As filed with the
Securities and Exchange Commission on March 11, 2020
Registration No. 333-235729
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
Amendment No. 2
to
Form
F-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
KITOV
PHARMA LTD.
(Exact
Name of Registrant as Specified in its Charter)
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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
132
Menachem Begin Road, Tel Aviv 6701101, Israel
+972-3-933-3121
(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 area code, and telephone number, including area code, of agent for service)
Copies
to:
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Avraham
Ben-Tzvi, Adv.
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Rick
A. Werner, Esq.
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Robert
L. Grossman, Esq.
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ABZ
Law Office
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Haynes
and Boone, LLP
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Drew
M. Altman, Esq.
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15
Yad Harutzim St.
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30
Rockefeller Plaza,
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Greenberg
Traurig, P.A.
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Suite
203
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26th
Floor
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333
S.E. 2nd Avenue
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Jerusalem
9342152, Israel
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New
York, New York 10112
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Miami,
Florida 33131
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Tel:
+972 79 572-2070
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Tel:
+1 212 659-7300
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Tel
+1 305 579-0500
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Approximate
date of commencement of proposed sale to the public:
As
soon as practicable after the effective date 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, please
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. ☐
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging
growth company ☒
If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards†
provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
†
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.
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 which 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 this Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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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PRELIMINARY
PROSPECTUS
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SUBJECT
TO COMPLETION
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DATED
MARCH 11, 2020
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Up to 13,913,043 Units
(each Unit consists
of one American Depositary Share and one Warrant to purchase one American Depositary Share)
Up to 13,913,043
Pre-Funded Units (each Pre-Funded Unit consist of one Pre-Funded Warrant to purchase one American Depositary Share and one Warrant
to purchase one American Depositary Share)
American Depositary
Shares underlying the Pre-Funded Warrants and
American Depositary
Shares underlying the Warrants
We are offering up to
13,913,043 units, or the “Units”, with each Unit consisting of (i) one American Depositary Share, or ADS, and (ii)
one warrant to purchase one ADS, or a “ordinary warrant.” Each ADS represents one ordinary share, no par value. The
ordinary warrants will have an exercise price of $_________ per ADS, will be exercisable at any time
after the date of issuance and will expire five years from the date of issuance. Each Unit will be sold at a negotiated
price of $_________ per Unit.
We are also offering to
those purchasers, if any, whose purchase of Units in this offering would result in the purchaser, together with its affiliates
and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding
ordinary shares immediately following the consummation of this offering, the opportunity to purchase, in lieu of Units that would
otherwise result in ownership in excess of 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding ordinary shares,
pre-funded units, or the “Pre-funded Units”, with each Pre-funded Unit consisting of (i) a pre-funded warrant to purchase
one ADS, or a “pre-funded warrant,” and (ii) one ordinary warrant. Because we will issue a ordinary warrant as
part of each Unit or Pre-funded Unit, the number of ordinary warrants sold in this offering will not change as a result of a change
in the mix of the Units and Pre-funded Units sold. Each pre-funded warrant contained in a Pre-funded Unit will be exercisable
for one ADS. The purchase price of each Pre-funded Unit will equal the price per Unit being sold to the public in this offering,
minus $0.0001, and the exercise price of each pre-funded warrant included in the Pre-funded Unit will be $0.0001 per ADS. The
pre-funded warrants will be immediately exercisable and may be exercised until the earlier of (X) for so long as our ordinary
shares (or securities otherwise convertible into such) are listed for trading on the Tel Aviv Stock Exchange, or “TASE,”,
and we are permitted by applicable law to issue only one class of ordinary shares, prior to the end of business on the fifteenth
anniversary of the date of the issuance and (Y) until all of the pre-funded warrants are exercised in full.
For each Pre-funded Unit
we sell, the number of Units we are offering will be decreased on a one-for-one basis. Units and the Pre-funded Units will not
be issued or certificated. The ADSs or pre-funded warrants, as the case may be, and the ordinary warrants included in the Units
or the Pre-funded Units, can only be purchased together in this offering, but the securities contained in the Units or Pre-funded
Units will be issued separately and will be immediately separable upon issuance.
The ADSs issuable from
time to time upon exercise of the ordinary warrants and the pre-funded warrants are also being offered by this prospectus. We
refer to the ADSs issued or issuable upon exercise of the ordinary warrants and pre-funded warrants, and the ADSs, the ordinary
warrants and pre-funded warrants being offered hereby, collectively, as the “securities.”
Our ordinary shares are
currently traded on the TASE under the symbol “KTOV.” The last reported sale price of our ordinary shares on TASE
on March 9, 2020 was NIS 1.653, or $0.4712, per share (based on the exchange rate reported by the Bank of Israel as of that date,
which was NIS 3.5080 = $1.00).
Our ADSs are currently
listed on The Nasdaq Capital Market, or “NASDAQ,” under the symbols “KTOV”. The last reported sale price
of our ADSs on The Nasdaq Capital Market on March 10, 2020 was $0.4623.
There is no established
public trading market for the ordinary warrants or the pre-funded warrants, and we do not expect a market to develop. In addition,
we do not intend to apply for a listing of the ordinary warrants or the pre-funded warrants on any national securities exchange
or other nationally recognized trading system. Without an active trading market, the liquidity of the ordinary warrants or the
pre-funded warrants will be limited.
We have assumed a public
offering price of $0.575 per Unit, the last reported sale price for our ADSs as reported on NASDAQ on March 6, 2020, and $0.5749
per Pre-funded Unit. The public offering price per Unit or Pre-funded Unit, as the case may be, will be determined through negotiation
between us and the investors in the offering and may be at a discount to the current market price. Therefore, the recent market
price used as the assumed public offering price throughout this prospectus may not be indicative of the offering price.
We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 and will be subject to reduced public company
reporting requirements.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 5 of this prospectus for
a discussion of information that should be considered in connection with an investment in our ADSs and warrants.
Neither
the Securities and Exchange Commission, the Israeli Securities Authority, nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
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Per Unit
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Per Pre-
funded Unit
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Total
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Public offering price
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$
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$
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$
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Placement agent fees(1)
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$
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$
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$
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Proceeds to us (before expenses)(2)
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$
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$
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$
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(1)
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We
have agreed to pay the placement agent a cash fee and a management fee, equal to 7.0% and 1.0%, respectively, of the gross
proceeds raised in this offering, and to reimburse the placement agent for certain of its offering-related expenses. In addition,
we have agreed to issue the placement agent or its designees warrants to purchase a number of ADSs equal to 7.0% of the aggregate
number of ADSs sold in this offering (including the number of ADSs issuable upon exercise of the pre-funded warrants), at
an exercise price of $_____ per ADS, which represents 125% of the public offering price per unit. See “Plan of
Distribution” for a description of the compensation to be received by the placement agent.
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(2)
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Does
not include proceeds from the exercise of the ordinary warrants or the pre-funded warrants in cash, if any.
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We have engaged H.C.
Wainwright & Co., LLC (“Wainwright” or the “placement agent”) to act as our exclusive placement agent
in connection with this offering. The placement agent is not purchasing or selling the securities offered by us, and is not required
to sell any specific number or dollar amount of securities, but will use its reasonable best efforts to arrange for the sale of
the securities offered by this prospectus. Because there is no minimum offering amount required as a condition to closing in this
offering, the actual public offering amount, placement agent fees, and proceeds to us, if any, are not presently determinable
and may be substantially less than the total maximum offering amounts set forth above. In either event, this offering may be closed
without further notice to you.
Delivery of the securities
is expected to be made on or about_________, 2020, subject to customary closing conditions.
H.C. Wainwright &
Co.
The date of this prospectus
is_________, 2020
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
You
should rely only on the information provided or incorporated by reference in this prospectus, as well as the additional
information described under “Incorporation of Certain Documents by Reference” on page 64 of this prospectus.
Neither we nor the placement agent have authorized anyone to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to purchase, the securities offered by this prospectus in any jurisdiction where it is unlawful
to make such offer or solicitation. You should not assume that the information contained in this prospectus, or any document
incorporated by reference in this prospectus, is accurate as of any date other than the date on the front cover of the
applicable document. Neither the delivery of this prospectus nor any distribution of securities pursuant to this prospectus
shall, under any circumstances, create any implication that there has been no change in the information set forth or
incorporated by reference into this prospectus or in our affairs since the date of this prospectus. Our business, financial
condition, results of operations and prospects may have changed since that date.
Before purchasing any
securities, you should carefully read this prospectus, together with the additional information described under the headings,
“Incorporation of Certain Documents by Reference,” and “Where You Can Find Additional Information” on
page 64 of this prospectus.
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
the context otherwise indicates or requires, all references to:
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the
terms “Registrant,” “Company,” “we,” “us,” “our,” and similar
designations refer to Kitov Pharma Ltd., together with (i) its now dissolved wholly owned subsidiary, Kitov Pharmaceuticals,
(ii) its majority owned subsidiary, TyrNovo, and, (iii) its wholly owned subsidiary, FameWave, except where otherwise stated
or where it is clear that the terms mean only Kitov Pharma Ltd. exclusive of any subsidiaries,
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“Kitov”
refer to the Registrant, together with its now dissolved wholly owned subsidiary, Kitov Pharmaceuticals, until completion
of the merger between the Registrant and Kitov Pharmaceuticals in December 2017, pursuant to which Kitov Pharmaceuticals merged
with and into the Registrant, with the Registrant remaining as the surviving entity,
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“Kitov
Pharma” refer to the Registrant, exclusive of its subsidiaries,
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“Kitov
Pharmaceuticals” refer to Kitov Pharmaceuticals Ltd., the now dissolved wholly owned subsidiary of the Registrant until
completion of the merger with the Registrant in December 2017, pursuant to which Kitov Pharmaceuticals merged with and into
the Registrant, with the Registrant remaining as the surviving entity,
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“TyrNovo”
refer to TyrNovo Ltd., the majority owned subsidiary of Kitov Pharma,
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“FameWave”
refer to FameWave Ltd., an Israeli private company which was acquired by Kitov Pharma in January 2020 and is now a wholly
owned subsidiary of Kitov Pharma,
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“FameWave
Transaction” refer to the acquisition of FameWave by Kitov Pharma pursuant to a stock purchase agreement, dated March
14, 2019, as amended (the “Acquisition Agreement”), together with the other transactions contemplated by the Acquisition
Agreement, which was completed in January 2020,
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the
terms “shekels”, “Israeli shekels” and “NIS” refer to New Israeli Shekels, the lawful
currency of the State of Israel,
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the
terms “dollar”, “US$” or “$” refer to U.S. dollars, the lawful currency of the United
States of America,
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the
terms “Euro” or “€” refer to the Euro, the lawful currency of the European Union member states,
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“ordinary
shares,” “our shares” and similar expressions refer to the Registrant’s Ordinary Shares, no par value
per share,
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“ADSs”
refer to the Registrant’s American Depositary Shares,
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“public
warrants” or “Series A warrants” refer to the Registrant’s warrants listed on The Nasdaq Capital Market
under the symbol KTOVW,
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the
“Companies Law” refer to Israel’s Companies Law, 5759-1999, as amended,
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the
“SEC” refer to the United States Securities and Exchange Commission, and
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“NASDAQ”
refer to The Nasdaq Capital Market, except where otherwise stated or where it is clear that the term means any of the NASDAQ
exchanges.
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Unless otherwise indicated, all information
contained in this prospectus gives retrospective effect to (i) a consolidation of Kitov Pharma’s share capital at a ratio
of 1:13, which was effected on November 30, 2014, or the “2014 Consolidation,” so that: (A) each 13 ordinary shares
of Kitov Pharma was consolidated into one ordinary share of Kitov Pharma; and (B) each of Kitov Pharma’s options (tradable
and non-tradable) outstanding immediately prior to the 2014 Consolidation was adjusted by multiplying the number of ordinary shares
into which such option was exercisable by 1/13 (rounded to 0.07692); and (ii) a consolidation of Kitov Pharma’s share capital
at a ratio of 1:20, which was effected on January 4, 2019, or the “reverse share split,” so that: (A) each 20 ordinary
shares of Kitov Pharma was consolidated into one ordinary share of Kitov Pharma and (B) each of Kitov Pharma’s options (tradable
and non-tradable) exercisable into ordinary shares outstanding immediately prior to the reverse share split was consolidated so
that each option exercisable into 20 ordinary shares would be exercisable for one ordinary share of Kitov Pharma at an exercise
price equal to the pre-reverse share split exercise price multiplied by 20.
PROSPECTUS
SUMMARY
This
summary highlights selected information about us, this offering and information contained in greater detail elsewhere in this
prospectus and in the documents incorporated by reference herein. This summary is not complete and does not contain all of the
information that you should consider before investing in our securities. You should carefully read and consider this entire prospectus
and the documents, including financial statements and related notes, and information incorporated by reference into this prospectus,
including the “Risk Factors” starting on page 5 of this prospectus, before
making an investment decision. If you invest in our securities, you are assuming a high degree of risk.
Overview
We
are a clinical-stage company advancing first-in-class therapies to overcome tumor immune evasion and drug resistance, seeking
to create successful long-lasting treatments for people with cancer.
We
currently have two operating segments:
(i) Oncology, which includes
CM-24, a monoclonal antibody which binds/specific to Carcinoembryonic Antigen Related Cell Adhesion Molecule 1 (“CEACAM1”),
a novel immune checkpoint that supports tumor immune evasion and survival through multiple pathways and NT219, a small molecule
that targets Insulin Receptor Substrate 1 and 2 (“IRS1/2”) and Signal Transducer and Activator of Transcription (“STAT3”),
two signal transduction pathways involved in the development of cancer drug resistance mechanisms. Within the Oncology segment:
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We
are advancing a phase 1/2 clinical trial with CM24 in combination with nivolumab (Opdivo®)
in patients with non-small cell lung cancer which is under a clinical collaboration agreement
previously signed with Bristol-Myers Squibb Company which is planned to be initiated
in the second half of 2020.
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We
are advancing NT219 to a Phase 1/2 study as a single agent followed by a dose escalation
phase of NT-219 in combination with cetuximab; and an expansion phase of NT-219 at its
recommended Phase 2 level, alone and in combination with a standard dose of cetuximab.
Based on our current development plans, we expect to submit an Investigational New Drug
application for NT219 during the first half of 2020;
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(ii) Pain and Hypertension,
which includes Consensi™, a combination drug approved by the FDA in May 2018 for the simultaneous treatment of two clinical
conditions, pain caused by osteoarthritis and hypertension (high blood pressure), which can be pre-existing or caused by the treatment
for osteoarthritis.
In addition, we may
consider the acquisition of oncology therapeutic candidates at various stages of development. We currently have no binding agreements
or commitments to complete any transaction for the possible acquisition of new therapeutic candidates or approved drug products.
NASDAQ Minimum Bid Price Requirement
On
July 8, 2019, we received a letter from the Listing Qualifications Department of NASDAQ indicating that, based upon the closing bid
price of our ADSs for the last 30 consecutive business days, we did not meet the minimum bid price of $1.00 per
share required for continued listing on NASDAQ pursuant to NASDAQ Listing Rule 5550(a)(2). We were not able to regain compliance
with this requirement within the 180-day period ending on January 6, 2020. However, on January 7, 2020, we were granted an additional
180-day compliance period ending on July 6, 2020 (the “Second Compliance Period”). The NASDAQ determination to grant
the Second Compliance Period was based on the Company’s meeting the continued listing requirement for market value of publicly
held shares and all other NASDAQ initial listing standards, with the exception of the bid price requirement, and our written notice
of our intention to cure the deficiency during the Second Compliance Period by effecting a reverse share split, if necessary.
We can regain compliance with this requirement if at any time before the expiration of the Second Compliance Period the closing
bid price for our ADSs is at least $1.00 per share for a minimum of ten consecutive business days. In the event we do not regain
compliance during the Second Compliance Period, NASDAQ will provide notice that our securities will be subject to delisting. At
that time, we may appeal NASDAQ’s delisting determination to a NASDAQ Listing Hearings Panel. We intend to continue actively
monitoring the bid price of our ADSs between now and the expiration of the Second Compliance Period and will consider available
options to resolve the deficiency and regain compliance with the minimum bid price requirement, including a reverse share split,
if necessary.
Reverse
Share Split
On
January 4, 2019, we effected the reverse share split at an exchange ratio of 1-for-20. The reverse share split applied to all
of our outstanding ordinary shares and therefore did not affect any shareholders’ relative ownership percentage. All shares
and price per share numbers set forth in our Annual Report on Form 20-F for the year ended December 31, 2018, that are incorporated
by reference into this prospectus, are presented after giving effect to the reverse stock split. The reverse share split was not
a reverse split of our ADSs. Our ADSs continue to trade as before the reverse share split and represent the same underlying portion
of our share capital as they did prior to the reverse share split, however, after the reverse share split, each ADS represents
one ordinary share, as compared to 20 ordinary shares prior to the reverse share split.
Corporate
Information
Kitov
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 TASE in 1978. In November 2015, we completed an initial public offering of our ADSs and Series
A warrants on NASDAQ. Our principal executive offices are located at One Azrieli Center, Round Tower, 19th 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 such website or connected thereto shall not be deemed to be incorporated into this prospectus.
THE
OFFERING
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Units offered by us
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13,913,043
Units, each consisting of (i) one ADS and (ii) one ordinary warrant to purchase one ADS.
The Units will not be certificated, and the ADS and ordinary warrant comprising each
Unit are immediately separable and will be issued separately in this offering.
This prospectus also relates to the offering
of ADSs issuable upon the exercise of the ordinary warrants included in the Units.
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Pre-funded Units offered by us
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We are also offering to those purchasers,
if any, whose purchase of Units in this offering would result in the purchaser, together with its affiliates and certain related
parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%)of our outstanding ordinary shares immediately
following the consummation of this offering, the opportunity to purchase, in lieu of Units that would otherwise result in ownership
in excess of 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding ordinary shares, Pre-funded Units. The purchase
price of each Pre-funded Unit will equal the public offering price at which the Units are being sold to the public in this offering,
minus $0.0001, and the exercise price of each pre-funded warrant included in each Pre-funded Unit will be $0.0001 per ADS. For
each Pre-funded Unit we sell, the number of Units we are offering will be decreased on a one-for-one basis. Because we will issue
a ordinary warrant as part of each Unit or Pre-funded Unit, the number of ordinary warrants sold in this offering will not change
as a result of a change in the mix of the Units and Pre-funded Units sold.
Each Pre-funded Unit will consist of (i) one
pre-funded warrant to purchase one ADS and (ii) one ordinary warrant to purchase one ADS. The Pre-funded Units will not be certificated
and the pre-funded warrants and the ordinary warrants comprising each Pre-funded Unit are immediately separable and will be issued
separately in this offering.
This prospectus also relates to the offering
of ADSs issuable upon exercise of the pre-funded warrants and the ordinary warrants included in the Pre-Funded Units.
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The ADSs
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Each
ADS represents one ordinary share. The ADSs initially will be evidenced by American Depositary
Receipts (“ADRs”), executed and delivered by The Bank of New York Mellon, as depositary
(the “Depositary”).
The Depositary, as depositary,
will be the holder of the ordinary shares underlying your ADSs and you will have rights as provided in the Deposit Agreement
dated as of November 25, 2015, among us, The Bank of New York Mellon, as Depositary, and all owners and holders from time
to time of ADSs issued thereunder (the “Deposit Agreement”), a form of which has been filed as an exhibit
to the registration statement for which this prospectus forms a part.
Subject to compliance with the
relevant requirements set out in this prospectus, you may turn in your ADSs to the Depositary in exchange for ordinary
shares underlying your ADSs.
The Depositary will charge you
fees for such exchanges pursuant to the Deposit Agreement.
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Ordinary
warrants
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Each
ordinary warrant will have an exercise price of $_________ per ADS, will be exercisable
at any time after the date of issuance and will expire on the fifth anniversary of the
date of issuance. To better understand the terms of the ordinary warrants, you should
carefully read the “Description of Securities” section of this prospectus.
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Pre-funded Warrants
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Each
pre-funded warrant will have an exercise price of $0.0001 per ADS and will be exercisable any time after the date of issuance
and may be exercised until the earlier of (X) for so long as our ordinary shares (or securities otherwise convertible into
such) are listed for trading on the TASE, and we are permitted by applicable law to issue only one class of ordinary shares,
prior to the end of business on the fifteenth anniversary of the date of the issuance and (Y) until all of the pre-funded
warrants are exercised in full. To better understand the terms of the pre-funded warrants, you should carefully read the “Description
of Securities” section of this prospectus.
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Offering Price
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The
offering price is $_________ per Unit and $__________ per Pre-funded Unit.
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Total ordinary shares
outstanding immediately after this offering (1)
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44,572,544
ordinary shares, assuming that the maximum number of Units offered by this prospectus is sold in this offering, no sale of
Pre-funded Units and issuance of the maximum number of ADSs a tail fee to a previous placement agent (not including one ordinary
share held in treasury) (such number of ordinary shares would be represented by 44,572,544 ADSs).
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Use of Proceeds
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We
intend to use the net proceeds of this offering to fund the development of our oncology
therapeutic candidates and for general working capital purposes.
See “Use of Proceeds” for additional information.
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Listing
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Our ADSs are listed on NASDAQ under the symbol “KTOV”
and our ordinary shares currently trade on TASE in Israel under the symbol “KTOV”. The ordinary warrants or the
pre-funded warrants being issued as part of the Units or the Pre-funded Units, as applicable, are not listed on any securities
exchange and we do not intend to list the ordinary warrants or pre-funded warrant on NASDAQ, the TASE or any other national
securities exchange or any other recognized trading system, and we do not expect a market to develop for the ordinary warrants
or the pre-funded warrants. Without a trading market, the liquidity of the ordinary warrants or the pre-funded warrants will
be limited.
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Risk factors
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Before deciding to invest in our securities,
you should carefully consider the risks related to our business, this offering and our securities, and our location in Israel.
See “Risk Factors” on page 5 of this prospectus.
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Dividend Policy
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We have never declared or paid any cash
dividends to our shareholders, and we currently do not expect to declare or pay any cash dividends in the foreseeable future.
See “Dividend Policy” for more information.
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Depositary
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The Bank of New York Mellon.
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(1) Assumes the issuance in a private placement of 173,913 ADSs (and the underlying
173,913 ordinary shares) to a previous placement agent upon closing of this offering, which represents the maximum number of ADSs
payable as part of the tail fee to the previous placement agent, at the assumed public offering price of $0.575 per Unit. See
“Plan of Distribution” for a description of the compensation to be received by the previous placement agent.
The number of ordinary
shares to be outstanding after this offering is based on 30,485,588 ordinary shares outstanding as of March 6, 2020 (such number
of ordinary shares would be represented by 30,485,588 of our ADSs) and excludes:
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5,101,185
ordinary shares issuable at a weighted average exercise price of NIS 5.35 (approximately $1.55) 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 5,101,185 of our ADSs);
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7,134,790
ordinary shares underlying the ADSs issuable upon exercise of the Series A warrants and the representative’s warrants
issued in our initial public offering, and the Series A warrants and the placement agent warrants issued as part of our offering
in July 2016 (such number of ordinary shares would be represented by 7,134,790 of our ADSs);
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529,427
ordinary shares underlying ADSs issuable upon exercise of the warrants issued in connection with our July 2017 private placement
of warrants and the placement agent warrants issued as part of our July 2017 public offering (such number of ordinary shares
would be represented by 529,427 of our ADSs);
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1,858,200
ordinary shares underlying ADSs issuable upon exercise of the warrants issued in connection with our June 2018 private placement
of warrants and the placement agent warrants issued as part of our June 2018 public offering (such number of ordinary shares
would be represented by 1,858,200 of our ADSs);
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2,571,430
ordinary shares issuable upon exercise of the warrants issued in our January 2019 private placement with an exercise price
of $2.00 and 240,000 ordinary shares underlying ADSs issuable upon exercise of placement agent warrants with an exercise price
of $2.1875 issued to the placement agent in our January 2019 offering;
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4,037,805 ordinary
shares underlying ADSs issuable upon the exercise of warrants issued by us in connection with the closing of the FameWave
Transaction;
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54,472 ordinary
shares underlying ADSs issuable upon the exercise of options to purchase 54,472 ADSs to be awarded in connection with the
closing of the FameWave Transaction;
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27,236 ordinary
shares issuable upon the exercise of options to purchase 27,236 ordinary shares to be awarded in connection with the closing
of the FameWave Transaction;
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13,913,043 ordinary shares
underlying ADSs issuable upon the exercise of ordinary warrants to be issued to investors
in this offering at an exercise price of $_________ per ADS;
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●
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13,913,043 ordinary shares underlying ADSs issuable upon the exercise of pre-funded warrants
to be issued to investors in this offering at an exercise price of $0.0001 per ADS; and
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973,913 additional shares of ordinary
shares underlying ADSs upon the exercise of the placement agent’s warrants with an exercise price of $_________
per ADS to be issued to the placement agent in connection with this offering.
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Unless
otherwise stated, outstanding share information throughout this prospectus excludes such outstanding securities. Except as otherwise
indicated, all information in this prospectus assumes no sale of Pre-funded Units in this offering, which, if sold, would reduce
the number of Units that we are offering on a one-for-one basis and no exercise of the placement agent’s warrants to be
issued to the placement agent in connection with this offering.
RISK
FACTORS
An
investment in our securities involves certain risks. Before investing in our securities, you should carefully consider the risk
factors set forth below and in our most recent Annual Report on Form 20-F, or any updates in our Reports on Form 6-K, together
with all of the other information appearing in this prospectus or incorporated by reference into this prospectus. The risks so
described are not the only risks facing our company. Additional risks not presently known to us or that we currently deem immaterial
may also impair our business operations. Any of these risks could materially and adversely affect our business, financial condition,
results of operations and cash flows and could result in a loss of all or part of your investment. In any case, the value of the
securities offered by means of this prospectus could decline due to any of these risks, and you may lose all or part of your investment.
Risks related to our
financial condition and capital requirements
NASDAQ
has a listing requirement of a minimum closing bid price of $1.00 per share. If our ADSs cannot maintain the required minimum
closing bid price and we fail to correct the listing requirement deficiency within the provided cure period, our ADSs may be involuntarily
delisted from NASDAQ.
Our ADSs are listed on
NASDAQ, and the quantitative listing standards of NASDAQ require, among other things, that listed companies maintain a minimum
closing bid price of $1.00 per ADS. On July 8, 2019, we received a letter from the Listing Qualifications Department
of NASDAQ indicating that, based upon the closing bid price of our ADSs for the last 30 consecutive business days, we
did not meet the minimum bid price of $1.00 per share required for continued listing on NASDAQ pursuant to NASDAQ Listing
Rule 5550(a)(2). We were not able to regain compliance with this requirement within the 180-day period ending on January 6, 2020.
However, on January 7, 2020, we were granted an additional 180-day compliance period ending on July 6, 2020 (the “Second
Compliance Period”). We can regain compliance with this requirement if at any time before the expiration of the Second Compliance
Period the closing bid price for our ADSs is at least $1.00 per share for a minimum of ten consecutive business days. In the event
we do not regain compliance during the Second Compliance Period, NASDAQ will provide notice that our securities will be subject
to delisting. At that time, we may appeal NASDAQ’s delisting determination to a NASDAQ Listing Hearings Panel. If we fail
to regain compliance within our applicable cure period, or fail to satisfy other listing requirements, our ADSs may be subject
to delisting.
To
resolve the noncompliance, we may consider available options including a reverse share split, which may not result in a permanent
increase in the market price of our ADSs, which is dependent on many factors, including general economic, market and industry
conditions and other factors detailed from time to time in the reports we file with the Securities and Exchange Commission. It
is not uncommon for the market price of a company’s shares to decline in the period following a reverse share split.
