---

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# FORM 20-F

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

# OR

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

# For the fiscal year
ended ________________

# OR

|o | TRANSACTION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------

# For the transition
period from _____________ to ____________

# OR

|x | SHELL COMPANY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

# Date of event requiring
this shell company report July 30, 2008

# Commission file number
0-30820

# TIKCRO TECHNOLOGIES
LTD.(Exact name of
Registrant as specified in its charter)

# ISRAEL
(Jurisdiction of
incorporation or organization)

# 126 Yigal Allon
Street, Tel Aviv 67443, Israel
(Address of principal
executive offices)

Izhak
Tamir, T: +972-3-694-8648, F: +972-3-694-8684, 126 Yigal Allon Street, Tel Aviv 67443,
Israel
(Name, Telephone,
E-mail and/or Facsimile number and Address of Company Contact Person)

|                                                                                |                                          
|------------------------------------------------------------------------------- | -----------------------------------------
|
|
|
|
|Securities registered or to be registered pursuant to Section 12(b) of the Act:
|Title of each class                                                             | Name of each exchange on which registered
|None                                                                            |                                          

Securities
registered or to be registered pursuant to Section 12(g) of the Act:Ordinary Shares, no
par value (Title of Class)

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:

# None  (Title of Class)



---

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Indicate the number of outstanding
shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

---

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

o Yes    x No

If this report is an annual or
transition report, indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes    o No

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

x Yes     o No

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer     o            Accelerated filer   o            Non-accelerated filer x

Indicate  by check mark which  basis
of  accounting  the  registrant  has used to  prepare  the  financial statements included
in this filing:

U.S. GAAP x                      IFRS as issued by the IASB o                     Other  o

If Other has been checked
in response to the previous question, indicate by check mark which financial statement
item the registrant has elected to follow.

Item 17 o Item 18 o

If this is an annual  report,  indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act).

o Yes    o No

2

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|         |                                                       |   
|-------- | ----------------------------------------------------- | --
|
|
|
|
|PART I   |                                                       | 1 
|ITEM 1.  | Identify of Directors, Senior Management and Advisors | 1 
|ITEM 2.  | Offer Statistics and Expected Timetable               | 1 
|ITEM 3.  | Key Information                                       | 1 
|A.       | Selected Financial Data                               | 1 
|B.       | Capitalization and Indebtedness                       | 3 
|C.       | Reasons for the offer and use of proceeds             | 3 
|D.       | Risk Factors                                          | 4 
|ITEM 4.  | Information on the Company                            | 13
|A.       | History and Development of the Company                | 13
|B.       | Business Overview                                     | 14
|C.       | Organizational Structure                              | 17
|D.       | Property, Plants and Equipment                        | 17
|ITEM 4A. | Unresolved Staff Comments                             | 17
|ITEM 5.  | Operating and Financial Review and Prospects          | 17
|A.       | Operating Results                                     | 17
|B.       | Liquidity and Capital Resources                       | 21
|C.       | Research and Development, Patents and Licenses        | 22
|D.       | Trend Information                                     | 22
|E.       | Off-balance Sheet Arrangements                        | 22
|F.       | Tabular Disclosure of Contractual Obligations         | 22
|ITEM 6.  | Directors, Senior Management and Employees            | 22
|A.       | Directors and Senior Management                       | 22
|B.       | Compensation                                          | 23
|C.       | Broad Practices                                       | 24
|D.       | Employees                                             | 29
|E.       | Share Ownership                                       | 29

3

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|ITEM 7.  | Major Shareholders and Related Party Transactions          | 30
|-------- | ---------------------------------------------------------- | --
|A.       | Major Shareholders                                         | 30
|B.       | Related Party Transactions                                 | 31
|C.       | Interests of Experts and Counsel                           | 31
|ITEM 8.  | Financial Information                                      | 31
|A.       | Consolidated Statements and other Financial Information    | 31
|B.       | Significant Changes                                        | 31
|ITEM 9.  | The Offer and Listing                                      | 31
|A.       | Offer and Listing Details                                  | 31
|B.       | Plan of Distribution                                       | 33
|C.       | Markets                                                    | 33
|D.       | Selling Shareholders                                       | 33
|E.       | Dilution                                                   | 33
|F.       | Expenses of the Issue                                      | 33
|ITEM 10. | Additional information                                     | 33
|A.       | Share Capital                                              | 33
|B.       | Memorandum and Articles of Association                     | 34
|C.       | Material Contracts                                         | 39
|D.       | Exchange Controls                                          | 39
|E.       | Taxation                                                   | 40
|F.       | Dividends and Paying Agents                                | 49
|G.       | Statement by Experts                                       | 49
|H.       | Documents On Display                                       | 49
|I.       | Subsidiary Information                                     | 50
|ITEM 11. | Quantitative and Qualitative Disclosures about Market Risk | 50
|ITEM 12. | Description of Securities other than Equity Securities     | 50

4

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|PART II.  |                                                                              | 50
|--------- | ---------------------------------------------------------------------------- | --
|ITEM 13   | Defaults, Dividend Averages and Delinquencies                                | 50
|ITEM 14   | Material Modifications to the Rights of Security Holders and Use of Proceeds | 50
|ITEM 15.  | Controls and Procedures                                                      | 50
|ITEM 16A. | Audit Committee Financial Expert                                             | 50
|ITEM 16B. | Code of Ethics                                                               | 51
|ITEM 16C. | Principal Accountant Fees and Services                                       | 51
|ITEM 16D. | Exemptions from Listing Standards for Audit Committees                       | 51
|ITEM 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       | 51
|PART III  |                                                                              | 51
|ITEM 17.  | Financial Statements                                                         | 51
|ITEM 18.  | Financial Statements                                                         | 51
|ITEM 19.  | Exhibits                                                                     | 51

5

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# PART I

Unless the context otherwise
requires, Tikcro, us, we and our refer to
Tikcro Technologies Ltd., an Israeli company, and its subsidiaries.

All share and per share information
in this Report has been adjusted to give retroactive effect to a one-for-three reverse
split of our ordinary shares that became effective on September 19, 2006.

Statements in this Report
concerning our business outlook or future economic performance; anticipated revenues,
expenses or other financial items; and statements concerning assumptions made or
expectations as to any future events, conditions, performance or other matters, are
forward-looking statements as that term is defined under the United States
Federal Securities Laws. In some cases, you can identify forward-looking statements by our
use of words such as expect, anticipate, believe,
intend, plan, seek and estimate and
similar expressions. Forward-looking statements are subject to risks, uncertainties and
other factors which could cause actual results to differ materially from those stated in
such statements. Factors that could cause or contribute to such differences include, but
are not limited to, those set forth under Risk Factors and elsewhere in this
Report as well as our reports on Form 6-K submitted to the Securities and Exchange
Commission.

|ITEM 1. |  | Identity of Directors, Senior Management and Advisors
|------- |  | -----------------------------------------------------

# A. Directors and Senior
Management

See Item 6 Directors, Senior
Management and Employees.

# B. Advisers

Not applicable.

# C. Auditors

For 2005, 2006 and 2007, our
independent accountant was Kost, Forer, Gabbay & Kasierer, a firm of certified public
accountants in Israel and member of Ernst & Young Global. Their address is 3
Aminadav Street, Tel Aviv, Israel, 67067.

|ITEM 2. |  | Offer Statistics and Expected Timetable
|------- |  | ---------------------------------------

Not applicable.

|ITEM 3. |  | Key Information
|------- |  | ---------------

# A. Selected Financial
Data

We have derived the following
selected financial data, with respect to the five years from 2003 to 2007, from the financial statements of Tikcro, which have been prepared
in accordance with generally accepted accounting principles in the United States. You
should read the selected consolidated financial data together with Item 5 Operating
and Financial Review and Prospects and our consolidated financial statements
included elsewhere or incorporated by reference in this Report.

1

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From April 2003, when we sold
substantially all of our assets and liabilities (other than financial indebtedness) to
STMicroelectronics, through 2007, we had so significant operations. Accordingly, the data
presented below are not indicative of our future operating results or financial position.

In
July 2008, we acquired a minority stake in
BioCancell Therapeutics, Inc., an Israel-based clinical-stage biopharmaceutical company.
Please see Item 4.A Information on the Company  History and Development of the
CompanyRecent Developments for more information.

|                                                            | Years Ended December 31,
|----------------------------------------------------------- | ------------------------
|
|
|
|
|Statement of Operations Data:                               |                         
|Revenues                                                    |                         
|                                                            |                         
|                                                            |                         
|Research and development expenses and development           |                         
|services costs (1)                                          |                         
|Less - royalty-bearing grants                               |                         
|                                                            |                         
|                                                            |                         
|Research and development expenses, net and development      |                         
|services costs, net (1)                                     |                         
|Selling, marketing, general and administrative expenses (1) |                         
|Operating loss                                              |                         
|Other income                                                |                         
|                                                            |                         
|Financial income (expense), net                             |                         
|                                                            |                         
|Net income (loss)                                           |                         
|                                                            |                         
|Basic net earnings (loss) per share**)                      |                         
|                                                            |                         
|Diluted net earnings (loss) per share**)                    |                         
|                                                            |                         
|Number of shares used in computing basic net earnings       |                         
|(loss) per share**)                                         |                         
|                                                            |                         
|Number of shares used in computing diluted net earnings     |                         
|(loss) per share**)                                         |                         
|                                                            |                         

---

|(1) | Operating
expenses include stock compensation expenses as follows: research and
          development expenses, net and development services costs, net of, $47, $0, $0,
          $0 and $0 for the years ended December 31, 2003, 2004, 2005, 2006 and 2007,
          respectively; and selling, marketing, general and administrative expenses of
          $724, $0, $0, $9 and $12 for the years ended December 31, 2003, 2004, 2005,
2006           and 2007, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*) | Represents
an amount lower than $0.01.
|-- | --------------------------------------

|**) | After
giving retroactive effect to the one-for-three reverse stock split in           September
19, 2006 for the years ended December 31, 2003 through 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

2

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|                                         | December 31,
|---------------------------------------- | ------------
|
|
|
|
|Balance Sheet Data:                      |             
|Cash and cash equivalents and short term |             
|investments                              |             
|Working capital                          |             
|Total assets                             |             
|Shareholders equity                      |             

# B. Capitalization and
Indebtedness

The
following table sets forth our capitalization as of March 31, 2008.

The information in this table should
be read in conjunction with and is qualified by reference to the consolidated financial
statements and notes thereto and other financial information included elsewhere or
incorporated by reference into this Report.

| |                                                                              | as of March 31, 2008
| | ---------------------------------------------------------------------------- | --------------------
|
|
|
|
| | Short-term debt                                                              |                     
| | Long-term debt                                                               |                     
| |                                                                              |                     
| | Shareholders' equity:                                                        |                     
| | Authorized: 16,666,667 shares at March 31, 2008;                             |                     
| | Issued: 9,895,141 shares at March 31, 2008;                                  |                     
| | Outstanding:  8,448,090 shares at March 31, 2008                             |                     
| | Additional paid-in capital                                                   |                     
| | Less - treasury  shares, at cost 1,447,051 ordinary shares at March 31, 2008 |                     
| | Accumulated other comprehensive income                                       |                     
| | Accumulated deficit                                                          |                     
| |                                                                              |                     
| | Total shareholders' equity                                                   |                     
| |                                                                              |                     

C.
          Reasons for the offer and use of proceeds

Not applicable.

3

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# D. Risk Factors

We believe that the occurrence of
any one or some combination of the following factors could have a material adverse effect
on our business, financial condition and results of operations.

Risks relating to our
business

# We currently conduct no
significant business activities.

In July 2008, we acquired a minority
stake in BioCancell Therapeutics, Inc., an Israel-based clinical-stage biopharmaceutical
company. Other than our involvement in the management of BioCancell, we do not currently
conduct any significant operations.

The growth of our business depends
on our obtaining additional financing, which may be unavailable to us.

In order to acquire stakes in
additional operating companies, we will need to raise additional funds through public or
private debt or equity financings. In addition, we may need to raise funds in order to
help finance companies in which we have acquired ownership interests. For example, we
provided $2.5 million to BioCancell in July 2008 and, if BioCancells development
proceeds as planned, we will likely provide it with additional funds in 2009. We also hold
a five-year warrant to purchase shares of BioCancell, for an aggregate exercise price of
approximately $3.0 million. If we do not raise additional funds, we may not be able to
provide BioCancell with the support it requires and we may not be able to acquire stakes
in additional operating companies. We may be unable to obtain additional financing on
acceptable terms or at all, which would harm our financial condition and results of
operations.

We may not consummate transactions
with additional operating companies.

There can be no assurance that we
will be successful in identifying and evaluating suitable business opportunities or in
consummating transactions with additional operating companies. No particular industry or
specific business within an industry has been selected for target companies. Accordingly,
we may enter into a transaction with a business entity having no significant operating
history, losses, limited or no potential for immediate earnings, limited assets, negative
net worth or other negative characteristics. In the event that we complete a transaction
with one or more operating companies, the success of our operations will be dependent upon
the management of such target company or companies and numerous other factors. There is no
assurance that we will be able to negotiate additional transactions on terms favorable to
us, or at all.

We may be deemed an
investment company under the Investment Company Act of 1940.

Following the sale of our business to
STMicroelectronics in April 2003 and the investment of the cash proceeds of the sale, we
may be deemed an investment company under the Investment Company Act of 1940,
unless we qualify for an exemption. The likelihood of being deemed to be an investment
company increases over time if we do not enter into a business combination or develop an
operating business. Even if we acquire minority stakes in one or more operating companies,
we may be deemed an investment company if we do not have sufficient control over such
companies or qualify for another exemption under the Investment Company Act of 1940. If we
are deemed an investment company, we could be found to be in violation of the Investment
Company Act of 1940. A violation of that law could make it more difficult for us to
register securities and raise funding and subject us to other material adverse
consequences.

4

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Our shareholders may be subject to
dilution of the value of our shares if we conduct a business combination or other type of
acquisition.

A business combination or the
acquisition of stakes in operating companies, which are among the business alternatives
considered by us, may involve the issuance of a significant number of additional shares.
Depending upon the value of the assets acquired in such transaction, the per share value
of our ordinary shares may increase or decrease, perhaps significantly.

# We may face tax
liabilities relating to our asset sales.

We havegenerated a
significantamount of income from the sale of the ASIC business of Silicon Value in
2001 and our various agreements with STMicroelectronics in 2002 to 2003. Based on our
assessment and that of our tax advisors, we believe that we have fully satisfied all tax
due in relation with these transactions. The tax authorities may not agree with our view.
Any such disagreement and subsequent tax dispute could result in tax liabilities in
amounts which we currently can not estimate.

# We might lose money from
the investment of our cash.

We invest the majority of our
cash on hand in a variety of financial instruments. If the obligor of any of the
instruments we hold defaults or undergoes a reorganization in bankruptcy, we may lose
all or a portion of our investment.  This would harm our financial condition. 
For information on the types of our investments as of December 31, 2007, see Item 11
 Quantitative and Qualitative Disclosures About Market Risk  Interest
Rate Risk Management.

We are subject to costs and risks
associated with complying with extensive corporate governance and disclosure requirements.

As a foreign private issuer subject
to U.S. federal securities laws, we are required to comply with laws, regulations and
standards relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002 and various SEC regulations. Section 404 of the Sarbanes-Oxley
Act requires managements annual review and evaluation of our internal control over
financial reporting and attestations of the effectiveness of these controls by our
management and, commencing from fiscal year 2009, by our independent registered public
accounting firm. There is no guarantee that these efforts will result in management
assurance or an attestation by our independent registered public accounting firm that our
internal control over financial reporting is adequate in future periods. If we complete a
business combination, we will likely need to invest additional time and resources in
connection with our compliance with Section 404 and the other applicable provisions of the
Sarbanes-Oxley Act, to assure that we continue to comply with these requirements. The
additional management attention and costs relating to compliance with the Sarbanes-Oxley
Act and other corporate governance requirements could materially and adversely affect our
financial results.

