----

----

| American      Depositary Shares, each representing | None                                            |
|----------------------------------------------------|-------------------------------------------------|
| two      Ordinary Shares, par value NIS 0.1        |                                            |
| (Title      of Class)                              | (Name      of each exchange on whichregistered) |

----

| 11,913,805      American Depositary Shares | 58,561,065      Ordinary Shares |
|--------------------------------------------|---------------------------------|

|  ̈ U.S.      GAAP | x  International      Financial Reporting Standards as issued |  ̈  Other |
|-----------------------|-------------------------------------------------------------------------|-------------------------|
|                  | by      the International Accounting Standards Board                    |                    |

----

|                                                                |                                                                                   | Page   |
|---------------------------------------------------------------------|----------------------------------------------------------------------------------------|--------|
|                                                                |                                                                                   |   |
| SPECIAL      CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS | 1                                                                                      |
|                                                                |                                                                                   |   |
| PART      I                                                         |                                                                                   |
| ITEM      1                                                         | Identity      of Directors, Senior Management and Advisers                             | 2      |
| ITEM      2                                                         | Offer      Statistics and Expected Timetable                                           | 2      |
| ITEM      3                                                         | Key      Information                                                                   | 2      |
| ITEM      4                                                         | Information      on the Company                                                        | 22     |
| ITEM      4A                                                        | Unresolved      Staff Comments                                                         | 36     |
| ITEM      5                                                         | Operating      and Financial Review and Prospects                                      | 36     |
| ITEM      6                                                         | Directors,      Senior Management and Employees                                        | 54     |
| ITEM      7                                                         | Major      Shareholders and Related Party Transactions                                 | 63     |
| ITEM      8                                                         | Financial      Information                                                             | 63     |
| ITEM      9                                                         | The      Offer and Listing                                                             | 64     |
| ITEM      10                                                        | Additional      Information                                                            | 66     |
| ITEM      11                                                        | Quantitative      and Qualitative Disclosures About Market Risk                        | 85     |
| ITEM      12                                                        | Description      of Securities other than Equity Securities                            | 86     |
|                                                                |                                                                                   |
| PART      II                                                        |                                                                                   |
| ITEM      13                                                        | Defaults,      Dividend Arrearages and Delinquencies                                   | 87     |
| ITEM      14                                                        | Material      Modifications to the Rights of Security Holders and Use of      Proceeds | 87     |
| ITEM      15                                                        | Controls      and Procedures                                                           | 87     |
| ITEM      16                                                        | Reserved                                                                               | 88     |
| ITEM      16A                                                       | Audit      Committee Financial Expert                                                  | 88     |
| ITEM      16B                                                       | Code      of Ethics                                                                    | 88     |
| ITEM      16C                                                       | Principal      Accountant Fees And Services                                            | 88     |
| ITEM      16D                                                       | Exemptions      From The Listing Standards For Audit Committees                        | 89     |
| ITEM      16E                                                       | Purchases      Of Equity Securities By The Issuer And Affiliated    Purchasers         | 89     |
| ITEM      16G                                                       | Corporate      Governance                                                              | 89     |
|                                                                |                                                                                   |   |
| PART      III                                                       |                                                                                   |
| ITEM      17                                                        | Financial      Statements                                                              | 90     |
| ITEM      18                                                        | Financial      Statements                                                              | 90     |
| ITEM      19                                                        | Exhibits                                                                               | 90     |
|                                                                |                                                                                   |   |
| SIGNATURES                                                          | 93                                                                                     |

----

----

----

|                                                                                       |   | Year ended December 31,                                |       |
|--------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                                                                       |   | 2009                                                   |       |   | 2008 |   |   | 2007 |   |
|                                                                                       |   | U.S. dollars in thousands (except per share      data) |       |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |
| Revenues                                                                                   |   |                                                   | -          |   |   |   | 5,940 |   |   |   | 907 |   |
| Cost      of revenues                                                                      |   |                                                   | -          |   |   |   | 1,841 |   |   |   | 110 |   |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Gross      profit                                                                          |   |                                                   | -          |   |   |   | 4,099 |   |   |   | 797 |   |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Research      and development costs                                                        |   |                                                   | -          |   |   |   | 11,722 |   |   |   | 11,500 |   |
| General      and administrative expenses (income)                                          |   |                                                   | (2,429     | )*) |   |   | 3,937 |   |   |   | 7,596 |   |
| Impairment      loss of intangible asset                                                   |   |                                                   | -          |   |   |   | 7,500 |   |   |   | - |   |
| Other      gains (losses), net                                                             |   |                                                   | 139        |   |   |   | 288 |   |   |   | (8 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Operating      income (loss)                                                               |   |                                                   | 2,568      |   |   |   | (18,772 | ) |   |   | (18,307 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Finance      income                                                                        |   |                                                   | 6          |   |   |   | 331 |   |   |   | 668 |   |
| Finance      costs                                                                         |   |                                                   | 10         |   |   |   | 17 |   |   |   | 30 |   |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Financial      income (costs), net                                                         |   |                                                   | (4         | ) |   |   | 314 |   |   |   | 638 |   |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Income      (loss) before taxes on income                                                  |   |                                                   | 2,564      |   |   |   | (18,458 | ) |   |   | (17,669 | ) |
| tax      benefit                                                                           |   |                                                   | (23        | ) |   |   | (31 | ) |   |   | (206 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Net      income (loss) for the year attributable to equity holders of the      parent      |   |                                                   | 2,587      |   |   |   | (18,427 | ) |   |   | (17,463 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Basic      and diluted earnings (loss) per share      (in U.S. dollars) **) |   |                                                   | 0.044      |   |   |   | (0.315 | ) |   |   | (0.382 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Weighted      average number of issued ordinary shares **)                                 |   |                                                   | 58,561,065 |   |   |   | 58,553,864 |   |   |   | 45,698,564 |   |

| *) | Including      reduced expenses which result from forfeiture of shares that were      contingent on the performance of the former chairman and CEO, see also      Note 16b to the financialstatements. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **) | After      taking into account the capital consolidation effected on June 22, 2009      (see note 16a(2) to the financialstatements). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                  |   | As of December 31,        |   |
|---------------------------------------------------------------------------------------|--------|---------------------------|--------|
|                                                                                  |   | 2009                      |   |   | 2008 |   |   | 2007 |   |
|                                                                                  |   | U.S. dollars in thousands |   |
| Cash,      cash equivalents, bank deposits and trading and marketable      securities |   |                      | 412    |   |   |   | 2,924 |   |   |   | 12,977 |   |
| Working      capital                                                                  |   |                      | (151   | ) |   |   | 1,433 |   |   |   | 8,532 |   |
| Total      assets                                                                     |   |                      | 715    |   |   |   | 3,402 |   |   |   | 23,378 |   |
| Long      term obligations                                                            |   |                      | -      |   |   |   | - |   |   |   | 131 |   |
| Total      shareholders' equity                                                       |   |                      | 7      |   |   |   | 1,474 |   |   |   | 17,878 |   |

----

|                                                                            |   | Year ended December 31,                                    |       |
|---------------------------------------------------------------------------------|--------|------------------------------------------------------------|------------|
|                                                                            |   | 2006                                                       |       |   | 2005 |   |
|                                                                            |   | U.S.      dollars in thousands (exceptper      share data) |       |
|                                                                            |   |                                                       |       |   |   |   |
| Revenues:                                                                       |   |                                                       |       |   |   |   |
| Reimbursed      out-of-pocket expenses                                          |   |                                                       | -          |   |   |   | 2,743 |   |
| License                                                                         |   |                                                       | 454        |   |   |   | 454 |   |
|                                                                            |   |                                                       | 454        |   |   |   | 3,197 |   |
| Cost      of revenues:                                                          |   |                                                       |       |   |   |   |   |   |
| Reimbursed      out-of-pocket expenses                                          |   |                                                       | -          |   |   |   | 2,743 |   |
| License                                                                         |   |                                                       | 54         |   |   |   | 54 |   |
|                                                                            |   |                                                       | 54         |   |   |   | 2,797 |   |
|                                                                            |   |                                                       |       |   |   |   |   |   |
| Gross      profit                                                               |   |                                                       | 400        |   |   |   | 400 |   |
|                                                                            |   |                                                       |       |   |   |   |   |   |
| Research      and development                                                   |   |                                                       | 10,229     |   |   |   | 7,313 |   |
| In-process      research and development                                        |   |                                                       | -          |   |   |   | 1,783 |   |
| General      and administrative expenses                                        |   |                                                       | 5,576      |   |   |   | 5,457 |   |
| Business      development costs                                                 |   |                                                       | 641        |   |   |   | 227 |   |
|                                                                            |   |                                                       |       |   |   |   |   |   |
| Operating      loss                                                             |   |                                                       | (16,046    | ) |   |   | (14,380 | ) |
|                                                                            |   |                                                       |       |   |   |   |   |   |
| Financial      and other income, net                                            |   |                                                       | 1,141      |   |   |   | 443 |   |
| Income      taxes                                                               |   |                                                       | (227       | ) |   |   | (78 | ) |
|                                                                            |   |                                                       |       |   |   |   |   |   |
| Loss      for the period                                                        |   |                                                       | (15,132    | ) |   |   | (14,015 | ) |
|                                                                            |   |                                                       |       |   |   |   |   |   |
| Basic      and diluted loss per share      (in U.S. dollars) **) |   |                                                       | (0.375     | ) |   |   | (0.412 | ) |
|                                                                            |   |                                                       |       |   |   |   |   |   |
| Weighted      average number of issued ordinary shares **)                      |   |                                                       | 40,347,459 |   |   |   | 34,024,601 |   |

| **) | After      taking into account the capital consolidation effected on June 22, 2009      (see note 16a(2) to the financialstatements). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                  |   | As of December 31,        |   |
|---------------------------------------------------------------------------------------|--------|---------------------------|--------|
|                                                                                  |   | 2006                      |   |   | 2005 |   |
|                                                                                  |   | U.S. dollars in thousands |   |
| Cash,      cash equivalents, bank deposits and trading and marketable      securities |   |                      | 25,347 |   |   |   | 13,360 |   |
| Working      capital                                                                  |   |                      | 22,694 |   |   |   | 11,385 |   |
| Total      assets                                                                     |   |                      | 26,900 |   |   |   | 15,151 |   |
| Long      term obligations                                                            |   |                      | 738    |   |   |   | 1,493 |   |
| Total      shareholders' equity                                                       |   |                      | 22,760 |   |   |   | 11,252 |   |

----

----

----

|   | · | difficulty      in establishing or managing relationships with clinical research      organizations and physicians; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | different      standards for the conduct of clinical trials and/or health care      reimbursement; |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | our      inability to locate qualified local consultants, physicians, and      partners; |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | the      potential burden of complying with a variety of foreign laws, medical      standards and regulatory requirements, including the regulation of      pharmaceutical products and treatment;and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | general      geopolitical risks, such as political and economic instability, and      changes in diplomatic and traderelations. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | obtaining      regulatory approvals to commence a clinical  trial; |
|--------|--------|--------------------------------------------------------------------|

|   | · | reaching      agreement on acceptable terms with prospective contract research      organizations, or CROs, and trial sites, the terms of which can be subject      to extensive negotiation and may vary significantly among different CROs      and trial sites; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | slower      than expected rates of patient recruitment due to narrow screening      requirements; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | the      inability of patients to meet protocol requirements imposed by the FDA or      other regulatory authorities; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | the      need or desire to modify our manufacturing  process; |
|--------|--------|---------------------------------------------------------------|

|   | · | delays,      suspension, or termination of the clinical trials due to the institutional      review board responsible for overseeing the study at a particular study      site; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | government      or regulatory delays or “clinical holds” requiring suspension or      termination of the trials. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | · | assist      us in developing, testing and obtaining regulatory approval for some of      our compounds and technologies; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | manufacture      our drug candidates; and |
|--------|--------|-------------------------------------------|

|   | · | market      and distribute our products. |
|--------|--------|------------------------------------------|

|   | · | perceptions      by members of the health care community, including physicians, of the      safety and efficacy of ourproducts; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      rates of adoption of our products by medical practitioners and the target      populations for our products; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | the      potential advantages that our products offer over existing treatment      methods or other products that may bedeveloped; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      cost-effectiveness of our products relative to competing products      including potential genericcompetition; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | · | the      level of off-label use of rHuEPO; |
|--------|--------|--------------------------------------------|

|   | · | the      availability of government or third-party payor reimbursement for our      products; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | the side effects or unfavorable      publicity concerning our products or similar products;      and |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | the      effectiveness of our and/or partners' sales, marketing and distribution      efforts. |
|--------|--------|------------------------------------------------------------------------------------------------|

----

----

|   | · | difficulty      and expense of assimilating the operations, technology or personnel of the      business; |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

----

|   | · | our      inability to attract and retain management, key personnel and other      employees necessary to conduct thebusiness; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      inability to maintain relationships with key third parties, such as      alliance partners, associated with thebusiness; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | · | exposure      to legal claims for activities of the business prior to the      acquisition; |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | the      diversion of our management’s attention from our core business;      and |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | the      potential impairment of substantial goodwill and write-off of in-process      research and development costs, adversely affecting our reported results      of operations. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | decreased      demand for a product; |
|--------|--------|--------------------------------------|

|   | · | injury      to our reputation; |
|--------|--------|--------------------------------|

|   | · | inability      to continue to develop a drug candidate or  technology; |
|--------|--------|------------------------------------------------------------------------|

|   | · | withdrawal      of clinical trial volunteers; and |
|--------|--------|---------------------------------------------------|

|   | · | loss      of revenues. |
|--------|--------|------------------------|

----

|   | · | the      progress of our planned researchactivities; |
|--------|--------|------------------------------------------------------|

|   | · | the      accuracy of our financialforecasts; |
|--------|--------|----------------------------------------------|

|   | · | the      number and scope of our planned development  programs; |
|--------|--------|-----------------------------------------------------------------|

|   | · | our      ability to establish and maintain current and new licensing or acquisition      arrangements; |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | our      ability to achieve our milestones under our licensing      arrangements; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | the      costs involved in enforcing patent claims and other intellectual property      rights; and |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | the      costs and timing of regulatoryapprovals. |
|--------|--------|---------------------------------------------------|

----

----

----

|   | · | developments      concerning our drug candidates; |
|--------|--------|---------------------------------------------------|

|   | · | announcements      of technological innovations by us or our  competitors; |
|--------|--------|----------------------------------------------------------------------------|

|   | · | introductions      or announcements of new products by us or our  competitors; |
|--------|--------|--------------------------------------------------------------------------------|

|   | · | announcements      by us of significant acquisitions, strategic partnerships, joint ventures      or capital commitments; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | changes      in financial estimates by securitiesanalysts; |
|--------|--------|------------------------------------------------------------|

|   | · | actual      or anticipated variations in interim operating results and near-term      working capital; |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | expiration      or termination of licenses, research contracts or other collaboration      agreements; |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | conditions      or trends in the regulatory climate and the biotechnology and      pharmaceutical industries; |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | changes      in the market valuations of similar companies;  and |
|--------|--------|------------------------------------------------------------------|

|   | · | additions      or departures of key personnel. |
|--------|--------|------------------------------------------------|

----

----

----

----

----

----

----

----

|   | · | initiate      a prospective, multi-center, double blind, placebo controlled Phase 1-2      clinical study intended to assess the safety and efficacy of rHuEPO when      given to patients with advanced MM; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | advance      the development of rHuEPO towards approval as treatment of MM either alone      or with a corporate partner; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | seek      to in-license or acquire additionalcandidates. |
|--------|--------|----------------------------------------------------------|

----

|   | · | Baz      R et al: A team from the Cleveland Clinic Myeloma Program analyzed      their experience with rHuEPO in MM patients. This retrospective analysis      provides data on 292 MM patients enrolled on different protocols between      1997 and 2003. The authors concluded that "rHuEPO was associated with      improved overall survival in this population of anemic MM patients with      SWOG stages II, III and IV." They summarized by saying that "a prospective      randomized trial is warranted to corroborate this finding" (Baz R et al:      Recombinant human erythropoietin is associated with increased overall      survival in patients with multiple myeloma (Acta Haematol 2007; 117:      162-7)). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Ludwig      H et al.: Forty two      patients with various types of cancers were treated with rHuEPO for their      anemia. The malignant diseases were: 18 multiple myeloma (MM), 10      myelodysplastic syndromes (MDS), 9 breast cancers and 5 colon cancers. The      median time period of treatment with rHuEPO was 16 weeks. The study was      designed to treat anemia (not the cancer). Response was defined as an      increase of the initial hemoglobin (Hb) level by at least 2 g/dl. The      response rates varied: 44.4% for breast cancer, 40% for colon cancer,      77.8% for MM, 10% for MDS. The median survival time of responders was 28.0      months as compared to only 9.2 months for non-responders. (Ludwig H et al;      Erythropoietin treatment for chronic anemia of selected hematological      malignancies and solid tumorsAnn Oncol 1993;  4:161-7). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Wallvik      J et al.: This Swedish group reports its experience with a      long-term follow-up of 68 MDS patients treated with rHuEPO. The median Hb      response duration was 15 months. The median overall survival time from      start of rHuEPO treatment was 26 months, significantly longer for      responders than for non-responders (49 vs. 18 months, p=0.018) (Wallvik J      et al.; Serum erythropoietin (EPO) levels correlate with survival and      independently predict response to EPO treatment in patients with      myelodysplastic syndromes. Eur J Haematol 2002; 68:  180-5). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

----

|   | · | is      intended to treat a serious or life-threatening  condition; |
|--------|--------|---------------------------------------------------------------------|

|   | · | is      intended to treat a serious aspect of the condition;  and |
|--------|--------|-------------------------------------------------------------------|

|   | · | has      the potential to address unmet medical needs, and this potential is being      evaluated in the planned drug development  program. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Phase 1: The drug is      administered to a small group of humans, either healthy volunteers or      patients, to test for safety, dosage tolerance, absorption, metabolism,      excretion, and clinicalpharmacology. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Phase 2: Studies are      conducted on a larger number of patients to assess the efficacy of the      product, to ascertain dose tolerance and the optimal dose range, and to      gather additional data relating to safety and potential adverse      events. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Phase 3: Studies      establish safety and efficacy in an expanded patient      population. |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | Phase 4: The FDA may      require Phase 4 post-marketing studies to find out more about the drug’s      long-term risks, benefits, and optimal use, or to test the drug in      different populations, such aschildren. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | slow      patient enrollment due to the nature of the clinical trial plan, the      proximity of patients to clinical sites, the eligibility criteria for      participation in the study or other factors, and the number of sites      participating in the trial; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | inadequately      trained or insufficient personnel at the study site to assist in      overseeing and monitoring clinical trials or delays in approvals from a      study site’s review board; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | longer      treatment time required to demonstrate efficacy or determine the      appropriate product dose; |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

|   | · | insufficient      supply of the drug candidates; |
|--------|--------|--------------------------------------------------|

|   | · | adverse      medical events or side effects in treated patients;  and |
|--------|--------|-----------------------------------------------------------------------|

|   | · | ineffectiveness      of the drug candidates. |
|--------|--------|----------------------------------------------|

----

----

----

|                                                                                       |   | Year ended December 31,                                |       |
|--------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                                                                       |   | 2009                                                   |       |   | 2008 |   |   | 2007 |   |
|                                                                                       |   | U.S. dollars in thousands (except per share      data) |       |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |
| Revenues                                                                                   |   |                                                   | -          |   |   |   | 5,940 |   |   |   | 907 |   |
| Cost      of revenues                                                                      |   |                                                   | -          |   |   |   | 1,841 |   |   |   | 110 |   |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Gross      profit                                                                          |   |                                                   | -          |   |   |   | 4,099 |   |   |   | 797 |   |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Research      and development costs                                                        |   |                                                   | -          |   |   |   | 11,722 |   |   |   | 11,500 |   |
| General      and administrative expenses (income)                                          |   |                                                   | (2,429     | )*) |   |   | 3,937 |   |   |   | 7,596 |   |
| Impairment      loss of intangible asset                                                   |   |                                                   | -          |   |   |   | 7,500 |   |   |   | - |   |
| Other      gains (losses), net                                                             |   |                                                   | 139        |   |   |   | 288 |   |   |   | (8 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Operating      income (loss)                                                               |   |                                                   | 2,568      |   |   |   | (18,772 | ) |   |   | (18,307 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Finance      income                                                                        |   |                                                   | 6          |   |   |   | 331 |   |   |   | 668 |   |
| Finance      costs                                                                         |   |                                                   | 10         |   |   |   | 17 |   |   |   | 30 |   |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Financial      income (costs), net                                                         |   |                                                   | (4         | ) |   |   | 314 |   |   |   | 638 |   |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Income      (loss) before taxes on income                                                  |   |                                                   | 2,564      |   |   |   | (18,458 | ) |   |   | (17,669 | ) |
| Tax      benefit                                                                           |   |                                                   | (23        | ) |   |   | (31 | ) |   |   | (206 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Net      income (loss) for the year attributable to equity holders of the      parent      |   |                                                   | 2,587      |   |   |   | (18,427 | ) |   |   | (17,463 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Basic      and diluted earnings (loss) per share      (in U.S. dollars) **) |   |                                                   | 0.044      |   |   |   | (0.315 | ) |   |   | (0.382 | ) |
|                                                                                       |   |                                                   |       |   |   |   |   |   |   |   |   |   |
| Weighted      average number of issued ordinary shares                                     |   |                                                   | 58,561,065 |   |   |   | 58,553,864 |   |   |   | 45,698,564 |   |

| *) | Including      reduced-expenses which result from forfeiture of shares that were      contingent on the performance of the former chairman and former CEO, see      also Note 16b to the financialstatements. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **) | After      taking into account the capital consolidation effected on June 22, 2009      (see note 16a(2) to the financialstatements). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                  |   | As of December 31,        |   |
|---------------------------------------------------------------------------------------|--------|---------------------------|--------|
|                                                                                  |   | 2009                      |   |   | 2008 |   |   | 2007 |   |
|                                                                                  |   | U.S. dollars in thousands |   |
| Cash,      cash equivalents, bank deposits and trading and marketable      securities |   |                      | 412    |   |   |   | 2,924 |   |   |   | 12,977 |   |
| Working      capital                                                                  |   |                      | (151   | ) |   |   | 1,433 |   |   |   | 8,532 |   |
| Total      assets                                                                     |   |                      | 715    |   |   |   | 3,402 |   |   |   | 23,378 |   |
| Long      term obligations                                                            |   |                      | -      |   |   |   | - |   |   |   | 131 |   |
| Total      shareholders' equity                                                       |   |                      | 7      |   |   |   | 1,474 |   |   |   | 17,878 |   |

