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
  x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended December 31, 2010
  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
  o
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 _____________
  Commission file number 0-30820
  TIKCRO TECHNOLOGIES LTD.
 (Exact name of Registrant as specified in its charter)
  N/A
 (Translation of Registrant’s name into English)
  ISRAEL
 (Jurisdiction of incorporation or organization)
  126 Yigal Allon Street, Tel Aviv 67443, Israel
 (Address of principal executive offices)
  Izhak Tamir, T: +972-3-696-2121, F: +972-3-696-5678, 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 registeredNone
 
 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)
  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:
  8,648,861 Ordinary Shares, no par value
  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
 oYesx 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.
 
 oYesx 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 Yeso No
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
 o Yeso 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 oItem 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).
 
 oYesx No
 
 - ii -
  PART I

4ITEM 1.
Identify of Directors, Senior Management and Advisors
4ITEM 2.
Offer Statistics and Expected Timetable
4ITEM 3.
Key Information
4A.
Selected Financial Data
4B.
Capitalization and Indebtedness
5C.
Reasons for the offer and use of proceeds
6D.
Risk Factors
6ITEM 4.
Information on the Company
15A.
History and Development of the Company
15B.
Business Overview
15C.
Organizational Structure
18D.
Property, Plants and Equipment
18ITEM 4A.
Unresolved Staff Comments
18ITEM 5.
Operating and Financial Review and Prospects
18A.
Operating Results
18B.
Liquidity and Capital Resources
22C.
Research and Development, Patents and Licenses
23D.
Trend Information
23E.
Off-balance Sheet Arrangements
23F.
Tabular Disclosure of Contractual Obligations
23ITEM 6.
Directors, Senior Management and Employees
23A.
Directors and Senior Management
23B.
Compensation
25C.
Broad Practices
25D.
Employees
30E.
Share Ownership
30  1
  ITEM 7.
Major Shareholders and Related Party Transactions
31A.
Major Shareholders
31B.
Related Party Transactions
31C.
Interests of Experts and Counsel
32ITEM 8.
Financial Information
32A.
Consolidated Statements and other Financial Information
32B.
Significant Changes
32ITEM 9.
The Offer and Listing
32A.
Offer and Listing Details
32B.
Plan of Distribution
34C.
Markets
34D.
Selling Shareholders
34E.
Dilution
34F.
Expenses of the Issue
34ITEM 10.
Additional information
34A.
Share Capital
34B.
Memorandum and Articles of Association
34C.
Material Contracts
39D.
Exchange Controls
40E.
Taxation
40F.
Dividends and Paying Agents
49G.
Statement by Experts
49H.
Documents On Display
49I.
Subsidiary Information
49ITEM 11.
Quantitative and Qualitative Disclosures about Market Risk
50ITEM 12.
Description of Securities other than Equity Securities
50  2
  PART II.

50ITEM 13
Defaults, Dividend Averages and Delinquencies
50ITEM 14
Material Modifications to the Rights of Security Holders and Use of Proceeds
50ITEM 15T.
Controls and Procedures
50ITEM 16A.
Audit Committee Financial Expert
51ITEM 16B.
Code of Ethics
51ITEM 16C.
Principal Accountant Fees and Services
52ITEM 16D.
Exemptions from Listing Standards for Audit Committees
52ITEM 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
52ITEM 16F.
Change in Registrant’s Certifying Accountant
52ITEM 16G.
Corporate Governance
52PART III

53ITEM 17.
Financial Statements
53ITEM 18
Financial Statements
53ITEM 19.
Exhibits
53
 
 3
 
 PART I
  Unless the context otherwise requires, “Tikcro,” “us,” “we” and “our” refer to Tikcro Technologies Ltd., an Israeli company. References to “U.S. dollars,” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels.
  All share and per share information in this Annual 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 Annual 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 Annual 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
  Not applicable.
  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 2006 to 2010, from the audited financial statements of Tikcro, which have been prepared in accordance with generally accepted accounting principles in the United States.
  The selected financial data set forth below as of December 31, 2009 and 2010 and for each of the years ended December 31, 2008, 2009 and 2010 are derived from our audited financial statements, which are included elsewhere in this Annual Report.
  The selected financial data as of December 31, 2006, 2007 and 2008 and for the years ended December 31, 2006 and 2007 are derived from our audited financial statements, which are not included in this Annual Report.
  You should read the selected financial data together with Item 5 “Operating and Financial Review and Prospects” and our financial statements included elsewhere or incorporated by reference in this Annual Report.
  4
  From 2005 to 2007, we did not conduct any active business. 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 31,2006


2007


2008


2009


2010(in thousands, except share and per share data)Statement of Operations Data:General and administrative expenses, net

$
209


$
334


$
678


$
448


$
471Consulting services


-



-



(20
)


(61
)


(82
)Operating loss


(209
)


(334
)


(658
)


(387
)


(389
)Financial income (expenses), net


419



481



652



3,282



(389
)Net income (loss)

$
210


$
147


$
(6
)

$
2,895


$
(778
)Basic net earnings (loss) per share

$
0.03


$
0.02



-*
)

$
0.35


$
(0.09
)Diluted net earnings (loss) per share

$
0.03


$
0.02



-*
)

$
0.34


$
(0.09
)Number of shares used in computing basic net earnings (loss) per share


7,908,800



7,932,909



8,166,999



8,347,179



8,475,833Number of shares used in computing diluted net earnings (loss) per share


8,053,548



8,064,699



8,166,999



8,392,283



8,475,833
 
 
 *)
Represents an amount lower than $0.01.
  December 31,2006


2007


2008


2009


2010(in thousands)Balance Sheet Data:Cash and cash equivalents, short term investments and deposits

$
10,126


$
10,325


$
7,803


$
7,432


$
7,270Long-term investment


-



-



2,910



6,164



5,625Working capital


9,967



10,187



7,514



7,201



7,108Total assets


10,149



10,357



10,733



13,645



13,051Shareholders equity


9,967



10,187



10,424



13,365



12,733
  B. Capitalization and Indebtedness
  Not applicable.
  5
  C. Reasons for the offer and use of proceeds
  Not applicable.
  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, and our results of operations are dependent on the valuation of BioCancell and our ability to sell BioCancell securities at a profit.
  In July 2008, we acquired a minority stake in BioCancell Therapeutics, Inc., an Israel-based clinical-stage biopharmaceutical company. Other than our involvement in BioCancell, we do not currently conduct any significant operations. Accordingly, our results of operations are principally impacted by the value of our holdings in BioCancell.  If there are adverse changes in the market price or fair value of BioCancell, our results of operations and/or the value of our assets will be adversely affected, and we may need to write-down or write-off the carrying value of our holding. Due to market limitations on the liquidity of BioCancell's shares, and due to material non-public information to which we may be exposed because of our representation on the board of directors of BioCancell, we may face difficulties in our ability to dispose of our securities in BioCancell at a time and in a manner we deem suitable.
  Conditions and changes in the national and global economic and political environments may adversely affect our business and financial results.
  Current global financial conditions have been characterized by increased volatility and several financial institutions have either gone into bankruptcy or have had to be rescued by governmental authorities. With major financial institutions de-levering their balance sheets, credit was constricted in recent years, and may likely remain so for an extended period. If economic growth further declines, this may have a negative impact on our financial condition and share price, which may impact our and BioCancell’s ability to obtain financing and other sources of funding in the future on terms favorable to us, if at all. If such increased levels of volatility and market turmoil continue, it may materially adversely affect our results of operations.
  The growth of our business depends on our obtaining additional financing, which may be unavailable to us.
  In order to acquire stakes in either BioCancell or in additional operating companies, we will need to raise additional funds through public or private debt or equity financings. We provided $2.5 million to BioCancell in July 2008. We may offer to provide it with additional funds in the future. We may be unable to obtain additional financing on acceptable terms or at all, which would harm our financial condition and results of operations.
  6
  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.  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.
  We may be deemed an “investment company” under the Investment Company Act of 1940, unless we qualify for an exemption. Even after we acquired a minority stake in BioCancell and although we may acquire similar stakes in additional 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.
  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 significantly increase or decrease.
  We might lose money from the investment of our cash.
  We invest the majority of our cash on hand in 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, 2010, 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 in Israel 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, various SEC regulations and the Israeli Companies Law. 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. There is no guarantee that these efforts will result in management assurance that our internal control over financial reporting is adequate in future periods. 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.
  7
  Risks relating to our holdings in BioCancell
  We provided funding to BioCancell, an Israel-based early stage clinical-stage biopharmaceutical company. Our success is 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. BioCancell is a clinical-stage company developing new drugs for the treatment of solid tumors of cancer. It is expected that BioCancell will operate at a loss over the coming years and will not generate any revenue from operations in the near term. To be profitable, BioCancell must successfully research, develop, obtain regulatory approval for, manufacture, introduce, market and distribute its drugs. Although BioCancell is conducting a clinical phase IIb trial with its leading drug candidate, 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 a phase III clinical trial that it is safe and effective for human use in the treatment of individuals with cancer, with requested primary goals for improved overall survival. The senior management of Biocancell has limited experience in conducting advanced clinical trials and in commercialization of 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, and other non-U.S. regulatory standards. If BioCancell does not successfully meet its scientific, regulatory, financial and commercial challenges, then the value of the securities we hold of BioCancell may significantly decline and our results of operations and financial condition may be materially harmed.
  BioCancell’s approach to discover and develop prospective therapeutic products is new and may never lead to marketable products.
  BioCancell has concentrated its efforts on developing therapeutic products utilizing target genes, such as the H19 and IGF2 genes, which is a new field of drug research and development. BioCancell’s focus solely on developing therapeutic products utilizing target genes as opposed to more proven technologies for the development of therapeutic products increases the risks associated with the ownership of its securities. Further, BioCancell's focus is mainly on direct injection of its drug-candidates into the solid tumors and, as a result, it does not directly address cancer metastasis. If BioCancell is unsuccessful in having clinical efficacy with its drug-candidates, our investment in BioCancell may significantly decline and our results of operations and financial condition may be materially harmed.
  BioCancell requires additional funding, which may further draw on our resources or result in significant dilution of our ownership.
  BioCancell requires substantial funding to discover, develop, protect and conduct research and development for its drug-candidates primarily for clinical trials of each cancer indication, and to manufacture and market any such product that may be approved for commercial sale. The current economic environment may cause difficulties in raising the funds needed for BioCancell to continue its operations.  We might allocate additional funds to support BioCancell in the future, 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 could be diluted, our influence over its business could weaken and the value of our holding could materially decline.
  8
  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 pursue the research and development of technologies and other therapeutic products for the treatment of all of the diseases that BioCancell is targeting and that it expects to target, including superficial bladder carcinoma, pancreatic and ovarian cancer.
  The competitors of BioCancell may develop products more rapidly or more effectively than BioCancell. Many of these competitors have: much greater experience and much greater financial, technical and human resources than BioCancell at every stage of the discovery, development, manufacture and commercialization process; 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; collaborative arrangements in target markets with leading companies and research institutions; and entrenched and established relationships with healthcare providers and payors.
  As a result of any of the foregoing factors, BioCancell’s competitors may develop or commercialize products with significant advantages over any therapeutic products that it develops.  If BioCancell’s competitors are more successful in commercializing their products than BioCancell, their success could adversely affect its competitive position and harm its business prospects.
  BioCancell’s exclusive license to its lead patents expire in 2017, and BioCancell may face increased competition from third parties who will be able to freely use the technologies that BioCancell has developed.
  Some of the 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 drug-candidates. 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. BioCancell's drug-candidate BC-819 was granted an "orphan drug" status under U.S. FDA rules for treatment of ovarian cancer and for treatment pancreatic cancer. The main benefit for having orphan drug status is the right to market the drug exclusively for 7 years in the U.S. from the date of its approval for marketing. Unless BioCancell is successful in extending the patent protection on its drugs beyond 2017 by having new patent protection or by applying for an "orphan drug" status under U.S. FDA rules for additional cancer indications (see below under Item 4B. "Business Overview—BioCancell--BioCancell's Intellectual Property Rights"), 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.
  9
  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 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 infringe upon the intellectual property rights of third parties.
  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. BioCancell’s licensors may terminate the license, may not successfully prosecute or may fail to maintain their patent applications to which BioCancell is licensed, may determine not to pursue litigation against other persons that are infringing these patents or 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 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 or to liquidate because of its limited asset and revenue base.
  10
  BioCancell relies on 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 Chief Scientific Officer, and Dr. Patricia Ohana, would likely significantly delay or prevent BioCancell’s achievement of product development and its other business objectives.
  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.  Recent political events in various countries in the Middle East and Northern Africa have shaken the stability of those countries. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons.  Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. This situation may potentially escalate in the future to violent events which may affect Israel and us. 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.
  11
 
