UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549



FORM
20-F



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



OR



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



For
the fiscal year ended December 31, 2016



OR



☐
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



OR



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



001-37353

(Commission
file number)



BiondVax
Pharmaceuticals Ltd.

(Exact
name of Registrant as specified in its charter)



ISRAEL

(Jurisdiction
of incorporation or organization)



14
Einstein StreetNes Ziona, Israel 74036(+972) (8) 930-2529(+972) (8) 930-2531 (facsimile)

(Address
of principal executive offices)



Ilan
Gerzi, Adv.Tammy Zoppo, Esq.Pearl Cohen Zedek Latzer BaratzOne Azrieli Center,Round Tower, 18thFloorTel-Aviv 6702101, Israel+972 (3) 607-3777+972 (3) 607-3778(facsimile)

(Name,
telephone, e-mail and/or facsimile number and address of company contact person)



Securities
registered or to be registered pursuant to Section 12(b) of the Act:



|Title
    of each class                                                                                                    |  | Name
    of each exchange on which registered
|-------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------
|American
        Depositary Shares, each representing 40
        ordinary
        share, par value NIS 0.0000001 per share |  | Nasdaq
    Capital Market                    
|                                                                                                                           |  |                                              
|Ordinary
    shares, par value NIS 0.0000001 per share                                                                     |  | Nasdaq
    Capital Market*                   



*  Not
for trading; only in connection with the registration of American Depositary Shares.





Securities
registered or to be registered pursuant to Section 12(g) of the Act.



None

(Title
of Class)



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



None

(Title
of Class)












Indicate
the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period
covered by the annual report. 135,097,367 and 175,715,799 as of December 31, 2016 and April 28, 2017, respectively.



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



Yes  ☐    No  ☒



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



Yes  ☐    No  ☒



Note
— Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 from their obligations under those Sections.



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



Yes  ☒    No  ☐



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Yes  ☒    No  ☐





Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.



| | Large
    accelerated filer | ☐ | Accelerated
    filer       | ☐
| | --------------------------- | - | --------------------------- | -
| | Non-accelerated
    filer   | ☒ | Emerging
    growth company | ☐



If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards†
provided pursuant to Section 13(a) of the Exchange Act.	☐



†
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.



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



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



If
“Other” has been checked in response to the previous question, indicate by check mark which financial statement item
the registrant has elected to follow. N/A



☐  Item
17    ☐Item 18



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



Yes  ☐    No  ☒



(APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)



Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. N/A



Yes  ☐    No  ☐





















BiondVax
Pharmaceuticals Ltd.



FORM
20-F

ANNUAL
REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016



TABLE
OF CONTENTS



|                                                                                      |    
|------------------------------------------------------------------------------------- | ---
|Introduction                                                                          | i  
|Special Note Regarding Forward-Looking Statements                                     | i  
|                                                                                      |    
|PART I                                                                               
|                                                                                     
|Item 1. Identity of Directors, Senior Management and Advisers                         | 1  
|Item 2. Offer Statistics and Expected Timetable                                       | 1  
|Item 3. Key Information                                                               | 1  
|Item 4. Information on the Company                                                    | 28 
|Item 4A. Unresolved Staff Comments                                                    | 54 
|Item 5. Operating and Financial Review and Prospects                                  | 54 
|Item 6. Directors, Senior Management and Employees                                    | 61 
|Item 7. Major Shareholders and Related Party Transactions                             | 81 
|Item 8. Financial Information                                                         | 83 
|Item 9. The Offer and Listing                                                         | 85 
|Item 10. Additional Information                                                       | 87 
|Item 11. Quantitative and Qualitative Disclosures About Market Risk                   | 100
|Item 12. Description of Securities Other than Equity Securities                       | 101
|                                                                                      |    
|PART II                                                                              
|                                                                                     
|Item 13. Defaults, Dividend Arrearages and Delinquencies                              | 108
|Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds | 108
|Item 15. Controls and Procedures                                                      | 108
|Item 16. [Reserved]                                                                   | 109
|Item 16A. Audit Committee Financial Expert                                            | 109
|Item 16B. Code of Ethics                                                              | 109
|Item 16C. Principal Accountant Fees and Services                                      | 109
|Item 16D. Exemptions from the Listing Standards for Audit Committees                  | 110
|Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers      | 110
|Item 16F. Change in Registrant’s Certifying Accountant                                | 110
|Item 16G. Corporate Governance                                                        | 110
|Item 16H. Mine Safety Disclosure                                                      | 112
|                                                                                      |    
|PART III                                                                             
|                                                                                     
|Item 17. Financial Statements                                                         | 113
|Item 18. Financial Statements                                                         | 113
|Item 19. Exhibits                                                                     | 113
|Signatures                                                                            | 115
|Index to Consolidated Financial Statements                                            | F-1














INTRODUCTION



Certain
Definitions:



In
this annual report, unless the context otherwise requires:



| | ● | references
    to “BiondVax,” the “Company,” “us,” “we” and “our” refer to BiondVax
    Pharmaceuticals Ltd. (the “Registrant”), an Israeli company;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | references
    to “ordinary shares,” “our shares” and similar expressions refer to the Registrant’s ordinary
    shares, NIS 0.0000001 nominal (par) value per share;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | references
    to “ADS” refer to the Registrant’s American Depositary Shares;
| | - | -----------------------------------------------------------------------------



| | ● | references
    to “dollars,” “U.S. dollars” and “$” are to United States Dollars;
| | - | ---------------------------------------------------------------------------------



| | ● | references
    to “shekels” and “NIS” are to New Israeli Shekels, the Israeli currency;
| | - | ---------------------------------------------------------------------------------------



| | ● | references
    to the “Companies Law” are to Israel’s Companies Law, 5759-1999, as amended; and
| | - | -----------------------------------------------------------------------------------------------



| | ● | references
    to the “SEC” are to the United States Securities and Exchange Commission.
| | - | ----------------------------------------------------------------------------------------



Forward-Looking
Statements



Some
of the statements under the sections entitled “Item 3. Key Information – Risk Factors,” “Item 4. Information
on the Company,” and “Item 5. Operating and Financial Review and Prospects” and elsewhere in this Annual Report
on Form 20-F constitute forward-looking statements. These statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements
by terms including “anticipates,” “believes,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “projects,”
“should,” “will,” “would,” and similar expressions intended to identify forward-looking statements,
but these are not the only ways these statements are identified. Forward-looking statements reflect our current views with respect
to future events and are based on assumptions and subject to risks and uncertainties. In addition, the section of this annual
report on Form 20-F entitled “Item 4. Information on the Company” contains information obtained from independent industry
and other sources that we have not independently verified. You should not put undue reliance on any forward-looking statements.
Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise
any forward-looking statements. Readers are encouraged to consult the Company’s filings made on Form 6-K, which are periodically
filed with or furnished to the SEC.



Factors
that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include,
but are not limited to:



| | ● | the
    initiation, timing, progress and results of our clinical trials;
| | - | ------------------------------------------------------------------------



| | ● | the
    clinical development, commercialization and market acceptance of our product candidate;
| | - | -----------------------------------------------------------------------------------------------



| | ● | our
    receipt of regulatory approvals for our product candidate, and the timing of other regulatory filings and approvals;
| | - | ----------------------------------------------------------------------------------------------------------------------------



| | ● | Our
    ability to obtain and maintain ongoing regulatory requirements, even if our product candidate receives marketing approvals;
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                    
| | ● | Our
    ability to maintain and expand our intellectual property in connection with our product candidate;                         



| | ● | Our
    ability to compete with other current influenza vaccines or other competing product candidates;
| | - | -------------------------------------------------------------------------------------------------------



| | ● | estimates
    of our expenses, future revenues, capital requirements and our needs for additional financing.
| | - | ------------------------------------------------------------------------------------------------------------







i







PART
I



|Item
                            1. | IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|----------------------------------- | -----------------------------------------------------



Not
applicable.



|Item 2. | OFFER
                                         STATISTICS AND EXPECTED TIMETABLE
|------- | --------------------------------------------------------------------------------



Not
applicable.



|Item 3. | KEY
                                         INFORMATION
|------- | --------------------------------------------------------



| | A. | Selected
    Financial Data
| | -- | ---------------------------



The
following table sets forth our selected consolidated financial data for the periods ended and as of the dates indicated. The following
selected historical consolidated financial data for our company should be read in conjunction with “Item 5. Operational
and Financial Review and Prospects” and other information provided elsewhere in this annual report on Form 20-F and our
consolidated financial statements and related notes. The selected consolidated financial data in this section is not intended
to replace the consolidated financial statements and is qualified in its entirety thereby.



The
selected consolidated statements of operations data for the years ended December 31, 2016, 2015, and 2014, and the selected consolidated
balance sheet data as of December 31, 2016 and 2015, have been derived from our audited consolidated financial statements set
forth elsewhere in this Annual Report on Form 20-F. The selected consolidated statements of operations data for the years ended
December 31, 2013 and 2012, and the selected consolidated balance sheet data as of December 31, 2014, 2013 and 2012, have been
derived from our audited consolidated financial statements not included in this Form 20-F.



Our
consolidated financial statements included in this annual report were prepared in accordance with IFRS, as issued by the International
Accounting Standards Board, and reported in NIS. This annual report contains conversions of NIS amounts into U.S. dollars at specific
rates solely for the convenience of the reader. Unless otherwise noted, for the purpose of the presentation of financial data
for the period ending on December 31, 2016, all conversions from NIS to U.S. dollars and from U.S. dollars to NIS were made at
a rate of 3.845 NIS to $1.00 U.S. dollar, the daily representative rate in effect as of December 30, 2016. No representation is
made that the NIS amounts referred to in this annual report could have been or could be converted into U.S. dollars at any particular
rate or at all.



|                                                                                                              |  | Year ended December 31, |       
|------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------
|                                                                                                              |  | 2012                    |       
|                                                                                                              |  | NIS in thousands        |       
|Statements of comprehensive loss data:(1)                                                                     |  |                         |       
|Research and development expenses                                                                             |  |                         | 8,616 
|Participation by the IIA and  UNISEC                                                                          |  |                         | (1,839
|Research and development, net of participations expenses                                                      |  |                         | 6,777 
|Marketing, general and administrative expenses                                                                |  |                         | 2,357 
|Operating loss                                                                                                |  |                         | 9,134 
|Financial income                                                                                              |  |                         | (321  
|Financial expenses                                                                                            |  |                         | 518   
|Financial income (expenses), net                                                                              |  |                         | (197  
|Net loss                                                                                                      |  |                         | 9,331 
|Loss (gain) from available-for-sale financial assets                                                          |  |                         | (11   
|Total comprehensive loss                                                                                      |  |                         | 9,320 
|Basic and Diluted net loss per share (NIS)                                                                    |  |                         | 0.22  
|Weighted average number of shares outstanding used to compute basic and diluted loss per share (in thousands) |  |                         | 41,530







1







|                                   |  | December 31,     |       
|---------------------------------- |  | ---------------- | ------
|                                   |  | 2014             |       
|                                   |  | NIS in thousands |       
|Statement of financial position    |  |                  |       
|Cash and cash equivalents          |  |                  | 9,612 
|Short-term deposits                |  |                  | -     
|Marketable securities – short term |  |                  | 2,016 
|Other receivables                  |  |                  | 1,081 
|Marketable securities – long term  |  |                  | 2,049 
|Property, plant and equipment      |  |                  | 2,638 
|Other long term assets             |  |                  | 1,066 
|Total assets                       |  |                  | 18,462
|Trade payables                     |  |                  | 524   
|Other payables                     |  |                  | 1,289 
|options                            |  |                  | -     
|Severance pay liability, net       |  |                  | 62    
|Total liabilities                  |  |                  | 1,875 
|Total shareholders’ equity         |  |                  | 16,587



|(1) | Diluted
loss per share data is not presented because the effect of the exercise of our outstanding options is anti-dilutive.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(2) | Calculated
using the exchange rate reported by the Bank of Israel for December 30, 2016, at the rate of one U.S. dollar per NIS 3.845.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



| | B. | Capitalization
    and Indebtedness
| | -- | -----------------------------------



Not
applicable.



| | C. | Reasons
    for the Offer and Use of Proceeds
| | -- | ---------------------------------------------



Not
applicable.



| | D. | Risk
    Factors
| | -- | ----------------



An
investment in our securities involves a high degree of risk. We operate in a dynamic industry that involves numerous risks and
uncertainties. You should carefully consider the factors described below, together with all other information contained in this
annual report, including our consolidated financial statements and the related notes included elsewhere in this annual report,
before deciding whether to invest in the securities. The following risks may adversely affect our business, financial condition,
operating results and cash flows and cause the trading price of the securities to decline, and you could lose all or part of your
investment.







2





Risks
Related to Our Financial Position and Capital Requirements



We
are a clinical stage biopharmaceutical company with a history of operating losses, are not currently profitable, do not expect
to become profitable in the near future and may never become profitable.