----

----

----

----

----

----

----

|   | - | It      is technically feasible to complete the intangible asset so that it will      be available for use; |
|--------|---|-------------------------------------------------------------------------------------------------------------|

|   | - | Management      intends to complete the intangible asset and use or sell    it; |
|--------|---|---------------------------------------------------------------------------------|

|   | - | There      is an ability to use or sell the intangible  asset; |
|--------|---|----------------------------------------------------------------|

|   | - | It can be demonstrated how the      intangible asset will generate probable future economic      benefits; |
|--------|---|------------------------------------------------------------------------------------------------------------|

|   | - | Adequate      technical, financial and other resources to complete the development and      to use or sell the intangible asset are available;  and |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | The      expenditure attributable to the intangible asset during its development      can be reliably measured. |
|--------|---|-----------------------------------------------------------------------------------------------------------------|

----

|   | 1. | Revenues      from transfer of rights to use development which include the Company's      involvement during the development period, are recognized on a      straight-line basis over the expected term of the    agreement. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Revenues      from sale of DOS development rights to Presidio and rendering of ongoing      services by the Company are recognized as  follows: |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a) | The      fair value of labor services by the Company's employees is recognized over      the service term. |
|--------|----|------------------------------------------------------------------------------------------------------------|

|   | b) | The      difference between the sale consideration and the fair value of labor      services is recognized at the date of transaction as revenues from sale of      DOS development rights. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Interest      income is recognized on a periodic basis using the effective interest      method. |
|--------|----|--------------------------------------------------------------------------------------------------|

----

----

----

----

|   | · | the      costs involved in closing the Bio-Gal transaction, including the required      financing; |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | the      accuracy of our financialforecasts; |
|--------|--------|----------------------------------------------|

|   | · | the      timing of the in-licensing, partnering and acquisition of new product      opportunities; |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | the      timing of expenses associated with product development and manufacturing      of the proprietary drug candidate that we have acquired from Bio-Gal Ltd.      and those that may be in-licensed, partnered or  acquired; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      ability to achieve our milestones under licensing arrangements;      and |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | the      costs involved in prosecuting and enforcing patent claims and other      intellectual property rights. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

----

|                         |   | Payment due by period (in thousands of US$) |   |
|------------------------------|--------|--------------------------------------------------------------------------------|--------|
| Contractual obligations |   | Total                                                                          |   |   | Less than 1 year |   |   | 1-3 years |   |   | 3-5 years |   |   | More than5 years |   |
| Operating      leases        |   |                                                                           | 34.2   |   |   |   | 28.2 |   |   |   | 6 |   |   |   | — |   |   |   | — |   |
| Total                        |   |                                                                           | 34.2   |   |   |   | 28.2 |   |   |   | 6 |   |   |   | — |   |   |   | — |   |

----

----

----

|                                |   | Research      and Development Expenses in thousand US$ |    |
|-------------------------------------|--------|--------------------------------------------------------|---------|
|                                |   | Years      ended December 31,                          |    |
|                                |   | 2009                                                   |    |   | 2008 |   |   | 2007 |   |
|                                |   |                                                   |    |   |   |   |   |   |   |
| Bicifadine                          |   |                                                   |    |   |   | 11,038 |   |   |   | 5,976 |   |
|                                |   |                                                   |    |   |   |   |   |   |   |   |   |
| DOS                                 |   |                                                   | — |   |   |   | 684 |   |   |   | 4,056 |   |
|                                |   |                                                   |    |   |   |   |   |   |   |   |   |   |
| Legacy      programs                |   |                                                   |    |   |   |   |   |   |   |   |   |   |
| Research      and development costs |   |                                                   | — |   |   |   | — |   |   |   | 1,524 |   |
| Less      participations            |   |                                                   | — |   |   |   | — |   |   |   | (56 | ) |
| Total      legacy programs          |   |                                                   | — |   |   |   | — |   |   |   | 1,468 |   |
|                                |   |                                                   |    |   |   |   |   |   |   |   |   |   |
| Total Research and    development   |   |                                                   |    |   |   |   |   |   |   |   |   |   |
| Research      and development costs |   |                                                   | — |   |   |   | 11,722 |   |   |   | 11,556 |   |
| Less      participations            |   |                                                   | — |   |   |   | — |   |   |   | (56 | ) |
|                                |   |                                                   | — |   |   |   | 11,722 |   |   |   | 11,500 |   |

----

| Name                |         | Age |         | Position                                            |
|---------------------|--------------|-----|--------------|-----------------------------------------------------|
| Amit      Yonay     |         | 40  |         | Chairman      of the Board of Directors             |
| Dafna      Cohen    |         | 40  |         | Non      Executive and External Director            |
| Jaron      Diament  |         | 42  |         | Non      Executive and External Director            |
| Marc      Allouche  |         | 36  |         | Non      Executive Director                         |
| Boaz      Shweiger  |         | 35  |         | Non      Executive Director                         |
| David      Grossman |         | 35  |         | Executive      Director and Chief Executive Officer |
| Ronen      Twito    |    | 35  |    | Chief      Financial Officer                        |

----

----

----

|   | · | first,      our audit committee reviews the proposal for  compensation; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | second,      provided that the audit committee approves the proposed compensation, the      proposal is then submitted to our Board of Directors for review, except      that a director who is the beneficiary of the proposed compensation does      not participate in any discussion or voting with respect to such proposal;      and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | finally,      if our Board of Directors approves the proposal, it must then submit its      recommendation to our shareholders, which is usually done in connection      with our shareholders’ generalmeeting. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | an      employment relationship; |
|--------|--------|----------------------------------|

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

|   | · | control;      and |
|--------|--------|-------------------|

|   | · | service      as an office holder, other than service as an officer for a period of not      more than three months, during which the company first offered shares to      the public. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | the      majority of shares voted at the meeting, including at least one-third of      the shares held by non-controlling shareholders voted at the meeting, vote      in favor of election of the director, with abstaining votes not being      counted in this vote; or |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      total number of shares held by non-controlling shareholders voted against      the election of the director does not exceed one percent of the aggregate      voting rights in the company. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                       |   | Year ended December 31, |    |
|--------------------------------------------|--------|-------------------------|---------|
|                                       |   | 2009                    |    |   | 2008 |   |   | 2007 |   |
| Research      and Development              |   |                    |    |   |   |   |   |   |   |
| Israel                                     |   |                    | — |   |   |   | 2 |   |   |   | 2 |   |
| US                                         |   |                    | — |   |   |   | — |   |   |   | 16 |   |
|                                       |   |                    | — |   |   |   | 2 |   |   |   | 18 |   |
| Financial      and general management      |   |                    |    |   |   |   |   |   |   |   |   |   |
| Israel                                     |   |                    | 2       |   |   |   | 3 |   |   |   | 4 |   |
| US                                         |   |                    | — |   |   |   | 2 |   |   |   | 2 |   |
|                                       |   |                    | 2       |   |   |   | 5 |   |   |   | 6 |   |
| Business      development                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Israel                                     |   |                    | — |   |   |   | — |   |   |   | — |   |
| US                                         |   |                    | — |   |   |   | 1 |   |   |   | 1 |   |
|                                       |   |                    | — |   |   |   | 1 |   |   |   | 1 |   |
| Total                                      |   |                    | 2       |   |   |   | 8 |   |   |   | 25 |   |
| Average      number of full-time employees |   |                    | 3       |   |   |   | 14 |   |   |   | 29 |   |

|                                                                     |   | Amount and nature of beneficial ownership |    |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------------|---------|
|                                                                |   | Ordinarysharesbeneficiallyownedexcludingoptions                    |    |   | Options1exercisablewithin60 days ofMay 31,2010 |   |   | Totalordinarysharesbeneficiallyowned |   |   | Percent ofordinarysharesbeneficiallyowned |   |
| Amit Yonay2Chairman of the      Board                     |   |                                                               | — |   |   |   | 70,833 |   |   |   | 70,833 |   |   |   | * |   |
| Marc      Allouche2Director                                              |   |                                                               | — |   |   |   | 70,833 |   |   |   | 70,833 |   |   |   | * |   |
| Dafna      CohenDirector                                                 |   |                                                               | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Jaron      DiamentDirector                                               |   |                                                               | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| David      GrossmanDirector      and Chief Executive Officer             |   |                                                               | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Boaz      Shweiger2Director                                              |   |                                                               | — |   |   |   | 70,833 |   |   |   | 70,833 |   |   |   | * |   |
| Ronen      Twito3Chief      Financial Officer                            |   |                                                               | — |   |   |   | 803,704 |   |   |   | 803,704 |   |   |   | 1.2 | % |
|                                                                     |   |                                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| All      directors and executive officers as a group    (7 persons) |   |                                                               | — |   |   |   | 1,016,203 |   |   |   | 1,016,203 |   |   |   | 1.6 | % |

----

|   | (1) | Options      to purchase ordinary shares. |
|--------|-----|-------------------------------------------|

|   | (2) | 70,833      options at an exercise price of NIS 0.298 per ordinary share of NIS 0.1      par value, exercisable until March 1,2020. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (3) | 803,704      options at an exercise price of NIS 0.075 per ordinary share of NIS 0.1      par value, exercisable until June 23,2019. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------|

|   | *  | Represents      Less than 1% of ordinary sharesoutstanding. |
|--------|---------|-------------------------------------------------------------|

----

----

----

|                                                          |   | US Dollar |   |
|---------------------------------------------------------------|--------|-----------|--------|
|                                                          |   | High      |   |   | Low |   |
| Last      Six Calendar Months                                 |   |      |   |   |   |   |   |   |
| June      2010 (until June 15)                                |   |      | 0.08   |   |   |   | 0.06 |   |
| May      2010                                                 |   |      | 0.11   |   |   |   | 0.06 |   |
| April      2010                                               |   |      | 0.13   |   |   |   | 0.11 |   |
| March      2010                                               |   |      | 0.13   |   |   |   | 0.10 |   |
| February      2010                                            |   |      | 0.14   |   |   |   | 0.12 |   |
| January      2010                                             |   |      | 0.15   |   |   |   | 0.09 |   |
| December      2009                                            |   |      | 0.15   |   |   |   | 0.09 |   |
| Financial      Quarters During the Past Two Full Fiscal Years |   |      |   |   |   |   |   |   |
| Second      Quarter of 2010 (until June 15)                   |   |      | 0.13   |   |   |   | 0.06 |   |
| First      Quarter of 2010                                    |   |      | 0.15   |   |   |   | 0.09 |   |
| Fourth      Quarter of 2009                                   |   |      | 0.18   |   |   |   | 0.09 |   |
| Third      Quarter of 2009                                    |   |      | 0.22   |   |   |   | 0.14 |   |
| Second      Quarter of 2009                                   |   |      | 0.32   |   |   |   | 0.05 |   |
| First      Quarter of 2009                                    |   |      | 0.20   |   |   |   | 0.05 |   |
| Fourth      Quarter of 2008                                   |   |      | 3.55   |   |   |   | 0.04 |   |
| Third      Quarter of 2008                                    |   |      | 4.96   |   |   |   | 2.95 |   |
| Second      Quarter of 2008                                   |   |      | 3.93   |   |   |   | 2.90 |   |
| First      Quarter of 2008                                    |   |      | 4.39   |   |   |   | 2.70 |   |
| Full      Financial Years Since Listing                       |   |      |   |   |   |   |   |   |
| 2009                                                          |   |      | 0.32   |   |   |   | 0.05 |   |
| 2008                                                          |   |      | 4.96   |   |   |   | 0.04 |   |
| 2007                                                          |   |      | 4.99   |   |   |   | 1.10 |   |
| 2006                                                          |   |      | 8.17   |   |   |   | 2.00 |   |

----

|  | 1 | Our      ADRs are quoted on the Pink Sheets since April 17, 2009. Our ADRs were quoted on the      NASDAQ Capital Market since December 3, 2007 until April 17, 2009 and      prior to that were quoted on the NASDAQ Global    Market. |
|--|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                          |   | New Israeli Shekel |   |   | US Dollar |   |
|---------------------------------------------------------------|--------|--------------------|--------|--------|-----------|--------|
|                                                          |   | High               |   |   | Low       |   |   | High |   |   | Low |   |
| Last      Six Calendar Months                                 |   |               |   |   |      |   |   |   |   |   |   |   |
| June      2010 (until June 15)                                |   |               | 0.262  |   |      |   | 0.162 |   |   |   | 0.069 |   |   |   | 0.042 |   |
| May      2010                                                 |   |               | 0.294  |   |      |   | 0.199 |   |   |   | 0.077 |   |   |   | 0.052 |   |
| April      2010                                               |   |               | 0.318  |   |      |   | 0.283 |   |   |   | 0.083 |   |   |   | 0.074 |   |
| March      2010                                               |   |               | 0.370  |   |      |   | 0.300 |   |   |   | 0.097 |   |   |   | 0.079 |   |
| February      2010                                            |   |               | 0.359  |   |      |   | 0.303 |   |   |   | 0.094 |   |   |   | 0.079 |   |
| January      2010                                             |   |               | 0.407  |   |      |   | 0.275 |   |   |   | 0.107 |   |   |   | 0.072 |   |
| December      2009                                            |   |               | 0.410  |   |      |   | 0.262 |   |   |   | 0.107 |   |   |   | 0.069 |   |
| Financial      Quarters During the Past Two Full Fiscal Years |   |               |   |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Second      Quarter of 2010 (until June 15)                   |   |               | 0.318  |   |      |   | 0.162 |   |   |   | 0.083 |   |   |   | 0.042 |   |
| First      Quarter of 2010                                    |   |               | 0.407  |   |      |   | 0.275 |   |   |   | 0.107 |   |   |   | 0.072 |   |
| Fourth      Quarter of 2009                                   |   |               | 0.468  |   |      |   | 0.262 |   |   |   | 0.123 |   |   |   | 0.069 |   |
| Third      Quarter of 2009                                    |   |               | 0.597  |   |      |   | 0.392 |   |   |   | 0.156 |   |   |   | 0.103 |   |
| Second      Quarter of 2009                                   |   |               | 1.285  |   |      |   | 0.200 |   |   |   | 0.336 |   |   |   | 0.052 |   |
| First      Quarter of 2009                                    |   |               | 0.345  |   |      |   | 0.095 |   |   |   | 0.090 |   |   |   | 0.025 |   |
| Fourth      Quarter of 2008                                   |   |               | 6.250  |   |      |   | 0.075 |   |   |   | 1.637 |   |   |   | 0.020 |   |
| Third      Quarter of 2008                                    |   |               | 8.700  |   |      |   | 5.065 |   |   |   | 2.278 |   |   |   | 1.326 |   |
| Second      Quarter of 2008                                   |   |               | 6.500  |   |      |   | 4.800 |   |   |   | 1.702 |   |   |   | 1.257 |   |
| First      Quarter of 2008                                    |   |               | 7.500  |   |      |   | 4.505 |   |   |   | 1.964 |   |   |   | 1.180 |   |
| Full      Financial Years Since Listing                       |   |               |   |   |      |   |   |   |   |   |   |   |   |   |   |   |
| 2009                                                          |   |               | 1.285  |   |      |   | 0.095 |   |   |   | 0.336 |   |   |   | 0.025 |   |
| 2008                                                          |   |               | 8.700  |   |      |   | 0.075 |   |   |   | 2.278 |   |   |   | 0.020 |   |
| 2007                                                          |   |               | 10.20  |   |      |   | 2.275 |   |   |   | 2.671 |   |   |   | 0.596 |   |
| 2006                                                          |   |               | 18.50  |   |      |   | 4.645 |   |   |   | 4.844 |   |   |   | 1.214 |   |

----

----

|   | · | a      breach of the office holder’s duty of care to the company or to another      person; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | a      breach of the office holder’s fiduciary duty to the company, provided that      he or she acted in good faith and had reasonable cause to believe that the      act would not prejudice the company;and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      financial liability imposed upon the office holder in favor of another      person. |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | monetary      liability imposed upon him or her in favor of a third party by a judgment,      including a settlement or an arbitral award confirmed by the court;      and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | reasonable      litigation expenses, including attorneys’ fees, actually incurred by the      office holder or imposed upon him or her by a court, in a proceeding      brought against him or her by or on behalf of the company or by a third      party, or in a criminal action in which he or she was acquitted, or in a      criminal action which does not require criminal intent in which he or she      was convicted; furthermore, a company can, with a limited exception,      exculpate an office holder in advance, in whole or in part, from liability      for damages sustained by a breach of duty of care to the      company. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | any      amendment to the Articles ofAssociation; |
|--------|--------|---------------------------------------------------|

|   | · | an      increase of the company's authorized share  capital; |
|--------|--------|--------------------------------------------------------------|

|   | · | a      merger; and |
|--------|--------|--------------------|

|   | · | approval      of interested party transactions that require shareholders      approval. |
|--------|--------|-----------------------------------------------------------------------------------------|

----

----

----

|   | · | there      is a limitation on acquisition of any level of control of the company;      or |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | the      acquisition of any level of control requires the purchaser to do so by      means of a  tender offer to the  public. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | the      judgment was obtained after due process before a court of competent      jurisdiction, that recognizes and enforces similar judgments of Israeli      courts, and the court had authority according to the rules of private      international law currently prevailing in  Israel; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | adequate      service of process was effected and the defendant had a reasonable      opportunity to be heard; |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · | the      judgment is not contrary to the law, public policy, security or      sovereignty of the State of Israel and its enforcement is not contrary to      the laws governing enforcement ofjudgments; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | the      judgment is no longer appealable;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 foreign      court. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|   | · | where      a company's equity, as defined in the law, exceeds the cost of fixed      assets as defined in the Inflationary Adjustments Law, a deduction from      taxable income that takes into account the effect of the applicable annual      rate of inflation on the excess is allowed up to a ceiling of 70% of      taxable income in any single tax year, with the unused portion permitted      to be carried forward on a linked basis. If the cost of fixed assets, as      defined in the Inflationary Adjustments Law, exceeds a company's equity,      then the excess multiplied by the applicable annual rate of inflation is      added to taxable income; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | subject      to specified limitations, depreciation deductions on fixed assets and      losses carried forward are adjusted for inflation based on the increase in      the consumer price index. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | a      citizen or resident of the US; |
|--------|--------|---------------------------------------|

----

|   | · | a      corporation created or organized under the laws of the US, the District of      Columbia, or any state; or |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | a      trust or estate, treated, for US federal income tax purposes, as a      domestic trust or estate. |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | have      elected mark-to-market accounting; |
|--------|--------|----------------------------------------------|

|   | · | hold      our ordinary shares as part of a straddle, hedge or conversion transaction      with other investments; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | own      directly, indirectly or by attribution at least 10% of our voting      power; |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | are      tax exempt entities; |
|--------|--------|-------------------------------|

|   | · | are      persons who acquire shares in connection with employment or other      performance of services; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | have      a functional currency that is not the USdollar. |
|--------|--------|-----------------------------------------------------------|