5

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Risks relating to our
holdings in BioCancell

We provided $2.5 million of
funding to BioCancell, an Israel-based clinical-stage biopharmaceutical company, whose
future is uncertain.  Our success is now dependent to a significant degree on the success of BioCancell.

We have provided $2.5 million of
funding to BioCancell and designated a member of its board of directors, and we may
provide BioCancell with additional funding in the future. BioCancell is developing new
drugs for the treatment of various types of cancer. To be profitable, BioCancell must
successfully research, develop, obtain regulatory approval for, manufacture, introduce,
market and distribute its drugs. The path necessary to achieve these goals for any drug
product is long and uncertain. Before BioCancell can sell any drug, it will be required to
demonstrate through clinical trials that it is safe and effective for human use in the
treatment of individuals with cancer. Neither BioCancell nor its senior management has
ever successfully commercialized a drug product and no assurance can be given that
BioCancell will be able to successfully complete the clinical trials for its drugs in
development in accordance with the standards of the U.S. Federal Drug Administration, or
the FDA, or if it is able, that its drugs will prove to be safe and will produce the
intended effects. If BioCancell does not successfully meet its scientific, regulatory,
financial and commercial challenges, then the value of our investment in BioCancell may
significantly decline and our results of operations and financial condition may be
materially harmed.

BioCancell will require additional
funding, which may further draw on our resources or result in significant dilution of our
ownership.

BioCancell is expected to need
additional funding for its operations in 2009 and may not be able to raise such funds
without our participation. It is likely that we will allocate additional funds to support
BioCancell in 2009, in which case our cash reserves will decline and the dependence of our
results on the results of BioCancell will increase. If we do not allocate additional funds
to BioCancell, our holding in BioCancell would be diluted, our influence over its business
could weaken and the value of our holding could materially decline.

The pharmaceutical and
biotechnology market is highly competitive. If BioCancell is unable to compete effectively
with existing products, new treatment methods and new technologies, it may be unable to
commercialize any therapeutic products that it may develop.

The biotechnology market is highly
competitive, is subject to rapid technological change and is significantly affected by
existing rival drugs and medical procedures, new product introductions and the market
activities of other participants. Pharmaceutical and biotechnology companies, academic
institutions, governmental agencies and other public and private research organizations
pursue the research and development of technologies and drugs for the treatment of some or
all of the diseases that BioCancell is targeting, including superficial bladder carcinoma,
pancreatic and ovarian cancer. A significant number of products are currently under
development, and may become commercially available in the future, for the treatment of
superficial bladder carcinoma, pancreatic and ovarian cancer.

The competitors of BioCancell may
develop products more rapidly or more effectively than BioCancell. They have: much greater
experience and much greater financial, technical and human resources than BioCancell; more
extensive experience in pre-clinical testing, conducting clinical trials, obtaining and
maintaining regulatory approvals and in manufacturing and marketing therapeutic products;
products that have been approved or are in late stages of development; established
distribution networks; and entrenched and established relationships with healthcare
providers and payors.

As a result of any of the foregoing
factors, the competitors of BioCancell may develop or commercialize products with
significant advantages over any therapeutic products that it develops. The competitors of
BioCancell therefore may be more successful in commercializing their products than
BioCancell, which could adversely affect its competitive position and harm its business
prospects.

6

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---

BioCancell is exposed to a risk of
substantial loss due to claims that may be filed against it in the future because
BioCancell does not maintain insurance policies to cover the risk of loss associated with
its operations.

BioCancell is exposed to the risk of
having claims seeking monetary damages being filed against it for loss or harm suffered by
participants of its clinical studies or for loss or harm suffered by users of any drug
that may receive approval for commercialization in the future. In either event, the FDA or
the regulatory authorities of other countries or regions may commence investigations of
the safety and effectiveness of any such clinical trial or commercialized drug, as well as
the manufacturing processes and facilities or marketing programs utilized in respect of
any such trial or drug. Such investigations may result in mandatory or voluntary recalls
of any commercialized drug or other significant enforcement action, such as limiting the
indications for which any such drug may be used, or suspension or withdrawal of approval
for any such drug. Investigations by the FDA or any other regulatory authority in other
countries or regions also could delay or prevent the completion of any of
BioCancells other clinical development programs. In the event that BioCancell is
required to pay damages for any such claim, it may be forced to seek bankruptcy protection
or to liquidate because its asset and revenue base may be insufficient to satisfy the
payment of damages, and insurance, if any, that it obtained or may obtain for product or
clinical trial liability may not provide sufficient coverage against its liabilities.

BioCancells exclusive
license to certain patents will expire in 2017, and BioCancell may face increased
competition from third parties who will be able to license the patents that BioCancell has
used in its research and development activities.

Certain patents underlying the
exclusive license that Yissum Research Development Company of the Hebrew University of
Jerusalem, or Yissum, has granted to BioCancell will expire beginning in 2017, after which
time, any one or more of BioCancells competitors could develop generic alternatives
to BioCancells prospective drugs. Such competitors may have greater resources and
marketing potential than BioCancell, and the commercialization of a generic alternative
would likely drive down the price that BioCancell is able to charge for its products. This
would materially harm BioCancells results of operations. In addition, unless
BioCancell is successful in extending the patent protection on its drugs beyond 2017, the
value of BioCancells drugs from FDA approval of its drugs to market through 2017 may
not commercially support the risks involved and expenses required to conclude FDA-approved
clinical trials, thus resulting in an early termination of the development of its drugs.

BioCancell is required, and may be
required in the future, to license patent rights from third party owners in order to
develop its prospective therapeutic products in the future. If BioCancell cannot obtain
and comply with the terms of such licenses or if such owners do not properly maintain or
enforce the patents underlying such licenses, BioCancells competitive position and
business prospects will be harmed.

BioCancell currently licenses
technologies and other patents from third parties for use in conducting its research and
development activities and it may be required to obtain additional licenses in the future
in the event that it believes it is necessary or useful for its business and its research
and development efforts to use third party intellectual property or if its efforts would
otherwise infringe upon the intellectual property rights of third parties.

7

---

---

Additionally, should BioCancell
succeed in obtaining any such license, its business prospects will depend in part on the
ability of its licensors to obtain, maintain and enforce patent protection for its
licensed intellectual property, in particular, those patents for which BioCancell secured
exclusive rights, such as the exclusive license granted to BioCancell by Yissum in
connection with its research on the H19 gene. If BioCancell were to breach any of its
obligations under any such license, the licensor may have the right to terminate the
license. In addition, BioCancells licensors may fail to successfully prosecute or
may fail to maintain their patent applications which they license to BioCancell, or,
contrary to the view of BioCancell, may determine not to pursue litigation against other
persons that are infringing these patents or, contrary to the view of BioCancell, may
pursue such litigation less aggressively than BioCancell would. Without protection for the
intellectual property that BioCancell has licensed and for which it may obtain licenses in
the future, other companies might be able to offer substantially identical products for
sale, which could adversely affect BioCancells competitive position and harm its
business prospects.

If BioCancell is not able to
obtain and enforce patent protection for its inventions, its ability to develop and
commercialize its prospective therapeutic products will be harmed.

BioCancells success depends, to
a considerable extent, on its ability to protect proprietary methods and technologies that
it develops under the patent and other intellectual property laws of the United States and
other countries, so that it may prevent others from unlawfully using its inventions and
proprietary information. The patent position of pharmaceutical or biotechnology companies,
including BioCancell, is generally uncertain and involves complex legal and factual
considerations. The standards that the U.S. Patent and Trademark Office, or PTO, and its
foreign counterparts use to grant patents are not always applied predictably or uniformly
and may change. There also is no uniform, worldwide policy regarding the subject matter
and scope of claims granted or allowable in pharmaceutical or biotechnology patents. Even
if BioCancells rights are not directly challenged, disputes among third parties
could lead to the weakening or invalidation of its intellectual property rights.
Accordingly, BioCancell does not know the degree of future protection for its proprietary
rights or the breadth of claims that will be allowed with respect to any patents issued to
it or to others. Additionally, the mere issuance of a patent does not guarantee that it is
valid or enforceable against third parties.

A third party may sue BioCancell for
infringing its patent rights. Likewise, BioCancell may need to resort to litigation to
enforce a patent issued or licensed to it or to determine the scope and validity of third
party proprietary rights. In addition, a third party may claim that BioCancell has
improperly obtained or used its confidential or proprietary information. The cost to
BioCancell of any litigation or other proceeding relating to intellectual property rights,
even if resolved in its favor, could be significant, and the litigation would divert its
managements efforts. From a financial perspective, there is a risk that BioCancell
would not be able to sustain the costs of any such litigation and would be forced to seek
bankruptcy protection or to liquidate because of its limited asset and revenue base.

8

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BioCancell relies on one primary
source and a limited number of third parties for the supply of certain major components
for its drugs and other raw materials required for its research and development
activities. If BioCancell is unable to reach agreements with these third parties or if it
is unable to maintain its contractual relationships with these third parties,
BioCancells research and development activities would be delayed.

BioCancell relies on third parties
for the provision of materials required for its research and development activities.
Obtaining these materials requires various approvals as well as reaching a commercial
agreement on acceptable terms with the provider of the materials. BioCancell may not be
able to reach agreements with a sufficient number of suppliers or do so on terms
acceptable to it. If BioCancell is unable to reach acceptable agreements with a sufficient
number of suppliers of research materials, its research and development activities will be
delayed and its ability to implement its business plan will be compromised.

If BioCancell is unable to retain
Professor Abraham Hochberg, Dr. Patricia Ohana and other qualified key management and
scientists, staff consultants and advisors, its ability to implement its business plan may
be adversely affected.

BioCancells success largely
depends on the skills, experience and efforts of certain of its senior management. The
loss of the service of any of these persons, including Professor Abraham Hochberg its
Co-Founder, Chairman of the Board and Chief Scientific Officer, and Dr. Patricia Ohana,
may significantly delay or prevent BioCancells achievement of product development
and its other business objectives. Should either of Professor Hochberg or Dr. Ohana cease
his or her employment with BioCancell or should BioCancell otherwise lose his or her
services, its ability to conduct its research and development activities would be
significantly compromised.

BioCancells employment
agreements with its key personnel, including Professor Abraham Hochberg and
Dr. Patricia Ohana, are terminable by the employee upon the provision of 90
days or three months advance written notice to BioCancell. BioCancell does not
carry key man life insurance on any of its executive officers or other key employees.

Risks relating to our
presence in Israel

Our incorporation in Israel may
limit our ability to find a target for a business combination or other transactions
outside Israel.

We are incorporated and headquartered
in Israel, and BioCancell is headquartered in Israel. A state of hostility, varying in
degree and intensity, has led to security and economic problems for Israel. Ongoing
violence between Israel and the Palestinians, as well as tension between Israel, Iran,
Syria and Lebanon, may have a material adverse effect on our business, financial
conditions and results of operations. We cannot predict the effect on us of the increase
in the degree of terror attacks against Israel, political instability in the region or
military action elsewhere in the Middle East. Furthermore, several countries restrict
doing business with Israel and Israeli companies, and additional companies may restrict
doing business with Israel and Israeli companies as a result of an increase in
hostilities.

9

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It may be difficult to enforce a
U.S. judgment against us, our officers and directors or to assert U.S. securities law
claims in Israel.

Service of process upon our directors
and officers named herein may be difficult to effect within the United States because some
of these people reside outside the United States. Any judgment obtained in the United
States against us or these individuals or entities may not be enforceable 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 any Israeli court
agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable
to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law
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. There is little binding case
law in Israel addressing these matters.

Subject to specified time limitations
and legal procedures, under the rules of private international law currently prevailing in
Israel, Israeli courts may enforce a U.S. final judgment in a civil matter, including
judgments based upon the civil liability provisions of the U.S. securities laws and
including a monetary or compensatory judgment in a non-civil matter, provided that:

| |  | the
judgment is enforceable in the state in which it was given;
| | - | ---------------------------------------------------------------

| |  | adequate
 service of process has been effected and the defendant has had a
                reasonable opportunity to be heard;
| | - | ------------------------------------------------------------------------------------------------------------------------------

| |  | the
 judgment  and its  enforcement  are not  contrary to the law,  public
                policy, security or sovereignty of the State of Israel;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
 judgment  was not  obtained by fraud and does not  conflict  with any
                other valid judgment in the same matter between the same parties; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 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 U.S. court.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

If a foreign judgment is enforced by
an Israeli court, it generally will be payable in new Israeli shekels, which can then be
converted into non-Israeli currency and transferred out of Israel. The usual practice in
an action to recover an amount in non-Israeli currency is for the Israeli court to render
judgment for the equivalent amount in new Israeli shekels at the rate of exchange on the
date of payment, but the judgment debtor also may make payment in non-Israeli currency.
Pending collection, the amount of the judgment of an Israeli court stated in new Israeli
shekels ordinarily will be linked to the Israel Consumer Price Index plus interest at the
annual rate (set by Israeli law) prevailing at that time. Judgment creditors bear the risk
of unfavorable exchange rates.

10

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Provisions of Israeli law may
delay, prevent or make more difficult a merger or other business combination, which may
depress out share price.

Provisions of Israeli corporate law
may have the effect of delaying, preventing or making more difficult a merger with, or
acquisition of, us. The Israeli Companies Law generally provides that a merger be approved
by the board of directors and a majority of the shares present and voting on the proposed
merger. For purposes of the shareholder vote, unless a court rules otherwise, the merger
will not be deemed approved if a majority of the shares not held by the other party to the
merger (or by any person who holds 25% or more of the shares or the right to appoint 25%
or more of the directors of the other party or its general manager) have voted against the
merger. Upon the request of any creditor of a party to the proposed merger, a court may
delay or prevent the merger if it concludes that there is a reasonable concern that, as a
result of the merger, the surviving company will be unable to satisfy the obligations of
the surviving company. Finally, a merger may not be completed unless at least (i) 50 days
have passed since the filing of a merger proposal signed by both parties with the Israeli
Registrar of Companies and (ii) 30 days have passed since the merger was approved by the
shareholders of each merging company.

The Companies Law also provides that
an acquisition of shares in a public company must be made by means of a tender offer if as
a result of the acquisition the purchaser would become a 25% or greater shareholder of the
company, unless there is already another 25% or greater shareholder of the company.
Similarly, an acquisition of shares must be made by means of a tender offer if as a result
of the acquisition the purchaser would become a 45% or greater shareholder of the company,
unless there is already a 45% or greater shareholder of the company. In any event, if as a
result of an acquisition of shares the acquirer will hold more than 90% of a
companys shares, the acquisition must be made by means of a tender offer for all of
the shares.

Finally, Israel tax law treats some
acquisitions, such as stock-for-stock exchanges between an Israeli company and a foreign
company, less favorably than U.S. tax laws. For example, Israeli tax law may, under
certain circumstances, subject a shareholder who exchanges his ordinary shares for shares
in another corporation, to taxation prior to the sale of the shares received in such
stock-for-stock swap.

The described restrictions could
prevent or make more difficult an acquisition of Tikcro, which could depress our share
price.

Risks relating to the
market for our ordinary shares

Holders of our ordinary shares who
are U.S. residents face income tax risks.

As a consequence of our ownership of
substantial cash and investment assets but no operating business assets, it is likely that
we would be classified for U.S. federal income tax purposes as having been a passive
foreign investment company, or PFIC, during each of 2005, 2006 and 2007. We could also be
classified as a PFIC for 2008, although the determination of PFIC status is made
separately for each year and our PFIC status could change.