We
are a clinical stage biopharmaceutical company that was incorporated in 2003. Since our incorporation, we have primarily focused
our efforts on research and development and clinical trials of our product candidate, M-001. M-001 is in clinical trials and has
not yet been approved for commercial sale. We may not receive the necessary regulatory approvals to commercialize our product
candidate. We are not profitable and have incurred losses since inception, principally as a result of research and development,
clinical trials and general administrative expenses in support of our operations. We have not generated any revenue, expect to
incur substantial losses for the foreseeable future and may never become profitable. For the years ended December 31, 2014, 2015
and 2016, we had net losses of $1,990,000, $2,613,000 and $2,389,000, respectively, and we expect such losses to continue for
the foreseeable future. In addition, as of December 31, 2016, we had an accumulated deficit of approximately $23,112 thousands
and we expect to experience negative cash flow for the foreseeable future. As a result, we will ultimately need to generate significant
revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability
in the future. If M-001 fails in clinical trials or does not gain regulatory clearance or approval, or if M-001 does not achieve
market acceptance, we may never become profitable. Our failure to achieve or maintain profitability, or substantial delays in
achieving profitability, could negatively impact the value of the securities and our ability to raise additional financing. A
substantial decline in the value of the securities would also affect the price at which we could sell them to secure future funding,
which could dilute the ownership interest of current shareholders. Even if we achieve profitability in the future, we may not
be able to sustain profitability in subsequent periods. Accordingly, it is difficult to evaluate our business prospects. Moreover,
our prospects must be considered in light of the risks and uncertainties encountered by an early-stage company in highly regulated
and competitive markets, such as the biopharmaceutical market, where regulatory approval and market acceptance of our products
are uncertain. There can be no assurance that our efforts will ultimately be successful or result in revenues or profits.



We
will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed
could force us to delay, limit, reduce or terminate our product development or commercialization efforts.



As
of December 31, 2016, we had approximately $7,119 thousands in cash and cash equivalents, marketable securities and short-term
deposits, a working capital of $6,441 thousands and an accumulated deficit of $ 23,112 thousands. As of December 31, 2016, we
had sufficient cash and cash commitments to fund operations for at least 15 months if we do not raise additional capital. Since
our inception, most of our resources have been dedicated to the development of M-001. In particular, we have expended and believe
that we will continue to expend significant operating and capital expenditures for the foreseeable future developing M-001 and
any future product candidate. These expenditures will include, but are not limited to, costs associated with research and development,
manufacturing, conducting preclinical experiments and clinical trials, contracting CMOs, hiring additional management and other
personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we incur
additional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated
clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development
and commercialization of our product candidates. On September 30, 2015, we entered into an agreement with a CMO, for the manufacturing
of M-001 large scale batches. Our forecasted budget for this agreement is $2.05 million. As of December 31, 2016, we have paid
a sum of $608,845 to the CMO. We may incur additional unexpected costs circulating our engagements with the CMO.



In
addition, on March 28, 2017, we announced that we have received an approval from the Investment Center of the Ministry of Economy
and Industry of the State of Israel, for a grant representing 20% of NIS 20 million budget, to be utilized towards the construction
of a factory for the production of Phase 3 and commercial batches of M-001. We therefore expect to finance part of the cost of
construction with our own financial resources.



We
also expect to incur additional costs for the purpose of conducting our planned and future Phase 2 and Phase 3 clinical trials.
We intend to participate in a Phase 2 clinical trial to be held in the U.S. by the National Institute of Allergy and Infectious
Diseases, or NIAID. The purpose of the planned clinical trial is to assess the ability of M-001 in humans to serve as a pandemic
primer to the H7N9 avian pandemic vaccine, and we expect NIAID will launch this clinical trial during 2017. We believe that the
results of the Phase 2 clinical trials conducted by us so far, or to be conducted in the future, will further expand our data
to provide greater support for any Phase 3 clinical trial of M-001 we may conduct in the future. We also intend, following the
receipt of all requisite regulatory approvals, to conduct Phase 3 clinical trials in the U.S. and EU, either with one or more
future collaborators, or, subject to available funds, on our own, in support of FDA approval to market M-001 in the U.S. While
all of our preclinical and clinical trials to date have been conducted outside the United States, considering the FDA’s
review and comments to our previously filed IND applications, we believe that the FDA will consider the results of our completed
preclinical and clinical trials in reviewing any future IND application. We expect to conduct an end of Phase 2 meeting with the
FDA during 2018.



As
a result of these and other factors currently unknown to us, we will require additional funds, through public or private equity
or debt financings or non-dilutive sources or other sources, such as strategic partnerships and alliances and licensing arrangements.
In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe
we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy,
competitive position, quality compliance and financial condition.



Our
future capital requirements depend on many factors, including:



| | ● | the
    scope, progress, results and costs of researching and developing M-001 and any future product candidate, and conducting preclinical
    and clinical trials;       
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                            
| | ● | the
    timing of, and the costs involved in, obtaining regulatory approvals for M-001 and any future product candidate;                                                   
| |   |                                                                                                                                                                            
| | ● | the
    cost of commercialization activities if any of M-001 and any future product candidate are approved for sale, including marketing,
    sales and distribution costs;





3









| | ● | the
    cost of manufacturing of M-001 and any future product candidate and any products we successfully commercialize;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | ● | our
    ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such
    agreements;                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                 
| | ● | the
    costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation
    costs and the outcome of such litigation;
| |   |                                                                                                                                                                                 
| | ● | the
    timing, receipt and amount of sales of, or royalties on, any future products;                                                                                           



| | ● | the
    expenses needed to attract and retain skilled personnel; and       
| | - | ---------------------------------------------------------------------------
| |   |                                                                            
| | ● | any
    product liability or other lawsuits related to any future products.



Additional
funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available
to us on a timely basis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other
research and development activities for M-001 or any future product candidate or delay, limit, reduce or terminate our establishment
of sales and marketing capabilities or other activities that may be necessary to commercialize M-001 or any future product candidate.



Raising
additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights
to our technologies or product candidates.



We
may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships
and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible
debt securities, the ownership interests of existing shareholders will be diluted, and the terms may include liquidation or other
preferences that adversely affect shareholder rights. Debt financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take certain actions, such as incurring debt, making capital expenditures or declaring
dividends. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties,
we may have to relinquish valuable rights to our technologies or any product candidate, or grant licenses on terms that are not
favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to
delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market product
candidates that we would otherwise prefer to develop and market ourselves.



Risks
Related to Development, Clinical Testing and Regulatory Approval of M-001 and Any Future Product Candidate



We
have not yet commercialized any products, and we may never become profitable.



We
currently have one product candidate, M-001, in Phase 2 clinical development and no products on the market or close to entering
the market. We do not know when or if we will complete our product development efforts, obtain regulatory approval for M-001 or
successfully commercialize M-001. Even if we are successful in developing M-001 or any product candidate that we may develop in
the future (if any), we will not be successful unless such product gains market acceptance for appropriate indications at favorable
reimbursement rates. The degree of market acceptance of these products will depend on a number of factors, including, but not
limited to:



| | ● | the
    timing of regulatory approvals in the U.S. and other countries, and for the uses, we intend to pursue with respect to the
    commercialization of M-001 or any future product candidate;                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                               
| | ● | the
    competitive environment;                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                               
| | ● | the
    establishment and demonstration in, and acceptance by, the medical community of the safety and clinical efficacy of our product
    candidate and its potential advantages over other competitive products;                                                                                           
| |   |                                                                                                                                                                                                                                                                                                               
| | ● | our
    ability to enter into supply agreements with health organizations and governments around the world for the supply of our product
    candidate or our ability to enter into strategic agreements with pharmaceutical and biopharmaceutical companies with strong
    marketing and sales capabilities;
| |   |                                                                                                                                                                                                                                                                                                               
| | ● | the
    establishment of external, and potentially, internal, sales and marketing capabilities to effectively market and sell M-001
    or any future product candidate in the United States, Israel, Europe and other countries;                                                                             
| |   |                                                                                                                                                                                                                                                                                                               
| | ● | the
    adequacy and success of our distribution, sales and marketing efforts; and                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                               
| | ● | the
    pricing and reimbursement policies of government and third-party payors, such as insurance companies, health maintenance organizations
    and other plan administrators.                                                                                                                             



Physicians,
patients, third-party payors or the medical community in general may be unwilling to accept, utilize or recommend, and in the
case of third-party payors, cover payment for M-001 or any future product candidate. As a result, we are unable to predict the
extent of our future losses or the time required for us to achieve profitability, if at all. Even if we successfully develop one
or more products, we may not become profitable.







4







We
may not develop additional product candidates other than M-001.



M-001
is our only product candidate in development. Other than M-001, we may not develop additional product candidates based on our
research and know-how and we may never attempt to develop other peptide-based products. As a result, our business and future success
depends on our ability to obtain regulatory approval of and then successfully commercialize M-001.



We
may never receive FDA regulatory approval for the performance of phase 3 clinical trial in the U.S.



In
June 2015, the FDA has accepted our newly submitted IND application, and we were informed by our regulatory advisors that the
“study may proceed”. We have submitted this IND in order to comply with Biomedical Advanced Research and Development
Authority, or BARDA, for a grant application we had previously submitted to BARDA, which unfortunately has been recently annulled
by BARDA all together to all potential grant candidates, including our company. Following such IND acceptance, which can be used
by us as a reference for other U.S. based trials, we intend to participate in a Phase 2 clinical trial to be held in the U.S.
by NIAID. We expect NIAID will launch this clinical trial during 2017. We currently intend, following the receipt of all required
regulatory approvals, to conduct Phase 3 clinical trials in the U.S, either with one or more future collaborators, or, subject
to available funds, on our own, in support of FDA approval to market M-001 in the U.S. Although we believe that the previous approved
preclinical and clinical trials we performed will serve as an adequate basis for future FDA regulated clinical trials in the U.S.,
we may not receive FDA approval to conduct Phase 3 clinical trials in the U.S. Failure to receive FDA approval for the conduct
of Phase 3 clinical trials in the U.S. will materially reduce our target market and the future profitability of M-001, may have
a material adverse effect on our business and could potentially cause us to cease operations. It is also possible that we may
decide or that the FDA may require that we conduct further clinical trials, provide additional data and information, and meet
additional standards for receipt of approval. If this were to occur, the time and financial resources required for obtaining FDA
approval for Phase 3 clinical trials, and complications and risks associated therewith, would likely substantially increase. Moreover,
while receipt of clinical trial approval by the FDA does not ensure the receipt of clinical trial approval in other countries,
failure or delay in obtaining clinical trial approval by the FDA may have a negative effect on the regulatory process in other
countries. Any failure or any delay or setback in obtaining clinical trial approval in the U.S. or in other countries would impair
our ability to develop M-001.



If
we receive approval to conduct Phase 3 clinical trials in Israel alone (but not the U.S.), we may nevertheless determine to abandon
our development efforts with respect to M-001, as the small market size in Israel as compared to the larger U.S. market, would
represent a significantly decreased market opportunity that we may determine does not justify our incurrence of the material expenses
related to the development and commercialization of M-001 in Israel only.



We
may not obtain the necessary materials for the performance of additional clinical trials in the U.S. or other countries around
the world.



Some
of our clinical trials involve obtaining materials and information that may not currently be in our possession and that we rely
on suppliers and manufactures to provide. Specifically, we were not able to satisfy the FDA’s request for information regarding
the H5N1 vaccine (including information as to manufacturing, dosage, formulation, etc.) required for our previously contemplated
Phase 2 clinical trial in the U.S., and as a result we elected to convert our IND application submitted in June 2013 into a Drug
Master File. Our BVX-007 Phase 2 clinical trial includes the administration of the H5N1 vaccine following the administration of
M-001 to our clinical trial participants. As of the date of this report, we received all the H5N1 vaccine doses required for the
BVX-007 trial from a European supplier (FluArt, Hungary). While we do not believe that the successful completion of BVX-007 will
be a predicate to the necessary regulatory approval support of Phase 3 clinical trials, it is possible that the FDA will require
us to complete clinical trials administering M-001 as a primer to H5N1 or request us to provide other materials that are not in
our possession before approving any proposed Phase 3 clinical trials to test the safety and efficacy of M-001 for such indication.



M-001
is subject to extensive regulation and may never obtain regulatory approval.



M-001
must satisfy rigorous standards of safety and efficacy before it can be approved for commercial use by the FDA or foreign regulatory
authorities for all or any of the three indications for which it has undergone or is planned to undergo testing. The FDA and foreign
regulatory authorities have full discretion over this approval process. We will need to conduct significant additional research,
including testing in animals and in humans, before we can file applications for product approval. Typically, in the pharmaceutical
industry, there is a high rate of attrition for product candidates in preclinical testing and clinical trials. Satisfying FDA
and foreign regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product
and requires the expenditure of substantial resources. Success in preclinical testing and early clinical trials does not ensure
that later clinical trials will be successful. For example, a number of companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical trials, even after promising results in earlier trials. In addition, delays or rejections
may be encountered based upon additional government regulation, including any changes in legislation or FDA or foreign regulatory
policy, during the process of product development, clinical trials and regulatory reviews. Failure to obtain FDA or foreign regulatory
approval of M-001 in a timely manner or at all will severely undermine our business by delaying or halting commercialization of
our products, imposing costly procedures, diminishing competitive advantages and reducing the number of saleable products and,
therefore, corresponding product revenues.