 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.
  12
  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 certain potentially adverse U.S federal income tax consequences.
  As a consequence of our ownership of relatively substantial cash and investment 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, for each year since 2003, including 2010. We could also be classified as a PFIC for 2011, 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.
  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.
  13
  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 traded on the OTC Bulletin Board. 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.
  The market price of our ordinary shares is subject to fluctuations.
  The market value of our ordinary shares has fluctuated over time. The following factors, among others, may significantly impact the market price of our ordinary shares:
  ●
the market price of BioCancell;
  ●
low trading volume of our ordinary shares;
  ●
BioCancell, its competitors or other third parties announcing new products, regulatory developments, new clinical data regarding current or future products, or earnings or losses;
  ●
delays or failures in the development of products of BioCancell;
  ●
political, economic or other developments affecting Israel;
  ●
global economic and other external factors; and
  ●
quarter-to-quarter fluctuations in our financial results.
  Two shareholders may be able to control us.
  Eric Paneth, one of our directors, beneficially owns approximately 13.4% of our outstanding ordinary shares. Izhak Tamir, our Chairman of the Board, beneficially owns approximately 12.3% 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.
  14
  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.
  Principal Capital Expenditures
  We did not have any capital expenditures in 2009 and 2010. In 2008 we had a capital expenditure of $2.5 million in regard of our investment in BioCancell.
  B. Business Overview
  General
  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 3.D “Risk Factors” above.
  BioCancell
  BioCancell is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel therapies for treating solid cancer tumors.  From the time of BioCancell’s inception in July 2004 through March 31, 2011, BioCancell invested approximately $23.0 million in research and development activities, general and administrative and other expenses, which is approximately similar to its operating loss over the same period. As of June 2011, BioCancell had 19 employees, 13 of which conduct clinical development or research and development for BioCancell; the other 6 are managers or administrators.
  Our Holdings in BioCancell
  In July 2008, we acquired from BioCancell 837,521 shares its common stock for consideration of $0.5 million, at a price of $0.60 per share, in a privately negotiated transaction. As part of the transaction we also received a four-year convertible note due June 2012 in the principal amount of $2.0 million, bearing interest at 10% per year and convertible into up to 3,464,385 shares of common stock, as well as a five-year warrant expiring June 2013 to purchase up to 4,301,906 shares of BioCancell common stock for an exercise price of $0.72 per share.
  15
  We currently hold approximately 3.5% of the outstanding capital stock of BioCancell. The common stock of BioCancell is listed on the Tel Aviv Stock Exchange, or TASE, under the symbol “BICL.” BioCancell has registered for resale with the Securities and Exchange Commission the shares of BioCancell common stock issued to us as well as the shares of common stock issuable upon conversion of our convertible note or upon exercise of our warrant.
  We are party to a voting agreement with two existing major shareholders of BioCancell, Clal Biotechnology Ltd., or CBI and Prof. Abraham Hochberg, BioCancell’s Chief Scientific Officer. Currently BioCancell has seven members on its Board of Directors. Subject to certain conditions, the parties to the agreement, who currently hold approximately 26.1% of BioCancell’s outstanding capital stock in the aggregate (35.4% on a fully diluted basis), 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. Under this agreement, each party is free to vote for other members of the Board. We also agreed with BioCancell that we will provide general consulting services to BioCancell for an agreed fee and designate one member to BioCancell's executive committee.  The executive committee currently consists of four members and its approval is required for material transactions, the adoption of annual budgets and any matters relating to its investment policies and working plan.
  BioCancell's Biotechnology
  BioCancell's research and development activities build upon the research of its founder, Professor Abraham Hochberg of the Hebrew University of Jerusalem, who isolated the human H19 gene and determined that it is expressed in over 40 different forms of cancer, including superficial bladder carcinoma and pancreatic and ovarian cancer, while laying dormant and non-expressed in non-cancerous cells. Research discovered that the H19 gene is significantly expressed in cancerous cells of between 70% and 84% of adult cancer patients, varying between cancer types. Research has also demonstrated that the H19 gene plays a significant role in the tumor development process by enabling tumor cells to survive under stress conditions, such as low serum and low oxygen levels, that are typical conditions of the environment in which cancerous cells develop. This survival supports the growth of the tumor and the development of metastases.
  BioCancell is currently focused on clinical trials with its lead prospective drug, BC-819. The detection of expression of the H19 gene is a prerequisite for treatment by BC-819. BC-819 is a double stranded DNA plasmid construct that incorporates the gene for diphtheria toxin, 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, orRNA. Once BC-819 DNA enters an H19-positive cancer cell, the cell can offer no resistance and is marked for death. The net result of this mechanism is highly selective tumor cell destruction. The strong safety profile of the plasmid is due, in part, to the fact that it produces the “A” portion only of diphtheria toxin inside cancerous cells. This toxin lacks the ability to penetrate other cells provided by the “B” portion, and consequently only acts to destroy the cell in which it is produced. Therefore, this new therapeutic modality is specific for the H19-positive cancer cell and thus far has not been detected with known toxic effects on normal cells — a safety feature that is unique when compared to currently available cancer treatments.
  16
  BC-819 has also demonstrated potential with respect to combination therapy. Even in cells that produce small amounts of H19 regulatory RNA, it appears that BC-819 acts to reverse the resistance of the cancer cells to chemotherapeutic agents. Moreover, the plasmid being used to deliver the cytotoxic DTA gene does not incorporate into the genome of the host. This has significant advantages over gene therapy platforms for cancer that depend on a “genetic correction” strategy.
  BioCancell is developing two BC-819-based therapy strategies. The first therapy is for bladder cancer wherein BC-819 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 cancers such as pancreatic and ovarian carcinomas in which BC-819 is injected directly into the tumor or instilled into the peritoneal cavity. Different routes of administration are employed depending upon the type of tumor (intravesical administration for bladder cancer, intratumoral injection for pancreatic cancer and intraperitoneal administration for ovarian cancer with ascites). All these delivery approaches are in the clinical trial stage.
  Diseases that are Potentially Treatable with BC-819
  Superficial Bladder Carcinoma BC-819 may be effective in treating superficial bladder carcinoma. Superficial bladder carcinoma is a specific form of bladder cancer resulting from the development and progression of cancerous tumors within the urothelium layer. The H19 gene is expressed at high levels in areas afflicted by superficial bladder carcinoma.
  Pancreatic Cancer.   Cancerous cells may develop in either the exocrine cells or the endocrine cells of the pancreas and the H19 gene is expressed at high levels in these cancerous regions.
  Ovarian Cancer.   Ovarian cancer is a disease in which normal ovarian cells begin to grow in an uncontrolled, abnormal manner and produce tumors in one or both ovaries. The H19 gene is expressed at high levels in areas afflicted by ovarian cancer.
  BioCancell's Clinical Trials
  BioCancell is pursuing three clinical trial efforts in a number of medical centers in Israel and the United States, pursuant to protocols approved by the U.S. FDA, using its lead drug-candidate, BC-819:
  ·
Phase IIb trial designed to treat patients suffering from bladder carcinoma, in enrollment phase of 39 patients.  Based on results from the first 18 patients treated with BC-819 in the course of the Phase IIb trial designed to treat patients suffering from bladder carcinoma, the U.S. FDA approved the continuation of the trial and the enrollment of an additional 21 patients.
  ·
Planned Phase IIb trial designed to treat patients with locally advanced, non-metastatic and non-resectable (inoperable) pancreatic cancer, pending regulatory approvals. This trial will build on results from a Phase I/IIa trial that enrolled 9 patients having this cancer indication.
  ·
Phase I/IIa trial designed to treat ovarian cancer, in enrolment phase of 11 patients.
  17
  BioCancell's Intellectual Property Rights
  Pursuant to an agreement BioCancell has with Yissum Research Development Company of the Hebrew University of Jerusalem, or Yissum, Yissum granted to BioCancell an exclusive, worldwide license for the use, development and commercialization of 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 to CBI all its shares in BioCancell.
  BioCancell’s patent portfolio includes patent applications in seven families in various stages of examination, where 31 patents of these families have been granted in the United States, Europe and other territories. All of BioCancell’s patents and patent applications were licensed to BioCancell from Yissum and are subject to the Yissum license.
  In addition, BioCancell's clinical stage drug, BC-819, targeting ovarian cancer and pancreatic cancer, was approved for protection under the U.S. FDA "orphan drug" plan. In the United States, an "orphan drug" is defined as a drug that treats a disease affecting less than 200,000 people each year. The main benefit for orphan drugs in the United States is the right to market the drug exclusively for seven years from the date it is approvedfor marketing, irrespective of patent protection.
  C. Organizational Structure
  We currently hold approximately 3.5% of the ownership and voting interests in BioCancell Therapeutics, Inc., a Delaware corporation headquartered in Jerusalem, Israel. If we convert our convertible notes in full, we will hold an aggregate of approximately 14.7% of BioCancell’s outstanding capital stock. Additionally, if we exercise the warrants to purchase shares we hold in full, we will hold an aggregate of approximately 25.4% of BioCancell’s outstanding capital stock. Such percentages take into account the issuance of shares by BioCancell upon this conversion and exercise but do not consider the conversion or exercise of any other securities.  Upon this conversion and exercise, we would hold an aggregate of approximately 17.2% of BioCancell’s outstanding capital stock on a fully diluted basis.
  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 audited financial statements, accompanying notes thereto and other financial information appearing elsewhere in this Annual Report.
  18
  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 3,464,385 shares of common stock, and a warrant to purchase up to 4,301,906 shares of common stock.  Please see Item 4.B “Business Overview - General” for more information.
  In 2008, our expenses exceeded our financial income resulting in a net loss of $6,000. In 2009, our financial income, generated mainly from an increase in the value of our investment in BioCancell, exceeded our expenses and resulted in a net income of $2.9 million. In 2010, we had financial expenses, net of $389,000, mainly from a decrease in the value of our investment in BioCancell, and expenses of $389,000 resulting in the net loss of $778,000.
  Application of Critical Accounting Policies and Estimates
  Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles.
  For additional information regarding our significant accounting policies please refer to Note 2 of our financial statements as of December 31, 2010 included in this report. While all the accounting policies impact the financial statements, certain policies may be viewed to be critical.  These policies are most important for the fair portrayal of our financial condition and results of operations and are those that require our management to make difficult, subjective and complex judgments, estimates and assumptions, based upon information available at the time that they are made, historical experience and various other factors that are believed to be reasonable under the circumstances
  In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. generally accepted accounting principles and does not require management’s judgment in its application.  There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.
  We are also subject to risks and uncertainties that may cause actual results to differ from estimates and assumptions. 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.
  19
  On an on-going basis, to fully understand and evaluate our reported financial results, we believe it is important to understand the significant estimates and judgments applied as they relate to our policies for income taxes and for valuation of our holdings in BioCancell, which is measured at fair value at each reporting date, with gains and losses being recorded as our audited financial statements, which are included elsewhere in this Annual Report.
  Income Taxes
  On January 1, 2007, we adopted the amended ASC 740 “Income Taxes”.  The guidance contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with ASC 740.   The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.   We accrue interest and penalties related to unrecognized tax benefits in the provision for income tax.
  Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different.  We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate.  To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made.  The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related interest.
  Long-term investment
  We elected to apply the fair value option for our holdings in BioCancell’s common stock, convertible note and warrant in accordance with ASC No. 825, “Financial Instruments”. The primary reasons for electing the fair value option were simplification and cost-benefit considerations as well as expansion of the use of fair value measurement being consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. ASC No. 825 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.
  Our holding in BioCancell's shares of common stock is based on quoted prices in an active market. Our holdings in BioCancell's convertible note and warrants were measured using a binominal model for evaluating derivatives, combined with other market- based analysis. The following are the main factors used in the valuations: average returns of notes of similar traded firms, historical volatility of the issuer's stock price (calculated upon actual historical stock price movements), applicable currency exchange rates, and risk free interest rates (based on the yield from U.S. treasury bonds with an equivalent term). In addition, we have taken into account the probability of the full ratchet mechanism in the convertible note and in the warrants being triggered.
  20
 