Although
we expect to take actions intended to restore our compliance with the listing requirements, we can provide no assurance that any
action taken by us would be successful, or that any such action would stabilize the market price or improve the liquidity of our
ADSs. Should a delisting occur, an investor would likely find it significantly more difficult to dispose of, or to obtain accurate
quotations as to the value of our ADSs, and our ability to raise future capital through the sale of our ADSs could be severely
limited. Delisting would also impact some of our disclosure obligations under Israeli law. Following a delisting, we will remain
a publicly traded company on TASE and revert to being subject to full Israeli securities laws and disclosure requirements. Accordingly,
we will need to comply with U.S. and Israeli disclosure requirements and the resolution of any conflicts between those requirements
may lead to additional costs and require significant management time. Furthermore, we expect these additional reporting rules
and regulations would increase our legal and financial compliance costs.
In
the event that our ADSs are delisted from NASDAQ, U.S. broker-dealers may be discouraged from effecting transactions in shares
of our ADSs because they may be considered penny stocks and thus be subject to the penny stock rules.
The
SEC has adopted a number of rules to regulate “penny stock” that restrict transactions involving stock which is deemed
to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
and Exchange Act of 1934, as amended (the “Exchange Act”). These rules may have the effect of reducing the liquidity
of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than
securities registered on certain national securities exchanges or quoted on NASDAQ if current price and volume information with
respect to transactions in such securities is provided by the exchange or system). Following a delisting from NASDAQ our ADSs
may constitute “penny stock” within the meaning of these rules. The additional sales practice and disclosure requirements
imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions our ADSs, which could severely
limit the market liquidity of such ADSs and impede their sale in the secondary market.
A
U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally,
an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or
her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent
to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny
stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”,
a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer
or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer
and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit
monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s
account and information with respect to the limited market in “penny stocks”.
Securities
holders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that
are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic
price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated
to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of practical limitations to prevent the described patterns
from being established with respect to our securities.
The recent coronavirus
outbreak may adversely affect our revenues, results of operations and financial condition.
In December 2019, a strain of coronavirus
was reported to have surfaced in Wuhan, China, and has reached multiple other countries, resulting in government-imposed quarantines,
travel restrictions and other public health safety measures in China, the USA, Israel, and other affected countries. The various
precautionary measures taken by many governmental authorities around the world in order to limit the spread of the Coronavirus,
which could have an adverse effect on the global markets and its economy, including on the availability and pricing of employees,
resources, materials, manufacturing and delivery efforts and other aspects of the global economy. Therefore, the Coronavirus could
disrupt, production and cause delays in the supply and delivery of products used in our operations, may affect our operation,
including the conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates
and products, may further divert the attention and efforts of the medical community to coping with the Coronavirus and disrupt
the marketplace in which we operate and may have a material adverse effects on our operations. The extent to which the coronavirus
impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information
which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among
others. The development of the coronavirus outbreak could materially disrupt our business and operations, slow down the overall
economy, curtail consumer spending, interrupt our sources of supply, and make it hard to adequately staff our operations.
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 to fund the development of our oncology therapeutic candidates and 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.
Because
the offering is being conducted on a “best efforts” basis, we may not raise the maximum proceeds set forth in this
prospectus, and even if we do, we will need additional capital in the future. If additional capital is not available, we may not
be able to continue to operate our business pursuant to our business plan or we may have to discontinue our operations entirely.
The placement agent
in this offering will offer the securities on a “best-efforts” basis with no minimum, meaning that we may raise substantially
less than the total maximum offering amount. As a “best efforts” offering, there can be no assurance that the offering
contemplated hereby will ultimately be consummated. If the offering is not consummated or we receive less than the maximum proceeds,
our business could be harmed.
We
have incurred losses in each year since our inception. If we continue to use cash at our historical rates of use and proceed with
potential acquisitions or in-licensing transactions we will need significant additional financing, which we may seek to raise
through, among other things, public and private equity offerings and debt financing. Any equity financings will likely be dilutive
to existing stockholders, and any debt financings will likely involve covenants restricting our business activities. Additional
financing may not be available on acceptable terms, or at all.
You
may experience immediate and substantial dilution in the net tangible book value of the ADSs you purchase in this offering.
The assumed offering
price of the ADSs underlying the Units and the Pre-funded Units offered pursuant to this prospectus is substantially higher than
the net tangible book value per ADS. Therefore, if you purchase Units or the Pre-funded Units in this offering, you will incur
immediate and substantial dilution in the pro forma net tangible book value per ADS from the price per unit that you pay for the
underlying ADS. If the holders of outstanding options or warrants exercise those options or warrants at prices below the assumed
offering price, you will incur further dilution. See the section entitled “Dilution” below for a more detailed discussion
of the dilution you will incur if you purchase securities in this offering.
There is no public
market for the warrants being offered in this offering.
There is no established
public trading market for the warrants being offered in this offering, and we do not expect a market to develop. In addition,
we do not intend to apply to list any of the warrants on any securities exchange or nationally recognized trading system, including
NASDAQ. Without an active market, the liquidity of the warrants will be limited.
Holders of the warrants
purchased in this offering will have no rights as ADS holders until such holders exercise such warrants and acquire our ADSs.
Until holders of warrants
purchased in this offering acquire our ADSs upon exercise thereof, holders of such warrants will have no rights with respect to
the shares of our ADSs underlying such warrants. Upon exercise of any of the warrants purchased in this offering, such holders
will be entitled to exercise the rights of an ADS holder only as to matters for which the record date occurs after the exercise
date.
The ordinary warrants
and placement agent warrants are speculative in nature.
The ordinary warrants
being sold in this offering have an exercise price of $________ per ADS and the placement agent warrants have an exercise price
of $______ per ADS. The ordinary warrants will expire on the fifth anniversary from the issuance date, and the placement agent
warrants will expire on the fifth anniversary from the effective date of this offering. In the event our ADS price does not exceed
the per share exercise price of the ordinary warrants or the placement agent warrants during the period when such warrants are
exercisable, such warrants will not have any value.
The ADSs, ordinary
warrants and pre-funded warrants have not been registered for offer in Israel and may be subject to resale limitations in Israel.
In the State of Israel,
the securities being offered hereby may not be offered to any person or entity other than persons or entities who are deemed Classified
Investors pursuant to the Israeli Securities Law, 5728-1968. 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
securities 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, and we have no intention of seeking any no-action letter from the ISA in connection
with this offering. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus may
be subject to restrictions on transferability, including 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, and must be effected only in compliance with the Israeli securities laws and regulations. To the extent that any securities
in this offering are acquired in Israel on a private placement basis and are subject to restrictions on transferability, including
the resale restrictions set forth in the Israeli securities laws and regulations, and transfers within Israel must be effected
only in compliance with the Israeli securities laws and regulations, the transferability or the liquidity of the securities in
Israel will be limited.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the information incorporated by reference herein 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 and the information incorporated by reference herein contain information obtained from independent industry
and other sources that we have not independently verified. 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.
Our
ability to predict our operating results or the effects of various events on our operating results is inherently uncertain. Therefore,
we caution you to consider carefully the matters described under the caption “Risk Factors” on page 5
of this prospectus, and certain other matters discussed in this prospectus and the information incorporated by reference
herein, and other publicly available sources. Such factors and many other factors beyond our control could cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements that may be expressed
or implied by the 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:
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the
initiation, timing, progress and results of our research, manufacturing, preclinical studies, clinical trials, and other therapeutic
candidate development efforts, as well as the extent and number of additional studies that we may be required to conduct;
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our
ability to advance our therapeutic candidates into clinical trials or to successfully complete our preclinical studies or
clinical trials;
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our
receipt of regulatory clarity and approvals for our therapeutic candidates and the timing of other regulatory filings and
approvals;
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our
ability to successfully meet our post marketing commitments to FDA for Consensi™ and to obtain approvals for marketing
of Consensi™ in other territories than the U.S.;
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a
delay or rejection of an NDA or BLA for one or more of our therapeutic candidates;
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our
ability to regain and maintain compliance with the NASDAQ listing standards;
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the
regulatory environment and changes in the health policies and regimes in the countries in which we operate including the impact
of any change in regulation and legislation that could affect the pharmaceutical industry, and the difficulty of predicting
actions of the FDA or any other applicable regulator of pharmaceutical products;
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the
research, manufacturing, preclinical and clinical development, commercialization, and market acceptance of our therapeutic
candidates;
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our
ability to successfully acquire, develop or commercialize our pharmaceutical products;
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the
ability of our commercialization partners to successfully achieve substantial sales for our drug products;
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our
ability to establish and maintain corporate collaborations;
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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;
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the
implementation of our business model, strategic plans for our business and therapeutic candidates;
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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;
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estimates
of our expenses, revenues, capital requirements and our needs for additional financing;
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the
impact of competitive companies, technologies and our industry; and
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the
impact of the public health, political and security situation in Israel, the U.S. and
other countries in which we may obtain approvals for our products or our business.
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USE
OF PROCEEDS
We
estimate that our net proceeds from this offering will be approximately $7.0 million, based on the sale of the maximum amount
of 13,913,043 Units in this offering at an assumed public offering price of $0.575 per Unit (the last reported sale price of our
ADSs on NASDAQ on March 6, 2020) after deducting the placement agent fees and estimated offering expenses payable by us (including
cash payment to the previous placement agent). However, this is a best efforts offering with no minimum, and we may not sell all
or any of the securities we are offering. As a result, we may receive significantly less in net proceeds.
If a holder of ordinary
warrants elects to exercise the ordinary warrants issued in this offering, we may also receive proceeds from the exercise of the
ordinary warrants. We cannot predict when or if the ordinary warrants will be exercised. It is possible that the ordinary warrants
may expire and may never be exercised.
Each
$0.25 increase or decrease in the assumed public offering price of $0.575 per Unit would increase or decrease, respectively,
our net proceeds by $3.48 million, assuming the maximum number of Units offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting placement agent fees and estimated offering expenses payable by us. We may also
increase or decrease the number of Units we are offering. An increase or decrease of 1,000,000 in the number of Units we are offering
would increase or decrease, respectively, the net proceeds from this offering, after deducting placement agent fees and estimated
offering expenses payable by us, by $0.58 million, assuming the
assumed public offering price stays the same.
We intend to use the net
proceeds of this offering to fund the development of our oncology drug candidates, acquisition of new assets and for general working
capital purposes.
Our
expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition.
Investors are cautioned, however, that expenditures may vary substantially from these uses. Investors will be relying on the judgment
of our management, who will have broad discretion regarding the application of the proceeds of this offering. The amounts and
timing of our actual expenditures will depend upon numerous factors, including the amount of cash generated by our operations,
the amount of competition and other operational factors. We may find it necessary or advisable to use portions of the proceeds
from this offering for other purposes.
DIVIDEND
POLICY
We
anticipate that, for the foreseeable future, we will retain any future earnings to support operations and to finance the growth
and development of our business. Therefore, we do not expect to pay cash dividends for at least the next several years. We did
not declare dividends during the three most recent fiscal years.
The
distribution of dividends may also be limited by the Companies Law, which permits the distribution of dividends only out of retained
earnings or earnings derived over the two most recent fiscal years, whichever is higher, provided that there is no reasonable
concern that payment of a dividend will prevent a company from satisfying its existing and foreseeable obligations as they become
due. Our amended and restated articles of association provide that dividends will be paid at the discretion of, and upon resolution
by, our Board of Directors, subject to the provision of the Companies Law.
CAPITALIZATION
The
following table sets forth our consolidated unaudited capitalization as of June 30, 2019 on
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on
a pro forma basis, to give effect to the issuance of 10,921,139 ordinary shares underlying ADSs issued by us in connection
with the closing of the FameWave Transaction; and
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on a pro forma
as adjusted basis, to give effect to the sale by us of (i) the maximum amount of 13,913,043
Units in this offering at an assumed public offering price of $0.575 per Unit, which
is the last reported sale price of our ADSs on NASDAQ on March 6, 2020, and no sale of
Pre-funded Units, after deducting placement agent fees and estimated offering expenses
payable by us and (ii) the payment of a net cash fee of $20,000 and the issuance in a
private placement of 173,913 ADSs to a previous placement agent, which are the maximum
“tail” fee payable to the previous placement agent, partially offset by the
management fee payable to Wainwright, assuming that the maximum number of Units offered
by us, as set forth on the cover page of this prospectus, at the assumed public offering
price of $0.575 per Unit, which is the last reported sale price of our ADSs on NASDAQ
on March 6, 2020, were purchased by non-Israeli investors.
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Our
capitalization following the closing of this offering will be adjusted based on the actual public offering price and other terms
of this offering determined at pricing. You should read this table together with our consolidated financial statements and the
related notes and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in our Annual Report on Form 20-F and our interim unaudited financial reports for the six-month period ended
June 30, 2019 which were furnished on Form 6-K, which are incorporated by reference herein.
The
amounts shown below are unaudited. The information in the following table should be read in conjunction with and is qualified
in its entirety by reference to the financial statements and notes thereto included in our most recent Annual Report on Form 20-F
and the other financial information incorporated by reference into this prospectus.
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(In thousands, except share
data)
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Actual
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Pro
Forma
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Pro
Forma
As Adjusted
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Cash
and cash equivalents and short-term deposits
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7,817
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11,317
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18,278
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Shareholders’ equity:
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|
Ordinary shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share premium
|
|
|
46,945
|
|
|
|
55,156
|
|
|
|
57,315
|
|
|
Receipts on account of warrants
|
|
|
7,940
|
|
|
|
7,940
|
|
|
|
7,940
|
|
|
Capital reserves
|
|
|
2,350
|
|
|
|
2,350
|
|
|
|
2,350
|
|
|
Accumulated deficit
|
|
|
(46,247
|
)
|
|
|
(46,247
|
)
|
|
|
(46,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders’ equity
|
|
|
10,988
|
|
|
|
19,199
|
|
|
|
21,358
|
|
|
Non-controlling interest
|
|
|
450
|
|
|
|
450
|
|
|
|
450
|
|
|
Total capitalization
|
|
|
11,438
|
|
|
|
19,649
|
|
|
|
21,808
|
|
A $0.25 increase or
decrease in the assumed public offering price of $0.575 per Unit, which is the last reported sale price of our ADSs on NASDAQ
on March 6, 2020, would increase or decrease, as appropriate, our as adjusted cash and cash equivalents, capital reserves, total
shareholders’ equity and total capitalization by approximately $1.08 million, assuming the number of Units offered by us
as set forth on the cover page of this prospectus remains the same, and after deducting placement agent fees and estimated offering
expenses payable by us, and excluding the proceeds, if any, from the exercise of ordinary warrants issued in this offering.
Similarly,
a 1,000,000 Unit increase or decrease in the number of Units offered by us, based on the assumed public offering price of $0.575
per Unit, would increase or decrease our as adjusted cash and cash equivalents, capital reserves and total shareholders’
equity by approximately $0.18 million, after deducting placement agent fees and estimated offering expenses payable by us, and
excluding the proceeds, if any, from the exercise of ordinary warrants issued in this offering.
The
number of ordinary shares to be outstanding after this offering is based on 19,532,143 ordinary shares outstanding as of June
30, 2019 (such number of ordinary shares would be represented by 19,532,143 of our ADSs) and excludes:
|
|
●
|
4,398,492
ordinary shares issuable at a weighted average exercise price of NIS 5.47 (approximately $1.57) 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 4,398,492 of our ADSs);
|
|
|
●
|
7,134,790
ordinary shares underlying the ADSs issuable upon exercise of the Series A warrants and the representative’s warrants
issued in our initial public offering, and the Series A warrants and the placement agent warrants issued as part of our offering
in July 2016 (such number of ordinary shares would be represented by 7,134,790 of our ADSs);
|
|
|
●
|
529,427
ordinary shares underlying ADSs issuable upon exercise of the warrants issued in connection with our July 2017 private placement
of warrants and the placement agent warrants issued as part of our July 2017 public offering (such number of ordinary shares
would be represented by 529,427 of our ADSs);
|
|
|
|
|
|
|
●
|
1,858,200
ordinary shares underlying ADSs issuable upon exercise of the warrants issued in connection with our June 2018 private placement
of warrants and the placement agent warrants issued as part of our June 2018 public offering (such number of ordinary shares
would be represented by 1,858,200 of our ADSs);
|
|
|
|
|
|
|
●
|
2,571,430
ordinary shares issuable upon exercise of the warrants issued in our January 2019 private placement with an exercise price
of $2.00 and 240,000 ordinary shares underlying ADSs issuable upon exercise of placement agent warrants with an exercise price
of $2.1875 issued to the placement agent in our January 2019 offering;
|
|
|
●
|
4,037,805 ordinary
shares underlying ADSs issuable upon the exercise of warrants issued by us in connection with the closing of the FameWave
Transaction;
|
|
|
|
|
|
|
●
|
54,472 ordinary
shares underlying ADSs issuable upon the exercise of options to purchase 54,472 ADSs to be awarded in connection with the
closing of the FameWave Transaction;
|
|
|
|
|
|
|
●
|
27,236 ordinary
shares issuable upon the exercise of options to purchase 27,236 ordinary shares to be awarded in connection with the closing
of the FameWave Transaction;
|
|
|
●
|
13,913,043
ordinary shares underlying ADSs issuable upon the exercise of ordinary warrants to be issued to investors in this offering
at an exercise price of $_________ per ADS;
|
|
|
●
|
13,913,043
ordinary shares underlying ADSs issuable upon the exercise of pre-funded warrants to be issued to investors in this offering
at an exercise price of $0.0001 per ADS; and
|
|
|
●
|
973,913
additional shares of ordinary shares underlying ADSs upon the exercise of the placement agent’s warrants with an exercise
price of $________ per ADS to be issued to the placement agent in connection with this offering.
|
DILUTION
If
you invest in our ADSs and warrants, your interest will be diluted immediately to the extent of the difference between the public
offering price per unit and the as-adjusted net tangible book value per ADS after this offering.
The
net tangible book value of our ADSs as of June 30, 2019 was approximately $5.3 million, or approximately $0.267 per ADS. Net tangible
book value per ADS represents the amount of our total tangible assets less total liabilities divided by the total number of our
ordinary shares outstanding as of June 30, 2019.
After
giving effect to (i) the issuance of 10,921,139 ordinary shares underlying the ADSs issued by us in connection with the closing
of the FameWave Transaction, (ii) the sale of the maximum amount of 13,913,043 Units in this offering at the assumed public offering
price of $0.575 per Unit, which is the last reported sale price of our ADSs on NASDAQ on March 6, 2020, and no sale of any Pre-funded
Units and after deducting the placement agent fees and estimated offering expenses payable by us in connection with this offering
and (iii) the payment of a net cash fee of $20,000 and the issuance in a private placement of 173,913 ADSs to a previous placement
agent, which are the maximum “tail” fee payable to the previous placement agent, partially offset by the management
fee payable to Wainwright, assuming that the maximum number of Units offered by us, as set forth on the cover page of this prospectus,
at the assumed public offering price of $0.575 per Unit, which is the last reported sale price of our ADSs on NASDAQ on March
6, 2020, were purchased by non-Israeli investors, our as adjusted net tangible book value as of June 30, 2019 would have been
approximately $8.4 million, or approximately $0.189 per ADS. This calculation assumes that none of the ordinary warrants issued
in offering are exercised and excludes the proceeds, if any, from the exercise of ordinary warrants. This represents an immediate
increase in net tangible book value of approximately $0.081 per ADS to our existing security holders and an immediate dilution
in as-adjusted net tangible book value of approximately $0.386 per ADS to purchasers of units in this offering, as illustrated
by the following table:
|
Assumed
public offering price per unit
|
|
|
|
|
|
$
|
0.575
|
|
|
Consolidated
net tangible book value per ADS as of June 30, 2019
|
|
$
|
0.267
|
|
|
|
|
|
|
Increase
in consolidated net tangible book value per ADS attributable to the offering
|
|
$
|
0.081
|
|
|
|
|
|
|
As
adjusted consolidated net tangible book value per ADS after this offering
|
|
|
|
|
|
$
|
0.189
|
|
|
Dilution
per ADS to new investors participating in this offering
|
|
|
|
|
|
$
|
0.386
|
|
The
information discussed above is illustrative only, and the dilution information following this offering will depend on the actual
public offering price and other terms of this offering determined at pricing. Each $0.25 increase or decrease in the assumed public
offering price of $0.575 per Unit, based on the last reported sale price for our ADSs on NASDAQ on March 6, 2020, would increase
or decrease the as adjusted net tangible book value per ADS after this offering by $0.024 per ADS and the dilution per share
to investors participating in this offering by $0.27 per ADS, assuming that the maximum number of Units offered by us, as set
forth on the cover page of this prospectus, remains the same and after deducting placement agent fees and estimated offering expenses
payable by us and excluding the proceeds, if any, from exercise of the ordinary warrants issued in this offering.
We
may also increase or decrease the number of Units we are offering. An increase of 1,000,000 in the number of Units offered by
us would increase or decrease our as adjusted net tangible book value per ADS by approximately $0.0002, and the dilution per ADS
to investors participating in this offering by $0.00023 after deducting placement agent fees and estimated offering expenses payable
by us and excluding the proceeds, if any, from exercise of the ordinary warrants issued in this offering.
The
number of ordinary shares to be outstanding after this offering is based on 19,532,143 ordinary shares outstanding as of June
30, 2019 (such number of ordinary shares would be represented by 19,532,143 of our ADSs) and excludes:
|
|
●
|
4,398,492
ordinary shares issuable at a weighted average exercise price of NIS 5.47 (approximately $1.57) 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 4,398,492 of our ADSs);
|
|
|
●
|
7,134,790
ordinary shares underlying the ADSs issuable upon exercise of the Series A warrants and the representative’s warrants
issued in our initial public offering, and the Series A warrants and the placement agent warrants issued as part of our offering
in July 2016 (such number of ordinary shares would be represented by 7,134,790 of our ADSs);
|
|
|
|
|
|
|
●
|
529,427
ordinary shares underlying ADSs issuable upon exercise of the warrants issued in connection with our July 2017 private placement
of warrants and the placement agent warrants issued as part of our July 2017 public offering (such number of ordinary shares
would be represented by 529,427 of our ADSs);
|
|
|
|
|
|
|
●
|
1,858,200
ordinary shares underlying ADSs issuable upon exercise of the warrants issued in connection with our June 2018 private placement
of warrants and the placement agent warrants issued as part of our June 2018 public offering (such number of ordinary shares
would be represented by 1,858,200 of our ADSs);
|
|
|
|
|
|
|
●
|
2,571,430
ordinary shares issuable upon exercise of the warrants issued in our January 2019 private placement with an exercise price
of $2.00 and 240,000 ordinary shares underlying ADSs issuable upon exercise of placement agent warrants with an exercise price
of $2.1875 issued to the placement agent in our January 2019 offering;
|
|
|
●
|
4,037,805 ordinary
shares underlying ADSs issuable upon the exercise of warrants issued by us in connection with the closing of the FameWave
Transaction;
|
|
|
|
|
|
|
●
|
54,472
ordinary shares underlying ADSs issuable upon the exercise of options to purchase 54,472 ADSs to be awarded in connection
with the closing of the FameWave Transaction;
|
|
|
|
|
|
|
●
|
27,236
ordinary shares issuable upon the exercise of options to purchase 27,236 ordinary shares to be awarded in connection with
the closing of the FameWave Transaction;
|
|
|
●
|
13,913,043
ordinary shares underlying ADSs issuable upon the exercise of ordinary warrants to be issued to investors in this offering
at an exercise price of $_________ per ADS;
|
|
|
●
|
13,913,043
ordinary shares underlying ADSs issuable upon the exercise of pre-funded warrants to be issued to investors in this offering
at an exercise price of $0.0001 per ADS; and
|
|
|
●
|
973,913
additional shares of ordinary shares underlying ADSs upon the exercise of the placement agent’s warrants with an exercise
price of $_________ per ADS to be issued to the placement agent in connection with this offering.
|
DESCRIPTION
OF SHARE CAPITAL
The
following description of our share capital and certain provisions of our articles of association are summaries and do not purport
to be complete. The description is qualified by reference to our corporate documents, copies of which are filed with the SEC as
exhibits to the registration statement of which this prospectus forms a part.
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 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 March 6, 2020 we had 30,485,588 ordinary shares outstanding (which would be represented
by 30,485,588 of our ADSs) and no non-voting senior preferred shares outstanding. The above amounts include one dormant ordinary
share held in treasury.
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 slips. 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 by voting slip 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 TASE may not have more than one
class of shares for a period of one year following initial registration of the company on 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 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 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.
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, qualifications, and special or relative rights or privileges as shall be determined by the
Board of Directors, which may include, among others, dividend 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) 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; (v) 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; (vi) 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; (vii) 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, except as otherwise specifically required by Israeli law. 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, companies incorporated under the laws of the State of Israel that are “public companies,” including companies
with shares listed on NASDAQ, are required to appoint at least two external directors.
Pursuant to regulations
promulgated under the Companies Law, companies with shares traded on a U.S. stock exchange, including NASDAQ, may, subject to
certain conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies
Law rules concerning the composition of the audit committee and compensation committee of the board of directors. In accordance
with these regulations, in July 2016, we elected to “opt out” from the Companies Law requirements to appoint external
directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the
board of directors.
Under these regulations,
the exemptions from such Companies Law requirements will continue to be available to us so long as: (i) we do not have a “controlling
shareholder” (as such term is defined under Section 1 of the Companies Law), (ii) our shares are traded on a U.S. stock
exchange, including NASDAQ, and (iii) we comply with the director independence requirements, the audit committee and the compensation
committee composition requirements, under U.S. laws (including applicable Nasdaq Rules) applicable to U.S. domestic issuers.
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.
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 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.
According to the Companies
Law, an arrangement between the company and 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 an arrangement between the company
and 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 exempt extraordinary
transactions must however be approved by both the board of directors and the audit committee. 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, provided that the compensation
due under such arrangements does not exceed the compensation sums prescribed for external directors under applicable companies
regulations. 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. In addition, Bank of Israel regulations require us to
submit regular quarterly update reports concerning foreign investments in the Company.
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
Special Tender Offer
According to the Companies
Law, an acquisition pursuant to which a purchaser will hold a “controlling stake”, that is defined as 25% or more
of the voting rights if no other shareholder holds a controlling stake, or an acquisition pursuant to which such purchaser will
hold more than 45% of the voting rights of the company if no other shareholder owns more than 45% of the voting rights, may not
be performed by way of market accumulation, but rather by way of a special tender offer (as defined in the Companies Law) made
to all of the company’s shareholders on a pro rata basis, or pursuant to a private placement approved by the company’s
shareholders with the purpose of approving the acquisition of controlling stake, or 45% or more of the company’s voting
rights. In accordance with the Companies Law, such procedures are not required if the controlling stake or 45% of the company’s
voting rights are purchased from an existing holder or a controlling stake or 45% of the company’s voting rights. A special
tender offer may not be consummated unless a majority of the shareholders who announced their stand on such offer have accepted
it (in counting the total votes of such shareholders, shares held by the controlling shareholders, shareholders who have personal
interest in the offer, shareholders who own 25% or more of the voting rights in the company, relatives or representatives of any
of the above or the bidder and corporations under their control, shall not be taken into account). A shareholder may be free to
object to such an offer without such objection being deemed as a waiver of his right to sell its respective shares if the transaction
is approved by a majority of the company’s shareholders despite his objection. Shares purchased not in accordance with those
provisions will become “dormant shares” and will not grant the purchaser any rights so long as they are held by the
purchaser.
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.
In addition, the board of directors must disclose any personal interest each member of the board of directors has in the offer
or stems therefrom.
In the event that
a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the
purchaser or such controlling person or entity shall refrain from making a subsequent tender offer for the purchase of shares
of the target company and cannot 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.
Full Tender Offer
A person wishing to
acquire shares or a class of shares of an Israeli public company and who would, as a result, own more than 90% of the target company’s
issued and outstanding share capital or of certain class of its shares, is required by the Companies Law to make a full tender
offer (as defined in the Companies Law) to all of the company’s shareholders for the purchase of all of the issued and outstanding
shares of the company or class of shares. If either (i) the shareholders who do not accept the offer hold, in the aggregate, less
than 5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders
who do not have a personal interest in the offer accept the offer, or (ii) the shareholders who do not accept the offer hold less
than 2% of the issued and outstanding share capital of the company or of the applicable class, then all of the shares that the
acquirer offered to purchase will be transferred to the acquirer by operation of law. However, a shareholder that had its shares
so transferred, whether or not it accepted the tender offer (unless otherwise provided in the offering memorandum), may, within
six (6) months from the date of acceptance of the tender offer, petition the court to determine that the tender offer was for
less than fair value and that the fair value should be paid as determined by the court. If the shareholders who did not accept
the tender offer hold at least 5% of the issued and outstanding share capital of the company or of the applicable class of shares,
the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued
and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.