----

|   | · | You      must include the gross amount of the dividend, not reduced by the amount      of Israeli tax withheld, in your US taxable  income. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | You      may be able to claim the Israeli tax withheld as a foreign tax credit      against your US income tax liability.  However, to the extent that      25% or more of our gross income from all sources was effectively connected      with the conduct of a trade or business in the US (or treated as      effectively connected, with limited exceptions) for a three-year period      ending with the close of the taxable year preceding the year in which the      dividends are declared, a portion of this dividend will be treated as US      source income, possibly reducing the allowable foreign  tax. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      foreign tax credit is subject to significant and complex limitations.      Generally, the credit can offset only the part of your US tax attributable      to your net foreign source passive income. Additionally, if we pay      dividends at a time when 50% or more of our stock is owned by US persons,      you may be required to treat the part of the dividend attributable to US      source earnings and profits as US source income, possibly reducing the      allowable credit. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A      US holder will be denied a foreign tax credit with respect to Israeli      income tax withheld from dividends received on the ordinary shares to      the extent the US holder has not held the ordinary shares for at      least 16 days of the 31-day period beginning on the date which is 15 days      before the ex-dividend date      or, alternatively, to the extent the US holder is under an obligation to      make related payments with respect to substantially similar or related      property. Any days during which a US holder has substantially diminished      its risk of loss on the ordinary shares are not counted toward meeting the      16-day holding period required by thestatute. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If      you do not elect to claim foreign taxes as a credit, you will be entitled      to deduct the Israeli income tax withheld from your XTL dividends in      determining your taxable income. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Individuals      who do not claim itemized deductions, but instead utilize the standard      deduction, may not claim a deduction for the amount of the Israeli income      taxes withheld. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If      you are a US corporation holding our stock, the general rule is that you      cannot claim the dividends-received deduction with respect to our      dividends.  There is an exception to this rule if you own at least      10% of our ordinary shares (by vote) and certain conditions are      met. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|   | · | gain      recognized by the US holder upon the disposition of, as well as income      recognized  upon receiving certain excess distributions on the      ordinary shares would be taxable as ordinary  income; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      US holder would be required to allocate the excess distribution and/or      disposition gain ratably over such US holder's entire holding period for      such ordinary shares; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      amount allocated to each year other than the year of the excess      distribution or disposition and pre-PFIC years would be subject to tax at      the highest applicable tax rate, and an interest charge would be imposed      with respect to the resulting taxliability; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      US holder would be required to file an annual return on IRS Form 8621 for      the years in which distributions were received on and gain was recognized      on dispositions of, our ordinary shares;and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | any      US holder who acquired the ordinary shares upon the death of the      shareholder would not receive a step-up to market value of his income tax      basis for such ordinary shares. Instead such US holder beneficiary would      have a tax basis equal to the decedent's basis, if  lower. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      item is effectively connected with the conduct by the Non-US holder of a      trade or business in the US and, in the case of a resident of a country      which has a tax treaty with the US, the item is attributable to a      permanent establishment in the US; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | the      non-US holder is subject to tax under the provisions of US tax law      applicable to US expatriates; or |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | the      individual non-US holder is present in the US for 183 days or more in the      taxable year of the disposition and certain other conditions are      met. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Item   |         | Associated Fee                                                                                                                                                                                                                                                                                                                   |         | Depositary Action                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |         |                                                                                                                                                                                                                                                                                                                             |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 1.     |         | Taxes      and other governmental charges                                                                                                                                                                                                                                                                                        |         | As      applicable                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |         |                                                                                                                                                                                                                                                                                                                             |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 2.     |         | Registration      fees in effect for the registration of transfers of shares generally on      the share register of XTL or foreign registrar and applicable to transfers      of shares to or from the name of the Depositary or its nominee or the      custodian or its nominee on the making of deposits or      withdrawals |         | As      applicable                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |         |                                                                                                                                                                                                                                                                                                                             |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 3.     |         | Expenses      incurred by the Depositary                                                                                                                                                                                                                                                                                         |         | •   Cable,      telex and facsimile transmission (where  expressly provided for      in the Deposit Agreement) •   Foreign      currency conversion into U.S. dollars                                                                                                                                                                                                                          |
|   |         |                                                                                                                                                                                                                                                                                                                             |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.     |         | $5.00      or less per 100 ADSs (or portion thereof)                                                                                                                                                                                                                                                                        |         | Execution      and delivery of ADRs for distributions and dividends in shares and rights      to subscribe for additional shares or rights of any other nature and      surrender of ADRs for the purposes of withdrawal, including the      termination of the Deposit Agreement                                                                                                                                                                       |
|   |         |                                                                                                                                                                                                                                                                                                                             |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 5.     |         | $0.02      or less per ADS (or portion thereof)                                                                                                                                                                                                                                                                                  |         | Any      cash distribution made pursuant to the Deposit Agreement, including, among      other things: •   cash      distributions or dividends; •   distributions      other than cash, shares or rights; •   distributions      in shares; and •   rights      of any other nature, including rights to subscribe for additional      shares. |
|   |         |                                                                                                                                                                                                                                                                                                                             |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 6.     |         | A      fee for the distribution of securities equal to the fee for the execution      and delivery of ADSs which would have been charged as a result of the      deposit of such securities                                                                                                                                      |         | Distributions      of securities other than cash, shares or rights                                                                                                                                                                                                                                                                                                                                                                                      |
|   |         |                                                                                                                                                                                                                                                                                                                             |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 7.     |         | A      fee of $.02 or less per ADS (or portion thereof) for depositary services,      which will accrue on the last day of each calendar year, provided,      however, that no fee will be assessed to the extent a fee of $.02 was      charged pursuant to Item 5 above during that calendar year                              |         | As      applicable                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |         |                                                                                                                                                                                                                                                                                                                             |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 8.     |    | Any      other charge payable by the Depositary, any of the Depositary's agents,      including its custodian, or the agents of the Depositary's agents in      connection with the servicing of shares or other deposited      securities                                                                                       |    | As      applicable                                                                                                                                                                                                                                                                                                                                                                                                                                      |

----

----

|                    |   | 2009                    |   |   | 2008   |   |
|-------------------------|--------|-------------------------|--------|--------|--------|--------|
|                    |   | (in      thousands US$) |   |
| Audit      fees         |   |                    | 62     |   |   |   | 79 |   |
| Audit-related      fees |   |                    | -      |   |   |   | 36 |   |
| Tax      fees           |   |                    | -      |   |   |   | 2 |   |
| All      Other fees     |   |                    | 8      |   |   |   | 22 |   |
| Total                   |   |                    | 70     |   |   |   | 139 |   |

----

----

| ExhibitNumber |   | Description                                                                                                                                                                                                                                          |
|---------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1           |   | Articles      of Association†                                                                                                                                                                                                                  |
| 4.1           |   | Form      of Share Certificate (including both Hebrew and English translations).      *                                                                                                                                                              |
| 4.2           |   | Form      of American Depositary Receipt (included in Exhibit 4.3).  †                                                                                                                                                                         |
| 4.3           |   | Deposit      Agreement, dated as of August 31, 2005, by and between XTL      Biopharmaceuticals Ltd., The Bank of New York, as Depositary, and each      holder and beneficial owner of American Depositary Receipts issued      thereunder. † |
| 4.5           |   | Form      of Director and Senior Management Lock−up Letter. ^                                                                                                                                                                                  |
| 10.13         |   | 1999      Share Option Plan dated June 1, 1999. †                                                                                                                                                                                              |
| 10.15         |   | 2000      Share Option Plan dated April 12, 2000. †                                                                                                                                                                                            |
| 10.16         |   | 2001      Share Option Plan dated February 28, 2001. †                                                                                                                                                                                         |
| 10.17         |   | Letter      of Understanding, dated August 5, 2005, relating to the License Agreement      dated June 2, 2004 between Cubist Pharmaceuticals, Inc. and XTL      Biopharmaceuticals Ltd. †                                                      |
| 10.20         |   | Employment      Agreement, dated as of January 3, 2006, between XTL Biopharmaceuticals      Ltd. and Ron Bentsur. ^                                                                                                                                  |
| 10.21         |   | Agreement,      dated August 1, 2005, between XTL Biopharmaceuticals Ltd. and Michael S.      Weiss. †                                                                                                                                         |
| 10.22         |   | Form      No. 1 of Director Service Agreement. †                                                                                                                                                                                               |
| 10.23         |   | Form      No. 2 of Director Service Agreement. †                                                                                                                                                                                               |
| 10.24         |   | Form      No. 3 of Director Service Agreement. †                                                                                                                                                                                               |
| 10.25         |   | Form      No. 4 of Director Indemnification Agreement†                                                                                                                                                                                         |
| 10.26         |   | License      Agreement Between XTL Biopharmaceuticals Ltd. and VivoQuest, Inc., dated      August 17, 2005†                                                                                                                                    |
| 10.27         |   | Asset      Purchase Agreement Between XTL Biopharmaceuticals Ltd. and VivoQuest,      Inc., dated August 17, 2005†                                                                                                                             |
| 10.28         |   | Securities      Purchase Agreement, dated March 17, 2006, by and among XTL      Biopharmaceuticals Ltd., and the purchasers named therein.    #                                                                                                      |
| 10.29         |   | Registration      Rights Agreement, dated March 22, 2006, by and among XTL      Biopharmaceuticals Ltd. and the purchasers named therein.  #                                                                                                         |
| 10.30         |   | Form      of Ordinary Share Purchase Warrants, dated March 22, 2006, issued to the      purchasers under the Securities Purchase Agreement. ^                                                                                                        |
| 10.32         |   | License      Agreement between XTL Development, Inc. and DOV Pharmaceutical, Inc.,      dated January 15, 2007. *                                                                                                                                    |
| 10.33         |   | Employment      Agreement, dated as of January 1, 2006, between XTL Biopharmaceuticals      Ltd. and Bill Kessler.*                                                                                                                                  |

----

| 10.34 |   | Securities      Purchase Agreement, dated October 25, 2007, by and among XTL      Biopharmaceuticals Ltd., and the purchasers named therein.    #                                                                                                                      |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.35 |   | Registration      Rights Agreement, dated October 25, 2007, by and among XTL      Biopharmaceuticals Ltd. and the purchasers named therein.  #                                                                                                                         |
| 10.36 |   | License      Agreement By and Between XTL Biopharmaceuticals Ltd. and Presidio      Pharmaceuticals, Inc. dated March 19, 2008. #                                                                                                                                      |
| 10.37 |   | Amended      and Restated License Agreement By and Between XTL Biopharmaceuticals Ltd.      and Presidio Pharmaceuticals, Inc. dated August 4, 2008.      &,>                                                                                                   |
| 10.38 |   | Services      Agreement, dated as of October 15, 2008, by and among XTL      Biopharmaceuticals Ltd., Quoque Bioventures LLC and Antecip Bioventures      LLC. +                                                                                                       |
| 10.39 |   | Stock      Appreciation Rights Agreement, dated as of October 15, 2008, by and among      XTL Biopharmaceuticals Ltd., XTL Development Inc., and Quoque Bioventures      LLC. +                                                                                        |
| 10.40 |   | Registration      Rights Agreement, dated as of October 15, 2008, by and among XTL      Biopharmaceuticals Ltd., XTL Development Inc., and Quoque Bioventures LLC.      +                                                                                              |
| 10.41 |   | Stock      Appreciation Rights Agreement, dated as of October 15, 2008, by and among      XTL Biopharmaceuticals Ltd., XTL Development Inc., and Antecip Bioventures      LLC. +                                                                                       |
| 10.42 |   | Registration      Rights Agreement, dated as of October 15, 2008, by and among XTL      Biopharmaceuticals Ltd., XTL Development Inc., and Quoque Bioventures LLC.      +                                                                                              |
| 10.43 |   | Asset      Purchase Agreement, dated as of March 18, 2009 between XTL      Biopharmaceuticals Ltd. and Bio-Gal Ltd. &, >                                                                                                                                        |
| 10.44 |   | Research      and License Agreement Between Yeda Research and Development Company Ltd.,      Mor Research Applications Ltd., Biogal Ltd. (under its previous name      Haverfield Ltd.) and Biogal Advanced Biotechnology Ltd. dated January 7,      2002. &, > |
| 10.45 |   | Amendment      to Research and License Agreement Between Yeda Research and Development      Company Ltd., Mor Research Applications Ltd., Haverfield Ltd. and Biogal      Advanced Biotechnology Ltd. effective as of April 1, 2008. &,      >                  |
| 10.46 |   | Amended      and Restated Asset Purchase Agreement, Originally dated as of March 18,      2009, by among XTEPO Ltd. and Bio-Gal Ltd.                                                                                                                                   |
| 10.47 |   | Share      Transfer Agreement, made as of December 31, 2009, by and among XTEPO      Ltd., XTL Biopharmaceuticals Ltd., and all of the shareholders and option      holders of XTL Biopharmaceuticals Ltd.                                                        |
| 10.48 |   | Notice      of Termination Agreement to Bicifadine License, dated March 4,      2010.                                                                                                                                                                                  |
| 10.49 |   | Employment      Agreement, dated as of January 18, 2010, between XTL Biopharmaceuticals      Ltd. and David Grossman.                                                                                                                                                  |
| 10.50 |   | Employment      Agreement, dated as of July 29, 2009, between XTL Biopharmaceuticals Ltd.      and Ronen Twito.                                                                                                                                                        |
| 21.1  |   | List      of Subsidiaries                                                                                                                                                                                                                                              |
| 23.1  |   | Consent      of Kesselman & Kesselman, a member of PricewaterhouseCoopers      International Ltd, dated June 28, 2010.                                                                                                                                             |
| 31.1  |   | Certification      of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated      June 28, 2010.                                                                               |
| 31.2  |   | Certification      of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated      June 28, 2010.                                                                               |

| 32.1 |   | Certification      of Chief Executive Officer and Chief Financial Officer pursuant to 18      U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act      of 2002, dated June 28, 2010 |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | XTL      BIOPHARMACEUTICALS LTD. |
|--------|----------------------------------|
|   | (Registrant)                     |
|   |                             |
|   | Signature:             | /s/ David Grossman |
|   |                             | David      Grossman |
|   |                             | Chief      Executive Officer |

----

|                                                      | Page            |
|-----------------------------------------------------------|-----------------|
|                                                      |            |
| Auditors'      Report                                     | F-2             |
|                                                      |            |
| Consolidated      Financial Statements - in U.S. dollars: |            |
|                                                      |            |
| Statements      of Financial Position                     | F-3             |
|                                                      |            |
| Statements      of Comprehensive Income                   | F-4             |
|                                                      |            |
| Statement      of Changes in Equity                       | F-5             |
|                                                      |            |
| Statement      of Cash Flows                              | F-6      - F-7  |
|                                                      |            |
| Notes      to Consolidated Financial Statements           | F-8      - F-61 |

----

----

|   |   |                                                                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                  |
|   |   | Kesselman      & KesselmanCertified      Public AccountantsTrade      Tower, 25 Hamered StreetTel      Aviv 68125 IsraelP.O      Box 452 Tel Aviv 61003Telephone      +972-3-7954555Facsimile      +972-3-7954556 |

----

----

|                                                       |   |   |   |   | December 31,              |     |   | January 1, |   |
|------------------------------------------------------------|--------|--------|--------|--------|--------------------------------|----------|--------|-----------------|--------|
|                                                  |   |   |   |   | 2009                           |     |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|                                                       |   | Note   |   |   | U.S.      dollars in thousands |     |
| ASSETS                                                     |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |
| CURRENT      ASSETS:                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |
| Cash      and cash equivalents                             |   | 5      |   |   |                           | 412      |   |            |   | 2,924 |   |   |   | 2,377 |   |   |   | 4,400 |   |
| Short-term      deposits                                   |   | 6      |   |   |                           | -        |   |            |   | - |   |   |   | 10,600 |   |   |   | 20,845 |   |
| Financial      assets at fair value through profit or loss |   |   |   |   |                           | -        |   |            |   | - |   |   |   | - |   |   |   | 102 |   |
| Assets      held for sale                                  |   |   |   |   |                           | -        |   |            |   | - |   |   |   | - |   |   |   | 18 |   |
| Employee      benefit assets                               |   | 13     |   |   |                           | -        |   |            |   | 12 |   |   |   | - |   |   |   | - |   |
| Accounts      receivable                                   |   | 7      |   |   |                           | 33       |   |            |   | 305 |   |   |   | 654 |   |   |   | 609 |   |
| Income      taxes receivable                               |   |   |   |   |                           | 72       |   |            |   | 49 |   |   |   | 270 |   |   |   | - |   |
| Restricted      deposits                                   |   |   |   |   |                           | 40       |   |            |   | 71 |   |   |   | - |   |   |   | - |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           | 557      |   |            |   | 3,361 |   |   |   | 13,901 |   |   |   | 25,974 |   |
| NON-CURRENT      ASSETS:                                   |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Restricted      deposits                                   |   |   |   |   |                           | -        |   |            |   | - |   |   |   | 61 |   |   |   | 172 |   |
| Employee      benefit assets                               |   | 13     |   |   |                           | -        |   |            |   | - |   |   |   | 16 |   |   |   | - |   |
| Fixed      assets                                          |   | 9      |   |   |                           | 23       |   |            |   | 41 |   |   |   | 106 |   |   |   | 490 |   |
| Intangible      assets                                     |   | 10     |   |   |                           | -        |   |            |   | - |   |   |   | 9,294 |   |   |   | 1,808 |   |
| Other      investments                                     |   | 1b     |   |   |                           | 135      |   |            |   | - |   |   |   | - |   |   |   | - |   |
| Deferred      tax assets                                   |   |   |   |   |                           | -        |   |            |   | - |   |   |   | - |   |   |   | 48 |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           | 158      |   |            |   | 41 |   |   |   | 9,477 |   |   |   | 2,518 |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Total      assets                                          |   |   |   |   |                           | 715      |   |            |   | 3,402 |   |   |   | 23,378 |   |   |   | 28,492 |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES      AND EQUITY                                |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| CURRENT      LIABILITIES:                                  |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Trade      payables                                        |   | 11     |   |   |                           | 192      |   |            |   | 416 |   |   |   | 2,144 |   |   |   | 941 |   |
| Other      accounts payable                                |   | 12     |   |   |                           | 516      |   |            |   | 1,058 |   |   |   | 1,665 |   |   |   | 1,834 |   |
| Income      taxes payable                                  |   |   |   |   |                           | -        |   |            |   | - |   |   |   | - |   |   |   | 143 |   |
| Deferred      revenue                                      |   |   |   |   |                           | -        |   |            |   | - |   |   |   | - |   |   |   | 399 |   |
| Retirement      benefit obligation                         |   | 13     |   |   |                           | -        |   |            |   | 447 |   |   |   | - |   |   |   | - |   |
| Liability      for share appreciation rights               |   | 14     |   |   |                           | -        |   |            |   | 7 |   |   |   | 1,560 |   |   |   | - |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           | 708      |   |            |   | 1,928 |   |   |   | 5,369 |   |   |   | 3,317 |   |
| NON-CURRENT      LIABILITIES:                              |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Retirement      benefit obligation                         |   |   |   |   |                           | -        |   |            |   | - |   |   |   | 131 |   |   |   | 223 |   |
| Deferred      revenue                                      |   |   |   |   |                           | -        |   |            |   | - |   |   |   | - |   |   |   | 398 |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           | -        |   |            |   | - |   |   |   | 131 |   |   |   | 621 |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| EQUITY      ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT:  |   | 16     |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Share      capital                                         |   |   |   |   |                           | 1,445    |   |            |   | 1,445 |   |   |   | 1,444 |   |   |   | 1,072 |   |
| Share      premium                                         |   |   |   |   |                           | 139,786  |   |            |   | 139,786 |   |   |   | 139,577 |   |   |   | 131,153 |   |
| Accumulated      deficit                                   |   |   |   |   |                           | (141,224 | )      |            |   | (139,757 | ) |   |   | (123,143 | ) |   |   | (107,671 | ) |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Totalequity                                                |   |   |   |   |                           | 7        |   |            |   | 1,474 |   |   |   | 17,878 |   |   |   | 24,554 |   |
|                                                       |   |   |   |   |                           |     |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Totalliabilities and equity                                |   |   |   |   |                           | 715      |   |            |   | 3,402 |   |   |   | 23,378 |   |   |   | 28,492 |   |

|                       |   |                  |   |             |
|----------------------------|--------|-----------------------|--------|------------------|
| Amit      Yonay            |   | David      Grossman   |   | Ronen      Twito |
| Chairman      of the Board |   | Director      and CEO |   | CFO              |

----

----

|                                                                                       |   |   |   |   | Year      ended December 31,                           |   |
|--------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------------------------------------------------|--------|
|                                                                                       |   |   |   |   | 2009                                                   |   |   | 2008 |   |   | 2007 |   |
|                                                                                       |   | Note   |   |   | U.S.      dollars in thousands (except per share data) |   |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |
| Revenues                                                                                   |   | 17     |   |   |                                                   | -      |   |   |   | 5,940 |   |   |   | 907 |   |
| Cost      of revenues                                                                      |   | 17     |   |   |                                                   | -      |   |   |   | 1,841 |   |   |   | 110 |   |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit                                                                          |   |   |   |   |                                                   | -      |   |   |   | 4,099 |   |   |   | 797 |   |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Research      and development costs                                                        |   | 18     |   |   |                                                   | -      |   |   |   | 11,722 |   |   |   | 11,500 |   |
| General      and administrative expenses                                                   |   | 19     |   |   |                                                   | (2,429 | )*) |   |   | 3,937 |   |   |   | 7,596 |   |
| Impairment      loss of intangible asset                                                   |   | 10     |   |   |                                                   | -      |   |   |   | 7,500 |   |   |   | - |   |
| Other      gains (losses), net                                                             |   | 20     |   |   |                                                   | 139    |   |   |   | 288 |   |   |   | (8 | ) |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss)                                                               |   |   |   |   |                                                   | 2,568  |   |   |   | (18,772 | ) |   |   | (18,307 | ) |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Finance      income                                                                        |   | 21     |   |   |                                                   | 6      |   |   |   | 331 |   |   |   | 668 |   |
| Finance      costs                                                                         |   | 21     |   |   |                                                   | 10     |   |   |   | 17 |   |   |   | 30 |   |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Financial      income (costs), net                                                         |   |   |   |   |                                                   | (4     | ) |   |   | 314 |   |   |   | 638 |   |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) before taxes on income                                                  |   |   |   |   |                                                   | 2,564  |   |   |   | (18,458 | ) |   |   | (17,669 | ) |
| tax      benefit                                                                           |   | 22     |   |   |                                                   | (23    | ) |   |   | (31 | ) |   |   | (206 | ) |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Net      income (loss) for the year attributable to equity holders of the      parent      |   |   |   |   |                                                   | 2,587  |   |   |   | (18,427 | ) |   |   | (17,463 | ) |
|                                                                                       |   |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted earnings (loss) per share      (in U.S. dollars) **) |   | 23     |   |   |                                                   | 0.044  |   |   |   | (0.315 | ) |   |   | (0.382 | ) |

| *) | Including      reduced expenses which result from forfeiture of shares that were      contingent on the performance of the former chairman and CEO, see also      Note 16b. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **)  | After      taking into account capital consolidation effected on June 22, 2009,      see Note 16a(2). |
|-----------|-----------------------------------------------------------------------------------------------------------------|

