurance contract, which
would provide coverage for any monetary liability incurred as a result of (a) a breach by the director or officer of his duty
of loyalty, except for insurance and indemnification where the director or officer acted in good faith and had a reasonable basis
to believe that the act would not prejudice the company; (b) a breach by the director or officer of his duty of care if the breach
was done intentionally or recklessly, except if the breach was solely as a result of negligence; (c) any act or omission done
with the intent to derive an illegal personal benefit; or (d) any fine, civil fine, monetary sanctions, or forfeit imposed on
the officer or director.
We
have issued letters of indemnification to our directors and officers, pursuant to which we have agreed to indemnify them in advance
for any liability or expense imposed on or incurred by them in connection with acts they perform in their capacity as a director
or officer, subject to applicable law. The amount of the advance indemnity will not exceed 25% of our then consolidated shareholders’
equity, per our most recent consolidated annual financial statements.
Our
indemnification obligations limit the personal liability of our directors and officers for monetary damages for breach of their
duties as directors by shifting the burden of such losses and expenses to us. Although we have obtained directors’ and officers’
liability insurance, certain liabilities or expenses covered by our indemnification obligations may not be covered by such insurance
or the coverage limitation amounts may be exceeded.
As
a result of the Motion or other claims which may be filed against our directors and officers, we may need to use a significant
amount of our funds to satisfy our indemnification obligations, which could severely harm our business and financial condition
and limit the funds available to shareholders who may choose to bring a claim against our company. See the risk factor titled
“Legal proceedings or third-party claims of intellectual property infringement and other legal challenges may require us
to spend substantial time and money and could prevent us from developing or commercializing our therapeutic candidates. An adverse
result in these infringements and other legal challenges could have a material adverse effect on our business, results of operations
and financial conditions” under the risk factor section titled “Risks Related to Intellectual Property and Legal Proceedings”.
These
provisions and resultant costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their
duties, and may similarly discourage the filing of derivative litigation by our shareholders against the directors and officers
even though such actions, if successful, might otherwise benefit our shareholders.
Risks
related to the offering
Our
management team will have immediate and broad discretion over the use of the net proceeds from this offering and may not use them
effectively.
We
currently intend to use the net proceeds of this offering for general working capital purposes. See “Use of Proceeds.”
However, our management will have broad discretion in the application of the net proceeds. Our shareholders may not agree with
the manner in which our management chooses to allocate the net proceeds from this offering. The failure by our management to apply
these funds effectively could have a material adverse effect on our business, financial condition and results of operation. Pending
their use, we may invest the net proceeds from this offering in a manner that does not produce income. The decisions made by our
management may not result in positive returns on your investment and you will not have an opportunity to evaluate the economic,
financial or other information upon which our management bases its decisions.
You
may experience immediate and substantial dilution in the net tangible book value of the ADSs you purchase in this offering.
While
no immediate dilution is expected from this offering, and we cannot estimate how many, if any, of the warrants covered by this
prospectus will be exercised, and if any of the warrants are exercised, how many, if any, of the warrants will be exercised for
cash. Thus, we cannot estimate how many ADSs may actually be issued by us as a result of this offering. It is possible that the
warrants covered by this prospectus may expire and may never be exercised. However, if any ADSs are issued upon exercise of warrants
covered by this prospectus, and depending on the net book value per ADS, at the time of any such exercise, you may experience
further dilution. If public warrants or [representative's warrants/placement agent's warrants] in this offering are exercised,
your ownership interest in us could be diluted to the extent of the difference between the price per ADS you will pay and the
consolidated net tangible book value per ADS after the exercise. Dilution would result from the fact that the price per ADS underlying
the warrants and the [representative's warrants/placement agent's warrants] may be substantially in excess of the consolidated
net tangible book value per ADS at the time of any such exercise. To the extent that options or warrants outstanding as of the
date of this prospectus have been or are exercised, or other ordinary shares or ADSs are issued, investors purchasing ADSs upon
exercise of warrants covered by this prospectus could experience further dilution. In addition, we may choose to raise additional
capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future
operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the
issuance of these securities could result in further dilution to our shareholders.
Risks
primarily related to our ADSs, ordinary shares, and other securities
We
will likely be classified as a Passive Foreign Investment Company, or PFIC, for U.S. federal income tax purposes in 2016 and may
continue to be a PFIC in future years, which may have negative tax consequences for U.S. investors.
We
will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of our gross
income is “passive income” or (ii) on average at least 50% of our assets by value produce passive income or are held
for the production of passive income. Based on our estimated gross income, the average value of our gross assets, and the nature
of our business, we believe that we will likely be classified as a PFIC in the current taxable year and in future years. If we
are treated as a PFIC for any taxable year during which a U.S. investor held our ordinary shares or ADSs, certain adverse U.S.
federal income tax consequences could apply to the U.S. investor.
The
market price of our ordinary shares, ADSs and Series A warrants is subject to fluctuation, which could result in substantial losses
by our investors.
The stock market
in general, and the market price of our ordinary shares on the TASE and our ADSs and Series A warrants on The NASDAQ Capital Market
in particular, are subject to fluctuation, and changes in the price of our listed securities may be unrelated to our operating
performance. The market prices of our ordinary shares on the TASE and our ADSs and Series A warrants on The NASDAQ Capital Market
have fluctuated in the past, and we expect it will continue to do so. The market price of our ordinary shares, ADSs and Series
A warrants are and will be subject to a number of factors, including:
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announcements
of technological innovations or new therapeutic candidates by us or others;
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announcements
by us of significant acquisitions, strategic partnerships, in-licensing, out-licensing, joint ventures or capital
commitments;
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expiration
or terminations of licenses, research contracts or other development or commercialization agreements;
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public
concern as to the safety of drugs that we, our current or potential development and commercialization partners or others
develop;
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the
volatility of market prices for shares of biotechnology companies generally;
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success
or failure of research and development projects;
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departure
of key personnel;
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developments
concerning intellectual property rights or regulatory approvals;
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variations
in our and our competitors’ results of operations;
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changes
in earnings estimates or recommendations by securities analysts, if our ordinary shares or ADSs or Series A warrants are covered
by analysts;
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changes
in government regulations or patent decisions;
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developments
by our current or potential development and commercialization partners; and
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general
market conditions and other factors, including factors unrelated to our operating performance.
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These
factors and any corresponding price fluctuations may materially and adversely affect the market price of our ordinary shares and
ADSs and Series A warrants and result in substantial losses by our investors.
Additionally,
market prices for listed securities of biotechnology and pharmaceutical companies historically have been very volatile. The market
for these listed securities has from time to time experienced significant price and volume fluctuations for reasons unrelated
to the operating performance of any one company. In the past, following periods of market volatility, shareholders have often
instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost
and divert resources and attention of management from our business, even if we are successful.
Future
sales of our ordinary shares or ADSs or other warrants could reduce the market price of our ordinary shares and ADSs.
As
of November 27, 2016, we had an aggregate of 153,237,209 issued and outstanding ordinary shares (including 21 shares held in treasury)
(such number of ordinary shares would be represented by 7,661,860 of our ADSs), 6,835,669 Series A warrants, representative's
warrants to purchase 157,945 of our ADSs, which were granted to the underwriters as part of our initial U.S. offering in November
2015, placement agent's warrants to purchase 141,176 of our ADSs, which were granted to the placement agent as part of our follow-on
U.S. offering in July 2016, and 11,583,883 non-tradable options to purchase 9,932,523 ordinary shares, (such number of non-tradable
options and their underlying ordinary shares would be represented by 496,626 of our ADSs). Substantial sales of our ordinary shares
or ADSs or other warrants, or the perception that such sales may occur in the future, including sales of shares issuable upon
the exercise of options, may cause the market price of our ordinary shares or ADSs or other listed securities to decline. Moreover,
the issuance of shares underlying our options and warrants will also have a dilutive effect on our shareholders, which could further
reduce the price of our ordinary shares and ADSs and other listed securities on their respective exchanges
As a
foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of applicable Securities
and Exchange Commission and The NASDAQ Capital Market requirements, which may result in less protection than is accorded to investors
under rules applicable to U.S domestic issuers.
As
a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise
required under the NASDAQ Listing Rules for U.S domestic issuers. We will follow home country practice in Israel with regard to
(1) director nomination procedures, as permitted by the Companies Law, under which either our board of directors, a group of directors,
or shareholder(s) holding sufficient portion of our share capital selects director nominees, subject to the terms of our amended
and restated articles of association. Directors are not selected, or recommended for board of director selection, as required
by the NASDAQ Listing Rules, by independent directors constituting a majority of the board’s independent directors or by
a nominations committee comprised solely of independent directors, and (2) quorum requirement at shareholders’ meetings,
as permitted under the Companies Law, under which and pursuant to our amended and restated articles of association, 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 at least 25% of the voting rights of our shares (and in an adjourned meeting, with some exceptions, any number of
shareholders), instead of 33 1/3% of the issued share capital required under the NASDAQ Listing Rules. In addition, we will
follow our home country law, instead of the NASDAQ Listing Rules, which require that we obtain shareholder approval for certain
dilutive events, such as for the establishment or amendment of certain equity based compensation plans, an issuance that will
result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or
more interest in the company and certain acquisitions of the stock or assets of another company.
In
the future we may elect to follow additional home country corporate governance practices instead of those otherwise required under
the NASDAQ Listing Rules for U.S domestic issuers. Following our home country governance practices as opposed to the requirements
that would otherwise apply to a U.S. company listed on The NASDAQ may provide less protection than is accorded to investors under
the NASDAQ Listing Rules applicable to domestic issuers.
In
addition, as a foreign private issuer, we will be exempt from the rules and regulations under the U.S. Securities Exchange Act
of 1934, as amended or the Exchange Act, related to the furnishing and content of proxy statements, and our officers, directors
and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act.
In
addition, we will not be required under the Exchange Act, to file annual, quarterly and current reports and financial statements
with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act. As our
ordinary shares are traded on the Tel Aviv Stock Exchange (“TASE”), while our ADSs and Series A warrants are traded
on The NASDAQ Capital Market, we currently also report to the Israel Securities Authority (“ISA”) and the TASE in
accordance with the provisions of Section 35XXXIII of the Israel Securities Law, 5728-1968 and the Securities Regulations (Periodic
and Immediate Reports of a Foreign Body Corporate) 5761-2000, promulgated thereunder (the “Dual-Listed Reporting
Requirements”). Pursuant to the Dual-Listed Reporting Requirements, we prepare our periodic and immediate reports in accordance
with U.S. securities laws and reporting requirements, as applicable to a foreign private issuer. We intend to file with the SEC,
within 120 days after the end of each fiscal year ending December 31, an annual report on Form 20-F containing financial statements
which will be examined and reported on, with an opinion expressed, by an independent registered public accounting firm. Furthermore,
we have committed to the underwriters of our initial U.S public offering which was completed in November 2015 that for a period
of three (3) years from November 25, 2015, we, at our expense, will announce its financial information for each of the first three
fiscal quarters consistent with the practices of companies which are dual-listed on both the Tel Aviv Stock Exchange and a domestic
U.S. securities exchange and report in accordance with the Dual-Listed Reporting Requirements; provided that the foregoing shall
not apply in the event we enter into a merger transaction in which we are the non-surviving entity that would cause our ADSs and
warrants to no longer be registered under the Exchange Act. The Representative of the underwriters of our initial U.S public offering
which was completed in November 2015 previously waived any announcement by us with respect to the filing of financial information
for the first quarter of 2016, and may issue such waivers to us in the future. It is noted that the Israel Securities Authority
(“ISA”) has recently proposed draft legislation which would dispense with the requirement for the announcement of
financial results for each of the first and third fiscal quarters of a calendar year. We would qualify for such dispensation based
on our company size as set forth in the proposed draft legislation. In addition the SEC has recently announced that it is seeking
comment for the dispensation of the requirement for the announcement of financial results for each of the first and third fiscal
quarters for certain U.S. domestic issuers. Thus it remains uncertain as to how companies dual-listed on both the Tel Aviv Stock
Exchange and a domestic U.S. securities exchange, and report in accordance with the in accordance with the Dual-Listed Reporting
Requirements), will continue their practices with respect to the announcements of financial information for each of the first
and third fiscal quarters, and it is possible that we may adopt practices for the announcement (if any) of financial information
for each of the first and third fiscal quarters which are different than what we have provided in the past.
The
depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying ADSs if a holder of our ADSs
does not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect their interests.
Under
the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our ordinary shares underlying ADSs
at shareholders’ meetings if a holder of our ADSs does not vote, unless:
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we
have instructed the depositary that we do not wish a discretionary proxy to be given;
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we
have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or
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a
matter to be voted on at the meeting would have a material adverse impact on shareholders.
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The
effect of this discretionary proxy is that a holder of our ADSs cannot prevent our ordinary shares underlying such ADSs from being
voted, absent the situations described above, and it may make it more difficult for shareholders to influence the management of
our company. Holders of our ordinary shares listed for trading on the TASE are not subject to this discretionary proxy.
We
currently do not anticipate paying cash dividends, and accordingly, shareholders must rely on the appreciation in our ADSs for
any return on their investment.
We
currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not
anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in our ADSs
will depend upon any future appreciation in their value. There is no guarantee that our ADSs will appreciate in value or even
maintain the price at which our holders have purchased their ADSs.
The
ability of any Israeli company to pay dividends or repurchase its shares is subject to Israeli law, and the amount of cash dividends
payable may be subject to devaluation in the Israeli currency.
The
ability of an Israeli company to pay dividends or repurchase its shares is governed by Israeli law, which provides that distributions,
including cash dividends and share repurchases, may be made only out of retained earnings as determined for statutory purposes.
Since we do not have earnings, we currently do not have any ability to pay dividends or repurchase our shares.
Investors
in our ADSs may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in
some limited circumstances, investors in our ADSs may not receive any value for them, if it is illegal or impractical to make
them available to investors in our ADSs.
The
depositary for the ADSs has agreed to pay investors in our ADSs the cash dividends or other distributions it or the custodian
receives on ordinary shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. Investors
in our ADSs will receive these distributions in proportion to the number of ordinary shares their ADSs represent. However, the
depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders
of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require
registration under the Securities Act of 1933, as amended or the Securities Act, but that are not properly registered or distributed
under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currency that was part
of a dividend which was distributed in foreign currency made in respect of deposited ordinary shares may require the approval
or license of, or a filing with, any government or agency thereof, which may be unobtainable. In these cases, the depositary may
determine not to distribute such property and hold it as “deposited securities” or may seek to affect a substitute
dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and
practicable substitute. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other
securities received through such distributions. We also have no obligation to take any other action to permit the distribution
of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositary may withhold from such dividends
or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes
it is required to make such withholding. This means that investors in our ADSs may not receive the same distributions or dividends
as those we make to the holders of our ordinary shares, and, in some limited circumstances, investors in our ADSs may not receive
any value for such distributions or dividends if it is illegal or impractical for us to make them available to investors in our
ADSs. These restrictions may cause a material decline in the value of the ADSs.
Holders
of ADSs must act through the depositary to exercise rights of shareholders of our company.
Holders
of our ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying
ordinary shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice
period required to convene a shareholders’ meeting is no less than 35 or 21 calendar days, depending on the proposals on
the agenda for the shareholders’ meeting. When a shareholder meeting is convened, holders of our ADSs may not receive sufficient
notice of the meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect to any specific
matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of our ADSs or carry
out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting
rights to holders of our ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in
time to ensure that they can instruct the depositary to vote the ordinary shares underlying their ADSs. Furthermore, the depositary
and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote
is cast or for the effect of any such vote. As a result, holders of our ADSs may not be able to exercise their right to vote and
they may lack recourse if the ordinary shares underlying their ADSs are not voted as they requested. In addition, ADS holders
will not be able to call a shareholders’ meeting unless they first withdraw their ordinary shares from the ADS program and
convert them into the underlying ordinary shares held in the Israeli market in order to allow them to submit to us a request to
call a meeting with respect to any specific matter, in accordance with the applicable provisions of the Companies Law and our
amended and restated articles of association.