Mergers
The Companies Law
provides that corporate mergers require the approval of both companies’ boards of directors and shareholders. The board
of directors of a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion there
exists a reasonable concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations
towards its creditors, taking into account the financial status of the merging companies. If the board of directors has determined
that such a concern exists, it may not approve a proposed merger. In the event, however, that shares of the target company are
held by the acquiring company or by a person holding 25% or more of any type of controlling means of the acquiring company, the
merger will not be approved if a majority of the shareholders of the target company attending and voting at the meeting at which
the merger is considered (without taking into account, for that purpose, the shares held by the acquiring company or by a person
holding 25% or more of any type of controlling means of the acquiring company) object to and do not vote in favor of the merger.
If a person holds 25% or more of any type of controlling means of more than one merging company, the same provisions shall apply
with regard to the shareholders’ vote with respect to each such company. Upon the request of a creditor of either party
to the proposed merger, the court may delay or prevent the merger if the court concludes that there exists a reasonable concern
that as a result of the merger the surviving company will be unable to satisfy the target company’s obligations. Furthermore,
a merger may not close unless at least 30 days have passed from the time that the general meeting of each of the merging companies
was held and at least 50 days have passed from the date on which the merger proposal was sent to the Israeli Registrar of Companies.
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 and explain in detail 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
Other than with respect
to certain restricted ordinary shares, the shares for a publicly traded company such as ours, which is listed on TASE (and has
ADSs listed on NASDAQ), are generally recorded in the name of our Israeli share registrar, Registration Company of United Mizrachi
Bank Ltd. Our transfer agent and registrar for our ADSs is the depositary for our ADSs, Bank of New York Mellon, and its address
is 101 Barclay Street, New York, NY.
Listing
Our ordinary shares
are currently traded on TASE under the symbol “KTOV.” Our ADSs and the Series A warrants issued in each of November
2015 and July 2016 are listed on NASDAQ under the symbols “KTOV” and “KTOVW”, respectively.
DESCRIPTION
OF SECURITIES WE ARE OFFERING
We are offering up
to 13,913,043 Units, with each unit consisting of one ADS and one ordinary warrant to purchase one ADS. The ADSs and accompanying
ordinary warrants part of the Units will be issued separately. We are also registering the ordinary shares underlying the ADSs
issuable from time to time upon exercise of the ordinary warrants part of the Units offered hereby.
We are also offering
to those purchasers, if any, whose purchase of Units in this offering would result in the purchaser, together with its affiliates
and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%)of our outstanding
ordinary shares immediately following the consummation of this offering, the opportunity to purchase, in lieu of Units that would
otherwise result in ownership in excess of 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding ordinary shares,
Pre-funded Units. The purchase price of each Pre-funded Unit will equal the public offering price at which the Units are being
sold to the public in this offering, minus $0.0001, and the exercise price of each pre-funded warrant included in each Pre-funded
Unit will be $0.0001 per ADS. Each Pre-funded Unit will consist of one pre-funded warrant to purchase one ADS and one ordinary
warrant to purchase one ADS. The ordinary warrants and the pre-funded warrants included in the Pre-funded Units will be issued
separately. We are also registering the ordinary shares underlying the ADSs issuable from time to time upon exercise of the ordinary
warrants and the pre-funded warrants included in the Pre-funded Units offered hereby. The material terms and provisions of our
ordinary shares and each other class of our securities that qualifies or limits our ordinary shares are described in the section
entitled “Description of Share Capital” beginning on page 15 of this prospectus.
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 one ordinary share (or a right to receive one ordinary share) 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 doing so does not require registration of any securities under the Securities Act of 1933, as amended,
or the “Securities Act.” 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
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 assurances from us that such distribution does not require registration
of such securities under the Securities Act. 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. 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 governmental 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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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
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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 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
pro rata 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
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.”
ORDINARY
WARRANTS
The following summary
of certain terms and provisions of the ordinary warrants that are being offered hereby is not complete and is subject to, and
qualified in its entirety by, the provisions of the ordinary warrants, the form of which is or shall be filed as an exhibit to
the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and
provisions of the form of ordinary warrant for a complete description of the terms and conditions of the ordinary warrants.
Duration and Exercise Price
Each ordinary warrant
offered hereby will have an initial exercise price per share equal to $ per ADS. The ordinary warrants
will be immediately exercisable and will expire on the fifth anniversary of the original issuance date. The exercise price and
number of ADSs issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations
or similar events affecting our ordinary shares and the exercise price. In addition, we may, with the consent of the ordinary
warrant holders, reduce the then current exercise price with respect to the ordinary warrants to any amount and for any period
of time deemed appropriate by our board of directors. The ordinary warrants will be issued separately from the ADSs, and may be
transferred separately immediately thereafter.
Exercisability
The ordinary warrants
will be exercisable, at the option of each holder, in whole or in part, by delivering 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). Subject to certain limitations and exceptions, a holder (together with its affiliates) may not exercise any portion of
a ordinary warrant to the extent that the holder would beneficially own more than 4.99/9.99% of the outstanding ordinary shares
immediately after exercise of such ordinary warrant, except that upon at least 61 days’ prior notice from the holder to
us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s ordinary warrants.
Purchasers of ordinary warrants in this offering may also elect prior to the issuance of the ordinary warrants to have the initial
exercise limitation set at 9.99% of our outstanding ordinary shares. No fractional ADSs will be issued in connection with the
exercise of a ordinary warrant. In lieu of fractional ADSs, we will pay the holder an amount in cash equal to the fractional amount
multiplied by the exercise price.
Cashless Exercise
If, at the time
a holder exercises the ordinary warrant, a registration statement registering the issuance of the ADSs underlying the ordinary
warrants under the Securities Act is not then effective or available, then in lieu of making the cash payment otherwise contemplated
to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such
exercise (either in whole or in part) the net number of ADSs determined according to a formula set forth in the ordinary warrants.
Fundamental Transaction
If,
at any time while the ordinary warrants are outstanding, (1) we, directly or indirectly, consolidate or merge with or into another
person, (2) we, directly or indirectly, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially
all of our assets, (3) any direct or indirect 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, directly or indirectly, effect any reclassification, reorganization or recapitalization of our 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, directly or indirectly, 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 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 ordinary warrant, and any additional consideration payable as part of the Fundamental Transaction. Notwithstanding
anything to the contrary, in the event of a Fundamental Transaction, the holder will have the right to require us or a successor
entity to repurchase its ordinary warrants at the Black Scholes value; provided, however, that if the Fundamental Transaction
is not within our control, including not approved by our board of directors, then the holder shall only be entitled to receive
the same type or form of consideration (and in the same proportion), at the Black Scholes value of the unexercised portion of
its ordinary warrants, that is being offered and paid to the holders of our ordinary shares in connection with the Fundamental
Transaction.
Transferability
Subject to applicable
laws, a ordinary warrant may be transferred at the option of the holder upon surrender of the ordinary warrant together with the
appropriate instruments of transfer.
Exchange Listing
There is no trading
market available for the ordinary warrants on any securities exchange or nationally recognized trading system. We do not intend
to list the ordinary warrants on any securities exchange or nationally recognized trading system, nor do we have any obligation
to do so.
Rights as a Shareholder
Except as otherwise
provided in the ordinary warrants or by virtue of such holder’s ownership of ADSs or ordinary shares, a holder of ordinary
warrants does not have rights or privileges of a holder of ADSs or ordinary shares, including any voting rights or dividends,
until the holder exercises the ordinary warrants.
PRE-FUNDED
WARRANTS
The following
summary of certain terms and provisions of the pre-funded warrants that are being offered hereby is not complete and is subject
to, and qualified in its entirety by, the provisions of the pre-funded warrants, the form of which is or shall be filed as an
exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the
terms and provisions of the form of pre-funded warrant for a complete description of the terms and conditions of the pre-funded
warrants.
The purpose of
the pre-funded warrants is to enable investors that may have restrictions on their ability to beneficially own more than 4.99%
(or, at the election of the purchaser, 9.99%) of our outstanding ordinary shares following the consummation of this offering the
opportunity to invest capital into the Company without triggering such ownership restrictions. By receiving pre-funded warrants
in lieu of the ADSs contained in the Units which would result in such holders’ ownership exceeding 4.99% (or, at the election
of the purchaser, 9.99%), such holders will have the ability to exercise their options to purchase the ADSs underlying the pre-funded
warrants for nominal consideration of $0.0001 per ADS at a later date.
Duration and Exercise Price
Each pre-funded
warrant offered hereby will have an initial exercise price per share equal to $0.0001. The pre-funded warrants will be immediately
exercisable and may be exercised at any time until the earlier of (X) for so long as our ordinary shares (or securities otherwise
convertible into such) are listed for trading on the TASE, and we are permitted by applicable law to issue only one class of ordinary
shares, prior to the end of business on the fifteenth anniversary from the date of issuance, and (Y) such pre-funded warrant is
exercised in full.
Adjustments
Until such exercise
termination date, the exercise price and number of ADSs issuable upon exercise is subject to appropriate adjustment in the event
of stock dividends, stock splits, reorganizations or similar events affecting our ordinary shares and the exercise price, which
are typical of such provisions in convertible securities. The pre-funded warrants will be issued separately from the ADSs, and
may be transferred separately immediately thereafter.
Exercisability
The pre-funded
warrants will be exercisable, at the option of each holder, in whole or in part, by delivering 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). Subject to certain limitations and exceptions, a holder (together with its affiliates) may not exercise any
portion of a pre-funded warrant to the extent that the holder would beneficially own more than 4.99/9.99% of the outstanding ordinary
shares immediately after exercise of such pre-funded warrant, except that upon at least 61 days’ prior notice from the holder
to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s pre-funded warrants.
Purchasers of pre-funded warrants in this offering may also elect prior to the issuance of the pre-funded warrants to have the
initial exercise limitation set at 9.99% of our outstanding ordinary shares. No fractional ADSs will be issued in connection with
the exercise of a pre-funded warrant. In lieu of fractional ADSs, we will pay the holder an amount in cash equal to the fractional
amount multiplied by the exercise price.
Cashless Exercise
If, at the time a
holder exercises its pre-funded warrants, a registration statement registering the issuance of the ADSs underlying the pre-funded
warrants under the Securities Act is not then effective or available for the issuance of such ADSs, then in lieu of making the
cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder
may elect instead to receive upon such exercise (either in whole or in part) the net number of ADSs determined according to a
formula set forth in the pre-funded warrants. The Depositary ADS issuance fee as well as other applicable charges and taxes, are
due and payable upon any cashless exercise.
Fundamental
Transaction
If, at any time while
the pre-funded warrants are outstanding, (1) we, directly or indirectly, consolidate or merge with or into another person, (2)
we, directly or indirectly, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of
our assets, (3) any direct or indirect 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, directly
or indirectly, effect any reclassification, reorganization or recapitalization of our 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, directly or indirectly, 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 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 pre-funded
warrant, and any additional consideration payable as part of the Fundamental Transaction.
Transferability
Subject to applicable
laws, a pre-funded warrant may be transferred at the option of the holder upon surrender of the pre-funded warrant together with
the appropriate instruments of transfer.
Exchange Listing
There is no trading
market available for the pre-funded warrants on any securities exchange or nationally recognized trading system. We do not intend
to list the pre-funded warrants on any securities exchange or nationally recognized trading system, nor do we have any obligation
to do so.
Rights as a Shareholder
While the pre-funded
warrants have certain adjustment provisions as set forth above, except by virtue of such holder’s ownership of ADSs or ordinary
shares, a holder of pre-funded warrants does not have rights or privileges of a holder of ADSs or ordinary shares, including any
voting rights or dividends, until the holder exercises the pre-funded warrants.
PLACEMENT AGENT WARRANTS
The material terms
and provisions of the placement agent warrants are substantially the same as the ordinary warrants described above under the heading
“Ordinary Warrants,” with the exception of the following terms:
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The
exercise price of the placement agent warrants is 125% of the offering price per Unit;
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The
beneficial ownership threshold of holders of placement agent investor warrants can elect
to set the is set at 4.99%;
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Holders
of placement agent warrants are not entitled to receive cash dividends or distribution
or return of capital in the form of cash made to holders of ordinary shares (as, if and
when declared by our board of directors); and
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The
placement agent warrants are not transferrable for a period of 180 days from the date
of effectiveness or the commencement of sales of this offering, as described in “Plan
of Distribution—Placement Agent Warrants”.
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MATERIAL
TAX CONSIDERATIONS
Taxation
Israeli Tax Considerations
General
The following is a
summary of the material tax consequences under Israeli law concerning the purchase, ownership and disposition of Ordinary Shares
and ADSs of our company.
This discussion does
not purport to constitute a complete analysis of all potential tax consequences applicable to investors upon purchasing, owning
or disposing of Ordinary Shares and ADSs of our company. In particular, this discussion does not take into account the specific
circumstances of any particular investor (such as tax-exempt entities, financial institutions, certain financial companies, broker-dealers,
investors that own, directly or indirectly, 10% or more of our outstanding voting rights, all of whom are subject to special tax
regimes not covered under this discussion). To the extent that issues discussed herein are based on legislation, which has yet
to be subject to judicial or administrative interpretation, there can be no assurance that the views expressed herein will accord
with any such interpretation in the future.
Potential investors
are urged to consult their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership and disposition
of the Ordinary Shares or ADSs being offered hereby, including, in particular, the effect of any foreign, state or local taxes.
General Corporate Tax Structure
in Israel
The Israeli corporate
tax rate applicable to Israeli resident companies is 23%.
Taxation of Shareholders
Capital Gains
Capital gain tax is
imposed on the disposal of capital assets by an Israeli resident and on the disposal of such assets by a non-Israeli resident
if those assets are either (i) located in Israel; (ii) shares or a right to a share in an Israeli resident corporation, or (iii)
represent, directly or indirectly, rights to assets located in Israel, unless an exemption is available or unless an applicable
double tax treaty between Israel and the seller’s country of residence provides otherwise. The Israeli Income Tax Ordinance
distinguishes between “Real Gain” and the “Inflationary Surplus.” Real Gain is the excess of the total
capital gain over Inflationary Surplus computed generally on the basis of the increase in the Israeli Consumer Price Index between
the date of purchase and the date of disposal. Inflationary Surplus is not subject to tax.
Real Capital Gain
accrued by individuals on the sale of the Ordinary Shares or ADSs will be taxed at the rate of 25%. However, if the individual
shareholder is a “Controlling Shareholder” (i.e., a person who holds, directly or indirectly, alone or together
with another, 10% or more of one of the Israeli resident company’s means of control) at the time of sale or at any time
during the preceding 12-month period, such gain will be taxed at the rate of 30%.
Corporate and individual
shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income which is 23% for corporations,
and a marginal tax rate of up to 47% for individuals.
Notwithstanding the
foregoing, real capital gains generated from the sale of our Ordinary Shares or ADSs by a non-Israeli shareholder may be exempt
from Israeli tax under the Israeli Income Tax Ordinance provided that the following cumulative conditions are met: (i) the Ordinary
Shares or ADSs were purchased upon or after the registration of the Ordinary Shares or ADSs on the stock exchange and (this condition
will not apply to shares purchased on or after January 1, 2009) (ii) the seller does not have a permanent establishment in Israel
to which the generated capital gain is attributed. However, non-Israeli resident corporations will not be entitled to the foregoing
exemption if Israeli residents: (i) hold more than 25% or more means of control in such non-Israeli corporation or (ii) are
the beneficiaries of, or are entitled to, 25% or more of the income or profits of such non-Israeli corporation, whether directly
or indirectly. In addition, such exemption would not be available to a person whose gains from selling or otherwise disposing
of the Ordinary Shares or ADSs are deemed to be business income.
In addition, the sale
of the Ordinary Shares or ADSs may be exempt from Israeli capital gain tax under the provisions of an applicable double tax treaty
(subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for such an exemption). For example,
the Convention between the Government of the U.S. and the Government of the State of Israel with respect to Taxes on Income (the
“U.S.- Israel Double Tax Treaty”) exempts a U.S. resident (for purposes of the treaty) from Israeli capital gains
tax in connection with the sale of the Ordinary Shares or ADSs, provided that: (i) the U.S. resident owned, directly or indirectly,
less than 10% of the voting power of the company at any time within the 12 month period preceding such sale; (ii) the U.S. resident,
being an individual, is present in Israel for a period or periods of less than 183 days in the aggregate during the taxable year;
(iii) the capital gain from the sale, exchange or disposition was not derived through a permanent establishment of the U.S. resident;
and (iv) the capital gains arising from such sale, exchange or disposition is not attributed to real estate located in Israel
or a resident in Israel; however, under the U.S-Israel Double Tax Treaty, the taxpayer would be permitted to claim a credit for
such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations
under U.S. law applicable to foreign tax credits. The U.S-Israel Double Tax Treaty does not relate to U.S. state or local taxes.
Payers of consideration
for the Ordinary Shares or ADSs, including the purchaser, the Israeli stockbroker or the financial institution through which the
Ordinary Shares or ADSs are held, are obligated, subject to certain exemptions, to withhold tax upon sale of Ordinary Shares or
ADSs from the amount of consideration paid upon the sale of the securities (or on the Real Capital Gain realized on the sale,
if known), at a rate of 25% for an individual or at a rate of corporate tax for a corporation (23% in 2019 and thereafter).
Upon the sale of traded
securities, a detailed return, including a computation of the tax due, must be filed and an advanced payment must be paid to the
Israeli Tax Authority on January 31 and July 31 of every tax year in respect of sales of traded securities made within the previous
six months. However, if all tax due was withheld at source according to applicable provisions of the Israeli Income Tax Ordinance
and regulations promulgated thereunder, such return need not be filed and no advance payment must be paid. Capital gains are also
reportable on annual income tax returns.
Dividends
Dividends distributed
by a company from income, which is not attributed to an Approved Enterprise, a Benefited Enterprise or a Preferred Enterprise
as defined in the Israel’s Encouragement of Capital Investment Law (1959), to a shareholder who is an Israeli resident individual
will be generally subject to income tax at a rate of 25%. However, a 30% tax rate will generally apply if the dividend recipient
is a Controlling Shareholder, as defined above, at the time of distribution or at any time during the preceding 12-month period.
If the recipient of the dividend is an Israeli resident corporation, such dividend will generally not be subject to tax provided
that the income from which such dividend is distributed, derived or accrued within Israel. A distribution of dividend by a company
from income attributed to a Preferred Enterprise will generally be subject to withholding tax in Israel at the following tax rates:
Israeli resident individuals - 20% with respect to dividends distributed as of 2014, or such lower rate as may be provided in
an applicable tax treaty; and Israeli resident companies - 0%. Dividends distributed from income attributed to an Approved Enterprise
and/or a Benefited Enterprise are subject to a tax rate of 15%. If the dividend is attributable partly to income derived from
an Approved Enterprise, Benefited Enterprise or Preferred Enterprise, and partly from other sources of income, the income tax
rate will be a blended rate reflecting the relative portions of the types of income.
Non-Israeli residents
(either an individual or a corporation) are generally subject to Israeli tax on the receipt of dividends at the rate of 25% (30%
if the dividend recipient is a Controlling Shareholder at the time of distribution or at any time during the preceding 12-month
period). Dividends distributed by an Israeli resident company from income, which is attributed to a Preferred Enterprise, to a
non-Israeli resident (either an individual or a corporation) are generally subject to withholding tax at a rate of 20%. These
rates may be reduced under the provisions of an applicable double tax treaty. For example, under the U.S.-Israel Double Tax Treaty,
the following tax rates will apply in respect of dividends distributed by an Israeli resident company to a U.S. resident: (i)
if the U.S. resident is a corporation which holds during that portion of the taxable year which precedes the date of payment of
the dividend and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting stock
of the Israeli resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation
for such prior taxable year (if any) consists of certain types of interest or dividends the tax rate is 12.5%; (ii) if both the
conditions mentioned in clause (i) above are met and the dividend is paid from an Israeli resident company’s income which
was entitled to a reduced tax rate under The Law for the Encouragement of Capital Investments, 1959, the tax rate is 15%; and
(iii) in all other cases, the tax rate is 25%. The aforementioned rates under the U.S.-Israel Double Tax Treaty will not apply
if the dividend income is attributed to a permanent establishment of the U.S. resident in Israel.
A non-Israeli resident
who receives dividend income derived from or accrued from Israel, from which the full amount of tax was withheld at source, is
generally exempt from the obligation to file tax returns in Israel with respect to such income, provided that (i) such income
was not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income
in Israel with respect to which a tax return is required to be filed and (iii) the taxpayer is not obliged to pay Excess Tax (as
described below).
Payers of dividends
on our shares, including the Israeli stockbroker effectuating the transaction, or the financial institution through which the
securities are held, are required, subject to any of the foregoing exemptions, reduced tax rates and the demonstration of a shareholder
of his, her or its foreign residency, to withhold taxes upon the distribution of dividends at a rate of 25%, provided that the
shares are registered with a nominee company (for corporations and individuals).
Excess Tax
Individual holders
who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) and who have taxable
income that exceeds a certain threshold in a tax year (NIS 649,560 for 2019), linked to the Israeli Consumer Price Index), which
is approximately $188,497, based on the representative NIS - U.S. dollar rate of exchange of 3.4460 on March 5, 2020), will be
subject to an additional tax at the rate of 3% on his or her taxable income for such tax year that is in excess of such amount.
For this purpose, taxable income includes taxable capital gains from the sale of securities and taxable income from interest and
dividends, subject to the provisions of an applicable double tax treaty.
Estate and Gift Tax
Israeli law presently
does not impose estate or gift taxes.
U.S. Federal Income Tax Considerations
The following is a
description of certain U.S. federal income tax consequences relating to the acquisition, ownership and disposition of our ADSs,
pre-funded warrants and warrants by a holder. This description addresses only the U.S. federal income tax consequences to holders
that are initial purchasers of our ADSs, pre-funded warrants and warrants pursuant to this offering and that will hold such ADSs,
pre-funded warrants and warrants as capital assets. This description does not address tax considerations applicable to holders
that may be subject to special tax rules, including, without limitation:
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banks,
financial institutions or insurance companies;
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real
estate investment trusts, regulated investment companies or grantor trusts;
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dealers
or traders in securities, commodities or currencies;
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tax
exempt entities or organizations;
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certain
former citizens or residents of the United States;
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persons that received our ADSs, pre-funded warrants
or warrants as compensation for the performance of services;
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persons
that will hold our ADSs, pre-funded warrants or warrants as part of a “hedging,”
“integrated” or “conversion” transaction or as a position in
a “straddle” for U.S. federal income tax purposes;
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partnerships
(including entities classified as partnerships for U.S. federal income tax purposes) or other pass- through entities, or holders
that will hold our ADSs, pre-funded warrants or warrants through such an entity;
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U.S.
Holders (as defined below) whose “functional currency” is not the U.S. dollar; or
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holders
that own directly, indirectly or through attribution 10% or more of the voting power or value of our shares.
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Moreover, this description
does not address the U.S. federal estate, gift, or alternative minimum tax consequences, or any U.S. state, local or non-U.S.
tax consequences of the acquisition, ownership and disposition of our ADSs, pre-funded warrants and warrants.
This description is based
on the U.S. Internal Revenue Code of 1986, as amended, or the Code, existing, proposed and temporary U.S. Treasury Regulations
promulgated thereunder and administrative and judicial interpretations thereof, in each case as in effect and available on the
date hereof. All the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences
described below. There can be no assurances that the U.S. Internal Revenue Service, or IRS, will not take a different position
concerning the tax consequences of the acquisition, ownership and disposition of our ADSs, pre-funded warrants and warrants or
that such a position would not be sustained. Holders should consult their own tax advisers concerning the U.S. federal, state,
local and foreign tax consequences of acquiring, owning and disposing of our ADSs, pre-funded warrants and warrants in their particular
circumstances.
For purposes of this
description, the term “U.S. Holder” means a beneficial owner of our ADSs, pre-funded warrants or warrants that, for
U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation (or entity treated as
a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state
thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of
its source or (iv) a trust (x) with respect to which a court within the United States is able to exercise primary supervision
over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (y) that
has elected to be treated as a domestic trust for U.S. federal income tax purposes.
A “Non-U.S.
Holder” is a beneficial owner of our ADSs, pre-funded warrants or warrants that is neither a U.S. Holder nor a partnership
(or other entity treated as a partnership for U.S. federal income tax purposes).
If a partnership (or
any other entity treated as a partnership for U.S. federal income tax purposes) holds our ADSs, pre-funded warrants and warrants,
the U.S. federal income tax consequences relating to an investment in our ADSs, pre-funded warrants and warrants will depend in
part upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax
advisor regarding the U.S. federal income tax consequences of acquiring, owning and disposing of our ADSs, pre-funded warrants
and warrants in its particular circumstances.
Persons considering
an investment in our ADSs, pre-funded warrants or warrants should consult their own tax advisors as to the particular tax consequences
applicable to them relating to the acquisition, ownership and disposition of our ADSs, pre-funded warrants and warrants, including
the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Tax Treatment
of Pre-Funded Warrants
Although the law is
not completely settled in the area, pre-funded warrants will probably be treated as ADSs for U.S. federal income tax purposes,
and the following discussion assumes such treatment. Any person that elects to receive pre-funded warrants in lieu of our ordinary
shares in this offering should consult their own tax advisor regarding the application of the U.S. federal income tax laws to
their particular situation.
Tax Basis of
each ADS, Pre-funded Warrant and Warrant
The ADSs and the pre-funded
warrant will be sold together with an accompanying warrant to purchase one ADS. The initial tax basis of a beneficial owner
in each ADS and pre-funded warrant will be equal to the amount paid for the ADS or pre-funded warrant less the fair market value
of their accompanying warrant(s). The initial basis in the accompanying warrant(s) will equal the initial fair market value of
the warrant(s).
Exchange
of ADSs for Ordinary Shares
In
general, if you hold ADSs, you will be treated as the holder of the underlying ordinary shares represented by those ADSs for U.S.
federal income tax purposes. Accordingly, gain or loss generally will not be recognized if you exchange ADSs for the underlying
ordinary shares represented by those ADSs. In addition, you will receive a basis in your ordinary shares equal to the basis of
your ADSs exchanged for such shares.
Taxation
of Dividends and Other Distributions on Our ADSs
Subject
to the discussion below under “Passive Foreign Investment Company Consequences,” if you are a U.S. Holder, the gross
amount of any distribution made to you with respect to our ADSs before reduction for any Israeli taxes withheld therefrom, generally
will be includible in your income as dividend income to the extent such distribution is paid out of our current or accumulated
earnings and profits as determined under U.S. federal income tax principles. Non-corporate U.S. Holders may qualify for the lower
rates of taxation with respect to dividends on ADSs applicable to “qualified dividends,” provided that certain conditions
are met, including certain holding period requirements and the absence of certain risk reduction transactions. Such lower rate
of taxation shall not apply if we are a PFIC for the taxable year in which we pay a dividend. Moreover, such dividends will not
be eligible for the dividends received deduction generally allowed to corporate U.S. Holders irrespective of PFIC status. To the
extent that the amount of any distribution by us exceeds our current and accumulated earnings and profits as determined under
U.S. federal income tax principles, it will be treated first as a tax-free return of your adjusted tax basis in our ADSs and thereafter
as either long-term or short-term capital gain depending upon whether the U.S. Holder has held our ADSs for more than one year
as of the time such distribution is received.
If
you are a U.S. Holder, dividends paid to you with respect to our ADSs will be foreign source income for foreign tax credit purposes.
Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from your taxable income or credited
against your U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. For this purpose, dividends generally constitute “passive category income.”