5







M-001
and any product candidate we may develop in the future will remain subject to ongoing regulatory requirements even if we receive
regulatory approval to market such product, and if we fail to comply with such requirements, we may not obtain such approvals
or could lose those approvals that have been obtained, and the sales of any approved commercial products could be suspended.



Even
if we receive regulatory approval to market M-001 and/or other product candidates, any such product will remain subject to extensive
regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage,
advertising, promotion, distribution and record keeping. Even if regulatory approval of a product is granted, the approval may
be subject to limitations on the uses for which the product may be marketed or the conditions of approval, or may contain requirements
for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product, which could negatively impact
us or our collaboration partners by reducing revenues or increasing expenses, and cause the approved product candidate not to
be commercially viable. In addition, as clinical experience with a drug expands after approval, typically because it is used by
a greater number and more diverse group of patients after approval than during clinical trials, side effects and other problems
may be observed over time after approval that were not seen or anticipated during pre-approval clinical trials or other studies.
Any adverse effects observed after the approval and marketing of a product candidate could result in limitations on the use of,
withdrawal of FDA or foreign regulatory approval or withdrawal of any approved products from the marketplace. Absence of long-term
safety data may also limit the approved uses of our products, if any. If we fail to comply with the regulatory requirements of
the FDA and other applicable U.S. and foreign regulatory authorities, or previously unknown problems with any approved commercial
products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed
sanctions or other setbacks, including, without limitation, the following:



| | ● | suspension
    or imposition of restrictions on the products, manufacturers or manufacturing processes, including costly new manufacturing
    requirements;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                             
| | ● | warning
    letters;                                                                                                                                        
| |   |                                                                                                                                                             
| | ● | civil
    or criminal penalties, fines and/or injunctions;                                                                                                  
| |   |                                                                                                                                                             
| | ● | product
    seizures or detentions;                                                                                                                         
| |   |                                                                                                                                                             
| | ● | import
    or export bans or restrictions;                                                                                                                  
| |   |                                                                                                                                                             
| | ● | voluntary
    or mandatory product recalls and related publicity requirements;                                                                              
| |   |                                                                                                                                                             
| | ● | suspension
    or withdrawal of regulatory approvals;                                                                                                       
| |   |                                                                                                                                                             
| | ● | total
    or partial suspension of production; and                                                                                                          
| |   |                                                                                                                                                             
| | ● | refusal
    to approve pending applications for marketing approval of new products or supplements to approved applications.                                 



If
we or our collaborators are slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or adoption
of new regulatory requirements or policies, marketing approval for our product candidates may be lost or cease to be achievable,
resulting in decreased revenue from milestones, product sales or royalties, which would have a material adverse effect on our
business, financial condition or results of operations.





6







If
clinical trials for M-001 are prolonged or delayed, we would be unable to commercialize our M-001 on a timely basis, which would
require us to incur additional costs and delay our receipt of any revenues from potential M-001 sales.



We
cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials that will cause
us or any regulatory authority to delay or suspend those clinical trials or delay the analysis of data derived from them. A number
of events, including any of the following, could delay the completion of our ongoing and planned clinical trials and negatively
impact our ability to obtain regulatory approval for, and to market and sell, a particular product candidate:



| | ● | conditions
    imposed on us by the FDA or any applicable foreign regulatory authority regarding the scope or design of our clinical trials;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------





| | ● | delays
    in recruiting and enrolling patients or volunteers into clinical trials;                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                              
| | ● | delays
    in obtaining, or our inability to obtain, required approvals from institutional review boards or other reviewing entities
    at clinical sites selected for participation in our clinical trials;
| |   |                                                                                                                                                                                                              
| | ● | insufficient
    supply or deficient quality of our product candidates or other materials necessary to conduct our clinical trials;                                                                          
| |   |                                                                                                                                                                                                              
| | ● | lower
    than anticipated retention rate of subjects and patients in clinical trials;                                                                                                                       
| |   |                                                                                                                                                                                                              
| | ● | negative
    or inconclusive results from clinical trials, or results that are inconsistent with earlier results, that necessitate additional
    clinical studies;                                          
| |   |                                                                                                                                                                                                              
| | ● | serious
    and unexpected drug-related side effects experienced by subjects and patients in clinical trials; or                                                                                             
| |   |                                                                                                                                                                                                              
| | ● | failure
    of our third-party contractors to comply with regulatory requirements or otherwise meet their contractual obligations to us
    in a timely manner.                                              



Clinical
trials require sufficient patient enrollment, which is a function of many factors, including the size of the patient population,
the nature of the trial protocol, the proximity of patients to clinical sites, the availability of effective treatments for the
relevant disease and the eligibility criteria for the clinical trial. Delays in patient enrollment can result in increased costs
and longer development times. The failure to enroll patients in a clinical trial could delay the completion of the clinical trial
beyond our current expectations. In addition, the FDA or foreign applicable regulatory authorities could require us to conduct
clinical trials with a larger number of subjects than we have projected for any of our product candidates. We may not be able
to enroll a sufficient number of patients in a timely or cost-effective manner. Furthermore, enrolled patients may drop out of
clinical trials, which could impair the validity or statistical significance of those clinical trials.



Prior
to commencing clinical trials in the United States, we must submit an IND application to the FDA and the IND application must
become effective. In June 2015, the FDA accepted our IND and we were informed by our regulatory advisors that “the study
may proceed”. Until this FDA acceptance, we conducted our completed Phase 1 and Phase 2 clinical trials for M-001 outside
the United States (in Israel) and we have conducted Phase 2 BVX-007 clinical trial in Europe. We intend to participate in a Phase
2 clinical trial to be held in the U.S. by NIAID, and we expect NIAID will launch this clinical trial during 2017.



We
do not know whether our additional clinical trials will begin as planned, will need to be restructured or will be completed on
schedule, if at all. Delays in our clinical trials will result in increased development costs for M-001. In addition, if our clinical
trials are delayed, our competitors may be able to bring products to market before we do and the commercial viability of M-001
or any other future candidates could be limited.



Clinical
trials are very expensive, time-consuming and difficult to design and implement, and, as a result, we may suffer delays or suspensions
in future trials which would have a material adverse effect on our ability to generate revenues.



Human
clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory
requirements. Regulatory authorities, such as the FDA, may preclude clinical trials from proceeding. Additionally, the clinical
trial process is time-consuming, failure can occur at any stage of the trials and we may encounter problems that cause us to abandon
or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors, including:



| | ● | unforeseen
    safety issues;                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                   
| | ● | determination
    of proper dosing;                                                                                                               
| |   |                                                                                                                                                   
| | ● | lack
    of effectiveness or efficacy during clinical trials;                                                                                     
| |   |                                                                                                                                                   
| | ● | failure
    of our contract manufacturers or inability of our in-house facility to manufacture our product candidates in accordance with
    cGMP;







7







| | ● | failure
    of third party suppliers to perform final manufacturing steps for the drug substance;                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                  
| | ● | slower
    than expected rates of patient recruitment and enrollment;                                                            
| |   |                                                                                                                                  
| | ● | lack
    of healthy volunteers and patients to conduct trials;                                                                   
| |   |                                                                                                                                  
| | ● | inability
    to monitor patients adequately during or after treatment;                                                          
| |   |                                                                                                                                  
| | ● | failure
    of third party contract research organizations to properly implement or monitor the clinical trial protocols;        
| |   |                                                                                                                                  
| | ● | failure
    of the FDA, institutional review boards, or IRBs, or other regulatory bodies to approve our clinical trial protocols;
| |   |                                                                                                                                  
| | ● | inability
    or unwillingness of medical investigators and IRBs to follow our clinical trial protocols; and                     
| |   |                                                                                                                                  
| | ● | lack
    of sufficient funding to finance the clinical trials.                                                                   



In
addition, we or regulatory authorities may suspend our clinical trials at any time if it appears that we are exposing participants
to unacceptable health risks or if the regulatory authorities find deficiencies in our regulatory submissions or the conduct of
these trials. Any suspension of clinical trials will delay possible regulatory approval, if any, and adversely impact our ability
to develop products and generate revenue.



We
have only conducted Phase 1 and Phase 2 clinical trials. We have never conducted a Phase 3 clinical trial, and may be unable to
do so for M-001 or any other future product candidates we may develop.



We
have never conducted a Phase 3 clinical trial. In 2013 we submitted an IND application to the FDA for a contemplated Phase 2 clinical
trial intended to be conducted in the U.S., to test the safety and efficacy of M-001 as a primer for the H5N1 Avian flu pandemic
vaccine. Due to difficulties in obtaining the requisite H5N1 avian flu vaccine (which is not publicly available) required for
the performance of the clinical trial, we were not able to satisfy the FDA’s requests for information concerning the H5N1
vaccine to be used in such trial (e.g., information as to the manufacturer, dosage, formulation, etc.). Without such information,
we could not complete our IND application and the FDA placed a clinical hold on the trial. As a result of these events, we elected
to convert our IND application into a Drug Master File. However, in June 2015 we received FDA approval for our newly submitted
IND for a Phase 2 clinical trial, and we were informed by our regulatory advisors that the “study may proceed”.



The
submission of a successful IND application and, subject to receipt of required approvals, the conduct of later-stage clinical
trials, are complicated processes. As an organization, we have conducted only Phase 1 and Phase 2 clinical trials in Israel in
accordance with Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other
applicable Israeli legislation, and a Phase 2 clinical trial in Europe. However, we have not conducted a Phase 3 clinical trial
or any FDA approved clinical trials before. We also have had limited interactions with the FDA and have not discussed our proposed
future Phase 3 clinical trial designs or implementation with the FDA. Consequently, we may be unable to successfully and efficiently
execute and complete our planned Phase 2 clinical trials in a way that leads to the approval of Phase 3 clinical trials for M-001.
We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of
M-001. Failure to commence or complete, or delays in, our planned clinical trials, would prevent us from or delay us in developing
and commercializing M-001 or any other product candidate we are developing.



We
may be forced to abandon development of M-001 altogether, which will significantly impair our ability to generate product revenues.



Upon
the completion of any clinical trial, the results of such trial might not support the claims sought by us. Further, success in
preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and the results of
later clinical trials may not replicate the results of prior clinical trials and preclinical testing. The clinical trial process
may fail to demonstrate that M-001 is safe for humans and effective for indicated uses. Any such failure may cause us to abandon
M-001 and may delay development of other product candidates. Any delay in, or termination or suspension of, our clinical trials
will delay the requisite filings with the relevant foreign regulatory authorities and, ultimately, our ability to commercialize
M-001 and generate product revenues. If the clinical trials do not support our drug product claims, the completion of development
of M-001 may be significantly delayed or abandoned, which would materially adversely affect our business, financial condition
or results of operations.







8







Positive
results in the previous clinical trials of M-001 may not be replicated in future clinical trials of such product candidate, which
could result in development delays or a failure to obtain marketing approval.



Positive
results in the previous clinical trials of M-001 may not be predictive of similar results in future clinical trials for such product
candidate. Also, interim results during a clinical trial do not necessarily predict final results. A number of companies in the
pharmaceutical and biopharmaceutical industries have suffered significant setbacks in late-stage clinical trials even after achieving
promising results in early-stage development. Accordingly, the results from the completed preclinical studies and clinical trials
for M-001 may not be predictive of the results we may obtain in later stage trials. Our clinical trials may produce negative or
inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials. Moreover, clinical
data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates
performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain FDA or European Medicines
Agency, or other applicable regulatory agency, approval for their products.



If
we experience delays in the enrollment of participants in our clinical trials, our receipt of necessary regulatory approvals could
be delayed or prevented.



We
may not be able to initiate or continue clinical trials for M-001 or any future product candidate if we are unable to locate and
enroll a sufficient number of eligible participants to participate in these trials as required by the FDA or other regulatory
authorities. Participant enrollment, a significant factor in the timing of clinical trials, is affected by many factors including
the size and nature of the population eligible to participate, the proximity of potential participants to clinical sites, the
eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and participants’
perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new
drugs that may be approved for the indications we are investigating. If we fail to enroll and maintain the number of participants
for which the clinical trial was designed, the statistical power of that clinical trial may be reduced, which would make it harder
to demonstrate that the product candidate being tested in such clinical trial is safe and effective. Additionally, enrollment
delays in our clinical trials may result in increased development costs for M-001 and any future product candidate, which would
cause our value to decline and limit our ability to obtain additional financing. Our inability to enroll a sufficient number of
participants for any of our current or future clinical trials would result in significant delays or may require us to abandon
one or more clinical trials altogether.



If
we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our
business and achieve our strategic objectives may be impaired.