Classification as a PFIC could result
in a reduction in the after-tax return to U.S. holders of our ordinary shares, which
could, in turn, cause a reduction in the value of our ordinary shares. Classification as a
PFIC also triggers the application of certain United States tax reporting requirements.

11

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Complex rules apply to a U.S. holder
of our ordinary shares if we are treated as a PFIC for U.S. federal income tax purposes
for any year during such U.S. holders holding period. Accordingly, U.S. holders are
urged to consult their tax advisors regarding the application of these rules.

U.S.
          residents should carefully read Item 10.E Taxation  United States
          Federal Income Tax Consequences for a more complete discussion of the U.S.
          federal income tax risks related to owning and disposing of our ordinary shares
          and the consequences of PFIC status.

The trading market for our
ordinary shares has low liquidity, which could make it difficult for our shareholders to
sell their shares at desired prices and amounts.

Our ordinary shares currently are
quoted on the OTC Bulletin Board, an electronic quotation medium regulated by the National
Association of Securities Dealers. Currently, we do not meet the initial listing
conditions of the Nasdaq Stock Market. The market for shares quoted on the OTC Bulletin
Board is typically less liquid than that for shares listed on the Nasdaq Stock Market.
This could make it more difficult for our shareholders to sell their shares at desired
prices and amounts.

# Two shareholders may be
able to control us.

Izhak Tamir and Eric Paneth,
directors of Tikcro, each beneficially own approximately 12.5% of our outstanding ordinary
shares. Currently, Messrs. Paneth and Tamir are not party to a shareholders agreement.
However, if Messrs. Paneth and Tamir act together, they effectively may have the power to
control the outcome of all matters submitted for the vote of our shareholders, including
the election of directors and the approval of significant change in control transactions.
Their combined equity interest in us may have the effect of making certain transactions
more difficult and may result in delaying, deferring or preventing a change in control of
Tikcro unless approved by one or both of them.

Our shareholder bonus rights plan
may delay, prevent or make more difficult a hostile acquisition of Tikcro, which could
depress our share price.

In September 2005, we adopted a
shareholder bonus rights plan pursuant to which share purchase bonus rights were
distributed to our shareholders. These rights generally will be exercisable and
transferable apart from our ordinary shares only if a person or group acquires beneficial
ownership of 15% or more of our ordinary shares, or commences a tender or exchange offer
upon consummation of which that person or group would hold such a beneficial interest.
Once these rights become exercisable and transferable, the holders of rights, other than
the person or group triggering their transferability, will be generally entitled to
purchase our ordinary shares at a discount from the market price. The rights will expire
on December 31, 2015. While these rights remain outstanding, they may make an acquisition
of us more difficult and result in delaying or preventing a change in control of Tikcro.

12

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|ITEM 4. |  | Information on the Company
|------- |  | --------------------------

A.
          History and Development of the Company

We were incorporated on December 14,
1999 under the laws of the State of Israel. We are governed by the Israeli Companies Law,
5759-1999. In September 2003, we changed our name from Tioga Technologies Ltd.
to Tikcro Technologies Ltd. Our principal executive offices are located at 126
Yigal Allon Street, Tel Aviv, Israel and our telephone number is (972-3) 694-8648.

# Recent Developments

In June 2008 we signed an agreement
to provide BioCancell Therapeutics, Inc., an Israel-based clinical-stage biopharmaceutical
company described below under Item 4.B, with $2.5 million in funding. This transaction was
consummated on July 30, 2008. In exchange for our $2.5 million in funding, BioCancell
issued to us 837,521 shares of common stock at a price of $0.60 per share and a four-year
convertible note bearing interest at 10% per year convertible into up to 3,464,385 shares
of common stock. In addition, we received a five-year warrant to purchase up to 4,301,906
shares of BioCancell common stock, for an aggregate exercise price of approximately $3.0
million. The common stock of BioCancell is listed on the Tel Aviv Stock Exchange, or TASE,
under the symbol BICL. The conversion price of our convertible note and the
exercise price of our warrant is $0.72 per share, which was determined based on the
average closing price of BioCancells common stock on the TASE over the 60-day period
ending two days prior to the closing date plus a premium of approximately 20%. On the
closing date of the transaction, the closing market price of BioCancells common
stock was $0.60 per share, and immediately following the closing BioCancell had
14,398,531 shares outstanding. The common stock of BioCancell issued in private
placements like ours is subject to resale restrictions under applicable securities laws.
BioCancell has undertaken steps to register such stock for resale.

We currently hold approximately 5.8%
of the outstanding capital stock of BioCancell. If we convert the note in full, we will
hold an aggregate of approximately 24.1% of BioCancells outstanding capital stock.
Additionally, if we also exercise the warrant in full, we will hold an aggregate of
approximately 38.8% of BioCancells outstanding capital stock. Such percentages take
into account the issuance of shares by BioCancell upon this conversion and exercise but
not the conversion or exercise of any other securitiesAccordingly, these percentages would
be lower if calculated on a fully diluted basis.

In connection with the agreement, we
reached a voting agreement with three existing major shareholders of BioCancell, Clal
Biotechnology Ltd., or CBI, Prof. Abraham Hochberg, BioCancells Co-Founder, Chairman
of the Board and Chief Scientific Officer, and Avi Barak, its Chief Executive Officer.
Currently BioCancell has nine members on its Board of Directors. Subject to certain
conditions, the parties to the agreement, who currently hold approximately 51% of
BioCancells outstanding capital stock in the aggregate, will vote for one member of
the board designated by Tikcro, for one member designated by CBI and for one member
designated by Professor Hochberg. Each party is free to vote for other members of the
Board. We also agreed with BioCancell that as long as the director nominated by us to
BioCancells Board of Directors serves in such capacity, we will provide general
consulting services to BioCancell. CBI and Provident Fund of the Employees of the Hebrew
University of Jerusalem in Israel, another existing stockholder of BioCancell participated
in the private placement on similar terms with additional funding of approximately $1.2
million in the aggregate.

# Principal Capital
Expenditures

We did not have any capital
expenditures in 2005, 2006 or 2007.

13

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# B. Business Overview

General

In July 2008, we acquired a minority
stake in BioCancell Therapeutics, Inc., an Israel-based clinical-stage biopharmaceutical
company. For information regarding our agreements with BioCancell, see Item 4A
Information on the Company  History and Development of the CompanyRecent
Developments above.

Our business plan is to enter into
one or more transactions with a wide variety of businesses without limitation as to their
industry or revenues. It is not possible at this time to predict when we will enter into
any such transactions or what will be the industry, operating history, revenues, future
prospects or other characteristics of any such business. Our ability to effect additional
transactions is dependent on the amount of additional funding we provide to BioCancell and
on our ability to raise additional funds to pursue our business plan. See Item 3D.
Risk Factors above.

# BioCancell

BioCancell is a development-stage
biopharmaceutical company focused on the discovery, development and commercialization of
novel therapies for treating cancer-related diseases. From the time of BioCancells
inception in July 2004 through March 31, 2008, BioCancell invested a total of
approximately $8.1 million in gross research and development expenses, general and
administrative and other expenses, which is approximately similar to its operating loss
over the same period. As of July 31, 2008, BioCancell had 17 employees, a majority of whom
conducts research and development.

BioCancells
Biotechnology

BioCancells research and
development activities are based upon the research of Professor Abraham Hochberg of the
Hebrew University of Jerusalem, who isolated the H19 gene and determined that it is
expressed in over 33 different forms of cancer, including superficial bladder carcinoma
and pancreatic and ovarian cancer, while laying dormant and non-expressed, and therefore
not active, in non-cancerous cells, with the exclusion of non-cancer embryonic cells.
Professor Hochbergs research discovered that the H19 gene is significantly expressed
in cancerous cells of adults. Research has also demonstrated that the H19 plays a
significant role in the tumor development process. The H19 gene is considered to enable
tumor cells to survive under stress conditions, such as low serum and low oxygen levels,
which are typical conditions of the environment in which cancerous cells develop. This
survival supports the growth of the tumor and the development of metastases.

In light of these results in the
research of cancer, and the role of the H19 gene in such processes, an anti-cancer drug
based on H19 has the potential to become a drug with competitive benefits as compared to
other treatment methods.

BioCancell is currently focused on
developing its leading prospective drug, BC-819. The detection of expression of the H19
gene is the biotechnological foundation of BioCancells potential therapy. BC-819 is
a double stranded DNA plasmid construct that incorporates the gene for the Diphtheria
Toxin A, or DTA, under the regulation of the H19 promoter sequence. The DTA gene is
transcribed into a cell-killing DTA peptide only in cells that produce H19 Ribonucleic
Acid, or RNA. The structure and base sequence of RNA are determinants of protein synthesis
and the transmission of genetic information.The H19 regulatory gene, which is
crucial to the growth of the tumor cells, is utilized instead as the activator of the
intra-cellular synthesis of DTA. The synthesis of this toxin peptide inhibits cellular
protein synthesis, thereby causing the cancer cells to commit suicide. Once
the BC-819 DNA enters an H19-positive cancer cell, the cell can offer no resistance and is
marked for death. The targeted result of this mechanism is to selectively destroy tumor
cells. Furthermore, the A portion of Diphtheria Toxin cannot attach to and enter cells in
the absence of the B portion of Diphtheria Toxin, and consequently only acts to destroy
the cell in which it is produced. Therefore, this therapeutic modality is specific for the
H19-positive cancer cell and thus far was not detected with known toxic effects on normal
cells.

14

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With BioCancells therapeutic
approach, the plasmid being used to deliver the cytotoxic DTA gene does not incorporate
into the genome of the host. This has clear advantages over gene therapy platforms for
cancer that depend on a genetic correction strategy.

BioCancell is developing two
BC-819-based strategies. The first therapy is for superficial bladder carcinoma cancer
wherein DTA-H19 is mixed with a transfection agent (to facilitate entry of BC-819
molecules into the cancer cells) for bladder instillation. The second BC-819 approach is
for advanced staged cancers such as pancreatic and ovarian, in which plasmid DNA is
injected directly into the tumor or instilled into the peritoneal cavity. Thus different
routes of administration are employed depending upon the type of tumor.

BioCancell has entered into an
agreement with Yissum Research Development Company of the Hebrew University of Jerusalem,
or Yissum, pursuant to which Yissum granted to BioCancell an exclusive, worldwide license
for the use, development, manufacturing and commercialization of products arising out of
patents owned by, and patent applications filed by, Yissum in connection with the H19 gene
in consideration of which BioCancell has agreed to pay certain royalties to Yissum. Yissum
was one of BioCancells co-founders. In 2007, Yissum sold all its shares in
BioCancell and currently holds no shares in BioCancell.

BioCancells patent portfolio
covers patent applications that are licensed to it under the agreement with Yissum. This
patent portfolio includes ten main patent applications, which to date have resulted in 14
granted patents in the United States and other countries.

Clinical Trials

BioCancells primary objective
is to continue its development of its leading prospective drug BC-819 for the treatment of
superficial bladder carcinoma, pancreatic and ovarian cancers while broadening the scope
of development to include additional indications.

Superficial bladder carcinoma
cancer  In August 2007, BioCancell completed a Phase I/IIa clinical trial for
testing BC-819 in the treatment of superficial bladder carcinoma, designed to assess the
safety and preliminary efficacy of BC-819 given by intravesical infusions into the bladder
of 18 patients with superficial bladder cancer who had failed previous treatment with
Bacillus Calmette-Guerin, or BCG, the current standard of care.

No severe adverse side effects which
can be related to the drug were diagnosed, except for one case the reason for which is
uncertain. BioCancell did not discover any dose limiting toxicity.

In March 2008, pursuant to FDA
approval, BioCancell commenced a multi-center Phase IIb intravesical trial of BC-819 in
intermediate-risk superficial bladder cancer. The purpose of the trial is to measure the
efficacy and safety of BC-819 at a dose of 20mg, as successfully tested in the previous
Phase I/IIa clinical trial. The trial is being conducted in six medical centers in Israel
and in one U.S.-based medical center with a total of 33 participants. Each participant
will receive six weekly treatments of BC-819. Patients responding to the treatment will be
offered nine additional maintenance treatments over nine months.

15

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Pancreatic cancer  On
March 6, 2008, BioCancell filed with the FDA a pre-IND application regarding future
potential Phase I clinical trials for testing BC-819 for the treatment of pancreatic,
ovarian and liver cancer. The purpose of the trials, as presented to the FDA, is to
examine the safety and preliminary efficacy of BC-819 in a series of increased doses and
various indications. Phase I/IIa clinical trials for the treatment of pancreatic cancer
are expected to commence at the Massey Cancer Center of Virginia Commonwealth University
in the United States and at the Tel Hashomer Sheba Medical Center in Israel.

Ovarian cancer Under
the pre-IND application detailed above, BioCancell is preparing for a multi-center Phase
I/IIa clinical trial for the treatment of ovarian cancer. An experimental treatment of
ovarian cancer conducted with a single patient in a leading medical cancer center in
Israel resulted with improvement in clinical condition, a decrease of 50% in the ovarian
cancer marker protein CA-125 in the patients blood, and a significant decrease in
the number of cancerous cells in the ascites.

Additional Cancer Drugs
in Development

In addition to pursuing its clinical
trials of BC-819 for the treatment of superficial bladder carcinoma and pancreatic and
ovarian cancer, BioCancell intends to continue its pre-clinical research related to the
use of BC-819 for the treatment of various other forms of cancer as it seeks to develop
additional drugs based on various implementations of its biotechnology. The following is a
summary of BioCancells other material research and development activities that are
still in the preliminary stage of laboratory research, the effects of which are yet not
certain. In addition, the company may need to license complementary technologies in order
to conclude the development of such drugs:

| | BC-820.
BC-820 is a potential therapeutic product that activates both the synthesis of DTA and
the protein Tumor Necrosis Factor, or TNF, of the cytokine family. Like BC-819, BC-820 is
expected to penetrate cancerous cells expressing the H19 gene and activates the synthesis
of diphtheria toxin and TNF in a targeted manner.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | BC-821.
BC-821 is a potential therapeutic product that penetrates cancerous cells and activates
the synthesis of DTA only in cells expressing the P4 promoter, a certain operating system
of the gene, of the target gene IGF2, which like the H19 target gene is expressed in
cancerous cells.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | BC-822. This potential therapeutic product seeks to suppress the growth of
cancerous cells by re-sequencing a cancer cells RNA by way of inserting a Small
Interfering RNA, or siRNA, which interferes with the expression of a specific gene.Such siRNA sequence prevents the expression of the H19 gene. Like BC-819, the
potential therapy would first penetrate cells expressing the H19 gene and attach the new
siRNA sequence once entry is consummated.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

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# C. Organizational
Structure

We currently hold approximately 5.8%
of the ownership and voting interests in BioCancell Therapeutics, Inc., a Delaware
corporation headquartered in Jerusalem, Israel.

# D. Property, Plants and
Equipment

We do not have any material fixed
assets.

|ITEM 4A. |  | Unresolved Staff Comments
|-------- |  | -------------------------

Not applicable.

|ITEM 5. |  | Operating and Financial Review and Prospects
|------- |  | --------------------------------------------

# A. Operating Results

Our operating and financial review
and prospects should be read in conjunction with our financial statements, accompanying
notes thereto and other financial information appearing elsewhere in this Report.

# Overview

In April 2003, STMicroelectronics
acquired our business pursuant to an asset purchase agreement. In January 2004, we reached
an agreement with STMicroelectronics that settled certain reciprocal financial claims,
including with respect to an escrow account which had been established under the asset
purchase agreement. In April 2005, the remaining amount under escrow was paid to us.

Following the sale of our business to
STMicroelectronics in April 2003, our plan of operation has been to explore the best
course of action for Tikcro, including to attempt to merge or effect a business
combination with a domestic or foreign, private or public operating company or to acquire
minority stakes in one or more operating companies in new areas of operations.