 Results of Operations
  The table below sets forth, for the periods indicated, financial data (in thousands of dollars) which we believe to be significant in analyzing our results of operations.
  Years Ended December 31,2008


2009


2010Statement of Operations Data:General and administrative expenses, net

$
678


$
448


$
471Consulting Services


(20
)


(61
)


(82
)Operating loss


(658
)


(387
)


(389
)Financial income (expenses), net


652



3,282



(389
)Net income (loss)

$
(6
)

$
2,895



(778
)
 
 Revenues.We receive revenues from consulting fees paid to us in accordance with an agreement with BioCancell signed in July 2008, pursuant o which we provided funding to BioCancell, we are entitled to appoint one director to BioCancell's board of directors and we provide BioCancell with certain consulting services. The revenues from such consulting fees were $20,000 in 2008, $61,000 in 2009 and $82,000 in 2010.
  General and administrative expenses. In 2009, we had lower general and administrative expenses than in 2008, mainly due to lower equity-based compensation expenses related to officers and directors and due to the one-time tax payment in 2008, which resulted in the expenses in 2008 being higher. There were no significant changes in general and administrative expenses in 2010 compared to 2009.
  Financial income, net. Financial income consists primarily of mark-to-market of the investment in BioCancell and also interest on marketable securities and bank deposits. In 2008 and 2009, our financial income included income from the mark-to-market adjustment of our investment in BioCancell in the amount of $393,000 and $3.2 million, respectively. In 2010, our financial expense included expense from the market to market adjustment of our investment in BioCancell in the amount of $428,000.
  Net income.  In 2008, we had net loss of $6,000, as a result of operating loss in the amount of $658,000, offset by financial income in the amount of $652,000.
  In 2009, we had net income of $2.9 million, primarily as a result of financial income in the amount of $3.3 million, which was partly offset by our operating loss in the amount of $387,000.
  21
  In 2010, we had net loss of $778,000 as a result of financial expenses in the amount of $389,000 and operating loss in the amount of $389,000.
  Impact of Inflation, Devaluation and Fluctuation of Currencies on Results of OperationsLiabilities 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. The value of the U.S. dollar declined against the NIS in 2008, 2009 and 2010, 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.
  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


NIS-USD Devaluation Rate


Israel Inflation Adjusted for Devaluation2006


(0.1
)


(8.2
)


8.12007


3.4



(9.0
)


12.42008


3.8



(1.1
)


4.92009


3.9



(0.7
)


4.62010


2.7



(6.0
)


8.7
  B. Liquidity and Capital Resources
  We had working capital of $7.5 million as of December 31, 2008, $7.2 million as of December 31, 2009 and $7.1 million as of December 31, 2010.  We believe that we have sufficient working capital for at least the next 12 months.
  In 2008, we had net loss of $6,000 and we used $173,000 of cash from operations. In 2009, we had net income of $2.9 million and we used $351,000 of cash from operations. In 2010, we had net loss of $778,000 and we used $125,000 of cash from operations.
  We generated net cash of $3.1 million from investment activities in 2008. We generated net cash of $1.5 million from investment activities in 2009. We generated net cash of $121,000 from investment activities in 2010.
  22
  In 2008, 2009 and 2010, we did not have any cash flow 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 receive any grants from the Office of the Chief Scientist in 2007 through 2010.
  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.
  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, 2010, 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 June 20, 2010:
  Name