Our
ordinary shares and our ADSs and Series A warrants are traded on different markets and this may result in price variations.
Our ordinary shares
trade on the TASE, and our ADSs and Series A warrants trade on The NASDAQ Capital Market. Trading on these markets take place in
different currencies (U.S. dollars on The NASDAQ Capital Market and New Israeli Shekels, or NIS, on the TASE), and at different
times (resulting from different time zones, different trading days and different public holidays in the U.S. and Israel). The trading
prices of our securities on these two markets may differ due to these and other factors. Any decrease in the price of our securities
on one of these markets could cause a decrease in the trading price of our securities on the other market.
Our
ADSs and Series A warrants have little prior trading history in the U.S., and present level of market activity may not be sustained,
which may limit the ability of our investors to sell our ADSs in the U.S.
Although our ADSs
and Series A warrants have been traded on The NASDAQ Capital Market since November 20, 2015, the present level of market activity
for our ADSs and Series A warrants may not be sustained. If an active market for our ADSs and Series A warrants is not sustained,
it may be difficult for an investor to sell its ADSs, Series A warrants or the ADSs underlying the warrants being issued in this
offering.
If
equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade
our ADSs or Series A warrants, the price of our ADSs or Series A warrants could decline.
The
trading market for our ADSs and Series A warrants will rely in part on the research and reports that equity research analysts
publish about us and our business. The price of our ADSs or Series A warrants could decline if such research or reports are not
published or if one or more securities analysts downgrade our ADSs or Series A warrants or if those analysts issue other unfavorable
commentary or cease publishing reports about us or our business.
We
incur increased costs as a result of operating as a public company in the U.S, and our management will be required to devote substantial
time to new compliance initiatives.
Our ADSs and
Series A warrants have been traded on The NASDAQ Capital Market since November 20, 2015. As a public company whose securities
are listed in the United States, we incur accounting, legal and other expenses that we did not incur as a public company listed
on the TASE, including costs associated with our reporting requirements under the Exchange Act. We also anticipate that we will
incur costs associated with corporate governance requirements, including requirements under Section 404 and other provisions of
the Sarbanes-Oxley Act, as well as rules implemented by the SEC and NASDAQ, and provisions of Israeli corporate law applicable
to public companies. We expect that these rules and regulations will increase our legal and financial compliance costs, introduce
new costs such as investor relations and stock exchange listing fees, and will make some activities more time-consuming and costly.
We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount
of additional costs we may incur or the timing of such costs.
As
an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, we may take advantage
of certain temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act (and the rules and regulations of the SEC thereunder).
When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring
compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public
company or the timing of such costs.
Pursuant
to Section 404 of the Sarbanes-Oxley Act and the related rules adopted by the SEC and the Public Company Accounting Oversight
Board, starting with the second annual report that we file with the SEC after the closing of our initial U.S. offering in November
2015, our management will be required to report on the effectiveness of our internal control over financial reporting. In addition,
once we no longer qualify as an “emerging growth company” under the JOBS Act and lose the ability to rely on the exemptions
related thereto discussed above and depending on our status as per Rule 12b-2 of the Exchange Act, our independent registered
public accounting firm may also need to attest to the effectiveness of our internal control over financial reporting under Section
404. We have only very recently commenced the process of determining whether our existing internal controls over financial reporting
systems are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies in our existing
internal controls. This process will require the investment of substantial time and resources, including by our chief financial
officer and other members of our senior management. As a result, this process may divert internal resources and take a significant
amount of time and effort to complete. In addition, we cannot predict the outcome of this determination and whether we will need
to implement remedial actions in order to implement effective controls over financial reporting. The determination and any remedial
actions required could result in us incurring additional costs that we did not anticipate, including the hiring of outside consultants.
Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our
stated results of operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses,
as well as higher independent auditor fees during and after the implementation of these changes. If we are unable to implement
any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do
so earlier than anticipated, it could adversely affect our operations, financial reporting and/or results of operations and could
result in an adverse opinion on internal controls from our independent auditors and cause the market price of our ordinary shares,
ADSs and warrants to decline.
Changes
in the laws and regulations affecting public companies will result in increased costs to us as we respond to their requirements.
These laws and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including
director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us
to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We
cannot predict or estimate the amount or timing of additional costs we may incur in order to comply with such requirements.
We
are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may
make our ordinary shares less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from
various requirements that are applicable to other public companies that are not “emerging growth companies.” Most
of such requirements relate to disclosures that we would only be required to make if we also ceased to be a foreign private issuer
in the future, for example, the requirement to hold shareholder advisory votes on executive and severance compensation and executive
compensation disclosure requirements for U.S. companies. However, as a foreign private issuer, we would still be required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We are exempt from such requirement for as
long as we remain an emerging growth company, which may be up to five fiscal years after the date of this offering. We will remain
an emerging growth company until the earliest of: (a) the last day of our fiscal year during which we have total annual gross
revenues of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the closing of our initial
U.S. offering; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible
debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. When we are
no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed
above. We cannot predict if investors will find our ordinary shares, ADSs, or warrants less attractive as a result of our reliance
on exemptions under the JOBS Act. If some investors find our ordinary shares, ADS, or warrants less attractive as a result, there
may be a less active trading market for our ordinary shares, ADS, and warrants and our share price may be more volatile.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some
of the statements in this prospectus may include forward looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can
identify forward-looking statements by terms including “anticipates”, “believes”, “could”,
“estimates”, “expects”, “intends”, “may”, “plans”, “potential”,
“predicts”, “projects”, “should”, “will”, “would”, and similar expressions
intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events
and are based on assumptions and subject to risks and uncertainties. In addition, certain sections of this prospectus contain
information obtained from independent industry and other sources. You should not put undue reliance on any forward-looking statements.
Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise
any forward-looking statements.
Factors
that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include,
but are not limited to:
|
●
|
the
initiation, timing, progress and results of our preclinical and clinical trials, and other development efforts;
|
|
●
|
our
ability to successfully complete our clinical trials;
|
|
●
|
our
receipt of regulatory approvals for our therapeutic candidates, and the timing of other regulatory filings and approvals;
|
|
●
|
the
clinical development, commercialization, and market acceptance of our therapeutic candidates;
|
|
●
|
our
ability to establish and maintain corporate collaborations;
|
|
●
|
the
interpretation of the properties and characteristics of our therapeutic candidates and of the results obtained with our therapeutic
candidates in preclinical studies or clinical trials;
|
|
●
|
the
implementation of our business model, strategic plans for our business and therapeutic candidates;
|
|
●
|
the
scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates
and our ability to operate our business without infringing the intellectual property rights of others;
|
|
●
|
estimates
of our expenses, future revenues capital requirements and our needs for additional financing;
|
|
●
|
competitive
companies, technologies and our industry; and
|
|
●
|
the
political and security situation in Israel on our business.
|
You
should review carefully the risks and uncertainties described under the heading “Risk Factors” in this prospectus
for a discussion of these and other risks that relate to our business and investing in our ADSs and warrants. The forward-looking
statements contained in this prospectus are expressly qualified in their entirety by this cautionary statement.
USE
OF PROCEEDS
Assuming
all 3,464,202 warrants covered by this prospectus are exercised for cash, we would receive net proceeds from the sale of the ADSs
upon exercise of such warrants of approximately $13.3 million. We intend to use any net cash proceeds received for general working
capital purposes. Because the holders of the warrants may exercise the warrants in their own discretion, if at all, we cannot
estimate how many, if any, of the warrants covered by this prospectus will be exercised, and if any of the warrants are exercised,
how many, if any, of the warrants will be exercised for cash. The amounts and timing of our actual expenditures will depend on
numerous factors. We may find it necessary or advisable to use portions of the net proceeds for other than general working capital
purposes, and we will have broad discretion in the application and allocation of the net proceeds from this offering. It is possible
that the warrants covered by this prospectus may expire and may never be exercised.
Our
expected use of net proceeds from the offering, if any, represents our current intentions based upon our present plans and business
condition. As of the date of this prospectus, we cannot predict with certainty any or all of the particular uses for any net proceeds
we receive upon the completion of the offering, or the amounts, if any, that we will actually spend on the uses set forth above.
The amounts and timing of our actual use of the net proceeds, if any, will vary depending on numerous factors. As a result, our
management will have broad discretion in the application of any net proceeds, which may include uses not set forth above, and
investors in our securities will be relying on our judgment regarding the application of any net proceeds from the offering.
CAPITALIZATION
The
following table sets forth our capitalization as of June 30, 2016.
The
amounts shown below are unaudited and represent management’s estimate. The information in this table should be read in conjunction
with and is qualified by reference to the financial statements and notes thereto and other financial information incorporated
by reference into this prospectus.
|
|
As of
June 30,
2016
|
|
|
|
(in thousand USD)
|
|
|
|
Actual
|
|
|
|
|
|
Cash and cash equivalents and short-term deposits
|
|
|
8,433
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
Ordinary shares
|
|
|
|
|
|
|
|
|
|
Share premium
|
|
|
23,052
|
|
Capital reserves
|
|
|
1,111
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(17,091
|
)
|
Total shareholders’ equity
|
|
|
7,072
|
|
Total capitalization
|
|
|
7,072
|
|
DILUTION
No immediate dilution
is expected from this offering, and we cannot estimate how many, if any, of the warrants covered by this prospectus will be exercised,
and if any of the warrants are exercised, how many, if any, of the warrants will be exercised for cash. Thus, we cannot estimate
how many ADSs may actually be issued by us as a result of this offering. It is possible that the warrants covered by this prospectus
may expire and may never be exercised. However, if any ADSs are issued upon exercise of warrants covered by this prospectus, and
depending on the net book value per ADS, at the time of any such exercise, you may experience further dilution. If public warrants
or representative's warrants in this offering are exercised, your ownership interest in us could be diluted to the extent of the
difference between the price per ADS you will pay and the consolidated net tangible book value per ADS after the exercise. Dilution
would result from the fact that the price per ADS underlying the warrants and the representative's warrants may be substantially
in excess of the consolidated net tangible book value per ADS at the time of any such exercise.
To the extent that
options or warrants outstanding as of the date of this prospectus have been or are exercised, or other ordinary shares or ADSs
are issued, investors purchasing ADSs upon exercise of warrants covered by this prospectus could experience further dilution.
In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe
we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the
sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.
PRICE RANGE OF OUR ORDINARY SHARES
Our ordinary shares
were originally listed for trading on the TASE in 1978, and are currently traded under the symbol “KTOV”. The following
table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the TASE
in NIS and U.S. dollars. U.S. dollar per ordinary share amounts are calculated using the U.S. dollar representative rate of exchange
on the date for which the high or low market price is applicable, as reported by the Bank of Israel.
|
|
NIS
|
|
|
U.S.
$
|
|
|
|
Price
per Ordinary Share*
|
|
|
Price
per Ordinary Share*
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Annual:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
4.13
|
|
|
|
0.50
|
|
|
|
1.05
|
|
|
|
0.13
|
|
2014
|
|
|
18.06
|
|
|
|
1.34
|
|
|
|
5.16
|
|
|
|
0.34
|
|
2013
|
|
|
33.27
|
|
|
|
3.04
|
|
|
|
9.41
|
|
|
|
0.83
|
|
2012
|
|
|
9.31
|
|
|
|
3.29
|
|
|
|
2.43
|
|
|
|
0.83
|
|
2011
|
|
|
15.01
|
|
|
|
4.76
|
|
|
|
4.21
|
|
|
|
1.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2016
|
|
|
0.66
|
|
|
|
0.54
|
|
|
|
0.18
|
|
|
|
0.14
|
|
Second Quarter 2016
|
|
|
1.29
|
|
|
|
0.62
|
|
|
|
0.34
|
|
|
|
0.16
|
|
First Quarter 2016
|
|
|
0.92
|
|
|
|
0.46
|
|
|
|
0.24
|
|
|
|
0.12
|
|
Fourth Quarter 2015
|
|
|
2.07
|
|
|
|
0.50
|
|
|
|
0.54
|
|
|
|
0.13
|
|
Third Quarter 2015
|
|
|
1.82
|
|
|
|
1.19
|
|
|
|
0.48
|
|
|
|
0.31
|
|
Second Quarter 2015
|
|
|
1.84
|
|
|
|
1.38
|
|
|
|
0.47
|
|
|
|
0.35
|
|
First Quarter 2015
|
|
|
4.13
|
|
|
|
1.51
|
|
|
|
1.05
|
|
|
|
0.38
|
|
Fourth Quarter 2014
|
|
|
3.35
|
|
|
|
1.34
|
|
|
|
0.90
|
|
|
|
0.34
|
|
Third Quarter 2014
|
|
|
6.89
|
|
|
|
3.25
|
|
|
|
2.01
|
|
|
|
0.88
|
|
Second Quarter 2014
|
|
|
8.35
|
|
|
|
6.01
|
|
|
|
2.41
|
|
|
|
1.75
|
|
First Quarter 2014
|
|
|
18.06
|
|
|
|
8.10
|
|
|
|
5.16
|
|
|
|
2.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Most Recent Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2016 (through November 27, 2016)
|
|
|
0.69
|
|
|
|
0.61
|
|
|
|
0.18
|
|
|
|
0.16
|
|
October 2016
|
|
|
0.74
|
|
|
|
0.66
|
|
|
|
0.20
|
|
|
|
0.17
|
|
September 2016
|
|
|
0.66
|
|
|
|
0.56
|
|
|
|
0.18
|
|
|
|
0.15
|
|
August 2016
|
|
|
0.66
|
|
|
|
0.57
|
|
|
|
0.17
|
|
|
|
0.15
|
|
July 2016
|
|
|
0.63
|
|
|
|
0.54
|
|
|
|
0.16
|
|
|
|
0.14
|
|
June 2016
|
|
|
0.91
|
|
|
|
0.62
|
|
|
|
0.24
|
|
|
|
0.16
|
|
May 2016
|
|
|
1.29
|
|
|
|
0.84
|
|
|
|
0.34
|
|
|
|
0.22
|
|
* Price adjusted due to the distribution
of dividends in October 2012 in connection with the sale by Kitov Holdings (then known as Mainrom Line Logistics Ltd.) of all
of its activities, assets, rights, obligations and liabilities to a private company held by its then controlling shareholders.
On November 27,
2016, the last reported sales price of our ordinary shares on the TASE was NIS 0.67 per share, or $0.173 per share (based on the
exchange rate reported by the Bank of Israel for such date). On November 25, 2016 the exchange rate of the NIS to the
U.S. dollar was $1.00 = NIS 3.871, as reported by the Bank of Israel.
PRICE RANGES OF OUR AMERICAN DEPOSITARY
SHARES AND PUBLIC WARRANTS
Our ADSs and Series A warrants are currently
traded on The NASDAQ Capital Market under the symbols “KTOV” and “KTOVW”, respectively. The following
table sets forth, for the periods indicated, the reported high and low closing sale prices of our ADSs on The NASDAQ Capital Market
in U.S. dollars.
|
|
U.S. $
|
|
|
|
Price per ADS
|
|
|
|
High
|
|
|
Low
|
|
Annual:
|
|
|
|
|
|
|
2015 (commencing November 20, 2015)
|
|
|
4.47
|
|
|
|
2.43
|
|
Quarterly:
|
|
|
|
|
|
|
|
|
Third Quarter 2016
|
|
|
3.62
|
|
|
|
2.77
|
|
Second Quarter 2016
|
|
|
6.68
|
|
|
|
3.11
|
|
First Quarter 2016
|
|
|
4.60
|
|
|
|
2.33
|
|
Fourth Quarter 2015 (commencing November 20, 2015)
|
|
|
4.47
|
|
|
|
2.43
|
|
Most Recent Six Months
|
|
|
|
|
|
|
|
|
November 2016 (through November 25, 2016)
|
|
|
3.75
|
|
|
|
3.12
|
|
October 2016
|
|
|
3.54
|
|
|
|
2.46
|
|
September 2016
|
|
|
3.62
|
|
|
|
2.87
|
|
August 2016
|
|
|
3.40
|
|
|
|
2.96
|
|
July 2016
|
|
|
3.13
|
|
|
|
2.77
|
|
June 2016
|
|
|
4.84
|
|
|
|
3.11
|
|
May 2016
|
|
|
6.68
|
|
|
|
4.23
|
|
On November 25, 2016,
the last reported sales price of our ADSs on The NASDAQ Capital Market was $3.58 per ADS.