A foreign tax credit for foreign taxes imposed on distributions may be denied if you do not satisfy certain minimum holding period
requirements. The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisor
to determine whether and to what extent you will be entitled to this credit.
The
amount of a distribution paid to a U.S. Holder in a foreign currency will be the dollar value of the foreign currency calculated
by reference to the spot exchange rate on the day the U.S. Holder receives the distribution, regardless of whether the foreign
currency is converted into U.S. dollars at that time. Any foreign currency gain or loss a U.S. Holder realizes on a subsequent
conversion of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If dividends received in foreign
currency are converted into U.S. dollars on the day they are received, a U.S. Holder generally should not be required to recognize
foreign currency gain or loss in respect of the dividend.
Subject
to the discussion below under “Backup Withholding Tax and Information Reporting Requirements,” if you are a Non-U.S.
Holder, you generally will not be subject to U.S. federal income (or withholding) tax on dividends received by you on your ADSs,
unless:
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you
conduct a trade or business in the U.S. and such income is effectively connected with that trade or business (and, if required
by an applicable income tax treaty, the dividends are attributable to a permanent establishment or fixed base that such holder
maintains in the U.S.); or
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you
are an individual and have been present in the U.S. for 183 days or more in the taxable year of such sale or exchange and
certain other conditions are met.
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Sale,
Exchange or Other Disposition of Our ADSs and Warrants
Subject to the discussion
below under “Passive Foreign Investment Company Consequences,” if you are a U.S. Holder, you generally will recognize
gain or loss on the sale, exchange or other disposition of our ADSs, pre-funded warrants or warrants equal to the difference between
the amount realized on such sale, exchange or other disposition and your adjusted tax basis in our ADSs, pre-funded warrants or
warrants, as applicable, and such gain or loss will be capital gain or loss. The adjusted tax basis in an ADS, pre-funded warrants
or warrant generally will be initially determined as described above in “Tax Basis of each ADS, Pre-funded Warrants and
Warrant.” If you are a non-corporate U.S. Holder, capital gain from the sale, exchange or other disposition of an ADS, pre-funded
warrant or warrant is generally eligible for a preferential rate of taxation applicable to capital gains, if your holding period
determined at the time of such sale, exchange or other disposition for such ADS, pre-funded warrant or warrant exceeds one year
(i.e., such gain is long-term capital gain). The deductibility of capital losses is subject to limitations. Any such gain or loss
generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes. A foreign tax credit for foreign
taxes imposed on capital gains may be denied if you do not satisfy certain minimum holding period requirements. The rules relating
to the determination of the foreign tax credit are complex, and it is possible that the ability of a U.S. Holder to claim a foreign
tax credit for any such Israeli tax will be limited. You should consult your tax advisor to determine whether, and to what extent,
you will be entitled to this credit.
Subject to the discussion
below under “Backup Withholding Tax and Information Reporting Requirements,” if you are a Non-U.S. Holder, you generally
will not be subject to U.S. federal income or withholding tax on any gain realized on the sale or exchange of such ADSs, pre-funded
warrants or warrants unless:
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such
gain is effectively connected with your conduct of a trade or business in the United States (and, if required by an applicable
income tax treaty, the gain is attributable to a permanent establishment or fixed base that you maintain in the United States);
or
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you
are an individual and have been present in the United States for 183 days or more in the taxable year of such sale or exchange
and certain other conditions are met.
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Exercise of
a Pre-Funded Warrant or Warrant
The exercise of a
pre-funded warrants, warrant for ADSs generally will not be a taxable event for the exercising U.S. Holder. A U.S. Holder will
have a tax basis in the ADSs received on exercise of a pre-funded warrant or warrant equal to the sum of the U.S. Holder’s
tax basis in the warrant surrendered, reduced by any portion of the basis allocable to a fractional share, plus the exercise price
of the pre-funded warrant or warrant. A U.S. Holder generally will have a holding period in ADSs acquired on exercise of a pre-funded
warrant or warrant that commences on the date of exercise of the pre-funded warrant or warrant.
Passive
Foreign Investment Company Consequences
We
may be classified as a Passive Foreign Investment Company (PFIC) for the 2020 tax year. If we are indeed so classified for 2020
or in any other taxable year, a U.S. Holder would be subject to special rules generally intended to reduce or eliminate any benefits
from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company that does not
distribute all of its earnings on a current basis.
A
non-U.S. corporation will be classified as a PFIC for federal income tax purposes in any taxable year in which, after applying
certain look-through rules with respect to the income and assets of subsidiaries, either:
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least 75% of its gross income is “passive income”; or
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least 50% of the average quarterly value of its total gross assets (which may be determined in part by the market value of
our ADSs, which is subject to change) is attributable to assets that produce “passive income” or are held for
the production of passive income.
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Section 1298(a)(4) of
the Code provides that to the extent provided in regulations, if any person has an option to acquire stock in a PFIC, such stock
shall be considered as owned by such person. Certain proposed regulations provide rules for treatment of options to acquire stock
in a PFIC. It is not currently known if, when or the extent to which such proposed regulations will be finalized and become effective.
The discussion below assumes that regulations relating to options to acquire PFIC stock will become effective and would apply
to the warrants. Each prospective investor is urged to consult with its own tax advisor about the tax consequences of holding
warrants if we are classified as a PFIC.
Passive income for
this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the
excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason
of the temporary investment of funds raised in offerings of our ADSs, pre-funded warrants and warrants. If a non-U.S. corporation
owns at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests
as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of
the other corporation’s income. If we are classified as a PFIC in any year with respect to which a U.S. Holder owns our
ADSs, pre-funded warrants or warrants, we will generally continue to be treated as a PFIC with respect to such U.S. Holder in
all succeeding years during which the U.S. Holder owns our ADSs, pre-funded warrants or warrants, regardless of whether we continue
to meet the tests described above.
Our PFIC status determination
is based on our income, assets and activities for the entire taxable year and therefore it is not possible to determine whether
we will be characterized as a PFIC for the 2020 taxable year until after the close of the year. In addition, our status as a PFIC
may depend on how quickly we utilize the cash proceeds from this offering in our business, which we cannot currently determine
with certainty.
If we are indeed properly
classified as a PFIC, and you are a U.S. Holder, then unless you make one of the elections described below, a special tax regime
will apply to both (a) any “excess distribution” by us to you (generally, your ratable portion of distributions in
any year which are greater than 125% of the average annual distribution received by you in the shorter of the three preceding
years or your holding period for our ADSs) and (b) any gain realized on the sale or other disposition of the ADSs, pre-funded
warrants or warrants. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will
be subject to tax as if (i) the excess distribution or gain had been realized ratably over your holding period, (ii) the amount
deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate for such
year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject
to tax, at the U.S. Holder’s regular ordinary income rate for the current year and would not be subject to the interest
charge discussed below), and (iii) the interest charge generally applicable to underpayments of tax had been imposed on the taxes
deemed to have been payable in those years. In addition, dividend distributions made to you will not qualify for the lower rates
of taxation applicable to long-term capital gains discussed above under “Distributions.” Certain elections may be
available that would result in an alternative treatment (such as mark-to-market treatment) of our ADSs, pre-funded warrants or
warrants.
If a U.S. Holder makes
the mark-to-market election, then, in lieu of being subject to the tax and interest charge rules discussed above, the U.S. Holder
generally will recognize as ordinary income any excess of the fair market value of the ADSs, pre-funded warrants at the end of
each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted
tax basis of the ADSs, pre-funded warrants over their fair market value at the end of the taxable year (but only to the extent
of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election,
the U.S. Holder’s tax basis in its ADSs and pre-funded warrants will be adjusted to reflect these income or loss amounts.
Any gain recognized on the sale or other disposition of ADSs or pre-funded warrants in a year when we are a PFIC will be treated
as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously
included as a result of the mark-to-market election).
The mark-to-market election
is available only if we are a PFIC and our ADSs are “regularly traded” on a “qualified exchange.” Our
ADSs will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of our ADSs
are traded on a qualified exchange on at least 15 days during each calendar quarter. NASDAQ is a qualified exchange for this purpose.
Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject
to the tax and interest charge rules discussed above with respect to such holder’s indirect interest in any investments
held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes, including stock in any of our
subsidiaries that are treated as PFICs. If a U.S. Holder makes a mark-to-market election, it will be effective for the taxable
year for which the election is made and all subsequent taxable years unless our ADSs are no longer regularly traded on a qualified
exchange or the IRS consents to the revocation of the election.
We
do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections if we are classified
as a PFIC. U.S. Holders should consult their tax advisors to determine whether any of these elections would be available and if
so, what the consequences of the alternative treatments would be in their particular circumstances.
If
we are determined to be a PFIC, the general tax treatment for U.S. Holders described in this section would apply to indirect distributions
and gains deemed to be realized by U.S. Holders in respect of any of our subsidiaries that also may be determined to be PFICs.
A U.S. Holder who owns
ADSs (or pre-funded warrants) during any year in which we are a PFIC, will be required to file an IRS Form 8621 (Information Return
by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with respect to us, generally with the U.S.
Holder’s federal income tax return for that year.
U.S.
Holders should consult their tax advisors regarding application of the PFIC rules.
Medicare
Tax
Certain U.S. Holders
that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income,”
which may apply to all or a portion of the following items with respect to ADSs, pre-funded warrants and warrants: dividend or
other distributions, gains from dispositions and “excess distributions” and income from “mark-to-market”
elections under the PFIC rules, if applicable. Each U.S. Holder that is an individual, estate or trust is urged to consult its
tax advisors regarding the applicability of the Medicare tax to its income and gains in respect of its investment in our ADSs,
pre-funded warrants and warrants.
Backup
Withholding Tax and Information Reporting Requirements
U.S. backup withholding
tax and information reporting requirements may apply to certain payments to certain holders of our ADSs, pre-funded warrants and
warrants. Information reporting generally will apply to payments of dividends on our ADSs, and to proceeds from the sale or redemption
of our ADSs, pre-funded warrants and warrants made within the United States, or by a U.S. payer or U.S. middleman, to a holder
of our ADSs, pre-funded warrants and warrants, other than an exempt recipient (including a payee that is not a U.S. person that
provides an appropriate certification and certain other persons). A payer may be required to withhold backup withholding tax from
any payments of dividends on our ADSs, or the proceeds from the sale or redemption of our ADSs, pre-funded warrants and warrants
within the United States, or by a U.S. payer or U.S. middleman, to a holder, other than an exempt recipient, if such holder fails
to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such
backup withholding tax requirements. Any amounts withheld under the backup withholding rules will be allowed as a credit against
the beneficial owner’s U.S. federal income tax liability, if any, and any excess amounts withheld under the backup withholding
rules may be refunded, provided that the required information is timely furnished to the IRS.
Foreign
Asset Reporting
Certain U.S. Holders who
are individuals are required to report information relating to an interest in our ADSs and pre-funded warrants, subject to certain
exceptions (including an exception for shares held in accounts maintained by financial institutions) by filing IRS Form 8938 (Statement
of Specified Foreign Financial Assets) with their federal income tax return. U.S. Holders are urged to consult their tax advisors
regarding their information reporting obligations, if any, with respect to their ownership and disposition of our ADSs, pre-funded
warrants and warrants.
Foreign
Account Tax Compliance Act
FATCA imposes withholding
tax on certain types of payments made to foreign financial institutions and certain other non-U.S. entities. The legislation imposes
a 30% withholding tax on dividends on, or, subject to the discussion of certain proposed Treasury Regulations below, gross proceeds
from the sale or other disposition of, our ADSs, pre-funded warrants and warrants paid to a “foreign financial institution”
or to certain “non-financial foreign entities” (each as defined in the Code), unless (i) the foreign financial institution
undertakes certain diligence and reporting obligations, (ii) the non-financial foreign entity either certifies it does not have
any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each
substantial United States owner, or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies
for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting
requirements in (i) above, it must enter into an agreement with the U.S. Treasury requiring, among other things, that it undertake
to identify accounts held by “specified United States persons” or “United States-owned foreign entities”
(each as defined in the Code), annually report certain information about such accounts, and withhold 30% on payments to account
holders whose actions prevent it from complying with these reporting and other requirements. If the country in which a payee is
resident has entered into an “intergovernmental agreement” with the United States regarding FATCA, that agreement
may permit the payee to report to that country rather than to the U.S. Department of the Treasury. The U.S. Treasury recently
released proposed Treasury Regulations which, if finalized in their present form, would eliminate the federal withholding tax
of 30% applicable to the gross proceeds of a sale or other disposition of our ordinary shares or warrants. In its preamble to
such proposed Treasury Regulations, the U.S. Treasury stated that taxpayers may generally rely on the proposed regulations until
final regulations are issued. Prospective investors should consult their own tax advisors regarding the possible impact of these
rules on their investment in our ADSs, pre-funded warrants and warrants, and the possible impact of these rules on the entities
through which they hold our ADSs, pre-funded warrants and warrants, including, without limitation, the process and deadlines for
meeting the applicable requirements to prevent the imposition of this 30% withholding tax under FATCA.
THE
DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN OUR ADSs
IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
EXPENSES
RELATED TO OFFERING
The
following table sets forth the costs and expenses, other than placement agent fees, payable by us in connection with the offer
and sale of the securities in this offering. All amounts listed below are estimates except the SEC registration fee, NASDAQ listing
fee and the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee.
|
Itemized expense
|
|
Amount
|
|
|
SEC registration fee
|
|
$
|
3,210.00
|
|
|
FINRA filing fee
|
|
|
4,205.00
|
|
|
Legal fees and expenses
|
|
|
180,000.00
|
|
|
Placement agent expenses
|
|
|
35,000.00
|
|
|
Depositary agent fees
|
|
|
139,000.00
|
|
|
Transfer agent and registrar fees
|
|
|
7,500.00
|
|
|
Accounting fees and expenses
|
|
|
5,000.00
|
|
|
Miscellaneous
|
|
|
7,500.00
|
|
|
Total
|
|
$
|
381,415.00
|
|
PLAN
OF DISTRIBUTION
We engaged H.C. Wainwright
& Co., LLC (“Wainwright” or the “placement agent”) to act as our exclusive placement agent to solicit
offers to purchase the securities offered by this prospectus. The placement agent is not purchasing or selling any securities,
nor are they required to arrange for the purchase and sale of any specific number or dollar amount of securities, other than to
use their “best efforts” to arrange for the sale of securities by us. Therefore, we may not sell the entire amount
of shares being offered. We may enter into a securities purchase agreement directly with certain institutional investors who purchase
our securities in this offering. We will not enter into securities purchase agreements with all other investors and such investors
shall rely solely on this prospectus in connection with the purchase of our securities in this offering.
Upon the closing of this
offering, we will pay the placement agent a cash transaction fee and a management fee, equal to 7.0% and 1.0%, respectively, of
the gross proceeds to us from the sale of the securities in the offering (excluding any proceeds from the exercise of the warrants
issued in the offering).
The following table
shows the per Unit and per Pre-funded Unit and total placement agent fees we will pay assuming the sale of all of the securities
offered pursuant to this prospectus.
|
|
|
Per
Unit
|
|
|
Per
Pre-
funded Unit
|
|
|
Placement Agent
Fees
|
|
$
|
|
|
|
$
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
We will also pay the
placement agent a non-accountable expense allowance of $35,000, reimburse the placement agent $12,900 for the clearing
expenses of the placement agent and reimburse the placement agent’s legal fees and expenses in an amount up to $40,000 in
connection with this offering, of which $20,000 has been paid subject to repayment to us to the extent not actually incurred.
We have also agreed
to pay a previous placement agent, which engagement was terminated on March 2, 2020, a tail fee consisting of (i) a cash compensation
equal to 1.25% of the gross proceeds raised in any underwritten public offering or a private placement of our securities with
non-Israeli investors, such fee to be partially offset from the management fee payable to Wainwright, which equals 1% of the gross
proceeds raised in this offering, and (ii) ADSs equal to 1.25% of the ADSs placed with such investors within 6 months following
the termination of the engagement of the previous placement agent. Assuming that the maximum number of Units offering by us, as
set forth on the cover page of this prospectus, at an assumed public offering price of $0.575 per Unit, which is the last reported
sale price of our ADSs on NASDAQ on March 6, 2020, were purchase by non-Israeli investors, we anticipate that the cash tail fee
payable to the previous placement agent will not exceed net $20,000 and we will issue up to 173,913 ADSs to the previous placement
agent.
We
estimate the total offering expenses of this offering that will be payable by us, excluding the placement agent fees and expenses,
will be approximately $346,000.
After
deducting the fees due to the placement agent, our estimated offering expenses, and the tail fee and reimbursement of the legal
fees and expenses to the previous placement agent, we expect the net proceeds from this offering to be approximately $7.0 million.
Placement Agent Warrants
In addition, we have
agreed to issue to the placement agent or its designees warrants, or the placement agent warrants, to purchase _____ _____ADSs
(which represents 7.0% of the aggregate number of ADSs (i) included in the Units and (ii) issuable upon the exercise of the pre-funded
warrants included within the Pre-funded Units that are, in each case, placed in this offering to investors). The placement agent
warrants will have an exercise price of $________ per ADS (equal to 125% of the price of the Units sold in this offering) and
will terminate on the fifth anniversary of the effective date of this offering. Pursuant to FINRA Rule 5110(g), the placement
agent warrants and any ADSs issued upon exercise of the placement agent warrants shall not be sold, transferred, assigned, pledged,
or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective
economic disposition of the securities by any person for a period of 180 days immediately following the effective date of this
offering or commencement of sales of this offering, except the transfer of any security:
|
|
●
|
by
operation of law or by reason of reorganization of our company;
|
|
|
|
|
|
|
●
|
to
any FINRA member firm participating in the offering and the officers or partners thereof, if all securities so transferred
remain subject to the lock-up restriction set forth above for the remainder of the time period;
|
|
|
|
|
|
|
●
|
if
the aggregate amount of securities of our company held by the holder of the placement agent warrants or related persons do
not exceed 1% of the securities being offered;
|
|
|
|
|
|
|
●
|
that
is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member
manages or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10%
of the equity in the fund; or
|
|
|
|
|
|
|
●
|
the
exercise or conversion of any security, if all securities received remain subject to the lock-up restriction set forth above
for the remainder of the time period.
|
This prospectus also
relates to the offering of ADSs issuable upon the exercise of the placement agent warrants.
The placement agent
may be deemed an underwriter within the meaning of Section 2(a)(11) of the Securities Act and any fees received by it and any
profit realized on the sale of the securities by it while acting as principal might be deemed to be underwriting discounts or
commissions under the Securities Act. The placement agent will be required to comply with the requirements of the Securities Act
and the Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, Regulation M under the
Exchange Act. These rules and regulations may limit the timing of purchases and sales of our securities by the placement agent.
Under these rules and regulations, the placement agent may not (i) engage in any stabilization activity in connection with our
securities; and (ii) bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities,
other than as permitted under the Exchange Act, until they have completed their participation in the distribution.
Right of First Refusal
We
have also granted Wainwright, subject to certain exceptions, a right of first refusal for a period of ten months following the
closing of this offering to act as sole book-running manager, sole underwriter, sole placement agent or sole agent for each and
every future debt financing or refinancing and public or private equity offering by us or any of our successors or subsidiaries.
Tail
Financing Payments
We
have also agreed to pay Wainwright, subject to certain exceptions, a tail fee
equal to the cash and warrant compensation in this offering, if any investor, who was contacted and brought over-the-wall by Wainwright
during the term of its engagement or introduced to us by Wainwright during the term of its engagement, provides us with capital
in any public or private offering or other financing or capital raising transaction during the 3-month period following the expiration
of the ten-month right of first refusal period discussed above.
Other
Relationships
The
placement agent 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 the placement agent
to do so.
Determination
of offering price
The public offering price
of the securities offered hereby was negotiated between us and the investors, in consultation with the placement agent, and other
advisors to us, based on the trading of our ordinary shares prior to the offering, among other things. Other factors considered
in determining the public offering price of the securities offered hereby include our history and prospects, the stage of development
of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management,
general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant.
Lock-up
Agreements
Our officers and directors
who are holders of our securities at the time of the offering, are expected, at the time of the offering, to enter into agreements
with the placement agent and certain investors in the offering to be subject to a lock-up period of 90 days following the
date of closing of this offering. This means that, during the applicable lock-up period following the closing of the offering,
such persons may not offer for sale, contract to sell, sell, distribute, grant any option, right to warrant to purchase, pledge,
hypothecate or otherwise dispose of, directly or indirectly, any ADS, our ordinary shares or any securities convertible into,
or exercisable or exchangeable for, our ordinary shares. Certain limited transfers are permitted during the lock-up period if
the transferee agrees to these lock-up restrictions.
We have also agreed,
in the securities purchase agreements with certain investors in the offering, to similar lock-up restrictions on the issuance
and sale of our securities for 30 days following the closing date of the offering pursuant to this prospectus, although we will
be permitted to issue equity-based incentive compensation to directors, officers, employees and consultants under our existing
plans, as well as securities to be issued under any previously contracted arrangements. The placement agent may, in its sole discretion
and without notice, waive the terms of any of these lock-up agreements. We have also agreed that, for a period of 365 days following
the closing date of this offering, we will not (i) issue or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive, additional ordinary shares (or ADSs) either (A) at a conversion price, exercise
price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the ordinary
shares at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to our business or the market for the ordinary shares
or (ii) enter into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit, “at
the market” offering or similar transaction, whereby we may issue securities at a future determined price. However, the
preceding sentence shall not restrict us from issuing ADSs and/or ordinary shares under an at the market offering program with
Wainwright following the expiration of the 30-day lock-up period.
Indemnification
We
have agreed to indemnify the placement agent against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments that the placement agent may be required to make for these liabilities.
Offer
Restrictions Outside the United States
Other
than in the United States, no action has been taken by us or the placement agent 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.
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.
Israel
In the State of Israel,
the securities offered hereby may not be offered to any person or entity other than on a private placement basis to the following
who are deemed Classified Investors pursuant to the Securities Law, 5728-1968:
|
|
●
|
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;
|
|
|
|
|
|
|
●
|
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;
|
|
|
|
|
|
|
●
|
an
insurer, as defined in the Law for Oversight of Insurance Transactions, 5741-1981;
|
|
|
|
|
|
|
●
|
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;
|
|
|
|
|
|
|
●
|
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;
|
|
|
|
|
|
|
●
|
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;
|
|
|
|
|
|
|
●
|
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;
|
|
|
|
|
|
|
●
|
an
underwriter fulfilling the conditions of Section 56(c) of the Securities Law, 5728-1968, acting on its own account;
|
|
|
|
|
|
|
●
|
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;
|
|
|
|
|
|
|
●
|
entity
fully owned by investors of the type listed in Section 15A(b) of the Securities Law, 5728-1968;
|
|
|
|
|
|
|
●
|
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
|
|
|
●
|
an
individual who meets at least one of three following criteria:
|
|
|
1)
|
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.
|
|
|
2)
|
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
|
|
|
3)
|
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).
|
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:
|
|
i.
|
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
|
|
|
ii.
|
carrying
out the examination of the individual’s compliance independently, while relying on external evidence and information
presented to it by the individual.
|
Offerees
of the securities offered hereby, or the “Classified 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 criteria.
In
addition, if 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.
Any Classified Investors in the State
of Israel who acquire our securities offered on a private placement basis concurrent with the U.S. public offering being made
hereby, are urged to consult their own legal and other advisors about the consequences of acquiring our securities offered hereby
as Classified Investors, in light of the Classified Investor’s own circumstances.
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
Kingdom
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.
DIRECTORS
AND SENIOR MANAGEMENT
The
following table sets forth the name and position of each of our executive officers and directors. The inclusion of any individual
in this table does not necessarily imply that such individual is an officer or office holder as such terms are defined under applicable
law.
|
Name
|
|
Age
|
|
Position
|
|
Eric
Rowinsky, M.D.
|
|
63
|
|
Independent
Director and Chairman of the Board of Directors
|
|
Isaac
Israel
|
|
41
|
|
Chief
Executive Officer and Director
|
|
Simcha
Rock, CPA, MBA
|
|
69
|
|
Director
|
|
Steven
Steinberg(1)(2)
|
|
58
|
|
Independent
Director
|
|
Ido
Agmon, MBA(2)
|
|
42
|
|
Independent
Director
|
|
Ran
Tzror, CPA, MBA(1)
|
|
38
|
|
Independent
Director
|
|
Revital
Stern-Raff, CPA, MBA(1)
|
|
45
|
|
Independent
Director
|
|
Gil
Efron, CPA, MA
|
|
54
|
|
Deputy
CEO and Chief Financial Officer
|
|
Gil
Ben-Menachem, Ph.D., MBA
|
|
52
|
|
Vice
President of Business Development
|
|
Hadas
Reuveni, Ph.D.
|
|
52
|
|
Vice
President or Research and Development
|
|
Michael Schickler, Ph.D.
|
|
62
|
|
Head of Clinical Operations
|
|
Bertrand
Liang
|
|
57
|
|
Chief Medical Officer
|
|
(1)
|
Member
of Kitov Pharma Audit Committee
|
|
(2)
|
Member
of Kitov Pharma Compensation Committee
|
Eric
Rowinsky, M.D. has been Chairman of Kitov Pharma’s Board since October 2019. Dr. Eric Rowinsky’s principal expertise
is in the development and registration of novel therapeutics to treat cancer. Since November 2015, Dr. Rowinsky has served as
Executive Chairman of the Board of Directors and President of Rgenix, Inc. He also serves as the Chief Scientific Officer of Clearpath
Development Inc., and has served as a consulting Chief Medical Officer of Oncotartis, Inc. since 2018 and Everest Medicines, Inc.
since 2017. Additionally, he has been an independent consultant since 2016 and works with many other life science companies in
providing expertise in developing and registering a wide range of novel cancer therapeutics. Dr. Rowinsky served as Executive
Vice President, Chief Medical Officer and Head of Research and Development of Stemline Therapeutics, Inc., a clinical-stage biopharmaceutical
company, from November 2011 until October 2015. Prior to joining Stemline, Dr. Rowinsky was co-founder and Chief Executive Officer
of Primrose Therapeutics, Inc., a start-up biotechnology company, from June 2010 until its acquisition in September 2011. He also
served as a drug development and regulatory strategy consultant to the ImClone-Lilly Oncology Business Unit and several other
biopharmaceutical and life sciences companies from 2010 to 2011. From 2005 to 2009, Dr. Rowinsky was Executive Vice President
and Chief Medical Officer of ImClone Systems Inc., where he led the FDA approval of Erbitux® for head and neck and colorectal
cancers and advanced eight other monoclonal antibodies through clinical development. From 1996 to 2004, Dr. Rowinsky held several
positions at the Cancer Therapy and Research Center, including Director of the Institute of Drug Development, or IDD, and the
SBC Endowed Chair for Early Drug Development at the IDD. From 1996 to 2006, he was a Clinical Professor of Medicine at the University
of Texas Health Science Center at San Antonio. From 1988 to 1996, Dr. Rowinsky was an Associate Professor of Oncology at The Johns
Hopkins University School of Medicine. He was a longstanding National Cancer Institute principal and co-principal investigator
from 1990 to 2004, and was integrally involved in pivotal clinical and preclinical investigations that led to the development
of numerous cancer therapeutics, including paclitaxel, docetaxel, topotecan, irinotecan, erlotinib, gefitinib and temsirolimus
among others. Dr. Rowinsky was also an Adjunct Professor of Medicine at New York University School of Medicine (2008-2018). Dr.
Rowinsky presently serves on the boards of directors of the public companies Biogen Idec, Inc., Fortress Biosciences, Inc., and
Verastem Inc. He formerly served on the boards of directors of the public companies Navidea Biopharmaceuticals Inc. (2010-2018),
BIND Therapeutics (2014-2016), and Biophytis S.A. (2018-2019), as well as at a number of privately held companies. Dr. Rowinsky
received a B.A. degree from New York University (1977) and an M.D. degree from Vanderbilt University School of Medicine (1981).
He completed his residency in internal medicine at the University of California, San Diego (1984) and completed his fellowship
in medical oncology at The Johns Hopkins Oncology Center (1987).