Age

PositionIzhak Tamir

58

Chairman of the BoardEric Paneth

59

DirectorLiat Hadad

39

External DirectorYiftach Atir

61

External DirectorAviv Boim

43

Chief Executive Officer
 
 23
 
 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 served as our Chief Executive Officer from August 2003 to December 2007. He has served as President and a Director of Orckit Communications Ltd. ("Orckit") since it was co-founded by him and by Mr. Paneth in 1990 and as Orckit’s Chairman of the Board since July 2008. Mr. Tamir has served as Chairman of the Board of Orckit-Corrigent Ltd., a subsidiary of Orckit, since 2001 and as Chief Executive Officer of Orckit-Corrigent Ltd.since May 2007 and as a Director of Gilat Satellite Networks Ltd. since 2005. 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 Chief Executive Officer from November 2008 to October 2010.  Mr. Paneth has also served as Chief Executive Officer of Orckit since it was co-founded by him and by Mr. Tamir in 1990 and as the Chairman of the Board of Directors of Orckit from 1990 to July 2008.  From 1975 until 1983, Mr. Paneth was a senior engineer in the Israeli Government, and from 1985 to 1990, he 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.
  Liat Hadad has served as one of our external directors since September 2009. Ms. Hadad has served as director of business development at Israeli Biomedical Innovations since March 2010. From May 2009 to March 2010, she served as director of business development at McCann Erickson Digital Israel. From 2001 to 2008, Ms. Hadad served as an associate in the Life Sciences Division of Giza Venture Capital. From 1999 to 2001, she was a Business Development and Marketing Manager at Girafa.com Ltd. From 1996 to 1998, she was a System Integrations Project Manager at IBM Israel. Ms. Hadad is also a program coordinator at Tzeva, the coordinator of the ORT project as part of a community involvement program. Ms. Hadad has a B.A. in sociology, anthropology and political science from Tel Aviv University, a B.A. in life sciences from the Open University and an Executive M.B.A. in entrepreneurial studies, marketing and finance from Tel Aviv University.
  Yiftach Atir has served as one of our external directors since September 2006. Mr. 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.
  24
  Aviv Boim has served as our Chief Executive Officer since October 2010.  He joined Tikcro in January 2008 as Chief Executive Officer and later served in the capacity of our representative to BioCancell, From 1998 to 2007, he served as the Chief Financial Officer of Orckit. 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.
  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 (five persons) who served in the capacity of director or executive officer in the year ended December 31, 2010, was approximately $51,000. The foregoing amounts consist of the fees paid to our directors and chief executive officer. In September 2009, we increased the cash compensation paid to our statutory external directors from NIS 22,500 per year and NIS 1,060 per meeting, to NIS 36,250 (approximately $10,200) per year and NIS 1,855 (approximately $520) per meeting. Our other directors are paid only a participation fee in the amount of $1,000 for attendance at each meeting of the board of directors or committee thereof.  Mr. Tamir does not receive any additional compensation for serving as our Chairman of the Board.
  C. Board Practices
  Israeli Companies Law
  We are subject to the provisions of the 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 and no 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.
  25
  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.  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 up to two 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.
  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 (i) the person or the person’s relative or affiliate 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 controlling shareholder thereof, or any affiliate thereof, or (ii) in a company that does not have a 25% shareholder, if such person has an affiliation with any person who, at the time of appointment, is the chairman, the chief executive officer, the chief financial officer or a 5% shareholder of the company.
  The term affiliation includes:
  ●
an employment relationship;
  ●
a business or professional relationship;
  ●
control; or
  ●
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 or its controlling shareholder may not give any direct or indirect benefit to the former external director.
  26
  Election Of External Directors
  External directors are to be elected by a majority vote at a shareholders’ meeting, provided that either:
  ●
at least a majority 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 two percent of the aggregate voting rights in the company.
  The initial term of an external director is three years and may be extended for up to two additional three year terms. 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. Reelection of an external director may be effected through one of the following mechanisms: (1) the board of directors proposed the reelection of the nominee and the election was approved by the shareholders by the majority required to appoint external directors for their initial term; or (2) a shareholder holding 1% or more of the voting rights proposed the reelection of the nominee, and the reelection is approved by a majority of the votes cast by the shareholders of the company, excluding the votes of controlling shareholders and those who have a personal interest in the matter as a result of their relations with the controlling shareholders, provided that the aggregate votes cast in favor of the reelection by such non-excluded shareholders constitute more than 2% of the voting rights in 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. Liat Hadad commenced her first term as an external director on September 1, 2009, and Yiftach Atir commenced his second term as an external director on September 28, 2009.
  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. The members of the audit committee must satisfy certain independence standards under the Companies Law, and the chairman of the audit committee is required to be an external director.
  The role of the audit committee is to examine deficiencies in the management of the company’s business, in consultation with the internal auditor and the company’s independent accountants, suggest remedial action, approve specified related party transactions and assess the company's internal audit system and the performance of its internal auditor. Our audit committee currently consists of our two external directors.
  27
  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.
  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;
  28
  ●
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.
  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 person 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.
  29
  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, employee or service provider, 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 a majority 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 two percent of the voting rights in the company.
  In addition, any such transaction whose term is longer than three years requires further shareholder approval every three years, unless (with respect to transactions not involving management fees or employment terms) the audit committee approves that a longer term is reasonable under the circumstances.
  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 had two employees as of December 31, 2008 and 2009 and one employee as of December 31, 2010.
  E. Share Ownership
  As of June 20, 2011, Mr. Eric Paneth beneficially owned 1,156,602 ordinary shares, or approximately 13.4% of our outstanding ordinary shares and Mr. Izhak Tamir beneficially owned 1,061,701 ordinary shares, or approximately 12.3% of our outstanding ordinary shares. 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.
  30
  As of June 20, 2011, we had outstanding (i) options to purchase a total of 133,334 ordinary shares, all of which were held by our directors, and (ii) 69,928 restricted shares that are subject to contractual restrictions on transfer and are subject to repurchase by us for no consideration under certain circumstances.
  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 June 20, 2011 (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)


1,198,755



13.9
%Eric Paneth


1,156,602



13.4
%Izhak Tamir


1,061,701



12.3
%Aviv Boim(3)


635,287



7.3
%
 _______________
 (1)
Based on 8,648,861 ordinary shares outstanding on June 20, 2011.
 (2)
Based on a Schedule 13D/A filed February 19, 2010.
 (3)
Includes 69,929 restricted shares issued under the 2003 Plan.
  Based on a Schedule 13G filed on January 6, 2006, Eugene Oshinsky and Rosa Oshinsky beneficially owned 462,667 of our ordinary shares, which, as of May 31, 2009, constituted 5.4% of our outstanding shares. These shares were held directly by RAM Capital Management Trust #01, a Massachusetts trust, of which Eugene Oshinsky and Rosa Oshinsky are trustees. According to a letter by RAM Capital Management Trust #1 dated December 19, 2009, RAM Capital Management Trust #1 no longer hold any of our shares.
  As of June 17, 2011, there were 53 holders of record of our ordinary shares in the United States who collectively held approximately 69% 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.
  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.
  31
  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. This agreement was terminated on June 1, 2011 and replaced with a management services agreement with a third party contractor.
  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
  In June 2009, our shareholders Steven and Kimberly Bronson filed a complaint in the District Court of Tel Aviv-Jaffa against us and our present or former directors and/or officers, Izhak Tamir, Eric Paneth and Aviv Boim, requesting, among other things, an order that we call a meeting of shareholders to vote on (i) a proposal to amend our articles of association to grant to our shareholders the power, normally conferred upon the board of directors, to determine plans of action for the company and (ii) if such proposal is approved by our shareholders, a proposal to approve a distribution of substantially all of our cash and all of our securities in BioCancell.  We believe that the complaint is without merit and are defending against it vigorously.
  Significant Changes
  No significant change has occurred since December 31, 2010, except as otherwise disclosed in this Annual Report.
  ITEM 9.
The Offer and Listing
  A. Offer and Listing Details
 Our ordinary shares are currently quoted on the OTC Bulletin Board 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, the OTC Bulletin Board or the Pink Sheets.  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.
  32
 