----

----

|                                                                |   |   |   |   | Year      ended December 31, 2009 |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|-----------------------------------|--------|
|                                                                |   |   |   |   | Sharecapital                      |   |   | Sharepremium |   |   | Accumulateddeficit |   |   | Total |   |
|                                                                |   | Note   |   |   | U.S.      dollars in thousands    |   |
|                                                                |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2009                                     |   |   |   |   |                              | 1,445  |   |   |   | 139,786 |   |   |   | (139,757 | ) |   |   | 1,474 |   |
|                                                                |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income for the year                                        |   |   |   |   |                              | -      |   |   |   | - |   |   |   | 2,587 |   |   |   | 2,587 |   |
| Share-based      payment to employees and others                    |   | 16     |   |   |                              | -      |   |   |   | - |   |   |   | (4,180 | ) |   |   | (4,180 | ) |
| Transfer      to equity for liability for share appreciation rights |   | 14     |   |   |                              | -      |   |   |   | - |   |   |   | 126 |   |   |   | 126 |   |
|                                                                |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2009                                   |   |   |   |   |                              | 1,445  |   |   |   | 139,786 |   |   |   | (141,224 | ) |   |   | 7 |   |

|                                             |   |   |   |   | Year      ended December 31, 2008 |   |
|--------------------------------------------------|--------|--------|--------|--------|-----------------------------------|--------|
|                                             |   |   |   |   | Sharecapital                      |   |   | Sharepremium |   |   | Accumulateddeficit |   |   | Total |   |
|                                             |   | Note   |   |   | U.S.      dollars in thousands    |   |
|                                             |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2008                  |   |   |   |   |                              | 1,444  |   |   |   | 139,577 |   |   |   | (123,143 | ) |   |   | 17,878 |   |
|                                             |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      for the year                           |   |   |   |   |                              | -      |   |   |   | - |   |   |   | (18,427 | ) |   |   | (18,427 | ) |
| Share-based      payment to employees and others |   | 16     |   |   |                              | -      |   |   |   | - |   |   |   | 1,813 |   |   |   | 1,813 |   |
| Exercise      of options                         |   | 16     |   |   |                              | 1      |   |   |   | 32 |   |   |   | - |   |   |   | 33 |   |
| Refund      of stamp duty on share issuance      |   |   |   |   |                              | -      |   |   |   | 177 |   |   |   | - |   |   |   | 177 |   |
|                                             |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2008                |   |   |   |   |                              | 1,445  |   |   |   | 139,786 |   |   |   | (139,757 | ) |   |   | 1,474 |   |

|                                             |   |   |   |   | Year      ended December 31, 2007 |   |
|--------------------------------------------------|--------|--------|--------|--------|-----------------------------------|--------|
|                                             |   |   |   |   | Sharecapital                      |   |   | Sharepremium |   |   | Accumulateddeficit |   |   | Total |   |
|                                             |   | Note   |   |   | U.S.      dollars in thousands    |   |
|                                             |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2007                  |   |   |   |   |                              | 1,072  |   |   |   | 131,153 |   |   |   | (107,671 | ) |   |   | 24,554 |   |
|                                             |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      for the year                           |   |   |   |   |                              | -      |   |   |   | - |   |   |   | (17,463 | ) |   |   | (17,463 | ) |
| Issue      of shares                             |   | 16     |   |   |                              | 372    |   |   |   | 8,420 |   |   |   | - |   |   |   | 8,792 |   |
| Share-based      payment to employees and others |   | 16     |   |   |                              | -      |   |   |   | - |   |   |   | 1,991 |   |   |   | 1,991 |   |
| Exercise      of options                         |   | 16     |   |   |                              | -      | *) |   |   | 4 |   |   |   | - |   |   |   | 4 |   |
|                                             |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                |   |   |   |   |                              | 1,444  |   |   |   | 139,577 |   |   |   | (123,143 | ) |   |   | 17,878 |   |

| *)  | Less      than $ 1,000. |
|----------|-------------------------|

----

----

|                                                                                                   |   |       |   |   | Year      ended December 31,   |   |
|--------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|--------------------------------|--------|
|                                                                                                   |   |       |   |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                                                                                   |   | Note       |   |   | U.S.      dollars in thousands |   |
| Cash flows from operating      activities:                                                             |   |       |   |   |                           |   |   |   |   |   |   |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |
| Net      income (loss) for the year attributable to equity holders of the      parent                  |   |       |   |   |                           | 2,587  |   |   |   | (18,427 | ) |   |   | (17,463 | ) |
| Adjustments      to reconcile net income (loss) to net cash used in operating      activities (a) |   |       |   |   |                           | (5,075 | ) |   |   | 7,849 |   |   |   | 3,543 |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Net      cash used in operating activities                                                             |   |       |   |   |                           | (2,488 | ) |   |   | (10,578 | ) |   |   | (13,920 | ) |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing      activities:                                                             |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Decrease      (increase) in restricted deposit                                                         |   | 6          |   |   |                           | 31     |   |   |   | (10 | ) |   |   | 113 |   |
| Decrease      in short-term bank deposits                                                              |   | 10         |   |   |                           | -      |   |   |   | 10,600 |   |   |   | 10,245 |   |
| Purchase      of intangible assets                                                                     |   | 9          |   |   |                           | -      |   |   |   | - |   |   |   | (7,500 | ) |
| Purchase      of fixed assets                                                                          |   | 9,      20 |   |   |                           | -      |   |   |   | (2 | ) |   |   | (65 | ) |
| Proceeds      from sale of fixed assets and held for sale assets                                       |   |       |   |   |                           | -      |   |   |   | 327 |   |   |   | 308 |   |
| Other      investments                                                                                 |   | 1b         |   |   |                           | (55    | ) |   |   | - |   |   |   | - |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Net      cash provided by (used in) investing activities                                               |   |       |   |   |                           | (24    | ) |   |   | 10,915 |   |   |   | 3,101 |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing      activities:                                                             |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Proceeds      from issue of shares                                                                     |   | 16         |   |   |                           | -      |   |   |   | - |   |   |   | 8,792 |   |
| Refund      of stamp duty paid in 2004 for share issuance                                              |   |       |   |   |                           | -      |   |   |   | 177 |   |   |   | - |   |
| Exercise      of options                                                                               |   | 16         |   |   |                           | -      |   |   |   | 33 |   |   |   | 4 |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Net      cash provided by financing activities                                                         |   |       |   |   |                           | -      |   |   |   | 210 |   |   |   | 8,796 |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Increase      (decrease) in cash and cash equivalents                                                  |   |       |   |   |                           | (2,512 | ) |   |   | 547 |   |   |   | (2,023 | ) |
| Cash      and cash equivalents at the beginning of the year                                            |   |       |   |   |                           | 2,924  |   |   |   | 2,377 |   |   |   | 4,400 |   |
|                                                                                                   |   |       |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents at the end of the year                                                  |   |       |   |   |                           | 412    |   |   |   | 2,924 |   |   |   | 2,377 |   |

----

----

|   |                                                                                           |   |   |   |   | Year      ended December 31,   |   |
|--------|------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------------------------|--------|
|   |                                                                                           |   |   |   |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|   |                                                                                           |   | Note   |   |   | U.S.      dollars in thousands |   |
| (a)    | Adjustments to reconcile net income (loss) to net      cash used in operating activities: |   |   |   |   |                           |   |   |   |   |   |   |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |
|   | Income      and expenses not involving cash flows:                                             |   |   |   |   |                           |   |   |   |   |   |   |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |
|   | Depreciation      and amortization                                                             |   | 9,10   |   |   |                           | 13     |   |   |   | 39 |   |   |   | 108 |   |
|   | Loss      (gain) on sale of fixed assets                                                       |   | 20     |   |   |                           | 5      |   |   |   | (288 | ) |   |   | (40 | ) |
|   | Share      options granted to directors, employees and service    providers                    |   | 16     |   |   |                           | (4,180 | ) |   |   | 1,813 |   |   |   | 1,991 |   |
|   | Impairment      of intangible assets                                                           |   | 10     |   |   |                           | -      |   |   |   | 7,500 |   |   |   | - |   |
|   | Impairment      of fixed assets                                                                |   | 9      |   |   |                           | -      |   |   |   | - |   |   |   | 105 |   |
|   | Change      in intangible assets                                                               |   | 10     |   |   |                           | -      |   |   |   | 1,783 |   |   |   | - |   |
|   | Change      in retirement benefit obligation, net                                              |   | 13     |   |   |                           | (435   | ) |   |   | 320 |   |   |   | (108 | ) |
|   | Change      in liability for share appreciation rights                                         |   | 14     |   |   |                           | 119    |   |   |   | (1,553 | ) |   |   | 1,560 |   |
|   | Change      in deferred taxes                                                                  |   | 22     |   |   |                           | -      |   |   |   | - |   |   |   | 48 |   |
|   | Proceeds      from sale of securities at fair value through profit or loss,      net           |   |   |   |   |                           | -      |   |   |   | - |   |   |   | 54 |   |
|   | Change      in fair value of financial assets at fair value through profit or      loss        |   |   |   |   |                           | -      |   |   |   | - |   |   |   | 48 |   |
|   | Finance      costs on restricted deposit                                                       |   |   |   |   |                           | -      |   |   |   | - |   |   |   | (2 | ) |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                           |   |   |   |   |                           | (4,478 | ) |   |   | 9,614 |   |   |   | 3,764 |   |
|   | Changes      in operating asset and liability items:                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   | Change      in deferred revenues                                                               |   |   |   |   |                           | -      |   |   |   | - |   |   |   | (797 | ) |
|   | Decrease      (increase) in accounts receivable                                                |   | 7      |   |   |                           | 249    |   |   |   | 570 |   |   |   | (315 | ) |
|   | Decrease      in other accounts payable                                                        |   | 12     |   |   |                           | (542   | ) |   |   | (607 | ) |   |   | (312 | ) |
|   | Increase      (decrease) in trade payables                                                     |   | 11     |   |   |                           | (304   | ) |   |   | (1,728 | ) |   |   | 1,203 |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                           |   |   |   |   |                           | (597   | ) |   |   | (1,765 | ) |   |   | (221 | ) |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                           |   |   |   |   |                           | (5,075 | ) |   |   | 7,849 |   |   |   | 3,543 |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| (b)    | Additional information on cash flows from      operating activities:                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   | Interest      received                                                                         |   |   |   |   |                           | 3      |   |   |   | 390 |   |   |   | 921 |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   | Interest      paid                                                                             |   |   |   |   |                           | -      |   |   |   | 3 |   |   |   | 4 |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   | Refund      of taxes on income                                                                 |   |   |   |   |                           | -      |   |   |   | 262 |   |   |   | - |   |
|   |                                                                                           |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|   | Payment      of taxes on income                                                                |   |   |   |   |                           | -      |   |   |   | 2 |   |   |   | 165 |   |

| (c) | Non-cash      investing activities for the year ended December 31, 2009 total at      approximately $ 80 thousand and it derives from deferred charges in      connection with Bio-Gal (Xtepo) transaction which were recorded in the      line item "other investments" (see Note 1b  below). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      1:- | GENERAL |
|---------------|---------|

|   | a. | A      general description of the Company and its  activity: |
|--------|----|--------------------------------------------------------------|

|  | b.  | In      furtherance to the restructuring plan, in March 2009, the Company entered      into an asset purchase agreement with Bio-Gal Ltd. for the rights to use a      patent on Recombinant Erythropoietin ("EPO") for the prolongation of      multiple myeloma patients' survival and improvement of their quality of      life. In accordance with agreement, the Company will issue Bio-Gal      Ordinary shares representing just under 50% of the issued share capital of      the Company at closing date. In addition, the Company will make milestone      payments of $ 10 million in cash upon the successful completion of a      Phase 2b clinical trial. The Company's Board may, in its sole discretion,      issue additional shares to Bio-Gal in lieu of such cash payment. The      Company is also obligated to pay 1% royalties on net sales of the      product. |
|--|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      1:- | GENERAL      (cont) |
|---------------|---------------------|

|   |   |                                                                                                                                                                              |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 1.     | The      completion of a successful fundraising by the Company or Xtepo at any time      after the successful completion of the phase 2 of an amount of minimum $ 2      million. |

|   | 2. | Six      months from the successful completion of phase  2. |
|--------|----|-------------------------------------------------------------|

|   | c. | In      2005, the Company acquired patent rights and other assets of VivoQuest      Inc. ("VivoQuest"), covering a compound library, which includes certain      compounds for the development of the DOS. Part of these rights was sold      during 2008 to Presidio. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d.     | As      of December 31, 2009, the Company has accumulated losses in the amount of      approximately $ 141.2 million and equity in the amount of $ 7      thousand. The continuation of the Company's operations is dependent on      closing the Bio-Gal transaction and obtaining its funds or raising funds      from alternative sources. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                    |

----

----

| NOTE      2:- | SIGNIFICANT      ACCOUNTING POLICIES |
|---------------|--------------------------------------|

|   | a. | Basis      of presentation of the financialstatements: |
|--------|----|--------------------------------------------------------|

|   | 1. | Until      December 31, 2008, the consolidated financial statements of the Company      have been prepared in accordance with U.S.GAAP. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | 1.  | International      Financial Reporting Standards(IFRS), |
|--------|----------|---------------------------------------------------------|

|   | 2.  | International      Accounting Standards (IAS), and |
|--------|----------|----------------------------------------------------|

|   | 3. | Interpretations      originated by the International Financial Reporting Interpretations      Committee (IFRIC) or the former Standing Interpretations Committee      (SIC). |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | The      Company's financial statements as of December 31, 2009, 2008 and 2007      and January 1, 2007 and for each of the three years in the period      ended December 31, 2009 have been prepared in accordance with IFRS      and Interpretations originated by the International Financial Reporting      Interpretations Committee (IFRIC) and include the additional disclosure in      accordance with the Israeli Securities Regulations (Annual Financial      Statements), 2010. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      2:- | SIGNIFICANT      ACCOUNTING POLICIES (Cont.) |
|---------------|----------------------------------------------|

|   | 3. | The      Group's operating cycle is 12months. |
|--------|----|-----------------------------------------------|

|   | 4. | The      Company analyses the expenses recognized in the statement of comprehensive      income by classification based on the function of  expense. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------|

|                   |   | Change in the    |   |
|------------------------|--------|----------------------------|--------|
|              |   | exchange rate         |   |
| Year ended        |   | of U.S. $ 1 |   |
|                   |   | %                          |   |
|                   |   |                       |   |
| December      31, 2009 |   |                       | (0.71  | ) |
| December      31, 2008 |   |                       | (1.14  | ) |
| December      31, 2007 |   |                       | (8.97  | ) |
| December      31, 2006 |   |                       | (8.21  | ) |
|                   |   |                       |   |   |
|                   |   | Exchange rate         |   |
| As of             |   | of U.S. $ 1 |   |
|              |   | NIS                        |   |
|                   |   |                       |   |   |
| December      31, 2009 |   |                       | 3.775  |   |
| December      31, 2008 |   |                       | 3.802  |   |
| December      31, 2007 |   |                       | 3.846  |   |
| December      31, 2006 |   |                       | 4.225  |   |

----

----

| NOTE      2:- | SIGNIFICANT      ACCOUNTING POLICIES (Cont.) |
|---------------|----------------------------------------------|

|   | d. | Fixed      assets: |
|--------|----|--------------------|

|                                |   | %            |   |
|-------------------------------------|--------|--------------|--------|
|                                |   |         |   |
| Laboratory      equipment           |   | 10      - 20 |   |
| Computers                           |   | 33           |   |
| Office      furniture and equipment |   | 6 -      16  |   |

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

|    | 2. | Recognition      and measurement: |
|--------------|----|-----------------------------------|

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

|   | - | it      is technically feasible to complete the intangible asset so that it will      be available for use; |
|--------|---|-------------------------------------------------------------------------------------------------------------|

|   | - | management      intends to complete the intangible asset and use or sell    it; |
|--------|---|---------------------------------------------------------------------------------|

|   | - | there      is an ability to use or sell the intangible  asset; |
|--------|---|----------------------------------------------------------------|

|   | - | it      can be demonstrated how the intangible asset will generate probable future      economic benefits; |
|--------|---|------------------------------------------------------------------------------------------------------------|

|   | - | adequate      technical, financial and other resources to complete the development and      to use or sell the intangible asset are available;  and |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | the      expenditure attributable to the intangible asset during its development      can be reliably measured. |
|--------|---|-----------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

|  | 1. | Revenues      from transfer of rights to use development which include the Group's      involvement during the development period, are recognized on a      straight-line basis over the expected term of the    agreement. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

|   | 2. | Revenues      from sale of DOS development rights to Presidio and rendering of ongoing      services by the Company are recognized as  follows: |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a) | The      fair value of labor services by the Group's employees is recognized over      the service term. |
|--------|----|----------------------------------------------------------------------------------------------------------|

|   | b) | The      difference between the sale consideration and the fair value of labor      services is recognized at the date of transaction as revenues from sale of      DOS development rights. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Interest      income are recognized on a periodic basis using the effective interest      method. |
|--------|----|---------------------------------------------------------------------------------------------------|

|   | 1. | Basic      earnings per share is calculated by dividing income or loss attributable      to equity holders of the parent by the weighted average number of Ordinary      shares outstanding during theperiod. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | For      the purpose of calculating diluted earnings or loss per share, the number      of Ordinary shares shall be the average Ordinary shares calculated in      basic earnings per share plus the weighted average number of shares that      would be issued on the conversion of all the dilutive potential shares      into shares. Potential Ordinary shares are taken into account as above      only when their conversion is dilutive (decreases the earnings or      increases the loss per share). |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

|   | s. | New      and amended IFRS standards and IFRIC  interpretations: |
|--------|----|-----------------------------------------------------------------|

|   | a) | IAS      27 (revised), "Consolidated and Separate Financial Statements" ("IAS 27R")      (effective for annual periods beginning on or after July 1, 2009).      IAS 27R requires the effects of all transactions with non-controlling      interests to be recorded in equity if there is no change in control and      these transactions will no longer result in goodwill or gains and losses.      IAS 27R also specifies the accounting when control of the entity is lost.      Any remaining interest in the entity is remeasured to fair value, and a      gain or loss is recognized in profit or loss. The Company/Group will apply      IAS 27R prospectively to all transactions with non-controlling interests      from January 1, 2010. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | IFRS      3 (revised), "Business Combinations" ("IFRS 3") (effective for annual      periods beginning on or after July 1, 2009). The revised standard      continues to apply the acquisition method to business combinations, with      some significant changes. For example, all payments to purchase a business      are to be recorded at fair value at the acquisition date, with contingent      payments classified as debt subsequently remeasured through the statement      of income. There is a choice on an acquisition-by-acquisition basis to      measure the non-controlling interest in the acquiree at fair value or at      the non-controlling interest's proportionate share of the acquiree's net      assets. All acquisition-related costs should be expensed. The Company will      apply IFRS 3R prospectively to all business combinations from      January 1, 2010. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c) | IFRS      9, "Financial Instruments" ("IFRS 9"). IFRS 9 was issued in November 2009      and it represents the first milestone in the three stages planned      replacement of IAS 39, "Financial Instruments: Recognition and      Measurement" ("IAS 39"). The first issued part replaces the sections      of IAS 39 which deal with the classification and measurement of financial      assets. Below are summarized principles of IFRS  9: |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | Financial      assets are classified into one of the two following categories: fair value      and amortized cost. The decision to which category a financial asset      should be classified is made on initial recognition. This classification      is driven by the entity's business model for managing financial      instruments and the contractual characteristics of the cash flows from the      instrument. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | A      hybrid contract with a financial asset host is classified in its entirety      into one of the above categories without separating the embedded      derivative from a host contract. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | A      financial asset is measured after initial recognition at amortized cost      only if two criteria are met: (a) the objective of the business model is      to hold the financial asset for the collection of the contractual cash      flows; and (b) the contractual cash flows under the instrument solely      represent payments of principal and interest (in other words, the      instrument has only basic features of aloan). |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | Financial      assets that are debt instruments not meeting the above criteria are      measured at fair value through profit orloss. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES      (Cont.) |
|----------|----------------------------------------------|

|   | - | Financial      assets that are equity instruments should be measured at fair value, as      follows: |
|--------|---|------------------------------------------------------------------------------------------------------|

|   | i. | Equity      instruments held-for-trading should be measured at fair    value. |
|--------|----|-------------------------------------------------------------------------------|

|   | ii. | As      for other equity instruments, an entity has an option to choose on initial      recognition (irrevocable designation) to recognize subsequent changes in      fair value in other comprehensive income. If the above is chosen, there is      no recycling of fair value gains and losses to profit or loss even if the      instrument is disposed. However, dividends from such instruments will be      recognized in profit or loss. Such designation is on an      instrument-by-instrument basis. Equity instruments which were not      designated as above, should be measured at fair value through profit or      loss. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d) | Amendment      to IAS 7, "Cash Flows Statements" ("the amendment to IAS 7"). This      amendment is part of the IASB's annual improvements project published in      April 2009. This amendment requires that only expenditures that result in      a recognized asset in the statement of financial position can be      classified as investing activities. The amendment to IAS 7 is applied      retrospectively for annual periods beginning on or after January 1,      2010. Earlier application is permitted. The Group will apply this      amendment from January 1, 2010 and it is not expected to have a material      impact on the financial statements. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | e) | Amendment      to IAS 38, "Intangible Assets" ("the amendment to IAS 38"). This amendment      is part of the IASB's annual improvements project published in April 2009.      The amendment to IAS 38 clarifies, among others, the requirements in IFRS      3 (revised), "Business Combinations" ("IFRS 3R") regarding the accounting      treatment of intangible assets acquired in a business combination. This      amendment permits the grouping of intangible assets as a single asset if      each asset has similar useful economic lives. The amendment to IAS 38 is      applied prospectively for annual periods beginning on or after      January 1, 2010. Earlier application is permitted. If an entity      applies IFRS 3 for an earlier period, the amendment to IAS 38 shall be      applied for that earlier period. The Group will apply the amendment to IAS      38 from January 1, 2010. At this stage, the impact, if any, on the      financial statements can not beassessed. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | f) | Amendment      to IAS 38, "Intangible Assets" ("the amendment to IAS 38"). This amendment      is part of the IASB's annual improvements project published in April 2009.      This amendment clarifies, among others, the description of valuation      techniques used when measuring the fair value of intangible assets      acquired in a business combination that are not traded in active markets.      The amendment to IAS 38 is applied prospectively for annual periods      beginning on or after January 1, 2010. Earlier application is      permitted. The Group will apply the amendment to IAS 38 from January 1,      2010. At this stage, the impact, if any, on the financial statements can      not be assessed. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      3:-  | CRITICAL      ACCOUNTING ESTIMATES AND JUDGMENTS |
|---------------------|--------------------------------------------------|

|   | a. | Share-based      payments as well as liability for share appreciation rights (see      Note 2n) - in evaluating the fair value and the recognition method of      share-based payment, the Company's management is to estimate, among      others, different parameters included in the computation of the fair value      of the options and the Company's results and the number of options that      will vest. Actual results and estimates to be made in the future may      significantly differ from currentestimates. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Intangible      assets - in testing impairment of intangible assets of research and      development, the Company's management is to estimate, among others, the      probable endpoints of trials conducted by the Company, the commercial      technical feasibility of the development and the resulting economic      benefits. Actual results and estimates to be made in the future may      significantly differ from currentestimates. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | Taxes      on income and deferred taxes - the Group is subject to taxes in Israel and      in the U.S. Significant judgment is required by the Company's management      in determining the provision for income taxes. There are many transactions      and calculations in the ordinary course of the Group for which the      ultimate tax determination is uncertain. Where the final tax outcome of      these matters is different from the amounts that were initially recorded,      such differences will impact the current and deferred income taxes in the      period in which such determination ismade. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE      4:- | FINANCIAL      INSTRUMENTS AND FINANCIAL RISKMANAGEMENT |
|---------------|---------------------------------------------------------|