In July 2008, we acquired a minority
stake in BioCancell. In exchange for $2.5 million in funding, BioCancell issued to us
837,521 shares of common stock, a convertible note in the principal amount of $2.0 million
convertible into up to 3,464,385shares of common stock, and a warrant to purchase
up to 4,301,906 shares of common stock. Please see Item 4.A Information on the
CompanyHistory and Development of the CompanyRecent Developments for
more information.

In 2005, 2006 and 2007, we generated
only financial income, which exceeded our expenses, resulting in net income of $4,000,
$210,000 and $147,000, respectively.

# Application of Critical
Accounting Policies and Estimates

We prepare our consolidated financial
statements in conformity with accounting principles generally accepted in the United
States. These accounting principles require management to make certain estimates,
judgments and assumptions based upon the information available at the time they are made,
historical experience and various other factors believed to be reasonable under the
circumstances. These estimates, judgments and assumptions can affect the reported amounts
of assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the periods presented. Management evaluates its estimates
and judgments on an on-going basis. Some of those judgments can be subjective and complex,
and consequently actual results may differ from those estimates.

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The Company is also subject to risks
and uncertainties that may cause actual results to differ from estimates and assumptions,
such as changes in the economic environment, competition, foreign exchange, taxation and
governmental programs. Certain of these risks, uncertainties and assumptions are discussed
in Item 3.D  Risk Factors. To facilitate the understanding of our
business activities, described below are certain accounting policies that are relatively
more important to the portrayal of our financial condition and results of operations and
that require managements subjective judgments. We base our judgments on past
experience and various other assumptions that are believed to be reasonable under the
circumstances. Please refer to Note 2 to our consolidated financial statements included in
this Report for a summary of all of our significant accounting policies

Marketable securities

SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, and Securities and Exchange Commission (SEC)
Staff Accounting Bulletin (SAB) 59, Accounting for Noncurrent Marketable Equity
Securities, provide guidance on determining when an investment is other-than-temporarily
impaired. Investments are reviewed quarterly for indicators of other-than-temporary
impairment. This determination requires significant judgment. In making this judgment, we
evaluate, among other factors, the duration and extent to which the fair value of an
investment is less than its cost, the financial health of the investee, and our intent and
ability to hold the investment. Investments with such an indicator are further evaluated
to determine the likelihood of a significant adverse effect on the fair value and amount
of the impairment as necessary. If market, industry and/or investee conditions
deteriorate, we may incur future impairments.

Accounting for
stock-based compensation

On January 1, 2006, the Company
adopted Statement of Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment, (SFAS 123(R)) which requires the measurement
and recognition of compensation expense for all share-based payment awards made to
employees and directors including employee stock options under the Companys stock
plans based on estimated fair values. SFAS 123(R) supersedes the Companys previous
accounting under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25) for periods beginning in fiscal 2006.
In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 107 (SAB 107) relating to SFAS 123(R). The Company has applied the
provisions of SAB 107 in its adoption of SFAS 123(R).

SFAS 123(R) requires companies to
estimate the fair value of equity-based payment awards on the date of grant using an
option-pricing model. The value of the portion of the award that is ultimately expected to
vest is recognized as expense over the requisite service periods in the Companys
statement of operations. Prior to the adoption of SFAS 123(R), the Company accounted for
equity-based awards to employees and directors using the intrinsic value method in
accordance with APB 25 as allowed under Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation (SFAS 123).

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The Company adopted SFAS 123(R) using
the modified prospective transition method, which requires the application of the
accounting standard as of January 1, 2006, the first day of the Companys fiscal
year 2006. Under that transition method, compensation cost recognized in the year ended
December 31, 2006, includes: (a) compensation cost for all share-based payments granted
prior to, but not yet vested as of January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of Statement 123, and (b)
compensation cost for all share-based payments granted subsequent to January 1, 2006,
based on the grant-date fair value estimated in accordance with the provisions of SFAS
123(R). As required by the modified prospective method results for prior periods have not
been restated.

The Company recognized compensation
expenses for the value of these awards, which has straight-line vesting, over the
requisite service period of each of the awards.

The Company estimates the fair value
of stock options granted using the Black-Scholes-Merton option-pricing model. The
option-pricing model requires a number of assumptions, of which the most significant are,
expected stock price volatility, and the expected option term. Expected volatility was
calculated based upon actual historical stock price movements over the most recent periods
ending at the date of grant, based on the expected option term (disregarding the term
before the Company started operating in its current mode). The expected option term
represents the period that the Companys stock options are expected to be outstanding
and was determined based on the simplified method, which is the average of the vesting
terms and original contractual terms of the stock options. The Company has historically
not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest
rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term.

Holdings in BioCancell

In February 2007, the FASB issued
SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, including
an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 provides companies
with an option to report selected financial assets and financial liabilities at fair
value, which can be elected on an instrument-by-instrument basis. Unrealized gains and
losses on items for which the fair value option has been elected are reported in earnings
at each subsequent reporting date. We elected to apply the fair value option for our
holdings in BioCancells common stock, convertible note and warrant, in accordance
with SFAS 159.

# Results of Operations

The table below sets forth, for the
periods indicated, financial data which we believe to be significant in analyzing our
results of operations.

|                                                        | Years Ended December 31,
|------------------------------------------------------- | ------------------------
|
|
|
|
|Statement of Operations Data:                           |                         
|Selling, marketing, general and administrative expenses |                         
|Operating loss                                          |                         
|Financial income, net                                   |                         
|                                                        |                         
|Net income                                              |                         
|                                                        |                         

19

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Revenues.
          We did not have any revenues in 2005, 2006 or 2007.

General and administrative
expenses. In 2005, 2006 and 2007, we incurred only general and administrative
expenses, which consisted primarily of management fees paid to Orckit Communications Ltd.
(Orckit) and professional fees. The increase is 2007 was primarily due to
professional fees incurred in negotiating and the evaluation of potential transactions and
other matters.

Financial income, net.
Financial income consists primarily of interest on marketable securities and bank
deposits.

Net income. In 2005, we had
net income of $4,000, primarily as a result of financial income in the amount of $237,000,
which was partly offset by our general and administrative expenses in the amount of
$233,000.

In 2006, we had net income of
$210,000, primarily as a result of financial income in the amount of $419,000, which was
partly offset by our general and administrative expenses in the amount of $209,000.

In 2007, we had net income of
$147,000, primarily as a result of financial income in the amount of $481,000, which was
partly offset by our general and administrative expenses in the amount of $334,000.

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

A devaluation of the new Israeli
shekel in relation to the U.S. dollar would have the effect of decreasing the dollar value
of our assets in new Israeli shekels to the extent the underlying value is new Israeli
shekel-based. Such a devaluation also would have the effect of reducing the U.S. dollar
amount of any of our liabilities which are payable in new Israeli shekels (unless such
payables are linked to the U.S. dollar).

We may have from time to time
expenses denominated in new Israeli shekels. Such expenses would decrease as a result of a
devaluation of the new Israeli shekel in relation to the U.S. dollar. In 2007, the value
of the U.S. dollar declined against the NIS, which caused our NIS denominated expenses to
increase. We do not presently engage in any hedging or other transactions intended to
manage risks relating to foreign currency exchange rate fluctuations.

20

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The following table presents
information about the rate of inflation in Israel, the rate of devaluation of the new
Israeli shekel against the U.S. dollar, and the rate of inflation of Israel adjusted for
the devaluation:

|Years Ended
December 31, | Israeli Inflation
Rate | Israeli Devaluation Rate | Israel Inflation Adjusted
for Devaluation
|------------------------ | ---------------------- | ------------------------ | -----------------------------------------
|
|
|
|
|2003                     |                        |                          |                                          
|2004                     |                        |                          |                                          
|2005                     |                        |                          |                                          
|2006                     |                        |                          |                                          
|2007                     |                        |                          |                                          

# B. Liquidity and Capital
Resources

We had working capital of $9.7
million as of December 31, 2005, $10.0 million as of December 31, 2006 and $10.2 million
as of December 31, 2007.

In 2005, we had net income of $4,000
and we generated $47,000 of cash from operations. In 2006, we had net income of $210,000
and we generated $237,000 of cash from operations. In 2007, we had a net income of
$147,000 and we used $46,000 million of cash in our operations.

We generated net cash from investing
activities of $750,000 in 2005 and $1.75 million in 2006, and we used net cash of $2.2
million from investment activities in 2007.

In 2005 and 2006, we did not have any
cash flow from financing activities. In 2007 we generated net cash of $11,000 from
financing activities.

# Government Grants

Under the Law for the Encouragement
of Industrial Research and Development, 1984, or the R&D Law, research and development
programs which meet specified criteria and are approved by a governmental committee of the
Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of the
Government of Israel are eligible for grants of up to 50% of the projects
expenditure, as determined by the research committee, in exchange for the payment of
royalties from the sale of products (and related services) developed in accordance with
the program.

We did not recognize any grants from
the Office of the Chief Scientist in 2005 through 2007.

Our agreements with
STMicroelectronics were approved by the Office of the Chief Scientist. This approval was
conditioned upon the undertaking of STMicroelectronics to comply with the provisions of
the R&D Law and to pay to the Office of the Chief Scientist royalties on the sale of
the purchased products that are based on our funded intellectual property.

21

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# C. Research and
Development, Patents and Licenses

We conduct no research and
development activities.

D.
          Trend Information

None.

E.
          Off-Balance Sheet Arrangements

We have no off-balance sheet
arrangements.

# F. Tabular Disclosure of
Contractual Obligations

As of December 31, 2007, we had no
contractual obligations of the type required to be disclosed in this section.

|ITEM 6. |  | Directors, Senior Management and Employees
|------- |  | ------------------------------------------

# A. Directors and Senior
Management and Employees

The following table lists our current
directors and senior managers as of July 31, 2008:

|Name         | Age |  | Position               
|------------ | --- |  | -----------------------
|
|
|
|
|Izhak Tamir  | 55  |  | Chairman of the Board  
|Eric Paneth  | 58  |  | Director               
|Irit Gal     | 56  |  | External Director      
|Yiftach Atir | 59  |  | External Director      
|Aviv Boim    | 41  |  | Chief Executive Officer

The business experience of each of
our directors and executive officers is as follows:

Izhak Tamir has served as
Chairman of our Board of Directors since January 2000 and as our Chief Executive Officer
from August 2003 to January 2008. He has served as President and a Director of Orckit
since it was co founded by him and by Mr. Paneth in 1990. Mr. Tamir has served as Chairman
of the Board of Corrigent Systems, a subsidiary of Orckit, since 2001 and as Chief
Executive Officer of Corrigent Systems since May 2007 and as a Director of Gilat Satellite
Networks Ltd. From 1987 until 1989, Mr. Tamir was employed by Comstream Inc., in San
Diego, California. From 1985 until 1987, he was vice president of A.T. Communication
Channels Ltd., a subsidiary of Bezeq. From 1978 to 1985, he was a senior engineer in the
Israeli Government. Mr. Tamir holds an engineering degree from the Technion, and an M.B.A.
from Tel Aviv University.

Eric Paneth has served as one
of our Directors since January 2000 and served as our President from February 2000 to June
2000. Mr. Paneth has also served as Chairman of the Board of Directors and Chief Executive
Officer of Orckit since it was co founded by him and by Mr. Tamir in 1990. From 1975 until
1983, Mr. Paneth was a senior engineer in the Israeli Government, and from 1985 to 1990,
was a technical department head in the Israeli Government. From 1983 until 1985, he was
employed by Linkabit Inc. in San Diego, California. Mr. Paneth holds an advanced
engineering degree from the Technion.

22

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Irit Galhas served as one of
our external directors since August 2003. Since September 2002, she has served as an
Associate at Stanford University, California, Office of Technology Licensing. Prior to
that, she served as a director and a manager for investments and strategic relations of
ZettaLight, an optical communications company. From May 2000 to February 2002, she served
as Vice President of Runway Telecom Ventures, an Israeli-based venture capital fund
founded by Alcatel and others. From June 1999 to 2000, she served as Vice President for
marketing and business development of Ceramight Composites, which operates in the area of
ceramic composites. From 1997 to 1999, she served as a manager with PricewaterhouseCoopers
in the areas of business development and corporate finance for technology companies. 
Ms. Gal holds B.S. and M.S. degrees in Chemical Engineering from the Technion and an M.A.
degree in Economics from Queens College of the City University of New York.

Yiftach Atir has been a
private consultant since January 2003. He also served as a director of Radware Ltd. and
Aran Research and Development (1982) Ltd. From August 2000 to January 2003, Mr. Atir
served as the managing director of Koor Corporation Venture Capital. Prior thereto, he
served as a managing director in Evergreen Venture Capital Funds, a management company for
a group of technology focused venture capital funds, where he had been employed since
November 1994. Prior to joining Evergreen, Mr. Atir served as a Brigadier General in the
Intelligence Corps of the Israel Defense Forces. Mr. Atir has a B.A. in political science
from Haifa University and an M.B.A. from Tel Aviv University and an M.A in Hebrew
literature from Ben Gurion University.

Aviv Boim has served as our
Chief Executive Officer since in January 2008. From 1998 to 2007, he served as the Chief
Financial Officer of Orckit Communications Ltd. From August 1996 to February 1998, Mr.
Boim was a banker with BT Alex. Brown Incorporated, an investment banking firm. From
August 1993 until August 1996, Mr. Boim was a vice president of Giza Ltd., Tel Aviv, an
investment banking firm. Mr. Boim holds a B.A. and an M.A. in economics and management
from Tel Aviv University and an L.L.B. from Tel Aviv University Law School.

Following the closing of the
transaction with BioCancell, Mr. Boim will become a board member in BioCancell, will
support BioCancell in that capacity and will reduce his position with us to a part-time
position.

There are no family relationships
between any director or senior manager. There are no arrangements or understandings
between any director or senior manager and any other person pursuant to which the director
or senior manager was selected.

# B. Compensation

The aggregate direct remuneration,
including fringe benefits commonly provided by companies in Israel, paid or accrued by us
to all persons as a group (four persons) who served in the capacity of director or
executive officer in the year ended December 31, 2007, was approximately $40,000, which
consisted of participation fees of $1,000 per director for attendance at each meeting of
the board of directors or committee thereof. We did not pay any compensation to any
executive officers in 2007, but we hired and started paying a chief executive officer as
of January 1, 2008.

23

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# C. Board Practices

Israeli
Companies Law

We are subject to the provisions of
the new Israeli Companies Law, 5759-1999, and the regulations adopted thereunder.

Board
of Directors

According to the Companies Law and
our articles of association, the oversight of the management of our business is vested in
our board of directors. The board of directors may exercise all powers and may take all
actions that are not specifically granted to our shareholders. As part of its powers, our
board of directors may cause us to borrow or secure payment of any sum or sums of money
for our purposes, at times and upon terms and conditions as it thinks fit, including the
grant of security interests in all or any part of our property. Our board of directors may
consist of not less than three nor more than 15 directors and as of the date hereof,consists of four directors, including our external directors.

Under the Companies Law, our board of
directors must determine the minimum number of directors having financial and accounting
expertise, as defined in the regulations, that our board of directors should have. 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 one director with the requisite financial and accounting expertise and that
Yiftach Atir has such expertise.

According to the Companies Law, a
companys chairman of the board may not serve as its chief executive officer, unless
otherwise approved by the shareholders for periods of up to three years. The required
shareholder approval is a majority of the shares voted on the matter, provided that at
least two-thirds of the shares of non-controlling shareholders voted in favor or no more
than 1% of the shares of non-controlling shareholders voted against. At the shareholder
meeting held in August 2006, our shareholders resolved to allow Mr. Tamir, our chairman,
to serve also as our chief executive officer for a period of up to three years. In January
2008, our board of directors appointed a new chief executive officer. Mr. Tamir did not
receive any compensation for serving in such office since 2004.