The following table
sets forth, for the periods indicated, the reported high and low closing sale prices of our Series A warrants on The NASDAQ Capital
Market in U.S. dollars.
|
|
U.S. $
|
|
|
|
Price per Series A
|
|
|
|
Warrant
|
|
|
|
High
|
|
|
Low
|
|
Annual:
|
|
|
|
|
|
|
2015 (commencing November 20, 2015)
|
|
|
0.75
|
|
|
|
0.49
|
|
Quarterly:
|
|
|
|
|
|
|
|
|
Third Quarter 2016
|
|
|
1.10
|
|
|
|
0.73
|
|
Second Quarter 2016
|
|
|
2.50
|
|
|
|
0.76
|
|
First Quarter 2016
|
|
|
1.10
|
|
|
|
0.50
|
|
Fourth Quarter 2015 (commencing November 20, 2015)
|
|
|
0.75
|
|
|
|
0.49
|
|
Most Recent Six Months
|
|
|
|
|
|
|
|
|
November 2016 (through November 25, 2016)
|
|
|
1.68
|
|
|
|
1.30
|
|
October 2016
|
|
|
2.38
|
|
|
|
1.22
|
|
September 2016
|
|
|
1.10
|
|
|
|
0.73
|
|
August 2016
|
|
|
0.85
|
|
|
|
0.73
|
|
July 2016
|
|
|
0.81
|
|
|
|
0.75
|
|
June 2016
|
|
|
1.49
|
|
|
|
0.76
|
|
May 2016
|
|
|
2.50
|
|
|
|
1.00
|
|
DESCRIPTION OF SHARE CAPITAL
The following description
of our share capital and provisions of our amended and restated articles of association are summaries and do not purport to be
complete.
Ordinary Shares
The following is
a description of our ordinary shares. Our authorized ordinary share capital is 500,000,000 ordinary shares, with no par value.
Our shareholders have been asked to vote on a proposal to increase our authorized ordinary share capital to 5,000,000,000 ordinary
shares, with no par value, at our 2016 Annual General Meeting of Shareholders scheduled for December 5, 2016. As of November 27,
2016, we had 153,237,209 ordinary shares outstanding (represented by 7,661,860 of our ADSs), and as of June 30, 2016, we had 82,488,969
ordinary shares outstanding (represented by 4,124,448 of our ADSs). The above amounts include 21 dormant shares held in treasury.
The ordinary shares
do not have preemptive rights, preferred rights or any other right to purchase our securities. Neither our amended and restated
articles of association nor the laws of the State of Israel restrict the ownership or voting of ordinary shares by non-residents
of Israel, except under certain circumstances for ownership by nationals of certain countries that are, or have been, in a state
of war with Israel.
Transfer of
Shares
. Our fully paid ordinary shares may generally be freely transferred under our amended and restated articles of association,
unless the transfer is restricted or prohibited by applicable law or the rules of the stock exchange on which the shares are traded.
Notices
.
Under the Companies Law, and regulations promulgated thereunder, and our amended and restated articles of association, we are
required to publish notices on our website, at least 21 days’ prior notice of a shareholders’ meeting. However, under
regulations promulgated under the Companies Law, we are required to publish notices on our website at least 35 calendar days prior
any shareholders’ meeting in which the agenda includes matters which may be voted on by voting instruments. Regulations
under the Companies Law exempt companies whose shares are listed for trading both on a stock exchange in and outside of Israel,
from some provisions of the Companies Law. These regulations exempt us from some of the requirements of the Israeli proxy regulations,
under certain circumstances.
According to the
Companies Law and the regulations promulgated thereunder, as applicable to the Company, for purposes of determining the shareholders
entitled to notice and to vote at such meeting, the board of directors may fix the record date not more than 40 nor less than
four calendar days prior to the date of the meeting, provided that an announcement regarding the general meeting shall be given
prior to the record date.
Election of
Directors
. Under our Amended and Restated Articles of Association, the number of directors on our Board will be no less than
four and no more than nine (including any external directors, to the extent that we may be required to appoint external directors
in accordance with the Companies Law and any Regulations enacted thereunder) (“Maximum Number”). The majority of the
members of the Board shall be residents of Israel, unless our center of management shall have been transferred to another country
in accordance with a resolution of our Board by a majority of three quarters (75%) of the participating director votes. The number
of directors may be changed, at any time and from time to time, by our shareholders with a majority of (a) 75% of the voting rights
participating and voting on the matter in the applicable general meeting of our shareholders and (b) more than 47.9% of all of
the voting rights in the Company as of the record date established for the applicable general meeting of our shareholders (“Special
Majority”). Our directors shall generally be nominated by our Board of Directors, and then appointed at our general meeting
of shareholders with a regular majority. In accordance with our Amended and Restated Articles of Association, the directors elected
to serve are divided into three classes, with each class comprising one-third of the members of our Board of Directors (the “Board”)
(who are not external directors, if any were appointed), (hereinafter the “first class”; the “second class”;
and the “third class"). If the number of directors is not equally divisible by three, each of the first class and the
second class will be comprised of a different number, the closest and lowest to one-third, while the third class will be comprised
of the remaining directors (who are not external directors, if any were appointed). If the number of directors changes, the number
of directors in each class will change in accordance with the aforesaid rule. In the annual general meeting of our shareholders
that will take place each year, the shareholders shall be entitled to elect directors who shall be elected for a Three-Year Term
to replace the class of directors whose term in office has expired as of such annual general meeting of our shareholders, and
so on ad infinitum, so that the directors who shall be elected as stated above shall enter office at the end of the annual general
meeting of our shareholders at which they were elected, unless a later date for commencement of the term was decided at the time
of the appointment, and shall serve for Three-Year Terms (unless their appointment will be terminated in accordance with the provisions
of our Amended and Restated Articles of Association), and so that each year, the terms in office of one of the classes of directors
shall expire at the annual general meeting of our shareholders for such year. A “Three-Year Term” means a term of
office of a director until the third annual general meeting of our shareholders which shall be held following the date of their
election as director, provided that each director shall continue to serve in office until his or her successor is duly elected
and qualified, or until his or her retirement, death, resignation or removal. Our Board may appoint a director at any time to
fill any vacancies until the annual meeting of our shareholders set to take place at the end of the Three-Year Term for the class
of directors to which such director is so appointed by the Board, provided that the total number of the members of the Board serving
at such time will not exceed the Maximum Number. The shareholders may at all times, by a Special Majority vote of the shareholders,
replace or dismiss a director (in the case of replacement, only if the appointed director is not a corporation). A director to
be replaced shall be given a reasonable opportunity to address the shareholders at their meeting. The tenure of a director expires
pursuant to the provisions of our Amended and Restated Articles of Association and the Companies Law, upon death or if s/he becomes
incompetent, unless removed from office as described above.
Dividend and
Liquidation Rights
. Subject to preferences that may be applicable to any then outstanding preferred shares, our profits, in
respect of which a resolution was passed to distribute them as dividend or bonus shares, shall be paid pro rata to the amount
of shares held by the shareholders. In the event of our liquidation, the liquidator may, with the general meeting’s approval,
and subject to any preferences that may be applicable to any then outstanding preferred shares, distribute parts of our property
in specie among the shareholders and he or she may, with similar approval, deposit any part of our property with trustees in favor
of the shareholders as the liquidator, with the approval mentioned above, deems fit.
Voting, Shareholders’
Meetings and Resolutions
. Holders of ordinary shares are entitled to one vote for each ordinary share held on all matters
submitted to a vote of shareholders. The quorum required for an ordinary meeting of shareholders consists of at least two shareholders
present, in person or by proxy, or who has sent us a voting instrument indicating the way in which he or she is voting, who hold
or represent, in the aggregate, at least 25% of the voting rights of our outstanding share capital. A meeting adjourned for lack
of a quorum is adjourned to the same day in the following week at the same time and place or any time and place as prescribed
by the board of directors in notice to the shareholders. At the reconvened meeting one shareholder at least, present in person
or by proxy constitutes a quorum except where such meeting was called at the demand of shareholders. With the agreement of a meeting
at which a quorum is present, the chairman may, and on the demand of the meeting he must, adjourn the meeting from time to time
and from place to place, as the meeting resolves. Annual general meetings of our shareholders are to be held once every year within
a period of not more than 15 months after the last preceding annual general shareholders’ meeting. Our board of directors
may call special general meetings of shareholders. The Companies Law provides that a special general meeting of shareholders may
be called by the board of directors or by a request of two directors or 25% of the directors in office, whichever is the lower,
or by shareholders holding at least 5% of our issued share capital and at least 1% of the voting rights, or of shareholders holding
at least 5% of our voting rights, subject to the provisions set forth in our Amended and Restated Articles of Association.
An ordinary resolution
requires approval by the holders of a majority of the voting rights present, in person or by proxy, at the meeting and voting
on the resolution.
Allotment of
Shares.
Our board of directors has the power to allot or to issue shares to any person, with restrictions and condition as
it deems fit.
Preferred Shares
Pursuant to Israel’s
securities laws, a company whose ordinary shares are registered for trade on the TASE may not have more than one class of shares
for a period of one year following initial registration of the company on the TASE. After a period of one year, it is permitted
to issue preferred shares if the preference of those shares is limited to a preference in the distribution of dividends and these
preferred shares have no voting rights, and if such issuance is otherwise in accordance with any then applicable TASE regulations
or directives with respect to the issuance of preferred shares by a company whose ordinary shares are listed on the TASE
.
We presently do
not have any issued and outstanding preferred shares. Our shareholders have been asked to vote at our 2016 Annual General Meeting
of Shareholders scheduled for December 5, 2016 on a proposal for an amendment to our amended and restated articles of association,
as well as to our memorandum of association, for the addition to the Company’s registered share capital of 1,000,000,000
preferred shares, with no par value, divided into 5 classes of 200,000,000 preferred shares in each class (the “Preferred
Shares”).
If the aforesaid
proposal is approved by the shareholders at the 2016 Annual General Meeting, the shareholders authorize our board of directors
to fix, by resolution of the board of directors, (i) the number of issued Preferred Shares (subject to the maximum number of Preferred
Shares authorized in such class), (ii) the designation of such class of Preferred Shares, and (iii) the conversion, redemption,
optional and other special rights, qualifications, limitations or restrictions, if any, of the shares of such class of Preferred
Shares. Consequently, the issuance of Preferred Shares would be available for issuance without further actions by the Company’s
shareholders, unless shareholder approval is required by Israeli law, the rules of any exchange or other market on which the Company’s
securities may then be listed or traded, the Company’s Articles of Association then in effect, or any other applicable rules
and regulations. For so long as we are also listed on the TASE, the issuance of any Preferred Shares will also be subject to the
requirements of any TASE regulations or directives governing the issuance of preferred shares by companies whose ordinary shares
are listed on the TASE. The TASE has not yet issued any directives in connection with the issuance of preferred shares by a company
whose ordinary shares are listed on TASE, other than a recently issued temporary directive which is currently scheduled to expire
in November 2017.
Following approval
by the shareholders as aforesaid, and subject to the actual terms of issuance determined by our Board of Directors for any Preferred
Shares when issued, our Preferred Shares may be convertible into our ordinary shares or another series of Preferred Shares. Each
such series of Preferred Shares shall have such number of shares, designations, preferences, voting powers, qualifications, and
special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend
rights, voting rights, liquidation preferences, conversion rights and preemptive rights, rights, qualifications, limitations and/or
restrictions determined by our board of directors in accordance with our articles of association in effect at the time of any
such issuance, including, but not limited to, some or all of the following: (i) the number of Preferred Shares constituting that
series and the distinctive designation of that series, which number may be increased or decreased (but not below the number of
Preferred Shares then outstanding) from time to time by action of the board of directors; (ii) the dividend rate and the manner
and frequency of payment of dividends on the Preferred Shares of that series, whether dividends will be cumulative, and, if so,
from which date; (iii) subject to applicable law, whether that series will have voting rights, in addition to any voting rights
provided by law, and, if so, the terms of such voting rights; (iv) the terms and conditions of any conversion privilege of the
series, including provision for adjustment of the conversion rate in such events as the board of directors may determine; (iv)
whether or not the shares of that series will be redeemable, and, if so, the terms and conditions of such redemption; (vi) whether
that series will have a sinking fund for the redemption or purchase of Preferred Shares of that series, and, if so, the terms
and amount of such sinking fund; (vii) whether or not the Preferred Shares of the series will have priority over or be on a parity
with or be junior to the Preferred Shares of any other series or class in any respect; (viii) the rights of the Preferred Shares
of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative
rights or priority, if any, of payment of Preferred Shares of that series; and any other relative rights, preferences and limitations
of that series.
Issuance of Preferred Shares by our
board of directors may result in such shares having dividend or liquidation preferences senior to the rights of the holders of
our ordinary shares and, Preferred Shares which are convertible into our ordinary shares could potentially dilute the voting rights
of the holders of our ordinary shares.
Once designated
by our board of directors, and offered hereby, each series of Preferred Shares may have specific financial and other terms that
will be described in a prospectus supplement. The description of the Preferred Shares that is set forth in any prospectus supplement
is not complete without reference to the documents that govern the Preferred Shares.
All Preferred Shares
offered hereby will, when issued, be fully paid and nonassessable, including Preferred Shares issued upon the exercise of Preferred
Share warrants or subscription rights, if any.
Each Preferred
Share shall be entitled to receive upon distribution, and in preference to our ordinary shares, (i) dividends in excess of the
general dividends issued to all shareholders including holders of Ordinary Shares, and/or (ii) amounts paid in a distribution
of our surplus assets on winding up, in an amount equal to the original issue price for such Preferred Shares as set forth in
the Company’s share registrar (adjusted for share combinations or subdivisions or other recapitalizations of the Company’s
shares), and less the amount of any dividend previously paid in preference, all pro rata to the number of the Company’s
Preferred Shares of each specific class of Preferred Shares issued and outstanding at such time, without having regard to any
premium paid or discount thereon, and all subject to the provisions hereof.
Furthermore, and
after payment of the Preferred Shares’ dividend preferences or liquidation preferences as aforesaid, each Preferred Share
in the Company’s capital shall be entitled to receive upon distribution, (i) a general dividend issued to all Shareholders,
(ii) bonus shares, and (iii) amounts paid in a distribution of the Company’s surplus assets on winding up, all pro rata
to the number of the Company’s Shares (Ordinary Shares and Preferred Shares) issued and outstanding at such time, without
having regard to any premium paid thereon or discount, and all subject to the provisions hereof.
All Preferred Shares
shall be non-voting shares and shall not vest the holder thereof with any right to participate in the Company‘s general
meetings, to receive notice thereof and/or to vote thereat. Without limitation to the above, the Preferred Shares shall not confer
upon the holders thereof any voting rights or any right to appoint directors or any other right with respect to general meetings,
including without limitation, attending, voting at or requesting to convene, such general meetings or proposing matters for the
agenda of such general meetings, except as expressly set forth below or as otherwise specifically provided by Israeli law.