Isaac
Israel has served as our chief executive officer and a member of Kitov Pharma’s Board since October 2012. Mr. Israel
was the founding chief executive officer of BeeContact Ltd. (formerly TASE:BCNT), from 2001 until 2007. Since 2008 Mr. Israel
has served as founding chief executive officer of Uneri Capital Ltd., a consulting firm in the capital markets field, owned by
Mr. Israel, which specializes in the healthcare sector. Mr. Israel also provides consulting services to Capital Point Ltd. (TASE:CPTP)
and serves as a member of the board of directors of various private healthcare corporations. In the past Mr. Israel also served
as chairman of the board of a public healthcare corporation, NextGen Biomed Ltd., which is traded on TASE.
Simcha
Rock, CPA, MBA, has served a member of Kitov Pharma’s Board since July 2013. He also serves as a strategic consultant
to us. He served as our Chief Financial Officer from July 2013 until he retired from his position as Chief Financial Officer as
of December 31, 2018, following a transition period with Gil Efron, our new Chief Financial Officer. Prior to joining us, Mr.
Rock was a private equity manager at Edmond de Rothschild Private Equity Management, a firm specializing in the management of
venture capital and other private equity investments funds, from February 2000 until January 2011, with responsibility for all
financial, legal and administrative matters for several investment funds. Prior to 2000, Mr. Rock held financial management positions
at Intel Electronics Ltd., The Jerusalem College of Technology, and JC Technologies Ltd. Mr. Rock holds a BA from Yeshiva University
and an MBA from Cleveland State University.
Steven
Steinberg, has served as a member of Kitov Pharma’s Board since July 2016. Since April 2017, Mr. Steinberg has been
an independent financial consultant. From January 2015 through March 2017, Mr. Steinberg served as the chief financial officer
of Glide Talk Ltd., a technology company in the video messaging arena. From September 2013 to October 2014 he served as vice president,
finance at Client Connect Ltd., a subsidiary of Conduit Ltd., and subsequent to an acquisition, of Perion Network, Ltd. a NASADQ
listed company. Between August 2011 and August 2013, Mr. Steinberg acted as an independent consultant, providing start-ups and
mature organizations with advice in financial reporting, due diligence and business models. From December 2002 until July 2011
Mr. Steinberg was employed by Answers Corporation, a NASDAQ listed company, where he served as chief financial officer. Prior
to 2002 he held a number of finance and chief financial officer roles, following a ten-year period of service as an audit manager
at Coopers & Lybrand (currently Price Waterhouse Coopers) in New York City. Mr. Steinberg holds a Bachelor’s Degree
in Business Administration from Florida International University – School of Business Administration, and was granted a
CPA license in New York State.
Ido
Agmon, MBA, has served as a member of Kitov Pharma’s Board since June 2016. Since 2012, Mr. Agmon has been acting
as an independent consultant and investment manager, providing start-ups, investment funds and technology-based ventures with
advice in strategic& financial planning, fund-raising and related business development activities. He
serves as a member of the board of directors of an Israeli privately held start-up corporation. From 2014 until the end
of 2016, Mr. Agmon was a manager of Aviv New-Tech (formerly Aviv Bio-Invest), a private investment fund which manages a portfolio
of public Israeli & global biomed and technology companies, of which he was a co-founder, and where he was responsible for
analysis and evaluation of investments in Israeli and global biomed companies. From 2009 until 2011, Mr. Agmon served as the CEO
of Meytav Technology Incubator, an Israeli-based accelerator for biotech, pharma & medtech ventures with over 20 portfolio
companies. Mr. Agmon has served as a board member at a number of biomed ventures. From 2007 until 2009, he worked as the Director
of Business Development at ATI incubator, a technology incubator specializing in biomed and cleantech projects, responsible for
deal-flow and project evaluation. Mr. Agmon holds a Bachelor’s Degree in Business Administration & Life Sciences from
Tel Aviv University, Tel Aviv, Israel, and an MBA from The Hebrew University, Jerusalem, Israel.
Ran
Tzror, CPA, MBA has served as a member of Kitov Pharma’s Board since March 2017. Since
2014, Mr. Tzror has been the director of S.Y Glilot Ltd., a real-estate company owned by his family. Between 2010 and 2014 he
was employed by Teva Pharmaceuticals Industries Ltd. (NYSE:TEVA; TASE:TEVA) in various roles in corporate business development,
the office of the CEO & President of Teva Pharmaceuticals, and as Director of the Corporate Post Merger Integration Office.
Between 2007 and 2010 he was a senior associate at Somekh Chaikin Certified Public Accountants (Israel), a member firm of KPMG
International. Between 2006 and 2007 he was a legal intern at the commercial division of Yigal Arnon & Co., Advocates &
Notary. Mr. Tzror holds a B.A. in Accounting, LL.B. in Law, and MBA in Financial Management from Tel-Aviv University. He also
completed various courses at the Kellogg Graduate School of Management at Northwestern University in Illinois. Mr. Tzror was granted
a CPA license in the State of Israel, and was also admitted as a member of the Israeli Bar Association.
Revital
Stern-Raff, CPA, MBA has served as a member of Kitov Pharma’s Board since March 2017. Since August 2017, Ms. Stern-Raff
has been an independent financial and accounting consultant. Between 2013 and August 2017, Ms. Stern-Raff, was the Chief Financial
Officer of several municipal development and community association units of the City of Giv’atayim, Israel. Between 2006
and 2013, Ms. Stern-Raff held comptroller and economist positions at Ilex Medical Ltd., a publicly-traded medical diagnostic equipment
company (TASE:ILX). Prior to 2006, Ms. Stern-Raff held a number of comptroller and public accounting positions. Between 2009 and
2012, Ms. Stern-Raff was an independent director at Real Imaging Holdings Ltd., a publicly traded breast cancer diagnostics company
(TASE:RIMG). Ms. Stern-Raff is a licensed CPA in Israel, and holds an M.B.A. (Finance) and B.A. (Business Administration –
Information Technology and Finance) from the Rishon Letzion College of Management in Israel.
Gil
Efron has served as our Deputy Chief Executive Officer and Chief Financial Officer since October 2018. Prior to joining us
he served as Deputy CEO and CFO of Kamada, a NASDAQ and TASE dual-listed plasma-derived protein therapeutics company, from September
2011 to November 2017. Prior to that, he was the CFO of NASDAQ listed RRsat Global Communications LTD from September 2005 to March
2011. Prior to that Mr. Efron served in various finance executive positions. Mr. Efron holds a BA degree in Economics and Accounting
and an MA degree in Business Administration from the Hebrew University of Jerusalem and was granted a certified public accountant’s
license in Israel.
Gil
Ben-Menachem, Ph.D., MBA, has served as the Company’s vice president of business development since January 2016,
as a member of the Board’s Science and Technology Committee since August 2016, as a director at TyrNovo Ltd., the Company’s
majority owned subsidiary, from February 2017 until our 2019 Annual General Meeting of Shareholders held on December 23, 3019
(the “2019 AGM”), and as a director of the Company from July 2017 until our 2019 AGM. Dr. Ben-Menachem has over 15
years of experience in the pharmaceutical, biotechnology, and venture capital industries. Prior to joining the Company, from 2013
until 2015 he was head of innovative products at Dexcel Pharma, a large privately held Israeli pharmaceutical company. From 2012
to 2013, Dr. Ben-Menachem served as chief executive officer of OphthaliX, a company that developed drugs in the ophthalmology
space. From 2008 to 2012 he served as director of business development at Teva Pharmaceutical Industries Ltd. (NYSE:TEVA; TASE:TEVA),
where he was responsible for business development efforts in connection with partnering and acquisition deals for late stage innovative
drug candidates. Between 2005 and 2008 he served as director of business development at Paramount Biosciences, a New York based
merchant bank and biotechnology venture capital firm. Dr. Ben-Menachem received his Ph.D. from the Hebrew University, and MBA
from the University of Maryland. He concluded his postdoctoral training in immunology and microbiology at the National Institutes
of Health (NIH), the U.S. Department of Health and Human Services’ medical research agency.
Dr.
Hadas Reuveni, Ph.D. has served as the Company’s Vice President Research and Development since 2017. Dr. Reuveni, a
co-inventor of the TyrNovo technology, received her Ph.D., Summa Cum Laude, for anti-cancer drug discovery from the Hebrew University
of Jerusalem. She has been engaged with the scientific projects in TyrNovo’s portfolio since 2005 and has nearly two decades
of research and development experience in biotechnology. Dr. Reuveni founded NovoTyr Ltd. a biotech start-up company which a predecessor
company to TyrNovo, developing small molecules for the treatment of cancer and neurodegenerative diseases, and where between 2005
and 2012 she served as the CEO. She also founded and served as a director and chief science officer of AngioB Ltd., a start-up
company that developed GPCR-based agents for multiple indications (2006-2010). Prior to these roles, she was the director of research
& development at Keryx Biopharmaceuticals (NASDAQ:KRX) on 2001-2004. Dr. Reuveni has served as a scientific consultant for
Integra Holdings Ltd., Campus Bio Management Ltd. and BioLineRX (NASDAQ/TASE BLRX).
Michael
Schickler, Ph.D., has served as the Company’s Head of Clinical Operations since January 2020. Prior to assuming this
role, Dr. Schickler served as the Chief Executive Officer of FameWave until the closing of the FameWave Acquisition. Dr. Schickler
has also provided consulting services for medical device and healthcare companies since July 2018, advising on various matters
pertaining to biopharmaceutical drug development, including as a consultant to the Company since March 2019. From May 2001 to
July 2018, Dr. Schickler served as Chief Executive Officer of CureTech Ltd. (“CureTech”), a biotechnology company
developing novel immunotherapies for the treatment and control of cancer. During his time at CureTech, Dr. Schickler led the company
from the establishment of its operations through its development into a clinical-stage company with activities spanning basic
research through GMP manufacturing and worldwide clinical operations. Dr. Schickler has served on the board of directors of CureTech
since October 2018 and has served on the board of directors of Accellta Ltd. since March 2017. Dr. Schickler received his Diploma
in Business Administration from the University of Lincoln, Lincoln, United Kingdom, his Ph.D. in Biology from The Weizmann Institute
of Science, Rehovot, Israel and his M.Sc. in Immunology and his B.Sc. in Biology from The Faculty of Life Sciences, Tel-Aviv University,
Israel.
Bertrand Liang
has served as the Company’s Chief Medical Officer since January 2020. Dr. Liang previously founded several biotechnology
companies, including Tracon Pharmaceuticals, Coronado Biosciences (subsequently merged with Fortress Biotech) and Pfenex Inc.
Earlier in his career, Dr. Liang was Site Head at Biogen Idec (now Biogen), leading pre-clinical and clinical development, and
Vice President, New Ventures; managing member, Forward Medical Sciences (a venture capital firm). He also served as Vice President
and Head of Hematology and Oncology at IDEC; and Global Development Leader at Amgen, where he led the development of various cytokines
that received U.S. Food and Drug Administration approval, including Neulasta®. Dr. Liang has also held academic positions
at the National Cancer Institute, University of Colorado and University of Vermont, where he headed Human Medical Genetics. He
is an alumnus of the Feinberg School of Medicine at Northwestern University, the Institute of Materials Research and Innovation,
University of Bolton, the Law School at University of London, Boston University, Regis University, and the MIT Sloan School of
Management. Dr. Liang has authored over 75 peer-reviewed publications, chapters and books, and edited a number of volumes in the
fields of Neurology and Oncology.
The
business addresses of our directors and senior management is One Azrieli Center, Round Tower, 132 Menachem Begin Road, Tel Aviv,
6701101, Israel.
Director Compensation
According to the
Company’s Compensation Policy (as defined herein), the Company’s non-executive directors who have been declared by the board of
directors as “independent” under applicable exchange listing rules, may be compensated by means of a periodic
payment and/or by means of payment for participation in Board (or committee) meetings, and may also receive ancillary
benefits, all as approved by appropriate corporate bodies under applicable law. The cash periodic and/or per meeting
compensation for any one non-executive directors shall be capped at $100,000 per annum.
In order to maintain their independent status, non-executive directors are not allowed to participate in performance-related
cash payment based incentive plans, nor in any pension schemes.
Such
directors may also be entitled to receive equity-based compensation in accordance with any applicable law. Under the
Compensation Policy, the equity-based compensation for any single office holder, at the date of the granting thereof, shall
not exceed in one calendar year, the higher of, (i) 5% of our share capital (on a fully diluted basis) calculated at the date
of the grant, or, (ii) USD 2.5 million. The value of equity-based compensation will be calculated based on the Black Scholes
Model, or any other reasonable, best practice or commonly accepted applicable equity based compensation valuation models
taking into account the circumstances of the specific grants. The valuation methodology for purposes of calculating the value
of the grants and compliance with the caps set forth above need not be the same valuation methodology which will ultimately
be used for accounting for the grants in our audited financial statements. The maximum cumulative possible extent of dilution
in respect of the entirety of the granting of equity-based compensation for our employees and office holders (including any
non-executive directors) shall not exceed in one calendar year 15% (on a fully diluted basis) calculated at the date of the
grant. The Compensation Policy directs that vesting periods for equity based compensation grants to office holders shall be
established by our Compensation Committee and board of directors, which shall be no less than 3 years vesting for the full
grant with a minimum vesting period of at least one year for the first tranche of the grant, and subsequently shall be no
more frequent than monthly vesting; provided, however, that such vesting may start as of the commencement of the engagement
of the office holder with the Company; and/or may include portions of the grant which are immediately vested upon date of the
grant, subject to the proviso that the aggregate fully vested equity based compensation grants for an office holder as of the
time of a new grant, including the vested portions of older grants awarded to such office holder and the vested portions of a
new grant at the time of grant, shall not exceed the caps set forth above. The exercise prices for equity based compensation
in the form of options shall be determined by the Compensation Committee and the board of directors, taking into account the
value of the Company’s traded securities leading up to and at the time of the grant, as well as the value of such
equity based compensation based on any reasonable, best practice or commonly accepted equity based compensation valuation
model. The Compensation Committee and the board of directors may make provisions for the cashless exercise of equity-based
compensation grants. The equity-based compensation grants may contain a mandatory exercise provision for vested grants which
shall provide for an automatic exercise upon reaching a certain share price and may also trigger the sale of the underlying
securities. The board of directors of the Company does not have discretion to limit the value of the equity-based
compensation at the time of exercise.
The
ceilings on the periodic and/or per meeting compensation, as well as for the equity-based compensation, for any Active Chairman
of the board of directors (i.e. not an independent director) holding no other executive role at the Company shall be three (3)
times the ceilings set forth above.
We
currently pay Kitov Pharma’s independent and non-executive non-chairman directors an annual fee of $40,000 for services
as a member of our Board of directors, an additional $3,500 annual fee for service on each board committee, and an additional
$7,000 annual fee for service on the board of directors of a subsidiary; provided, however, that the maximum annual fee for
services on our board of directors, on Board committees and/or on the board of directors of any subsidiaries shall not exceed
$47,000. The above dollar denominated fees, and all other dollar denominated payments that we pay our directors based in
Israel, are paid in NIS based on the NIS/$ exchange rate at the beginning of the month in which such amounts are paid, but
not lower than the exchange rate in effect on January 1, 2017. In addition, we pay Dr. Rowinsky an annual fee of $60,000 for
services as a member of our board of directors, as Chairman of our board of directors, for service on any committee of the
board of directors, and for service on the board of directors of a subsidiary. All such director annual fees shall be paid
pro-rata for any service during part of a year.
So
long as the Company operates in accordance with 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, and is not required to pay non-executive directors annual and per meeting fees as set forth under the Compensation
Regulations, the Company shall not pay any per meeting fees to its non-executive directors. Each of our Compensation
Committee, Board of directors and shareholders have also approved ancillary benefits such that we may subsidize ongoing
corporate governance training or other professional training for directors in amounts up to $5,000 per director per annum. We
also reimburse the directors for any direct expenses incurred during the performance of their duties (e.g. travel, parking,
telephone, meals etc.). During the year ended December 31, 2019, we paid Kitov Pharma’s non-executive directors NIS
1,064 thousand (approximately $308 thousand) in the aggregate.
In
June and July of 2017 each of our Compensation Committee, board of directors and shareholders approved a grant of 31,361 restricted
stock units, or “RSUs,” to be granted to each of our non-executive non-chairman directors under our 2016 Equity-Based
Incentive Plan. In order to allow for greater flexibility in reducing the tax burden of the grant, each of the applicable non-executive
directors was entitled to elect, prior to the time of grant, to receive in lieu of all or part of the approved grant of RSU’s,
to receive such number of options to purchase our ordinary shares at a ratio of 1.667 options per RSU, which options shall have
an exercise price which was calculated based on the average USD closing price of our ADSs on NASDAQ for the thirty (30) days prior
to the board of directors’ approval of the grant, converted into ordinary share values at the ratio of 1 ADS representing
1 ordinary shares, and converted into New Israel Shekel at the Bank of Israel Representative Exchange Rate for the date of May
24, 2017 such that the exercise price of each option equals to NIS 6.594 per one ordinary share. Any RSUs and/or options so granted
to each of the applicable non-executive directors, are being vested quarterly over a period of 3 years beginning one year following
the start date of each non-executive director’s appointment to our board of directors, and are exercisable for 7 years from
the date of grant. The RSUs and/or options were granted under applicable tax beneficial provisions, in accordance with the provisions
of the 2016 Equity-Based Incentive Plan and applicable law. Our Compensation Committee, board of directors and shareholders each
approved change of control acceleration for the grant of RSUs and/or options to each of the applicable non-executive directors.
Each of Messrs. Agmon, Weber and Tzror elected to received RSUs, and each of Mr. Steinberg and Ms. Stern-Raff elected to receive
half of the award as RSUs and half as options, under such terms as aforesaid.
In
March and April of 2019 each of our Compensation Committee, board of directors and shareholders approved grants of 112,000 options
to be granted to each of our non-executive, non-chairman directors under our 2016 Equity-Based Incentive Plan to purchase an equivalent
number of our ordinary shares. The options have an option exercise price which was calculated based on a ten percent premium
over the 30-day average closing price of our ADSs on NASDAQ prior to the decision by our board of directors to approve the equity-based
compensation awards, such that the exercise price of each option equals to NIS 4.64 (USD 1.28) per one ordinary share. The options
to be granted to the directors, are being vested quarterly over a period of 3 years from March 19, 2019 beginning one year following
such date, and are exercisable for 7 years from March 19, 2019. The options were granted under applicable tax beneficial provisions,
in accordance with the provisions of the 2016 Equity-Based Incentive Plan and applicable law.
In
addition, in November and December of 2019, each of our Compensation Committee, board of directors and shareholders approved a
grant of 400,000 options to be granted to Dr. Rowinsky under our 2016 Equity-Based Incentive Plan. The options have an option
exercise price which was calculated based on a 10% percent premium over the closing price of our ADSs on NASDAQ on the day of
the decision by our board of directors to approve the equity-based compensation awards, such that the exercise price of each option
equals to USD 0.814 per one ordinary share. The options granted to Dr. Rowinsky, are being vested quarterly over a period of 3
years from the grant date, with a minimum vesting period of at least one year for the first tranche of the grant, and are exercisable
for 7 years from such date.
Our
Compensation Committee, board of directors and shareholders each approved change of control acceleration for the grant of RSUs
and/or options to each of the non-executive directors.
Directors’
Service Contracts
There
are no arrangements or understandings between us and any of our subsidiaries, on the one hand, and any of our directors, on the
other hand, providing for benefits upon termination of their employment or service as directors of our company or any of our subsidiaries,
except as provided in certain employment or service agreements with our executive officers who also serve as directors.
Executive Compensation
For so long as
we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies,
including the requirement applicable to emerging growth companies to disclose the compensation of our chief executive officer
and other two most highly compensated executive officers on an individual, rather than an aggregate, basis. Nevertheless, the
regulations governing Israeli public companies, which were promulgated under the Israeli Companies Law, require us to disclose
in the proxy statement for our annual general meeting of our shareholders (or to include a reference therein to other previously
furnished public disclosure) the annual compensation of our five most highly compensated office holders on an individual basis,
rather than on an aggregate basis. The disclosure is to be made with respect to the year of the financial statements being presented
at such annual general meeting, and as recorded in the Company’s financial statements for such year. This disclosure must
be on an individual basis, broken out by components, and recognized in such annual financial statements, rather than only on
an aggregate basis for all office holders. This disclosure may not be as extensive as that required of a U.S. domestic issuer.
Under the Companies
Law and Regulations, the compensation of Kitov Pharma’s directors with respect their service as a director, as well as their
engagement in other roles (if the director is so engaged) as well as Kitov Pharma’s chief executive officer generally requires
the approval of our compensation committee, the subsequent approval of the board of directors and, unless exempted under the regulations
promulgated under the Companies Law, the approval of the shareholders at a general meeting. In addition the Companies Law and
Regulations requires the compensation of a public company’s executive officers (other than the chief executive officer)
who are not directors at the company to be approved by, first, the compensation committee, second, by the company’s board
of directors and third, if such compensation arrangement is inconsistent with the company’s duly approved compensation policy,
or compensation is approved prior to the approval of a new compensation policy upon expiration of the term of the previous compensation
policy, or is to an executive officer who is a controlling shareholder (or certain relatives or affiliates thereof), also by the
company’s shareholders. As such, the individual compensation to our directors and members of our management bodies may not
necessarily be disclosed or brought for prior approval by the shareholders on an individual basis.
The aggregate compensation
paid, and benefits in-kind granted to or accrued on behalf of all of Kitov’s directors and office holders for their services,
in all capacities, to us during the year ended December 31, 2019, was approximately $3.0 million. As of December 31, 2019, the
total amount set aside as an actuarial estimate by us to provide post-employment benefits for certain office holders was in the
aggregate amount of approximately $285 thousand. We have not set aside amounts to provide post-employment benefits for the remaining
office holders.
We have entered
into engagement agreements with each of our executive officers. All of these agreements contain customary provisions regarding
noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition
provisions may be limited under applicable laws.
Our directors and
executive officers hold exemption and indemnification letters and a valid D&O insurance policy.
The breakdown of
the annual compensation received by each of Kitov’s five most highly compensated office holders (as defined in the Companies
Law) for the year ended December 31, 2019, broken out by component and on an individual basis, as recorded in our financial statements
for such year, are shown in the table below:
|
Name
|
|
Position
|
|
Salary
or
other
payments1
in (in $
thousands)
|
|
|
Bonus
payments or accruals
(in $ thousands)
|
|
|
Share-based
payment
(in $
thousands)2
|
|
|
Total
(in $ thousands)3
|
|
|
Isaac Israel
|
|
Chief Executive Officer and Director
|
|
|
391,459
|
|
|
|
173,025
|
|
|
|
185,382
|
|
|
|
749,866
|
|
|
Gil Efron
|
|
Chief Financial Officer and Deputy CEO
|
|
|
262,621
|
|
|
|
94,286
|
|
|
|
222,282
|
|
|
|
579,189
|
|
|
Dr. Gil Ben-Menachem
|
|
Vice
President Business Development and Director4
|
|
|
218,211
|
|
|
|
51,003
|
|
|
|
123,595
|
|
|
|
392,809
|
|
|
Dr. Hadas Reuveni
|
|
Vice President of Research and Development
|
|
|
217,489
|
|
|
|
79,288
|
|
|
|
179,325
|
|
|
|
476,101
|
|
|
Dr. J. Paul Waymack
|
|
Chairman
of the board of directors 5
|
|
|
195,120
|
|
|
|
65,040
|
|
|
|
7,993
|
|
|
|
268,153
|
|
|
1
|
Includes
social benefits, such as payments to the National Insurance Institute, advanced education funds, managers’ insurance
and pension funds; vacation pay; and recuperation pay as mandated by Israeli law, and car lease or vehicle use reimbursement
related benefits.
|
|
2
|
Share
based payments are measured at the fair value of the service, when available. The fair value of the Company’s share
options granted to employees, directors and service providers, where fair value of service was not measurable, was estimated
using the fair value of Kitov Pharma’s traded warrants with similar terms, making some adjustments to reflect the specific
terms of the options based on the expected duration.
|
|
3
|
The
total compensation amounts do not include any amounts recorded for an increase in actuarial estimate calculations for post-employment
benefit liabilities for the office holder. Compensation amounts which were paid or otherwise measured in NIS have been translated
into US$ for purposes of this report at average representative exchange rates for the year.
|
|
4
|
Dr.
Ben-Menachem was an executive director on our board of directors until the end of his term at the 2019 annual meeting of shareholders
in December 2019.
|
|
5
|
Dr.
Waymack was our Chairman of our board of directors until his retirement as a director in July 2019. He continued
as our Chief Medical Officer until his full retirement in September 2019.
|
|
6
|
For
more information on the calculation of the annual bonus please see below under the description of the individual executive
director’s compensation arrangements for 2019.
|
Consulting Agreement with Waymack Inc. (wholly owned
by Dr. John Paul Waymack)
Earlier in
2019 we announced that Dr. John Paul Waymack would be retiring as our chairman of the board of directors and from his role as
chief medical officer following a transition period. He retired from our board of directors in July 2019 and retired fully as
of September 2019.
In July 2013, we
entered into a consulting agreement with Waymack Inc. for the services of Dr. John Paul Waymack, one of our founders, pursuant
to which Dr. Waymack provides services to us as the chairman of our board of directors, and is responsible for the medical operations
of the Company as Chief Medical Officer in which capacity he reports to our board of directors. In return for Dr. Waymack’s
services, as of March 2014 we paid Waymack Inc. a monthly fee of NIS 29,880 (approximately $8,690 per month based on the representative
rate of exchange on June 30, 2014). Between September 2014 and December 2015, we paid Waymack Inc. a monthly fee of $14,000. During
2016, we paid Waymack Inc. a monthly fee of $20,000. During 2017 and 2018 we paid Waymack Inc. a monthly fee of $27,100. From
January 1, 2019 until his full retirement on September 30, 2019 we paid Waymack Inc. a monthly fee of $21,680. The service agreement
was terminable by either party upon 120 days’ advance notice to the other party. The above agreement was terminated as of
September 30, 2019.
In addition to
the above monthly fee Waymack Inc. was entitled to the following additional compensation:
Retirement Grant.
A retirement grant of six (6) times the monthly fee upon termination of Dr. Waymack’s engagement with us, provided that
the termination is not due to circumstances that do not entitle an employee to severance payments under any applicable law and/or
under any judicial decision of a competent tribunal.
Annual Bonus.
Annual bonus, which shall not exceed twelve (12) times the monthly fee, of which up to nine (9) times the monthly fee is based
on measurable criteria and up to three (3) times the monthly fee is based on non-measurable criteria under our compensation policy.
Following is a description of the annual bonus, commencing with the 2019 calendar year, based on measurable criteria which were
updated following a review by each of the Compensation Committee and board of directors of the Company’s goals and targets:
(i) a bonus in the amount of one (1) time the monthly fee for each increase of 25% of the Company’s equity or assets or
market cap or price per ADS at calendar year-end compared to the previous calendar year-end (exclusive of any increase directly
attributable to an equity raise), but in any event no more than three (3) times the monthly fee; (ii) a bonus in the amount of
one (1) times the monthly fee for completion of in-licensing transaction for a new product; (iii) a bonus in the amount of one
(1) times the monthly fee for completion of a commercial transaction for one of our therapeutic candidates (out-licensing or marketing
transaction) (iv) a bonus in the amount of one (1) times the monthly fee upon approval by the FDA (NDA approval) or any comparable
regulatory authority in connection with our products; (v) a bonus in the amount of two (2) times the monthly fee for acceptance
of one of our therapeutic candidates for IND by the FDA or a comparable stage by any comparable regulatory agency; (vi) a bonus
in the amount of one (1) times the monthly fee for publication of a scientific paper related to one of our therapeutic candidates;
and (vii) a bonus in the amount of one (1) time the monthly fee for registration of a patent for one of our therapeutic candidates.