Although
all of our efforts to date have been, and a substantial amount of our efforts in the future are expected to be focused on of the
development of M-001, another possible future element of our strategy may include identifying and testing additional compounds
that are optimized for peptide-based products. Research programs designed to identify additional product candidates require substantial
technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs
may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development
or commercialization for many reasons, including the following:



| | ● | the
    research methodology used may not be successful in identifying potential product candidates;                                                                                                                     
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                          
| | ● | competitors
    may develop alternatives that render our product candidates obsolete;                                                                                                                                    
| |   |                                                                                                                                                                                                                          
| | ● | a
    product candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is
    unlikely to be effective or otherwise does not meet applicable regulatory criteria;
| |   |                                                                                                                                                                                                                          
| | ● | a
    product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and                                                                                              
| |   |                                                                                                                                                                                                                          
| | ● | a
    product candidate may not be accepted as safe and effective by regulatory authorities, patients, the medical community or
    third-party payors.                                                                  



If
we are unable to identify suitable compounds for preclinical and clinical development, we may not be able to obtain sufficient
product revenues in future periods, which likely would result in significant harm to our financial position and adversely impact
our stock price.







9







Reimbursement
may not be available for M-001 (if and when approved for commercial sale) or any future product candidates, which could make it
difficult for us to sell such products profitably.



Market
acceptance and sales of M-001 or any future product candidate will depend on coverage and reimbursement policies and may be affected
by healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance
organizations, decide which products they will pay for and establish reimbursement levels. We cannot be sure that coverage and
reimbursement will be available for our products. We also cannot be sure that the amount of reimbursement available, if any, will
not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only at limited levels,
we may not be able to successfully compete through sales of our proposed products.



Increasing
expenditures for healthcare have been the subject of considerable public attention in the United States. Both private and government
entities are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the U.S. healthcare
system have been introduced or proposed in Congress and in some state legislatures, including reducing reimbursement for prescription
products and reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products.



Significant
developments that may adversely affect the pricing of our product candidate, if approved in the United States, include: (i) the
enactment of federal healthcare reform laws and regulations, including the Medicare Prescription Drug Improvement and Modernization
Act of 2003 and the Patient Protection and Affordable Care of 2010, or PPACA, and (ii) trends in the practices of managed care
groups and institutional and governmental purchases, including the impact of consolidation of our customers. Changes to the health
care system enacted as part of healthcare reform in the United States, as well as the increased purchasing power of entities that
negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, may result in increased pricing pressure by influencing,
for instance, the reimbursement policies of third party payors. It is uncertain how current and future reforms in these areas
will influence the future of our business operations and financial condition.



We
expect to experience pricing pressures in connection with the sale of any of our products, should we receive approval, generally
due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative
proposals. If we fail to successfully secure and maintain adequate coverage and reimbursement for our future products or are significantly
delayed in doing so, we will have difficulty achieving market acceptance of our products and our business will be harmed.



We
are subject to extensive and costly government regulation.



The
product we are developing is, and any products we may develop in the future will be, subject to extensive and rigorous domestic
government regulation, including with respect to Israel, regulation by the Israeli Ministry of Health, and with respect to the
U.S. regulation by the FDA, the CMS, other divisions of the U.S. Department of Health and Human Services, including its Office
of Inspector General, the U.S. Department of Justice, the Departments of Defense and Veterans Affairs and, to the extent our products
are paid for directly or indirectly by those departments, state and local governments and their respective foreign equivalents.
The FDA regulates the research, development, preclinical and clinical testing, manufacture, safety, effectiveness, record keeping,
reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import and export of pharmaceutical products
under various regulatory provisions. M-001 or any product candidates we may develop, which will be tested and marketed abroad,
will be subject to extensive regulation by foreign governments, whether or not we have obtained the Israeli ministry of Health’s
approval and/or FDA approval for M-001 or any other a given product and its uses. Such foreign regulation may be equally or more
demanding than corresponding Israeli or U.S. regulation.



Government
regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling products. Our failure
to comply with these regulations could result in, by way of example, significant fines, criminal and civil liability, product
seizures, recalls, withdrawals, withdrawals of approvals, and exclusion and debarment from government programs. Any of these actions,
including the inability of our proposed products to obtain and maintain regulatory approval, would have a materially adverse effect
on our business, financial condition, results of operations and prospects.



Changes
in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, which may result in necessary
changes to clinical trial protocols, which could result in increased costs to us, delay our development timeline or reduce the
likelihood of successful completion of our clinical trials.



Changes
in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, as a result of which we
may need to amend clinical trial protocols. Amendments may require us to resubmit our clinical trial protocols to IRBs for review
and approval, which may adversely affect the cost, timing and successful completion of a clinical trial. If we experience delays
in the completion of, or if we terminate, any of our clinical trials, the commercial prospects for any affected product candidate
would be harmed and our ability to generate product revenue would be delayed, possibly materially.







10







If
we acquire or license additional technologies or product candidates, we may incur a number of additional costs, have integration
difficulties and/or experience other risks that could harm our business and results of operations.



We
may acquire and in-license additional product candidates and technologies. Any product candidate or technologies we in-license
or acquire will likely require additional development efforts prior to commercial sale, including extensive preclinical or clinical
testing, or both, and approval by the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone
to risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate or product
developed based on in-licensed technology will not be shown to be sufficiently safe and effective for approval by regulatory authorities.
In addition, we cannot assure you that any product candidate that we develop based on acquired or licensed technology that is
granted regulatory approval will be manufactured or produced economically, successfully commercialized or widely accepted or competitive
in the marketplace. Moreover, integrating any newly acquired or in-licensed product candidates could be expensive and time-consuming.
If we cannot effectively manage these aspects of our business strategy, our business may not succeed.



Risks
Related to Our Business and Industry



We
are a clinical stage biopharmaceutical company with no approved products, which makes it difficult to assess our future viability.



We
are a clinical stage biopharmaceutical company with a limited operating history. We have not yet demonstrated an ability to successfully
overcome many of the risks and uncertainties frequently encountered by companies in rapidly evolving fields, particularly in the
pharmaceutical area. For example, to execute our business plan, we will need to successfully:



| | ● | execute
    on product candidate development activities;                                                                                                               
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                        
| | ● | obtain
    required FDA and applicable foreign regulatory approvals for the development and commercialization of any product candidate;                                
| |   |                                                                                                                                                                        
| | ● | maintain,
    leverage and expand our intellectual property portfolio;                                                                                                 
| |   |                                                                                                                                                                        
| | ● | build
    and maintain robust sales, distribution and marketing capabilities, either on our own or in collaboration with strategic partners;                           
| |   |                                                                                                                                                                        
| | ● | gain
    market acceptance for our products;                                                                                                                           
| |   |                                                                                                                                                                        
| | ● | develop
    and maintain any strategic relationships we elect to enter into; and                                                                                       
| |   |                                                                                                                                                                        
| | ● | manage
    our spending as costs and expenses increase due to drug discovery, preclinical development, clinical trials, regulatory approvals
    and commercialization.



If
we are unsuccessful in accomplishing these objectives, we may not be able to develop product candidates, raise capital, expand
our business or continue our operations.



The
members of our management team and certain consultants are important to the efficient and effective operation of our business,
and we may need to add and retain additional leading experts. Failure to retain our management and consulting team and add additional
leading experts could have a material adverse effect on our business, financial condition or results of operations.



Our
executive officers, our management team and technical personnel, as well as certain consultants, are important to the efficient
and effective operation of our business, particularly Dr. Ron Babecoff, our Chief Executive Officer, and Dr. Tamar Ben-Yedidia,
our Chief Scientific Officer. Our failure to retain the personnel that have developed much of the technology we utilize today,
or any other key management and technical personnel, could have a material adverse effect on our future operations. Our success
is also dependent on our ability to attract, retain and motivate highly trained technical, and management personnel, among others,
to continue the development and commercialization of our current and future products. As of the date of this annual report, we
do not have key-man insurance on any of our officers or consultants.







11







As
such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required
for the development, maintenance and expansion of our activities. There can be no assurance that we will be able to retain our
existing personnel or attract additional qualified employees or consultants. The loss of personnel or the inability to hire and
retain additional qualified personnel in the future could have a material adverse effect on our business, financial condition
and results of operation.



We
face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer
and we may never be profitable.



We
will compete against fully integrated pharmaceutical and biopharmaceutical companies and smaller companies that are collaborating
with pharmaceutical companies, academic institutions, government agencies and other public and private research organizations.
In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and
development programs than we do, and have substantially greater financial resources than we do, as well as significantly greater
experience in:



| | ● | developing
    immuno-modulating products (including vaccines);                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                         
| | ● | undertaking
    preclinical testing and human clinical trials;                                                          
| |   |                                                                                                                         
| | ● | obtaining
    FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals of drugs;
| |   |                                                                                                                         
| | ● | formulating
    and manufacturing drugs; and                                                                            
| |   |                                                                                                                         
| | ● | launching,
    marketing and selling drugs.                                                                             



Generally,
our competitors currently include large fully integrated pharmaceutical companies such as Sanofi-Pasteur, GlaxoSmithKline, Seqirus
(Ex bioCSL and Novartis flu vaccines), AstraZeneca and Abbott (Solvay). ther competitors are companies and academic research institutes
in various developmental stages attempting to develop improved influenza vaccines, such as SEEK Group, AltImmune, Inovio Pharmaceuticals,
Inc., FluGen, Inc., Medicago, Vivaldi Biosciences, Vaccitech, and Vaxart. If our competitors develop and commercialize products
faster than we do, or develop and commercialize products that are superior to our product candidates, our commercial opportunities
will be reduced or eliminated. Our competitors may succeed in developing and commercializing products earlier and obtaining regulatory
approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors may also develop products or
technologies that are superior to those we are developing, and render our product candidate obsolete or non-competitive. If we
cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.



The
extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond
our control. Competition in the biotechnology and biopharmaceutical industry is intense and has been accentuated by the rapid
pace of technology development. Our competitors also compete with us to:



| | ● | attract
    parties for acquisitions, joint ventures or other collaborations;
| | - | -----------------------------------------------------------------------------
| |   |                                                                              
| | ● | license
    proprietary technology that is competitive with M-001;           
| |   |                                                                              
| | ● | attract
    funding; and                                                     
| |   |                                                                              
| | ● | attract
    and hire scientific talent and other qualified personnel.        



We
may be subject to legal proceedings and/or to product liability lawsuits.



We
could incur substantial costs in connection with product liability claims relating to our current or potential product candidates.
We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability
lawsuits, which may result in substantial losses.



M-001
or any future product candidate could cause adverse events, including injury, disease or adverse side effects. These adverse events
may not be observed in clinical trials, but may nonetheless occur in the future. If any of these adverse events occur, they may
render M-001 or any future product candidate ineffective or harmful in some patients, and any future sales would suffer, materially
adversely affecting our business, financial condition and results of operations.







12







In
addition, potential adverse events caused by M-001 or any future product candidate could lead to product liability lawsuits. If
product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit
the marketing and commercialization of any future product. Our business exposes us to potential product liability risks, which
are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. We may not be able to avoid product
liability claims. For example, changes in laws outside the U.S. are expanding our potential liability for injuries that occur
during clinical trials. Product liability insurance is expensive, subject to deductibles and coverage limitations, and may not
be available in the amounts that we desire for a price we are willing to pay. Product liability insurance for the pharmaceutical
and biotechnology industries is generally expensive, if available at all. If, at any time, we are unable to obtain sufficient
insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, we may be unable to
clinically test, market or commercialize our product candidate. A successful product liability claim brought against us in excess
of our insurance coverage, if any, may cause us to incur substantial liabilities, and, as a result, our business, liquidity and
results of operations would be materially adversely affected. In addition, the existence of a product liability claim could affect
the market price of our ordinary shares, ADSs and ADS warrants.



We
are defendants in a lawsuit arising from the cancellation of a Consulting Services Agreement and the outcome is unpredictable.



On
May 29, 2014, we entered into a Consulting Services Agreement with a consultant. Pursuant to the Consulting Services Agreement
the consultant was granted 1,000,000 options exercisable for 1,000,000 of our ordinary shares, with 50% of the options exercisable
at an exercise price of NIS 1.00 (approximately $0.26), and the remaining 50% options at an exercise price of NIS 2.50 (approximately
$0.64). In addition, under the terms of the agreement, the consultant contended that it was also entitled to 2.5% of the net proceeds
received as a result of our initial public offering in May 2015. On March 2, 2015, we unilaterally cancelled this Consulting Services
Agreement. As a result of the cancellation of the Consulting Services Agreement all options previously granted to the consultant,
vested or unvested, expired. The cancellation notice also provided that all rights and benefits previously granted to the consultant
pursuant to the Consulting Services Agreement are invalid. On September 9, 2015, the consultant brought a suit against us in the
Israeli magistrate court in Tel Aviv, claiming that we wrongfully terminated the Consulting Services Agreement and requesting
monetary compensation in the amount of approximately NIS 1.5 million (approximately $380,000) and the reinstatement of the previously
cancelled options. On November 11, 2015, we filed our defense with the court wherein we contended that the Consulting Services
Agreement was lawfully cancelled and that the consultant’s suit has no legal basis.



The
parties submitted affidavits and legal expert opinions to the court. An additional pre-trial meeting was held on February 13,
2017. The parties await the court’s decision on the appointment of an expert to provide legal opinion on the case, and an additional
hearing was scheduled for September 25, 2017. We intend to vigorously defend against this lawsuit. However, litigation is unpredictable,
and we cannot make any representations as to what the actual outcome would be due to the many intangibles presented in all litigations.
We believe this monetary compensation and the reinstatement of the cancelled options will not pose a material financial burden
on us in the event that the Israeli court rules in favor of the consultant.