Our directors are elected at annual
meetings of our shareholders by a vote of the holders of a majority of the ordinary shares
voting thereon. Generally, our directors hold office until the next annual meeting of
shareholders following the annual meeting at which they were elected. Directors may be
removed earlier from office by resolution passed at a general meeting of our
shareholders. Pursuant to the Israeli Companies Law, external directors are elected
by shareholders for a three-year term and may be re-elected by shareholders for an
additional three-year term.

Unless otherwise unanimously decided
by our directors, a quorum at a meeting of the board of directors is constituted by the
presence of a majority of the directors then in office who are lawfully entitled to
participate in the meeting, but not less than two directors. A resolution proposed at a
meeting of the board of directors is deemed adopted if approved by a majority of the
directors present and voting on the matter.

24

---

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There are no arrangements or
understandings between us and any of our directors for benefits upon termination of
service.

External
Directors

Qualifications
of External Directors

Under the Companies Law, companies
incorporated under the laws of Israel whose shares are listed for trading on a stock
exchange or have been offered to the public in or outside of Israel are required to
appoint at least two external directors. External directors are required to possess
professional qualifications as set out in regulations promulgated under the Companies Law.
The Companies Law provides that a person may not be appointed as an external director if
the person or the persons relative, partner, employer or any entity under the
persons control has, as of the date of the persons appointment to serve as an
external director, or had, during the two years preceding that date any affiliation with:

| |  | the
company;
| | - | ------------

| |  | any
entity controlling the company; or
| | - | --------------------------------------

| |  | any
entity controlled by the company or by its controlling entity.
| | - | ------------------------------------------------------------------

The term affiliation includes:

| |  | an
employment relationship;
| | - | ---------------------------

| |  | a
business or professional relationship maintained on a regular basis;
| | - | ----------------------------------------------------------------------

| |  | control;
and
| | - | ------------

| |  | service
as an office holder.
| | - | ----------------------------

The Companies Law defines the term
office holder of a company to include a director, the chief executive officer,
the chief business manager, a vice president and any officer that reports directly to the
chief executive officer.

No person can serve as an external
director if the persons position or other business creates, or may create conflict
of interests with the persons responsibilities as an external director or may
otherwise interfere with the persons ability to serve as an external director. Until
the lapse of two years from termination of office, a company may not engage an external
director to serve as an office holder and cannot employ or receive services from that
person, either directly or indirectly, including through a corporation controlled by that
person.

25

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Election
Of External Directors

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

| |  | at
least one third of the shares of non-controlling  shareholders voted at the meeting vote
              in favor of the election; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| |  | the
total number of shares voted against the election of the external director does not
exceed one percent of the aggregate voting rights in the company.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------

The initial term of an external
director is three years and may be extended for an additional three years. Thereafter, he
or she may be reelected by our shareholders for additional periods of up to three years
each only if the audit committee and the board of directors confirm that, in light of the
external directors expertise and special contribution to the work of the board of
directors and its committees, the reelection for such additional periods is beneficial to
the company. External directors may be removed from office only by the same percentage of
shareholders as is required for their election, or by a court, and then only if the
external directors cease to meet the statutory qualifications for their appointment or if
they violate their duty of loyalty to the company. Each committee of a companys
board of directors is required to include at least one external director, except for the
audit committee which is required to include all the external directors. Irit Gal
commenced her second term as an External Director on August 28, 2006, and Yiftach Atir
commenced his first term as an External Director on September 28, 2006.

Audit
Committee

Under the Companies Law, our board of
directors is required to appoint an audit committee, comprised of at least three directors
including all of the external directors, but excluding:

| |  | the
chairman of the board of directors; and
| | - | -------------------------------------------

| |  | a
controlling shareholder or a relative of a controlling shareholder and any director
employed by the company or who provides services to the company on a regular basis.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The role of the audit committee is to
examine irregularities in the management of the companys business, in consultation
with the internal auditor and the companys independent accountants, suggest remedial
action and to approve specified related party transactions. Our audit committee consists
of our two external directors and one additional director, Eric Paneth.

We have adopted an audit committee
charter, which sets forth the powers and responsibilities of our audit committee. Our
audit committee assists the board of directors in fulfilling its responsibility for
oversight of the quality and integrity of our accounting, auditing and financial reporting
practices and financial statements and the independence qualifications and performance of
our independent auditors. Our audit committee also has the authority and responsibility to
oversee our independent auditors, to recommend for shareholder approval the appointment
and, where appropriate, replacement of our independent auditors and to pre-approve audit
engagement fees and all permitted non-audit services and fees. Our audit committee also
serves as our qualified legal compliance committee, responsible for investigating reports,
made by attorneys appearing and practicing before the SEC in representing us, of perceived
material violations of U.S. federal or state securities laws, breaches of fiduciary duty
or similar violations by us or any of our agents.

26

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Approval
of Interested Party Transactions

The approval of the audit committee
is required to effect specified actions and transactions with office holders, controlling
shareholders and entities in which they have a personal interest. An audit committee may
not approve an action or a transaction with related parties or with its office holders
unless at the time of approval the two external directors are serving as members of the
audit committee and at least one of whom was present at the meeting in which an approval
was granted.

Internal
Auditor

Our board of directors has appointed
an internal auditor. Under the Companies Law, the role of the internal auditor is to
examine, among other things, whether the companys actions comply with the law and
orderly business procedure. Under the Companies Law, the internal auditor may not be an
interested party, an office holder or a relative of any of the foregoing, nor may the
internal auditor be the companys independent accountant or its representative. The
Companies Law defines the term interested party to include a person who holds
5% or more of the companys outstanding share capital or voting rights, a person who
has the right to appoint one or more directors or the general manager, or any person who
serves as a director or as the general manager.

Approval
of Specified Related Party Transactions Under Israeli Law

Fiduciary
Duties of Office Holders

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

| |  | information
on the advisability of a given action brought for his approval or performed by him by
virtue of his position; and
| | - | -----------------------------------------------------------------------------------------------------------------------------

| |  | all
other important information pertaining to these actions.
| | - | ------------------------------------------------------------

The
duty of loyalty of an office holder includes a duty to:

| |  | refrain
from any conflict of interest between the performance of his duties in the company and
the performance of his other duties or his personal affairs;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | refrain
from any activity that is competitive with the company;
| | - | ---------------------------------------------------------------

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

| |  | disclose
to the company any information or documents relating to a companys affairs which
the office holder has received due to his position as an office holder.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

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Disclosure
of Personal Interest of an Office Holder

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

| |  | the
office holders spouse, siblings, parents, grandparents, descendants, spouses
descendants and the spouses of any of these people; or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------

| |  | any
corporation in which the office holder is a 5% or greater shareholder, director or
general manager or in which he has the right to appoint at least one director or the
general manager.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | other
than in the ordinary course of business;
| | - | ----------------------------------------------

| |  | otherwise
than on market terms; or
| | - | ----------------------------------

| |  | that
is  likely  to have a  material  impact  of the  company's  profitability,  assets or
                liabilities.
| | - | -----------------------------------------------------------------------------------------------------------------------

Once an office holder complies with
the above disclosure requirement, the board of directors may approve a transaction between
the company and an office holder, or a third party in which an office holder has a
personal interest. A transaction that is adverse to the companys interest may not be
approved.

If the transaction is an
extraordinary transaction, approval of both the audit committee and the board of directors
is required. Under specific circumstances, shareholder approval may also be required. A
director who has a personal interest in a transaction that is considered at a meeting of
the board of directors or the audit committee generally may not be present at this meeting
or vote on this matter, unless a majority of the members of the board of directors or the
audit committee, as the case may be, has a personal interest in the matter. If a majority
of members of the board of directors have a personal interest therein, shareholder
approval is also required.

28

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Disclosure
of Personal Interests of a Controlling Shareholder

Under the Companies Law, the
disclosure requirements that apply to an office holder also apply to a controlling
shareholder of a public company. A controlling shareholder is a shareholder who has the
ability to direct the activities of a company, including, for this purpose, a shareholder
that owns 25% or more of the voting rights if no other shareholder owns more than 50% of
the voting rights, but excluding a shareholder whose power derives solely from his or her
position on the board of directors or any other position with the company. Extraordinary
transactions with a controlling shareholder or in which a controlling shareholder has a
personal interest, and the engagement of a controlling shareholder as an office holder or
employee, require the approval of the audit committee, the board of directors and the
shareholders of the company in that order. The shareholder approval must be by a majority
of the shares voted on the matter, provided that either:

| |  | at
least one-third of the shares of shareholders who have no personal interest in the
transaction and who vote on the matter vote in favor thereof; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
shareholders who have no personal interest in the transaction who vote against the
transaction do not represent more than one percent of the voting rights in the company.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Shareholders generally have the right
to examine any document in the companys possession pertaining to any matter that
requires shareholder approval.

# D. Employees

We have no employees, other than a
chief executive officer.

# E. Share Ownership

As of July 31, 2008, Messrs. Eric
Paneth and Izhak Tamir, each, directly or through a wholly owned company, beneficially
owned 1,061,701 ordinary shares, or approximately 12.5% of our outstanding ordinary
shares. As of such date, Mr. Aviv Boim beneficially owned 502,046 ordinary shares, or
approximately 5.9% of our outstanding ordinary shares. Of the shares beneficially owned by
Mr. Boim, 402,311 shares are subject to contractual restrictions on transfer and are
subject to repurchase by us for no consideration if his employment terminates under
certain circumstances. The transfer restrictions, as well as our repurchase right, with
respect to most of such shares expire in installments over the period ending on December
31, 2010, subject to 12-month acceleration if his employment terminates under certain
circumstances. None of our other directors beneficially owns 1% or more of our outstanding
ordinary shares.

Share Incentive Plans

We have two share incentive plans
pursuant to which options may be granted to our directors, officers, employees,
consultants and contractors. These share incentive plans are administered by our board of
directors, which determines the optionees, dates of grant and the exercise price of
options. Unless otherwise decided by our board of directors, options granted under the
share incentive plans are non-assignable except by the laws of descent. Under the share
incentive plans, the grantee is responsible for all personal tax consequences of the grant
and the exercise thereof. The plan adopted in 2003 (the 2003 Plan) allows us
to grant options to qualified persons pursuant to the capital gains route
under Section 102 of the Israeli Income Tax Ordinance. In December 2007, our Board of
Directors amended the 2003 Plan to also enable the granting of restricted shares or
restricted share units, or RSUs. Restricted shares are grants of our ordinary shares that
are subject to certain re-sale restrictions for a specified period of time, and RSUs are
rights to receive our ordinary shares under certain conditions, for no consideration. The
other terms and conditions of the 2003 Plan that are applicable to options also apply to
restricted stock and RSUs, to the extent applicable.

29

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As of July 31, 2008, we had
outstanding options to purchase a total of 133,334 ordinary shares, all of which were held
by our directors, and 402,311 restricted shares.

|ITEM 7. |  | Major Shareholders and Related Party Transactions
|------- |  | -------------------------------------------------

A. Major Shareholders

The following table sets forth
certain information regarding the beneficial ownership of our ordinary shares as of July
31, 2008 (unless otherwise specified), by each person who is known to own beneficially
more than 5% of the outstanding ordinary shares. The voting rights of all major
shareholders are the same as for all other shareholders.

|Identity of Person or Group          | Amount Owned | Percent of Class(1)
|------------------------------------ | ------------ | -------------------
|
|
|
|
|Steven N. Bronson(2)                 |              |                    
|Eric Paneth                          |              |                    
|Izhak Tamir                          |              |                    
|Aviv Boim(3)                         |              |                    
|Eugene Oshinsky and Rosa Oshinsky(4) |              |                    

---

|(1) | Based
on 8,514,757 ordinary shares outstanding on July 31, 2008.
|--- | ----------------------------------------------------------------

|(2) | Based
on a                     Schedule 13D/A filed on October 18, 2007.
|--- | ------------------------------------------------------------------------

|(3) | Includes
402,311 restricted                     shares. See Item 6.E above.
|--- | ---------------------------------------------------------------------------

|(4) | Based
on a Schedule 13G filed on January 6, 2006. The ordinary shares are held
                    directly by RAM Capital Management Trust #01, a Massachusetts trust.
Eugene                     Oshinsky and Rosa Oshinsky, as trustees, are deemed to have
beneficial ownership                     of the ordinary shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of July 31, 2008, there were 68
holders of record of our ordinary shares in the United States who collectively held
approximately 69.7% of our outstanding ordinary shares. The number of record holders in
the United States is not representative of the number of beneficial holders nor is it
representative of where such beneficial holders are resident since many of these ordinary
shares were held of record by brokers or other nominees.

30

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# B. Related Party
Transactions

Relationship between
Tikcro and Orckit

Tikcro and Orckit, except as
otherwise contemplated in the agreement referred to below, operate independently of one
another as separate public companies.

We believe that the agreement
described below has been entered into on terms similar to terms that would be obtained
from independent third parties.

Services
Agreement

On July 1, 2003, Tikcro signed a
Services Agreement with Orckit for administrative services, including bookkeeping and
office services, as well as for certain services related to the evaluation of prospective
opportunities for a business combination. Total fees to Orckit for such services in 2004
were $25,000 per quarter. In 2005 the fees were reduced to $18,000 per quarter, and in
2006 the fees were further reduced to $12,000 per quarter.

# C. Interests of Experts
and Counsel

Not applicable.

|ITEM 8. |  | Financial Information
|------- |  | ---------------------

# A. Consolidated
Statements and other Financial Information

See financial statements under Item
18.

Legal
Proceedings

We
have no material legal proceedings.

Significant
Changes

No
significant change has occurred since December 31, 2007, except as otherwise disclosed in
this Report.

|ITEM 9. |  | The Offer and Listing
|------- |  | ---------------------

A. Offer and Listing Details

Our ordinary shares are currently
quoted on the OTC Bulletin Board, an electronic quotation medium regulated by the National
Association of Securities Dealers, under the symbol TIKRF. The OTC Bulletin Board
typically has lower liquidity than the Nasdaq Global Market.

The following table sets forth, for
the periods indicated, the high and low sales prices of our ordinary shares as reported on
the Nasdaq Global Market or the OTC Counter Bulletin Board. The price per share of our
ordinary shares has been retroactively adjusted to reflect the one-for-three reverse split
of our ordinary shares that became effective on September 19, 2006.

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|Calendar Year | Price Per Share
|------------- | ---------------
|
|
|
|
|2003          |                
|2004          |                
|2005          |                
|2006          |                
|2007          |                
|              |                
|
|
|              |                
|2006          |                
|              |                
|              |                
|              |                
|              |                
|2007          |                
|              |                
|              |                
|              |                
|              |                
|2008          |                
|              |                
|              |                
|              |                
|              |                
|
|
|              |                
|2008          |                
|              |                
|              |                
|              |                
|              |                
|              |                
|              |                

32

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# B. Plan of Distribution

Not applicable

# C. Markets

Our ordinary shares are quoted on the
OTC Bulletin Board under the symbol TIKRF.

# D. Selling Shareholders

Not applicable.

# E. Dilution

Not applicable.

# F. Expenses of the Issue

Not applicable.

|ITEM 10. |  | Additional Information
|-------- |  | ----------------------

# A. Share Capital

As of December 31, 2007 and July 31, 2008,
our authorized share capital was 16,666,667 ordinary shares.

As of December 31, 2007 and July 31,
2008, our issued share capital was 9,502,517 ordinary shares and 9,961,808 ordinary
shares, respectively.

As of December 31, 2007 and July 31,
2008, our outstanding share capital was 8,055,466 ordinary shares and 8,514,757 ordinary
shares, respectively.