So long as any
Preferred Shares are outstanding, the provisions of the section below titled “Modification of class rights”, and the
provisions of this section shall apply, such that the adoption of a resolution, by a regular majority in voting power of the Preferred
Shares who are present, entitled to vote thereon (if any) and voting thereon, voting together as a single class, given in person
or by proxy or by an authorized proxy holder, at a meeting of holders of Preferred Shares shall be necessary for effecting or
validating:
(i) Authorization
of Senior Shares. Any amendment or alteration of the Memorandum of Association or Articles of Association of the Company so as
to authorize or create, or increase the authorized amount of, any class or series of shares to be so authorized, created or increased
after the initial issuance of any class of Preferred Shares, the terms of which expressly provide that such class or series will
rank senior to the outstanding class or classes of Preferred Shares as to dividend rights and distribution rights upon the liquidation,
winding up or dissolution of the Company (collectively, “Senior Shares”);
(ii) Amendment
of the Preferred Shares. Any amendment, alteration or repeal of any provision of the Articles of Association so as to adversely
affect the special rights, preferences, privileges or voting powers of the Preferred Shares.
(iii) Share
Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving
the Preferred Shares, or of a merger or consolidation of the Company with or into another entity, unless in each case (x) the
Preferred Shares remain outstanding or, in the case of any such merger or consolidation with respect to which the Company is not
the surviving or resulting entity (or the Preferred Shares are otherwise exchanged or reclassified), are converted or reclassified
into or exchanged for preferred shares of the surviving or resulting entity or its ultimate parent, and (y) such Preferred Shares
that remain outstanding or such preferred shares, as the case may be, have rights, preferences, privileges and voting powers of
the surviving or resulting entity or its ultimate parent that, taken as a whole, are not materially less favorable to the holders
thereof than the rights, preferences, privileges and voting powers, taken as a whole, of the Preferred Shares immediately prior
to the consummation of such transaction;
provided, however,
that (A) for all purposes of this section, (1) any increase in the amount of the Company’s authorized Ordinary Shares or
Preferred Shares or the issuance of any additional Ordinary Shares or Preferred Shares or (2) the authorization or creation of
any class or series of shares established after the initial issuance of any class of Preferred Shares, the terms of which do not
expressly provide that such class or series ranks senior to or on a parity with the previously issued and outstanding Preferred
Shares as to dividend rights and distribution rights upon any liquidation, winding up or dissolution of the Company (collectively,
“Junior Shares”); or the authorization or creation of any class or series of shares established after the initial
issuance of any class of Preferred Shares the terms of which expressly provide that such class or series will rank on a parity
with the previously issued and outstanding Preferred Shares as to dividend rights and distribution rights upon any liquidation,
winding up or dissolution of the Company (collectively, “Parity Shares”); and, any increase in the amount of authorized
but unissued shares of such class or series of Parity Shares or Junior Shares or the issuance of additional shares of such class
or series of Parity Shares or Junior Shares, will be deemed not to adversely affect (or to otherwise cause to be materially less
favorable) the rights, preferences, privileges or voting powers of the previously issued and outstanding Preferred Shares and
shall not require the consent or the adoption of a resolution by the holders of the previously issued and outstanding Preferred
Shares; (B) in the event of a binding share exchange or reclassification involving the Preferred Shares, or of a merger or consolidation
of the Company with or into another entity, as described above in which the provisions of sub-section (b)(iii)(x) and (y) above
are complied with, the consent or the adoption of a resolution by the holders of the previously issued Preferred Shares shall
not be required in order to effect, validate or approve such share exchange, reclassification, merger or consolidation; and (C)
to the extent that, notwithstanding the provisions of immediately preceding clauses (A) and (B), the consent or approval of the
holders of Preferred Shares, voting together as a single class, is nonetheless required by applicable law or the Articles of Association
in such circumstances, or such consent or approval is otherwise required by applicable law or the Articles of Association with
respect to any matter that is not set forth in the provisions of items (i)-(iii) of this section above, such approval or consent
may be given by the adoption of a resolution, by a simple majority of the voting power of the Preferred Shares who are present,
entitled to vote thereon (if any) and voting thereon, voting together as a single class, given in person or by proxy or by an
authorized person, at a meeting of holders of Preferred Shares and the legal quorum for any such meeting shall be as set forth
above with respect to meeting of holders of our Ordinary Shares.
The rules and procedures
for calling and conducting any meeting of the holders of Preferred Shares (including, without limitation, the fixing of a record
date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any
other procedural aspect or matter with regard to such a meeting or such consents shall be governed by any rules the Board of Directors,
in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of our Amended and
Restated Articles of Association (including the provisions set forth above), applicable law and, if applicable, the rules of any
national securities exchange or other trading facility on which the Preferred Shares are listed or traded at the time.
Although our board
of directors has no intention at the present time of doing so, it could authorize the issuance of a series of Preferred Shares
that could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt.
Board of Directors
Under our Amended
and Restated Articles of Association, resolutions by the board of directors shall be decided by a majority of votes of the directors
present, or participating, in the case of voting by media, and voting, each director having one vote. In the event of a tie, the
chairman of the board does not hold a casting vote.
Under the Companies
Law, except as provided below, companies incorporated under the laws of the State of Israel that are “public companies,”
including Israeli companies with shares listed on NASDAQ, are required to appoint at least two external directors who meet the
qualification requirements set forth in the Companies Law. On July 13, 2016, our Board of Directors resolved to adopt the corporate
governance exception set forth in Regulation 5D of the Israeli Companies Regulations (Relief for Public Companies with Shares
Listed for Trading on a Stock Market Outside of Israel), 5760-2000. In accordance with such Regulation, a public company with
securities listed on certain foreign exchanges, including NASDAQ, that satisfies the applicable foreign country laws and regulations
that apply to companies organized in that country relating to the appointment of independent directors and composition of audit
and compensation committees and have no controlling shareholder are exempt from the requirement to appoint external directors
or comply with the audit committee and compensation committee composition requirements under the Companies Law. In accordance
with our Board’s resolution, for so long as the Company does not have a controlling shareholder as defined in Section 1
of the Companies Law, the Company intends to comply with the NASDAQ Listing Rules in connection with a majority of independent
directors on the Board and in connection with the composition of each of the Audit Committee and the Compensation Committee, in
lieu of such requirements set forth under the Companies Law. A majority of our Board members are independent as required by the
NASDAQ Listing Rules. Furthermore, our Audit Committee consists of at least three independent directors, and our Compensation
Committee consists of at least two independent directors. Should any person or entity become deemed to be a controlling shareholder
as defined in Section 1 of the Companies Law, then in accordance with Section 248(a) of the Companies Law, we will be required
to convene a special general meeting of the shareholders at the earliest possible date, the agenda of which shall include the
appointment of at least two external directors. Following such appointment, all of the external directors shall be appointed to
each of our Audit Committee and Compensation Committee, and at least one external director shall be appointed to each committee
of the Board of Directors authorized to exercise any of the powers of the board of directors.
The Companies Law
requires that certain transactions, actions and arrangements be approved as provided for in a company’s articles of association
and in certain circumstances by the audit committee or the compensation committee and by the board of directors itself. Those
transactions that require such approval pursuant to a company’s articles of association must be approved by its board of
directors. In certain circumstances, audit committee and shareholder approval is also required. The vote required by the audit
committee and the board of directors for approval of such matters, in each case, is a majority of the directors participating
in a duly convened meeting. Under the Companies Law, except as to certain companies listed on foreign stock exchanges, including
NASDAQ, as described above, the audit committee is to be comprised of at least three members appointed by the board of directors,
which members must include all of the external directors. The majority of members of the audit committee must be independent directors
(as defined in the Companies Law), and the chairman of the audit committee must be an external director.
The Companies Law
requires that a member of the board of directors or senior management of the company promptly and, in any event, not later than
the first board meeting at which the transaction is discussed, disclose any personal interest that he or she may have, either
directly or by way of any corporation in which he or she is, directly or indirectly, a 5% or greater shareholder, director or
general manager or in which he or she has the right to appoint at least one director or the general manager, as well as all related
material information known to him or her, in connection with any existing or proposed transaction by the company. In addition,
if the transaction is an extraordinary transaction, (that is, a transaction other than in the ordinary course of business, otherwise
than on market terms, or is likely to have a material impact on the company’s profitability, assets or liabilities), the
member of the board of directors or senior management must also disclose any personal interest held by his or her spouse, siblings,
parents, grandparents, descendants, spouse’s descendants, siblings and parents, and the spouses of any of the foregoing.
Once the member
of the board of directors or senior management complies with the above disclosure requirement, a company may approve the transaction
in accordance with the provisions of its articles of association. Under the provisions of the Companies Law, whoever 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, unless it is not an extraordinary transaction as defined in the Companies Law. 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 for the presentation of a matter, such officer holder may be present at the meeting. Notwithstanding
the foregoing, if the majority of the directors have a personal interest in a matter, they shall be allowed to participate and
vote on this matter, but the approval of the transaction by the shareholders in the general meeting is required.
Our amended and
restated articles of association provide that, subject to the Companies Law, all actions executed in good faith by the board of
directors or by a committee thereof or by any person acting as a director or a member of a committee of the board of directors,
will be deemed to be valid even if, after their execution, it is discovered that there was a flaw in the appointment of these
persons or that any one of these persons was disqualified from serving at his or her office.
Our amended and
restated articles of association provide that, subject to the provisions of the Companies Law, the board of directors may appoint
board of directors’ committees. The committees of the board of directors shall report to the board of directors their resolutions
or recommendations on a regular basis, as shall be prescribed by the board of directors. The board of directors may cancel the
resolution of a committee that has been appointed by it; however, such cancellation shall not affect the validity of any resolution
of a committee, pursuant to which we acted, vis-à-vis another person, who was not aware of the cancellation thereof. Decisions
or recommendations of the committee of the board which require the approval of the board of directors will be brought to the directors’
attention a reasonable time prior to the discussion at the board of directors.
According to the
Companies Law, a contract of a company with its directors, regarding their conditions of service, including the grant to them
of exemption from liability from certain actions, insurance, and indemnification as well as the company’s contract with
its directors on conditions of their employment, in other capacities, generally requires the approval of the compensation committee
(or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law), the board of directors, and
the shareholders.
Under the Companies
Regulations (Relief from Related Party Transactions), 5760-2000, promulgated under the Companies Law, as amended, certain extraordinary
transactions between a public company and its controlling shareholder(s) do not require shareholder approval. Such extraordinary
transactions must be approved by both the board of directors and the audit committee and (i) must involve the extension of an
existing transaction that was duly approved and does not involve any significant change in the terms of the existing transaction
or the change is solely for the benefit of the company; (ii) is solely for the benefit of the company; (iii) is with the controlling
shareholder or another person in which the controlling shareholder has an interest and the transaction is in accordance with the
terms of a framework agreement that was duly approved; (iv) is with the controlling shareholder or another person in which the
controlling shareholder has an interest, the purpose of which is a transaction of theirs with a third party or a joint proposal
to enter into a transaction with a third party, and the terms of the transaction that apply to the controlling shareholder are
not significantly different from the terms that apply to the controlling shareholder or an entity controlled by him or her (while
taking into account the extent of their respective involvement in the transaction); (v) is among companies controlled by the controlling
shareholder, or between the public company and the controlling shareholder or another person in which the controlling shareholder
has a personal interest, and the transaction is on market terms, within the ordinary course of business and does not harm the
company; or (vi) on the date of approval of the extraordinary transaction by the board of directors and audit committee, the shareholders
who do not have personal interest in the approval of the said transactions do not hold more than 2% of the voting rights in the
company. In addition, under such regulations, directors’ compensation and employment arrangements in a public company do
not require the approval of the shareholders if both the compensation committee (or the audit committee acting in lieu of a compensation
committee pursuant to the Companies Law) and the board of directors agree that such arrangements are solely for the benefit of
the company. Employment and compensation arrangements for an office holder that is a controlling shareholder of a public company,
or the provision of directors and officers insurance for the chief executive officer, do not require shareholder approval if certain
criteria are met. The Board, following the prior determination of the Audit Committee or Compensation Committee, as applicable,
may also determine that the compensation being offered to certain office holders (including directors) is an engagement which,
pursuant to the leniencies set forth in the Relief Regulations, can be entered into by a company immediately, with the approval
by the shareholders being deferred to the next shareholder meeting to be called by the Company, is such compensation is consistent
with compensation policy of the company which was approved by the shareholders of the company in accordance with the Companies
Law, and are no more beneficial to the recipient as such similar compensation previously granted to other holders of the same
office.
Exchange Controls
There are currently
no material Israeli currency control restrictions on payments of dividends or other distributions with respect to our securities
or the proceeds from the sale of our securities, except under certain circumstances, for shareholders who are subjects of countries
that are, or have been, in a state of war with Israel or otherwise as set forth in this section. However, legislation remains
in effect pursuant to which currency controls can be imposed by administrative action at any time. Israeli residents have an obligation
to file reports with the Bank of Israel regarding certain transactions.
Access to corporate records
Under the Companies
Law, shareholders are provided access to minutes of our general meetings, our shareholders register and principal shareholders
register, our amended and restated articles of association, our financial statements and any document that we are required by
law to file publicly with the Israeli Companies Registrar or the Israel Securities Authority. In addition, shareholders may request
to be provided with any document related to an action or transaction requiring shareholder approval under the related party transaction
provisions of the Companies Law. We may deny this request if we believe it has not been made in good faith or if such denial is
necessary to protect our interest or protect a trade secret or patent.
Modification of class rights
Under
the Companies Law and our amended and restated articles of association, the rights attached to any class of share, such as voting,
liquidation and dividend rights, may be amended by adoption of a resolution by the holders of a majority of the shares of that
class present at a separate class meeting, or otherwise in accordance with the rights attached to such class of shares, as set
forth in our amended and restated articles of association. The enlargement of an existing class of shares or the issuance of additional
shares thereof, shall not be deemed to modify the rights attached to the previously issued shares of such class or of any other
class, unless otherwise provided by the terms of the shares.
Acquisitions under Israeli Law
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 the 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 the shares.
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.
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, 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.
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, on the condition 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.
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 in control of 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 to the potential purchaser
and shareholders for damages resulting from his or her acts, 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.
If a special tender
offer was accepted by a majority of the shareholders who announced their stand on such offer, then shareholders 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.
Under the Companies
Regulations (Relief for Public Companies whose Shared are Traded on Exchanges Outside of Israel), 5760-2000 (the “Foreign
Listing Relief Regulations”), the above requirements for a special tender offer do not apply in instances whereby according
to the laws of the foreign jurisdiction there are limitations regarding the acquisition of a controlling interest in the company
of any specified portion or the acquisition of a controlling interest of any specified portion necessitates an offer by the potential
acquirer of a controlling interest to acquire shares from amongst the publicly traded shares. The Israeli Securities Authority
is of the view that US securities laws and exchange regulations of various exchanges do not purport to limit the acquisition of
controlling interests in a company, do not require the potential acquirer of a controlling interest to make an offer to acquire
shares from the public, and as such Israeli companies that are publicly traded in the United States of America cannot benefit
from the special tender offer waiver pursuant to the Foreign Listing Relief Regulations and are thus subject to the general provisions
of the Companies Law which require a special tender offer as outlined above.
Merger
The Companies Law
permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under
the Companies Law are met, a majority of each party’s shareholders, by a majority of each party’s shares that are
voted on the proposed merger at a shareholders’ meeting.
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 boards of directors 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 non-surviving entity of the merger has more than one class of shares, the merger must be approved by each class of shareholders,
and such separate class voting may also include any classes of otherwise non-voting shares.
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, if 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.
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.
Private Placements
Under the Companies
Law, if (i) as a result of a private placement a person would become a controlling shareholder or (ii) a private placement will
entitle investors to receive 20% or more of the voting rights of a company as calculated before the private placement, and all
or part of the private placement consideration is not in cash or in public traded securities or is not in market terms and if
as a result of the private placement the holdings of a substantial shareholder shall increase or as a result of it a person shall
become a substantial shareholder, then in either case, the allotment must be approved by the board of directors and by the shareholders
of the company. A “substantial shareholder” in connection with a private placement as set forth above, is defined
as a shareholder who holds five percent or more of the company’s outstanding share capital or voting rights, and which assumes
the exercise of all of the securities convertible into shares either held by that person prior to such private placement or offered
to such person under the private placement. In order for the private placement to be on “market terms” the board of
directors has to determine, on the base of detailed explanation, that the private placement is on market terms, unless proven
otherwise. Otherwise, under the Companies Law and the regulations promulgated thereunder, a private placement of securities does
not require approval at a general meeting of the shareholders of a company; provided however, that in other special circumstances,
such as a private placement completed in lieu of a special tender offer, or a private placement under circumstances which qualifies
as a related party transaction requiring shareholder approval, approval at a general meeting of the shareholders of a company
is then also required. A Registered Direct Offering in the United States is generally considered a private placement under the
Companies Law.