If
our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider
trading, our business may experience serious adverse consequences.



We
are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply
with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established,
to comply with federal and state health-care fraud and abuse laws and regulations, to report financial information or data accurately
or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry
are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. Our
board of directors adopted a Code of Ethics upon the listing of our securities on the NASDAQ Capital Market. However, it is not
always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may
not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other
actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted
against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact
on our business, including the imposition of significant fines or other sanctions.







13







In
addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic
information regarding our business, our results of operations or potential transactions we are considering. If a director, executive
or employee was to be investigated, or an action was to be brought against a director, executive or employee for insider trading,
it could have a negative impact on our reputation and the market price of the securities. Such a claim, with or without merit,
could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks
important to the success of our business.



Specifically,
on March 29, 2016, in connection with an investigation conducted by the Israeli Securities Authority, or ISA, regarding certain
shareholders of BiondVax, not including among them CEO and director Dr. Babecoff, alleged use of inside information, Dr. Babecoff
was investigated by the ISA under warning. After fully cooperating with the ISA investigators, Dr. Babecoff was released subject
to certain restrictions, including a deposit of a bond. On April 10, 2016, the Audit Committee and the Board of Directors of the
Company approved the payment of NIS 200,000, to be increased by an additional amount of up to NIS 200,000, as needed, for the
benefit of Dr. Babecoff, for the purpose of placing the bond required, in accordance with the Companies Law, and in accordance
with the exemption and indemnification letter between the Company and Dr. Babecoff. Although Dr. Babecoff continues to fulfill
all his duties to the Company and the Company is not a party to the investigation and continues its business operations as usual,
the outcome of the pending investigation is unclear at this stage. The investigation or an additional action brought against Dr.
Babecoff on these alleged charges could adversely affect our reputation and the market price of the securities, may cause additional
expenses to Company and divert attention of our management team from other tasks important to the success of our business.



We
may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect
on our business, results of operations and financial condition.



We
may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth,
including potentially rapid and substantial growth, which will result in an increase in the level of responsibility for management
personnel and place a strain on our human and capital resources. To manage growth effectively, we will be required to continue
to implement and improve our operating and financial systems and controls to expand, train and manage our employee base. Our ability
to manage our operations and growth effectively will require us to continue to expend funds to enhance our operational, financial
and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable
to scale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies
in existing systems and controls, then we will not be able to successfully commercialize our product candidate or future products.
Failure to attract and retain sufficient talented personnel will further strain our human resources and could impede our growth
or result in ineffective growth. Moreover, the management, systems and controls currently in place or to be implemented may not
be adequate for such growth, and the steps we have taken to hire personnel and to improve such systems and controls might not
be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on our business, results
of operations and financial condition.



If
we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately
insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely
affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.



Our
business will expose us to potential liability that results from risks associated with conducting clinical trials of BVX-007 and
any future product candidate. For example, we obtained a EUR 1,000,000, in the aggregate, of clinical trial liability insurance
covering the conducted clinical trial of BVX-007until the end of the trial in October 2016, and for an additional period of five
years thereafter. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect
on our business, prospects, financial condition and results of operations even though clinical trial insurance is successfully
maintained or obtained. The current and planned insurance coverages may only mitigate a small portion of a substantial claim against
us.



In
addition, we may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers
and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified
officers and directors to manage the Company.



Recent
disruptions in the financial markets and economic conditions could affect our ability to raise capital.



In
recent years, the U.S. and global economies suffered dramatic downturns as the result of a deterioration in the credit markets
and related financial crisis as well as a variety of other factors including, among other things, extreme volatility in security
prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations
of others. The U.S. and certain foreign governments have recently taken unprecedented actions in an attempt to address and rectify
these extreme market and economic conditions by providing liquidity and stability to the financial markets. If the actions taken
by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability
to raise capital, if needed, on a timely basis and on acceptable terms or at all.







14







Our
current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply
or adequately comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which
may materially adversely affect our business, results of operations and financial condition.



Although
our ordinary shares trade on the TASE and we file reports in Israel, our current management team has limited experience managing
and operating a publicly traded U.S. company. Failure to comply or adequately comply with any laws, rules or regulations applicable
to our business may result in fines or regulatory actions, which may materially adversely affect our business, results of operation
or financial condition and could result in delays in achieving the development of an active and liquid trading market for the
securities.



We
may be subject to extensive environmental, health and safety, and other laws and regulations in multiple jurisdictions.



Our
business involves the controlled use, directly or indirectly through our service providers, of hazardous materials, various biological
compounds and chemicals; therefore, we, our agents and our service providers may be subject to various environmental, health and
safety laws and regulations, including those governing air emissions, water and wastewater discharges, noise emissions, the use,
management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites. The
risk of accidental contamination or injury from these materials cannot be eliminated. If an accident, spill or release of any
regulated chemicals or substances occurs, we could be held liable for resulting damages, including for investigation, remediation
and monitoring of the contamination, including natural resource damages, the costs of which could be substantial. We are also
subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures,
exposure to blood-borne pathogens and the handling of biohazardous materials and chemicals. Although we maintain workers’
compensation insurance to cover the costs and expenses that may be incurred because of injuries to our employees resulting from
the use of these materials, this insurance may not provide adequate coverage against potential liabilities. Additional or more
stringent federal, state, local or foreign laws and regulations affecting our operations may be adopted in the future. We may
incur substantial capital costs and operating expenses and may be required to obtain consents to comply with any of these or certain
other laws or regulations and the terms and conditions of any permits or licenses required pursuant to such laws and regulations,
including costs to install new or updated pollution control equipment, modify our operations or perform other corrective actions
at our respective facilities or the facilities of our service providers. For instance, we have undergone inspections and obtained
approvals from various governmental agencies.



Governments
outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.



In
some countries, particularly the countries comprising the European Union, or the EU, the pricing of pharmaceuticals and certain
other therapeutics is subject to governmental control. In these countries, pricing negotiations with governmental authorities
can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval
in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate
to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is
set at unsatisfactory levels, our business could be harmed, possibly materially.



Failure
to complete the construction of the mid-sized factory in Jerusalem may create additional labilities for the Company and may create
a delay in the development and production of Phase 3 and commercial batches of M-001



On
March 28, 2017 we received an approval from the Investment Center of the Ministry of Economy and Industry of the State of Israel,
for a grant representing 20% of NIS 20 million budgets to be utilized towards the construction for the production of Phase 3 and
commercial batches of M-001. We therefore expect to finance part of the cost of construction with our own financial resources.



We
may not be able to complete the construction of the mid-sized factory or the production of M-001by ourselves on time or at all
due to delays that are not dependent on us and/or which were not expected by us, such as delays or failure in receiving the requisite
regulatory approvals or necessary permits for the facility. Failure to complete the construction of the manufacturing facility
by ourselves may create financial loss to us and additional costs incurred as a result of locating alternative manufacturing methods,
such as contracting with subcontractors.



In
addition, the grant we received from the Investment Center of the Ministry of Economy and Industry of the State of Israel is subject
to certain terms and conditions described elsewhere in this annual report. A failure to comply with any of these terms and conditions,
for reasons dependent on us or unexpected or not under our control may require us to expend additional funds and may cause additional
delays in the construction of the mid-sized factory.







15







Risks
Related to Our Intellectual Property



M-001
is based on an exclusive license from Yeda, and we could lose our rights to this license if a dispute with Yeda arises or if we
fail to comply with the financial and other terms of the license.



We
license our core intellectual property from Yeda under an exclusive license agreement, pursuant to which received an exclusive
worldwide license for the development, manufacturing, use, marketing, sale, distribution and importing of products that are directly
or indirectly based on certain patents and patent applications owned by Yeda and/or certain other intellectual property to be
developed by Yeda and related thereto. Pursuant to the terms of the license agreement, unless earlier terminated in accordance
with the provisions thereof, the license agreement will terminate upon the later of: (i) the expiration date of the last patent
licensed thereunder; (ii) in the event only one product will be developed and/or commercialized by utilizing the licensed intellectual
property, 15 years from the date of first commercial sale of such product in either the U.S or Europe, following receipt of New
Drug Approval from the FDA or equivalent approval in any European country for such product; (iii) in the event that more than
one product will be developed and/or commercialized by utilizing the licensed intellectual property, following the receipt of
New Drug Approval from the FDA or equivalent approval in any European country for such product, the expiry of a 20 year period
during which there shall not have been a sale of any such products in either the U.S. or Europe. However, Yeda is entitled to
terminate the exclusivity rights or to terminate the license agreement with 30 days prior written notice to us if: (a) no commercial
sales of at least one product are initiated during six months after receipt of an FDA or similar regulatory approval for commercial
marketing; or (b) no sales of any products are reported for over a year after sales of a product have commenced. Yeda will also
be entitled to terminate the license agreement by written notice: (x) in the event we materially breach any of our obligations
under the agreement, provided that such material breach is un-curable or, if curable, is not cured by us within 30 days (or in
the case of failure by us to make payments due to Yeda in connection with the license agreement, 10 days) from receipt of notice
of such breach; or (y) in the event a temporary or permanent liquidator is appointed for our Company, a resolution is passed to
voluntary wind up our Company, or an order or act is granted for the winding up of our Company, provided that if such order or
act was initiated by any third party, such order or act is not cancelled within 120 days; or (z) we contest the validity of one
of the patents registered by Yeda. Upon termination of the license agreement, other than pursuant to (i) through (iii) above,
all rights and documents will be returned to Yeda, and we will be required to grant Yeda an exclusive world-wide irrevocable license
to our know-how and products which are based on the intellectual property licensed form Yeda or that were discovered or occur
or arise from the performance of our development work pursuant to the license agreement. In the event that Yeda terminates the
license agreement due to any reason other than (a), (b) or (x) through (z) above, we will be entitled to receive royalty payments
equal to 25% of the net proceeds received by Yeda from the grant to third parties, within the five years following the termination
of the license agreement, of a license or other rights which include our developments, up to the aggregate amount of research
fund actually expended by us for development. If Yeda terminates the license agreement or licenses to a third party the intellectual
property licenses to us pursuant to the license agreement, or if any dispute arises with respect to our arrangement with Yeda,
such dispute may disrupt our operations and would likely have a material and adverse impact on us if resolved in a manner that
is unfavorable to us. Our current product candidate is based on the intellectual property licensed under the license agreement,
and if the license agreement is terminated, it would have a material adverse effect on our business, prospects and results of
operations.



If
we fail to adequately protect, enforce or secure rights to the patents which we own or that were licensed to us or any patents
we may own in the future, the value of our intellectual property rights would diminish and our business and competitive position
would suffer.



Our
success, competitive position and future revenues, if any, depend in part on our ability to obtain and successfully leverage intellectual
property covering our products and product candidates, know-how, methods, processes and other technologies, to protect our trade
secrets, to prevent others from using our intellectual property and to operate without infringing the intellectual property rights
of third parties.



The
risks and uncertainties that we face with respect to our intellectual property rights include, but are not limited to, the following:



| | ● | the
    degree and range of protection any patents will afford us against competitors;                                                                             
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                    
| | ● | the
    patents concerning our business activities were not registered in all countries and therefore our patent protection may be
    lacking in some territories;
| |   |                                                                                                                                                                    
| | ● | if
    and when patents will be issued;                                                                                                                            
| |   |                                                                                                                                                                    
| | ● | whether
    or not others will obtain patents claiming aspects similar to those covered by our own or licensed patents and patent applications;                    
| |   |                                                                                                                                                                    
| | ● | we
    may be subject to interference proceedings;                                                                                                                 
| |   |                                                                                                                                                                    
| | ● | we
    may be subject to opposition or post-grant proceedings in foreign countries;                                                                                
| |   |                                                                                                                                                                    
| | ● | any
    patents that are issued may not provide meaningful protection;                                                                                             
| |   |                                                                                                                                                                    
| | ● | we
    may not be able to develop additional proprietary technologies that are patentable;                                                                         
| |   |                                                                                                                                                                    
| | ● | other
    companies may challenge patents licensed or issued to us or our customers;                                                                               







16







| | ● | other
    companies may independently develop similar or alternative technologies, or duplicate our technologies;
| | - | -----------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                  
| | ● | other
    companies may design around technologies we have licensed or developed;                                
| |   |                                                                                                                  
| | ● | enforcement
    of patents is complex, uncertain and expensive; and                                              
| |   |                                                                                                                  
| | ● | we
    may need to initiate litigation or administrative proceedings that may be costly whether we win or lose.  



If
patent rights covering our products and methods are not sufficiently broad, they may not provide us with any protection against
competitors with similar products and technologies. Furthermore, if the United States Patent and Trademark Office, or the USPTO,
or any foreign patent office issue patents to us or our licensors, others may challenge the patents or design around the patents,
or the patent office or the courts may invalidate the patents. Thus, any patents we own or license from or to third parties may
not provide any protection against our competitors.



We
cannot be certain that patents will be issued as a result of any pending applications, and we cannot be certain that any of our
issued patents or patents licensed from Yeda (or any other third-party in the future) will give us adequate protection from competing
products. For example, issued patents, including the patents licensed by us, may be circumvented or challenged, declared invalid
or unenforceable, or narrowed in scope.