Special bonus
based on either a Merger Transaction or a Commercialization Transaction. A special bonus equal to: (i) 3.5% of our valuation
determined in a Merger Transaction for a valuation up to $30 million, plus an additional 2.0% of our valuation for the next $20
million layer of valuation (i.e. above $30 million but less than $50 million), plus an additional 1.0% of our valuation for the
layer of valuation above $50 million; provided that in any event Dr. Waymack will not be entitled to a bonus based on a Merger
Transaction in an amount exceeding $2,000,000; A “Merger Transaction” means one or more related transactions of either:
(A) sale, lease, license or any transfer of all or most of our assets or securities; (B) merger so that the shareholders holding
at least 50% of our issued and outstanding share capital prior to the consummation of such transaction hold less than 50% of our
issued and outstanding share capital or the share capital of the surviving company following the consummation of such transaction;
(ii) 3.5% of the cumulative revenues from a Commercialization Transaction for cumulative revenues up to $30 million, plus an additional
2.0% of cumulative revenues for the next $20 million layer of valuation (i.e. above $30 million but less than $50 million), plus
an additional 1.0% of cumulative revenues for the layer of cumulative revenues above $50 million. The bonus is payable for a Commercial
Transaction whose value or estimated value is at least $5 million as a result of the commercialization of our products. In the
event the value or estimated value of a Commercialization Transaction exceeds such amount, Dr. Waymack will be entitled to an
additional monthly bonus against revenues as a result of the Commercialization Transaction in the prior month. In any event Dr.
Waymack will not be entitled to a bonus based on a Commercialization Transaction in an amount exceeding $2,000,000. A “Commercialization
Transaction” means the execution of a licensing and/or distribution agreement of our products with estimated revenues of
at least $5 million. Any special bonus to be paid to Waymack Inc. with respect to a Commercialization Transaction shall be subject
to the limitation that any special bonuses to office holders of the Company together with any fees paid to advisors, bankers and
such in connection with the Commercialization Transaction shall be in aggregate no more than 17% of the cumulative revenues from
a Commercialization Transaction for cumulative revenues up to $30 million, and no more that 14% of cumulative revenues above $30
million.
In 2016, each of
our audit committee, board of directors and shareholders approved a grant of options under our 2016 Equity-Based Incentive Plan
to Dr. Waymack for the purchase of 154,453 ordinary shares (the “Initial PW Grant”) (such number of ordinary shares
would comprise 154,453 of our ADSs). Such options will vest over a period of 3 years from June 27, 2016; have an exercise price
of NIS 15.768 per ordinary share; and are exercisable for 8 years from June 27, 2016, provided, however, that no options were
exercisable prior to our adoption of a revised compensation policy in accordance with the Companies Law, which occurred in July
2017. In addition Dr. Waymack was granted an additional 123,438 options following our July 2016 follow-on public offering, on
the same terms and conditions of the Initial PW Grant so that the sum total of his options following such public offering reflected
3.5% of our issued and outstanding shares subsequent to the offering(the “Subsequent PW Grant”); this grant was made
subject to the proviso that the economic value of the total options issued to Dr. Waymack, calculated as of the date of issuance
of the Subsequent PW Grant, was not in excess of the economic value of the Initial PW Grant as of the date of the approval of
our board of directors for the option grants to Dr. Waymack.
In addition, in
2017 each of our Compensation Committee, board of directors and shareholders approved a grant of 232,305 RSUs to be granted to
Dr. Waymack under our 2016 Equity-Based Incentive Plan (such number of ordinary shares resulting from the RSUs would comprise
232,305 of our ADSs). In order to allow for greater flexibility in reducing the tax burden of the grant, Dr. Waymack was entitled
to elect, prior to the time of grant, to receive in lieu of all or part of the approved grant of RSUs, such number of options
to purchase our ordinary shares at a ratio of 1.667 options per RSU, and which options shall have an exercise price which was
calculated based on the average USD closing price of our ADSs on the NASDAQ Capital Market for the thirty (30) days prior to the
board of directors’ approval of the terms of office and employment of Dr. Waymack which will include the grant, converted
into ordinary share values at the ratio of 1 ADS representing 1 ordinary shares, and converted into New Israel Shekel at the Bank
of Israel Representative Exchange Rate for the date of May 24, 2017 such that the exercise price of each option equals to NIS
6.594 per one ordinary share. Dr. Waymack elected to receive 387,251 options in lieu of 232,305 RSUs (such number of ordinary
shares resulting from the options would comprise 387,251 of our ADSs). These options which were granted to Dr. Waymack shall be
vested quarterly over a period of 3 years from the commencement of Dr. Waymack’s engagement, and are exercisable for 7 years
from August 1, 2017. Our Compensation Committee, board of directors and shareholders each approved change of control acceleration
for the grants of options to Dr. Waymack.
In March and April
of 2019 each of our Compensation Committee, board of directors and shareholders approved a grant of 572,868 options to be granted
to Dr. Waymack under our 2016 Equity-Based Incentive Plan to purchase an equivalent number of ordinary shares of Kitov. The options
have an option exercise price which was calculated based on a ten percent premium over the 30-day average closing price of our
ADSs on the NASDAQ prior to the decision by our board of directors to approve the equity-based compensation awards, such that
the exercise price of each option equals to NIS 4.64 (USD 1.28) per one ordinary share. The options granted to Dr. Waymack were
to be vested quarterly over a period of 3 years from March 19, 2019 beginning one year following such date, and exercisable for
7 years from March 19, 2019. The options were granted under applicable tax beneficial provisions, in accordance with the provisions
of the 2016 Equity-Based Incentive Plan and applicable law. These options expired unvested following Dr. Waymack’s retirement.
Agreement with Mr. Isaac Israel
As of September
2014 we entered into an employment agreement with Mr. Isaac Israel as our chief executive officer for the provision of services
pursuant to which we paid Mr. Israel a base salary of NIS 40,000 (approximately $10,593) per month. In addition to the above we
provided Mr. Israel with a car allowance at a monthly cost of up to NIS 4,000 (approximately $1,059), management insurance policy
and advanced study fund.
Effective as of
May 1, 2016, Mr. Israel increase the scope of his engagement with the Company to 100% from 80% and his base monthly consideration
and linked benefits were increased proportionally. In addition, as of May 1, 2016, Mr. Israel is engaged via a services agreement
with Uneri Capital Ltd., a private company wholly owned by Mr. Isaac Israel, provided, however, that there is no difference to
our costs and expenses for such engagement as a service provider instead of as an employee. For such services we paid Uneri Capital
as of such date monthly payments of NIS 68,867 (approximately $17,911) per month during 2016. Effective January 1, 2017 we are
paying Uneri Capital a monthly fee of $26,250 and a car allowance at a monthly cost of up to NIS 5,000 (approximately $1,400).
The fee, and all other payments derived from a multiple of the fee that we pay Uneri Capital, is paid in NIS based on the NIS/$
exchange rate at the beginning of the month in which such amounts are paid, but not lower than the exchange rate in effect on
January 1, 2017. The service agreement may be terminated by either party upon 120 days’ advance notice to the other party.
In addition, Mr. Israel is entitled to the following additional compensation:
Retirement Grant.
A retirement grant of six (6) time the monthly fee upon termination of Mr. Israel’s engagement with us, provided that the
termination is not due to circumstances that do not entitle an employee to severance payments under any applicable law and/or
under any judicial decision of a competent tribunal.
Annual Bonus.
Annual bonus commencing with the 2019 calendar year has decreased such that it shall not exceed eight (8) times the monthly fee,
of which up to six (6) times the monthly fee is based on measurable criteria and up to two (2) times the monthly fee is based
on non-measurable criteria under our compensation policy. Following is a description of the annual bonus, commencing with the
2019 calendar year, based on measurable criteria which were updated following a review by each of the Compensation Committee and
board of directors of the Company’s goals and targets: (i) a bonus in the amount of one (1) time the monthly fee for each
increase of 25% of the Company’s equity or assets or market cap or price per ADS at calendar year-end compared to the previous
calendar year-end (exclusive of any increase directly attributable to an equity raise), but in any event no more than three (3)
times the monthly fee; (ii) a bonus in the amount of two (2) times the monthly fee for completion of in-licensing transaction
for a new product; (iii) a bonus in the amount of one (1) times the monthly fee for completion of a commercial transaction for
one of our therapeutic candidates (out-licensing or marketing transaction) (iv) a bonus in the amount of one (1) times the monthly
fee for acceptance of one of our therapeutic candidates for IND by the FDA or a comparable stage by any comparable regulatory
agency; (v) a bonus in the amount of one (1) time the monthly fee for registration of a patent for one of our therapeutic candidates;
and (vi) a bonus in the amount of one (1) times the monthly fee for meeting annual budget goals and/or (vii) a bonus in the amount
of one (1) times the monthly fee for initial coverage of the Company’s stock by a new analyst.
Special bonus
based on either a Merger Transaction, Fund Raise or a Commercialization Transaction. A special bonus equal to: (i) 3.5%
of our valuation determined in a Merger Transaction for a valuation up to $30 million, plus an additional 2.0% of our valuation
for the next $20 million layer of valuation (i.e. above $30 million but less than $50 million), plus an additional 1.0% of our
valuation for the layer of valuation above $50 million; provided that in any event Mr. Israel will not be entitled to a bonus
based on a Merger Transaction in an amount exceeding $2,000,000; A “Merger Transaction” means one or more related
transactions of either: (A) sale, lease, license or any transfer of all or most of our assets or securities; (B) merger so that
the shareholders holding at least 50% of our issued and outstanding share capital prior to the consummation of such transaction
hold less than 50% of our issued and outstanding share capital or the share capital of the surviving company following the consummation
of such transaction; (ii) 3.5% of the cumulative revenues from a Commercialization Transaction for cumulative revenues up to $30
million, plus 2.0% of cumulative revenues above $30 million but less than $50 million, plus 1.0% of cumulative revenues above
$50 million. The bonus is payable for a Commercial Transaction whose value or estimated value is at least $5 million as a result
of the commercialization of our products. In the event the value or estimated value of a Commercialization Transaction exceeds
such amount, Mr. Israel will be entitled to an additional monthly bonus against revenues as a result of the Commercialization
Transaction in the prior month. In any event Mr. Israel will not be entitled to a bonus based on a Commercialization Transaction
in an amount exceeding $2,000,000. A “Commercialization Transaction” means the execution of a licensing and/or distribution
agreement of our products with estimated revenues of at least $5 million. Any special bonus to be paid to Mr. Israel with respect
to a Commercialization Transaction shall be subject to the limitation that any special bonuses to office holders of the Company
together with any fees paid to advisors, bankers and such in connection with the Commercialization Transaction shall be in aggregate
no more than 17% of the cumulative revenues from a Commercialization Transaction for cumulative revenues up to $30 million, and
no more that 14% of cumulative revenues above $30 million.
In 2016, each of
our audit committee, board of directors and our shareholders approved a grant of options under our 2016 Equity-Based Incentive
Plan to Mr. Israel for the purchase of 110,324 ordinary shares (such number of ordinary shares would comprise 110,324 of our ADSs).
Such options will vest over a period of 3 years from June 27, 2016, have an exercise price of NIS 15.768 per ordinary share, and
are exercisable for 8 years from June 27, 2016, provided, however, that no options were exercisable prior to our adoption of our Compensation Policy in accordance with the Companies Law, which occurred in July 2017.
In addition, in
2017 each of our Compensation Committee, board of directors and shareholders approved a grant of 217,786 RSUs to be granted to
Mr. Israel under our 2016 Equity-Based Incentive Plan to Mr. Israel (such number of ordinary shares resulting for the RSUs would
comprise 217,786 of our ADSs). In order to allow for greater flexibility in reducing the tax burden of the grant, Mr. Israel was
entitled to elect, prior to the time of grant, to receive in lieu of all or part of the approved grant of RSU’s, such number
of options to purchase our ordinary shares at a ratio of 1.667 options per RSU, and which options shall have an exercise price
which was calculated based on the average USD closing price of our ADSs on the NASDAQ Capital Market for the thirty (30) prior
to the board of directors’ approval of the terms of office and employment of Mr. Israel which will include the grant, converted
into ordinary share values at the ratio of 1ADS representing 1 ordinary shares, and converted into New Israel Shekel at the Bank
of Israel Representative Exchange Rate for the date of May 24, 2017 such that the exercise price of each option equals to NIS
6.594 per one ordinary share. Mr. Israel elect to take the entire award as RSU’s. The RSUs which were granted to Mr. Israel
shall be vested quarterly over a period of 3 years from the commencement of Mr. Israel’s engagement, and are exercisable
for 7 years from August 1, 2017. Our Compensation Committee, board of directors and shareholders each approved change of control
acceleration for the grants of equity-based compensation awards to Mr. Israel.
In March and April
of 2019 each of our Compensation Committee, board of directors and shareholders approved a grant of 502,079 options to be granted
to Mr. Israel under our 2016 Equity-Based Incentive Plan to purchase an equivalent number of ordinary shares of Kitov. The options
have an option exercise price which was calculated based on a ten percent premium over the 30-day average closing price of our
ADSs on the NASDAQ prior to the decision by our board of directors to approve the equity-based compensation awards, such that
the exercise price of each option equals to NIS 4.64 (USD 1.28) per one ordinary share. The options granted to Mr. Israel are
being vested quarterly over a period of 3 years from March 19, 2019 beginning one year following such date, and exercisable for
7 years from March 19, 2019. The options were granted under applicable tax beneficial provisions, in accordance with the provisions
of the 2016 Equity-Based Incentive Plan and applicable law.
Employment Agreement with Dr. Gil Ben-Menachem
Pursuant to an
employment agreement entered into with Dr. Ben-Menachem in 2016, we are currently paying Dr. Ben-Menachem a monthly salary of
NIS 48,000, and the Company provides him with a medium size leased car and bears all of the cost of this car. In addition, Dr.
Ben-Menachem is entitled to a retirement grant of three (3) times the monthly salary upon termination of Dr. Ben-Menachem’s
engagement with us, provided that the termination is not due to circumstances that do not entitle an employee to severance payments
under any applicable law and/or under any judicial decision of a competent tribunal. Dr. Ben-Menachem is also entitled to performance
bonuses and commissions in connection with business development goals related to in-licensing and out-licensing transactions.
The commission awarded to Dr. Ben-Menachem during the year ended December 31, 2019 was $48,000, in connection with the out-licensing
of Consensi™.
In the second quarter
of 2016, each of our audit committee and board of directors approved a grant of options under our 2016 Equity-Based Incentive
Plan to Dr. Ben-Menachem for the purchase 22,065 ordinary shares. Such options vest over a period of 3 years from May 22, 2016,
have an exercise price of NIS 15.768 per ordinary share, and are exercisable for 8 years from May 22, 2016.
In addition, in
2017 each of our Compensation Committee and board of directors approved a grant of 59,818 RSUs to be granted to Dr. Ben-Menachem
under our 2016 Equity-Based Incentive Plan. The RSUs which were granted to Dr. Ben-Menachem are being vested quarterly over a
period of 3 years from the commencement of Dr. Ben-Menachem’s engagement, and are exercisable for 7 years from August 1,
2017. Our Compensation Committee, board of directors and shareholders each approved change of control acceleration for the grants
of equity-based compensation awards to Dr. Ben-Menachem.
In March and April
of 2019 each of our Compensation Committee, board of directors and shareholders approved a grant of 339,582 options to be granted
to Dr. Ben-Menachem under our 2016 Equity-Based Incentive Plan to purchase an equivalent number of ordinary shares of Kitov. The
options have an option exercise price which was calculated based on a ten percent premium over the 30-day average closing price
of our ADSs on the NASDAQ prior to the decision by our board of directors to approve the equity-based compensation awards, such
that the exercise price of each option equals to NIS 4.64 (USD 1.28) per one ordinary share. The options granted to Dr. Ben-Menachem
are being vested quarterly over a period of 3 years from March 19, 2019 beginning one year following such date, and exercisable
for 7 years from March 19, 2019. The options were granted under applicable tax beneficial provisions, in accordance with the provisions
of the 2016 Equity-Based Incentive Plan and applicable law.
Board
Practices
Board of directors and Officers
Our board of directors
presently consists of seven directors. All of our directors also serve as directors of our subsidiaries TyrNovo Ltd. and FameWave
Ltd. Each of Dr. Rowinsky, Ms. Stern-Raff, Mr. Tzror, Mr. Steinberg, and Mr. Agmon qualifies as an independent director under
the corporate governance standards of the NASDAQ Listing Rules and the independence requirements of Rule 10A-3 of the Exchange
Act.
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 of directors does not hold a casting vote.
Under the Companies
Law, companies incorporated under the laws of the State of Israel that are “public companies,” including companies
with shares listed on NASDAQ, are required to appoint at least two external directors.
Pursuant to regulations
promulgated under the Companies Law, companies with shares traded on a U.S. stock exchange, including NASDAQ, may, subject to
certain conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies
Law rules concerning the composition of the audit committee and compensation committee of the board of directors. In accordance
with these regulations, in July 2016, we elected to “opt out” from the Companies Law requirements to appoint external
directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the
board of directors.
Under these regulations,
the exemptions from such Companies Law requirements will continue to be available to us so long as: (i) we do not have a “controlling
shareholder” (as such term is defined under Section 1 of the Companies Law), (ii) our shares are traded on a U.S. stock
exchange, including NASDAQ, and (iii) we comply with the director independence requirements, the audit committee and the compensation
committee composition requirements, under U.S. laws (including applicable Nasdaq Rules) applicable to U.S. domestic issuers.
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.
Our directors are divided into three classes, with each class comprising one-third of the members of our board of directors
(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.
At our 2020
annual general meeting of shareholders, the appointment of the directors included in the second class shall end. At our 2021
general meeting of shareholders, the appointment of the directors included in the third class shall end. At our 2022 general
meeting of shareholders, the appointment of the directors included in the first class shall end. At our annual general
meeting of our shareholders, the shareholders are entitled to elect directors who shall be elected for a Three-Year Term (as
defined below) 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 of directors, provided that the total number of the members of the board of directors serving at such
time will not exceed the Maximum Number (see below). 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. At our 2020 annual
general meeting of shareholders, the terms of the directors included in the second class (Messrs. Steinberg, and Tzror) shall
end. At our 2021 general meeting of shareholders, the terms of the directors included in the third class (Messrs. Israel and
Rock and Ms. Stern-Raff) shall end. At our 2022 general meeting of shareholders, the terms of the directors included in the
first class (Dr. Rowinsky and Mr. Agmon) shall end.
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 Kitov Pharma
as of the record date established for the applicable general meeting of our shareholders (“Special Majority”).
In addition, under
the Companies Law, our board of directors must determine the minimum number of directors who are required to have financial and
accounting expertise. Under applicable regulations, a director with financial and accounting expertise is a director who, by reason
of his or her education, professional experience and skill, has a high level of proficiency in and understanding of business accounting
matters and financial statements. He or she must be able to thoroughly comprehend the financial statements of the company and
initiate debate regarding the manner in which financial information is presented. In determining the number of directors required
to have such expertise, the board of directors must consider, among other things, the type and size of the company and the scope
and complexity of its operations. Our board of directors has determined that we require at least one director with the requisite
financial and accounting expertise and that Mr. Rock, Mr. Steinberg, Ms. Stern-Raff, Mr. Tzror are each deemed to have such expertise.
Alternate Directors
Our amended
and restated articles of association provide, as allowed by the Companies Law, that any director may, at all times, appoint
any person (which is not a corporation) by written notice to us to serve as an alternate director at a meeting of the board of
directors. A person who is not qualified to be appointed as a director, a person who is already serving as a director or a person
who is already serving as an alternate director for another director, may not be appointed as an alternate director, unless otherwise
permitted by applicable law. A director who is already serving as a director may be appointed as an alternate director for a member
of a committee of the board of directors so long as he or she is not already serving as a member of such committee, and if the
alternate director is to replace an external director, he or she is required to be an external director and to have either “financial
and accounting expertise” or “professional expertise,” depending on the qualifications of the external director
he or she is replacing. So long as the external director’s appointment is valid, the alternate director shall be entitled
to participate and vote in every meeting of the board of directors from which the appointing director is absent. Subject to the
terms of appointment, the alternate director will be regarded as a director and shall have all of the authority of the director
he or she is replacing. An appointing director may at any time cancel the appointment of an alternate director. The term of appointment
of an alternate director will end if the appointing director notifies us in writing of the termination or cancellation of the
appointment or if the appointing director’s appointment is terminated.
Audit Committee
Under the Companies
Law, the board of directors of any public company must also appoint an audit committee. Companies listed on foreign stock exchanges,
including NASDAQ, which have adopted the corporate governance exceptions, such as our company (as described above), are exempt
from the audit committee composition requirements under the Companies Law, but must comply with the audit committee composition
requirements of the applicable foreign exchange.
Under
the NASDAQ Listing Rules, we are required to maintain an audit committee consisting of at least three independent directors, all
of whom are financially literate and one of whom has accounting or related financial management expertise.
Each
of the members of the audit committee is required to be “independent” as such term is defined in Rule 5605(a)(2) of
the NASDAQ Listing Rules and in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence
of board and committee members. The independence requirements of the Exchange Act implement two basic criteria for determining
independence: (1) audit committee members are barred from accepting directly or indirectly any consulting, advisory or other compensatory
fee from the issuer or an affiliate of the issuer, other than in the member’s capacity as a member of the board of directors
and any board committee, and (2) audit committee members may not be an “affiliated person” of the issuer or any subsidiary
of the issuer apart from her or his capacity as a member of the board of directors and any board committee. The SEC has defined
“affiliate” for non-investment companies as “a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person specified.” The term “control” is
intended to be consistent with the other definitions of this term under the Exchange Act as “the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.”
Audit Committee Role
Under the Companies Law, our audit committee:
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recommends to
the board of directors to recommend to our shareholders to appoint and approve the compensation of the independent registered
public accounting firm engaged to audit our financial statements;
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monitors deficiencies
in the management of the Company, inter alia, in consultation with the independent registered public accounting firm and internal
auditor, and advises the board of directors on how to correct such deficiencies;
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decides whether
to approve and recommend to the board of directors to approve engagements or transactions that require the audit committee’s
approval under the Companies Law relating generally to certain related party transactions. The audit committee must pre-determine
procedures for a competitive process, or other procedures, before approving related party transactions with controlling shareholders,
even if such transactions are deemed by the audit committee not to be extraordinary transactions. This process is to be supervised
by the audit committee, or any person authorized for such supervision, or via any other method approved by the audit committee;
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decides as to
what transactions shall be considered as “extraordinary transactions” as such term is defined under the Companies
Law in connection with related party transaction;
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determines the
approval process for transactions that are not negligible, as well as determine which types of transactions would require
the approval of the audit committee. Non-negligible transactions are defined as related party transactions with a controlling
shareholder, or in which the controlling shareholder has a personal interest, even if they are deemed by the audit committee
not to be extraordinary transactions but which have also been classified by the audit committee as non-negligible transactions;
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meets and receives
reports from both the internal auditors and the independent registered public accounting firm dealing with matters that arise
in connection with their audits; and
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regulates the
Company’s rules on employee complaints, and implementing a whistleblower protection plan with respect to employee complaints
of business irregularities.
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In
accordance with the Sarbanes-Oxley Act of 2002 and the NASDAQ Listing Rules, the audit committee is also directly responsible
for the appointment, compensation and performance of our independent auditors, and pre-approves audit and non-audit services to
be provided by the independent auditors. In addition, the audit committee is responsible for assisting the board of directors
in reviewing our annual financial statements, the adequacy of our internal controls and our compliance with legal and regulatory
requirements. The audit committee also oversees our major financial risk exposures and policies for managing such potential risks,
discusses with management and our independent auditor significant risks or exposure and assesses the steps management has taken
to minimize such risk.
Our board of directors
has adopted an audit committee charter setting forth the responsibilities of the audit committee, which are consistent with the
provisions of the Companies Law, rules and regulations of the SEC and the NASDAQ Listing Rules.
The approval of
the audit committee (or under certain circumstances the compensation committee) is required to effect specified actions and transactions
with office holders and controlling shareholders and their relatives, or in which they have a personal interest. The audit committee
may not approve an action or a transaction with a controlling shareholder or with an office holder unless at the time of approval
the audit committee meets the composition requirements under the Companies Law.
Our audit committee
consists of Ms. Revital Stern-Raff, Mr. Steven Steinberg and Mr. Ran Tzror. All members of our audit committee meet the requirements
for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ Listing Rules. Our board of directors
has determined that all of the above members of the audit committee are audit committee financial experts as defined by the SEC
rules and have the requisite financial experience as defined by the NASDAQ Listing Rules.
Compensation Committee
Israeli public
companies are required to appoint a compensation committee in accordance with the requirements set forth in the Companies Law.
Companies listed on foreign stock exchanges, including NASDAQ, which have adopted the corporate governance exceptions, such as
our company (as described above), are exempt from the compensation committee composition requirements under the Companies Law,
but must comply with the compensation committee composition requirements of the applicable foreign exchange.
In accordance with
the Companies Law, the roles of the compensation committee are, among others, as follows:
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to recommend
to the board of directors the compensation policy for directors and officers, and to recommend to the board of directors once
every three years whether the compensation policy that had been approved should be extended for a period of more than three
years;
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to recommend
to the board of directors updates to the compensation policy, from time to time, and examine its implementation;
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to decide whether
to approve the terms of office and employment of directors and officers that require approval of the compensation committee;
and
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to decide whether
the compensation terms of the chief executive officer of Kitov Pharma which were determined pursuant to the compensation policy
need not be brought for approval of the shareholders because it will harm the ability to engagement with the chief executive
officer.
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In addition to
the roles mentioned above our compensation committee will also make recommendations to our board of directors regarding the awarding
of employee equity grants.
Our board of directors
has adopted a compensation committee charter setting forth the responsibilities of the compensation committee, which are consistent
with the provisions of the Companies Law, rules and regulations of the SEC and the NASDAQ Listing Rules. Our compensation committee
presently consists of Mr. Steven Steinberg and Mr. Ido Agmon.
Compensation Policy
Israeli public
companies must adopt a compensation policy with respect to the terms of service and employment of their directors and officers.
The compensation policy must be approved by the compensation committee (or the audit committee acting in lieu of a compensation
committee pursuant to the Companies Law) and board of directors, and subject to limited exceptions, by the shareholders. Shareholder
approval requires one of the following: (i) the majority of shareholder votes counted at general meeting including the majority
of all of the votes of those shareholders who are non-controlling shareholders and do not have a personal interest in the approval
of the compensation policy, who participate at the meeting (excluding abstentions) or (ii) the total number of votes against the
proposal among the shareholders mentioned in paragraph (i) does exceed two percent (2%) of the voting rights in the company. Under
special circumstances, the board of directors may approve the compensation policy despite the objection of the shareholders on
the condition that the compensation committee (or the audit committee acting in lieu of a compensation committee pursuant to the
Companies Law) and then the board of directors decide, on the basis of detailed arguments and after discussing again the compensation
policy, that approval of the compensation policy, despite the objection of the meeting of shareholders, is for the benefit of
the company.
On July 12, 2017,
Kitov Pharma’s shareholders approved our current compensation policy (the “Compensation Policy”).
The Compensation
Policy will not, on its own, grant any rights to our directors or officers. The Compensation Policy includes both long term and
short term compensation elements and is to be reviewed from time to time by our compensation committee (or the audit committee
acting in lieu of a compensation committee pursuant to the Companies Law) and board, according to the requirements of the Companies
Law.
In general, compensation
for officers will be examined while taking into consideration the following parameters, including, among others (i) education,
qualifications, expertise, seniority (with us in particular, and in the officer’s profession in general), professional experience
and achievements of the officer; (ii) meeting by the officer of the targets set for him, if relevant; (iii) the officer’s
position, the scope of his responsibility and previous wage agreements that were signed with him; and (iv) the ratio between the
total cost of the proposed engagement terms of an officer and the total cost of the wages for all of our other employees, officers
and contractors, and in particular compared to the average or median wage of such employees, officers and contractors and the
effect of this ratio and difference, if any, on labor relations.
Our
Compensation Policy must be reviewed from time to time by our Compensation Committee and board of directors, to ensure its alignment
with our compensation philosophy and to consider its appropriateness for the Company. Pursuant to the Israeli Companies Law, our
Compensation Policy must generally be re-approved once every three years by the board of directors, after considering the recommendations
of the Compensation Committee, and by a special majority of Company’s shareholders as detailed above. Any amendment to the
Compensation Policy requires the same approvals.