Establishment
We were incorporated
under the laws of the State of Israel. We are registered with the Israeli Registrar of Companies in Jerusalem, Israel.
Listing
Our ordinary shares
are traded on the TASE under the symbol “KTOV.”
Share History
The following is a summary of the history
of our share capital for the last three years.
Ordinary Share Issuances
On January 3, 2014, we issued a holder
of options, 18,047 ordinary shares upon the exercise of options.
On March 3, 2014, we issued 2,211,450
ordinary shares, in exchange for NIS 17.25 million (approximately $4.9 million based on the representative rate of exchange on
the date of closing, March 3, 2014) in a public offering on the Tel Aviv Stock Exchange pursuant to a prospectus we filed with
the Israel Securities Authority. As part of the offering, we committed to our shareholders that we would initiate a rights offering
to all existing shareholders. The specific terms of the rights offering were not described in the prospectus.
On April 1, 2014, we issued in Israel
157,783 ordinary shares to Dexcel for services provided pursuant to the Development Services Agreement with Dexcel.
On May 28, 2014, we published a prospectus
for a rights offering under which each shareholder received, at no cost, one Series 1 TASE traded warrant for each ten ordinary
shares held by such shareholder. No consideration was received by us in connection with the issuance of the warrants. The aggregate
number of Series 1 TASE traded warrants issued was 5,717,074 exercisable into 439,757 ordinary shares. During June 2015 we issued,
in aggregate, 352 of our ordinary shares upon exercises of 4,571 Series 1 TASE traded warrants, and the remainder of the Series
1 Traded warrants expired unexercised on June 30, 2015.
On September 3, 2014 we issued 1,548,015
ordinary shares, and 25,156,250 Series 2 TASE traded warrants exercisable into 1,935,019 ordinary shares in exchange for NIS 8.05
million (approximately $2.2 million based on the representative rate of exchange on the date of closing, September 3, 2014) in
a public offering on the Tel Aviv Stock Exchange, and on March 31, 2015 we issued an additional 24,913,200 Series 2 TASE traded
warrants exercisable into 1,916,323 ordinary shares under the same terms and conditions. The Series 2 TASE traded warrants were
exercisable any time until September 2, 2015 at an exercise price of NIS 5.20 (approximately $1.38). On August 30, 2015, following
approval of the extension by special meetings of our shareholders and our holders of our Series 2 TASE traded warrants on August
16, 2015, the Tel Aviv District courts approved, under Section 350 of the Israeli Companies Law, the extension of the exercise
period of the Series 2 TASE traded warrants until March 1, 2016. During September 2015 we issued, in aggregate, 1,231 of our ordinary
shares upon exercises of 16,000 Series 2 TASE traded warrants, and the remainder of the Series 2 TASE traded warrants expired
unexercised on March 1, 2016.
On March 31, 2015 we issued 6,388,000
ordinary shares and 3,194,000 Series 3 TASE traded warrants exercisable into 3,194,000 ordinary shares, as well as the additional
24,913,200 Series 2 TASE traded warrants exercisable into 1,916,323 ordinary shares as noted above, all in exchange for NIS 8.304
million (approximately $2.1 million based on the representative rate of exchange on the date of closing, March 31, 2015) in a
public offering on the Tel Aviv Stock Exchange. No Series 3 TASE traded warrants were exercised and they expired on April 30,
2015.
In May 2015, we issued in Israel
597,511 ordinary shares to Dexcel for services provided pursuant to the Development Services Agreement with Dexcel.
On November 25, 2015, we completed
an underwritten public offering of 3,158,900 ADSs, each representing 20 of our ordinary shares, and public warrants to purchase
up to 3,158,900 ADSs. The ADSs and public warrants were issued in a fixed combination of one ADS and one warrant to purchase one
ADS for a combined price to the public of $4.13. In addition, the underwriters of the offering partially exercised their option
to purchase an additional 220,074 warrants to purchase 220,074 ADSs. At closing of the offering we issued 63,178,000
of our ordinary shares, represented by 3,158,900 of our ADSs The public warrants had an initial per ADS exercise price of $4.13,
were exercisable immediately, and have a term of five years from the date of issuance. The gross proceeds to us from this offering
were approximately $13 million, prior to deducting underwriting discounts, commissions and other offering expenses. Between December
2015 and May 2016, we issued in, aggregate, 1,454,340 of our ordinary shares, represented by 72,717 ADSs which were issued upon
exercises of 72,717 public warrants. The public warrants were subject to “weighted average” ratchet anti-dilution
provisions as set forth in the Warrant Agent Agreement, providing that until November 25, 2016, upon issuances of our ADSs or
an equivalent number of ordinary shares (or securities convertible or exercisable into ADSs or an equivalent number of ordinary
shares), subject to specified exceptions, at a price less than the exercise price then in effect, the exercise price would be
reduced based on the “weighted average” formula set forth in the Warrant Agent Agreement. The “weighted average”
ratchet provision of the public warrants was triggered by our July 5, 2016 follow-on public offering (described below), and upon
closing of the follow-on public offering on July 5, 2016, the exercise price of all the public warrants was reduced in accordance
with its terms to $3.78.
On December 24, 2015 we issued
in Israel 1,379,060 of our ordinary shares to the former shareholders of Kitov Pharmaceuticals Ltd. as a result of the
attainment of milestones as set forth in the 2013 Share Transfer Agreement, and the termination of the non-listed share
purchase rights reflecting such milestone shares. For more information on this agreement see “Certain Relationships and
Related Party Transactions – Share Transfer Agreement with Kitov Pharmaceuticals" in our 2015 Annual Report on
Form 20-F. One of the recipients, Dr. J. Paul Waymack, the chairman of our board of directors, who is the beneficial holder
of 1,103,248 shares issued to a trustee in Israel, is a U.S. resident.
On each of January 20, 2016 and on
March 7, 2016, we issued 160,000 of our ordinary shares represented by 8,000 of our ADSs issued on such dates to a vendor of ours
located in the U.S. in consideration for services provided to us, and on May 2, 2016, we issued 189,100 of our ordinary shares,
represented by 9,455 ADSs issued to a vendor of ours located in the U.S. in consideration for services provided to us.
In June 2016, we issued in Israel
3,009,888 ordinary shares to Dexcel for services provided pursuant to the Development Services Agreement with Dexcel.
On July 5, 2016, we completed a follow-on
public offering of 2,378,823 Class A units, with each Class A unit consisting of one ADS and a public warrant, as well as 1,150,589
Class B units, with each Class B unit consisting of a non-listed, pre-funded warrant to purchase one ADS, or a pre-funded warrant,
and a public warrant. At closing of the offering we issued 47,576,460 of our ordinary shares, represented by 2,378,823 of our
ADSs. Each Class A unit was sold at a negotiated price of $3.40 per unit, including the ADS issuance fee of $0.01 per ADS, and
each Class B unit was sold at a negotiated price of $3.40 per unit, including the pre-funded warrant exercise price of $0.01 per
full ADS and the ADS issuance fee of $0.01 per ADS. The pre-funded warrants were exercisable at any time after the date of issuance
upon payment of the exercise price and the ADS issuance fee. The gross proceeds to us from this offering were approximately $12,000,000,
prior to deducting placement agent fees and other estimated offering expenses. Between July and September 2016 we issued, in aggregate,
23,011,780 of our ordinary shares represented by 1,150,589 ADSs which were issued upon exercises of all 1,150,589 of the pre-funded
warrants
As of November 27, 2016, we
had an aggregate of 153,237,209 issued and outstanding ordinary shares (including 21 shares held in treasury) (such number of
ordinary shares would be represented by 7,661,860 of our ADSs), 6,835,669 Series A warrants, representative's warrants to purchase
157,945 of our ADSs, which were granted to the underwriters as part of our initial U.S. offering in November 2015, placement agent's
warrants to purchase 141,176 of our ADSs, which were granted to the placement agent as part of our follow-on U.S. offering in
July 2016, and 11,583,883 non-tradable options to purchase 9,932,523 ordinary shares (such number of non-tradable options and
their underlying ordinary shares would be represented by 496,626 of our ADSs).
Authorized Share Capital
On November
20, 2014, our shareholders approved an increase in our authorized share capital from 38,461,538 ordinary shares with no par value,
to 500,000,000 ordinary shares with no par value.
On November
30, 2014 we effected a consolidation of our share capital at a ratio of 1:13, so that: (A) each 13 ordinary shares of Kitov Holdings
was consolidated into one ordinary share of Kitov Holdings; and (B) each option (tradable and non-tradable) outstanding immediately
prior to the Consolidation was adjusted by multiplying the number of ordinary shares into which such option was exercisable by
1/13 (rounded to 0.07692).
Our present
authorized ordinary share capital is 500,000,000 ordinary shares, with no par value. At our 2016 Annual General Meeting of Shareholders
scheduled for December 5, 2016, our shareholders have been asked to vote on proposals to increase our authorized ordinary share
capital to 5,000,000,000 ordinary shares, with no par value, and to approve the addition to our authorized share capital of 1,000,000,000
preferred shares, with no par value, divided into 5 classes of 200,000,000 preferred shares in each class.
DESCRIPTION OF AMERICAN DEPOSITARY
SHARES
The
Bank of New York Mellon, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS
will represent 20 shares (or a right to receive 20 shares) deposited with Bank Hapoalim or Bank Leumi, as custodian for the depositary
in Israel. Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The
depositary’s office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The
Bank of New York Mellon’s principal executive office is located at One Wall Street, New York, New York 10286.
You
may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate
evidencing a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name,
or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct
or indirect participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS
holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you
must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this
section. You should consult with your broker or financial institution to find out what those procedures are.
Registered
holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.
As
an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Israeli law governs
shareholder rights. The depositary will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you
will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially
holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit
agreement and the ADSs.
The
following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the
entire deposit agreement and the form of ADR. Directions on how to obtain copies of those documents are provided under the heading
“Where You Can Find Additional Information”.
Dividends and Other Distributions
How will
you receive dividends and other distributions on the shares?
The depositary
has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on shares
or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in proportion
to the number of shares your ADSs represent.
Cash.
The
depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can do so on
a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval
is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those
ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders
who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.
Before making a
distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See “Taxation and
Government Programs - Taxation of our Shareholders" for more detail. It will distribute only whole U.S. dollars and cents
and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot
convert the foreign currency, you may lose some of the value of the distribution.
Shares.
The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The depositary
will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing
those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional
ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares (or
ADSs representing those shares) sufficient to pay its fees and expenses in connection with that distribution.
Rights to purchase
additional shares.
If we offer holders of our securities any rights to subscribe for additional shares or any other rights,
the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell
those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses.
To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case, you will receive
no value for them. The depositary will exercise or distribute rights only if we ask it to and provide satisfactory assurances
to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities to which
the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing
ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability
of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders,
and the securities distributed may be subject to restrictions on transfer.
Other Distributions.
The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal,
fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we
distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed,
in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any
securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution.
The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection
with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain
ADS holders, and the securities distributed may be subject to restrictions on transfer.
The depositary
is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have
no obligation to register ADSs, shares, rights or other securities under the Securities Act of 1933, as amended, or the Securities
Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else
to ADS holders.
This means that you may not receive the distributions we make on our shares or any value for them if it is
illegal or impractical for us to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary
will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment
of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will
register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person
or persons that made the deposit.
How can ADS holders withdraw the deposited securities?
You may surrender
your ADSs for the purpose of withdrawal at the depositary’s office. Upon payment of its fees and expenses and of any taxes
or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited
securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at
your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible. The depositary
may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.
How do ADS holders interchange
between certificated ADSs and uncertificated ADSs?
You may surrender
your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR
and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Alternatively,
upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange
of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those
ADSs.
Voting Rights
How do you vote?
ADS holders may
instruct the depositary how to vote the number of deposited shares their ADSs represent. If we request the depositary to solicit
your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and
send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders
may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary.
The depositary will try, as far as practical, subject to the laws of Israel and the provisions of our articles of association
or similar documents, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders.
If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that
case, the depositary may try to vote as you instruct, but it is not required to do so.
Except by instructing
the depositary as described above, you won’t be able to exercise voting rights unless you surrender your ADSs and withdraw
the shares. However, you may not know about the meeting enough in advance to withdraw the shares.
In any event, the depositary
will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed by the
holder of the ADSs or as described in the following sentence. If we asked the depositary to solicit your instructions at
least 30 days before the meeting date but the depositary does not receive voting instructions from you by the specified date,
it will consider you to have authorized and directed it to give a discretionary proxy
to
a person designated by us to vote the number of deposited securities represented by your ADSs. The depositary will give
a discretionary proxy in those circumstances to vote on all questions at to be voted upon unless we notify the depositary that:
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do not wish to receive a discretionary proxy;
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there
is substantial shareholder opposition to the particular question; or
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the
particular question would have an adverse impact on our shareholders.
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We
are required to notify the depositary if one of the conditions specified above exists.
We cannot assure
you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In
addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of
carrying out voting instructions.
This means that you may not be able to exercise voting rights and there may be nothing you
can do if your shares are not voted as you requested.
In order to give
you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities,
if we request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters
to be voted upon at least 30 days in advance of the meeting date.
Fees and Expenses
Persons depositing or withdrawing
shares or ADS holders must pay
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For
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$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
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●Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
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●Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
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$.05 (or less) per ADS
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●Any cash distribution to ADS holders
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A fee equivalent to the fee that would be payable if
securities distributed to you had been shares and the shares had been deposited for issuance of ADSs
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●Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders
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$.05 (or less) per ADS per calendar year
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●Depositary services
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Registration or transfer fees
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●Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
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Expenses of the depositary
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●Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
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●converting foreign currency to U.S. dollars
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Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes
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●As necessary
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Any charges incurred by the depositary or its agents for servicing the deposited securities
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●As necessary
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The depositary
collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose
of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting
those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may
collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging
the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any
cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated
to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are
paid.
From time to time,
the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance
of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected
from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency
or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.
The depositary
may convert foreign currency itself or through any of its affiliates and, in those cases, acts as principal for its own account
and not as an agent, fiduciary or broker on behalf of any other person and earns revenue, including, without limitation, fees
and spreads that it will retain for its own account. The spread is the difference between the exchange rate assigned to
the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives in an offsetting
foreign currency trade. The depositary makes no representation that the exchange rate used or obtained in any currency conversion
under the deposit agreement will be the most favorable rate that could be obtained at the time or as to the method by which that
rate will be determined, subject to its obligations under the deposit agreement.
Payment of Taxes
You will be responsible
for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs.
The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented
by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented
by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities,
it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders
any property, remaining after it has paid the taxes.
Tender and Exchange Offers; Redemption,
Replacement or Cancellation of Deposited Securities
The depositary
will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do by an ADS holder surrendering
ADSs and subject to any conditions or procedures the depositary may establish.
If deposited securities
are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary
will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs
upon surrender of those ADSs.
If there is any
change in the deposited securities such as a sub-division, combination or other reclassification, or any merger, consolidation,
recapitalization or reorganization affecting the issuer of deposited securities in which the depositary receives new securities
in exchange for or in lieu of the old deposited securities, the depositary will hold those replacement securities as deposited
securities under the deposit agreement. However, if the depositary decides it would not be lawful to hold the replacement securities
because those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the
replacement securities and distribute the net proceeds upon surrender of the ADSs.
If there is a replacement
of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute
new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying
the new deposited securities.
If there are no
deposited securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying
ADSs have become apparently worthless, the depositary may call for surrender or of those ADSs or cancel those ADSs upon notice
to the ADS holders.