In
addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we were the first to make our inventions or to file patent applications covering those inventions.



It
is also possible that others may obtain issued patents that could prevent us from commercializing our products or require us to
obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those
patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement,
and we may be unable to do so.



In
addition to patents and patent applications, we depend upon proprietary know-how to protect our proprietary technology. We require
our employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of
confidential information to any other parties. We also require our employees and consultants to disclose and assign to us their
ideas, developments, discoveries and inventions. These agreements may not, however, provide adequate protection for our know-how
or other proprietary information in the event of any unauthorized use or disclosure.



Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance
with these requirements.



Periodic
maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime
of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,
fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be
cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights
in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application
include, but are not limited to, failure to respond to office actions within prescribed time limits, non-payment of fees and failure
to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would
have a material adverse effect on our business.



Costly
litigation may be necessary to protect our intellectual property rights and we may be subject to claims alleging the violation
of the intellectual property rights of others.



We
may face significant expense and liability as a result of litigation or other proceedings relating to patents and other intellectual
property rights of others. In the event that another party has also filed a patent application or been issued a patent relating
to an invention or technology claimed by us in pending applications, we may be required to participate in an interference proceeding
declared by the USPTO to determine priority of invention, which could result in substantial uncertainties and costs for us, even
if the eventual outcome is favorable to us. We, or our licensors, also could be required to participate in interference proceedings
involving issued patents and pending applications of another entity. An adverse outcome in an interference proceeding could require
us to cease using the technology or to license rights from prevailing third parties.







17







The
cost to us of any patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved
in our favor, could be substantial and could divert management’s resources and attention. Our ability to enforce our patent
protection could be limited by our financial resources, and may be subject to lengthy delays. A third party may claim that we
are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and activities,
such as research, development and the sale of any future products. Such lawsuits are expensive and would consume time and other
resources. There is a risk that a court will decide that we are infringing the third party’s patents and will order us to
stop the activities claimed by the patents, redesign our products or processes to avoid infringement or obtain licenses (which
may not be available on commercially reasonable terms or at all). In addition, there is a risk that a court will order us to pay
the other party damages for having infringed their patents.



Moreover,
there is no guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities
claimed by the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. In
addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to
our product candidate, technologies or other matters. Any claims of infringement asserted against us, whether or not successful,
may have a material adverse effect on us.



We
rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties
using our intellectual property to compete against us.



Although
we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the
non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and
assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we
employ them, the agreements can be difficult and costly to enforce. Although we seek to enter into these types of agreements with
our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize or independently
develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights
associated with M-001 or any future product candidates. If a dispute arises, a court may determine that the right belongs to a
third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary
know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors
or others. Despite the protective measures we employ, we still face the risk that:



| | ● | these
    agreements may be breached;                                                        
| | - | ---------------------------------------------------------------------------------------------
| |   |                                                                                              
| | ● | these
    agreements may not provide adequate remedies for the applicable type of breach;    
| |   |                                                                                              
| | ● | our
    proprietary know-how will otherwise become known; or                                 
| |   |                                                                                              
| | ● | our
    competitors will independently develop similar technology or proprietary information.



International
patent protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have
to expend substantial sums and management resources.



Patent
law outside the United States may be different than in the United States. Further, the laws of some foreign countries, such as
China where certain patents owned or licensed by us were granted, may not protect our intellectual property rights to the same
extent as the laws of the United States, if at all. A failure to obtain sufficient intellectual property protection in any foreign
country could materially and adversely affect our business, results of operations and future prospects. Moreover, we may participate
in opposition proceedings to determine the validity of our foreign patents or our competitors’ foreign patents, which could
result in substantial costs and divert management’s resources and attention. Additionally, due to uncertainty in patent
protection law, we have not filed patent applications in many countries where significant markets exist.



Intellectual
property rights do not necessarily address all potential threats to our competitive advantage.



The
degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples
are illustrative:



| | ● | others
    may be able to make compounds that are the same as or similar to M-001 or any future product candidate but that are not covered
    by the claims of the patents that we own or have exclusively licensed; 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                       
| | ● | we
    or our licensors or any future strategic partners might not have been the first to make the inventions covered by the issued
    patent or pending patent application that we own or have exclusively licensed;
| |   |                                                                                                                                                                                                                       
| | ● | we
    or our licensors or any future strategic partners might not have been the first to file patent applications covering certain
    of our inventions;                                                            
| |   |                                                                                                                                                                                                                       
| | ● | others
    may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our
    intellectual property rights;                                                
| |   |                                                                                                                                                                                                                       
| | ● | it
    is possible that our pending patent applications will not lead to issued patents;                                                                                                                              







18







| | ● | issued
    patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid
    or unenforceable, as a result of legal challenges by our competitors;                                             
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                              
| | ● | our
    competitors might conduct research and development activities in countries where we do not have patent rights and then use
    the information learned from such activities to develop competitive products for sale in our major commercial markets;
| |   |                                                                                                                                                                                                                                                              
| | ● | we
    may not develop additional proprietary technologies that are patentable; and                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                              
| | ● | the
    patents of others may have an adverse effect on our business.                                                                                                                                                                                        



We
may be subject to claims challenging the inventorship of our patents and other intellectual property.



We
may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other
intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations
of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against
these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.
Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management and other employees.



Risks
Related to Our Operations in Israel



Potential
political, economic and military instability in the State of Israel, where our senior management, our head executive office, research
and development, and manufacturing facilities are located, may adversely affect our results of operations.



Our
head executive office, our research and development facilities, our current manufacturing facility, as well as some of our clinical
sites are located in Israel. Our officers and most of our directors are residents of Israel. Accordingly, political, economic
and military conditions in Israel and the surrounding region may directly affect our business and operations. Since the establishment
of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. Any
hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely
affect our operations and results of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed
conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. In December 2008, January 2009, November
2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas, the Palestinian Authority and/or
other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted
in missiles being fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding
Jerusalem. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which
our employees and some of our consultants are located, and negatively affected business conditions in Israel. Our offices and
laboratory, located in Nes Ziona, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities
and towns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during
which there were a substantially larger number of rocket and missile attacks aimed at Israel. In addition, since February 2011,
Egypt has experienced political turbulence and an increase in terrorist activity in the Sinai Peninsula following the resignation
of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of a military regime in
his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been
previously outlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence
and violence may damage peaceful and diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar
civil unrest and political turbulence has occurred in other countries in the region, including Syria which shares a common border
with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflict in Syria has escalated,
and evidence indicates that chemical weapons have been used in the region. This instability and intervention by third parties
such as Russia may lead to deterioration of the political and economic relationships that exist between the State of Israel and
some of these countries, and may have the potential for causing additional conflicts in the region. In addition, Iran has threatened
to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among
extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally,
a violent jihadist group named Islamic State of Iraq and the Levant (known as ISIS) is involved in hostilities in Iraq and Syria,
has executed terror attached in Europe and around the world and have been growing in influence. Although ISIS’s activities
have not directly affected the political and economic conditions in Israel, ISIS’s stated purpose is to take control of
the Middle East, including Israel. These situations may potentially escalate in the future to more violent events which may affect
Israel and us. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business
conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom
we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative
arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation
in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated
to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. Further, in the past,
the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business
with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating
results, financial condition or the expansion of our business.







19







Our
operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.



Many
Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until
they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event
of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods
of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future.
Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption
could materially adversely affect our business, financial condition and results of operations.



Investors
may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal
securities laws, against us, or our executive officers and directors or asserting U.S. securities laws claims in Israel.



None
of our directors or officers are residents of the United States, except for director Jack Rosen. Director George Lowell is a dual
U.S. and Israel citizen. Most of our directors’ and officers’ assets and our assets are located outside the United
States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the
United States against us or our non-U.S. our directors and executive officers may be difficult to obtain within the United States.
We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original
actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli
courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because
Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim,
it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content
of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure
will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli
courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against
us or our officers and directors.



Moreover,
among other reasons, including but not limited to, fraud or absence of due process, or the existence of a judgment which is at
variance with another judgment that was given in the same matter if a suit in the same matter between the same parties was pending
before a court or tribunal in Israel, an Israeli court will not enforce a foreign judgment if it was given in a state whose laws
do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely
to prejudice the sovereignty or security of the State of Israel.







20







Under
applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent
our competitors from benefiting from the expertise of some of our former employees.



We
generally enter into non-competition agreements with our employees and key consultants. These agreements prohibit our employees
and key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for
a limited period of time. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees
work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants
developed while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings
of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of
material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential
commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed,
we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our
ability to remain competitive may be diminished.



Your
rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights
and responsibilities of shareholders of U.S. corporations.



Since
we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association
and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders
of U.S. based corporations. In particular, a shareholder of an Israeli company, such as us, has a duty to act in good faith and
in a customary manner in exercising its rights and performing its obligations towards us and other shareholders and to refrain
from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,
such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related
party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against
other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine
the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder of ours or other power towards
us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. Since
Israeli corporate law underwent extensive revisions approximately 15 years ago, the parameters and implications of the provisions
that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to impose additional obligations
and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.



Provisions
of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a
change of control, even when the terms of such a transaction are favorable to us and our shareholders.



Israeli
corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special
approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant
to these types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date
that a merger proposal was filed by each merging company with the Israel Registrar of Companies and at least 30 days from the
date that the shareholders of both merging companies approved the merger. In addition, the holder of a majority of each class
of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer
receives at least 95% of the issued share capital (provided that a majority of the offerees that do not have a personal interest
in such tender offer shall have approved the tender offer, except that if the total votes to reject the tender offer represent
less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees
that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders,
including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion
of the tender offer, petition the court to alter the consideration for the acquisition (unless the acquirer stipulated in the
tender offer that a shareholder that accepts the offer may not seek appraisal rights).



Our
articles of association provide that our directors (other than external directors) are elected to terms, with only a two or three
of our directors (other than external directors) to be elected each year, in each case for a term of three years. Our 2015 annual
general meeting approved the staggering and extension of the term of our board members.  The staggering of the terms of our directors
prevents a potential acquirer from readily replacing our entire board of directors at a single annual general shareholder meeting.
This could prevent an acquirer from seeking to effect a change in control of our company by proposing an acquisition proposal
offer opposed by our board, even if beneficial to our shareholders.







21







Furthermore,
Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of
residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does
not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for
tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a
holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating
companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and
when such time expires, the tax becomes payable even if no actual disposition of the shares has occurred.



These
and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such
an acquisition or merger would be beneficial to us or to our shareholders.

We
have received Israeli government grants for certain research and development expenditures. The terms of these grants and loans
may require us to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. In
addition, under the Encouragement of Industrial, Research and Development Law, 5744-1984, or the Research Law, to which we are
subject due to our receipt of grants from the National Authority for Technological Innovation, which was later amended to the
Innovation Authority, or IIA, of the Israeli Ministry of Economy, formerly known as the OCS, a recipient of IIA grants such as
us must report to the applicable authority of IIA regarding any change of control or any change in the holding of the means of
control of our Company which transforms any non-Israeli citizen or resident into an “interested party”, as defined
in the Research Law, in our Company, and in the latter event, the non-Israeli citizen or resident shall execute an undertaking
in favor of the IIA, in a form provided under the IIA guidelines, as published on IIA’s website.



Because
a certain portion of our expenses is incurred in currencies other than the U.S. Dollar, our results of operations may be harmed
by currency fluctuations and inflation.



Our
reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S.
Dollar and Euro. As a result, we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency
hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned
above in relation to the NIS. These measures, however, may not adequately protect us from adverse effects.







22







We
have received Israeli government grants for certain of our research and development activities. The terms of these grants may
require us to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. We may
be required to pay penalties in addition to the repayment of the grants. Such grants may be terminated or reduced in the future,
which would increase our costs.



Our
research and development efforts have been financed, partially, through grants that we have received from the OCS. We therefore
must comply with the requirements of the Research Law and related regulations, including, but not limited to, pay royalties to
the OCS on income generated from the sale of products and related services associated with such products. As of December 31, 2016,
we have received $5.2 million in OCS grants. In February 2016 we were notified that IIA, or OCS, agreed to fund up to 40% of a
NIS 3.6 million (US$920,000) project towards ongoing development of the Company’s M-001. As a result of our receipt of these
grants, we were required to agree to abide by any obligations resulting from such funding. We therefore must comply with the requirements
of the Research Law and related regulations.



The
discretionary approval of an OCS committee will be required for any transfer to third parties outside of Israel of rights related
to M-001, which has been developed with OCS funding. We may not receive the required approvals should we wish to transfer this
technology, manufacturing and/or development outside of Israel in the future. We may be required to pay penalties in addition
to repayment of the grants. Such grants may be terminated or reduced in the future, which would increase our costs. OCS approval
is not required for the export of any products resulting from the OCS funded research or development in the ordinary course of
business.