 Calendar Year
Price Per ShareHigh

Low2006
1.37

0.882007
1.38

1.012008
1.14

0.402009
0.95

0.452010
0.96

0.63Calendar Quarter
Price Per ShareHigh

Low2009First Quarter
0.70

0.45Second Quarter
0.95

0.56Third Quarter
0.92

0.73Fourth Quarter
0.92

0.632010First Quarter
0.96

0.67Second Quarter
0.88

0.70Third Quarter
0.86

0.67Fourth Quarter
0.82

0.632011First Quarter
0.72

0.655Second Quarter (through June 17)
0.78

0.65Calendar Month
Price Per ShareHigh

LowDecember 2010
0.72

0.63January 2011
0.70

0.66February 2011
0.72

0.66March 2011
0.69

0.66April 2011
0.70

0.66May 2011
0.75

0.67June 2011 (through June 17)
0.78

0.65
 
 33
  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
  Not applicable.
  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.
  34
  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.
  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.
  35
  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.
  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.
  36
  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 six months following the consummation of a full tender offer, but the acquirer will be entitled to stipulate that tendering shareholders forfeit their appraisal rights.  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.
  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.
  37
  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.
  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
  38
  ●
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.
  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 Annual Report.
  39
  For information regarding our agreements with BioCancell, see Item 4.B “Business Overview - General.”
  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.
  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.
  40
  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, partners or other equity owners in partnerships or 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.
  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 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 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, 2012. 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 is treated as a short-term capital gain or loss.  See “Israeli Tax Considerations —Capital Gains Tax” 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, although the tax treaty between the United States and Israel may permit gain derived from the taxable disposition of ordinary shares by a U.S. Holder to be treated as foreign-source income for U.S. foreign tax credit purposes under certain circumstances.
  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.” 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 to a U.S. Holder generally will be treated as a dividend to the extent 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%, although the rate applicable to dividend income is scheduled to return to the rate applicable to ordinary income for tax years beginning after December 31, 2012. 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 National 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.”
  42
  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 deductibility 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 involve the application of complex rules that depend on a U.S. Holder’s particular circumstances.
  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.
  Passive Foreign Investment Company Status
  Generally, a foreign corporation is treated as a passive foreign investment company (“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 publicly-traded foreign corporation’s assets for purposes of the Asset Test.  The legislative history of the U.S. Taxpayer Relief Act of 1997 (the “1997 Act”) 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, however, whether other valuation methods could be employed to determine the value of our assets for purposes of the Asset Test.
  43
  Based on the composition of our gross income, the composition and value of our gross assets and the amount of our liabilities during each year since 2003, we believe that we are likely to be treated as having been a PFIC in each such year, including 2010.  There also can be no assurance that we will not be deemed a PFIC in 2011 or any other future tax year.
  If we are treated as a PFIC for U.S. federal income tax purposes for any year during a U.S. Holder’s holding period of ordinary shares and the U.S. Holder does not make a QEF Election or a “mark-to-market “ election (both as described below):
  ·
The U.S. Holder would be required to report as ordinary income any so-called “excess distributions” allocated to the current tax year, pay tax on amounts allocated to each prior tax year in which we were a PFIC at the highest rate applicable to 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. “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.
  ·
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 generally 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 such U.S. Holder recognizes gain upon a disposition of our ordinary shares, receives certain distributions from us or makes the QEF Election or mark-to-market election described below
  For any tax 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 (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.
  44
  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 by completing U.S. Internal Revenue Service Form 8621 and attaching it to his, her or its U.S. federal income tax return for the first tax year to which the election will apply, and must satisfy additional filing requirements each year the election remains in effect. Upon his, her or its request, we will provide to each U.S. Holder who wishes to make a QEF Election the information required to make the 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 generally will not be available.  Rather, the tax basis of ordinary shares in the hands of a U.S. Holder who acquires 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.  For example, under legislation enacted by the U.S. in 2010, U.S. Holders will be required to file a special information return for each year in which we are treated as a PFIC. The U.S. Internal Revenue Service has announced that it is developing guidance for filing this annual information return, but until further guidance is issued, a U.S. Holder that was required to file Internal Revenue Service Form 8621 (as described above) before March 18, 2010 (because, for example, such U.S. Holder had recognized gain upon the disposition of our ordinary shares or had made a QEF Election) must continue to file Form 8621. A U.S. Holder that was not otherwise required to file Form 8621 annually before March 18, 2010, however, will not be required to file the new annual information return for a tax year beginning before March 18, 2010.
  Due to the complexity of the PFIC rules and the uncertainty of their application in many circumstances, U.S. Holders should consult their own tax advisors regarding our status as a PFIC and, if we are treated as a PFIC, compliance with the applicable reporting requirements and the eligibility, manner and advisability of making a QEF Election or a mark-to-market election.
  45
  Information Reporting and Backup Withholding
  Payments in respect of our ordinary shares that are made in the U.S. or by certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding tax at a rate which currently is 28%.  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). The backup withholding tax 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 for obtaining such an exemption, if applicable.
  The foregoing discussion of certain U.S. federal income tax considerations is a general summary only and should not be considered as income tax advice or relied upon for tax planning purposes. Each U.S. Holder should consult with his, her or its own tax advisor regarding U.S. federal, state, local and non-U.S. income and other tax consequences of the acquisition, ownership and disposition of our ordinary
  46
  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 25% for the 2010 tax year and 24% for the 2011 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, 2009, the corporate tax rate is scheduled to decrease to 23% for the 2012 tax year, 22% for the 2013 tax year, 21% for the 2014 tax year, 20% for the 2015 tax year and 18% for the 2016 tax year and thereafter. Israeli companies are generally subject to capital gains tax at the corporate tax  rate.
  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 or the Pink Sheets 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 or the Pink Sheets 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.
  47
  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%. However, the different tax rates may not apply to dealers in securities and shareholders who acquired their shares prior to an initial public offering. Israeli companies are subject to the corporate tax rate on capital gains derived from the sale of listed shares.
  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 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 applicable 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%.
  48
  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.
  F.
Dividends and Paying Agents
  Not applicable.
  G.
Statement by Experts
  Not applicable.
  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.  The SEC also maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.  The address of this web site is http://www.sec.gov.  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.
  49
  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 fluctuationsbecause 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, 2010, 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, 2010, we had $7.3 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
  None.
  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
  None.
  ITEM 15.
Controls and Procedures
  See Item 15T below.
  ITEM 15T.
Controls and Procedures
  Disclosure Controls and Procedures
  We performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of December 31, 2010. The evaluation was performed with the participation of our senior management and under the supervision and with the participation of our principal executive and financial officer. Based on this evaluation, our principal executive and financial officer has concluded that our disclosure controls and procedures are effective to alert him on a timely basis to material information required to be included in our periodic reports with the Securities and Exchange Commission.
  50
  Management’s Annual Report on Internal Control Over Financial Reporting
  Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and our board of directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurances with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decline.
  Our management conducted an evaluation, pursuant to Rule 13a-15(c) under the Exchange Act, of the effectiveness, as of the end of the period covered by this Annual Report, of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this evaluation, management assessed the effectiveness of our internal control over financial reporting as at December 31, 2010 and concluded that our internal control over financial reporting was effective as of December 31, 2010.
  Changes in Financial Control Over Financial Reporting
  There were no changes in our internal control over financial reporting that occurred during 2010 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
  ITEM 16A.
Audit Committee Financial Expert
  Our board of directors has determined that Mr. Yiftach Atir qualifies as an “audit committee financial expert” as defined in Item 16A of Form 20-F and is “independent” as defined in the applicable regulations.
  ITEM 16B.
Code of Ethics
  Our board of directors has adopted a Code of Ethics.  We will provide a copy of our Code of Ethics free of charge to any person who requests one. Such requests may be sentto our offices at 126 Yigal Allon Street, Tel Aviv, Israel, Attention: Chief Executive Officer.
  51
  ITEM 16C.
Principal Accountant Fees and Services
  For 2009 and 2010, our independent accountant was Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global. These accountants billed the following fees to us for professional services in each of the last two fiscal years:
  Year Ended December 31,2009


2010Audit Fees

$
43,000


$
44,500Tax Fees


5,000



5,500All Other Fees


0



0Total

$
48,000


$
50,000
 
 “Audit Fees” are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, consents and assistance with and review of documents filed with the SEC.
  “Tax Fees” are the aggregate fees billed for professional services rendered for tax compliance, tax advice, other than in connection with the audit.  Tax compliance involves preparation of original and amended tax returns, tax planning and tax advice.
  Our Audit Committee has adopted a pre-approval policy for the engagement of our independent accountant to perform certain audit and non-audit services.  Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee pre-approves annually a catalog of specific audit and non-audit services in the categories of Audit Service, Audit-Related Service, Tax Services and other services that may be performed by our independent accountants and the maximum pre-approved fees that may be paid as compensation for each pre-approved service in those categories. Any proposed services exceeding the maximum pre-approved fees require specific approval by the Audit Committee.
  With respect to each pre-approved service actually requested to be provided, an executive officer is required to notify the Audit Committee in writing and state whether, in the executive officer’s view, the provision of such service by the outside auditor would impair its independence.
  The Audit Committee may delegate its pre-approval authority to one or more of its members, subject to ratification by the entire Audit Committee.
  ITEM 16D.
Exemptions from Listing Standards for Audit Committees
  Not applicable.
  ITEM 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  None.
  ITEM 16F.
Change in Registrant’s Certifying Accountant
  None.
  ITEM 16G.
Corporate Governance
  Not Applicable.
  52
  PART III
  ITEM 17.
Financial Statements
  We have responded to Item 18 in lieu of this item.
  ITEM 18.
Financial Statements
  The Financial Statements required by this item are found at the end of this Annual Report, beginning on page F-1.
  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 Annual Report.
  53
  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 Annual Report on its behalf.
  TIKCRO TECHNOLOGIES LTD.By:
/s/ Aviv BoimAviv BoimChief Executive Officer
 
 Date:  June 29, 2011
  54
  Exhibit Index
  Exhibit No.

Exhibit1.1

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)12.1

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act (f)13.1

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act (f)14.1

Consent of Independent Registered Public Accounting Firm (f)
 ________________________
  (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)
Incorporated by reference to Tikcro’s Shell Company Report on Form 20-F filed on August 5, 2008 (File No. 0-30820).
  (f)
Filed herewith.
  55
  TIKCRO TECHNOLOGIES LTD.
  FINANCIAL STATEMENTS
 
 AS OF DECEMBER 31, 2010
 
 IN U.S. DOLLARS
 
 INDEX
 
 PageReport of Independent Registered Public Accounting Firm
F-2Balance Sheets
F-3Statements of Operations
F-4Statements of Changes in Shareholders' Equity
F-5Statements of Cash Flows
F-6Notes to Financial Statements
F-7 - F-18
 
 
 
 
 
 REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Board of Directors and Shareholders of
 
 TIKCRO TECHNOLOGIES LTD.
  We have audited the accompanying balance sheets of Tikcro Technologies Ltd. ("the Company") as of December 31, 2010 and 2009, and the related statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
  We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.
 