All of our issued ordinary shares are
fully paid. Our ordinary shares have no par value.

As of December 31, 2007 and July,
2008, we hold, at cost, 1,447,051 ordinary shares as treasury shares.

For information relating to options
exercisable for ordinary shares, see the description of our share incentive plans in Item
6.E Share Ownership.

During 2005 and 2006, we did not
issue any shares.

33

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During 2007, we issued 146,666
ordinary shares, at an exercise price of $0.08 per share, pursuant to exercises by our
directors of options that were granted by our board of directors under our share incentive
plan in 2000 and 2001.

During 2008, we issued an aggregate
of 459,291 restricted ordinary shares, at no cost, to our CEO pursuant to his employment
agreement. The issuance of such shares was approved by our audit committee and board of
directors in December 2007.

# B. Memorandum and
Articles of Association

# Objects and Purposes

We were organized under Israeli law
on December 14, 1999 as a private company, and on June 30, 2000 became a public company.
Our registration number with the Israeli registrar of companies is 51-286883-7. Our object
is to engage, directly or indirectly, in any lawful undertaking or business whatsoever,
including, without limitation, as stipulated in section 2 of our memorandum of
association, which was filed with the Israeli registrar of companies.

# Transfer of Shares and
Notices

Fully paid ordinary shares may be
freely transferred pursuant to our articles of association unless the transfer is
restricted or prohibited by another instrument. Unless otherwise prescribed by law,
shareholders of record are entitled to at least 21 calendar days prior notice of any
general shareholders meeting.

The ownership or voting of our
ordinary shares by non-residents of Israel, except with respect to citizens of countries
which are in a state of war with Israel, is not restricted in any way by our memorandum of
association or articles of association or by the laws of the State of Israel.

# Dividend and Liquidation
Rights

Our board of directors is authorized
to declare dividends, subject to applicable law. Dividends may be paid only out of profits
and other surplus, as defined in the Companies Law, as of the end of the most recent
financial statements or as accrued over a period of two years, whichever is higher.
Alternatively, if we do not have sufficient profits or other surplus, then permission to
effect a distribution can be granted by order of an Israeli court. In any event, a
distribution is permitted only if there is no reasonable concern that the dividend will
prevent us from satisfying our existing and foreseeable obligations as they become due.

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

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# Voting,
Shareholders Meetings and Resolutions

Holders of ordinary shares have one
vote for each ordinary share held on all matters submitted to a vote of shareholders.
These voting rights may be affected by the grant of any special voting rights to the
holders of a class of shares with preferential rights that may be authorized in the
future. No cumulative voting is permitted.

We have two types of general
shareholders meetings: the annual general meetings and extraordinary general meetings.
These meetings may be held either in Israel or in any other place the board of directors
determines. An annual general meeting must be held in each calendar year, but not more
than 15 months after the last annual general meeting. Our board of directors may convene
an extraordinary meeting, from time to time, at its discretion and is required to do so
upon the request of any two directors, at least 25% of the directors, or shareholders
holding at least 5% of our ordinary shares. The quorum required for an ordinary meeting of
shareholders consists of at least two shareholders present in person or by proxy who hold
or represent between them at least 25% of the outstanding voting shares unless otherwise
required by applicable rules. A meeting adjourned for lack of a quorum generally is
adjourned to the same day in the following week at the same time and place or any time and
place as the chairman may designate with the consent of the holders of a majority of the
voting power represented at the meeting and voting on the matter adjourned. At such
reconvened meeting the required quorum consists of any two members present in person or by
proxy.

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

These voting rights may be affected
by the grant of any special voting rights to the holders of a class of shares with
preferential rights that may be authorized in the future.

# Duties of Shareholders

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

| |  | any
amendment to the articles of association;
| | - | ---------------------------------------------

| |  | an
increase of our authorized share capital;
| | - | --------------------------------------------

| |  | a
merger; or
| | - | ------------

| |  | approval
of certain  actions and  transactions  which  require                  shareholder
approval.
| | - | -----------------------------------------------------------------------------------------------------

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

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Furthermore, any controlling
shareholder, any shareholder who knows that it possesses the power to determine the
outcome of a shareholder vote and any shareholder that, pursuant to the provisions of the
articles of association, has the power to appoint or to prevent the appointment of an
office holder in Tikcro or any other power toward Tikcro is under a duty to act in
fairness towards us. The Companies Law does not describe the substance of this duty of
fairness.

# Mergers and Acquisitions
under Israeli Law; Anti-takeover Provisions

The Companies Law includes provisions
that allow a merger transaction and requires that each company that is a party to a merger
have the transaction approved by its board of directors and a vote of the majority of its
shares. For purposes of the shareholder vote, unless a court rules otherwise, the merger
will not be deemed approved if a majority of the shares held by parties other than the
other party to the merger, or by any person who holds 25% or more of the shares or the
right to appoint 25% or more of the directors of the other party, vote against the merger.
Upon the request of a creditor of either party of the proposed merger, the court may delay
or prevent the merger if it concludes that there exists a reasonable concern that as a
result of the merger, the surviving company will be unable to satisfy the obligations of
any of the parties to the merger. In addition, a merger may not be completed unless at
least (i) 50 days have passed from the time that a proposal of the merger has been filed
with the Israeli Registrar of Companies by each merging company and (ii) 30 days have
passed since the merger was approved by the shareholders of each merging company.

The Companies Law also provides that
an acquisition of shares of a public company must be made by means of a tender offer if as
a result of the acquisition the purchaser would become a 25% or greater shareholder of the
company and there is no existing 25% or greater shareholder in the company. An acquisition
of shares of a public company must be made by means of a tender offer if as a result of
the acquisition the purchaser would become a 45% or greater shareholder of the company and
there is no existing 45% or greater shareholder in the company. This requirement does not
apply if the acquisition (i) occurs in the context of a private placement by the company
that received shareholder approval, (ii) was from a 25% shareholder of the company and
resulted in the acquirer becoming a 25% shareholder of the company or (iii) was from a 45%
shareholder of the company and resulted in the acquirer becoming a 45% shareholder of the
company. The tender offer must be extended to all shareholders, but the offeror is not
required to purchase more than 5% of the companys outstanding shares, regardless of
how many shares are tendered by shareholders. The tender offer may be consummated only if
(i) at least 5% of the companys outstanding shares will be acquired by the offeror
and (ii) the number of shares tendered in the offer exceeds the number of shares whose
holders objected to the offer.

If as a result of an acquisition of
shares the acquirer will hold more than 90% of a companys outstanding shares, the
acquisition must be made by means of a tender offer for all of the outstanding shares. If
as a result of a full the tender offer the acquirer would own more than 95% of the
outstanding shares, then all the shares that the acquirer offered to purchase will be
transferred to it. The law provides for appraisal rights if any shareholder files a
request in court within three months following the consummation of a full tender offer. If
as a result of a full tender offer the acquirer would own 95% or less of the outstanding
shares, then the acquirer may not acquire shares that will cause his shareholding to
exceed 90% of the outstanding shares.

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Finally, Israeli tax law treats
stock-for-stock acquisitions between an Israeli company and a foreign company less
favorably than does U.S. tax law. For example, Israeli tax law may, under certain
circumstances, subject a shareholder who exchanges his ordinary shares for shares in
another corporation to taxation prior to the sale of the shares received in such
stock-for-stock swap.

Our articles of association provide
that our board of directors may, at any time in its sole discretion, adopt protective
measures to prevent or delay a coercive takeover of Tikcro, including, without limitation,
the adoption of a shareholder rights plan. In September 2005, our board of directors
adopted a shareholder bonus rights plan pursuant to which share purchase bonus rights were
distributed on September 26, 2005, at the rate of one right for each of our ordinary
shares held by shareholders of record as of the close of business on that date.

The rights plan is intended to help
ensure that all of our shareholders are able to realize the long-term value of their
investment in Tikcro in the event of a potential takeover which does not reflect the full
value of Tikcro and is otherwise not in the best interests of Tikcro and its shareholders.
The rights plan is also intended to deter unfair or coercive takeover tactics.

Each right initially will entitle
shareholders to buy one-half of one of our ordinary shares for $2.50. The rights generally
will be exercisable and transferable apart from our ordinary shares only if a person or
group becomes an acquiring person by acquiring beneficial ownership of 15% or
more of our ordinary shares, subject to certain exceptions set forth in the rights plan,
or commences a tender or exchange offer upon consummation of which such person or group
would become an acquiring person. Subject to certain conditions described in
the rights plan, once the rights become exercisable, the holders of rights, other than the
acquiring person, will be entitled to purchase ordinary shares at a discount from the
market price.

The rights will expire on December
31, 2015 and are generally redeemable by our board of directors, at $0.01 per right, at
any time until the tenth business day following public disclosure that a person or group
has become an acquiring person.

# Modification of Class
Rights

Our articles of association provide
that the rights attached to any class (unless otherwise provided by the terms of that
class), such as voting, rights to dividends and the like, may be varied by a shareholders
resolution, subject to the sanction of a resolution passed by the holders of a majority of
the shares of that class at a separate class meeting.

# Indemnification,
Exculpation and Insurance of Office Holders

Exculpation
of Office Holders

Under the Companies Law, an Israeli
company may not exempt an office holder from liability for breach of his duty of loyalty,
but may exempt in advance an office holder from liability to the company, in whole or in
part, for a breach of his duty of care (except in connection with distributions), provided
the articles of association of the company allow it to do so. Our articles of
associationallow us to exempt our office holders to the fullest extent permitted
by law.

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Insurance
of Office Holders

Our articles of association provide
that, subject to the provisions of the Companies Law, we may enter into an insurancecontract which would provide coverage for any monetaryliability incurred byany of our office holders, with respect to an act performed in the capacity of an
office holder for:

| |  | a
breach of his duty of care to us or to another person;
| | - | --------------------------------------------------------

| |  | a
breach of his duty of loyalty to us, provided that the office holder acted in good faith
and had reasonable cause to assume that his act would not prejudice our interests; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | a
financial liability imposed upon him in favor of another person.
| | - | ------------------------------------------------------------------

Indemnification
of Office Holders

The Companies Law and our articles of
association provide that a company may indemnify an office holder against the following
obligations and expenses imposed on the office holder with respect to an act performed in
the capacity of an office holder:

| |  | a
financial obligation imposed on him in favor of another person by a court judgment,
including a compromise judgment or an arbitrators award approved by the court; such
indemnification may be approved (i) after the liability has been incurred or (ii) in
advance, provided that our undertaking to indemnify is limited to events that our board
of directors believes are foreseeable in light of our actual operations at the time of
providing the undertaking and to a sum or criterion that our board of directors
determines to be reasonable under the circumstances.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | reasonable
litigation expenses, including attorneys fees, expended by the office holder as a
result of an investigation or proceeding instituted against him by a competent authority,
provided that such investigation or proceeding concluded without the filing of an
indictment against him and either (A) concluded without the imposition of any financial
liability in lieu of criminal proceedings or (B) concluded with the imposition of a
financial liability in lieu of criminal proceedings but relates to a criminal offense
that does not require proof of criminal intent; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | reasonable
litigation expenses, including attorneys fees, expended by the office holder or
charged to him by a court in connection with:
| | - | -----------------------------------------------------------------------------------------------------------------------------------------

| |  | proceedings
 we  institute  against  him or that are  instituted  on our behalf or by
                     another person;
| | - | --------------------------------------------------------------------------------------------------------------------------

| |  | a
criminal charge from which he is acquitted; or
| | - | ------------------------------------------------

| |  | a
criminal proceeding in which he is convicted of an offense that does not require proof of
criminal intent.
| | - | ------------------------------------------------------------------------------------------------------------

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Limitations
on Exculpation, Insurance and Indemnification

The Companies Law provides that a
company may not exculpate or indemnify an office holder, or enter into an insurance
contract which would provide coverage for any monetary liability incurred as a result of
any of the following:

| |  | a
breach by the office holder of his duty of loyalty unless, with respect to insurance
coverage or indemnification, the office holder acted in good faith and had a reasonable
basis to believe that the act would not prejudice the company;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | a
breach by the office  holder of his duty of care if the  breach  was done  intentionally
                or recklessly;
| | - | -------------------------------------------------------------------------------------------------------------------------

| |  | any
act or omission done with the intent to derive an illegal personal benefit; or
| | - | ----------------------------------------------------------------------------------

| |  | any
fine levied against the office holder.
| | - | ------------------------------------------

In addition, under the Companies Law,
exculpation of, indemnification of, and procurement of insurance coverage for, our office
holders must be approved by our audit committee and our board of directors and, if the
beneficiary is a director, by our shareholders.

Our articles of associations also
provide that, subject to the provisions of applicable law, we may procure insurance for or
indemnify any person who is not an office holder, including without limitation, any of our
employees, agents, consultants or contractors.

In accordance with the foregoing
provisions, we have obtained liability insurance in favor of our directors and officers
and have granted them letters of indemnification and exculpation.

# C. Material Contracts

In September 2005, we entered into a
bonus rights agreement with a trustee on behalf of our shareholders, which is summarized
above under Item 10.B Mergers and Acquisitions under Israeli Law;
Anti-Takeover Provisions and is incorporated by reference as an exhibit to this
Report.

# D. Exchange Controls

There are currently no Israeli
currency control restrictions on payments of dividends or other distributions with respect
to our ordinary shares or the proceeds from the sale of the shares, except for the
obligation of Israeli residents to file reports with the Bank of Israel regarding certain
transactions. However, legislation remains in effect pursuant to which currency controls
can be imposed by administrative action at any time.

# E. Taxation

The following is a general summary
only and should not be considered as income tax advice or relied upon for tax planning
purposes. Holders of our ordinary shares should consult their own tax advisors as to the
United States, Israeli or other tax consequences of the purchase, ownership and
disposition of ordinary shares, including, in particular, the effect of any foreign, state
or local taxes.

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# United States Federal
Income Tax Consequences

The
following summary describes the material U.S. federal income tax consequences to U.S.
Holders (as defined below) arising from the purchase, ownership or disposition of our
ordinary shares. This summary is based on the Internal Revenue Code of 1986, as amended,
or the Code, the final, temporary and proposed U.S. Treasury Regulations promulgated
thereunder and administrative and judicial interpretations thereof, all as of the date
hereof and all of which are subject to change (possibly with retroactive effect) or
different interpretations. For purposes of this summary, a U.S. Holder will be deemed to
refer only to any of the following holders of our ordinary shares:

| |  | an
 individual  who is either a U.S.  citizen or a resident of the U.S. for U.S.  federal
 income                 tax purposes;
| | - | -------------------------------------------------------------------------------------------------------------------------------

| |  | a
corporation  or other entity  taxable as a  corporation  for U.S.  federal  income tax
purposes                 created  or  organized  in or  under  the laws of the U.S.  or
any  political  subdivision                 thereof;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | an
estate the income of which is subject to U.S.  federal  income tax regardless of the
source of                 its income; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------

| |  | a
trust, if (a) a U.S. court is able to exercise primary  supervision over the
 administration of                 the trust and one or more U.S.  persons  have the
 authority  to control  all  substantial                 decisions of the trust,  or (b)
the trust has a valid election in effect under  applicable                 U.S. Treasury
Regulations to be treated as a U.S. person.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

This summary does not consider all
aspects of U.S. federal income taxation that may be relevant to particular U.S. Holders by
reason of their particular circumstances, including potential application of the U.S.
federal alternative minimum tax, or any aspect of state, local or non-U.S. federal tax
laws or U.S. federal tax laws other than U.S. federal income tax laws. In addition, this
summary is directed only to U.S. Holders that hold our ordinary shares as capital
assets within the meaning of Section 1221 of the Code and does not address the
considerations that may be applicable to particular classes of U.S. Holders, including
financial institutions, regulated investment companies, real estate investment trusts,
pension funds, insurance companies, broker-dealers, tax-exempt organizations, grantor
trusts, partnerships or other pass-through entities, U.S. Holders whose functional
currency is not the U.S. dollar, U.S. Holders who have elected mark-to-market accounting,
U.S. Holders who acquired our ordinary shares through the exercise of options or otherwise
as compensation, U.S. Holders who hold our ordinary shares as part of a
straddle, hedge or conversion transaction, U.S.
Holders selling our ordinary shares short, U.S. Holders deemed to have sold our ordinary
shares in a constructive sale, and U.S. Holders, directly, indirectly or
through attribution, of 10% or more (by vote or value) of our outstanding ordinary shares.
If a partnership (including for this purpose any entity, domestic or foreign, treated as a
partnership for U.S. federal income tax purposes) is a beneficial owner of our ordinary
shares, the U.S. federal income tax treatment of a partner in such partnership generally
will depend upon the status of the partner and the activities of the partnership. A
partnership that is a beneficial owner of our ordinary shares, and partners in such
partnership, are urged to consult their own tax advisors regarding the U.S. federal income
tax consequences of the purchase, ownership and disposition of our ordinary shares.