----

----

| NOTE      4:-  | FINANCIAL      INSTRUMENTS AND FINANCIAL RISK MANAGEMENT  (Cont.) |
|---------------------|-------------------------------------------------------------------|

----

----

| NOTE      4:-  | FINANCIAL      INSTRUMENTS AND FINANCIAL RISK MANAGEMENT  (Cont.) |
|---------------------|-------------------------------------------------------------------|

|                                                             |   | December 31,              |   |   | January 1, |   |
|------------------------------------------------------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|                                                        |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|                                                             |   | U.S.      dollars in thousands |   |
| Cash      at banks, short-term deposits and restricted deposits: |   |                           |   |   |            |   |   |   |   |   |   |   |
|                                                             |   |                           |   |   |            |   |   |   |   |   |   |   |
| AAA                                                              |   |                           | -      |   |            |   | 1,305 |   |   |   | 6,187 |   |   |   | 11,319 |   |
| AA+                                                              |   |                           | 440    |   |            |   | - |   |   |   | - |   |   |   | - |   |
| AA                                                               |   |                           | -      |   |            |   | 1,056 |   |   |   | 6,505 |   |   |   | - |   |
| AA-                                                              |   |                           | 10     |   |            |   | 632 |   |   |   | 341 |   |   |   | 14,088 |   |
| Cash      not in banks                                           |   |                           | 2      |   |            |   | 2 |   |   |   | 5 |   |   |   | 10 |   |
|                                                             |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                           | 452    |   |            |   | 2,995 |   |   |   | 13,038 |   |   |   | 25,417 |   |

----

----

| NOTE      5:-  | CASH      AND CASH EQUIVALENTS |
|---------------------|--------------------------------|

|                          |   | December 31,              |   |   | January 1, |   |
|-------------------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|                          |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|                          |   | U.S.      dollars in thousands |   |
|                          |   |                           |   |   |            |   |   |   |   |   |   |   |
| Cash      at bank and on hand |   |                           | 358    |   |            |   | 2,700 |   |   |   | 2,314 |   |   |   | 473 |   |
| Short-term      bank deposits |   |                           | 54     |   |            |   | 224 |   |   |   | 63 |   |   |   | 3,927 |   |
|                          |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
|                          |   |                           | 412    |   |            |   | 2,924 |   |   |   | 2,377 |   |   |   | 4,400 |   |

|             |   | December 31,              |   |   | January 1, |   |
|------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|             |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|             |   | U.S.      dollars in thousands |   |
|             |   |                           |   |   |            |   |   |   |   |   |   |   |
| NIS              |   |                           | 81     |   |            |   | 24 |   |   |   | 55 |   |   |   | 228 |   |
| U.S.      dollar |   |                           | 331    |   |            |   | 2,897 |   |   |   | 2,316 |   |   |   | 4,172 |   |
| U.K.      Pound  |   |                           | -      |   |            |   | 3 |   |   |   | 6 |   |   |   | - |   |
|             |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
|             |   |                           | 412    |   |            |   | 2,924 |   |   |   | 2,377 |   |   |   | 4,400 |   |

| NOTE      6:-  | SHORT-TERM      DEPOSITS |
|---------------------|--------------------------|

| NOTE      7:-  | ACCOUNTS      RECEIVABLE |
|---------------------|--------------------------|

|   | a. | Composition: |
|--------|----|--------------|

|                        |   | December 31,              |   |   | January 1, |   |
|-----------------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|                   |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|                        |   | U.S.      dollars in thousands |   |
|                        |   |                           |   |   |            |   |   |   |   |   |   |   |
| Accrued      income         |   |                           | -      |   |            |   | - |   |   |   | 61 |   |   |   | 317 |   |
| Government      authorities |   |                           | 8      |   |            |   | 69 |   |   |   | 21 |   |   |   | 8 |   |
| Prepaid      expenses       |   |                           | 21     |   |            |   | 211 |   |   |   | 553 |   |   |   | 259 |   |
| Other      receivables      |   |                           | 4      |   |            |   | 25 |   |   |   | 19 |   |   |   | 25 |   |
|                        |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
|                        |   |                           | 33     |   |            |   | 305 |   |   |   | 654 |   |   |   | 609 |   |

|   | b. | The      carrying amount of other accounts receivable which represent monetary      items is denominated in the following  currencies: |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------|

|             |   | December 31,              |   |   | January 1, |   |
|------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|             |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|             |   | U.S.      dollars in thousands |   |
|             |   |                           |   |   |            |   |   |   |   |   |   |   |
| NIS              |   |                           | 8      |   |            |   | 2 |   |   |   | 40 |   |   |   | 12 |   |
| U.S.      dollar |   |                           | 4      |   |            |   | 92 |   |   |   | 61 |   |   |   | 338 |   |
|             |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Total            |   |                           | 12     |   |            |   | 94 |   |   |   | 101 |   |   |   | 350 |   |

----

----

| NOTE      8:-  | ADDITIONAL      INFORMATION ABOUT INVESTMENT INSUBSIDIARY |
|---------------------|-----------------------------------------------------------|

| Name      and country ofincorporation |   | %      interestheld |   | Scope      of investments                                   |   | Dividendsreceived      orreceivable |
|---------------------------------------|--------|---------------------|--------|-------------------------------------------------------------|--------|-------------------------------------|
|                                  |   |                |   |                                                        |   |                                |
| XTL      Biopharmaceuticals Inc.,     |   | 100%      equity    |   | 31.12.2009      - $ (1,728) thousand                        |   | -                                   |
| incorporated      in Delaware         |   | interest      and   |   | 31.12.2008      - $ (11,106) thousand                       |   | -                                   |
|                                  |   | voting      rights  |   | 31.12.2007      - $ 5,116 thousand                          |   | -                                   |
|                                  |   |                |   | 1.1.2007     -      $ 702 thousand |   | -                                   |

----

----

| NOTE      9:-  | FIXED      ASSETS |
|---------------------|-------------------|

|   | a. | Composition      of fixed assets and accumulated depreciation, by major classes, and the      movement therein in 2009 are: |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------|

|                                                      |   | Cost                           |   |   | Accumulated depreciation |   |   |            |   |   |    |   |
|-----------------------------------------------------------|--------|--------------------------------|--------|--------|-------------------------------|--------|--------|-----------------|--------|--------|---------|--------|
|                                                 |   | Opening                        |   |   | Additions                     |   |   | Disposals       |   |   | Closing |   |   | Opening |   |   | Additions |   |   | Disposals |   |   | Closing |   |   | Depreciated cost |   |
|                                                 |   | book                           |   |   | during the               |   |   | during the |   |   | book    |   |   | book |   |   | during the |   |   | during the |   |   | book |   |   | December 31, |   |
|                                                 |   | amount                         |   |   | year                          |   |   | year            |   |   | amount  |   |   | amount |   |   | year |   |   | year |   |   | amount |   |   | 2009 |   |   | 2008 |   |
|                                                      |   | U.S.      dollars in thousands |   |
|                                                      |   |                           |   |   |                          |   |   |            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Office      furniture and equipment (including computers) |   |                           | 162    |   |                          |   | -      |            |   |   | (24     | )      |   |   | 138 |   |   |   | 121 |   |   |   | 13 |   |   |   | (19 | ) |   |   | 115 |   |   |   | 23 |   |   |   | 41 |   |
| Leasehold      improvements                               |   |                           | 141    |   |                          |   | -      |            |   |   | (141    | )      |   |   | - |   |   |   | 141 |   |   |   | - |   |   |   | (141 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                      |   |                           |   |   |                          |   |   |            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |                           | 303    |   |                          |   | -      |            |   |   | (165    | )      |   |   | 138 |   |   |   | 262 |   |   |   | 13 |   |   |   | (160 | ) |   |   | 115 |   |   |   | 23 |   |   |   | 41 |   |

|                                                      |   | Cost                           |   |   | Accumulated depreciation |   |   |            |   |   |    |   |
|-----------------------------------------------------------|--------|--------------------------------|--------|--------|-------------------------------|--------|--------|-----------------|--------|--------|---------|--------|
|                                                 |   | Opening                        |   |   | Additions                     |   |   | Disposals       |   |   | Closing |   |   | Opening |   |   | Additions |   |   | Disposals |   |   | Closing |   |   | Depreciated cost |   |
|                                                 |   | book                           |   |   | during the               |   |   | during the |   |   | book    |   |   | book |   |   | during the |   |   | during the |   |   | book |   |   | December 31, |   |
|                                                 |   | amount                         |   |   | year                          |   |   | year            |   |   | amount  |   |   | amount |   |   | year |   |   | year |   |   | amount |   |   | 2008 |   |   | 2007 |   |
|                                                      |   | U.S.      dollars in thousands |   |
|                                                      |   |                           |   |   |                          |   |   |            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Office      furniture and equipment (including computers) |   |                           | 318    |   |                          |   | 2      |            |   |   | (158    | )      |   |   | 162 |   |   |   | 216 |   |   |   | 28 |   |   |   | (123 | ) |   |   | 121 |   |   |   | 41 |   |   |   | 102 |   |
| Leasehold      improvements                               |   |                           | 141    |   |                          |   | -      |            |   |   | -       |   |   |   | 141 |   |   |   | 141 |   |   |   | - |   |   |   | - |   |   |   | 141 |   |   |   | - |   |   |   | - |   |
| Laboratory      equipment                                 |   |                           | 119    |   |                          |   | -      |            |   |   | (119    | )      |   |   | - |   |   |   | 115 |   |   |   | - |   |   |   | (115 | ) |   |   | - |   |   |   | - |   |   |   | 4 |   |
|                                                      |   |                           |   |   |                          |   |   |            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |                           | 578    |   |                          |   | 2      |            |   |   | (277    | )      |   |   | 303 |   |   |   | 472 |   |   |   | 28 |   |   |   | (238 | ) |   |   | 262 |   |   |   | 41 |   |   |   | 106 |   |

----

----

| NOTE      9:-  | FIXED      ASSETS (Cont.) |
|---------------------|---------------------------|

|                                                      |   | Cost                           |   |   | Accumulated depreciation |   |   |            |   |   |    |   |
|-----------------------------------------------------------|--------|--------------------------------|--------|--------|-------------------------------|--------|--------|-----------------|--------|--------|---------|--------|
|                                                 |   | Opening                        |   |   | Additions                     |   |   | Disposals       |   |   | Closing |   |   | Opening |   |   | Additions |   |   |   |   |   | Disposals |   |   | Closing |   |   | Depreciated cost |   |
|                                                 |   | book                           |   |   | during the               |   |   | during the |   |   | book    |   |   | book |   |   | during the |   |   |   |   |   | during the |   |   | book |   |   | December 31, |   |   | January 1, |   |
|                                                 |   | amount                         |   |   | year                          |   |   | year            |   |   | amount  |   |   | amount |   |   | year |   |   | Impairment |   |   | year |   |   | amount |   |   | 2007 |   |   | 2007 |   |
|                                                      |   | U.S.      dollars in thousands |   |
|                                                      |   |                           |   |   |                          |   |   |            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Office      furniture and equipment (including computers) |   |                           | 383    |   |                          |   | 65     |            |   |   | (130    | )      |   |   | 318 |   |   |   | 279 |   |   |   | 33 |   |   |   | - |   |   |   | (96 | ) |   |   | 216 |   |   |   | 102 |   |   |   | 104 |   |
| Leasehold      improvements                               |   |                           | 572    |   |                          |   | -      |            |   |   | (431    | )      |   |   | 141 |   |   |   | 572 |   |   |   | - |   |   |   | - |   |   |   | (431 | ) |   |   | 141 |   |   |   | - |   |   |   | - |   |
| Laboratory      equipment                                 |   |                           | 1,281  |   |                          |   | -      |            |   |   | (1,162  | )      |   |   | 119 |   |   |   | 895 |   |   |   | 61 |   |   |   | 105 |   |   |   | (946 | ) |   |   | 115 |   |   |   | 4 |   |   |   | 386 |   |
|                                                      |   |                           |   |   |                          |   |   |            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |                           | 2,236  |   |                          |   | 65     |            |   |   | (1,723  | )      |   |   | 578 |   |   |   | 1,746 |   |   |   | 94 |   |   |   | 105 |   |   |   | (1,473 | ) |   |   | 472 |   |   |   | 106 |   |   |   | 490 |   |

|   | b. | Additional      information: |
|--------|----|------------------------------|

|   | 1. | In      2007, the Group's management examined the recoverable amount of fixed      assets and recorded an impairment of laboratory equipment of      $ 105 thousand. The impairment has been charged in research and      development costs. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | In      2009, depreciation of fixed assets of $ 13 thousand has been charged      in general and administrative expenses (2008 - $ 28 thousand and 2007      - $ 28 thousand) and no depreciation has been charged in research and      development costs (2008 - $ 0 thousand and 2007 - $ 66      thousand). |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      10:-  | INTANGIBLE      ASSETS |
|----------------------|------------------------|

|   | a. | On      November 18, 2008, the Company published the results of Phase 2b      clinical trial of Bicifadine for diabetic neuropathic pain which testified      that the therapeutic did not meet its endpoints and, therefore, the      development activity was ceased. On this date, an intangible asset of      $ 7.5 million representing the acquired development rights was      impaired, see alsoNote 26d(4). |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | As      part of the Company's license agreement with VivoQuest (see      Note 15a(3)), the Company allocated the acquisition cost to fixed      assets and intangible assets, based on the fair value at the date of      acquisition. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | U.S. dollarsin thousands |   |
|-------------------------------------------------------------|--------|------------------------------------|--------|
|                                                        |   |                               |   |
| Fair      value of Company's shares issued upon acquisition |   |                               | 1,391  |   |
| Cash      paid                                              |   |                               | 400    |   |
| Direct      acquisition costs                               |   |                               | 148    |   |
|                                                        |   |                               |   |   |
| Total      acquisition cost                                 |   |                               | 1,939  |   |
|                                                        |   |                               |   |   |
| Assets      arising on acquisition:                         |   |                               |   |   |
|                                                        |   |                               |   |   |
| Fixed      assets                                           |   |                               | 113    |   |
|                                                        |   |                               |   |   |
| Intangible      assets:                                     |   |                               |   |   |
| In-process      research and development assets             |   |                               | 1,783  |   |
| Employment      contracts with professional staff           |   |                               | 43     |   |
|                                                        |   |                               |   |   |
| Total      intangible assets                                |   |                               | 1,826  |   |
|                                                        |   |                               |   |   |
| Total      assets arising on acquisition                    |   |                               | 1,939  |   |

----

----

| NOTE      11:-  | TRADE      PAYABLES |
|----------------------|---------------------|

|                |   | December      31,              |   |   | January      1, |   |
|---------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|                |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|                |   | U.S.      dollars in thousands |   |
|                |   |                           |   |   |            |   |   |   |   |   |   |   |
| Open      accounts  |   |                           | 170    |   |            |   | 416 |   |   |   | 2,144 |   |   |   | 941 |   |
| Checks      payable |   |                           | 22     |   |            |   | - |   |   |   | - |   |   |   | - |   |
|                |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Total               |   |                           | 192    |   |            |   | 416 |   |   |   | 2,144 |   |   |   | 941 |   |

|   | b. | The      carrying amount of other trade payables is denominated in the following      currencies: |
|--------|----|---------------------------------------------------------------------------------------------------|

|             |   | December      31,              |   |   | January      1, |   |
|------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|             |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|             |   | U.S.      dollars in thousands |   |
|             |   |                           |   |   |            |   |   |   |   |   |   |   |
| NIS              |   |                           | 36     |   |            |   | 16 |   |   |   | 143 |   |   |   | 135 |   |
| U.S.      dollar |   |                           | 156    |   |            |   | 400 |   |   |   | 2,001 |   |   |   | 806 |   |
|             |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Total            |   |                           | 192    |   |            |   | 416 |   |   |   | 2,144 |   |   |   | 941 |   |

| NOTE      12:-  | OTHER      ACCOUNTS PAYABLE |
|----------------------|-----------------------------|

|   | a. | Composition: |
|--------|----|--------------|

|                                |   | December 31,              |   |   | January 1, |   |
|-------------------------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|                           |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|                                |   | U.S.      dollars in thousands |   |
|                                |   |                           |   |   |            |   |   |   |   |   |   |   |
| Employees      and payroll accruals |   |                           | 122    |   |            |   | 39 |   |   |   | 44 |   |   |   | 52 |   |
| Government      authorities         |   |                           | -      |   |            |   | 8 |   |   |   | 23 |   |   |   | 33 |   |
| Accrued      expenses               |   |                           | 394    |   |            |   | 1,003 |   |   |   | 1,570 |   |   |   | 1,683 |   |
| Other                               |   |                           | -      |   |            |   | 8 |   |   |   | 28 |   |   |   | 66 |   |
|                                |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Total                               |   |                           | 516    |   |            |   | 1,058 |   |   |   | 1,665 |   |   |   | 1,834 |   |

|   | b. | The      carrying amount of other accounts payable is denominated in the following      currencies: |
|--------|----|-----------------------------------------------------------------------------------------------------|

|             |   | December 31,              |   |   | January 1, |   |
|------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|        |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|             |   | U.S.      dollars in thousands |   |
|             |   |                           |   |   |            |   |   |   |   |   |   |   |
| NIS              |   |                           | 132    |   |            |   | 87 |   |   |   | 109 |   |   |   | 381 |   |
| U.S.      dollar |   |                           | 384    |   |            |   | 971 |   |   |   | 1,556 |   |   |   | 1,453 |   |
|             |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Total            |   |                           | 516    |   |            |   | 1,058 |   |   |   | 1,665 |   |   |   | 1,834 |   |

----

----

| NOTE      13:-  | RETIREMENT      BENEFIT OBLIGATION |
|----------------------|------------------------------------|

|  | a. | According      to the effective labor laws and employment contracts in Israel and      overseas, the Company and the subsidiaries are obligated to pay      compensation and/or pension to employees who are dismissed and, under      certain circumstances, to employees whoretire. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | b. | The      Company's obligation for pension payment in Israel and the Company's      obligation for compensation payments to employees in Israel for whom the      applicable obligation is pursuant to section 14 to the Severance Pay Law,      are covered by fixed contributions in defined contribution plans. The      amounts contributed as above are not reflected in the statements of      financial position. During 2009, all company's employees were covered      pursuant to section 14 to the severance paylaw. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c. | The      Company has an obligation to pay compensation to employees which is a      defined benefit plan for which compensation reserves and managers'      policies exist and the Group companies make contributions. The net amount      of compensation obligations included in the statement of financial      position as of December 31, 2009, 2008, 2007 and January 1, 2007 reflect      the difference between the pension obligation and the plan assets, as      outlined below. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | December 31,              |   |   | January 1, |   |
|-------------------------------------------------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|                                                        |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|                                                        |   | U.S.      dollars in thousands |   |
|                                                        |   |                           |   |   |            |   |   |   |   |   |   |   |
| Present      value of fully or partially funded obligations |   |                           | -      |   |            |   | 27 |   |   |   | 33 |   |   |   | 219 |   |
| Fair      value of plan assets                              |   |                           | -      |   |            |   | (39 | ) |   |   | (49 | ) |   |   | (191 | ) |
|                                                        |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Present      value of unfunded obligations                  |   |                           | -      |   |            |   | (12 | ) |   |   | (16 | ) |   |   | 28 |   |

|                                      |   | Year      ended December 31,   |   |
|-------------------------------------------|--------|--------------------------------|--------|
|                                      |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                      |   | U.S.      dollars in thousands |   |
|                                      |   |                           |   |   |   |   |   |   |   |
| Balance      at the beginning of the year |   |                           | 27     |   |   |   | 33 |   |   |   | 219 |   |
|                                      |   |                           |   |   |   |   |   |   |   |   |   |   |
| Current      service cost                 |   |                           | -      |   |   |   | - |   |   |   | 46 |   |
| Interest      cost                        |   |                           | -      |   |   |   | 2 |   |   |   | 8 |   |
| Benefits      paid                        |   |                           | (39    | ) |   |   | (10 | ) |   |   | (165 | ) |
| Actuarial      losses (gains)             |   |                           | 12     |   |   |   | 2 |   |   |   | (75 | ) |
|                                      |   |                           |   |   |   |   |   |   |   |   |   |   |
| Balance      at the end of the year       |   |                           | -      |   |   |   | 27 |   |   |   | 33 |   |