On
July 29, 2015, the Israeli parliament amended the Research Law to include a number of guidelines to some of the core issues of
the Research Law, and to establish IIA, which replaced the OCS. IIA is intended to have greater power and freedom than the OCS
in launching creative funding tracks and instituting new guidelines that will govern the transferability and licensing of the
resulting technology. IIA was formed as of January 1, 2016, and new grant tracks and guidelines will be published from time to
time. Until IIA publishes new relevant regulations, which may take a few months, the existing OCS regulations will continue to
apply. We cannot assess at this time how the amended Research Law will affect our obligations to the OCS and any future grants
received, if at all from IIA.



Risks
Related to our Securities



We incur significant additional increased
costs as a public company in the United States as well as in Israel, and our management is required to devote substantial additional
time to new compliance initiatives as well as to compliance with ongoing U.S. and Israeli reporting requirements.



We
are a publicly traded company in the U.S and Israel. As a public company in the U.S., we incur additional significant accounting,
legal and other expenses that we did not incur before our initial public offering. We also incur costs associated with corporate
governance requirements of the SEC and the NASDAQ Capital Market, as well as requirements under Section 404 and other provisions
of the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal and financial compliance costs, introduce
new costs such as investor relations, stock exchange listing fees and shareholder reporting, and to make some activities more
time consuming and costly. The implementation and testing of such processes and systems may require us to hire outside consultants
and incur other significant costs. Any future changes in the laws and regulations affecting public companies in the United States,
including Section 404 and other provisions of the Sarbanes-Oxley Act, and the rules and regulations adopted by the SEC and the
NASDAQ Capital Market, for so long as they apply to us, will result in increased costs to us as we respond to such changes. These
laws, rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including
director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us
to attract and retain qualified persons to serve on our board of directors, our board committees, if any, or as executive officers.





23







We may be a passive foreign
investment company, or PFIC, for U.S. federal income tax purposes in 2017 or in any subsequent year. There may be negative tax
consequences for U.S. taxpayers that are holders of our ordinary shares or our ADSs



Generally,
if for any taxable year 75% or more of our gross income is passive income, or at least 50% of our assets are held for the production
of, or produce, passive income, we would be characterized as a PFIC for U.S. federal income tax purposes. Passive income for this
purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities
transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amount
derived due to the temporary investment of funds, including those raised in a public offering. In determining whether a non-US
corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly,
at least a 25% interest (by value) is considered.



Although
we were not PFIC in 2015 and 2016, we cannot determine at this point of time whether we are a PFIC for 2017, because, among other
things, PFIC status is determined annually and is based on our income, assets and activities for the entire taxable year. There
can be no assurance that we are not or will not be classified as a PFIC in any year. If we were to be characterized as a PFIC
for U.S. federal income tax purposes in any taxable year during which a U.S. Investor, as defined in elsewhere in this Annual
Report, owns ADSs, such U.S. Investor could face adverse U.S. federal income tax consequences, including having gains realized
on the sale of the ADSs classified as ordinary income, rather than as capital gain, the loss of the preferential rate applicable
to dividends received on the ADSs by individuals who are U.S. Investors, and having interest charges apply to distributions by
us and the proceeds of ADS sales. Certain elections exist that may alleviate some adverse consequences of PFIC status and would
result in an alternative treatment (such as mark-to-market treatment) of the ADSs; however, we do not intend to provide the information
necessary for U.S. Investors to make “qualified electing fund elections” if we are classified as a PFIC. If we are
a PFIC in any year, U.S. investors may be subject to additional IRS filing requirements, including the filing of IRS Form 8621,
as a result of directly or indirectly owning stock of a PFIC.



Failure
to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material
adverse effect on our business, results of operation or financial condition. In addition, current and potential shareholders could
lose confidence in our financial reporting, which could have a material adverse effect on the price of the ADSs and warrants.



Effective
internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required
to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley
Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. In addition,
if we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time
to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial
reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal controls, failing to remediate
these deficiencies or weaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment
may cause investors to lose confidence in our reported financial information, which could have a material adverse effect on the
price of the ADSs and warrants. If we cannot provide reliable financial reports or prevent fraud, our operating results could
be harmed.



As
an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain
disclosure requirements, which could make the ADSs and ADS warrants less attractive to investors.



For
as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting
and other regulatory requirements that are generally unavailable to other public companies, including:



| | ● | an
    exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required
    by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; and                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                  
| | ● | an
    exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB,
    requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required
    to provide additional information about our audit and our financial statements.



24







We
will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual
gross revenues of $1 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the
first sale of the ADSs pursuant to an effective registration statement, (iii) the date on which we have, during the previous three-year
period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed a “large accelerated
issuer” as defined in Regulation S-K of the Securities Act.



We
cannot predict if investors will find the securities less attractive because we may rely on these exemptions. If some investors
find the securities less attractive as a result, there may be a less active trading market for securities and the market price
of the securities may be more volatile.



We
are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting
companies.



We
are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC.
Under the Exchange Act, we are subject to reporting obligations that, in certain respects, are less detailed and less frequent
than those of U.S. domestic reporting companies. For example, we are not required to issue quarterly reports, proxy statements
that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under the regulations
promulgated under the Companies Law, as an Israeli public company listed overseas we will be required to disclose the compensation
of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted
for Israeli public companies listed overseas prior to such amendment), this disclosure will not be as extensive as that required
of U.S. domestic reporting companies. We also have four months after the end of each fiscal year to file our annual reports with
the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore,
our officers, directors and principal shareholders will be exempt from the requirements to report short-swing profit recovery
contained in Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are also not subject to the requirements
of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency
and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting companies.



As
a “foreign private issuer,” we are permitted, and follow certain home country corporate governance practices instead
of otherwise applicable SEC and NASDAQ Capital Market requirements, which may result in less protection than is accorded to investors
under rules applicable to domestic U.S. issuers.



As
a “foreign private issuer,” we are permitted, and follow certain home country corporate governance practices instead
of those otherwise required under the listing rules of the NASDAQ Capital Market for domestic U.S. issuers. For instance, we intend
to follow home country practice in Israel with regard to, among other things, board independence requirements, director nomination
procedures and quorum requirements. In addition, we may follow our home country law instead of the listing rules of the NASDAQ
Capital Market that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment
of certain equity based compensation plans, an issuance that will result in a change of control of us, certain transactions other
than a public offering involving issuances of a 20% or greater interest in the Company, and certain acquisitions of the stock
or assets of another company. We also intend to follow our home country rules regarding the periodic approval of and changes to
the formal charter for our compensation committee instead of the listing rules of the NASDAQ Capital Market. We may in the future
elect to follow home country corporate governance practices in Israel with regard to other matters. Following our home country
corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ
Capital Market may provide less protection to you than what is accorded to investors under the listing rules of the NASDAQ Capital
Market applicable to domestic U.S. issuers.



If
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or
if they adversely change their recommendations or publish negative reports regarding our business or our traded securities, our
securities price and trading volume could be negatively impacted.



The
trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish
about us, our business, our market or our competitors. We do not have any control over these analysts, and we cannot provide any
assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change
their recommendation regarding the securities, or provide more favorable relative recommendations about our competitors, the price
of the securities would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly
publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the
securities or their trading volume.



25







The
market price for the ADSs and ADS warrants may be volatile.



The
market price for the ADSs and ADS warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous
factors including the following:



| | ● | our
    failure to obtain the approvals necessary to commence further clinical trials;                                                                                                                        
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                               
| | ● | results
    of clinical and preclinical studies;                                                                                                                                                              
| |   |                                                                                                                                                                                                               
| | ● | announcements
    of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes
    or delays in the regulatory review process;            
| |   |                                                                                                                                                                                                               
| | ● | announcements
    of technological innovations, new products or product enhancements by us or others;                                                                                                         
| |   |                                                                                                                                                                                                               
| | ● | adverse
    actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing
    activities;                                                       
| |   |                                                                                                                                                                                                               
| | ● | changes
    or developments in laws, regulations or decisions applicable to our product candidates or patents;                                                                                                
| |   |                                                                                                                                                                                                               
| | ● | any
    adverse changes to our relationship with manufacturers or suppliers;                                                                                                                                  
| |   |                                                                                                                                                                                                               
| | ● | announcements
    concerning our competitors or the pharmaceutical or biotechnology industries in general;                                                                                                    
| |   |                                                                                                                                                                                                               
| | ● | achievement
    of expected product sales and profitability or our failure to meet expectations;                                                                                                              
| |   |                                                                                                                                                                                                               
| | ● | our
    commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions
    or intellectual property infringement actions;                         
| |   |                                                                                                                                                                                                               
| | ● | any
    major changes in our board of directors, management or other key personnel;                                                                                                                           
| |   |                                                                                                                                                                                                               
| | ● | legislation
    in the United States, Europe and other foreign countries relating to the sale or pricing of pharmaceuticals;                                                                                  
| |   |                                                                                                                                                                                                               
| | ● | announcements
    by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments;                                                              
| |   |                                                                                                                                                                                                               
| | ● | expiration
    or terminations of licenses, research contracts or other collaboration agreements;                                                                                                             
| |   |                                                                                                                                                                                                               
| | ● | public
    concern as to the safety of therapeutics we, our licensees or others develop;                                                                                                                      
| |   |                                                                                                                                                                                                               
| | ● | success
    of research and development projects;                                                                                                                                                             
| |   |                                                                                                                                                                                                               
| | ● | developments
    concerning intellectual property rights or regulatory approvals;                                                                                                                             
| |   |                                                                                                                                                                                                               
| | ● | variations
    in our and our competitors’ results of operations;                                                                                                                                             
| |   |                                                                                                                                                                                                               
| | ● | changes
    in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs are covered by analysts;                                                                      
| |   |                                                                                                                                                                                                               
| | ● | future
    issuances of ordinary shares, ADSs or other securities;                                                                                                                                            
| |   |                                                                                                                                                                                                               
| | ● | general
    market conditions, including the volatility of market prices for shares of biotechnology companies generally, and other factors,
    including factors unrelated to our operating performance; and
| |   |                                                                                                                                                                                                               
| | ● | the
    other factors described in this “Risk Factors” section.                                                                                                                                               



These
factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and ADS warrants,
which would result in substantial losses by our investors.



In
addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related
to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the
market price of the ADS and ADS warrants.



26







The
warrants are speculative in nature and with no established trading market.



The
ADS warrants do not confer any rights of ownership of ADSs on its holders but only represent the right to acquire ADSs at a fixed
price for a limited period of time. Specifically, commencing on the date of issuance, holders of the warrants may exercise their
right to acquire the ADSs and pay an exercise price per share of $6.25 per ADS, subject to adjustment upon certain events, prior
to five years from the date of issuance, after which date any unexercised ADS warrants will expire and have no further value.
Furthermore, at the time of exercise the holder must pay a fee of $0.05 per ADS and any other applicable taxes or charges for
issuance of ADSs.



Our
ordinary shares, the ADSs and ADS warrants are traded on different markets and this may result in price variations.



Our
ordinary shares have been traded on the TASE since August 2007. Our ADSs and warrants have been traded on The NASDAQ Capital Market
since May 2015. Trading in these securities on these markets takes place in different currencies (dollars on NASDAQ and NIS on
the TASE), and at different times (resulting from different time zones, different trading days and different public holidays in
the United States and Israel). The trading prices of our securities on these two markets may differ due to these and other factors.



Substantial
future sales or perceived potential sales of our ordinary shares, ADSs or warrants in the public market could cause the price
of our ordinary shares, the ADSs and warrants to decline.



Substantial
sales of our ordinary shares the ADSs or ADS warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price
of our ordinary shares, ADSs and ADS warrants to decline. All our outstanding ordinary shares are registered and available for
sale in Israel. Sales by us or our security holders of substantial amounts of our ordinary shares, ADSs or ADS warrants, or the
perception that these sales may occur in the future, could cause a reduction in the market price of our ordinary shares, ADSs
or ADS warrants.



The
issuance of any additional ordinary shares, any additional ADSs, or any securities that are exercisable for or convertible into
our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares, the ADSs and the ADS warrants
and will have a dilutive effect on our existing shareholders and holders of ADSs and ADS warrants.



We
have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate
in value, our investors may not benefit from holding our securities.



We
have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends our ordinary
shares in the foreseeable future. Moreover, the Israeli Companies Law, as amended, or the Companies Law, imposes certain restrictions
on our ability to declare and pay dividends. As a result, investors in the ADSs, ADS warrants or ordinary shares will not be able
to benefit from owning these securities unless their market price becomes greater than the price paid by such investors and they
are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price more than
the price paid.



You
may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited
circumstances, you may not receive dividends or other distributions on our ordinary shares and you may not receive any value for
them, if it is illegal or impractical to make them available to you.



The
depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary
shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions
in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that
it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make
a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act, but that are
not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars
from foreign currency that was part of a dividend made in respect of deposited ordinary shares may require the approval or license
of, or a filing with, any government or agency thereof, which may be unobtainable. In these cases, the depositary may determine
not to distribute such property and hold it as “deposited securities” or may seek to effect a substitute dividend
or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable
substitute. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities
received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary
shares, rights or anything else to holders of ADSs. In addition, the depositary may withhold from such dividends or distributions
its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes it is required
to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders
of our ordinary shares, and, in some limited circumstances, you may not receive any value for such distributions or dividends
if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value
of the ADSs.