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Each U.S. Holder should consult with
its own tax advisor as to the particular tax consequences to it of the purchase, ownership
and sale of our ordinary shares, including the effects of applicable tax treaties, state,
local, foreign or other tax laws and possible changes in the tax laws.

Sale, Exchange or Other
Taxable Disposition of Our Ordinary Shares

Subject to the discussion below under
Passive Foreign Investment Company Status, a U.S. Holders sale, exchange
or other taxable disposition of our ordinary shares generally will result in the
recognition by such U.S. Holder of capital gain or loss in an amount equal to the
difference between the U.S. dollar value of the amount realized and the U.S. Holders
tax basis in the ordinary shares disposed of (determined in U.S. dollars). This gain or
loss will be long-term capital gain or loss if such ordinary shares have been held or are
deemed to have been held for more than one year at the time of the disposition. Individual
U.S. Holders currently are subject to a maximum tax rate of 15% on long-term capital gains
for tax years beginning on or before December 31, 2010. Short-term capital gains generally
are taxed at the same rates applicable to ordinary income. If the U.S. Holders
holding period on the date of the taxable disposition is one year or less, such gain or
loss will be a short-term capital gain or loss. See Israeli Tax Considerations
 Capital Gains Tax on Sales of Our Ordinary Shares for a discussion of
taxation by Israel of capital gains realized on sales of our ordinary shares. Any capital
loss realized upon the taxable disposition of ordinary shares generally is deductible only
against capital gains and not against ordinary income, except that non-corporate U.S.
Holders generally may deduct annually from ordinary income up to $3,000 of capital losses
in excess of capital gains. In general, any capital gain or loss recognized by a U.S.
Holder upon the taxable disposition of ordinary shares will be treated as U.S.-source
income or loss for U.S. foreign tax credit purposes. However, under the tax treaty between
the United States and Israel, gain derived from the taxable disposition of ordinary shares
by a U.S. Holder who is a resident of the United States for purposes of the treaty and who
sells the ordinary shares within Israel may be treated as foreign-source income for U.S.
foreign tax credit purposes.

A U.S. Holders tax basis in
his, her or its ordinary shares generally will be the U.S. dollar purchase price paid by
such U.S. Holder to acquire such ordinary shares. The U.S. dollar cost of an ordinary
share purchased with foreign currency generally will be the U.S. dollar value of the
purchase price on the date of purchase or, in the case of our ordinary shares that are
purchased by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on
the settlement date for the purchase. Such an election by an accrual basis U.S. Holder
must be applied consistently from year to year and cannot be revoked without the consent
of the U.S. Internal Revenue Service. The holding period of each ordinary share owned by a
U.S. Holder will commence on the day following the date of the U.S. Holders purchase
of such ordinary share and will include the day on which the ordinary share is sold by
such U.S. Holder.

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In the case of a U.S. Holder who uses
the cash basis method of accounting and who receives NIS in connection with the taxable
disposition of ordinary shares, the amount realized will be based on the spot
rate of exchange on the settlement date of such taxable disposition. If such U.S.
Holder subsequently converts NIS into U.S. dollars at a conversion rate other than the
spot rate in effect on the settlement date, he, she or it may have a foreign currency
exchange gain or loss treated as ordinary income or loss for U.S. federal income tax
purposes. A U.S. Holder who uses the accrual method of accounting may elect the same
treatment required of cash method taxpayers with respect to a taxable disposition of
ordinary shares, provided that the election is applied consistently from year to year.
Such election may not be changed without the consent of the U.S. Internal Revenue Service.
If an accrual method U.S. Holder does not elect to be treated as a cash method taxpayer
(pursuant to U.S. Treasury Regulations applicable to foreign currency transactions), such
U.S. Holder may be deemed to have realized an immediate foreign currency gain or loss for
U.S. federal income tax purposes in the event of any difference between the U.S. dollar
value of the NIS on the date of taxable disposition and the settlement date. Any such
currency gain or loss generally would be treated as U.S.-source ordinary income or loss
and would be subject to tax in addition to any gain or loss recognized by such U.S. Holder
on the taxable disposition of ordinary shares.

Treatment of Distributions

For U.S federal income tax purposes,
the amount of any distribution with respect to our ordinary shares will equal the amount
of cash distributed, the fair market value of any property distributed and the amount of
any Israeli taxes withheld on such distribution as described below under Israeli Tax
Considerations  Tax on Dividends to Non-Israeli Resident Shareholders. Other
than distributions in liquidation or in redemption of our ordinary shares that are treated
as exchanges, a distribution with respect to our ordinary shares paid by us to a U.S.
Holder generally will be treated as a dividend to the extent that the distribution does
not exceed our current and accumulated earnings and profits, as determined for U.S.
federal income tax purposes. The amount of any distribution that exceeds these earnings
and profits will be treated first as a non-taxable return of capital, reducing the U.S.
Holders tax basis in his, her or its ordinary shares (but not below zero), and then
generally as capital gain from a deemed sale or exchange of such ordinary shares.
Corporate U.S. Holders generally will not be allowed a deduction under Section 243 of the
Code for dividends received on our ordinary shares and thus will be subject to tax at the
rate applicable to their taxable income. Currently, a noncorporate U.S. Holders
qualified dividend income generally is subject to tax at a rate of 15%. For
this purpose, qualified dividend income generally includes dividends paid by a
foreign corporation if, among other things, the noncorporate U.S. Holder meets certain
minimum holding period requirements and either (a) the stock of such corporation is
readily tradable on an established securities market in the U.S., including the Nasdaq
Global Market, or (b) such corporation is eligible for the benefits of a comprehensive
income tax treaty with the U.S. which includes an information exchange program and is
determined to be satisfactory by the U.S. Secretary of the Treasury. The U.S. Secretary of
the Treasury has indicated that the income tax treaty between the U.S. and Israel is
satisfactory for this purpose. Dividends paid by us will not qualify for the 15% U.S.
federal income tax rate, however, if we are treated, for the tax year in which the
dividends are paid or the preceding tax year, as a passive foreign investment
company for U.S. federal income tax purposes. See the discussion below under the
heading   Passive Foreign Investment Company Status. U.S. Holders are
urged to consult their own tax advisors regarding the U.S. federal income tax consequences
of their receipt of any distributions with respect to our ordinary shares.

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A dividend paid by us in NIS will be
included in the income of U.S. Holders at the U.S. dollar amount of the dividend, based on
the spot rate of exchange in effect on the date of receipt or deemed receipt
of the distribution, regardless of whether the payment is in fact converted into U.S.
dollars. U.S. Holders will have a tax basis in the NIS for U.S. federal income tax
purposes equal to that U.S. dollar value. Any gain or loss upon the subsequent conversion
of the NIS into U.S. dollars or other disposition of the NIS will constitute foreign
currency gain or loss taxable as ordinary income or loss and will be treated as
U.S.-source income or loss for U.S. foreign tax credit purposes.

Dividends received with respect to
our ordinary shares will constitute portfolio income for purposes of the
limitation on the use of passive activity losses and, therefore, generally may not be
offset by passive activity losses. Dividends received with respect to our ordinary shares
also generally will be treated as investment income for purposes of the
investment interest deduction limitation contained in Section 163(d) of the Code, and as
foreign-source passive income for U.S. foreign tax credit purposes or, in the case of a
U.S. Holder that is a financial services entity, financial services income. Subject to
certain limitations, U.S. Holders may elect to claim as a foreign tax credit against their
U.S. federal income tax liability any Israeli income tax withheld from distributions on
our ordinary shares which constitute dividends under U.S. income tax law. U.S. Holders
that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli
income tax withheld, but only if the U.S. Holder elects to do so with respect to all
foreign income taxes in such year. In addition, special rules may apply to the computation
of foreign tax credits relating to qualified dividend income, as defined
above. The calculation of foreign tax credits and, in the case of a U.S. Holder that
elects to deduct foreign income taxes, the availability of deductions are complex and
involve the application of rules that depend on a U.S. Holders particular
circumstances. U.S. Holders are urged to consult their own tax advisors regarding the
availability to them of foreign tax credits or deductions in respect of any Israeli tax
withheld or paid with respect to any dividends which may be paid with respect to our
ordinary shares.

Passive Foreign
Investment Company Status

Generally, a foreign corporation is
treated as a passive foreign investment company, or PFIC, for U.S. federal income tax
purposes for any tax year if, in such tax year, either (i) 75% or more of its gross
income (including its pro rata share of the gross income of any company in which it owns
25% or more of the shares by value) is passive in nature (the Income Test), or
(ii) the average percentage of its assets during such tax year (including its pro rata
share of the assets of any company in which it owns 25% or more of the shares by value)
which produce, or are held for the production of, passive income (determined by averaging
the percentage of the fair market value of its total assets which are passive assets as of
the end of each quarter of such year) is 50% or more (the Asset Test). Passive
income for this purpose generally includes dividends, interest, rents, royalties and gains
from securities and commodities transactions.

There is no definitive method
prescribed in the Code, U.S. Treasury Regulations or administrative or judicial
interpretations thereof for determining the value of a foreign corporations assets
for purposes of the Asset Test. The legislative history of the U.S. Taxpayer Relief Act of
1997, or the 1997 Act, however, indicates that for purposes of the Asset Test, the
total value of a publicly-traded foreign corporations assets generally will be
treated as equal to the sum of the aggregate value of its outstanding stock plus its
liabilities. It is unclear under current interpretations of the 1997 Act whether
other valuation methods could be employed to determine the value of our assets.

43

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Based on the composition of our gross
income and the composition and value of our gross assets since 2003, we believe that we
are likely to be treated as having been a PFIC in each year since 2003. There also can be
no assurance that we will not be deemed a PFIC in any future tax year.

U.S.
          Holders are urged to consult their own tax advisors for guidance as to our
          status as a PFIC in any tax year. For those U.S. Holders who determine that we
          are a PFIC in any tax year and notify us in writing of their request for the
          information required in order to effectuate the QEF Election described below, we
          will promptly make such information available to them.

For each year during a U.S.
Holders holding period of ordinary shares in which we are treated as a PFIC for U.S.
federal income tax purposes and such U.S. Holder does not make a QEF Election or a
mark-to-market  election (both as described below):

| |  | Excess
distributions by us to such U.S. Holder would be taxed in a special way. Excess
distributions with respect to any U.S. Holder are amounts received by such U.S.
Holder with respect to our ordinary shares in any tax year that exceed 125% of the
average distributions received by such U.S. Holder from us during the shorter of (i) the
three previous years, or (ii) such U.S. Holders holding period of our ordinary
shares before the then-current tax year. Excess distributions must be allocated ratably
to each day that a U.S. Holder has held our ordinary shares. A U.S. Holder must include
amounts allocated to the current tax year in his, her or its gross income as ordinary
income for that year, pay tax on amounts allocated to each prior tax year in which we
were a PFIC at the highest rate on ordinary income in effect for such prior year and pay
an interest charge on the resulting tax at the rate applicable to deficiencies of U.S.
federal income tax.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The
entire amount of any gain realized by such U.S. Holder upon the sale or other disposition
of our ordinary shares also would be treated as an excess distribution subject
to tax as described above.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The
tax basis in ordinary shares acquired from a decedent who was a U.S. Holder would not
receive a step-up to fair market value as of the date of the decedents death, but
instead would be equal to the decedents basis, if lower.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Although we generally will be treated
as a PFIC as to any U.S. Holder if we are a PFIC for any year during the U.S.
Holders holding period, if we cease to be a PFIC, the U.S. Holder may avoid the
consequences of PFIC classification for subsequent years if he, she or it elects to
recognize gain based on the unrealized appreciation in his, her or its ordinary shares
through the close of the tax year in which we cease to be a PFIC.

A U.S. Holder who beneficially owns
shares of a PFIC must file U.S. Internal Revenue Service Form 8621 (Return by a
Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with the
U.S. Internal Revenue Service for each tax year in which he, she or it holds shares in a
PFIC. This form describes any distributions received with respect to these shares and any
gain realized upon the disposition of these shares.

44

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For any year in which we are treated
as a PFIC, a U.S. Holder may elect to treat his, her or its ordinary shares as an interest
in a qualified electing fund, known as a QEF Election, in which case the U.S. Holder would
be required to include in income currently his, her or its proportionate share of our
earnings and profits in years in which we are a PFIC regardless of whether distributions
of our earnings and profits are actually made to the U.S. Holder. Any gain subsequently
recognized by the U.S. Holder upon the sale of his, her or its ordinary shares, however,
generally would be taxed as capital gain and the denial of the basis step-up at death
described above would not apply.

A U.S. Holder may make a QEF Election
with respect to a PFIC for any tax year of the U.S. Holder. A QEF Election is effective
for the tax year in which the election is made and all subsequent tax years of the U.S.
Holder. Procedures exist for both retroactive elections and the filing of protective
statements. A U.S. Holder making the QEF Election must make the election on or before the
due date, as extended, for the filing of the U.S. Holders U.S. federal income tax
return for the first tax year to which the election will apply. Upon his, her or its
request, we will provide to each U.S. Holder, who wishes to make a QEF Election for any
year in which we are treated as a PFIC, the information required to make a QEF Election
and to make subsequent annual filings.

As an alternative to a QEF Election,
a U.S. Holder generally may elect to mark his, her or its ordinary shares to market
annually, recognizing ordinary income or loss (subject to certain limitations) equal to
the difference, as of the close of the tax year, between the fair market value of his, her
or its ordinary shares and the adjusted tax basis of such shares. If a mark-to-market
election with respect to ordinary shares is in effect on the date of a U.S. Holders
death, the normally available step-up in tax basis to fair market value will not be
available. Rather, the tax basis of the ordinary shares in the hands of a U.S. Holder who
acquired them from a decedent will be the lesser of the decedents tax basis or the
fair market value of the ordinary shares. Once made, a mark-to-market election generally
continues unless revoked with the consent of the U.S. Internal Revenue Service.

The implementation of many aspects of
the Codes PFIC rules requires the issuance of Treasury Regulations which in many
instances have yet to be promulgated and which may have retroactive effect when
promulgated. We cannot be sure that any of these regulations will be promulgated or, if
so, what form they will take or what effect they will have on the foregoing discussion.
Accordingly, and due to the complexity of the PFIC rules, U.S. Holders should consult
their own tax advisors regarding our status as a PFIC and the eligibility, manner and
advisability of making a QEF Election or a mark-to-market election if we are treated as a
PFIC.