----

----

| NOTE      13:-  | RETIREMENT      BENEFIT OBLIGATION (Cont.) |
|----------------------|--------------------------------------------|

|                                      |   | Year      ended December 31,   |   |
|-------------------------------------------|--------|--------------------------------|--------|
|                                      |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                      |   | U.S.      dollars in thousands |   |
|                                      |   |                           |   |   |   |   |   |   |   |
| Balance      at the beginning of the year |   |                           | 39     |   |   |   | 49 |   |   |   | 191 |   |
|                                      |   |                           |   |   |   |   |   |   |   |   |   |   |
| Expected      return on plan assets       |   |                           | -      |   |   |   | 2 |   |   |   | 6 |   |
| Actuarial      gains (losses)             |   |                           | -      |   |   |   | (2 | ) |   |   | 1 |   |
| Employer      contributions               |   |                           | -      |   |   |   | - |   |   |   | 16 |   |
| Benefits      paid                        |   |                           | (39    | ) |   |   | (10 | ) |   |   | (165 | ) |
|                                      |   |                           |   |   |   |   |   |   |   |   |   |   |
| Balance      at the end of the year       |   |                           | -      |   |   |   | 39 |   |   |   | 49 |   |

|                                |   | Year      ended December 31,   |   |
|-------------------------------------|--------|--------------------------------|--------|
|                                |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                |   | U.S.      dollars in thousands |   |
|                                |   |                           |   |   |   |   |   |   |   |
| Current      service cost           |   |                           | -      |   |   |   | - |   |   |   | 46 |   |
| Interest      cost                  |   |                           | -      |   |   |   | 2 |   |   |   | 8 |   |
| Actuarial      losses (gains)       |   |                           | 12     |   |   |   | 4 |   |   |   | (76 | ) |
| Expected      return on plan assets |   |                           | -      |   |   |   | (2 | ) |   |   | (6 | ) |
|                                |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                |   |                           | 12     |   |   |   | 4 |   |   |   | (28 | ) |

|                                |   | December 31,              |   |   | January 1, |   |
|-------------------------------------|--------|--------------------------------|--------|--------|-----------------|--------|
|                                |   | 2009                           |   |   | 2008            |   |   | 2007 |   |   | 2007 |   |
|                                |   | U.S.      dollars in thousands |   |
|                                |   |                           |   |   |            |   |   |   |   |   |   |   |
| Discount      rate                  |   |                           | -      |   |            |   | 2.884 |   |   |   | 5.276 |   |   |   | 5.111 |   |
| Israeli      CPI rate               |   |                           | -      |   |            |   | (0.4 | ) |   |   | 2.5 |   |   |   | 1.29 |   |
| Expected      return on plan assets |   |                           | -      |   |            |   | 2.884 |   |   |   | 5.276 |   |   |   | 5.111 |   |
| Expected      employee turnover     |   |                           | -      |   |            |   | 47.17 |   |   |   | 47.17 |   |   |   | 47.17 |   |
| Future      salary increases        |   |                           | -      |   |            |   | (0.4 | ) |   |   | 2.5 |   |   |   | 1.29 |   |

----

----

| NOTE      13:-  | RETIREMENT      BENEFIT OBLIGATION (Cont.) |
|----------------------|--------------------------------------------|

|  | d. | The      group records a provision in its books relates to retirement agreements      signed with executive officers and employees. As of December 31, 2008 and      2007, the liability related to these agreements totaled $ 447 thousand and      $ 131 thousand, respectively. As of December 31 2009 the group has no      liability for retirement agreements other than the defined contribution      plans as aforementioned in b. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE      14:-  | LIABILITY      FOR SHARE APPRECIATION RIGHTS |
|----------------------|----------------------------------------------|

----

----

| NOTE      14:-  | LIABILITY      FOR SHARE APPRECIATION RIGHTS(Cont.) |
|----------------------|-----------------------------------------------------|

| NOTE      15:-  | COMMITMENTS      AND CONTINGENT LIABILITIES |
|----------------------|---------------------------------------------|

|  | a.  | Royalty      and contingent milestone payments: |
|--|----------|-------------------------------------------------|

|  | 1. | The      Company acquired patent rights from others. These license agreements      require the Company to make contingent milestone payments to its      licensors. In addition, under these agreements, the Company must pay      royalties on sales of products resulting from licensed      technologies. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | The      subsidiary is committed to pay an advisory fee (in cash or by issuance of      shares) to a third party in connection with the DOV transaction (see also      Note 14 above). |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3. | During      September 2005, the Company licensed from VivoQuest perpetual, exclusive,      and worldwide rights to VivoQuest's intellectual property and technology,      covering a proprietary compound library, which includes VivoQuest's lead      hepatitis C compounds (the Diversity Oriented Synthesis, or DOS program).      In addition, the Company acquired from VivoQuest certain assets, including      VivoQuest's laboratory equipment, assumed VivoQuest's lease of its      laboratory space and certain research and development employees. The      Company executed this transaction in order to broaden its pipeline and      strengthen its franchise in infectiousdiseases. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | a) | the      Company issued the fair value equivalent of $1,391,000 of its Ordinary      shares (1,314,420 Ordinary shares (262,884 after the capital      consolidation), calculated based upon the average of the closing prices      per share for the period commencing two days before, and ending two days      after the closing of the transaction), made cash payments of approximately      $ 400,000 to cover VivoQuest's operating expenses prior to the      closing of the Transaction, and incurred $ 148,000 in direct expenses      associated with theTransaction; |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      15:-  | COMMITMENTS      AND CONTINGENT LIABILITIES (Cont.) |
|----------------------|-----------------------------------------------------|

|   | b) | the      Company agreed to make additional contingent milestone payments triggered      by certain regulatory and sales targets, totaling up to $ 34 million,      $ 25 million of which will be due upon or following regulatory      approval or actual product sales, and payable in cash or Ordinary shares      at the Company's election. No contingent consideration has been paid      pursuant to the license agreement as of the balance sheet date, because      none of the milestones have been achieved;and |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c) | the      Company agreed to make royalty payments on future product      sales. |
|--------|----|--------------------------------------------------------------------------------|

|   | b.  | Operating      lease commitments: |
|--------|----------|-----------------------------------|

----

----

| NOTE      15:-  | COMMITMENTS      AND CONTINGENT LIABILITIES (Cont.) |
|----------------------|-----------------------------------------------------|

|   | c.  | Contingent      liabilities: |
|--------|----------|------------------------------|

| NOTE      16:-  | SHARE      CAPITAL, RESERVES AND RETAINEDEARNINGS |
|----------------------|---------------------------------------------------|

|   | a.  | Share      capital: |
|--------|----------|---------------------|

|   | 1.  | Composition: |
|--------|----------|--------------|

|                                    |   | Number      of shares |    |   | Amount                         |   |
|-----------------------------------------|--------|-----------------------|---------|--------|--------------------------------|--------|
|                                    |   | Authorized            |    |   | Issued      andoutstanding     |   |   | Authorized |   |   | Issued      andoutstanding |   |
|                                    |   | December      31,     |    |   | December      31,              |   |   | December      31, |   |   | December      31, |   |
|                                    |   | 2009                  |    |   | 2008                           |   |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
|                                    |   | Thousand              |    |   | U.S.      dollars in thousands |   |
|                                    |   |                  |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ordinary      shares of NIS 0.1 *) |   |                  | 700,000 |   |                           |   | - |   |   |   | 58,561 |   |   |   | - |   |   |   | 18,543 |   |   |   | - |   |   |   | 1,445 |   |   |   | - |   |
|                                    |   |                  |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ordinary      shares of NIS 0.02   |   |                  | -       |   |                           |   | 500,000 |   |   |   | - |   |   |   | 292,805 |   |   |   | - |   |   |   | 2,630 |   |   |   | - |   |   |   | 1,445 |   |

|                                  |   | Number      of shares |            |   | Amount                         |        |
|---------------------------------------|--------|-----------------------|-----------------|--------|--------------------------------|-------------|
|                                  |   | Authorized            |            |   | Issued      andoutstanding     |        |   | Authorized |   |   | Issued      andoutstanding |   |
|                                  |   | December31,           | January      1, |   |                           | December31, | January      1, |   |   | December31, | January      1, |   |   | December31, | January      1, |   |
|                                  |   | 2007                  |            |   | 2007                           |        |   | 2007 |   |   | 2007 |   |   | 2007 |   |   | 2007 |   |   | 2007 |   |   | 2007 |   |
|                                  |   | Thousand              |            |   | U.S.      dollars in thousands |        |
|                                  |   |                  |            |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ordinary      shares of NIS 0.02 |   |                  | 500,000         |   |                           |        | 300,000 |   |   |   | 292,655 |   |   |   | 220,124 |   |   |   | 2,630 |   |   |   | 1,420 |   |   |   | 1,444 |   |   |   | 1,072 |   |

|   | *) | Traded      on the Tel-Aviv Stock Exchange. As of December 31, 2009, Ordinary share of      NIS 0.1 was traded atNIS 0.272. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | Ordinary      shares confer upon their holders voting rights and right to participate in      the shareholders' meeting, right to receive earnings and the right to      participate in the excess of assets upon liquidation of the      Company. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | a) | that      the share capital of the Company be consolidated so that each 5 shares of      NIS 0.02 par value shall be consolidated into one (1) share of NIS      0.1 par value. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | b) | that      the authorized share capital of the Company be increased from NIS      10,000,000 par value divided into 100,000,000 Ordinary shares of NIS 0.1      par value to NIS 70,000,000 divided into 700,000,000 Ordinary shares      of NIS 0.1 par value. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c) | that      the ADR ratio be amended from one (1) ADR representing two (2) Ordinary      shares of NIS 0.1 par value to one (1) ADR representing twenty (20)      Ordinary shares of NIS 0.1 parvalue. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      16:-  | SHARE      CAPITAL, RESERVES AND RETAINED EARNINGS(Cont.) |
|----------------------|-----------------------------------------------------------|

|   | d) | due      to the capital consolidation, the amount of share options granted before      the capital consolidation and the exercise price were adjusted      accordingly. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3. | In      November 2007, the Company completed a private placement of 72,485,020      Ordinary shares of NIS 0.02 par value (14,497,004 Ordinary shares of      NIS 0.1 par value after the capital consolidation) each at $ 0.135      per share. Total proceeds to the Company from this private placement were      approximately $ 8.8 million, net of offering expenses of      approximately $ 1million. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Share-based      payment: |
|--------|----|---------------------------|

|  | 1. | In      April 2007, the Company's Board granted 70,000 share options to employees      in the Group to purchase 70,000 Ordinary shares of NIS 0.1 each at an      exercise price equal to $ 1.87 per share. The fair value of all share      options using the Black-Scholes model was $ 1.0 per option on the      grant date and a total of $ 70 thousand for all options. The option      term is for a period of 10 years from the grant date. The options are      exercisable on a straight-line basis every anniversary of the grant date      over a four-year period. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | In      August 2007, the Company granted 4,000 share options to a director to      purchase 4,000 Ordinary shares of NIS 0.1 each at an exercise price      equal to $ 1.02 per share. The fair value of all share options using      the Black-Scholes model was $ 0.55 per option on the grant date and a      total of $ 2.2 thousand for all options. The option term is for a      period of 10 years from the grant date. The options are exercisable on a      straight-line basis every quarter of the grant date over a three-year      period. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      16:-  | SHARE      CAPITAL, RESERVES AND RETAINED EARNINGS(Cont.) |
|----------------------|-----------------------------------------------------------|

|  | 3. | In      January 2008, the Company's Board granted 859,060 share options to      employees in the Company to purchase 859,060 Ordinary shares of      NIS 0.1 each at an exercise price equal to $ 1.575 per share.      The fair value of all share options using the Black-Scholes model was      $ 0.9 per option on the grant date and a total of $ 770 thousand      for all options. The option term is for a period of 10 years from the      grant date. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a) | 799,300      options of which one-quarter is exercisable immediately and the balance is      exercisable on a straight-line basis every anniversary of the grant date      over three years |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | 24,000      options are exercisableimmediately |
|--------|----|------------------------------------------------|

|   | c) | 35,760      options are exercisable on a straight-line basis every anniversary of the      grant date over four years |
|--------|----|-----------------------------------------------------------------------------------------------------------------------|

|  | 4. | In      December 2007, the Company canceled 1,850,000 options (with      performance-related conditions) that were granted to the Chairman in      August 2005 to purchase 1,850,000 shares of NIS 0.1 each at an      exercise price equal to $ 1.77 per share and granted to the Chairman      1,850,000 new options to purchase 1,850,000 shares of NIS 0.1 each at      an exercise price equal to $ 1.8 per share. All other exercise terms      remained exactly the same as those of the cancelled options. The fair      value of all share options was between $ 2.315 and $ 2.98 per      option and a total of $ 4,916 thousand for all    options. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      16:-  | SHARE      CAPITAL, RESERVES AND RETAINED EARNINGS(Cont.) |
|----------------------|-----------------------------------------------------------|

|  | 5. | In      March 2008, the Company's Board granted 50,000 share options to employees      in the Company to purchase 50,000 Ordinary shares of NIS 0.1 each at      an exercise price equal to $ 1.595 per share. The fair value of all      share options using the Black-Scholes model was $ 0.95 per option on      the grant date and a total of $ 48 thousand for all options. The      option term is for a period of 10 years from the grant date. The options      are exercisable on a straight-line basis every anniversary of the grant      date over a four-year period. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 6. | In      May 2008, the Company granted 8,000 share options to service providers of      the Company to purchase 8,000 Ordinary shares of NIS 0.1 each at an      exercise price equal to $ 1.55 per share. The fair value of all share      options using the Black-Scholes model was $ 0.75 per option on the      grant date and a total of $ 6 thousand for all options. The option      term is for a period of 10 years from the grant date. The options are      exercisable on a straight-line basis every anniversary of the grant date      over a two-year period. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 7. | In      July 2008, the Company granted 60,000 share options to a director in the      Company to purchase 60,000 Ordinary shares of NIS 0.1 each at an      exercise price equal to $ 1.75 per share. The fair value of all share      options using the Black-Scholes model was $ 1.1 per option on the      grant date and a total of $ 65 thousand for all options. The option      term is for a period of 10 years from the grant date. The options are      exercisable on a straight-line basis every month of the grant date over a      three-year period. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 8. | In      August 2008, the Company granted 4,000 share options to a director in the      Company to purchase 4,000 Ordinary shares of NIS 0.1 each at an      exercise price equal to $ 1.84 per share. The fair value of all share      options using the Black-Scholes model was $ 1.15 per option on the      grant date and a total of $ 4.5 thousand for all options. The option      term is for a period of 10 years from the grant date. The options are      exercisable on a straight-line basis every quarter of the grant date over      a three-year period. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      16:-  | SHARE      CAPITAL, RESERVES AND RETAINED EARNINGS(Cont.) |
|----------------------|-----------------------------------------------------------|

|  | 9. | In      October 2008, the Company granted 940,000 share options to directors in      the Company to purchase 940,000 Ordinary shares of NIS 0.1 each at an      exercise price equal to $ 0.99 per share (of which 700,000 share      options were granted to the Chairman). The fair value of all share options      using the Black-Scholes model was $ 0.32 per option to the Chairman      and $ 0.62 per option to other directors on the grant date and a      total of $ 376 thousand for all options. The option term is for a      period of 10 years from the grantdate. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a) | 583,334      options are exercisableimmediately |
|--------|----|-------------------------------------------------|

|   | b) | 116,666      options are exercisable on a straight-line basis every month of the grant      date over six months |
|--------|----|------------------------------------------------------------------------------------------------------------------|

|  | 10. | In      July 2009, the Company's Board granted 1,400,000 share options (unlisted)      to s senior officer in the Company to purchase 1,400,000 Ordinary shares      of NIS 0.1 each at an exercise price equal to NIS 0.075 per      share. The fair value of all share options using the Black-Scholes model      was NIS 0.42079 per option on the grant date and a total of      NIS 589,106 for all options. The option term is for a period of 120      months from the grant date, such that 33.33% of the share options are      exercisable immediately after five months from the grant date and the      remaining 66.67% share options are exercisable on a straight-line basis      every month of the grant date over a three-year  period. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      16:-  | SHARE      CAPITAL, RESERVES AND RETAINED EARNINGS(Cont.) |
|----------------------|-----------------------------------------------------------|

|                                  |   | Year ended December 31, |       |
|---------------------------------------|--------|----------------------------------------|------------|
|                             |   | 2009                                   |       |   | 2008 |   |   | 2007 |   |
|                             |   | Options                                |       |   | Weightedaverageexerciseprice |   |   | Options |   |   | Weightedaverageexerciseprice |   |   | Options |   |   | Weightedaverageexerciseprice |   |
|                                  |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding      at beginning of year |   |                                   | 6,165,036  |   |   |   | 2.63 |   |   |   | 5,833,531 |   |   |   | 3.07 |   |   |   | 6,647,048 |   |   |   | 3.11 |   |
| Granted                               |   |                                   | 1,400,000  |   |   |   | 0.02 |   |   |   | 1,985,060 |   |   |   | 1.31 |   |   |   | 1,954,000 |   |   |   | 1.80 |   |
| Exercised      *)                     |   |                                   | -          |   |   |   | - |   |   |   | (30,108 | ) |   |   | 1.10 |   |   |   | (9,083 | ) |   |   | 0.53 |   |
| Cancelled                             |   |                                   | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,850,000 | ) |   |   | 1.75 |   |
| Expired                               |   |                                   | (2,607,217 | ) |   |   | 2.18 |   |   |   | (934,764 | ) |   |   | 3.03 |   |   |   | (789,507 | ) |   |   | 3.50 |   |
| Forfeited                             |   |                                   | (2,817,105 | ) |   |   | 2.44 |   |   |   | (688,683 | ) |   |   | 2.03 |   |   |   | (118,927 | ) |   |   | 2.40 |   |
|                                  |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding      at end of year       |   |                                   | 2,140,714  |   |   |   | 1.70 |   |   |   | 6,165,036 |   |   |   | 2.63 |   |   |   | 5,833,531 |   |   |   | 3.07 |   |
|                                  |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable      at end of year       |   |                                   | 1,338,121  |   |   |   | 2.65 |   |   |   | 2,900,192 |   |   |   | 2.93 |   |   |   | 2,597,004 |   |   |   | 3.53 |   |

|   | *) | Total      proceeds received from these exercises aggregated $ 33 thousand and      $ 4 thousand for the years ended December 31, 2008 and 2007,      respectively. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      16:-  | SHARE      CAPITAL, RESERVES AND RETAINED EARNINGS(Cont.) |
|----------------------|-----------------------------------------------------------|

| Year      ended December 31, 2009          |      |   | Year      ended December 31, 2008 |   |
|--------------------------------------------|-----------|--------|-----------------------------------|--------|
| Optionsoutstanding      atend      of year |      |   | Range      ofexercise      prices |   |   | Weightedaverageremainingcontractuallife |   |   | Optionsoutstanding      atend      of year |   |   | Range      ofexercise      prices |   |   | Weightedaverageremainingcontractuallife |   |
|                                       |      |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       | 1,400,000 |   |                              |   | 0-0.500 |   |   |   | 9.6 |   |   |   | - |   |   |   | 0-0.500 |   |   |   | 10 |   |
|                                       | 18,150    |   |                              |   | 0.500-1.499 |   |   |   | 0.1 |   |   |   | 987,075 |   |   |   | 0.500-1.499 |   |   |   | 10 |   |
|                                       | 200,425   |   |                              |   | 1.500-1.995 |   |   |   | 2.5 |   |   |   | 2,916,903 |   |   |   | 1.500-1.995 |   |   |   | 1.7 |   |
|                                       | 10,840    |   |                              |   | 2.000-2.495 |   |   |   | 0.3 |   |   |   | 10,840 |   |   |   | 2.000-2.495 |   |   |   | 2.3 |   |
|                                       | 220,459   |   |                              |   | 2.500-3.495 |   |   |   | 0.2 |   |   |   | 473,058 |   |   |   | 2.500-3.495 |   |   |   | 2.7 |   |
|                                       | 2,880     |   |                              |   | 3.500-4.495 |   |   |   | 0.1 |   |   |   | 1,439,880 |   |   |   | 3.500-4.495 |   |   |   | 7.1 |   |
|                                       | 77,960    |   |                              |   | 4.500-5.500 |   |   |   | 0.1 |   |   |   | 82,280 |   |   |   | 4.500-5.500 |   |   |   | 0.9 |   |
|                                       | 210,000   |   |                              |   | 5.500-10.55 |   |   |   | 0.7 |   |   |   | 255,000 |   |   |   | 10.55-5.500 |   |   |   | 1.7 |   |
|                                       |      |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       | 2,140,714 |   |                              |   |   |   |   |   | 6.6 |   |   |   | 6,165,036 |   |   |   |   |   |   |   | 4.3 |   |

| Year      ended December 31, 2007          |      |   | Year      ended December 31, 2006 |   |
|--------------------------------------------|-----------|--------|-----------------------------------|--------|
| Optionsoutstanding      atend      of year |      |   | Range      ofexercise      prices |   |   | Weightedaverageremainingcontractuallife |   |   | Optionsoutstanding      atend      of year |   |   | Range      ofexercise      prices |   |   | Weightedaverageremainingcontractuallife |   |
|                                       |      |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       | 116,702   |   |                              |   | 0.500-1.499 |   |   |   | 5.5 |   |   |   | 163,555 |   |   |   | 0.500-1.499 |   |   |   | 5.9 |   |
|                                       | 2,362,000 |   |                              |   | 1.500-1.995 |   |   |   | 2.8 |   |   |   | 2,262,000 |   |   |   | 1.500-1.995 |   |   |   | 3.6 |   |
|                                       | 681,164   |   |                              |   | 2.000-2.495 |   |   |   | 0.2 |   |   |   | 1,160,520 |   |   |   | 2.000-2.495 |   |   |   | 1.1 |   |
|                                       | 680,532   |   |                              |   | 2.500-3.495 |   |   |   | 8.3 |   |   |   | 764,000 |   |   |   | 2.500-3.495 |   |   |   | 9.5 |   |
|                                       | 1,439,880 |   |                              |   | 3.500-4.495 |   |   |   | 8.1 |   |   |   | 1,454,760 |   |   |   | 3.500-4.495 |   |   |   | 9 |   |
|                                       | 298,253   |   |                              |   | 4.500-5.500 |   |   |   | 0.9 |   |   |   | 587,213 |   |   |   | 4.500-5.500 |   |   |   | 1.5 |   |
|                                       | 255,000   |   |                              |   | 10.55-5.500 |   |   |   | 2.7 |   |   |   | 255,000 |   |   |   | 10.55-5.500 |   |   |   | 3.7 |   |
|                                       |      |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       | 5,833,531 |   |                              |   |   |   |   |   | 4.4 |   |   |   | 6,647,048 |   |   |   |   |   |   |   | 4.9 |   |