In
adopting the Compensation Policy, we considered feedback we received from shareholders regarding corporate governance “best
practices” for companies of a similar size, scope of business, and life-cycle. Subsequently, we adopted the Compensation
Policy to better align and to further improve the link between the long-term interests of the participants of the compensation
system with those of the shareholder. Targets used to determine payout levels for variable compensation elements such as the Annual
Bonus and Long-Term Incentives (LTIs) are approved by the Compensation Committee in advance. We expect that we will continue to
monitor the regulatory environment and to solicit feedback from our shareholders in the future to ensure that this link is maintained
and continuously strengthened.
In
addition to receiving and implementing suggestions by shareholders regarding the Compensation Policy, our Compensation Committee
and board of directors considered numerous factors, including the relevant matters and provisions set forth in the Israeli Companies
Law, and reviewed various data and other information they deemed relevant, with the advice and assistance of legal and other advisors.
They also used benchmark studies of peer companies prepared for us by outside consultants to determine that the various compensation
elements included in the Compensation Policy are in line with market practice. As a reference point, we target actual compensation
packages to the median compensation level of the peer group, while maintaining the potential for above-average variable compensation
for high performance. It should also be noted that our Compensation Committee expects to conduct these analyses and benchmarks
pay for executives at least once every three years. The benchmark group comprised a selection of companies chosen to reflect the
competitive environment in which we operate. These companies were selected according to criteria such as revenues, market capitalization,
business type, geographic location, and size.
Our
Compensation Policy is intended to strike a balance between short and long-term performance incentives for the executives in a
way that links pay to performance of our executive officers’ interests with those of the Company and our shareholders. We
believe that it allows us to provide meaningful incentives that reflect both our short- and long-term goals and performance, as
well as our executive officers’ individual performance and impact on shareholder value, while providing compensation that
is competitive in the global marketplace in which we recruit talent and designed to reduce incentives to take excessive risks.
Our
Compensation Policy (i) has an annual cap on equity based compensation of 15%, (ii) allows for non-executive directors to be paid
solely with an annual cash fee in lieu of annual and per-meeting cash fees, (iii) allows non-executive directors to receive equity-based
incentive compensation, (iv) allows for increased individual and Company coverage under the proposed directors’ and officers’
insurance policy for renewal as set forth in the Compensation Policy, (v) allows for signing or retention bonuses in order to
recruit qualified personnel, (vi) allows for change of control payments in order to reduce to some extent the personal uncertainty
of office holders and promote full and impartial consideration of change of control opportunities for the Company, and (vii) has
a cap on the value of share-based compensation for each Office holder, during each year, which is the higher of (X) 5% of the
share capital of the Company (on a fully diluted basis) calculated at the date of the grant, or (Y) USD 2.5 million value of the
equity-based compensation calculated based on the Black Scholes Model, or any other reasonable, best practice or commonly
accepted applicable equity based compensation valuation models taking into account the circumstances of the specific grants in
accordance with the provisions of the Compensation Policy.
The
brief overview above is qualified in its entirety by reference to the full text of our Compensation Policy.
Other Board Committees
In the past our
board of directors established an investment committee in order to oversee the management and investment of the Company’s
cash and cash equivalents, which met on an ad hoc basis as required and was empowered to establish guidelines and policies, as
well as to make decisions, with respect to managing our financial assets. Our board of directors recently resolved to disband
this committee and authorized our audit committee to oversee such activities. Our board of directors had also previously established
a science and technology committee in order to advise and assist the board of directors of the Company in the oversight of the
Company’s research and development and technology programs. This committee also on an ad hoc basis. Our board of directors
also recently resolved to disband this committee.
Employees
As of December
31, 2019, the Company had employees and consultants on full time basis as follow: (i) six in business development,
general and administrative roles; and, (ii) three in research and development roles.
As of December
31, 2018, the Company had employees and consultants on full time basis as follow: (i) six in business development, general and
administrative roles; and, (ii) four in research and development roles.
As of December
31, 2017, the Company had employees and consultants on full time basis as follow: (i) six in business development, general and
administrative roles; and, (ii) three in research and development roles.
While
none of our employees is party to a collective bargaining agreement, in Israel we are subject to certain labor statutes and national
labor court precedent rulings, as well as to certain provisions of the collective bargaining agreements between the Histadrut
(General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations including the Industrialists’
Associations. These provisions of collective bargaining agreements are applicable to our Israeli employees by virtue of extension
orders issued in accordance with relevant labor laws by the Israeli Ministry of Labor and Welfare, and which apply such agreement
provisions to our employees even though they are not directly part of a union that has signed a collective bargaining agreement.
The laws and labor court rulings that apply to our employees principally concern the minimum wage laws, procedures for dismissing
employees, determination of severance pay, leaves of absence (such as annual vacation or maternity leave), sick pay and other
conditions for employment. The extension orders which apply to our employees principally concern the requirement for length of
the work day and workweek, mandatory contributions to a pension fund, annual recreation allowance, travel expenses payment and
other conditions of employment. We generally provide our employees with benefits and working conditions beyond the required minimums.
We have never experienced
labor-related work stoppages or strikes and believe that our relations with our employees are satisfactory.
MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The following table
sets forth information with respect to the beneficial ownership of our ordinary shares as of March 6, 2020 by each person or entity
known by us to beneficially own 5% or more of our outstanding ordinary shares.
The beneficial ownership
of Kitov Pharma’s ordinary shares is determined in accordance with the rules of the SEC. Under these rules, a person is
deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to
direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of
the security. For purposes of this section, we deem ordinary shares issuable pursuant to options or warrants that are currently
exercisable or exercisable within 60 days of March 6, 2020, if any, to be outstanding and to be beneficially owned by the person
holding the options or warrants for the purposes of computing the percentage ownership of that person, but we do not treat them
as outstanding for the purpose of computing the percentage ownership of any other person. The percentage of ordinary shares beneficially
owned is based on 30,485,588 ordinary shares (not including 1 share held in treasury). Our disclosure is based on information
provided to us by the holders, or disclosed in public regulatory filings in the United States
or Israel, in accordance with the applicable law.
None of our shareholders
has different voting rights from other shareholders. To the best of our knowledge, we are not owned or controlled, directly or
indirectly, by another corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent
date, result in a change of control of our company. Unless otherwise noted below, all references to “ordinary shares”
refers to ordinary shares of Kitov Pharma.
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Shares
Beneficially Owned
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Name of Beneficial
Owner
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Number
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Percentage
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5% or greater shareholders
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M.
Arkin (1999) Ltd.(1)
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4,463,953
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14.6
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%
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OrbiMed
Israel Partners Limited Partnership(2)
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3,461,983
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11.4
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%
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Pontifax
Group(3)
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3,141,594
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10.3
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%
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(1)
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M.
Arkin Ltd. (“Arkin”) acquired its holdings in Kitov Pharma in January 2020
upon completion of the FameWave Transaction in exchange for its holdings in FameWave
and a cash investment of $1.167 million. The ADSs were issued on a private placement
basis in Israel pursuant to exemptions from the prospectus requirements under applicable
Israeli securities laws and from the registration requirements of the Securities Act.
These holdings include (i) 3,292,139 restricted ADSs and (ii) warrants to purchase 1,171,814
restricted ADSs representing 1,171,814 restricted, ordinary shares, which are immediately
exercisable. To our knowledge these are the only holdings of Arkin in Kitov Pharma. Arkin
has signed a Shareholder’s Undertaking in connection with the FameWave Transaction
containing, amongst other matters, certain standstill limitations and an undertaking
not to vote its ADSs, subject to certain exceptions relating to significant corporate
transactions, against the recommendation of our board of directors, during an initial
transfer lockup period of between 6-12 months following the closing of the FameWave Transaction,
and subsequent to the transfer lock-up period until the earlier of its holdings being
reduced to below 2.5% of our issued and outstanding shares or 24 months following the
closing of the FameWave Transaction. Of the 4,463,953 restricted ADSs beneficially owned
by Arkin, 2,343,629 restricted ADSs are being held by Altshuler Shaham Trust Co. Ltd.
(“Altshuler Shaham”) as trustee and escrow agent in connection with the closing
of the FameWave Transaction. While such ADSs are held by Altshuler Shaham, the right
to vote such ADSs is solely exercisable by Arkin.
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(2)
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OrbiMed
Israel Partners Limited Partnership (“OrbiMed”) acquired its holdings in
Kitov Pharma in January 2020 upon completion of the FameWave Transaction in exchange
for its holdings in FameWave and a cash investment of $1.167 million. The ADSs were issued
on a private placement basis in Israel pursuant to exemptions from the prospectus requirements
under applicable Israeli securities laws and from the registration requirements of the
Securities Act. It owns (i) 3,461,983 restricted ADSs and (ii) warrants to purchase 1,256,736
restricted ADSs representing 1,256,736 restricted ordinary shares. However, pursuant
to the terms of the warrants, OrbiMed cannot exercise the warrants to the extent that
OrbiMed would beneficially own, along with any affiliates after any such exercise, more
than 9.99% of our outstanding ordinary shares. Consequently, as of the date set forth
above, OrbiMed is not able to exercise any of its warrants due to these beneficial ownership
limitations. To our knowledge these are the only holdings of Orbimed in Kitov Pharma.
Orbimed has signed a Shareholder’s Undertaking in connection with the FameWave
Transaction containing, amongst other matters, certain standstill limitations and an
undertaking not to vote its ADSs, subject to certain exceptions relating to significant
corporate transactions, against the recommendation of our board of directors, during
an initial transfer lockup period of between 6-12 months following the closing of the
FameWave Transaction, and subsequent to the transfer lock-up period until the earlier
of its holdings being reduced to below 2.5% of our issued and outstanding shares or 24
months following the closing of the FameWave Transaction. Of the 3,461,983 restricted
ADSs beneficially owned by OrbiMed, 2,513,473 restricted ADSs are being held by Altshuler
Shaham as trustee and escrow agent in connection with the closing of the FameWave Transaction.
While such ADSs are held by Altshuler Shaham, the right to vote such ADSs is solely exercisable
by OrbiMed.
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(3)
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Includes
(i) (A) 1,156,797 restricted ADSs and (B) warrants to purchase 403,759 restricted ADSs
held by Pontifax (Israel) II LP (“Pontifax Israel”), (ii) (A) 449,065 ADSs
and (B) warrants to purchase 156,741 restricted ADSs held by Pontifax (Israel) II –
Individual Investors LP (“Pontifax Israel Individual Investors”) and (iii)
(A) 1,535,732 ADSs and (B) warrants to purchase 536,032 restricted ADSs held by Pontifax
(Cayman) II LP (“Pontifax Cayman,” and together with Pontifax Israel and
Pontifax Israel Individual Investors, the “Pontifax Group”). The Pontifax
Group acquired its holdings in Kitov Pharma in January 2020 upon completion of the FameWave
Transaction in exchange for its holdings in FameWave and a cash investment of $1.167
million. The ADSs were issued on a private placement basis in Israel pursuant to exemptions
from the prospectus requirements under applicable Israeli securities laws and from the
registration requirements of the Securities Act. Pontifax Group owns, in aggregate, 3,141,594
restricted ADSs and warrants to purchase 1,096,532 restricted ADSs representing 1,096,532
restricted ordinary shares. However, pursuant to the terms of the warrants, Pontifax
Group cannot exercise the warrants to the extent that Pontifax Group would beneficially
own, along with any affiliates after any such exercise, more than 9.99% of our outstanding
ordinary shares. Consequently, as of the date set forth above, Pontifax Group is not
able to exercise any of its warrants due to these beneficial ownership limitations. To
our knowledge these are the only holdings of Pontifax Group in Kitov Pharma. Pontifax
Group has signed a Shareholder’s Undertaking in connection with the FameWave Transaction
containing, amongst other matters, certain standstill limitations and an undertaking
not to vote its ADSs, subject to certain exceptions relating to significant corporate
transactions, against the recommendation of our board of directors, during an initial
transfer lockup period of between 6-12 months following the closing of the FameWave Transaction,
and subsequent to the transfer lock-up period until the earlier of its holdings being
reduced to below 2.5% of our issued and outstanding shares or 24 months following the
closing of the FameWave Transaction. Of the 3,141,594 restricted ADSs beneficially owned
by Pontifax Group, 2,193,085 restricted ADSs are being held by Altshuler Shaham as trustee
and escrow agent in connection with the closing of the FameWave Transaction. While such
ADSs are held by Altshuler Shaham, the right to vote such ADSs is solely exercisable
by Pontifax Group.
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Except as indicated
in footnotes to this table, we believe that the shareholders named in this table have sole voting and investment power with respect
to all shares shown to be beneficially owned by them, based on information provided to us by such shareholders.
Changes
in Percentage Ownership by Major Shareholders
M. Arkin (1999) Ltd.
Arkin acquired its
holdings in Kitov Pharma in January 2020 upon completion of the FameWave Transaction in exchange for its holdings in FameWave
and a cash investment of $1.167 million. These holdings include (i) 3,292,139 restricted ADSs and (ii) warrants to purchase 1,171,814
restricted ADSs representing 1,171,814 restricted, ordinary shares, which are immediately exercisable.
OrbiMed Israel Partners Limited Partnership
OrbiMed acquired its
holdings in Kitov Pharma in January 2020 upon completion of the FameWave Transaction in exchange for its holdings in FameWave
and a cash investment of $1.167 million. It owns (i) 3,461,983 restricted ADSs and (ii) warrants to purchase 1,256,736 restricted
ADSs representing 1,256,736 restricted ordinary shares. However, pursuant to the terms of the warrants, OrbiMed cannot exercise
the warrants to the extent that OrbiMed would beneficially own, along with any affiliates after any such exercise, more than 9.99%
of our outstanding ordinary shares. Consequently, as of the date set forth above OrbiMed is not able to exercise any of its warrants
due to these beneficial ownership limitations.
Pontifax (Israel) II LP/Pontifax (Israel)
II – Individual Investors LP/Pontifax (Cayman) II LP
Pontifax Group acquired
its holdings in Kitov Pharma in January 2020 upon completion of the FameWave Transaction in exchange for its holdings in FameWave
and a cash investment of $1.167 million. Pontifax Group owns, in aggregate, (i) 3,141,594 restricted ADSs and (ii) warrants to
purchase 1,096,542 restricted ADSs representing 1,096,542 restricted ordinary shares. However, pursuant to the terms of the warrants,
Pontifax Group cannot exercise the warrants to the extent that Pontifax Group would beneficially own, along with any affiliates
after any such exercise, more than 9.99% of our outstanding ordinary shares. Consequently, as of the date set forth above, Pontifax
Group is not able to exercise any of its warrants due to these beneficial ownership limitations.
Empery
Asset Management, LP/ Mr. Ryan M. Lane/ Mr. Martin D. Hoe
Empery Asset Management,
LP (“Empery”) participated in our registered direct offering in January 2019, following which it filed a Schedule
13G with the SEC setting forth the holdings of Empery affiliated entities after they surpassed a holding of 5% of our ordinary
shares. In August 2019 they notified us that they no longer hold any of our ADSs or ordinary shares. The Empery affiliated entities
own in aggregate 1,563,971 warrants to purchase 1,563,971 ADSs representing 1,563,971 ordinary shares. However, other than with
respect to 1,521,231 of our NASDAQ listed Series A warrants, pursuant to the terms of the above noted warrants, the holders cannot
exercise the warrants to the extent that such holders would beneficially own, along with any affiliates after any such exercise,
more than 4.99% of our outstanding ordinary shares. Consequently, as of the date set forth above, the Empery affiliated shareholders
are not able to exercise 42,740 of such warrants due to these blockers.
Sabby
Volatility Warrant Master Fund, Ltd./Sabby Management, LLC/Hal Mintz
Sabby
Volatility Warrant Master Fund, Ltd. participated in our registered direct offering in June 2018 after which they surpassed a
holding of 5% of Kitov Pharma’s ordinary shares. On January 4, 2019 Sabby Volatility Warrant Master Fund, Ltd., Sabby Management,
LLC and Hal Mintz filed a Schedule 13G/A with the SEC pursuant to which they notified the SEC that their holdings were reduced
to below 5% of our issued and outstanding share capital.
Sabby Volatility Warrant
Master Fund, Ltd. subsequently participated in our registered direct offering in January 2019, following which it filed a new
Schedule 13G with the SEC. In August 2019 it notified us that as of August 15, 2019 it holds 6,782 of our ADSs as well as an aggregate
of 2,045,175 unregistered warrants issued in each of June 2018 (760,000 warrants) and January 2019 (1,285,175 warrants). In January
2020, Sabby Volatility Warrant Master Fund, Ltd., Sabby Management, LLC and Hal Mintz filed a Schedule 13G/A with the SEC pursuant
to which they notified the SEC that their holdings were reduced to below 5% of our issued and outstanding share capital, and that
they held, as of the filing date, 976,070 of our ADSs. Pursuant to the terms of the above noted warrants, Sabby Volatility Warrant
Master Fund, Ltd. cannot exercise the warrants to the extent the Sabby Volatility Warrant Master Fund, Ltd. and any affiliates
would beneficially own, after any such exercise, more than 4.99% of our outstanding ordinary shares. Consequently, as of the date
set forth above, Sabby Volatility Warrant Master Fund, Ltd. is not able to exercise 1,500,014 of these warrants due to the blockers.
Armistice
Capital, LLC/Armistice Capital Master Fund Ltd./Steven Boyd
Armistice
Capital Master Fund LLC participated in our registered direct offering in June 2018 after which it surpassed a holding of 5% of
Kitov Pharma’s ordinary shares. On June 11, 2018 Armistice Capital, LLC, Armistice Capital Master Fund Ltd. and Steven Boyd
filed a Schedule 13G with the SEC pursuant to which it notified the SEC that their holdings were reduced to below 5% of our issued
and outstanding share capital.
Rosalind
Advisors, Inc./ Steven Salamon/Rosalind Master Fund L.P.
Based
on a Schedule 13G filed by Rosalind Advisors, Inc. (“Advisor” to RMF), Rosalind Master Fund L.P. (“RMF”),
and Steven Salamon (“President”; Steven Salamon is the portfolio manager of the Advisor to RMF) with the SEC on February
1, 2018, RMF held 1,105,600 ordinary shares, which included (i) 950,000 ADSs and (ii) 155,600 of our Series A warrants. representing
the right to purchase 155,600 of our ADSs, and which were exercisable. As reported on the Schedules 13G, RMF was the record owner
of 950,000 of our ADSs and 155,600 of our Series A warrants. Rosalind Advisors, Inc. is the investment advisor to RMF and may
be deemed to be the beneficial owner of shares held by RMF. Steven Salamon is the portfolio manager of the Advisor and may be
deemed to be the beneficial owner of shares held by RMF. Notwithstanding the foregoing, as reported on the Schedule 13G filed
as aforesaid, the Advisor and Mr. Salamon disclaim beneficial ownership of the shares. We have no direct knowledge as to when
or under what circumstances Rosalind Master Fund L.P. acquired its holdings in Kitov Pharma. Based on their public filings, their
ownership of Kitov Pharma surpassed more than 5% of Kitov Pharma’s outstanding ordinary shares on January 25, 2018 and were
reduced to below 5% of our issued and outstanding share capital in May 2018.
Goldman
Hirsch Partners Ltd.
On
January 12, 2017, Kitov Pharma acquired a controlling equity stake in TyrNovo Ltd. from Goldman Hirsch Partners Ltd. (GHP), its
majority shareholder, for consideration of USD 2 million in cash and 564,625 ordinary shares of Kitov Parent, which was equivalent
to USD 1.8 million based on the closing price of Kitov Pharma’s ordinary shares on TASE on January 11, 2017. At closing
of the transaction on January 13, 2017, Kitov Pharma issued 564,625 ordinary shares to Katzenell Dimant Trustees Ltd. as
trustee holding such shares in escrow on behalf of Kitov Parent and GHP, which at such time represented approximately 6.8% of
Kitov Pharma’s issued and outstanding share capital. The ordinary shares were issued on a private placement basis in Israel
pursuant to exemptions from the prospectus requirements under applicable Israeli securities laws and from the registration requirements
of the Securities Act. GHP signed a Shareholder’s Undertaking in connection with the ordinary shares containing, amongst
other matters, a prohibition on transfer of such ordinary shares until January 13, 2018 and certain standstill limitations. Pursuant
to such undertaking, GHP has agreed to vote its ordinary shares, subject to certain exceptions relating to significant corporate
transactions, in accordance with the recommendation of our board of directors and in favor of persons nominated and recommended
to serve as directors by the board, and has granted Kitov Parent a proxy to ensure GHP’s compliance with such voting undertakings.
It is our understanding, to the best of our knowledge, that GHP is controlled by Dr. Gil Pogozelich, an Israeli citizen and resident.
GHP’s holdings of 564,625 ordinary shares that we issued to them in January 2017 were reduced to below 5% of our issued
and outstanding share capital in January 2018 as a result of subsequent share issuances by us.
Acquisition
of FameWave Ltd.
On March 14, 2019,
we entered into the Acquisition Agreement to acquire FameWave, a privately held Israeli biopharmaceutical company (FameWave’s
main asset is CM-24, a clinical stage humanized monoclonal antibody targeting CEACAM1, a novel immune checkpoint protein belonging
to the Human CEA (Carcino-Embryonic Antigen) protein family. The Acquisition Agreement was amended on August 16, 2019, pursuant
to which the parties agreed that all major closing conditions have been met other than finalizing the tax ruling for the sellers
and the issuance and exchange of shares in the companies. On January 7, 2020, the FameWave Transaction closed. Each of the selling
FameWave shareholders, including the investors in the concurrent private placement ADS issuance, has represented to us that other
than the applicable voting undertaking and the Registration Rights Agreement that was entered into at the closing of the FameWave
Transaction, such party is not, and will not be, a party to any agreement or arrangement, whether written or oral, with us, any
of the our officers or shareholders or a corporation in which the our officers or shareholders are an Interested Party (as defined
in the Israeli Companies Law, 5759-1999), regulating the management of the Company, the shareholders’ rights in the Company,
the transfer of shares in the Company, including any voting agreements, shareholder agreements or any other similar agreement
even if its title is different or has any other relations or agreements with any of our shareholders, directors or officers. In
addition, each of the investment funds and any FameWave shareholders that signed the Registration Rights Agreement in connection
with the FameWave Transaction, entered into the Shareholder’s Undertaking, which amongst other matters, contains undertakings
of the shareholder not to seek to become part of a bloc of shares of the Company which would necessitate a special tender offer
under the Israeli Companies Law, or would otherwise seek to effect a change of control in Kitov. Furthermore, to the best of our
knowledge it is the intention of all of the investment funds and the other FameWave shareholders to be passive unaffiliated shareholders
of the Company. Upon the closing of the acquisition, FameWave became a wholly owned subsidiary of Kitov Pharma. For more information
on the transaction, including details of the issuances of our securities to the significant shareholders of FameWave and the investment
funds, please see Item 4.A. History and Development of the Company – Recent Developments – FameWave Acquisition of
our Annual Report on Form 20-F for the year ended December 31, 2018 and our Report on Form 6-K from January 8, 2020. For more
Information on the Acquisition Agreement in connection with this transaction please see Item 10 – Additional Information
– C. Material Contracts – FameWave Acquisition Agreement in our Annual Report for the year ended December 31, 2018
on Form 20-F and our Report on Form 6-K from August 20, 2019.
Record
Holders
As
of March 6, 2020, there were (i) 12 shareholders of record of our ordinary shares, 11 of which were Israeli or other non-U.S.
persons or entities holding 64.18% of our ordinary shares, and the other was our ADS Depositary holding (a) 35.74% of our ordinary
shares on behalf of Israeli or other non-U.S. persons holding restricted ADSs and (b) 0.8% of our ordinary shares on behalf of
U.S. persons holding restricted ADSs; and (ii) one holder of record for the public warrants which was a U.S. entity. As of March
6, 2020, there were 24,740,271 ADSs outstanding (or approximately 81.15% of our total issued and outstanding ordinary shares),
which were held by a number of different brokerage and other nominee holders of record as recorded on the records of our ADS Depositary,
The Bank of New York Mellon.
The
number of record holders is not representative of the number of beneficial holders of our ADSs, ordinary shares, and our warrants
because many of the ADSs, ordinary shares and our warrants are held by brokers or other nominees. Other than with respect to certain
restricted shares or ADS containing a legend, the shares for a publicly traded company such as ours, which is listed on TASE (and
with ADSs listed on NASDAQ), are generally recorded in the name of our Israeli share registrar, Registration Company of United
Mizrahi Bank Ltd. or in the name of our ADS Depositary, The Bank of New York Mellon.
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B.
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Related
Party Transactions
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See Item 7. Major Shareholders
and Related Party Transactions—B. Related Party Transactions in our Annual Report on Form 20-F for the year ended December
31, 2018, which is incorporated by reference.
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. This prospectus incorporates by reference the documents
listed below:
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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 SEC 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, September
9, 2019, October
2, 2019, October
11, 2019, November
12, 2019, November
19, 2019, December
23, 2019, January
8, 2020, January
9, 2020, January
27, 2020, February
3, 2020, February
11, 2020 and February
24, 2020.
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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
LEGAL
MATTERS
The
validity of the ordinary shares being offered pursuant to this prospectus will be passed upon by the Law Office of Avraham Ben-Tzvi,
Adv., of Jerusalem, Israel. Certain legal matters with respect to U.S. federal securities law will be passed upon for us by Haynes
and Boone LLP, New York, New York. Greenberg Traurig, P.A., Miami, Florida, is acting as counsel to the placement agent in connection
with this offering.
EXPERTS
The
consolidated financial statements of Kitov Pharma Ltd. and its subsidiaries as of December 31, 2018 and 2017 and for each of the
years in the three-year period ended December 31, 2018, 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. The audit report covering the December 31,
2018 consolidated financial statements refers to a change in the method of accounting of revenue recognition.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have filed with the SEC a registration statement on Form F-1 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. The SEC maintains an Internet
site that contains reports, proxy and information statements and other information regarding issuers that file electronically
with the SEC. Our filings with the SEC are available to the public through this web site at http://www.sec.gov. These
SEC filings are also generally available to the public on (i) the Israel Securities Authority’s Magna website at www.magna.isa.gov.il,
(ii) the Tel Aviv Stock Exchange website at http://www.maya.tase.co.il, and (iii) from commercial document retrieval services.
In
addition, since our ordinary shares are traded on TASE, we also presently report to ISA and 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 Kitov Pharma, 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 (www.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 TASE and NASDAQ, and which reports to the SEC as
a foreign private issuer and to ISA and TASE in accordance with the Dual-Listed Reporting Requirements. Our Proxy Materials may
not necessarily be mailed to our beneficial shareholders in Israel, or 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,
nor as an admission that in doing so we are not availing, nor that we may not avail, ourselves of any, or all of, the exemptions
set forth under Regulation 3 of the Companies Regulations (Relief Regulations for Companies Whose Securities are Listed for Trading
on an Exchange Outside of Israel), 5760-2000. Furthermore, nothing in the form or content of, and/or the language in, any of our
Proxy Materials should be taken as an admission by us with respect to that which is stated under Regulation 5 of the Notice Regulations
concerning the applicability (or lack thereof) of instructions under relevant non-Israeli law as to the content our Proxy Materials,
insofar as such may apply to certain matters on the agenda of the applicable meeting of securities holders.
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. 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. In addition, in accordance with the NASDAQ Listing Rules, as a
foreign private issuer we are required to submit on a Form 6-K an interim balance sheet and income statement as of the end of
the second quarter of each fiscal year.
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.
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) 738-6680 as
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.
Up to 13,913,043 Units
(each Unit consists of one American Depositary
Share and one Warrant to purchase one American Depositary Share)
Up to 13,913,043 Pre-Funded Units (each
Pre-Funded Unit consist of one Pre-Funded Warrant to purchase one American Depositary Share and one Warrant to purchase one American
Depositary Share)
American Depositary Shares underlying the
Pre-Funded Warrants and
American Depositary Shares underlying the
Warrants
H.C. Wainwright & Co.