 Tel-Aviv, Israel
/s/ KOST FORER GABBAY & KASIERERJune 29, 2011
A Member of Ernst & Young Global
 
 F - 2
 TIKCROTECHNOLOGIES LTD.
  BALANCE SHEETS
 U.S. dollars in thousands, except share and per share data
  December 31,2009


2010ASSETSCURRENT ASSETS:Cash and cash equivalents

$
4,909


$
4,905Marketable securities (Note 3, 4)


-



2,365Deposits (Note 11a)


2,523



-Other current assets


49



156Total current assets


7,481



7,426LONG-TERM INVESTMENT (Note 4, 5)


6,164



5,625Total assets

$
13,645


$
13,051LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Other current liabilities (Note 11b)

$
280


$
318Total current liabilities


280



318COMMITMENTS AND CONTINGENT LIABILITIES (Note 6)SHAREHOLDERS' EQUITY (Note 7):Share capital -Ordinary shares of NIS 0 par value  – Authorized: 16,666,667 shares at December 31, 2009 and 2010; Issued: 10,003,887 and 10,095,912 shares at December 31, 2009 and 2010 respectively; Outstanding: 8,556,836 and 8,648,861 shares at December 31, 2009 and 2010, respectively


-



-Additional paid-in capital


146,397



146,528Less - treasury shares, at cost, 1,447,051 Ordinary shares at December 31, 2009 and 2010


(1,065
)


(1,065
)Accumulated other comprehensive income


-



15Accumulated deficit


(131,967
)


(132,745
)Total shareholders' equity


13,365



12,733Total liabilities and shareholders' equity

$
13,645


$
13,051
  The accompanying notes are an integral part of the financial statements.
 
 F - 3
  TIKCROTECHNOLOGIES LTD.
  STATEMENTS OF OPERATIONS
 U.S. dollars in thousands, except per share and per share data
  Year ended December 31,2008


2009


2010Operating costs and expenses:General and administrative expenses

$
678


$
448


$
471Consulting services (Note 9)


(20
)


(61
)


(82
)Operating loss


658



387



389Financial income (expenses), net (Note 11c)


652



3,282



(389
)Net income (loss)

$
(6
)

$
2,895


$
(778
)Net earnings (loss) per share(Note 10):Basic net earnings (loss) per share

$
*
)

$
0.35


$
(0.09
)Weighted average number of shares used in computing basic earnings (loss) per share


8,166,999



8,347,179



8,475,833Diluted net earnings (loss) per share

$
*
)

$
0.34


$
(0.09
)Weighted average number of shares used in computing basic earnings (loss) per share


8,166,999



8,392,283



8,475,833
  *)
Represents an amount lower than $ 0.01.
  The accompanying notes are an integral part of the financial statements.
  F - 4
  TIKCROTECHNOLOGIES LTD.
  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
 U.S. dollars in thousands, except share data
 
 Outstanding


Additional


Accumulated other








Total


TotalOrdinary shares


paid-in


comprehensive


Treasury


Accumulated


comprehensive


shareholders'Number


Amount


capital


income (loss)


shares


deficit


income (loss)


equityBalance at January 1, 2008


8,055,466



-



146,068



40



(1,065
)


(134,856
)


-



10,187Issuance of shares (Note 7)


459,291



-



-



-



-



-



-



-Stock based compensation


-



-



245



-



-



-



-



245Comprehensive income:Reclassification adjustments to income on marketable securities


-



-



-



(40
)


-



-


$
(40
)


(40
)Unrealized income on available-for-sale marketable securities


-



-



-



38



-



-



38



38Net loss


-



-



-



-



-



(6
)


(6
)


(6
)Total comprehensive incomeBalance at December 31, 2008


8,514,757



-



146,313



38



(1,065
)


(134,862
)

$
(8
)


10,424Issuance of shares (Note 7)


41,216



-



-



-



-



-



-



-Issuance of shares


863



-Stock based compensation


-



-



84



-



-



-



-



84Comprehensive income:Reclassification adjustments to income on marketable securities


-



-



-



(38
)


-



-


$
(38
)


(38
)Net income


-



-



-



-



-



2,895



2,895



2,895Total comprehensive incomeBalance at December 31, 2009


8,556,836


$
-


$
146,397


$
-


$
(1,065
)

$
(131,967
)

$
2,857


$
13,365Issuance of shares (Note 7)


92,025



-























-Stock based compensation


-



-



131



-



-



-



-



131Comprehensive loss:Unrealized income on available-for-sale marketable securities


-



-



-



15



-



-


$
15



15Net loss


-



-



-



-



-



(778
)


(778
)


(778
)Total comprehensive lossBalance at December 31, 2010


8,648,851


$
-


$
146,528


$
15


$
(1,065
)

$
(132,745
)

$
(763
)

$
12,733
  The accompanying notes are an integral part of the financial statements.
 F - 5
 
 TIKCROTECHNOLOGIES LTD.
  STATEMENTS OF CASH FLOWS
 U.S. dollars in thousands
  Year ended December 31,2008


2009


2010Cash flows from operating activities:Net income (loss)

$
(6
)

$
2,895


$
(778
)Adjustments required to reconcile net income (loss) to net cash used in operating activities:Decrease (increase) in other current assets


12



(29
)


(69
)Decrease in related party - current account


(14
)


-



-Increase (decrease) in other current liabilities


136



(55
)


38Accrued interest on marketable securities and deposits


10



(8
)


(38
)Accretion of discount on marketable securities, net


(163
)


(6
)


52Increase (decrease) in fair value of long-term investment


(393
)


(3,198
)


524Value of shares received in connection with BioCancell investment related to consulting services


-



(34
)


(52
)Gain on sale of BioCancell shares


-



-



(46
)Stock based compensation


245



84



131Net cash used in operating activities


(173
)


(351
)


(238
)Cash flows from investing activities:Purchase of available-for-sale marketable securities


(3,989
)


-



(2,402
)Purchase of bank deposits


-



(2,500
)


-Proceeds from realization of available-for-sale marketable securities


9,545



4,000



-Proceeds from realization of bank deposits


-



-



2,523Proceeds from sale of BioCancell shares


-



-



113Long-term investment in BioCancell


(2,500
)


-



-Net cash provided by investing activities


3,056



1,500



234Increase (decrease) in cash and cash equivalents


2,883



1,149



(4
)Cash and cash equivalents at the beginning of the year


877



3,760



4,909Cash and cash equivalents at the end of the year

$
3,760


$
4,909


$
4,905
 
 Supplemental disclosure of cash flows activities:Cash received during the year for:Interest

$
47


$
68


$
120Non-cash activities:Net change in unrealized gain (loss) on marketable securities

$
38


$
(38
)

$
15Value of shares received in connection with BioCancell investment (Note 5)

$
17


$
56


$
47
  The accompanying notes are an integral part of the financial statements.
 
 F - 6
  TIKCROTECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
  NOTE 1:-
GENERAL
 
 Tikcro Technologies Ltd. ("the Company" or "Tikcro") was incorporated in 1999, under the laws of Israel.
 
 The Company has no significant business activities other than its holdings in BioCancell Therapeutics, Inc. ("BioCancell"), see Note 5.
 
 NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES
 
 a.
Basis of presentation:
 
 The financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP").
 
 b.
Use of estimates:
 
 The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant assumptions are employed in estimates used in determining the investment in BioCancesll for which the Company chose to apply the fair value option and stock based compensation. Actual results could differ from those estimates.
 
 c.
Financial statements in U.S. dollars:
 
 A substantial portion of the Company's cash flow transactions is incurred in dollars. Investing activities and equity transactions are made in dollars. The Company's management believes that the dollar is the currency of the primary economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the dollar.
 
 Accordingly, monetary accounts maintained in currencies other than the dollar are re-measured into U.S. dollars in accordance with Accounting Standards Codification ("ASC") No. 830. All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.
 
 d.
Cash equivalents:
 
 Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less.
 
 e.
Short term deposits:
 
 Bank deposits with maturities of more than three months but less than one year are included in short-term deposits. Such short-term deposits are stated at cost which approximates market values.
 
 F - 7
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
 
 NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
 
 f.
Marketable securities:
 
 The Company accounts for investments in marketable securities in accordance with ASC No. 320, “Investments - Debt and Equity Securities”.
 
 Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date.
 
 The Company classifies all of its marketable securities as available for sale. Available for sale securities are stated at fair value, with the unrealized gains and losses, net of tax, reported in “accumulated other comprehensive income (loss)” in shareholders’ equity. Realized gains and losses on sale of investments are included in “financial income, net” and are derived using the specific identification method for determining the cost of securities.
 
 The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest and dividends on securities are included in “financial income, net”.
 
 The Company recognizes an impairment charge when the fair value of a debt security is below its cost basis of such security and such decline is judged to be other-than-temporary. Factors considered in making such a determination include the duration and severity of the decline, the reason for the decline in value, the potential recovery period and the Company’s intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis. For securities that are deemed other-than-temporarily impaired, the amount of impairment is recognized in the statement of income and is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income. For the three years ended December 31, 2010 the Company did not identify any other-than-temporary impairment loss
 
 g.
Long-term investment:
 
 The Company adopted ASC No. 825, "Financial Instruments" as of the date of the investment in BioCancell and elected to apply the fair value option to its long-term investment. The primary reasons for electing the fair value option were simplification and cost-benefit considerations, as well as expansion of the use of fair value measurement being consistent with the FASB's long-term measurement objectives for accounting for financial instruments. The losses and gains due to changes in fair value for items measured at fair value pursuant to election of the fair value option were included in financial income, net. See also Note 5.
 
 h.
Income taxes:
 
 The Company account for income taxes in accordance with ASC No. 740, "Income Taxes". This ASC prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.
 