Amendment and Termination
How may the deposit agreement
be amended?
We may agree with
the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases
fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile
costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding
ADSs until 30 days after the depositary notifies ADS holders of the amendment.
At the time an amendment becomes effective,
you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement
as amended.
How may the deposit agreement
be terminated?
The depositary
will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the
deposit agreement if:
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60 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment;
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we delist our shares from an exchange on which they were listed and do not list the shares on another exchange;
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we appear to be insolvent or enter insolvency proceedings;
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all or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities;
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there are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or
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there has been a replacement of deposited securities.
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If the deposit
agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At any time after
the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received
on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest,
for the
prorata
benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as
soon as practicable after the termination date.
After the termination
date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities,
except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities if it would interfere
with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all
the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities,
but
,
after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other
distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any
other duties under the deposit agreement except as described in this paragraph.
Limitations on Obligations and Liability
Limits on our Obligations and the
Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement
expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability
of the depositary. We and the depositary:
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are
only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
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are
not liable if we are or it is prevented or delayed by law or circumstances beyond our or its control from performing our or
its obligations under the deposit agreement;
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are
not liable if we or it exercises discretion permitted under the deposit agreement;
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are
not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made
available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages
for any breach of the terms of the deposit agreement;
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have
no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf
or on behalf of any other person;
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are
not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and
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may
rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the
proper person.
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In the deposit
agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary
will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:
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payment
of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties
for the transfer of any shares or other deposited securities;
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satisfactory
proof of the identity and genuineness of any signature or other information it deems necessary; and
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compliance
with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer
documents.
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The depositary
may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed
or at any time if the depositary or we think it advisable to do so.
Right to Receive the Shares Underlying
your ADSs
ADS holders have
the right to cancel their ADSs and withdraw the underlying shares at any time except:
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when
temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer
books; (ii) the transfer of shares is blocked to permit voting at a shareholders' meeting; or (iii) we are paying a dividend
on our shares;
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when
you owe money to pay fees, taxes and similar charges; or
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when
it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or
to the withdrawal of shares or other deposited securities.
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This right of withdrawal
may not be limited by any other provision of the deposit agreement.
Pre-release of ADSs
The deposit agreement
permits the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the ADSs. The
depositary may also deliver shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release
transaction has been closed out). A pre-release is closed out as soon as the underlying shares are delivered to the depositary.
The depositary may receive ADSs instead of shares to close out a pre-release. The depositary may pre-release ADSs only under the
following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents
to the depositary in writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is fully collateralized
with cash or other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the
pre-release on not more than five business days' notice. In addition, the number of ADSs that may be outstanding at any time as
a result of pre-release will not normally exceed 30% of the total number of ordinary shares deposited under the deposit agreement,
although the depositary may disregard the limit from time to time if it thinks it is appropriate to do so. The depositary has
full discretion as to how and to what extent it may disregard the limit for the amount of ADSs that may be outstanding at any
time as a result of the pre-release.
Direct Registration System
In the deposit
agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and
Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates
interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC
participant. Profile is a feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated
ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC
account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that
transfer.
In connection with
and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand
that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in
requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf
of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties
agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile
system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.
Shareholder communications; inspection
of register of holders of ADSs
The depositary
will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities
that we make generally available to holders of deposited securities. The depositary will send you copies of those communications
or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of holders of
ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.
Transfer agent and registrar
Our transfer agent
and registrar will be the depositary for our ADSs, Bank of New York Mellon, and its address is 101 Barclay Street, New York, NY.
Listing
Our ADSs are listed
on The NASDAQ Capital Market under the symbol “KTOV.”
Series A Warrants
The following summary
of certain terms and provisions of the outstanding Series A warrants is not complete and is subject to, and qualified in its entirety
by the provisions of the Warrant Agent Agreement and form of Warrant Certificate, which is filed as an exhibit to the registration
statement filed with the SEC on Form F-1 (Registration No. 333-207117) on November 18, 2015, as amended by the Letter Amendment
to Warrant Agent Agreement which is filed as an exhibit to our Report on Form 6-K submitted to the SEC on June 29, 2016, as subsequently
amended and supplemented. Prospective investors should carefully review the terms and provisions set forth in the Warrant Agent
Agreement and form of Warrant Certificate, as amended. Series A warrants are administered by the Bank of New York Mellon, as warrant
agent.
Exercisability.
The Series A warrants are exercisable immediately upon issuance and at any time up to November 25, 2020. The Series A warrants
will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice accompanied
by payment in full for the number of ADSs purchased upon such exercise (except in the case of a cashless exercise as discussed
below), together with the ADS issuance fee of $0.05 per ADS and other applicable charges and taxes. Unless otherwise specified
in the Series A warrant, the holder will not have the right to exercise the Series A warrants, in whole or in part, if the holder
(together with its affiliates) would beneficially own in excess of 4.99% of the number of our ordinary shares outstanding immediately
after giving effect to the exercise, as such percentage is determined in accordance with the terms of the Series A warrants.
Cashless Exercise.
In the event that a registration statement covering ordinary shares underlying the Series A warrants is not effective, and
an exemption from registration is not available for the resale of such ordinary shares underlying the Series A warrants, the holder
may, in its sole discretion, exercise Series A warrants and, in lieu of making the cash payment otherwise contemplated to be made
to us upon such exercise in payment of the aggregate exercise price, elect instead to receive upon such exercise the net number
of ADSs determined according to the formula set forth in the Warrant Agent Agreement. The issuance fee of $0.05 per ADS, as well
as other applicable charges and taxes, are due and payable upon any cashless exercise.
Exercise Price.
The initial exercise price per ADS purchasable upon exercise of the Series A warrants is equal to $3.78 per full ADS (which
may be adjusted as set forth below). In addition to the exercise price per ADS, the $0.05 issuance fee per ADS and other applicable
charges and taxes are due and payable upon exercise.
Adjustment Provisions.
The exercise price and the number of ADSs issuable upon exercise are subject to appropriate adjustment in the event of certain
stock dividends and distributions, stock splits, stock subdivisions and combinations, reclassifications or similar events affecting
our ADSs or ordinary shares.
Transferability.
Subject to applicable laws, the Series A warrants may be transferred at the option of the holders upon surrender of the Series
A warrants to the warrant agent, together with the appropriate instruments of transfer.
Warrant Agent
and Exchange Listing.
The Series A warrants will be issued in registered form under the Warrant Agent Agreement between us
and the warrant agent.
Fundamental
Transaction
. If, at any time while the Series A warrants are outstanding, (1) we consolidate or merge with or into another
person, (2) we sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of our assets,
(3) any purchase offer, tender offer or exchange offer (whether by us or another person) is completed pursuant to which holders
of our ordinary shares are permitted to sell, tender or exchange their ordinary shares for other securities, cash or property
and has been accepted by the holders of 50% or more of our outstanding shares of ordinary shares, (4) we effect any reclassification
or recapitalization of our ADSs or ordinary shares or any compulsory share exchange pursuant to which our ordinary shares are
converted into or exchanged for other securities, cash or property, or (5) we consummate a stock or share purchase agreement or
other business combination with another person whereby such other person acquires more than 50% of our outstanding ordinary shares,
each, a “Fundamental Transaction”, then upon any subsequent exercise of the Series A warrants, the holders thereof
will have the right to receive the same amount and kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder
of the number of ADSs then issuable upon exercise of the Series A warrant, and any additional consideration payable as part of
the Fundamental Transaction.
Rights as a
Shareholder.
Except as otherwise provided in the Warrant Agent Agreement or by virtue of such holder’s ownership of
ADSs or ordinary shares, the holder of Series A warrants does not have rights or privileges of a holder of ADSs or ordinary shares,
including any voting rights, until the holder exercises the Series A warrants.
Outstanding warrants.
As of November 27, 2016, there were 6,835,669 Series A Warrants issued to public investors in our initial public offering
in November 2015 and our follow-on public offering in July 2016, pursuant to prospectuses dated November 23, 2015 and June 30,
2016.
Representative's Warrants
We issued to the
representative of the underwriters in our November 2015 initial public offering 157,945 representative's warrants to purchase
up to 157,945 ADSs. The ADSs issuable upon exercise of these representative's warrants are identical to those offered to investors
in our initial public offering in the U.S., except that such representative's warrants are in certificate form and have an exercise
price equal to $4.956. We have registered the representative’s warrants and the ADSs issuable upon exercise of the representative's
warrants. The representative’s warrants are exercisable for cash or on a cashless basis at per share exercise price equal
of $4.956 and expire on the fifth anniversary of the issuance date. In addition, the representative’s warrants provide for
registration rights upon request, in certain cases, at our expense. The exercise price and number of ADSs issuable upon exercise
of the representative's warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
cash dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying
shares will not be adjusted for issuances of ADSs at a price below the warrant exercise price.
Placement Agent’s Warrants
On July 5, 2016,
we issued to the placement agent for our July 2016 follow-on public offering 141,176 warrants to purchase 141,176 ADSs, or the
“placement agent’s warrants”. The ADSs issuable upon exercise of the placement agent’s warrants are identical
to the ADSs issuable upon exercise of the public warrants. The placement agent’s warrants are exercisable for cash or on
a cashless basis at a per ADS exercise price equal to $4.08 and expire on June 28, 2021. The placement agent’s warrants
and the ADSs underlying the placement agent’s warrants have been deemed compensation by FINRA and are, therefore, subject
to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The placement agent (or permitted assignees under the Rule) will not
sell, transfer, assign, pledge or hypothecate the placement agent’s warrants or the securities underlying the placement
agent’s warrants, nor will it engage in any hedging, short sale, derivative, put or call transaction that would result in
the effective economic disposition of these warrants or the underlying securities for a period of 180 days after the effective
date. The exercise price and number of ADSs issuable upon exercise of the placement agent’s warrants may be adjusted in
certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization,
merger or consolidation.
PLAN OF DISTRIBUTION
This prospectus
relates to 3,464,202 of our ADSs issuable upon the exercise of 3,306,257 unexercised public warrants issued to public investors
in our initial public offering and 157,945 unexercised representative’s warrants. The warrants were offered and sold by
us in a public offering completed on November 25, 2016, pursuant to a prospectus dated November 23, 2016, which prospectus also
covered the offer and sale by us of the ADSs underlying the warrants. The ongoing offer and sale by us of the ADSs issuable upon
exercise of the warrants is being made pursuant to this prospectus. The 3,306,257 unexercised public warrants covered by this
prospectus are exercisable until November 25, 2020 at a current exercise price of $3.78 per ADS, subject to adjustment upon events
specified in the Warrant Agent Agreement. The 157,945 unexercised representative’s warrants are exercisable until November
25, 2020 at a current exercise price of $4.956 per ADS, subject to adjustment upon events specified in the representative’s
warrants.
We will deliver
ADSs upon exercise of the warrants, in whole or in part. We will not issue fractional ADSs. Each warrant contains instructions
for the exercise. In order to exercise a warrant, the holder must deliver the information required by the applicable warrant agreement,
along with payment of the exercise price, if the exercise price is being paid in cash, for the ADSs to be purchased. We will then
deliver our ADSs in the manner described in the applicable warrant agreement.
Other Relationships
We engaged H.C.
Wainwright & Co., LLC (“Wainwright” or the “underwriter”) to act as our underwriter to solicit offers
to purchase the securities offered as part of our initial public offering which was completed on November 25, 2016. Wainwright
has performed other investment banking services for us in the past, including acting as underwriter for our initial public offering
in November 2015, and as placement agent for our follow-on public offering in the U.S. in July 2016, for which it has received
customary fees and expenses. Wainwright may, from time to time, engage in transactions with or perform services for us in the
ordinary course of its business and may continue to receive compensation from us for such services, but we have no present agreements
with Wainwright to do so, other than our granting Wainwright, as placement agent for our follow-on public offering in the U.S.
in July 2016, a right of first refusal to act as sole book-running manager for each and every public and private equity and public
debt offering for a period of nine months after July 5, 2016.
Offer Restrictions Outside the United
States
Other than in the
United States, no action has been taken by us or the representative of the underwriters that would permit a public offering of
the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered
by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material
or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons
into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to
the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Australia
This prospectus
is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities
and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D
of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons
to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one
or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia
only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that
by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless
permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold
to the offeree within 12 months after its transfer for the offeree under this prospectus.
China
The information
in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s
Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative
Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other
than directly to “qualified domestic institutional investors.”
European Economic Area — Belgium,
Germany, Luxembourg and Netherlands
The information
in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under the
Directive 2003/71/EC (“Prospectus Directive”), as implemented in Member States of the European Economic Area (each,
a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.
An offer to the
public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following
exemptions under the Prospectus Directive as implemented in that Relevant Member State:
(a) to legal entities
that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose
is solely to invest in securities;
(b) to any legal
entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet
of more than €€43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii)
an annual net turnover of more than €€50,000,000 (as shown on its last annual unconsolidated or consolidated financial
statements);
(c) to fewer than
100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive)
subject to obtaining the prior consent of the Company or any underwriter for any such offer; or
(d) in any other
circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result
in a requirement for the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive.
France
This document is
not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France
within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaireet financier) and Articles
211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities
have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This document and
any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France
and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales
and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting
for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1, D.754-1
and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified
investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles
L.411-2-II-2° and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article
211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly
or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8
to L.621-8-3 of the French Monetary and Financial Code.
The information
in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with
or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of
securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus
Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly
in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations
and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Israel
In the State of
Israel, the securities offered hereby may not be offered to any person or entity other than the following who are deemed Classified
Investors pursuant to the Securities Law, 5728-1968:
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a
fund for joint investments in trust, i.e., mutual fund, as such term is defined in the Law for Joint Investments in Trust,
5754-1994, or a management company of such a fund;
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a
provident fund as defined in the Control of the Financial Services (Provident Funds) Law 5765-2005, or a management company
of such a fund;
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an
insurer, as defined in the Law for Oversight of Insurance Transactions, 5741-1981;
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a
banking entity or satellite entity, as such terms are defined in the Banking Law (Licensing), 5741-1981, other than a joint
services company, acting for its own account or for the account of investors of the type listed in Section 15A(b) of the Securities
Law, 1968;
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a
company that is licensed as a portfolio manager, as such term is defined in Section 8(b) of the Law for the Regulation of
Investment Advisors and Portfolio Managers, 5755-1995, acting on its own account or for the account of investors of the type
listed in Section 15A(b) of the Securities Law, 5728-1968;
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an
investment advisor or investment distributer, as such term is defined in Section 7(c) of the Law for the Regulation of Investment
Advisors and Portfolio Managers, 5755-1995, acting on its own account;
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a
member of the Tel Aviv Stock Exchange, acting on its own account or for the account of investors of the type listed in
Section 15A(b) of the Securities Law, 5728-1968;
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an
underwriter fulfilling the conditions of Section 56(c) of the Securities Law, 5728-1968, acting on its own account;
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venture
capital fund, defined as an entity primarily involved in investments in companies which, at the time of investment, (i) are
primarily engaged in research and development or manufacture of new technological products or processes and (ii) involve above-average
risk;
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entity
fully owned by investors of the type listed in Section 15A(b) of the Securities Law, 5728-1968;
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an
entity, other than an entity formed for the purpose of purchasing securities in this offering, in which the shareholders’
equity is in excess of NIS 50 million; and
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an
individual who meets at least one of three following criteria:
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1)
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the
total value of the individual’s liquid assets exceeds NIS 8 million (currently approximately USD 2 million); the term
“liquid assets” is defined as cash, deposits, financial assets (units or shares in registered funds, options,
futures contracts, structures and professional training funds), and traded securities.
