DESCRIPTION
OF SHARE CAPITAL
The
following description of our share capital and provisions of our articles of association are summaries and do not purport to be
complete.
Authorized
Share Capital. Our authorized share capital is 250,000,000 ordinary shares, with no par value, and 50,000,000 non-voting senior
preferred shares, with no par value, divided into 5 classes of 10,000,000 preferred shares in each class. As of December 31, 2018,
we had we had 16,009,264 ordinary shares outstanding (after giving effect to a reverse share split of our ordinary shares, at
an exchange ratio of 1-for-20, which was completed on January 4, 2019, which ordinary shares would be represented by 16,009,264
of our ADSs) and no non-voting senior preferred shares outstanding, and as of September 15, 2019, we had 19,532,143 ordinary shares
outstanding (which would be represented by 19,532,143 of our ADSs) and no non-voting senior preferred shares outstanding. The
above amounts include 1 dormant ordinary share held in treasury. The shares outstanding amounts above do not include the shares
we expect to issue following completion of the transactions for our acquisition of FameWave and the concurrent investment in the
Company by certain shareholders of FameWave in a private placement, pursuant to which we agreed to issue at closing of the transactions
an additional 10,921,139 ADSs representing an equivalent number of our ordinary shares.
Ordinary
Shares
The
following is a description of our ordinary shares.
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. On December 5, 2016, our shareholders approved the amendment
to our amended and restated articles of association, as well as to our memorandum of association, for the addition to Kitov Pharma’s
registered share capital of 50,000,000 non-voting senior preferred shares, with no par value, divided into 5 classes of 10,000,000
preferred shares in each class (the “Preferred Shares”).
Pursuant
to our amended and restated articles of association, our board of directors is authorized 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. In March 2017, the TASE issued principles for directives in connection with the issuance of preferred shares by a company
whose ordinary shares are listed on TASE.
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, change of control 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.
Transfer
agent and registrar
Our
transfer agent and registrar is the depositary for our ADSs, Bank of New York Mellon, and its address is 101 Barclay Street, New
York, NY.
Listing
Our
ADSs and the “Series A” investor warrants issued in each of November 2015 and July 2016 are listed on NASDAQ under
the symbols “KTOV” and “KTOVW”, respectively.
PLAN
OF DISTRIBUTION
We
are registering the securities issued to the selling shareholders to permit the resale of these securities by the holders thereof
from time to time after the date of this prospectus, pursuant to the provisions of the Registration Rights Agreement. As used
in this Prospectus, “selling shareholders” includes donees, pledgees, transferees or other successors-in-interest
selling shares received after the date of this prospectus from a selling shareholder as a gift, pledge, partnership distribution
or other permitted transfer.
We
will not receive any of the proceeds from the sale by the selling shareholders of the securities. We will bear all fees and expenses
incident to our obligation to register the securities.
The
selling shareholders may sell all or a portion of the securities beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the securities are sold through underwriters or broker-dealers,
the selling shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. The securities
may be sold on any national securities exchange or quotation service on which the securities may be listed or quoted at the time
of sale, in the over-the-counter market or in transactions otherwise than on these exchanges or systems or in the over-the-counter
market and in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses
or block transactions. The selling shareholders may use any one or more of the following methods when selling shares:
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ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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block
trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
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an
exchange distribution in accordance with the rules of the applicable exchange;
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privately
negotiated transactions;
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settlement
of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
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broker-dealers
may agree with the selling shareholders to sell a specified number of such securities at a stipulated price per share;
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through
the writing or settlement of options or other hedging transactions, whether such options are listed on an options exchange or
otherwise;
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a
combination of any such methods of sale; and
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any
other method permitted pursuant to applicable law.
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The
selling shareholders also may resell all or a portion of the securities in open market transactions in reliance upon Rule 144
under the Securities Act, as permitted by that rule, or Section 4(a)(1) under the Securities Act, if available, rather than under
this prospectus, provided that they meet the criteria and conform to the requirements of those provisions.
Broker-dealers
engaged by the selling shareholders may arrange for other broker-dealers to participate in sales. If the selling shareholders
effect such transactions by selling securities to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers
or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders or commissions
from purchasers of the securities for whom they may act as agent or to whom they may sell as principal. Such commissions will
be in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction
will not be in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction
a markup or markdown in compliance with FINRA Rule 2121.01.