 F - 8
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
 
 NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
 
 Based on ASC No. 740 a two-step approach is used to recognize and measure uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income tax.
 
 i.
Accounting for stock-based compensation:
 
 The Company accounts for stock-based compensation in accordance with ASC No. 718, "Compensation-Stock Compensation". ASC No. 718 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 an expense over the requisite service periods in the Company's income statements. Upon exercise of stock options the Company issues new shares.
 
 The Company recognizes compensation expenses for the value of its awards granted based on the straight line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC No. 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
 
 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. No options were granted during 2008, 2009 and 2010. The Company values non-vested shares based on the market value of the underlying shares at the date of grant.
 
 j.
Fair value of financial instruments:
 
 The Company measures its cash equivalents, deposits, marketable securities and long-term investment at fair value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
 
 Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
 Level 2 - Other inputs that are directly or indirectly observable in the marketplace, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets with insufficient volume or infrequent transactions, or other inputs that are observable (model-derived valuations in which significant inputs are observable), or can be derived principally from or corroborated by observable market data.
 
 Level 3 - Unobservable inputs which are supported by little or no market activity and significant to the overall fair value measurement.
 
 The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
 
 F - 9
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
  NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
 
 k.
Basic and diluted net earnings (loss) per share:
 
 Basic net earnings (loss) per share are computed based on the weighted average number of Ordinary shares outstanding during each year. Diluted net earnings (loss) per share are computed based on the weighted average number of Ordinary shares outstanding during each year, plus dilutive potential Ordinary shares considered outstanding during the year, in accordance with ASC No. 260, "Earnings per Share".
 
 The total number of shares excluded from the calculation of the diluted net earnings (loss) per share, because they had anti-dilutive effect, for the years ended December 31, 2008 and 2009 and 2010, were 592,624, 66,667 and 288,323, respectively.
 
 l.
Concentrations of credit risks:
 
 Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, and available-for-sale marketable debt securities.
 
 Cash, cash equivalents and deposits are invested in major banks in Israel and the U.S., mainly in U.S. dollars. Such deposits in the United States may be in excess of insured limits and are not insured in other jurisdictions. Management believes that the institutions in which the Company invests and the financial institutions that hold the Company's investments are financially sound and, accordingly, low credit risk exists with respect to these investments.
 
 The Company often invests in marketable securities which include investments in corporate investment grade debentures.
 
 In addition, with respect to the Company's investment in Biocancell, refer to Note 5.
 
 The Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
 
 m.
Treasury shares:
 
 The Company repurchases Ordinary shares on the open market which are held as treasury shares. The Company presents the cost of repurchased treasury shares as a reduction in shareholders' equity.
 
 F - 10
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
  NOTE 3:-
MARKETABLE SECURITIES
 
 The following is a summary of available-for-sale marketable securities (excluding accrued interest receivable included in other current assets on balance sheet):
 
 December 31, 2010Amortized

cost


Gross

Unrealized

Gains


Gross

Unrealized

Loss


Estimated

fairmarket

valueAvailable-for-sale:Corporate debentures

$
2,350


$
15


$
0


$
2,365
 
 As of December 31, 2009 there were no marketable securities. As of December 31, 2010 the marketable securities have contractual maturities of over one year (through two years).
 
 NOTE 4:-
FAIR VALUE MEASUREMENTS
 
 In accordance with ASC No. 820 and ASC No. 825, the Company measures its long-term investment, which is comprised from investments in Ordinary shares, convertible loans and warrants (see also Note 5) at fair value. Investment in Ordinary shares and in marketable securities are classified within Level2, since these assets are valued using quoted market price in an active market.
 
 Convertible loan and warrants of Biocancell are classified within Level 3 because they are valued using valuation techniques. Some of the inputs to these models are unobservable in the market and are significant, which are based on a valuation using an independent valuation firm. The valuation uses a binominal model for evaluating derivatives, combined with other market-based analysis. The main variables for the valuations are: average returns of notes of similar traded firms, historical variance of the investee's stock price, applicable currency exchange rates, and risk free interest rates. Key assumptions in determining the estimated fair value of the convertible loan and warrants as of December 31, 2010 include (a) the risk free interest rate of 0.48% and 0.85 % for the convertible loan and warrants, respectively (2009: 1.47% and 1.99%, respectively) and (b) a volatility of 73.2% (2009: 136.4%) (c) probability of the full ratchet mechanism .  The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. Expected volatility was calculated based upon actual historical stock price movements.
 F - 11
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
 NOTE 4:-
FAIR VALUE MEASUREMENTS (Cont.)
 The Company's financial assets measured at fair value on a recurring basis consisted of the following types of instruments:
 
 As of December 31, 2010Fair value measurements using input typeLevel 1


Level 2


Level3


TotalMarketable securities – corporate debentures

$
-


$
2,365


$
-


$
2,365Long-term investment -  investment in Ordinary shares


636



-







636Long-term investment - investment in convertible loan and warrants (*)


-



-



4,989



4,989Total financials assets

$
636


$
2,365


$
4,989


$
7,990
 
 As of December 31, 2009Fair value measurements using input typeLevel 1


Level 2


Level3


TotalLong-term investment -  investment in Ordinary shares

$
624


$
-


$
-


$
624Long-term investment - investment in convertible loan and warrants  (*)


-



-



5,540



5,540Total financials assets

$
624


$
-


$
5,540


$
6,164
 
 (*)
Including accrued interest on the loan
 
 During the years 2009 and 2010, there have been no transfers in and/or out of Level 3. All changes in the Level 3 were as a result of change in fair value.
 
 NOTE 5:-
LONG - TERM INVESTMENT
 
 In July 2008, the Company signed an agreement with BioCancell Therapeutics, Inc. ("BioCancell"), an Israel-based clinical-stage biopharmaceutical company, whose Common stock is listed on the Tel Aviv Stock Exchange. As part of the agreement, the Company provided funding to BioCancell, is entitled to appoint one member to BioCancell's board of directors and provides BioCancell with certain consulting services. It was also agreed between Tikcro and two major shareholders of BioCancell, who held together with Tikcro at December 31, 2010 approximately 28% of the shares of BioCancell (approximately 38% on a fully diluted basis), to vote for one member of the board for each of these 3 shareholders. However, no restrictions were made on the vote for other members of the board.
 
 The investment included a purchase of 837,521 shares of Common stock of BioCancell at a price per share in NIS equal to $ 0.597 ($ 500 in total), a convertible loan in the amount of $ 2,000 with a conversion price per share in NIS equal to $ 0.716 and receiving a warrant to purchase from BioCancell up to 4,301,906 shares of Common stock at a price per share in NIS equal to $ 0.716. During the year ended December 31, 2010, the Company sold 104,372 shares of Common stock of BioCancell for consideration of $113, and received 63,939 shares of Common stock for consulting services (see Note 9). As of December 31, 2010, Tikcro's voting stock interest in BioCancell, based on its outstanding Common stock of 924,966 shares, represented approximately 3.5% (17.2% on a fully diluted basis).
 
 In addition, Tikcro is entitled to a "full ratchet" anti-dilution protection in cases Biocancell issues additional securities, under terms stipulated in the agreement.
 
 F - 12
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
 
 NOTE 5:-
LONG TERM INVESTMENT (Cont.)
 
 The Company has a representative on BioCancell's board of directors. In addition, as part of the investment agreement, the board of directors of BioCancell has designated an executive committee comprised of 4 members of the board of directors including one Tikcro representative (the "executive committee"). The approval of the executive committee will be required for the consummation of material transaction of BioCancell, adoption of BioCancell's budget, decisions relating to investment policy and a working plan.
 
 In connection with the investment, for the consulting services provided by the Company and as long as its representative serves on BioCancell's board of directors, Tikcro is entitled to the management fees in amount of $ 30 per annum and 63,939 shares of Common stock of BioCancell. Starting the last quarter of 2010, the Company is also entitled to receive interest in cash accrued on the convertible loan granted to Biocancell.
 
 As a result of applying ASC No. 825, the Company has recorded financial income in the amount of $ 393 and $ 3,198 for the years ended December 31, 2008 and 2009, respectively and financial expenses in the amount of $524 for the year ended December 31, 2010.
 
 The Company undertook to pay a fee of 4% of the net realized profits from securities held in portfolio companies.
  NOTE 6:-
COMMITMENTS AND CONTINGENT LIABILITIES
 
 a.
Directors and officers indemnification agreements:
 
 The Company, from time to time, has entered into indemnification agreements with several of its directors and officers, in which the Company undertakes to indemnify them, to the fullest extent permitted by law, for acts taken or omitted by them in their respective capacities as directors or officers of the Company. Pursuant to these agreements, the obligations of the Company remain in effect even after the termination of the directors and officers services to or employment with the Company.
 
 b.
Litigation:
 
 In June 2009, one of the Company's shareholders holding 1,198,755 shares representing approximately 14% of the outstanding shares at that time filed a complaint in the District Court of Tel Aviv against the Company and certain of its present directors and a former officer requesting, among other things, an order that the Company call a meeting of shareholders to vote on (i) a proposal to amend the Company's articles of association to grant to its shareholders the power, normally conferred upon the board of directors, to determine plans of action for the Company and (ii) if such proposal is approved by the Company's shareholders, to approve a distribution of substantially all of Company's cash and all of its securities in BioCancell. The Company believes that the complaint is without merit and intends to defend against it vigorously.
 