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2)
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The
individual’s income in each of the last two years exceeds NIS 1.2 million (currently approximately USD 308 thousand)
or the income of the individual’s family unit exceeds NIS 1.8 million (currently approximately USD 462 thousand); the
term “family unit” is defined in an individual and his/her family members who live with him or whose livelihoods
are dependent on each other. or
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3)
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the
total value of the individual’s liquid assets exceeds NIS 5 million (currently approximately USD 1.3 million) and either
the individual’s income in each of the last two years exceeds NIS 600,000 (currently approximately USD 154 thousand)
or such income of the individual’s family unit exceeds NIS 900,000 (currently approximately USD 231 thousand).
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and the company is able to verify compliance
of an individual with the eligibility criteria above as of the date of the sale of the securities either by :
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i.
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obtaining
written approval of an accountant, lawyer, or in appropriate circumstances other external body, which the Company has reasonable
grounds to rely on, certifying that it took reasonable measures (apart from the individual’s declaration) to verify
that the individual complies with the criteria, and specifying those measures; or
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ii.
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carrying
out the examination of the individual’s compliance independently, while relying on external evidence and information
presented to it by the individual.
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Offerees of the
securities offered hereby, or the Investors, in the State of Israel shall be required to submit written confirmation that as of
the date of any offer of securities, and as of the date of the sale of any securities, they fall within the scope of one of the
above criteria, that they are fully aware of the significance of being an Investor pursuant to such criteria and that they have
given their consent, or the Consent. An approach to an Investor for the Consent shall not be considered a public offering. This
prospectus will not be distributed or directed to investors in the State of Israel who do not fall within one of the above criteriaif
a purchase of securities is made within an institutional trading system, as that term is defined in the Tel Aviv Stock Exchange
regulations, a person giving a stock exchange member his prior Consent before submitting a purchase order to the institutional
trading system for the first time will be seen as acting within the provisions the above criteria with respect to the Consent,
provided that if such person is an investor pursuant to the sixth, ninth, tenth, eleventh or twelfth bullet points specified above,
such person committed in advance that, until the last business day of the third month in each year, he will renew his Consent,
and that if he withdraws his Consent, he will notify the stock exchange member immediately and will cease to give purchase orders
in such institutional trading institution.
The securities offered by this
prospectus have not been approved or disapproved by the Israeli Securities Authority, or the ISA, nor have such securities
been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel,
absent the publication of a prospectus. The ISA has not issued permits, approvals, licenses or no-action letters in
connection with the offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed
their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in
Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on
transferability, including the resale restrictions e forth under Section 15C of the Israel Securities Law and Section 5 of
the Israeli Securities Regulations (Details Regarding Sections 15A-15C of the Securities Law-1968) – 2000, and must be
effected only in compliance with the Israeli securities laws and regulations. In March 2015, the ISA issued a no-action
letter stating that in instances whereby the private placement of securities of a dual-listed company would otherwise be
subject to resale restrictions in Israel, but such securities have been released from resale restrictions to the public over
a non-Israeli exchange, such as The NASDAQ Capital Market, then such securities may be freely sold over such non-Israeli
exchange, notwithstanding the resale restrictions set forth under Section 15C of the Israel Securities Law and Section 5 of
the Israeli Securities Regulations (Details Regarding Sections 15A-15C of the Securities Law-1968) – 2000.
Any Classified
Investors in the State of Israel who acquire our securities offered hereby are urged to consult their own legal and other advisors
about the consequences of acquiring our securities offered hereby as Classified Investors, and of any reliance upon the ISA’s
no-action letter noted above, in light of the Classified Investor’s own circumstances. We have no intention of seeking any
no-action letter from the ISA in connection with this offering.
Italy
The offering of
the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione
Nazionale per le Societ — $$— Aga e la Borsa, “CONSOB” pursuant to the Italian securities
legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities
may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24
February 1998 (“Decree No. 58”), other than:
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qualified
investors, as defined in Article 100 of Decree no. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14
May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and
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in
other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter
of Regulation No. 11971 as amended.
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Any
offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding
placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
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made
by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative
Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other
applicable laws; and
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in
compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.
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Any subsequent
distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided
under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with
such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring
the securities for any damages suffered by the investors.
Japan
The securities
have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law
No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to
a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph
3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or
indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified
Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional
Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.
Portugal
This document is
not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários)
in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários).
The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese
Securities Market Commission (Comissão do Mercado de ValoresMobiliários) for approval in Portugal and, accordingly,
may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances
that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of
securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities
Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any
other person.
Sweden
This document has
not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly,
this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances
that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980)
omhandel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors”
(as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute
it or the information contained in it to any other person.
Switzerland
The securities
may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other
stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure
standards for issuance prospectuses under art. 652a or art.1156 of the Swiss Code of Obligations or the disclosure standards for
listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated
trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly
distributed or otherwise made publicly available in Switzerland.
Neither this document
nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory
authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss
Financial Market Supervisory Authority.
This document is
personal to the recipient only and not for general circulation in Switzerland.
United Arab Emirates
Neither this document
nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or
any other governmental authority in the United Arab Emirates, nor has the Company received authorization or licensing from the
Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the
securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer
or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption
of such shares, may be rendered within the United Arab Emirates by the Company.
No offer or invitation
to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
Neither the information
in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority
in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended
(“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued
on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom,
and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any
other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA.
This document should
not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other
person in the United Kingdom.
Any invitation
or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue
or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be
communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to us.
In the United Kingdom,
this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating
to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial
Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49 (2)(a) to
(d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated
(together “relevant persons”). The investments to which this document relates are available only to, and any invitation,
offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should
not act or rely on this document or any of its contents.
LEGAL MATTERS
The validity of
the securities being offered by this prospectus and other legal matters concerning this offering relating to Israeli law will
be passed upon for us by Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co., Tel-Aviv, Israel. Haynes and Boone, LLP, New
York, New York is acting as our United States securities counsel in connection with the offering.
EXPERTS
The
consolidated financial statements of Kitov Pharmaceuticals Holdings Ltd. as of December 31, 2015 and 2014 and for each of the
years in the three-year period ended December 31, 2015, have been incorporated by reference herein in reliance upon the report
of Somekh Chaikin, a Member Firm of KPMG International, independent registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and auditing.
LEGAL PROCEEDINGS
From time to time,
we may become party to legal proceedings and claims in the ordinary course of business, or otherwise. On December 3, 2015, we
announced that we received a lawsuit and motion to approve the lawsuit as a class action lawsuit pursuant to the Class Action
Lawsuits Law 5766-2006 (the “Motion”) which was filed against us and our directors at the Tel Aviv District Court
(Economic Division). The Motion is with respect to asserted claims for damages to the holders of our securities listed on the
Tel Aviv Stock Exchange, arising due to the public offering of our initial public offering of our securities in the U.S. during
November 2015. In the Motion it was claimed that the class the petitioners are seeking to represent, namely, anyone holding our
shares at the start of trading on November 22, 2015 exclusive of the respondents and/or anyone acting on their behalf and/or any
affiliates thereof and excluding anyone whose rights to our shares derive from ADS certificates issued in the U.S to such extent
as derived therefrom; and any holders of our Series 2 TASE listed warrants as of the start of trading on November 22, 2015, exclusive
of the respondents and/or anyone acting on their behalf and/or any affiliates thereof (Purported Class). The total amount claimed
from all defendants, if the Motion is certified as a class action, as set forth in the motion is approximately NIS 16.4 million.
In addition to this amount, the petitioners in the motion are seeking remedies in order to redress discrimination against the
Purported Class owing to the dilution caused by the public offering, including the possibility that the Purported Class should
be awarded from the Company amounts reflecting the losses of the Purported Class from a possible price increase in the shares
of the Company following the announcement of the Phase III clinical trial results.
Under applicable
Israeli law, a motion to approve a lawsuit as a class action initially needs to be approved as such by the court. Only after such
approval is granted by the court, will the court proceed to the second stage of hearing the underlying claims of the class action
lawsuit. We announced that we reject the claims asserted in the Motion. We have delivered our response to the court in accordance
with applicable law, and a preliminary hearing was held by the court on September 12, 2016. At such hearing the court determined
that certain claims of the petitioners in connection with alleged personal interests by affiliates of the Company in connection
with the public offering of our initial public offering of our securities in the U.S. during November 2015 are not part of the
grounds for the Motion and no remedies shall be sought by the petitioners in connection therewith. The court set a schedule for
the submission by the petitioners of a motion for discovery, and any responses to such motion, which have already been submitted
by the parties to the Motion. An additional preliminary hearing was scheduled by the court for February 7, 2017. On November
8, 2016, a shareholder, submitted a request to the court in connection with the Motion to be excluded from the Purported Class
and claiming to have independent causes of action and claims of approximately NIS 1 million (the “Petition to Exclude”).
We responded to the court as required, and, amongst other arguments, we noted that pursuant to the Class Action Lawsuits Law 5766-2006
and the Regulations enacted thereunder, at the current stage of the court proceedings with respect to the Motion, such shareholder
cannot petition to be excluded from the Purported Class. The court ordered the shareholder to respond to our response and he has
done so. The shareholder has not submitted any independent lawsuit against us, and we are of the view that such shareholder’s
claims are identical to the asserted claims for damages in the Motion.
We have been advised
by our attorneys that the likelihood of the Company not incurring any financial obligation as a result of the class action (including
the Motion and the Petition to Exclude) exceeds the likelihood that the Company will incur a financial obligation. At this preliminary
stage however, we are unable, with any degree of certainty, to make any other evaluations or any other assessments with respect
to the Motion's probability of success or the scope of potential exposure, if any.
Other than the
Motion (including the Petition to Exclude), we are not currently a party to any significant legal or arbitration proceedings involving
any third party, including governmental proceedings pending or known to be contemplated, which may have, or have had in the recent
past, significant effects on the company’s financial position or profitability.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with
the SEC a registration statement on Form F-3 under the Securities Act relating to the offering of our securities offered hereby.
This prospectus does not contain all of the information contained in the registration statement. The rules and regulations of
the SEC allow us to omit certain information from this prospectus that is included in the registration statement. Statements made
in this prospectus concerning the contents of any contract, agreement or other document are summaries of all material information
about the documents summarized, but are not complete descriptions of all terms of these documents. If we filed any of these documents
as an exhibit to the registration statement, you may read the document itself for a complete description of its terms.
We are required
to file reports and other information with the SEC under the Exchange Act, and the regulations thereunder applicable to foreign
private issuers. We also furnish to the SEC under cover of Form 6-K material information required to be made public in Israel,
filed with and made public by any stock exchange or distributed by us to our shareholders. You may read and copy the registration
statement, including the related exhibits and schedules, and any document we file with the SEC without charge at the SEC’s
public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains an Internet site that contains
reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available
to the public through this web site at http://www.sec.gov.
In addition, since
our ordinary shares are traded on the TASE, in the past we filed Hebrew language periodic and immediate reports with, and furnished
information to, the TASE and the Israel Securities Authority, or the ISA, as required under Chapter F of the Israel Securities
Law, 1968. In accordance with Section 35XXXIII of the Israel Securities Law, and pursuant to the prior approvals of our securities
holders to change to reporting in accordance with the U.S. securities laws and regulations, and in accordance with the exemption
from reporting under Chapter F of the Law which was received by us from ISA pursuant to Section 35XXXII(1A) of the Law, as of
December 31, 2015, we commenced reporting to ISA and the TASE in accordance with the Securities Regulations (Periodic and
Immediate Reports of a Foreign Body Corporate) 5761-2000, promulgated thereunder (the “Dual-Listed Reporting
Requirements”). Pursuant to the Dual-Listed Reporting Requirements, we prepare our periodic and immediate reports in accordance
with U.S. securities laws and reporting requirements. Our major shareholders are required to make applicable ownership disclosures
in accordance with U.S. securities laws and reporting requirements. We generally initially file or furnish our reports, as applicable,
to the SEC. We then submit copies of the SEC filings and submissions to ISA and TASE, including any filings made by our major
shareholders with respect to their holdings in the Company, in accordance with the Dual-Listed Reporting Requirements. Such copies
can be retrieved electronically through the websites for listed company reports of ISA (www.magna.isa.gov.il) and TASE (maya.tase.co.il).
As a foreign private
issuer, we will be exempt from the rules under the Exchange Act relating to the furnishing and content of proxy statements, and
our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act. As permitted under the Companies Law, and the Notice Regulations which were enacted
pursuant to such law, and as set forth in our Amended and Restated Articles of Association, we are not required to physically
deliver a notice of a shareholders meeting, a proxy statement or a voting slip. We prepare notices of general meetings of our
shareholders, as well as the accompanying proxy statements, voting slips and voting instruction forms, (collectively, the “Proxy
Materials”) in accordance with applicable laws, rules and regulations and disclosure requirements in the State of Israel,
as such are applicable to a company whose shares are traded on both the TASE and the NASDAQ, and which reports to the SEC as a
foreign private issuer and to ISA and the TASE in accordance with the Dual-Listed Reporting Requirements. Our Proxy Materials
may not necessarily be mailed to our beneficial shareholders in Israel, nor to our beneficial ADS holders in the U.S. We will
furnish to the SEC on Form 6-K the forms of our Proxy Materials, and they will be made available to the public on the SEC’s
website at www.sec.gov. We will also submit the Proxy Materials to ISA and TASE and they will be made available to the public
on their respective websites for listed company reports: www.magna.isa.gov.il and www.maya.tase.co.il. We will also include the
Proxy Materials on our corporate website, to the extent required under the Companies Law and the applicable regulations enacted
thereunder governing publication of notices of general meetings of our shareholders and the distribution of the Proxy Materials.
The circulation of by us of any Proxy Materials should not be taken as an admission that we are subject to the proxy rules under
the Exchange Act.
In addition, we
will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as
promptly as U.S. companies whose securities are registered under the Exchange Act. However, we intend to file with the SEC, within
120 days after the end of each fiscal year ending December 31, an annual report on Form 20-F containing financial statements which
will be examined and reported on, with an opinion expressed, by an independent registered public accounting firm. Furthermore,
we have committed to the underwriters of our initial U.S public offering which was completed in November 2015 that for a period
of three (3) years from November 25, 2015, the Company, at its expense, will announce its financial information for each of the
first three fiscal quarters consistent with the practices of companies which are dual-listed on both the TASE and a domestic U.S.
securities exchange and report in accordance with the Dual-Listed Reporting Requirements; provided that the foregoing shall not
apply in the event the Company enters into a merger transaction in which the Company is the non-surviving entity that would cause
our ADSs and warrants to no longer be registered under the Exchange Act. We will furnish this periodic information with the SEC
under cover of Form 6-K. The Representative of the underwriters of our initial U.S public offering which was completed in November
2015 previously waived any announcement by us with respect to the filing of financial information for the first quarter of 2016,
and may issue such waivers to us in the future. It is noted that ISA has recently proposed draft legislation which would dispense
with the requirement for the announcement of financial results for each of the first and third fiscal quarters of a calendar year.
We would qualify for such dispensation based on our company size as set forth in the proposed draft legislation. In addition the
SEC has recently announced that it is seeking comment for the dispensation of the requirement for the announcement of financial
results for each of the first and third fiscal quarters for certain U.S. domestic issuers. Thus it remains uncertain as to how
companies dual-listed on both the TASE and a domestic U.S. securities exchange, and report in accordance with the Dual-Listed
Reporting Requirements, will continue their practices with respect to the announcements of financial information for each of the
first and third fiscal quarters, and it is possible that we may adopt practices for the announcement (if any) of financial information
for each of the first and third fiscal quarters which are different than what we have provided in the past.
We maintain a corporate
website at www.kitovpharma.com. Information contained on, or that can be accessed through, our website does not constitute a part
of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference. We will post
on our website any materials required to be posted on such website under applicable corporate or securities laws and regulations,
including posting any notices of general meetings of our shareholders.