In
connection with sales of the securities or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging in positions
they assume. The selling shareholders may also sell securities short and if such short sale shall take place after the date that
this Registration Statement is declared effective by the Commission, the selling shareholders may deliver securities covered by
this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling shareholders
may also loan or pledge securities to broker-dealers that in turn may sell such shares, to the extent permitted by applicable
law. The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The
selling shareholders may, from time to time, pledge or grant a security interest in some or all of the securities owned by them
and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the securities
from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933, as amended, amending, if necessary, the list of selling shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer and
donate the securities in other circumstances in which case the transferees, donees, pledgees or other successors in interest will
be the selling beneficial owners for purposes of this prospectus.
The
selling shareholders and any broker-dealer or agents participating in the distribution of the securities may be deemed to be “underwriters”
within the meaning of Section 2(a)(11) of the Securities Act in connection with such sales. In such event, any commissions paid,
or any discounts or concessions allowed to, any such broker-dealer or agent and any profit on the resale of the shares purchased
by them may be deemed to be underwriting commissions or discounts under the Securities Act. Selling Shareholders who are “underwriters”
within the meaning of Section 2(a)(11) of the Securities Act will be subject to the applicable prospectus delivery requirements
of the Securities Act including Rule 172 thereunder and may be subject to certain statutory liabilities of, including but not
limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934, as amended,
or the Exchange Act.
Each
selling shareholder, other than H.C. Wainwright & Co. LLC, has informed the Company that it is not a registered broker-dealer.
Each selling shareholder has informed the Company that it does not have any written or oral agreement or understanding, directly
or indirectly, with any person to distribute the securities. Upon the Company being notified in writing by a selling shareholder
that any material arrangement has been entered into with a broker-dealer for the sale of common stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus
will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling shareholder
and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the securities were
sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus,
and (vi) other facts material to the transaction. In no event shall any broker-dealer receive fees, commissions and markups, which,
in the aggregate, would exceed eight percent (8.0%).
Under
the securities laws of some states, the securities may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the securities may not be sold unless such shares have been registered or qualified for sale in such
state or an exemption from registration or qualification is available and is complied with. Subject to the terms of the Registration
Rights Agreement, the Company has no obligation to qualify the resale of any shares in any particular state.
There
can be no assurance that any selling shareholder will sell any or all of the securities registered pursuant to the shelf registration
statement, of which this prospectus forms a part.
Each
selling shareholder and any other person participating in such distribution will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange
Act, which may limit the timing of purchases and sales of any of the securities by the selling shareholder and any other participating
person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the
securities to engage in market-making activities with respect to the shares of Common Stock. All of the foregoing may affect the
marketability of the securities and the ability of any person or entity to engage in market-making activities with respect to
the shares of Common Stock.
We
will pay all expenses of the registration of the securities pursuant to the registration rights agreement, including, without
limitation, Securities and Exchange Commission filing fees and expenses of initial compliance with state securities or “blue
sky” laws; provided, however, that each selling shareholder will pay all underwriting discounts and selling commissions,
if any and any related legal expenses incurred by it.
EXPENSES
OF THE OFFERING
The
following is a statement of estimated expenses to be incurred by us in connection with the registration of the securities registered
hereby, all of which will be borne by us. All amounts shown are estimates except the SEC registration fee.
SEC registration fees
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$
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182.42
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Legal fees and expenses
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$
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5,000
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Accountant’s fees and expenses
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$
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1,500
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Total
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$
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6,682.42
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INCORPORATION
OF CERTAIN DOCUMENTS 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 December 31, 2018, filed with the SEC on March 26, 2019 (as amended by
the Form 20-F/A amendment filed on April 3, 2019); and
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our
reports on Form 6-K furnished to the SEC on April 1, 2019, April 8, 2019, April 12, 2019 (excluding Exhibits 99.1 and 99.2
thereto), April 29, 2019, May 2, 2019 (excluding Exhibit 99.1 thereto), May 10, 2019, June 27, 2019, July 2, 2019, July 12, 2019, August 8, 2019 (excluding Exhibit 99.1 thereto other than the text which is found under the heading entitled “Financial
Results for Six-Month Period Ended June 30, 2019” in Exhibit 99.1 thereto), August 13, 2019, August 20, 2019, August 26, 2019, and September 9, 2019.
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The
information relating to us contained in this prospectus does not purport to be comprehensive and should be read together with
the information contained in the documents incorporated or deemed to be incorporated by reference in this prospectus.
As
you read the above documents, you may find inconsistencies in information from one document to another. If you find inconsistencies
between the documents and this prospectus, you should rely on the statements made in the most recent document. All information
appearing in this prospectus is qualified in its entirety by the information and financial statements, including the notes thereto,
contained in the documents incorporated by reference herein.
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
Pharma Ltd.
One
Azrieli Center, Round Tower
132
Menachem Begin Rd.
Tel
Aviv 6701101, Israel
Tel:
+972-3-9333121
Attention:
Chief Financial Officer