The date of this prospectus is_________, 2020
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
6. Indemnification of Directors and Officers
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, 5728 – 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
(or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) 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.
The
compensation committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and board
of directors may approve the inclusion of each director under the coverage of our directors and officers insurance policy without
the need for shareholder approval, if they determine that, pursuant to the leniencies set forth in Regulation 1B1 of the Relief
Regulations, the provision of such insurance coverage to the directors under our directors and officers insurance policy is being
granted on market terms, and with no material adverse effect on our profits, assets or obligations, and is consistent with our
Compensation Policy which was approved by our shareholders in accordance with the Companies Law, and is the same as the coverage
provided to all of our other directors.
The
compensation committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and board
of directors may approve the issuance to directors of our standard letters of waiver of liability and indemnification, immediately,
as of the date of their respective appointments as directors, with the approval by our shareholders being deferred to the next
general meeting of our shareholders following such approval, if they determine that, pursuant to the leniencies set forth in Regulation
1B4 of the Relief Regulations, that the letters which we issue to the appointed directors are consistent with our Compensation
Policy which was approved by our shareholders in accordance with the Companies Law, and are no more beneficial to the Appointed
Directors as such letters previously issued to our other directors.
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.
Our
Audit Committee and Board of Directors approved the issuance of letters of indemnity (the “Indemnity Letters”) to
our office holders pursuant to which we agreed to indemnify such office holders, including an undertaking in advance for such
indemnification. The Indemnity Letters also received the approval of our shareholders. According to the Indemnity Letters, the
total accumulative sum of indemnification paid by us to all our office holders that were issued by Kitov Pharma will not exceed
a sum equal to 25% of our equity attributed to our shareholders according to our latest audited or reviewed consolidated financial
statements, as the case may be, as of the date of indemnification. The payment of the indemnity sum will not prejudice the right
of office holders to receive insurance coverage benefits. Once we have paid indemnity sums to our office holders at the maximum
indemnity sum, we will not bear additional indemnity sums unless the payment of these additional sums is approved by authorized
corporate bodies according to the law applicable at the time of payment of the additional indemnity sums, and subject to an amendment
in our articles of association if required by applicable law at such time.
In
addition, 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, including with respect to liabilities resulting from our Registration
Statements on Form F-1 filed in connection with our initial public offering in the U.S. during November 2015, in connection with
our July 2016 public offering, and in connection with each of our July 2017, June 2018 and January 2019 registered direct offerings,
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.
We
have indemnified and we expect to continue to indemnify our officers and directors for obligations, including the deductibles
for our directors’ and officers’ liability insurance policy, and we may be required to pay costs and expenses they
may incur related to the ISA Investigation and the 2015 Motion, the 2017 Motions and U.S. Class Actions described in “Item
8. Financial Information – A. Financial Statements and Other Financial Information – Legal Proceedings” in our
Annual Report on Form 20-F for the fiscal year ended December 31, 2018, pursuant to the letters of indemnification issued to our
directors and officers.
Insofar
as indemnifications for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling
us pursuant to the foregoing provisions, we have 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.
Item
7. Recent Sales of Unregistered Securities
The
following is a summary of transactions during the three years preceding this offering, involving offers and sales of our securities
which, unless otherwise indicated, took place outside the United States and were not registered under the United States Securities
Act of 1933, as amended (the “U.S. Securities Act”):
In
January 2017, we acquired a controlling equity stake in TyrNovo Ltd. (“TyrNovo”) from Goldman Hirsch Partners Ltd.
(GHP), its majority shareholder, for consideration of USD 2 million in cash and 564,625 of our ordinary shares, which was equivalent
to USD 1.8 million based on the closing price of our ordinary shares on TASE on January 11, 2017. The ordinary shares were issued
on a private placement basis pursuant to exemptions from the registration requirements of the U.S. Securities Act provided by
Regulation S promulgated under the U.S. Securities Act. The issued shares have not been, and will not be, registered under
the U.S. Securities Act or any U.S. state securities laws, and may not be offered or sold in the United States or to, or for the
account or benefit of, United States persons absent registration or any applicable exemption from the registration requirements
of the U.S. Securities Act and applicable U.S. state securities laws.
In
July 2017 we issued to institutional and accredited investors unregistered warrants to purchase up to 1,215,873 ADSs in a private
placement completed concurrently with a registered direct offering. We also issued unregistered warrants to purchase up to 170,222
ADSs to H.C. Wainwright & Co., LLC, the exclusive placement agent for the offering. The ADSs were issued on a private
placement basis pursuant to exemptions from the registration requirements of the U.S. Securities Act provided by Regulation S,
Section 4(a)(2) and Regulation D (Rule 506) under the U.S. Securities Act. Of the above unregistered warrants issued by us
in July 2017, unexercised warrants to purchase 558,154 ADSs representing 558,154 of our ordinary shares were subsequently registered
by us in August 2018. H.C. Wainwright previously served as our exclusive placement agent for a registered offering of our securities
in each of January 2019, June 2018, July 2017 and July 2016. H.C. Wainwright also served as an underwriter for our initial public
offering on NASDAQ in November 2015.
In
October 2017, we issued 67,367 ADSs to a vendor of ours located in the U.S. in consideration for services provided to us. The
ADSs were issued on a private placement basis pursuant to exemptions from the registration requirements of the U.S. Securities
Act provided by Section 4(a)(2) and Regulation D (Rule 506) under the U.S. Securities Act. The issued ADSs have not been,
and will not be, registered under the U.S. Securities Act or any U.S. state securities laws, and may not be offered or sold in
the United States or to, or for the account or benefit of, United States persons absent registration or any applicable exemption
from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws.
In
March 2018 we closed the transaction for the acquisition of an additional 27% stake in TyrNovo, pursuant to an agreement with
certain unaffiliated minority shareholders of TyrNovo, previously announced in October 2017. Pursuant to the agreement, we acquired
4,024 ordinary shares, or approximately 27% of the outstanding shares of TyrNovo (the “Newly Acquired TyrNovo Shares”).
In exchange for the Newly Acquired TyrNovo Shares, we issued to these unaffiliated minority shareholders of TyrNovo, in aggregate,
658,484 of our newly issued ordinary shares (equivalent to 658,484 ADSs) (the “TyrNovo Minority Consideration Shares”).
The TyrNovo Minority Consideration Shares were issued on a private placement basis pursuant to exemptions from the registration
requirements of the U.S. Securities Act provided by Regulation S, Section 4(a)(2) and Regulation D (Rule 506) under the U.S. Securities
Act. The issued shares have not been, and will not be, registered under the U.S. Securities Act or any U.S. state securities
laws, and may not be offered or sold in the United States or to, or for the account or benefit of, United States persons absent
registration or any applicable exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state
securities laws.
In
June 2018, we closed the acquisition of Taoz’s entire stake in TyrNovo, then representing 3.1% of the outstanding shares
of TyrNovo (following subsequent cash investments by us in TyrNovo), pursuant to an agreement with Taoz. Pursuant to this new
share exchange agreement with Taoz, in exchange for Taoz’s entire holding in TyrNovo and the termination of the existing
shareholder and investment agreements by and among us, TyrNovo and Taoz, we issued to Taoz 140,845 of our newly issued ordinary
shares (equivalent to 140,845 ADSs) (the “Taoz Shares”), which represented at such time approximately 0.9% of our
issued and outstanding share capital. The Taoz Shares were issued in Israel on a private placement basis pursuant to exemptions
from the registration requirements of the U.S. Securities Act provided by Regulation S promulgated under the U.S. Securities Act,
and were subsequently registered by us in August 2018.
In
June 2018 we issued to institutional investors unregistered warrants to purchase up to 1,630,000 ADSs representing 1,630,000 of
our ordinary shares in private placements completed concurrently with a registered direct offering. We also issued unregistered
warrants to purchase up to 228,200 ADSs representing 228,200 of our ordinary shares to H.C. Wainwright & Co., LLC, the
exclusive placement agent for the offering. All of these warrants remain unexercised and the ADS and shares underlying them have
been registered by us separately on a Registration Statement on Form F-3. They were issued on a private placement basis pursuant
to exemptions from the registration requirements of the U.S. Securities Act provided by Regulation S, Section 4(a)(2) and Regulation
D (Rule 506) under the U.S. Securities Act. H.C. Wainwright previously served as our exclusive placement agent for a registered
offering of our securities in each of January 2019, June 2018, July 2017 and July 2016. H.C. Wainwright also served as an underwriter
for our initial public offering on NASDAQ in November 2015.
In
January 2019 we issued to institutional investors unregistered warrants to purchase up to 2,571,430 ADSs representing 2,571,430
of our ordinary shares in private placements completed concurrently with a registered direct offering. We also issued unregistered
warrants to purchase up to 240,000 ADSs representing 240,000 of our ordinary shares to H.C. Wainwright & Co., LLC, the
exclusive placement agent for the offering. All of these unregistered warrants remain unexercised and the ADSs and shares underlying
them have been registered by us under a Registration Statement on Form F-1. They were issued on a private placement basis pursuant
to exemptions from the registration requirements of the U.S. Securities Act provided by Regulation S, Section 4(a)(2) and Regulation
D (Rule 506) under the U.S. Securities Act. H.C. Wainwright previously served as our exclusive placement agent for a registered
offering of our securities in each of January 2019, June 2018, July 2017 and July 2016. H.C. Wainwright also served as an underwriter
for our initial public offering on NASDAQ in November 2015.
On January 7, 2020,
we closed the FameWave Transaction, pursuant to which we acquired 100% of the shares of FameWave, a privately held Israeli biopharmaceutical
company, from its shareholders in exchange for newly issued ADSs subject to a 12-month lock-up period, priced at $1.23 per ADS,
plus 50% warrant coverage with an exercise price of $1.98 per ADS. In addition, we provided a loan to FameWave of approximately
$2 million, for the return of the intellectual property rights to CM-24 to FameWave, and to repay certain loans which may be provided
by FameWave’s shareholders to FameWave to conduct business pursuant to the approved business budget. In addition to the
share exchange, in accordance with the Acquisition Agreement, three leading life science focused investment funds, Orbimed, Pontifax
Group, and Arkin (collectively, the “investment funds”), which collectively (together with their respective affiliates)
held approximately 90% of FameWave, invested an aggregate of $3.5 million in the Company in exchange for newly issued ADSs of
the Company, priced at $1.23 per ADS. In addition, we have agreed to approve grants to Dr. Michael Schickler, the former CEO of
FameWave, who has joined us as our Head of Clinical Operations, under Kitov’s Employees Stock Option Plan under the 102
Capital Gains Track, or other eligible tax track, as applicable, of options to purchase 54,472 ADSs and 27,236 ordinary shares.
As of January 7, 2020, the investment funds, together with their respective affiliates, former minority shareholders of FameWave
(in aggregate), and other persons that received our securities in connection with the FameWave Transaction hold approximately
10,921,139 restricted ADS, representing 10,921,139 of our ordinary shares, and warrants to purchase 4,037,805 restricted ADSs,
representing 4,037,805 of our ordinary shares. The above-mentioned securities were offered and issued on a private placement basis
pursuant to exemptions from the registration requirements of the U.S. Securities Act provided by Regulation S, Section 4(a)(2)
or Regulation D (Rule 506) under the U.S. Securities Act, as applicable. The ADSs and ADSs issuable upon exercise of the warrants
are subject a lock-up agreement, and the ADSs Kitov issued to the investment funds in return for their $3.5 million investment
in the Company, are subject to a lock-up agreement restricting transfer or sale of the ADSs for a 12-month period commencing on
the date of issuance by us; provided, however, that during the period following 6 months after the date of issuance of the securities
and until the end of the such 12-month period, the holder will be allowed to sell the securities, subject to any statutory resale
restrictions or limitations, but only if (i) we have not publicly announced clinical data related to FameWave’s products,
and (ii) the market price for our ADSs on NASDAQ at the close of the preceding trading day was above $3.00 per ADS. In addition,
at the closing of the FameWave Transaction, we entered into a Registration Rights Agreement with the investment funds and any
other holders of the securities we issued who have agreed to the lock-up (the “Registration Rights Agreement”) providing
for the filing of a registration statement (the “Registration Statement”) with the Securities and Exchange Commission
registering the ADSs and the ADSs underlying the warrants. Pursuant to the Registration Rights Agreement we are obligated to file
a registration statement by no later than 120 days prior to the end of the above mentioned lock-up period and to cause the Registration
Statement to be declared effective no later than the end of such lock-up period. In addition, each FameWave shareholder that received
our ADSs pursuant to the FameWave Transaction and has signed the lock-up agreement and the Registration Rights Agreement was required
to also sign a Shareholder’s Undertaking in connection with the ownership of our ordinary shares containing, amongst other
matters, an undertaking that during the above mentioned lock-up period, and, subsequent to such lock-up period until the earlier
of (a) for so long as the aggregate number of our ordinary share equivalents beneficially owned by the shareholder and its group
members, as a group, is greater than or equal to 2.5% of the our then issued and outstanding ordinary shares or (b) 24 months
following the date of the undertaking, the shareholder shall cause all of our voting securities beneficially owned by it or any
of its group members or over which it or any of its group members has voting control not to be voted (i) against any person nominated
and recommended to serve as our directors by our Board of Directors and/or any applicable committee thereof and (ii) with respect
to any other action, proposal or matter to be voted on by our shareholders, in a manner inconsistent with the recommendation of
our Board of Directors or any applicable committee thereof; provided, however, that the undertakings in sub-clauses (i) and (ii)
above shall not apply to: (1) matters under Sections 270(1), 270(2), 270(3) and 270(4) the Israeli Companies Law governing related
or interested party transaction and officeholder compensation, as well as matters which require the declaration by officers or
shareholders of a personal interest and/or affiliation with a controlling shareholder as defined in, and in accordance with, the
Israeli Companies Law, or (2) matters directly affecting the development of the technology controlled by FameWave or (3) where,
based on a legal advice opinion received in writing by the shareholder, the shareholder reasonably believes that such vote by
the shareholder may impose any liability on the shareholder.
Item 8. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
Number
|
|
Exhibit Description
|
|
3.1
|
|
Memorandum
of Association of the Registrant (originally filed as Exhibit 1.1 to the Registrant’s Annual Report on Form 20-F as
filed with the Securities and Exchange Commission on March 26, 2019 and incorporated herein by reference thereto).
|
|
3.2
|
|
Amended
and Restated Articles of Association of the Registrant (originally filed as Exhibit 1.2 to the Registrant’s Annual Report
on Form 20-F as filed with the Securities and Exchange Commission on March 26, 2019 and incorporated herein by reference thereto).
|
|
4.1
|
|
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 our Registration Statement
on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015).
|
|
4.2
|
|
Form
of Warrant Agent Agreement (incorporated by reference to Exhibit 4.2 to our Registration Statement on Form F-1/A as filed
with the Securities and Exchange Commission on November 18, 2015).
|
|
4.3
|
|
Form
of American Depositary Receipt (incorporated by reference to prospectus filed with the Securities and Exchange Commission
on January 4, 2019)
|
|
4.4
|
|
Form
of Underwriters’ Warrant (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form F-1/A as filed
with the Securities and Exchange Commission on November 18, 2015).
|
|
4.5
|
|
Form
of Placement Agent Warrant (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form
F-1/A as filed with the Securities and Exchange Commission on June 27, 2016).
|
|
4.6
|
|
Form
of Letter Amendment to Warrant Agent Agreement with respect to Series A warrants (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)
|
|
4.7
|
|
Form
of Pre-Funded Series B Warrant Agreement (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 June 27, 2016).
|
|
4.8
|
|
Stock
Purchase Agreement, dated January 12, 2017, by and between the Registrant and Goldman Hirsh Partners Ltd. (incorporated by
reference to Exhibit 2.8 to the Registrant’s Annual Report on Form 20-F as filed with the Securities and Exchange Commission
on May 1, 2017).
|
|
4.9
|
|
Shareholder’s
Undertaking by Goldman Hirsh Partners Ltd. dated January 13, 2017. (incorporated by reference to Exhibit 2.9 to the Registrant’s
Annual Report on Form 20-F as filed with the Securities and Exchange Commission on May 1, 2017)
|
|
4.10
|
|
Form
of Warrant issued to purchasers in the July 2017 offering (incorporated by reference to Exhibit 4.1 to the Registrant’s
Form 6-K furnished to the Securities and Exchange Commission on July 14, 2017)
|
|
4.11
|
|
Form
of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 6-K furnished to the Securities
and Exchange Commission on July 14, 2017)
|
|
4.12
|
|
Stock
Purchase Agreement, dated October 3, 2017, by and among the Registrant, Certain Stockholders of TyrNovo Ltd. and the Stockholders’
Representative (incorporated by reference to Exhibit 2.13 to the Registrant’s Annual Report on Form 20-F as filed with
the Securities and Exchange Commission on March 5, 2018)
|
|
4.13
|
|
Form
of Warrant issued to purchasers in the June 2018 offering (incorporated by reference to Exhibit 4.1 to the Registrant’s
Form 6-K furnished to the Securities and Exchange Commission on June 5, 2018)
|
|
4.14
|
|
Form
of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 6-K furnished to the Securities
and Exchange Commission on June 5, 2018)
|
|
4.15
|
|
Form
of Warrant issued to purchasers in the January 2019 offering (incorporated by reference to Exhibit 4.1 to the Registrant’s
Form 6-K furnished to the Securities and Exchange Commission on January 18, 2019)
|
|
4.16
|
|
Form
of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 6-K furnished to the Securities
and Exchange Commission on January 18, 2019)
|
|
4.17***
|
|
Form
of Shareholder Undertaking and Agreement, dated January 7, 2020, between Kitov Pharma Ltd. and the shareholders signatory
thereto.
|
|
4.18***
|
|
Form
of Warrant issued in FameWave Transaction
|
|
4.19***
|
|
Form
of Ordinary Warrant
|
|
4.20***
|
|
Form
of Pre-funded Warrant
|
|
4.21***
|
|
Form
of Placement Agent Warrant
|
|
5.1***
|
|
Opinion
of Law Office of Avraham Ben-Tzvi, Adv.
|
|
5.2***
|
|
Opinion
of Haynes and Boone LLP, U.S. legal counsel to the Registrant.
|
|
10.1
|
|
Form
of Letter of Exemption adopted on July 2013 (unofficial English translation from Hebrew) (incorporated by reference to Exhibit
10.5 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015).
|
|
10.2
|
|
Form
of Letter of Indemnity adopted on July 2013 (unofficial English translation from Hebrew) (incorporated by reference to Exhibit
10.6 to our Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015).
|
|
10.3
|
|
Kitov
Pharma Ltd. 2016 Equity-Based Incentive Plan (incorporated by reference to Annex C to the Proxy Statement included as
Exhibit 99.1 to the Registrant’s Form 6-k furnished to the Securities and Exchange Commission on March 22, 2019)
|
|
10.4
|
|
Form
of Underwriting Agreement (incorporated by reference to Exhibit 1.1 to our Registration Statement on Form F-1/A filed with
the Securities and Exchange Commission on November 18, 2015).
|
|
10.5
|
|
Form
of Share Purchase Agreement between Kitov Pharma and the purchasers (incorporated by reference to Exhibit 1.1 to the Registrant’s
Form 6-K furnished to the Securities and Exchange Commission on June 29, 2016)
|
|
10.6*
|
|
License
Agreement, dated as of August 15, 2013, by and between Yissum Research Development Company of The Hebrew University of Jerusalem,
Ltd. and TyrNovo Ltd. (incorporated by reference to Exhibit 4.14 to the Registrant’s Annual Report on Form 20-F as filed
with the Securities and Exchange Commission on May 1, 2017)
|
|
10.7*
|
|
First
Amendment to License Agreement, dated as of April 8, 2014, by and between Yissum Research Development Company of The Hebrew
University of Jerusalem, Ltd. and TyrNovo Ltd. (incorporated by reference to Exhibit 4.15 to the Registrant’s Annual
Report on Form 20-F as filed with the Securities and Exchange Commission on May 1, 2017)
|
|
10.8*
|
|
Second
Amendment to License Agreement, dated as of March 16, 2017, by and between Yissum Research Development Company of The Hebrew
University of Jerusalem, Ltd. and TyrNovo Ltd. (incorporated by reference to Exhibit 4.16 to the Registrant’s Annual
Report on Form 20-F as filed with the Securities and Exchange Commission on May 1, 2017)
|
|
10.9
|
|
Form
of Securities Purchase Agreement dated as of July 11, 2017 by and between the Registrant and the purchasers in the offering
(incorporated by reference to Exhibit 1.1 to the Registrant’s Form 6-K furnished to the Securities and Exchange Commission
on July 14, 2017)
|
|
10.10
|
|
Kitov
Pharma Ltd. Office holder Compensation Policy approved the shareholders on July 12, 2017
(incorporated by reference to Exhibit A to the Proxy Statement included as Exhibit 99.1
to the Registrant’s Form 6-K furnished to the Securities and Exchange Commission
on June 8, 2017)
|
|
10.11
|
|
Revolving
Secured Facility and Pledge Agreement dated March 1, 2017 by and between TyrNovo Ltd., and Kitov Pharma Ltd. (incorporated
by reference to Exhibit 4.18 to the Registrant’s Annual Report on Form 20-F as filed with the Securities and Exchange
Commission on March 5, 2018)
|
|
10.12
|
|
Convertible
Bridge Loan Agreement, dated September 15, 2017, by and between Kitov Pharma Ltd. and TyrNovo Ltd. (incorporated by reference
to Exhibit 4.19 to the Registrant’s Annual Report on Form 20-F as filed with the Securities and Exchange Commission
on March 5, 2018)
|
|
10.13
|
|
Form
of Securities Purchase Agreement dated as of June 1, 2018 by and between the Registrant and the purchasers in the offering
(incorporated by reference to Exhibit 1.1 to the Registrant’s Form 6-K furnished to the Securities and Exchange Commission
on June 5, 2018)
|
|
10.14
|
|
Form
of Securities Purchase Agreement dated as of January 16, 2019 by and between the Registrant and the purchasers in the offering
(incorporated by reference to Exhibit 1.1 to the Registrant’s Form 6-K furnished to the Securities and Exchange Commission
on January 18, 2019)
|
|
10.15**
|
|
Product
Manufacturing Agreement, effective as of November 8, 2018, by and between Kitov Pharma Ltd. and Dexcel Ltd. (incorporated
by reference to Exhibit 4.15 to the Registrant’s Form 20-F/A filed the Securities and Exchange Commission on April 3,
2019)
|
|
10.16**
|
|
Agreement
dated as of December 27, 2018, by and between Kitov Pharma Ltd. and Coeptis Pharmaceuticals Inc. (incorporated by reference
to Exhibit 4.16 to the Registrant’s Form 20-F/A filed the Securities and Exchange Commission on April 3, 2019)
|
|
10.17**
|
|
Stock
Purchase Agreement by and among Kitov Pharma Ltd., The Stockholders of FameWave Ltd. and M. Arkin (1999) Ltd. dated as of
March 14, 2019 (incorporated by reference to Exhibit 4.17 to the Registrant’s Form 20-F/A filed the Securities and Exchange
Commission on April 3, 2019).
|
|
10.18
|
|
English
Translation of Enforcement Arrangement entered into by and amongst the Israel Securities Authority, Kitov Pharma Ltd., Isaac
Israel, Paul Waymack, and Simcha Rock (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 6-K furnished
to the Securities and Exchange Commission on August 13, 2019)
|
|
10.19
|
|
Amendment
dated August 16, 2019 to the Stock Purchase Agreement by and among Kitov Pharma Ltd., The Stockholders of FameWave Ltd. and
M. Arkin (1999) Ltd. dated as of March 14, 2019 (incorporated by reference to Exhibit 10.19 to the Registrant’s Registration
Statement on Form F-1 filed with the Securities and Exchange Commission on September 16, 2019).
|
|
10.20
**
|
|
Amendment
dated October 8, 2019, to the Agreement by and between Kitov Pharma Ltd. and Coeptis Pharmaceuticals Inc (incorporated by
reference to Exhibit 10.20 to the Registrant’s Registration Statement on Form F-3 filed with the Securities and Exchange
Commission on December 2, 2019).
|
|
10.21***
|
|
Form
of Securities Purchase Agreement
|
|
10.22***
|
|
Form
of Lock-Up and Registration Rights Agreement, dated January 7, 2020, between the Kitov Pharma Ltd. and the sellers listed
on Exhibit A thereto.
|
|
21.1***
|
|
List
of subsidiaries of the Registrant
|
|
23.1***
|
|
Consent
of Law Office of Avraham Ben-Tzvi, Adv. (included in Exhibit 5.1)
|
|
23.2***
|
|
Consent
of Haynes and Boone, LLP (included in Exhibit 5.2)
|
|
23.3±
|
|
Consent of Somekh Chaikin, independent registered public accounting firm, a Member Firm of KPMG International
|
|
24.1***
|
|
Power
of Attorney
|
|
|
*
|
Confidential
treatment granted with respect to portions of this Exhibit.
|
|
|
**
|
Portions
of this exhibit have been omitted because they are both (i) not material, and (ii) would
likely cause competitive harm to the Company if publicly disclosed.
|
(b)
Financial Statement Schedules
All
schedules have been omitted because either they are not required, are not applicable or the information is otherwise set forth
in the consolidated financial statements and related notes thereto.
Item
9. Undertakings
The
undersigned Registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities Act;
|
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective date of the 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 the 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 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
|
|
|
(iii)
|
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 the registration statement.
|
provided,
however, that paragraphs (1)(i), (1)(ii) and (1)(iii) do not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 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 this registration statement;
(2)
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.
(3)
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.
(4)
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 Securities 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 (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 Securities 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.
(5)
That, for the purpose of determining liability of the 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: (i) any preliminary
prospectus or prospectus of the undersigned Registrant to the offering required to be filed pursuant to Rule 424; (ii) 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; (iii) 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 (iv) any other
communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
(6)
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 foregoing provisions, 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.
(7)
That,
|
|
(i)
|
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.
|
|
|
(ii)
|
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 on Form F-1 and has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Tel Aviv, Israel on March 11, 2020.
|
|
KITOV
PHARMA LTD.
|
|
|
|
|
|
|
By:
|
/s/
Isaac Israel
|
|
|
|
Name:
|
Isaac
Israel
|
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
|
|
|
|
By:
|
/s/
Gil Efron
|
|
|
|
Name:
|
Gil
Efron
|
|
|
|
Title:
|
Deputy
CEO and Chief Financial Officer
|
Pursuant to the requirements
of the Securities Act, this amendment to the registration statement has been signed by the following persons in the capacities
and on the dates indicated.
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
*
|
|
Chairman
of the Board of Directors
|
|
March
11, 2020
|
|
Eric
K. Rowinsky
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Isaac Israel
|
|
Chief
Executive Officer and Director (Principal Executive Officer)
|
|
March
11, 2020
|
|
Isaac
Israel
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
11, 2020
|
|
Simcha
Rock
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
11, 2020
|
|
Ido
Agmon
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
11, 2020
|
|
Steven
Steinberg
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
11, 2020
|
|
Revital
Stern-Raff
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
March
11, 2020
|
|
Ran
Tzror
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Gil Efron
|
|
Deputy
CEO and Chief Financial Officer
|
|
March
11, 2020
|
|
Gil
Efron
|
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
|
|
* By:
|
/s/
Isaac Israel
|
|
|
|
Isaac Israel
|
|
|
|
Attorney-in-fact
|
|
Signature
of authorized representative in the United States
Pursuant to
the requirements of the Securities Act, the Registrant’s duly authorized representative has signed this Amendment No. 2
to Registration Statement on Form F-1 on this 11th day of March 2020.
|
|
Puglisi
& Associates
|
|
|
|
|
|
|
|
Authorized
U.S. Representative
|
|
|
|
|
|
|
|
By:
|
/s/
Donald J. Puglisi
|
|
|
|
Name:
|
Donald
J. Puglisi
|
|
|
|
Title:
|
Managing
Director
|
II-10
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