INCORPORATION BY REFERENCE
The SEC allows
us to incorporate by reference the information we file with or furnish to the SEC, which means that we can disclose important
information to you by referring you to another document filed or furnished separately with the SEC. The information incorporated
by reference is considered to be part of this prospectus. Any information that we file or furnish later with the SEC and that
is deemed incorporated by reference will also be considered to be part of this prospectus and will automatically update and supersede
the information in this prospectus. In all cases, you should rely on the later information over different information included
in this prospectus. This prospectus incorporates by reference the documents listed below, and any future Annual Reports on Form
20-F that we file with the SEC and certain Reports on Form 6-K that we furnish to the SEC (but only to that extent that such Form
6-K states that it is incorporated by reference herein), in each case, between the date of the initial registration statement
and the effectiveness of the registration statement and following the effectiveness of the registration statement until the offering
of the securities under the registration statement is terminated:
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The description of our ordinary shares,
no par value per share, and the American Depositary Shares representing the ordinary shares, contained in Item 1 of the Registration
Statement on Form 8-A (File No. 001-37643) filed with the Commission on November 18, 2015;
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our Annual Report on Form 20-F for the fiscal year ended on December 31, 2015, filed with the SEC on March
18, 2016; and
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our reports on Form 6-K furnished to the SEC on May 20, 2016, May 24, 2016, May 26, 2016, June 27, 2016 (2
reports), June 29, 2016, July 5, 2016, July 13, 2016, August 17, 2016 (limited to the text which is found under the headings entitled
“Financial Results for Six Months Ended June 30, 2016” and “Balance Sheet Highlights”, respectively, in
Exhibit 99.1 attached thereto; and, the entire Exhibit 99.2 attached thereto), September 27, 2016 (film number 161903448 only),
October 3, 2016, October 27, 2016, and November 2, 2016.
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We will provide,
free of charge, to each person, including any beneficial owner, to whom this prospectus is delivered, a copy of any or all information
that has been incorporated by reference into this prospectus, but which has not been delivered with the prospectus, upon written
or oral request to us at the following address:
Kitov Pharmaceuticals Holdings Ltd.
One Azrieli Center, Round Tower, 23
rd
Floor
132 Menachem Begin Rd.
Tel Aviv 6701101, Israel
Tel: +972-3-9333121
Attention: Company Secretary
You should rely
only on the information contained or incorporated by reference in this prospectus or a prospectus supplement. We have
not authorized any other person to provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and any accompanying
prospectus supplement, as well as the information we previously filed with the SEC and incorporated by reference, is accurate
only as of the dates on the front cover of those documents, or such earlier date, that is indicated in such documents. Our business,
financial condition, results of operations and prospects may have changed since those dates.
ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated
under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts
named in this prospectus, substantially all of whom reside outside the United States, may be difficult to obtain within the United
States. Furthermore, because substantially all of our assets and substantially all of our directors and officers are located outside
the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible
within the United States.
It may be difficult
to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim
based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In addition,
even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. If U.S. law is applicable
then it must be proved as a fact which can be a time-consuming and costly process. Certain matters of procedure will also be governed
by Israeli law.
Subject to specified
time limitations and legal procedures, Israeli courts may enforce a United States judgment in a civil matter which, subject to
certain exceptions, is non-appealable, including judgments based upon the civil liability provisions of the Securities Act and
the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that:
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the
judgments are obtained after due process before a court of competent jurisdiction, according
to the laws of the state in which the judgment is given and the rules of private international
law currently prevailing in Israel;
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the
prevailing law of the foreign state in which the judgments were rendered allows the enforcement
of judgments of Israeli courts (however, the Israeli courts may waive this requirement
following a request by the attorney general);
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adequate
service of process has been effected and the defendant has had a reasonable opportunity
to be heard and to present his or her evidence;
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the
judgments are not contrary to public policy, and the enforcement of the civil liabilities
set forth in the judgment does not impair the security or sovereignty of the State of
Israel;
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the
judgments were not obtained by fraud and do not conflict with any other valid judgment
in the same matter between the same parties;
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an
action between the same parties in the same matter is not pending in any Israeli court
at the time the lawsuit is instituted in the foreign court; and
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the
obligations under the judgment are enforceable according to the laws of the State of
Israel and according to the law of the foreign state in which the relief was granted.
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We have irrevocably
appointed Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, DE 19715 Tel: +1 (302) 738-6680as our agent to receive
service of process in any action against us in any United States federal or state court arising out of this offering or any purchase
or sale of securities in connection with this offering.
If a foreign judgment
is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli
currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli
currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in
force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount
of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus
interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk
of unfavorable exchange rates.
PROSPECTUS
3,464,202 American Depositary Shares
Each Representing 20 Ordinary Shares
Issuable upon Exercise of Warrants
KITOV
PHARMACEUTICALS HOLDINGS LTD.
November 28, 2016
Part II
Information Not Required in Prospectus
Item
8. Indemnification of Office Holders (including Directors).
Under the Companies
Law, a company may not exculpate an office holder from liability for a breach of a fiduciary duty. An Israeli company may exculpate
an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result
of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our
amended and restated articles of association include such a provision. The company may not exculpate in advance a director from
liability arising out of a prohibited dividend or distribution to shareholders.
Under the Companies
Law and the Securities Law, 5738 – 1968 (“Securities Law”) a company may indemnify an office holder in respect
of the following liabilities, payments and expenses incurred for acts performed by him or her as an office holder, either in advance
of an event or following an event, provided its articles of association include a provision authorizing such indemnification:
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a
monetary liability incurred by or imposed on him or her in favor of another person pursuant to a judgment, including a settlement
or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to
such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board
of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an
amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking
shall detail the abovementioned foreseen events and amount or criteria;
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reasonable
litigation expenses, including reasonable attorneys’ fees, incurred by the office holder as a result of an investigation
or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided
that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial
liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding
or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal
intent or in connection with a monetary sanction;
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a
monetary liability imposed on him or her in favor of a payment for a breach offended at an Administrative Procedure (as defined
below) as set forth in Section 52(54)(a)(1)(a) to the Securities Law;
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expenses
associated with an Administrative Procedure conducted regarding an office holder, including reasonable litigation expenses
and reasonable attorneys’ fees; and
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reasonable
litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted
against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which
the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.
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An “Administrative
Procedure” is defined as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4
(Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to prevent Procedures or
Interruption of procedures subject to conditions) to the Securities Law.
Under the Companies
Law and the Securities Law, a company may insure an office holder against the following liabilities incurred for acts performed
by him or her as an office holder if and to the extent provided in the company’s articles of association:
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a
breach of a fiduciary duty to the company, provided that the office holder acted in good faith and had a reasonable basis
to believe that the act would not harm the company;
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a
breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct
of the office holder;
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a
monetary liability imposed on the office holder in favor of a third party;
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a
monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section
52(54)(a)(1)(a) of the Securities Law; and
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expenses
incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and
reasonable attorneys’ fees.
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Under the Companies
Law, a company may not indemnify, exculpate or insure an office holder against any of the following:
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a
breach of fiduciary duty, except for indemnification and insurance for a breach of the fiduciary duty to the company to the
extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the
company;
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a
breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the
office holder;
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an
act or omission committed with intent to derive illegal personal benefit; or
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a
fine or forfeit levied against the office holder.
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Under the Companies
Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the board
of directors and, with respect to directors or controlling shareholders, their relatives and third parties in which such controlling
shareholders have a personal interest, also by the shareholders.
Our amended and
restated articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted
or to be permitted by law. Our office holders are currently covered by a directors’ and officers’ liability insurance
policy.
We have entered
into agreements with each of our current office holders exculpating them from a breach of their duty of care to us to the fullest
extent permitted by law, subject to limited exceptions, and undertaking to indemnify them to the fullest extent permitted by law,
subject to limited exceptions, to the extent that these liabilities are not covered by insurance. This indemnification is limited
to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria
determined by the board of directors as reasonable under the circumstances. The maximum aggregate amount of indemnification that
we may pay to our office holders based on such indemnification agreement is with respect to all permitted indemnification, including
in connection with a public offering of our securities, an amount equal to 25% of our shareholders’ equity on a consolidated
basis, based on our most recent financial statements made publicly available before the date on which the indemnification payment
was made. Such indemnification amounts are in addition to any insurance amounts. Each office holder who agrees to receive this
letter of indemnification also gives his approval to the termination of all previous letters of indemnification that we have provided
to him or her in the past, if any.
Insofar as indemnifications
for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is therefore unenforceable.
To our knowledge,
other than with respect to the Motion described further in the section entitled “Legal Proceedings” above in this
prospectus, there is no pending litigation or proceeding against any of our office holders as to which indemnification is being
sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any office holder.
Item 9. Exhibits
The index to exhibits
appears below on the page immediately following the signature pages of this Registration Statement.
Item 10. Undertakings
(1) The undersigned registrant
hereby undertakes:
(a) to
file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
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(i)
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to include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, or the Securities Act;
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(ii)
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to reflect in the prospectus any
facts or events arising after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective registration statement; and
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(iii)
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to include any material information
with respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in this Registration Statement;
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provided, however,
that
paragraphs (i), (ii) and (iii) above do not apply if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, or the Exchange Act that are incorporated by reference in this Registration
Statement or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the Registration Statement.
(b) that,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) to
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of the offering.
(d) to
file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form
20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means
of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding
the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements and
information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3.
(e) that,
for the purpose of determining any liability under the Securities Act to any purchaser:
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(i)
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if the registrant is relying on Rule 430B:
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a.
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each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be a part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
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b.
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each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
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(ii)
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if the registrant is subject to Rule 430C: each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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(f) that, for
the purpose of determining liability of a registrant under the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser:
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(i)
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any preliminary prospectus or prospectus of the undersigned registrant to the offering required to be filed pursuant to Rule 424;
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(ii)
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any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by an undersigned registrant;
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(iii)
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the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
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(iv)
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any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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(2) The undersigned registrant hereby
undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to
the provisions referred to in Item 8, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(4) The undersigned registrant hereby
undertakes that, for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
(5) The undersigned registrant hereby
undertakes that, for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the
requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it complies with all
of the requirements for filing of this Post-Effective Amendment No. 2 to Form F-1 on Form F-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Tel Aviv, Israel on November 28, 2016.
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KITOV
PHARMACEUTICALS HOLDINGS LTD.
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By:
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/s/
Isaac Israel
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Name:
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Isaac
Israel
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Title:
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Chief
Executive Officer
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By:
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/s/
Simcha Rock
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Name:
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Simcha
Rock
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Title:
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Chief
Financial Officer
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KNOW ALL MEN BY
THESE PRESENTS, that we, the undersigned officers and directors of Kitov Pharmaceuticals Holdings Ltd., a company incorporated
under the laws of the State of Israel, do hereby constitute and appoint Isaac Israel and Simcha Rock, and each of them, as his
or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments, exhibits thereto
and other documents in connection therewith) to this Registration Statement and any subsequent registration statement filed by
the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as amended, which relates to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the
requirements of the Securities Act of 1933, this Post-Effective Amendment No.2 to Form F-1 on Form F-3 has been signed by the following
persons in the capacities and on the dates indicated.
Signatures
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Title
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Date
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/s/
J. Paul Waymack
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Chairman
of the Board of Directors and
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November
28, 2016
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J.
Paul Waymack
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Chief
Medical Officer
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/s/
Isaac Israel
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Chief
Executive Officer and Director
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November
28, 2016
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Isaac
Israel
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(Principal
Executive Officer)
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/s/
Simcha Rock
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Chief
Financial Officer and Director
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November
28, 2016
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Simcha
Rock
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(Principal
Financial Officer and
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Principal
Accounting Officer)
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/s/
Yair Katzir
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Director
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November
28, 2016
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Yair
Katzir
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/s/
Steven Steinberg
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Director
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November
28, 2016
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Steven
Steinberg
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Director
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Alain
Zeitoun
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/s/
Ido Agmon
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Director
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November
28, 2016
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Ido
Agmon
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/s/
Leah Bruck
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Director
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November
28, 2016
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Leah
Bruck
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Signature of authorized representative
in the United States
Pursuant to the
requirements of the Securities Act of 1933, as amended, the Registrant’s duly authorized representative has signed this Post-Effective
Amendment No. 2 to Form F-1 on Form F-3 on this 28
th
day of November 2016.
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By:
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Puglisi & Associates
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Authorized U.S. Representative
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By:
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/s/ Donald J. Puglisi
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Name:
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Donald J. Puglisi
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Title:
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Managing Director
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EXHIBIT INDEX
Exhibit Number
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Exhibit Description
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1.1
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Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 to the Registrant’s Registration Statement on Form F-1/A filed with the Securities and Exchange Commission on November 18, 2015).
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3.1
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Amended and Restated Articles of Association of the Registrant incorporated by reference to Exhibit 99.1 to the Registrant’s Form 6-K furnished to the Securities and Exchange Commission on March 3, 2016).
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3.2
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Certificate of Company Name Change (both unofficial English translations from Hebrew) included as part of Exhibit 3.1 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015, and incorporated herein by reference).
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3.3
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The Israeli Companies Ordinance Memorandum of Association of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on June 27, 2016).
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4.1
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Form of Deposit Agreement among the Registrant, the Bank of New York Mellon, as Depositary, and all Owners and Holders from time to time of American Depositary Shares issued hereunder (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015).
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4.2
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Form of American Depositary Receipt (included in Exhibit 4.1).
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4.3
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Form of Warrant Agent Agreement, including form of Warrant Certificate with respect to Series A Warrants (incorporated by reference to Exhibit 4.2 to Amendment No. 2 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on November 17, 2015, and incorporated herein by reference).
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4.4
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Form of Letter Amendment to Warrant Agent Agreement (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 6-K furnished to the Securities and Exchange Commission on June 29, 2016)
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4.5
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Form of Underwriters' Warrant (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form F-1/A as filed with the Securities and Exchange Commission on November 18, 2015).
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4.6
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Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on June 27, 2016).
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5.1
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Form of Opinion of Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co., Israeli counsel to the Registrant, as to the validity of the ordinary shares (incorporated by reference to Exhibit 5.1 to the Registrant’s Registration Statement on Form F-1MEF as filed with the Securities and Exchange Commission on November 20, 2015).
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10.1†
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Development Services Agreement, dated as of April 1, 2014, by and between Kitov Pharmaceuticals Holdings Ltd. and Dexcel Ltd. (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015).
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10.2
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Master Research Services Agreement, including Work Order No. 1, dated February 4, 2014, between Kitov Pharmaceuticals Holdings Ltd. and Java Clinical Research Limited (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015).
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10.3
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Change Order Forms under Master Research Services Agreement between Kitov Pharmaceuticals Holdings Ltd. and Java Clinical Research Limited dated March 26, 2014, September 22, 2014, and April 2, 2015 (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015).
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10.4
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Work Order No. 2 under Master Research Services Agreement between Kitov Pharmaceuticals Holdings Ltd. and Java Clinical Research Limited dated September 7, 2016.
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10.5
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Share Transfer Agreement, dated as of April 2, 2013, Kitov Pharmaceuticals Holdings Ltd. (then known as Mainron
Line Logisitics Ltd.), Kitov Pharmaceuticals Ltd., the shareholders of Kitov Pharmaceuticals, Sheer Roichman and Haiku Capital
Ltd. (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form F-1 filed with the
Securities and Exchange Commission on September 24, 2015).
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10.6
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Form of Letter of Exemption adopted on July 2013 (unofficial English translation from Hebrew) (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015).
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10.7
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Form of Letter of Indemnity adopted on July 2013 (unofficial English translation from Hebrew) (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015).
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10.8
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2013 Stock Option Plan, as amended (unofficial English translation from Hebrew) (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015).
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10.9
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Loan Agreement, dated August 12, 2015 between Kitov Pharmaceuticals Holdings Ltd. and certain lenders (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015).
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10.10
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2016 Equity-Based Incentive Plan (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration
Statement on Form F-1 as filed with the Securities and Exchange Commission on May 20, 2016).
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21.1
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List of subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrant’s Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015).
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23.1
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Consent of Somekh Chaikin, independent registered public accounting firm, a Member Firm of KPMG International
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23.2
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Consent of Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co., Israeli counsel to the Registrant (included in Exhibit 5.1)
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† Portions of this exhibit have
been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.
II-9
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