----

----

| NOTE      17:-  | REVENUES      AND COST OF REVENUES |
|----------------------|------------------------------------|

|  | a. | The      Company entered into a licensing agreement with Cubist Pharmaceuticals,      Inc. in June 2004, and as amended in August 2005, under which the Company      granted Cubist a license to commercialize clinical against hepatitis B. In      July 2007, Cubist terminated theagreement. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | As      for revenues and cost of revenues in 2008 arising on the sale of the      development rights of DOS, see Notes 10b and  15a(3). |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE      18:-  | RESEARCH      AND DEVELOPMENT COSTS |
|----------------------|-------------------------------------|

|                                                                 |   | Year      ended December 31,   |   |
|----------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                 |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                                                 |   | U.S.      dollars in thousands |   |
|                                                                 |   |                           |   |   |   |   |   |   |   |
| Salaries      and payroll accruals                                   |   |                           | -      |   |   |   | 1,583 |   |   |   | 2,788 |   |
| Expenses      relating to options to employees and service providers |   |                           | -      |   |   |   | 54 |   |   |   | 149 |   |
| Laboratory      materials and production works                       |   |                           | -      |   |   |   | 602 |   |   |   | 1,525 |   |
| Clinical      trials                                                 |   |                           | -      |   |   |   | 8,473 |   |   |   | 3,610 |   |
| Subcontracted      work                                              |   |                           | -      |   |   |   | - |   |   |   | 632 |   |
| Professional      services                                           |   |                           | -      |   |   |   | 227 |   |   |   | 456 |   |
| Rent      and laboratory maintenance                                 |   |                           | -      |   |   |   | 661 |   |   |   | 1,140 |   |
| Depreciation      and amortization                                   |   |                           | -      |   |   |   | 11 |   |   |   | 80 |   |
| Impairment      of laboratory equipment                              |   |                           | -      |   |   |   | - |   |   |   | 105 |   |
| Other                                                                |   |                           | -      |   |   |   | 111 |   |   |   | 1,071 |   |
|                                                                 |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                           | -      |   |   |   | 11,722 |   |   |   | 11,556 |   |
| Less      - grants and participations                                |   |                           | -      |   |   |   | - |   |   |   | 56 |   |
|                                                                 |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                           | -      |   |   |   | 11,722 |   |   |   | 11,500 |   |

----

----

| NOTE      19:-  | GENERAL      AND ADMINISTRATIVE EXPENSES |
|----------------------|------------------------------------------|

|                                                                    |   | Year      ended December 31,   |   |
|-------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                    |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                                                    |   | U.S.      dollars in thousands |   |
|                                                                    |   |                           |   |   |   |   |   |   |   |
| Salaries      and payroll accruals                                      |   |                           | 428    |   |   |   | 1,307 |   |   |   | 1,198 |   |
| Expenses      relating to options to employees and service providers *) |   |                           | (4,180 | ) |   |   | 1,759 |   |   |   | 1,842 |   |
| Patents                                                                 |   |                           | 14     |   |   |   | 235 |   |   |   | 440 |   |
| Expenses      (income) relating to share appreciation rights            |   |                           | 119    |   |   |   | (1,553 | ) |   |   | 1,560 |   |
| Directors'      fees                                                    |   |                           | 98     |   |   |   | 356 |   |   |   | 280 |   |
| Travel      abroad                                                      |   |                           | 8      |   |   |   | 17 |   |   |   | 85 |   |
| Foreign      services, public relation and travel                       |   |                           | 13     |   |   |   | 145 |   |   |   | 296 |   |
| Rent      and office maintenance                                        |   |                           | 355    |   |   |   | 183 |   |   |   | 77 |   |
| Vehicle      maintenance                                                |   |                           | 25     |   |   |   | 16 |   |   |   | 14 |   |
| Insurance                                                               |   |                           | 198    |   |   |   | 203 |   |   |   | 203 |   |
| Professional      services                                              |   |                           | 378    |   |   |   | 1,029 |   |   |   | 1,233 |   |
| Depreciation      and amortization                                      |   |                           | 13     |   |   |   | 28 |   |   |   | 28 |   |
| Other                                                                   |   |                           | 102    |   |   |   | 212 |   |   |   | 340 |   |
|                                                                    |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                           | (2,429 | ) |   |   | 3,937 |   |   |   | 7,596 |   |

|  | *) | Include      reduced expenses which result from forfeiture of share options that were      contingent on the performance of the former chairman and CEO, see also      Note 16b. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE      20:-  | OTHER      GAINS (LOSSES), NET |
|----------------------|--------------------------------|

|                                                                                    |   | Year      ended December 31,   |   |
|-----------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                    |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                                                                    |   | U.S.      dollars in thousands |   |
|                                                                                    |   |                           |   |   |   |   |   |   |   |
| Gain      (loss) on sale of fixed assets                                                |   |                           | (5     | ) |   |   | 288 |   |   |   | 40 |   |
| Change      in fair value of financial assets at fair value through profit or      loss |   |                           | -      |   |   |   | - |   |   |   | (48 | ) |
| Other      income                                                                       |   |                           | 144    |   |   |   | - |   |   |   | - |   |
|                                                                                    |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                           | 139    |   |   |   | 288 |   |   |   | (8 | ) |

----

----

| NOTE      21:-  | FINANCE      COSTS (INCOME), NET |
|----------------------|----------------------------------|

|                                  |   | Year      ended December 31,   |   |
|---------------------------------------|--------|--------------------------------|--------|
|                                  |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                  |   | U.S.      dollars in thousands |   |
| Finance      costs:                   |   |                           |   |   |   |   |   |   |   |
|                                  |   |                           |   |   |   |   |   |   |   |
| Interest      charge                  |   |                           | 2      |   |   |   | 3 |   |   |   | 4 |   |
| Exchange      differences             |   |                           | -      |   |   |   | - |   |   |   | 9 |   |
| Management      fees and commissions  |   |                           | 8      |   |   |   | 14 |   |   |   | 16 |   |
| Other                                 |   |                           | -      |   |   |   | - |   |   |   | 1 |   |
|                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Total      finance costs              |   |                           | 10     |   |   |   | 17 |   |   |   | 30 |   |
|                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Finance      income:                  |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Interest      income on bank deposits |   |                           | 3      |   |   |   | 251 |   |   |   | 668 |   |
| Exchange      differences             |   |                           | 3      |   |   |   | 14 |   |   |   | - |   |
| Other                                 |   |                           | -      |   |   |   | 66 |   |   |   | - |   |
|                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Total      finance income             |   |                           | 6      |   |   |   | 331 |   |   |   | 668 |   |
|                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Finance      income (costs), net      |   |                           | (4     | ) |   |   | 314 |   |   |   | 638 |   |

| NOTE      22:-  | TAXES      ON INCOME |
|----------------------|----------------------|

|   | a. | Taxation      in Israel: |
|--------|----|--------------------------|

|   | 1. | Since      the 2008 tax year, the results for tax purposes of the Company are      measured in nominal values. Until the end of the 2007 tax year, the      results for tax purposes of the Company were adjusted for the changes in      the Israeli CPI pursuant to the Income Tax (Inflationary Adjustments) Law,      1985 ("the inflationary adjustmentslaw"). |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Tax      rates: |
|--------|----|-----------------|

----

----

| NOTE      22:-  | TAXES      ON INCOME (Cont.) |
|----------------------|------------------------------|

|   | b. | Foreign      subsidiaries: |
|--------|----|----------------------------|

|   | c. | Carryforward      tax losses and real loss on sale of marketable  securities: |
|--------|----|-------------------------------------------------------------------------------|

----

----

| NOTE      22:-  | TAXES      ON INCOME (Cont.) |
|----------------------|------------------------------|

|   | d. | Taxes      on income included in the statements of income for the years      presented: |
|--------|----|-----------------------------------------------------------------------------------------|

|   | 1.  | As      follows: |
|--------|----------|------------------|

|                                       |   | Year      ended December 31,   |   |
|--------------------------------------------|--------|--------------------------------|--------|
|                                       |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                       |   | U.S.      dollars in thousands |   |
| Current      taxes:                        |   |                           |   |   |   |   |   |   |   |
|                                       |   |                           |   |   |   |   |   |   |   |
| Current      taxes on income for the year  |   |                           | -      |   |   |   | 10 |   |   |   | - |   |
| Adjustments      in respect of prior years |   |                           | (23    | ) |   |   | (41 | ) |   |   | (254 | ) |
|                                       |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                       |   |                           | (23    | ) |   |   | (31 | ) |   |   | (254 | ) |
|                                       |   |                           |   |   |   |   |   |   |   |   |   |   |
| Deferred      taxes                        |   |                           | -      |   |   |   | - |   |   |   | 48 |   |
|                                       |   |                           |   |   |   |   |   |   |   |   |   |   |
| Tax      benefit                           |   |                           | (23    | ) |   |   | (31 | ) |   |   | (206 | ) |

|  | 2. | Below      is a reconciliation between the "theoretical" tax expense, assuming that      all the income were taxed at the regular tax rate applicable to companies      in Israel (see a(2) above) and the taxes recorded in the statement of      comprehensive income in the reportedyear: |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                       |   | 2009            |   |   | 2008            |   |    | 2007            |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|-----------------|--------|--------|-----------------|--------|---------|-----------------|--------|
|                                                                                                                  |   | $ thousand |   |   | $ thousand |   |    | $ thousand |   |
| Income      (loss) before taxes on income, as reported in the statements of      income                                    |   |            | 2,564  |   |            |   | (18,458 | )               |   |   | (17,669 | ) |
|                                                                                                                       |   |            |   |   |            |   |    |            |   |   |   |   |
| Theoretical      tax (tax saving) on this income (loss)                                                                    |   |            | 667    |   |            |   | (4,984  | )               |   |   | (5,124 | ) |
| Increase      (decrease) in taxes resulting from different tax rates for foreign      subsidiaries                         |   |            | 85     |   |            |   | (1,138  | )               |   |   | (365 | ) |
| Expenses      not deductible for tax purposes                                                                              |   |            | 2      |   |            |   | 405     |            |   |   | 761 |   |
| Tax      exempt income                                                                                                     |   |            | (1,087 | )      |            |   | -       |            |   |   | - |   |
| Increase      in taxes resulting from taxable losses in the reported year for which no      deferred taxes were recognized |   |            | 333    |   |            |   | 5,727   |            |   |   | 4,776 |   |
| Taxes      in respect of prior year                                                                                        |   |            | (23    | )      |            |   | (41     | )               |   |   | (254 | ) |
|                                                                                                                       |   |            |   |   |            |   |    |            |   |   |   |   |
| Taxes      on income                                                                                                       |   |            | (23    | )      |            |   | (31     | )               |   |   | (206 | ) |

----

----

| NOTE      22:-  | TAXES      ON INCOME (Cont.) |
|----------------------|------------------------------|

|  | 3. | Since      the balance of carryforward tax losses exceeds other temporary differences      (net), and considering that the Company can not assess with certainty that      it will have sufficient income in the future to allow the losses to be      used in the foreseeable future, in 2009, the Company did not record      deferred taxes on these losses. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | e.  | The      effect of the adoption of IFRS in Israel on the tax    liability: |
|--------|----------|----------------------------------------------------------------------------|

|   | f. | Tax      assessments: |
|--------|----|-----------------------|

----

----

| NOTE      23:-  | EARNINGS      PER SHARE |
|----------------------|-------------------------|

|   | a.  | Basic: |
|--------|----------|--------|

|                                                                                             |   | Year      ended December 31, |       |
|--------------------------------------------------------------------------------------------------|--------|------------------------------|------------|
|                                                                                             |   | 2009                         |       |   | 2008 |   |   | 2007 |   |
|                                                                                             |   |                         |       |   |   |   |   |   |   |
| Income      (loss) attributable to equity holders of the parent (U.S. dollars in      thousands) |   |                         | 2,587      |   |   |   | (18,427 | ) |   |   | (17,463 | ) |
|                                                                                             |   |                         |       |   |   |   |   |   |   |   |   |   |
| Weighted      average number of issued Ordinary shares                                           |   |                         | 58,561,065 |   |   |   | 58,553,864 |   |   |   | 45,698,564 |   |
|                                                                                             |   |                         |       |   |   |   |   |   |   |   |   |   |
| Basic      earnings (loss) per share (in U.S. dollars)                                           |   |                         | 0.044      |   |   |   | (0.315 | ) |   |   | (0.382 | ) |

|                                                                                                                                                                                |   | Year      ended December 31,   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                                                                                                                |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                                                                                                                                                                |   | U.S.      dollars in thousands |   |
|                                                                                                                                                                                |   |                           |   |   |   |   |   |   |   |
| Total      income (loss) for the year attributable to equity holders of the parent      according to the statement of income used to determine basic earnings      (loss) per share |   |                           | 2,587  |   |   |   | (18,427 | ) |   |   | (17,463 | ) |
|                                                                                                                                                                                |   |                           |   |   |   |   |   |   |   |   |   |   |
| Total      net income (loss) used to determine diluted earnings (loss) per      share                                                                                               |   |                           | 2,587  |   |   |   | (18,427 | ) |   |   | (17,463 | ) |

|                                                                                            |   | Number      of shares |       |
|-------------------------------------------------------------------------------------------------|--------|-----------------------|------------|
|                                                                                            |   |                  |       |   |   |   |   |   |   |
| Weighted      average number of shares used to determine basic earnings (loss) per      share   |   |                  | 58,561,065 |   |   |   | 58,553,864 |   |   |   | 45,698,564 |   |
| Adjustment      for incremental shares due to exercise of share options                         |   |                  | 209,102    |   |   |   | - |   |   |   | - |   |
|                                                                                            |   |                  |       |   |   |   |   |   |   |   |   |   |
| Weighted      average number of shares used to determine diluted earnings (loss) per      share |   |                  | 58,770,167 |   |   |   | 58,553,864 |   |   |   | 45,698,564 |   |
|                                                                                            |   |                  |       |   |   |   |   |   |   |   |   |   |
| Diluted      earnings (loss) per share (in U.S. dollars)                                        |   |                  | 0.044      |   |   |   | (0.315 | ) |   |   | (0.382 | ) |

----

----

| NOTE      24:-  | TRANSACTIONS      AND BALANCES WITH RELATED PARTIES |
|----------------------|-----------------------------------------------------|

|   | a. | Compensation      to interested parties: |
|--------|----|------------------------------------------|

|                                                                                  |   | Year      ended December 31,   |   |
|---------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                  |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                                                                  |   | U.S.      dollars in thousands |   |
|                                                                                  |   |                           |   |   |   |   |   |   |   |
| Wages      and salaries to interested parties employed by the Group*)                 |   |                           | (1,219 | ) |   |   | 1,169 |   |   |   | 1,041 |   |
|                                                                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Number      of individuals to whom the benefit relates                                |   |                           | 2      |   |   |   | 1 |   |   |   | 1 |   |
|                                                                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Management      fees and commissions to interested parties employed by the      Group |   |                           | -      |   |   |   | - |   |   |   | - |   |
|                                                                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Number      of individuals to whom the benefit relates                                |   |                           | -      |   |   |   | - |   |   |   | - |   |
|                                                                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Compensation      to directors not employed by the Group **)                          |   |                           | (2,569 | ) |   |   | 944 |   |   |   | 1,222 |   |
|                                                                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Number      of individuals to whom the benefit relates                                |   |                           | 12     |   |   |   | 6 |   |   |   | 6 |   |
|                                                                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Rentals      to other interested parties not employed by the Group                    |   |                           | -      |   |   |   | - |   |   |   | - |   |
|                                                                                  |   |                           |   |   |   |   |   |   |   |   |   |   |
| Number      of individuals to whom the benefit relates                                |   |                           | -      |   |   |   | - |   |   |   | - |   |

|  | *) | Includes      reduced expenses in 2009 which result from forfeiture of shares that were      contingent on the performance of the former CEO, in amount of $ 1.45      million. The fair value of the benefit recorded due to Options granted to      the CEO for the years 2008 and 2007 was approximately $ 919 and $ 816,      respectively. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **) | Includes      reduced expenses in 2009 which result from forfeiture of shares that were      contingent on the performance of the former chairman, in amount of $ 2.65      million. The fair value of the benefit recorded due to Options granted to      the chairman for the years 2008 and 2007 was approximately $ 643 and $      946, respectively. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      24:-  | TRANSACTIONS      AND BALANCES WITH RELATED PARTIES(Cont.) |
|----------------------|------------------------------------------------------------|

|   | b. | Compensation      to key management personnel: |
|--------|----|------------------------------------------------|

|                                        |   | Year      ended December 31,   |   |
|---------------------------------------------|--------|--------------------------------|--------|
|                                        |   | 2009                           |   |   | 2008 |   |   | 2007 |   |
|                                        |   | U.S.      dollars in thousands |   |
|                                        |   |                           |   |   |   |   |   |   |   |
| Salaries      and other short-term benefits |   |                           | 424    |   |   |   | 1,122 |   |   |   | 1,066 |   |
| Increased      termination benefits         |   |                           | -      |   |   |   | - |   |   |   | - |   |
| Post-employment      benefits               |   |                           | 76     |   |   |   | 410 |   |   |   | - |   |
| Other      long-term benefits               |   |                           | -      |   |   |   | - |   |   |   | - |   |
| Share-based      payments                   |   |                           | (4,059 | )*) |   |   | 1,769 |   |   |   | 1,865 |   |
|                                        |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                        |   |                           | (3,559 | ) |   |   | 3,301 |   |   |   | 2,931 |   |

|   | *) | Includes      reduced expenses which result from forfeiture of shares that were      contingent on the performance of the former chairman and CEO, see also      Note 16b. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE      25:  | EVENTS      AFTER THE BALANCE SHEET DATE |
|---------------------|------------------------------------------|

|   | a. | Below      is information about the Company's engagement with  Bio-Gal: |
|--------|----|-------------------------------------------------------------------------|

|  | 1. | Following      the Board's approval of the engagement of the Company with Bio-Gal on      December 31, 2009, the Company published on January 14, 2010 an      extraordinary private placement , to acquire 100% of the issued and      outstanding shares of Xtepo Ltd. (a private company that was established      for the purpose of this transaction, and which the Bio Gal intellectual      property will be transferred into), by allocating 133,063,688 ordinary      shares of NIS 0.1 par value each of the Company representing after      their allocation 69.44% of the Company's issued and outstanding share      capital. On March 2, 2010 the extraordinary shareholders meeting approved      the Bio-Gal transaction (see also note 1b' regarding the contingent      conditions for the transactionclosing). |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | On      February 28, April 26, and on June 28, 2010 the Company and Bio-Gal have      extended the term for the closing of the Bio-Gal transaction, which was      eventually set to August 31, 2010. The rest of the terms for the closing      remained unchanged. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      25:  | EVENTS      AFTER THE BALANCE SHEET DATE(Cont.) |
|---------------------|-------------------------------------------------|