Information Reporting and
Backup Withholding

Payments in respect of our ordinary
shares that are made in the United States or by certain U.S.-related financial
intermediaries may be subject to information reporting and backup withholding tax at rates
equal to 28% through 2010 and 31% after 2010 (unless legislation is enacted that provides
otherwise). Information reporting will not apply, however, with respect to payments to
certain U.S. Holders, including corporations and tax-exempt organizations. In addition,
backup withholding will not apply to a U.S. Holder that (i) is a corporation or comes
within certain exempt categories, and demonstrates that fact when so required, or (ii)
furnishes a correct taxpayer identification number and furnishes other required
certifications. U.S. Holders required to establish their exemption from backup withholding
generally must provide a certification on IRS Form W-9 (or substitute form). Backup
withholding is not an additional tax. Amounts withheld under the backup withholding rules
may be credited against a U.S. Holders U.S. federal income tax liability, and a U.S.
Holder may obtain a refund of any excess amounts withheld under the backup withholding
rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service.
U.S. Holders should consult their own tax advisors regarding their qualification for an
exemption from backup withholding and the procedures of obtaining such an exemption, if
applicable.

45

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# Israeli Tax
Considerations

The following is a summary of the
principal tax laws applicable to companies in Israel, with special reference to their
effect on us. This section also contains a discussion of certain Israeli tax consequences
to persons holding ordinary shares. This summary does not discuss all the acts of Israeli
tax law that may be relevant to a particular investor in light of his or her personal
investment circumstances or to certain types of investors subject to special treatment
under Israeli law, such as traders in securities or persons that own, directly or
indirectly, 10% or more of our outstanding voting share capital. To the extent that the
discussion is based on new tax legislation which has not been subject to judicial or
administrative interpretation, there can be no assurance that the views expressed in this
discussion will be accepted by the tax authorities or the courts. The discussion should
not be construed as legal or professional tax advice and is not exhaustive of all possible
tax considerations.

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 ordinary shares, including, in particular, the
effect of any foreign, state or local taxes.

General Corporate Tax
Structure

Generally, Israeli companies are
subject to Corporate Tax on taxable income at the rate of 29% for the 2007 tax year and
27% for the 2008 tax year. Following an amendment to the Israeli Income Tax Ordinance [New
Version], 1961, or the Tax Ordinance, which came into effect on January 1, 2006, the
corporate tax rate is scheduled to decrease as follows: 26% for the 2009 tax year and 25%
for the 2010 tax year and thereafter. Israeli companies are generally subject to capital
gains tax at a rate of 25% for capital gains (other than gains deriving from the sale of
listed securities) derived after January 1, 2003.

Taxation Under
Inflationary Conditions

The Income Tax (Inflationary
Adjustments) Law, 1985, which is referred to below as the Inflationary Adjustments Law,
attempts to overcome some of the problems presented to a traditional tax system by an
economy experiencing rapid inflation, which was the case in Israel at the time the law was
enacted. Generally, the Inflationary Adjustments Law provides significant tax deductions
and adjustments to depreciation methods and tax loss carry forwards to compensate for loss
of value resulting from an inflationary economy. Our taxable income is subject to the
provisions of this law.

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The Israeli Income Tax Ordinance and
regulations promulgated thereunder allow Foreign-Invested Companies, which
maintain their accounts in U.S. dollars in compliance with the regulations published by
the Israeli Minister of Finance, to base their tax returns on their operating results as
reflected in the dollar financials statements or to adjust their tax returns based on
exchange rate changes rather than changes in the Israeli CPI, in lieu of the principles
set forth by the Inflationary Adjustments Law. For these purposes, a Foreign-Invested
Company is a company, more than 25% of whose share capital, in terms of rights to profits,
voting and appointment of directors, and of whose combined share and loan capital is held
by persons who are not residents of Israel. A company that elects to measure its results
for tax purposes based on the dollar exchange rate cannot change that election for a
period of three years following the election. We believe that we qualify as a Foreign
Investment Company within the meaning of the Inflationary Adjustments Law. We have not yet
elected to measure our results for tax purposes based on the U.S. dollar exchange rate,
but may do so in the future.

On February 26, 2008 the Israeli
parliament approved an amendment to the Inflationary Adjustments Law that limits the
applicability of such law so that it will generally cease to apply after the 2007 tax
year.

Capital Gains Tax on
Sales of Our Ordinary Shares

Israeli law generally imposes a
capital gains tax on the sale of any capital assets by residents of Israel, as defined for
Israeli tax purposes, and on the sale of any capital assets located in Israel, including
shares in Israeli companies by non-residents of Israel, unless a specific exemption is
available or unless a tax treaty between Israel and the shareholders country of
residence provides otherwise. The law distinguishes between real gain and inflationary
surplus. The inflationary surplus is a portion of the total capital gain that is
equivalent to the increase of the relevant assets purchase price that is
attributable to the increase in the Israeli consumer price index, or in certain
circumstances, a foreign currency exchange rate, between the date of purchase and the date
of sale. The real gain is the excess of the total capital gain over the inflationary
surplus.

Provisions of Israeli tax law may
treat a sale of securities listed on a stock exchange differently than the sale of other
securities. In the past, the Israeli Tax Authority, or the ITA, has indicated that it does
not recognize the OTC Bulletin Board as a stock exchange for purposes of the
Tax Ordinance. However, the current position of the ITA is to view securities quoted on
the OTC Bulletin Board as listed on a stock exchange where such securities
were previously delisted from a stock exchange (such as the Nasdaq Global
Market or the Tel Aviv Stock Exchange), such as our ordinary shares.

The tax rate generally applicable to
capital gains derived from the sale of shares, whether listed on a stock market or not, is
20% for Israeli individuals, unless such shareholder claims a deduction for financing
expenses in connection with such shares, in which case the gain will generally be taxed at
a rate of 25%. Additionally, if such shareholder is considered a significant
shareholder at any time during the 12-month period preceding such sale (i.e., such
shareholder holds directly or indirectly, including jointly with others, at least 10% of
any means of control in the company) the tax rate will be 25%. Israeli companies are
subject to the corporate tax rate on capital gains derived from the sale of listed shares,
unless such companies were not subject to the Inflationary Adjustments Law (or certain
regulations) as of August 10, 2005, in which case the applicable tax rate is 25%. However,
the different tax rates may not apply to dealers in securities and shareholders who
acquired their shares prior to an initial public offering.

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The tax basis of shares acquired
prior to January 1, 2003 will be determined in accordance with the average closing share
price in the three trading days preceding January 1, 2003. However, a request may be made
to the tax authorities to consider the actual adjusted cost of the shares as the tax basis
if it is higher than such average price.

Non-Israeli residents are exempt from
Israeli capital gains tax on any gains derived from the sale of shares of Israeli
companies publicly traded on a recognized stock exchange outside of Israel, provided that
such capital gains are not derived from a permanent establishment in Israel, that such
shareholders are not subject to the Inflationary Adjustments Law and that such
shareholders did not acquire their shares prior to the issuers initial public
offering. However, non-Israeli corporations will not be entitled to such exemption if
Israeli residents (i) have a controlling interest of 25% or more in such non-Israeli
corporation, or (ii) are the beneficiaries of or are entitled to 25% or more of the
revenues or profits of such non-Israeli corporation, whether directly or indirectly.

In some instances where our
shareholders may be liable to Israeli tax on the sale of their ordinary shares, the
payment of the consideration may be subject to the withholding of Israeli tax at the
source.

Pursuant to the Convention between
the Government of the United States of America and the Government of Israel with Respect
to Taxes on income, as amended, known as the U.S.-Israel Tax Treaty, the sale, exchange or
disposition of ordinary shares by a person who holds the ordinary shares as a capital
asset and who qualifies as a resident of the United States within the meaning of the
treaty and who is entitled to claim the benefits afforded to a resident by the treaty
generally will not be subject to Israeli capital gains tax. This exemption does not apply
if: (i) the treaty U.S. resident holds, directly or indirectly, shares representing 10% or
more of our issued voting power during any part of the twelve-month period preceding the
applicable sale, exchange or disposition, subject to specific conditions, or (ii) the
capital gains from such sale, exchange or disposition can be allocated to a permanent
establishment in Israel. In these cases, the sale, exchange or disposition would be
subject to Israel tax, to the extent applicable, as mentioned above. However, under the
U.S.-Israel Tax Treaty, the treaty U.S. resident would be permitted to claim a credit for
the capital gains tax paid in Israel against the U.S. federal income tax imposed with
respect to the applicable sale, exchange or disposition, subject to the limitations in
U.S. laws applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate to
U.S. state or local taxes.

Tax on Dividends to
Non-Israeli Resident Shareholders

Non-residents of Israel are subject
to income tax on income accrued or derived from sources in Israel. These sources of income
include passive income such as dividends. On distributions of dividends other than bonus
shares, or stock dividends, income tax is generally withheld at the source at the
rate of 20%, or 25% for a shareholder that is considered a significant shareholder
at any time during the 12-month period preceding such distribution. A different rate may
be provided in a treaty between Israel and the shareholders country of residence.
Under the U.S.-Israel Tax Treaty, the maximum tax on dividends paid to a holder of
ordinary shares who is a U.S. resident (as defined in the treaty) is 25%, and in certain
circumstances if such shareholder is a U.S. corporation holding at least 10% of our issued
voting power during the part of the tax year which precedes the date of payment of the
dividend as well as the previous tax year, and not more than 25% of our gross income
consists of interest or dividends, the maximum Israeli tax on dividends paid to such
corporation is 12.5%.

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A non-resident of Israel who receives
interest or dividend income derived from or accrued in Israel, from which tax was withheld
at the source, is generally exempted from the duty to file tax returns in Israel with
respect to such income, provided such income was not derived from a business conducted in
Israel by the taxpayer and the taxpayer has no other taxable sources of income in Israel.

Israel presently has no estate or
gift tax.

# F. Dividends and Paying
Agents

For information regarding dividend
restrictions, see Item 10.B Memorandum and Articles of Association  Dividend
and Liquidation Rights.

# G. Statement by Experts

Kost, Forer, Gabbay & Kasierer, a
firm of certified public accountants in Israel and a member firm of Ernst & Young
Global, have audited our consolidated financial statements included in our annual report
on Form 20-F for the year ended December 31, 2007, as set forth in their report which is
incorporated by reference into this Report.

# H. Documents On Display

We are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, applicable to foreign
private issuers and fulfill the obligations with respect to such requirements by filing
reports with the Securities and Exchange Commission. You may read and copy any document we
file with the Securities and Exchange Commission without charge at the Securities and
Exchange Commissions public reference room at 100 F Street, N.E., Washington, D.C.
20549. Copies of such material may be obtained by mail from the Public Reference Branch of
the Securities and Exchange Commission at such address, at prescribed rates. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the
public reference room.

As a foreign private issuer, we are
exempt from the rules under the Exchange Act prescribing the furnishing and content of
proxy statements, and our officers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section
16 of the Exchange Act. In addition, we are not required under the Exchange Act to file
periodic reports and financial statements with the Securities and Exchange Commission as
frequently or as promptly as United States companies whose securities are registered under
the Exchange Act.

# I. Subsidiary Information

Not applicable.

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|ITEM 11. |  | Quantitative and Qualitative Disclosures about Market Risk
|-------- |  | ----------------------------------------------------------

# General

We are exposed to market risk,
including movements in interest rates and foreign currency exchange rates. Our financial
results may be negatively impacted by foreign currency fluctuations because we generate
most of our financial income in U.S. dollars but incur some of our expenses in new Israeli
shekels. Because our financial results are reported in U.S. dollars, our results of
operations may be impacted by fluctuations in the rates of exchange between the U.S.
dollar and new Israeli shekels as our financial results are converted into U.S. dollars.

We do not presently engage in any
hedging or other transactions intended to manage risks relating to foreign currency
exchange rate or interest rate fluctuations. At December 31, 2007, we did not own any
market risk sensitive instruments. However, we may in the future undertake hedging or
other similar transactions or invest in market risk sensitive instruments if our
management determines that it is necessary to offset these risks.

# Interest Rate Risk
Management

As of December 31, 2007, we had $10.3
million of cash and short term investments, primarily all of which was linked to the U.S.
dollar.

|ITEM 12. |  | Description of Securities other than Equity Securities
|-------- |  | ------------------------------------------------------

Not applicable.

# PART II

|ITEM 13. |  | Defaults, Dividend Averages and Delinquencies
|-------- |  | ---------------------------------------------

Not applicable.

|ITEM 14. |  | Material Modifications to the Rights of Security Holders and Use of Proceeds
|-------- |  | ----------------------------------------------------------------------------

Not applicable.

|ITEM 15. |  | Controls and Procedures
|-------- |  | -----------------------

Not applicable.

|ITEM 16A. |  | Audit Committee Financial Expert
|--------- |  | --------------------------------

Not applicable.

|ITEM 16B. |  | Code of Ethics
|--------- |  | --------------

Not applicable.

|ITEM 16C. |  | Principal Accountant Fees and Services
|--------- |  | --------------------------------------

Not applicable.

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|ITEM 16D. |  | Exemptions from Listing Standards for Audit Committees
|--------- |  | ------------------------------------------------------

Not applicable.

|ITEM 16E. |  | Purchases Of Equity Securities by the Issuer and Affiliated Purchasers
|--------- |  | ----------------------------------------------------------------------

Not applicable.

# PART III

|ITEM 17. |  | Financial Statements
|-------- |  | --------------------

We have responded to Item 18 in lieu
of this item.

|ITEM 18. |  | Financial Statements
|-------- |  | --------------------

Our audited financial statements for
the year ended December 31, 2007, and the related audit report of our independent
accountant, are incorporated herein by reference to our annual report on Form 20-F for the
year ended December 31, 2007, which was filed with the Securities and Exchange Commission
on June 26, 2008.

In addition, our interim unaudited
financial statements for March 31, 2008, are incorporated herein by reference to our
report on Form 6-K submitted to the Securities and Exchange Commission on May 19, 2008.

|ITEM 19. |  | Exhibits
|-------- |  | --------

The exhibit lists required by this
Item is incorporated by reference to the Exhibit Index, which appears following the
signature page of this Report.

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SIGNATURE

The registrant hereby certifies that
it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this Report on its behalf.

| |  | TIKCRO TECHNOLOGIES LTD.By: /s/ Aviv Boim
Aviv BoimChief Executive Officer
| |  | ----------------------------------------------------------------------------------------

Date: August 4,
2008

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Exhibit Index

|Exhibit No. |  | Exhibit
|----------- |  | -------

|1.1 |  | Memorandum
of Association, as amended (a)
|--- |  | -----------------------------------------

|1.2 |  | Amended
and Restated Articles of Association (a)
|--- |  | ------------------------------------------------

|1.3 |  | Bonus
Rights Agreement, dated as of September 12, 2005, between Tikcro Technologies Ltd. and
                   American Stock Transfer & Trust Company, as Rights Agent (b)
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.1 |  | Share
Incentive Plan, as amended (c)
|--- |  | ------------------------------------

|4.2 |  | Tikcro
2003 Stock Option Plan, as amended (d)
|--- |  | ---------------------------------------------

|4.3 |  | Summary
of Agreements dated June 22, 2008 between BioCancell Therapeutics, Inc. and Tikcro
                   Technologies Ltd. (e)
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------

|8.1 |  | List
of Subsidiaries (e)
|--- |  | ------------------------

---

|(a) | Incorporated
by reference to Tikcros Annual Report on Form 20-F for the                year
ended December 31, 2006 (File No. 0-30820).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(b) | Incorporated
by reference to Tikcros Report on Form 6-K filed with the                Securities
and Exchange Commission on September 14, 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Incorporated
by reference to Tikcros Registration Statement on Form S-8                (File No.
333-12904).
|--- | -------------------------------------------------------------------------------------------------------------

|(d) | Incorporated
by reference to Tikcros Annual Report on Form 20-F for the                year
ended December 31, 2007 (File No. 0-30820).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(e) | Filed
herewith.
|--- | ---------------

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