 F - 13
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
 
 NOTE 7:-
SHAREHOLDERS' EQUITY
 
 a.
Ordinary shares:
 
 The Ordinary shares confer upon the holders the right to receive notice to participate and vote in general meetings of the Company and the right to receive dividends, if declared.
 
 b.
Stock option plans:
 
 1.
Under the Company's stock option plan (as amended in December 2007) ("the plan"), shares and options to purchase shares may be granted to employees, officers, consultants and directors of the Company.
 
 2.
No options were granted, exercised or forfeited during 2008, 2009 and 2010. Regarding shares issued, see b.4 below. As of December 31, 2010, an aggregate of 1,891,356 Ordinary shares of the Company were reserved for issuance under the plan.
 
 3.
The options granted generally become fully exercisable after three to four years and expire no later than 10 years from the approval date of the option plan under terms of grant. Any option forfeited or cancelled before expiration become available for future grants.
 
 The following is a summary of the Company's stock options transactions in 2010:
 
 Year ended December 31, 2010Amount


Weighted

average

exercise

price


Weighted average

remaining contractual life


Aggregate intrinsic value *)Options outstanding at beginning of year


133,334


$
0.92



5.14


$
-Granted


-


$
-



-


$
-Exercised


-


$
-



-


$
-Options outstanding at end of year


133,334


$
0.92



4.14


$
-Vested and expected to vest at end of year


133,334


$
0.92



4.14


$
-Options exercisable at end of year


133,334


$
0.92



4.14


$
-
 
 *) The options were out of the money as of December 31, 2010 and their intrinsic value was considered as zero.
 
 The options outstanding as of December 31, 2010, have been separated into two exercise prices as follows:
 
 Optionsoutstanding and exercisable


Weighted averageas of


remainingExercise


December 31,


contractualPrice


2010


life (years)$
0.87



66,667



2.65$
0.97



66,667



5.62133,334



4.14
 
 F - 14
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
 
 NOTE 7:-
SHAREHOLDERS' EQUITY (Cont.)
 
 4.
The following table summarizes information relating to restricted shares, as well as changes to such awards during 2008, 2009 and 2010:
 
 2008


2009


2010Outstanding at beginning of year


-



223,763



181,808Granted


459,291



59,621



73,620Vested


(235,528
)


(101,576
)


(123,378
)Outstanding as of December 31,


223,763



181,808



132,050
 
 The weighted average fair values at grant date of restricted shares granted for the years ended December 31, 2008, 2009 and 2010 were $ 0.7, $ 0.59 and $0.6 respectively.
 
 Restricted shares are subject to a repurchase right by the Company on certain occasions. Under the repurchase right, the Company may reacquire a pro-rata portion of the granted shares, for no consideration, if certain conditions occur including the employees' end of service with the Company.
 
 As of December 31, 2010, there was $75 of total unrecognized compensation cost related to share-based compensation arrangement granted under the plan. That cost is expected to be recognized over a weighted-average period of 1.0 year.
 
 During 2008, the Company extended the vesting schedule of certain restricted shares. According to ASC No. 718, the change was treated as a cancellation of the original shares and a grant of a new award. Accordingly, in the financial statements ended December 31, 2008, the Company reversed the remaining compensation cost and the full fair value of the new award on the modification date in the amount of $ 134 is recognized over the remaining vesting period.
 
 During 2009 and 2010, the Company shortened the vesting schedule of certain restricted shares. According to ASC No. 718, the change was treated as modification. Accordingly, in the financial statements for the year ended December 31, 2009 and 2010, the Company recorded incremental compensation costs based on fair value of the awards on the modification dates in the amount of $ 60 and $12 respectively, which is recognized over the remaining vesting periods.
 
 c.
Shareholder bonus rights plan:
 
 On September 12, 2005, the Company's Board of Directors adopted a Shareholder Bonus Rights Plan (the "Rights Plan") pursuant to which share purchase bonus rights (the "Right") were distributed on September 26, 2005, at the rate of one Right for each of the Company's 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 the Company's shareholders are able to realize the long-term value of their investment in the Company in the event of a potential takeover which does not reflect the full value of the Company and is otherwise not in the best interests of the Company and its shareholders. The Rights Plan is also intended to deter unfair or coercive takeover tactics.
 
 F - 15
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
  NOTE 7:-
SHAREHOLDERS' EQUITY (Cont.)
 
 Each right will entitle shareholders to buy one-half of one of the Company's Ordinary shares. The Rights generally will be exercisable and transferable apart from the Company's Ordinary shares only if a person or group becomes an "Acquiring Person" by acquiring beneficial ownership of 15% or more of the Company's 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 the Company's Board of Directors, at $ 0.03 per Right, at any time until the tenth business day following public disclosure that a person or group has become an "Acquiring Person".
 
 NOTE 8:-
TAXES ON INCOME
 
 a.
Corporate tax structure:
 
 Taxable income of Israeli companies is subject to tax at the rate of 26% in 2009, and 25% in 2010. In July 2009, Israel's Parliament (the Knesset) passed the Economic Efficiency Law (Amended Legislation for Implementing the Economic Plan for 2009 and 2010), 2009, which prescribes, among other things, an additional gradual reduction in the Israeli corporate tax rate and real capital gains tax rate starting from 2011 to the following tax rates: 2011 - 24%, 2012 - 23%, 2013 - 22%, 2014 - 21%, 2015 - 20%, 2016 and thereafter - 18%.
 
 Significant components of the Company's deferred tax liabilities and assets are as follows:
 
 December 31,2009


2010Deferred tax assets:Net operating loss and capital loss carry forward

$
27,223


$
28,951Valuation allowance


(26,563
)


(28,389
)Deferred tax asset


660



562Deferred tax liability - increase in fair value of long-term investment


(660
)


(562
)Net deferred tax asset

$
-


$
-
 
 Management currently believes that since the Company has a history of losses it is more likely than not that the deferred tax assets regarding the loss carry-forward and other temporary differences will not be realized in the foreseeable future.
 
 c.
Net operating losses carry-forward:
 
 The Company has accumulated operating losses for tax purposes as of December 31, 2010, in the amount of approximately $ 31,969 (denominated in NIS), which may be carried forward and offset against taxable income in the future for an indefinite period.
 
 The Company has accumulated capital losses of approximately $ 127,360 (denominated in NIS), which may be carried forward and offset against capital gains.
 F - 16
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
 
 NOTE 8:-
TAXES ON INCOME (Cont')
 
 d.
The main reconciling item from the statutory tax rate of the Company to the effective tax rate is the offset of operating income with carry-forward losses.
 
 e.
Tax assessments for the tax years up to and including 2004 are considered as final subject to the powers vested with the director of the tax authority pursuant to sections 145,147 and 152 of the income tax ordinance.
 
 f.
As of December 31, 2009 and 2010 and for the twelve-month periods then ended, the Company did not have any unrecognized tax benefits.
 
 
 NOTE 9:-
RELATED PARTY TRANSACTIONS
 
 The balances with and the results of operations from transactions with related parties were as follows:
 
 December 31,2009


2010Balances:Payables (*)

$
(14
)

$
(14
)Receivables (**)

$
40


$
107
 
 Year ended December 31,2008


2009


2010Transactions:Administrative services (*)

$
48


$
48


$
48Consulting services (**)

$
20


$
61


$
82Interest on convertible loan (**)


-



-


$
41
 
 (*)
On January, 2000 Orckit Communications Ltd (“Orckit”) executed a plan of separation which divided Orckit into two separate companies: (i) Tikcro, and (ii) Orckit.  A portion of Orckit and the Company’s shares beneficially owned by shared owners. Orckit provides the Company with certain administrative services.
 
 (**)
Consulting services provided by the Company in connection with the investment in BioCancell -See Note 5. The consulting fees are recorded as on offset in the operating expenses in the statement of operations.
 
 F - 17
 
 TIKCRO TECHNOLOGIES LTD.
 NOTES TO FINANCIAL STATEMENTS
 U.S. dollars in thousands, except share and per share data
  NOTE 10:-
BASIC AND DILUTED NET EARNINGS (LOSS) PER SHARE
 
 The following table sets forth the computation of basic and diluted net earnings (loss) per share.
 
 Year ended December 31,2008


2009


2010Net  income (loss)

$
(6
)

$
2,895


$
(778
)
 
 Weighted average Ordinary shares outstanding


8,166,199



8,347,179



8,475,833Effect of dilutive securities:Employee stock options and shares


-



45,104



-Diluted weighted average Ordinary shares outstanding


8,166,199



8,392,283



8,475,833
 
 NOTE 11:-
SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
 
 a.
At December 31, 2009, the Company had bank deposits amounting to $ 2,500 denominated in dollars bearing interest at a rate of 1.55% per year. The deposits matured during 2010.
 
 b.
Other current liabilities:
 
 December 31,2009


2010Tax authorities

$
99


$
102Director fees


30



47Accrued expenses, open vendor accounts and deferred income


151



169$
280


$
318
 
 c.
Financial income, net
 
 Year ended December 31,2008


2009


2010Financial expenses:Revaluation of long term investment


-



-


$
(524
)Bank charges currency exchange rate and other

$
(26
)

$
(9
)


(4
)$
(26
)

$
(9
)

$
(528
)Financial income:Accretion of discount on marketable securities, net


285



93



52Interest income and other


-



-



41Gain on sale of BioCancell shares


-



-



46Revaluation of long term investment


393



3,198



-678



3,291



139$
652


$
3,282


$
(389
)
 
 F - 18