|   | b. | Below      is information about share-based payments granted after the balance sheet      date to directors in the Group, the CEO (who also acts as a director in      the Company) and to anotheremployee: |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 1. | On      January 18, 2010, the Company's Board approved to grant 450,000 share      options to directors in the Company to purchase 450,000 Ordinary shares of      NIS 0.1 each at an exercise price equal to NIS 0.298 per share.      Pursuant to the guidance of IFRS 2, the fair value of all share options at      the date when the Board accepted the resolution, using the Black-Scholes      model was approximately $ 36 thousand. The option term is for a      period of 10 years from the grant date. 33% of the options are exercisable      immediately and the remaining options are exercisable in 24 tranches every      month over a two-year period. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | On      January 18, 2010, the Company's Board approved to grant 1,610,000      share options to the Company's CEO to purchase 1,610,000 Ordinary shares      of NIS 0.1 each at an exercise price equal to NIS 0.075 per      share. Pursuant to the guidance of IFRS 2, the fair value of all share      options at the date when the Board accepted the resolution, using the      Black-Scholes model was approximately $ 136 thousand. The option term      is for a period of 10 years from the grant date. 33% of the options are      exercisable immediately and the remaining options are exercisable in 24      tranches every month over a two-yearperiod. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3. | On      January 26, 2010, the Company's Board granted 100,000 share options      to an employee in the Company to purchase 100,000 Ordinary shares of      NIS 0.1 each at an exercise price equal to NIS 0.1 per share.      The fair value of all share options using the Black-Scholes model was      NIS 0.36 per option on the grant date and a total of NIS 36      thousand for all options. The option term is for a period of 10 years from      the grant date. The options are exercisable in 24 tranches every quarter      over a three-year period. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c. | On      March 2, 2010, the shareholders annual general meeting of the Company      approved the terms of employment of Mr. David Grossman, the Company’s CEO      and Director. However, the terms of employment shall become effective only      upon the closing of the Bio-Galtransaction. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d. | In      March 2010, the Company formally terminated the license agreement with      DOV, regarding the Bicifadine, and all rights under this agreement were      reverted to DOV, in coordination withDOV. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS |
|----------------|------------------------------------------------|

|   | a. | Reconciliations      of the consolidated statements of financial position as of January 1,      2007 ("opening balance sheet"), December 31, 2007 and December 31,      2008. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Reconciliations      of the consolidated statements of comprehensive income for the years ended      December 31, 2007 and2008. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | Reconciliations      of certain equity items as of January 1, 2007, December 31, 2007      and December 31, 2008. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------|

|   | d. | Giving      explanations of the reconciliations carried out, as above, including a      description of the exemptions elected by the Company in the transition to      IFRS, in accordance with IFRS1. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS (Cont.) |
|----------------|--------------------------------------------------------|

|   | a. | The      effect of the transition on the consolidated statements of financial      position: |
|--------|----|----------------------------------------------------------------------------------------------|

|                                                       |   |   |   |   | January      1, 2007           |   |   | December      31, 2007               |   |   | December      31, 2008 |   |
|------------------------------------------------------------|--------|--------|--------|--------|--------------------------------|--------|--------|--------------------------------------|--------|--------|------------------------|--------|
|                                                       |   |   |   |   | USGAAP                         |   |   | Effect      oftransitionto      IFRS |   |   | IFRS                   |   |   | USGAAP |   |   | Effect      oftransitionto      IFRS |   |   | IFRS |   |   | USGAAP |   |   | Effect      oftransitionto      IFRS |   |   | IFRS |   |
|                                                       |   | Item   |   |   | U.S.      dollars in thousands |   |
| ASSETS                                                     |   |   |   |   |                           |   |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           |   |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CURRENT      ASSETS:                                       |   |   |   |   |                           |   |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents                             |   |   |   |   |                           | 4,400  |   |                                 |   | -      |                   |   |   | 4,400 |   |   |   | 2,377 |   |   |   | - |   |   |   | 2,377 |   |   |   | 2,924 |   |   |   | - |   |   |   | 2,924 |   |
| Short-term      deposits                                   |   |   |   |   |                           | 20,845 |   |                                 |   | -      |                   |   |   | 20,845 |   |   |   | 10,600 |   |   |   | - |   |   |   | 10,600 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Employee      benefit assets                               |   | 1      |   |   |                           | -      |   |                                 |   | -      |                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 40 |   |   |   | (28 | ) |   |   | 12 |   |
| Financial      assets at fair value through profit or loss |   |   |   |   |                           | 102    |   |                                 |   | -      |                   |   |   | 102 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Assets      held for sale                                  |   |   |   |   |                           | 18     |   |                                 |   | -      |                   |   |   | 18 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Accounts      receivable                                   |   | 1,9    |   |   |                           | 702    |   |                                 |   | (93    | )                      |   |   | 609 |   |   |   | 924 |   |   |   | (270 | ) |   |   | 654 |   |   |   | 354 |   |   |   | (49 | ) |   |   | 305 |   |
| Income      taxes receivable                               |   | 9      |   |   |                           | -      |   |                                 |   | -      |                   |   |   | - |   |   |   | - |   |   |   | 270 |   |   |   | 270 |   |   |   | - |   |   |   | 49 |   |   |   | 49 |   |
| Deferred      taxes                                        |   | 8      |   |   |                           | 29     |   |                                 |   | (29    | )                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Restricted      deposits                                   |   |   |   |   |                           | -      |   |                                 |   | -      |                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 71 |   |   |   | - |   |   |   | 71 |   |
|                                                       |   |   |   |   |                           |   |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           | 26,096 |   |                                 |   | (122   | )                      |   |   | 25,974 |   |   |   | 13,901 |   |   |   | - |   |   |   | 13,901 |   |   |   | 3,389 |   |   |   | (28 | ) |   |   | 3,361 |   |
|                                                       |   |   |   |   |                           |   |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NON-CURRENT      ASSETS:                                   |   |   |   |   |                           |   |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Employee      benefit assets                               |   | 1      |   |   |                           | 98     |   |                                 |   | (98    | )                      |   |   | - |   |   |   | 48 |   |   |   | (32 | ) |   |   | 16 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Restricted      deposits                                   |   |   |   |   |                           | 172    |   |                                 |   | -      |                   |   |   | 172 |   |   |   | 61 |   |   |   | - |   |   |   | 61 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Fixed      assets                                          |   |   |   |   |                           | 490    |   |                                 |   | -      |                   |   |   | 490 |   |   |   | 106 |   |   |   | - |   |   |   | 106 |   |   |   | 41 |   |   |   | - |   |   |   | 41 |   |
| Intangible      assets                                     |   | 4,5    |   |   |                           | 25     |   |                                 |   | 1,783  |                   |   |   | 1,808 |   |   |   | 11 |   |   |   | 9,283 |   |   |   | 9,294 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Deferred      taxes                                        |   | 8      |   |   |                           | 19     |   |                                 |   | 29     |                   |   |   | 48 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                       |   |   |   |   |                           |   |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |                           | 804    |   |                                 |   | 1,714  |                   |   |   | 2,518 |   |   |   | 226 |   |   |   | 9,251 |   |   |   | 9,477 |   |   |   | 41 |   |   |   | - |   |   |   | 41 |   |
|                                                       |   |   |   |   |                           |   |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                          |   |   |   |   |                           | 26,900 |   |                                 |   | 1,592  |                   |   |   | 28,492 |   |   |   | 14,127 |   |   |   | 9,251 |   |   |   | 23,378 |   |   |   | 3,430 |   |   | (28 | ) |   |   | 3,402 |   |

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS (Cont.) |
|----------------|--------------------------------------------------------|

|                                         |   |   |   |   | January      1, 2007           |     |   | December      31, 2007               |   |   | December      31, 2008 |   |
|----------------------------------------------|--------|--------|--------|--------|--------------------------------|----------|--------|--------------------------------------|--------|--------|------------------------|--------|
|                                         |   |   |   |   | USGAAP                         |     |   | Effect      oftransitionto      IFRS |   |   | IFRS                   |   |   | USGAAP |   |   | Effect      oftransitionto      IFRS |   |   | IFRS |   |   | USGAAP |   |   | Effect      oftransitionto      IFRS |   |   | IFRS |   |
|                                         |   | Item   |   |   | U.S.      dollars in thousands |     |
| LIABILITIES      AND EQUITY                  |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CURRENT      LIABILITIES:                    |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Trade      payables                          |   |   |   |   |                           | 941      |   |                                 |   | -      |                   |   |   | 941 |   |   |   | 2,144 |   |   |   | - |   |   |   | 2,144 |   |   |   | 416 |   |   |   | - |   |   |   | 416 |   |
| Other      accounts payable                  |   | 1,9    |   |   |                           | 2,062    |   |                                 |   | (228   | )                      |   |   | 1,834 |   |   |   | 1,665 |   |   |   | - |   |   |   | 1,665 |   |   |   | 1,058 |   |   |   | - |   |   |   | 1,058 |   |
| Income      taxes payable                    |   | 9      |   |   |                           | -        |   |                                 |   | 143    |                   |   |   | 143 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Employee      benefit liabilities            |   | 1      |   |   |                           | -        |   |                                 |   | -      |                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 523 |   |   |   | (76 | ) |   |   | 447 |   |
| Liability      for share appreciation rights |   |   |   |   |                           | -        |   |                                 |   | -      |                   |   |   | - |   |   |   | 1,560 |   |   |   | - |   |   |   | 1,560 |   |   |   | 7 |   |   |   | - |   |   |   | 7 |   |
| Deferred      revenue                        |   |   |   |   |                           | 399      |   |                                 |   | -      |                   |   |   | 399 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                         |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |                           | 3,402    |   |                                 |   | (85    | )                      |   |   | 3,317 |   |   |   | 5,369 |   |   |   | - |   |   |   | 5,369 |   |   |   | 2,004 |   |   |   | (76 | ) |   |   | 1,928 |   |
|                                         |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NON-CURRENT      LIABILITIES:                |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Employee      benefit liabilities            |   | 1      |   |   |                           | 340      |   |                                 |   | (117   | )                      |   |   | 223 |   |   |   | 194 |   |   |   | (63 | ) |   |   | 131 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Deferred      revenue                        |   |   |   |   |                           | 398      |   |                                 |   | -      |                   |   |   | 398 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                         |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |                           | 738      |   |                                 |   | (117   | )                      |   |   | 621 |   |   |   | 194 |   |   |   | (63 | ) |   |   | 131 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                         |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      liabilities                       |   |   |   |   |                           | 4,140    |   |                                 |   | (202   | )                      |   |   | 3,938 |   |   |   | 5,563 |   |   |   | (63 | ) |   |   | 5,500 |   |   |   | 2,004 |   |   |   | (76 | ) |   |   | 1,928 |   |
|                                         |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EQUITY:                                      |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share      capital                           |   |   |   |   |                           | 1,072    |   |                                 |   | -      |                   |   |   | 1,072 |   |   |   | 1,444 |   |   |   | - |   |   |   | 1,444 |   |   |   | 1,445 |   |   |   | - |   |   |   | 1,445 |   |
| Share      premium                           |   |   |   |   |                           | 136,611  |   |                                 |   | (5,458 | )                      |   |   | 131,153 |   |   |   | 146,982 |   |   |   | (7,405 | ) |   |   | 139,577 |   |   |   | 149,089 |   |   |   | (9,303 | ) |   |   | 139,786 |   |
| Accumulated      deficit                     |   |   |   |   |                           | (114,923 | )      |                                 |   | 7,252  |                   |   |   | (107,671 | ) |   |   | (139,862 | ) |   |   | 16,719 |   |   |   | (123,143 | ) |   |   | (149,108 | ) |   |   | 9,351 |   |   |   | (139,757 | ) |
|                                         |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      equity                            |   |   |   |   |                           | 22,760   |   |                                 |   | 1,794  |                   |   |   | 24,554 |   |   |   | 8,564 |   |   |   | 9,314 |   |   |   | 17,878 |   |   |   | 1,426 |   |   |   | 48 |   |   |   | 1,474 |   |
|                                         |   |   |   |   |                           |     |   |                                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      liabilities and equity            |   |   |   |   |                           | 26,900   |   |                                 |   | 1,592  |                   |   |   | 28,492 |   |   |   | 14,127 |   |   |   | 9,251 |   |   |   | 23,378 |   |   |   | 3,430 |   |   |   | (28 | ) |   |   | 3,402 |   |

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS (Cont.) |
|----------------|--------------------------------------------------------|

|   | b. | The      effect of the transition on the consolidated statements of comprehensive      income: |
|--------|----|------------------------------------------------------------------------------------------------|

|                                                                 |   |   |   |   | Year      endedDecember      31, 2007                  |    |   | Year      endedDecember      31, 2008 |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------------------------------------------------------|---------|--------|---------------------------------------|--------|
|                                                                 |   |   |   |   | USGAAP                                                 |    |   | Effect      oftransitionto      IFRS  |   |   | IFRS |   |   | USGAAP |   |   | Effect      oftransitionto      IFRS |   |   | IFRS |   |
|                                                                 |   | Par.   |   |   | U.S.      dollars in thousands (except per share data) |    |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                             |   | 5      |   |   |                                                   | 907     |   |                                  |   | - |   |   |   | 907 |   |   |   | 5,940 |   |   |   | - |   |   |   | 5,940 |   |
| Cost      of revenues                                                |   | 4      |   |   |                                                   | 110     |   |                                  |   | - |   |   |   | 110 |   |   |   | 58 |   |   |   | 1,783 |   |   |   | 1,841 |   |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit                                                    |   |   |   |   |                                                   | 797     |   |                                  |   | - |   |   |   | 797 |   |   |   | 5,882 |   |   |   | (1,783 | ) |   |   | 4,099 |   |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Research      and development costs                                  |   | 1,2,4  |   |   |                                                   | 19,007  |   |                                  |   | (7,507 | ) |   |   | 11,500 |   |   |   | 11,748 |   |   |   | (26 | ) |   |   | 11,722 |   |
| General      and administrative expenses                             |   | 1,2,6  |   |   |                                                   | 5,557   |   |                                  |   | 2,039 |   |   |   | 7,596 |   |   |   | 5,115 |   |   |   | (1,178 | ) |   |   | 3,937 |   |
| Business      development expenses (income)                          |   | 6      |   |   |                                                   | 2,008   |   |                                  |   | (2,008 | ) |   |   | - |   |   |   | (1,102 | ) |   |   | 1,102 |   |   |   | - |   |
| Impairment      loss of intangible asset                             |   | 4      |   |   |                                                   | -       |   |                                  |   | - |   |   |   | - |   |   |   | - |   |   |   | (7,500 | ) |   |   | (7,500 | ) |
| Other      gains (losses), net                                       |   |   |   |   |                                                   | 40      |   |                                  |   | (48 | ) |   |   | (8 | ) |   |   | 288 |   |   |   | - |   |   |   | 288 |   |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      loss                                                  |   |   |   |   |                                                   | (25,735 | )      |                                  |   | 7,476 |   |   |   | (18,307 | ) |   |   | (9,591 | ) |   |   | (9,181 | ) |   |   | (18,772 | ) |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Finance      income                                                  |   | 3      |   |   |                                                   | -       |   |                                  |   | 668 |   |   |   | 668 |   |   |   | - |   |   |   | 331 |   |   |   | 331 |   |
| Finance      cost                                                    |   | 3      |   |   |                                                   | -       |   |                                  |   | 30 |   |   |   | 30 |   |   |   | - |   |   |   | 17 |   |   |   | 17 |   |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Finance      income, net                                             |   | 3      |   |   |                                                   | 590     |   |                                  |   | 48 |   |   |   | 638 |   |   |   | 314 |   |   |   | - |   |   |   | 314 |   |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before taxes on income                                     |   |   |   |   |                                                   | (25,145 | )      |                                  |   | 7,476 |   |   |   | (17,669 | ) |   |   | (9,277 | ) |   |   | (9,181 | ) |   |   | (18,458 | ) |
| Tax      benefit                                                     |   |   |   |   |                                                   | (206    | )      |                                  |   | - |   |   |   | (206 | ) |   |   | (31 | ) |   |   | - |   |   |   | (31 | ) |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive      loss for the year                                 |   |   |   |   |                                                   | (24,939 | )      |                                  |   | 7,476 |   |   |   | (17,463 | ) |   |   | (9,246 | ) |   |   | (9,181 | ) |   |   | (18,427 | ) |
|                                                                 |   |   |   |   |                                                   |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted loss per share (in U.S. dollars) *) |   |   |   |   |                                                   | (0.546  | )      |                                  |   | 0.164 |   |   |   | (0.382 | ) |   |   | (0.158 | ) |   |   | (0.157 | ) |   |   | (0.315 | ) |

|   | *) | After      taking into account consolidation of shares effected on June 22,      2009, see Note 16a. |
|--------|----|----------------------------------------------------------------------------------------------------------------|

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS (Cont.) |
|----------------|--------------------------------------------------------|

|   | c. | The      effect of the above reconciliations on the consolidated statements of      changes in equity: |
|--------|----|--------------------------------------------------------------------------------------------------------|

|                                             |   |   |   |   | Sharecapital                   |   |   | Sharepremium |   |    | Accumulateddeficit |   |   | Total    |   |
|--------------------------------------------------|--------|--------|--------|--------|--------------------------------|--------|--------|--------------|--------|---------|--------------------|--------|--------|----------|--------|
|                                             |   | Par.   |   |   | U.S.      dollars in thousands |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |
| Balance      at January 1, 2007, U.S. GAAP       |   |   |   |   |                           | 1,072  |   |         |   | 136,611 |               |   |   | (114,923 | )      |   |   | 22,760 |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |   |   |   |   |
| Share-based      payment to employees and others |   | 2      |   |   |                           | -      |   |         |   | (5,458  | )                  |   |   | 5,458    |   |   |   | - |   |
| Adjustments      of employee benefit liabilities |   | 1      |   |   |                           | -      |   |         |   | -       |               |   |   | 11       |   |   |   | 11 |   |
| Intangible      asset                            |   | 4      |   |   |                           | -      |   |         |   | -       |               |   |   | 1,783    |   |   |   | 1,783 |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |   |   |   |   |
| Balance      at January 1, 2007, IFRS       |   |   |   |   |                           | 1,072  |   |         |   | 131,153 |               |   |   | (107,671 | )      |   |   | 24,554 |   |

|                                             |   |   |   |   | Sharecapital                   |   |   | Sharepremium |   |    | Accumulateddeficit |   |   | Total    |   |
|--------------------------------------------------|--------|--------|--------|--------|--------------------------------|--------|--------|--------------|--------|---------|--------------------|--------|--------|----------|--------|
|                                             |   | Par.   |   |   | U.S.      dollars in thousands |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |
| Balance      at December 31, 2007, U.S. GAAP     |   |   |   |   |                           | 1,444  |   |         |   | 146,982 |               |   |   | (139,862 | )      |   |   | 8,564 |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |   |   |   |   |
| Share-based      payment to employees and others |   | 2      |   |   |                           | -      |   |         |   | (7,405  | )                  |   |   | 7,405    |   |   |   | - |   |
| Adjustments      of employee benefit liabilities |   | 1      |   |   |                           | -      |   |         |   | -       |               |   |   | 31       |   |   |   | 31 |   |
| Intangible      asset                            |   | 4      |   |   |                           | -      |   |         |   | -       |               |   |   | 9,283    |   |   |   | 9,283 |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |   |   |   |   |
| Balance      at December 31, 2007, IFRS     |   |   |   |   |                           | 1,444  |   |         |   | 139,577 |               |   |   | (123,143 | )      |   |   | 17,878 |   |

|                                             |   |   |   |   | Sharecapital                   |   |   | Sharepremium |   |    | Accumulateddeficit |   |   | Total    |   |
|--------------------------------------------------|--------|--------|--------|--------|--------------------------------|--------|--------|--------------|--------|---------|--------------------|--------|--------|----------|--------|
|                                             |   | Par.   |   |   | U.S.      dollars in thousands |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |
| Balance      at December 31, 2008, U.S. GAAP     |   |   |   |   |                           | 1,445  |   |         |   | 149,089 |               |   |   | (149,108 | )      |   |   | 1,426 |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |   |   |   |   |
| Share-based      payment to employees and others |   | 2      |   |   |                           | -      |   |         |   | (9,303  | )                  |   |   | 9,303    |   |   |   | - |   |
| Adjustments      of employee benefit liabilities |   | 1      |   |   |                           | -      |   |         |   | -       |               |   |   | 48       |   |   |   | 48 |   |
|                                             |   |   |   |   |                           |   |   |         |   |    |               |   |   |     |   |   |   |   |   |
| Balance      at December 31, 2008, IFRS     |   |   |   |   |                           | 1,445  |   |         |   | 139,786 |               |   |   | (139,757 | )      |   |   | 1,474 |   |

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS (Cont.) |
|----------------|--------------------------------------------------------|

|   | d. | Explanations      of the transition to reporting underIFRS: |
|--------|----|-------------------------------------------------------------|

|   | 1. | Retirement      benefit obligation: |
|--------|----|-------------------------------------|

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS (Cont.) |
|----------------|--------------------------------------------------------|

|   | 2. | Share-based      payments: |
|--------|----|----------------------------|

|   | 3. | Finance      income and costs: |
|--------|----|--------------------------------|

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS (Cont.) |
|----------------|--------------------------------------------------------|

|   | 4. | Research      and development expenses: |
|--------|----|-----------------------------------------|

|   | 5.  | Revenue      recognition on disposal of intangibleassets: |
|--------|----------|-----------------------------------------------------------|

----

----

| NOTE      26:- | RECONCILIATION      BETWEEN U.S. GAAP AND IFRS (Cont.) |
|----------------|--------------------------------------------------------|

|   | 6.  | Business      development expenses: |
|--------|----------|-------------------------------------|

|   | 7.  | Cumulative      comparative figures: |
|--------|----------|--------------------------------------|

|   | 8.  | Deferred      taxes: |
|--------|----------|----------------------|

|   | 9.  | Income      taxes receivable and payable: |
|--------|----------|-------------------------------------------|

----