27







Holders
of ADSs must act through the depositary to exercise their rights as our shareholders.



Holders
of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying
ordinary shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice
period required to convene a shareholders meeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda
for the shareholders meeting. When a shareholder meeting is convened, holders of the ADSs may not receive sufficient notice of
a shareholders’ meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect to
any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the
ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to
extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting
materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents
will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for
the effect of any such vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack
recourse if their ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able
to call a shareholders’ meeting.



You
may be subject to limitations on transfer of your ADSs.



Your
ADSs and ADS warrants are transferable on the books of the depositary. However, the depositary may close its transfer books at
any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary
may refuse to deliver, transfer or register transfers of ADSs and ADS warrants generally when our books or the books of the depositary
are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government
or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of
the deposit agreement.



Your
percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters
on which shareholders vote.



Our
board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our
authorized but unissued shares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances
of additional shares would reduce your influence over matters on which our shareholders vote.



Management
will have broad discretion as to the use of the proceeds from the exercise of the warrants, and we may not use the proceeds effectively.



Our
management will have broad discretion in the application of the net proceeds from the exercise of the ADS warrants held by the
public investor and the representatives of the underwriters and could spend the proceeds in ways that you do not agree with or
that do not improve our results of operations or enhance the value of ADSs or ADS warrants. Our failure to apply these funds effectively
could have a material adverse effect on our business and cause the price of the ADSs and ADS warrants to decline.



|Item 4. | INFORMATION ON THE COMPANY
|------- | --------------------------



| | A. | History and Development
    of the Company
| | -- | ------------------------------------------



Our
History



Our
legal commercial name is BiondVax Pharmaceuticals Ltd. We are a company limited by shares organized under the laws of Israel.
We were incorporated in Israel in 2003 as a privately held company. In February 2007, we completed an initial public offering
of our ordinary shares on the TASE. In May 2015, we completed an initial public offering of our ADSs and ADS Warrants on the Nasdaq
Capital Market.



Our
principal executive offices are located at 14 Einstein Street, Nes Ziona, Israel, 74036, and our telephone number is (+972) (8)
930-2529. Our agent for service of process in the United States is Puglisi & Associates, whose address is 850 Library Avenue,
Suite 204, Newark, Delaware, and whose telephone number is (302) 738-6680.



28







Our
capital expenditures for 2016, 2015, and 2014 amounted to $5,000, $9,000 and $8,000, respectively. These expenditures were primarily
for computers and Laboratory equipment.



| | B. | Business Overview
| | -- | -----------------



We
are a clinical stage biopharmaceutical company focused on developing and, ultimately, commercializing immunomodulation therapies
for infectious diseases. Our current product candidate, M-001, is a synthetic peptide-based protein targeting both seasonal and
pandemic strains of the influenza virus. Unlike existing influenza vaccines, which offer only strain specific seasonal protection
or pandemic prevention, M-001 is designed to provide long-lasting protection against multiple existing and future influenza strains.
As a result, we believe that M-001 has the potential to become an attractive alternative to existing influenza vaccines.



M-001
is based on research initially conducted at the Weizmann Institute of Science in Israel, or the Weizmann Institute, over a period
of approximately 10 years prior to our inception in 2003. In 2003, we acquired from Yeda Research and Development Company Ltd.,
or Yeda, an affiliate of the Weizmann Institute, an exclusive worldwide license for the development, manufacture, use, marketing,
sale, distribution and importation of products based, directly or indirectly, on patents and patent applications filed pursuant
to the invention titled “Peptide Based Vaccine for Influenza”, developed on the basis of the research conducted by
Professor Ruth Arnon and her team at the Weizmann Institute. Since 2003, we have continued the research and development of M-001
under the supervision of our Chief Scientific Officer, Dr. Tamar Ben Yedidia and, at present, we own or license five families
of patents filed in a large number of jurisdictions, the latest of which is expected to be in force until 2035.



According
to a report by the U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, or the CDC, annual
seasonal influenza vaccines in the U.S. were found to be effective in preventing the onset of the influenza virus in between 8%
and 48% of healthy adults during the influenza seasons from 2004 to 2008 (depending on the particular season and the statistical
significance of the sample). In addition, studies conducted by universities and hospitals in cooperation with the CDC from 2004
and until today measured the effectiveness of the influenza vaccine at preventing outpatient medical visits due to laboratory-confirmed
influenza. These studies estimated the adjusted influenza vaccine effectiveness to be between 10% during the 2004/2005 season
and 60% during the 2010/2011 season, and only 19% effective during the 2014/2015 season. Most existing influenza vaccines are
formulated based on weakened or dead strains of the influenza virus that are predicted to be the most common during the then upcoming
influenza season or that are predicted to be most likely to cause a pandemic outbreak in the then upcoming influenza season. Furthermore,
as seasonal and pandemic influenza vaccines are strain-specific, most existing vaccines only target those specific strains and
do not cope with the ever-changing nature of the influenza virus. In addition, according to BARDA, which is responsible for the
advanced development and procurement of medical countermeasures for pandemic influenza in the United States, the production cycle
of existing influenza vaccines is long (approximately 6 months), considerably limiting the ability to timely immunize the non-affected
population in case of a pandemic outbreak.



We
intend to seek regulatory approvals to market M-001 for the following three indications: (i) as a standalone universal vaccine
suitable to be administered to the general population to provide protection against seasonal and pandemic strains of influenza,
that we refer to as the Universal Standalone Indication; (ii) as a seasonal influenza vaccine, or primer, to be administered to
patients over the age of 65 with additional age-related medical conditions, or elderly with co-morbidities, in combination with
the existing seasonal vaccine to provide additional protection against seasonal influenza virus strains, that we refer to as the
Universal Seasonal Primer for Elderly Indication; and (iii) as a pre-pandemic influenza vaccine, or primer, suitable to be administered
to the general population in combination with the existing pandemic vaccine, to provide additional protection against pandemic
strains of the influenza virus, that we refer to as the Universal Pandemic Primer Indication.



To
date, we have completed two Phase 1/2 clinical trials and three Phase 2 clinical trials conducted in Israel pursuant to clinical
trial protocols approved by the Israeli Ministry of Health and a Phase 2 clinical trial in Europe. The clinical trials in Israel
were designed for adults between the ages of 18 and 49 and 55 to 75, and included an aggregate of 479 participants. Because our
product candidate is a vaccine, we conducted our Phase 1/2 clinical trials on healthy participants to test both safety of M-001
as our primary endpoint and the immunogenicity of M-001 as our secondary endpoint. Results from our Phase 1/2 and Phase 2 clinical
trials indicated that M-001 was well tolerated and safe across all treatment groups within the trial population and that M-001
was effective in causing an immune reaction in clinical trial participants administered with M-001. Following the completion of
our clinical trial BVX-005 in February 2012, we have focused our efforts on seeking a cGMP approval for our M-001 production process.
In addition, we have also focused a portion of our efforts since February 2012 on improving the manufacturing process for M-001
and on reducing production costs.



In
June 2015 we received preliminary results from our Phase 2 clinical trial BVX-006, indicating M-001 was safe, well tolerated and
induced humoral immune responses, successfully meeting the primary safety and secondary immunogenicity endpoints. In addition,
in November 2016 we received positive preliminary safety results from our BVX-007 clinical trial, with no related severe adverse
events and only three moderate adverse events possibly or probably related to the treatment. BVX-007 was initiated in September
2015 in Europe as part of our membership in the UNISEC Consortium following the receipt of a regulatory clearance from the relevant
Hungarian Regulatory Authority. The UNISEC Consortium is a consortium of three university partners, five National Health Institutes
and other companies and organizations to work on promising recently developed concepts for a universal influenza vaccine. BVX-007
includes the administration of the H5N1 vaccine following the administration of M-001 to our clinical trial participants. We entered
into an agreement with a supplier for the supply of H5N1 vaccine approved by the relevant regulatory authority for the purpose
of performing BVX-007. We expect final results of BVX-007 to be released during the second quarter of 2017.



29







In
June 2015, the FDA has accepted our newly submitted IND application, and we were informed by our regulatory advisors that the
“study may proceed”. We have submitted this IND in order to comply with the requirements of BARDA, for a grant application
we had previously submitted to BARDA which unfortunately has been recently annulled by BARDA all together to all potential grant
candidates, including our company. Following such IND acceptance, which can be used by us as a reference for other U.S. based
trials, we intend to participate in a Phase 2 clinical trial to be held in the U.S. by the NIAID. The purpose of the planned clinical
trial is to assess the ability of M-001 in humans to serve as a pandemic primer to the H7N9 avian pandemic vaccine, and we expect
NIAID will launch this clinical trial during 2017.



We
believe that the results of the Phase 2 clinical trials conducted by us so far, or to be conducted in the future, will further
expand our data to provide greater support for any Phase 3 clinical trial of M-001 we may conduct in the future.



On
March 28, 2017 we received an approval from the Investment Center of the Ministry of Economy and Industry of the State of Israel,
for a grant representing 20% of NIS 20 million budgets to be utilized towards the construction for the production of Phase 3 and
commercial batches of M-001. This grant is subject to certain terms and conditions, including those outlined under the Encouragement
of Capital Investment Law 1959. We plan to build a mid-sized factory in Jerusalem, with potential capacity to annually produce
up to tens of millions of doses of M-001. We therefore expect to finance part of the cost of construction with our own financial
resources.



We
intend, following the receipt of all requisite regulatory approvals, to conduct Phase 3 clinical trials in the U.S., either with
one or more future collaborators, or, subject to available funds, on our own, in support of FDA approval to market M-001 in the
U.S. While all of our preclinical and clinical trials to date have been conducted outside the United States, considering the FDA’s
review and comments to this IND application, we believe that the FDA will consider the results of our completed preclinical and
clinical trials in reviewing any future IND application. We expect to conduct an end of Phase 2 meeting with the FDA during 2018.



We
do not currently have sufficient financial resources to conduct Phase 3 clinical trials of M-001 on our own. Subject to the completion
of our current and planned Phase 2 clinical trials and the approval of an IND application for Phase 3 clinical trials, we intend
to seek to establish collaborations with large multinational pharmaceutical companies and/or national health authorities to finance
Phase 3 clinical trials of M-001. However, to the extent that we have sufficient capital to do so (whether through sales of debt
or equity securities or otherwise), we may seek to conduct Phase 3 clinical trials of M-001 for some or all of our indications
without such collaborations.



Our
Market Opportunity



Influenza
is an infectious disease caused by different strains of the influenza virus. The disease is common around the world, and appears
as seasonal or pandemic outbreaks. The various strains of influenza are classified into A and B groups according to the type of
proteins in the virus. According to information published in March 2014 by the WHO, the global annual attack rate of seasonal
influenza is estimated at 5% – 10% in adults and 20% – 30% in children, and between 250,000 and 500,000 of those infected
die as a result of influenza related complications. In the U.S., it is estimated that 200,000 are hospitalized each year from
the flu and 23,000 deaths on average occur each year, including 21,000 deaths of elderly. In addition, during seasonal influenza
epidemics from 1979/80 through 2000/01, the estimated overall number of influenza-associated hospitalizations in the United States
ranged from approximately 54,000 to 430,000 per epidemic, and 63% of these cases occurred among persons over the age of 65. Infants,
adults over the age of 50 and chronic disease patients are most likely to contract influenza and suffer from complications.



The
influenza virus undergoes frequent mutations. These mutations decrease the effectiveness of the immune reaction of the human body.
If the mutations are very significant, the mutated virus strains may cause global pandemics. Over the last few years, new strains
of the influenza virus previously only existing in animals have appeared in humans, including Avian flu strains such as H5 and
H7. We believe that the appearance of new potentially pandemic strains is a growing concern among health authorities, as these
strains increase the risk of worldwide pandemics and high mortality and morbidity rates. Furthermore, according to the worldwide
scientific journal Vaccine (Molinari et al. 2007), the direct financial loss attributed to the influenza disease in the
year 2003 was estimated at a total of $87.1 billion annually, of which $55.7 billion relate to incidents of the disease among
adults aged 65 years or older.



30







To
date, the most common therapeutic treatment methods for influenza focus on pain and symptom relief. While anti-viral treatments
may shorten the duration and severity of the disease, such treatments must be applied in the early stages of the course of the
disease to be effective. Many countries around the world, including the United States, provide preventative treatment in the form
of annual or seasonal influenza vaccines, which are especially recommended to patients in risk groups. Because seasonal vaccines
target only particular influenza strains predicted for the coming year, such vaccines may not be effective against the strains
that actually do appear (if different from those predicted) and may not protect against unexpected mutations of a particular influenza
strain that was predicted.



The
seasonal influenza vaccine market was dominated in 2012 by five large pharmaceutical companies, including: Sanofi, GlaxoSmithKline
plc (GSK), Novartis International, CSL Limited, Abbott Laboratories and AstraZeneca. According to Data Monitor’s Influenza
vaccine forecast report, dated November 2013, sales of seasonal influenza vaccines in the 2012/2013 influenza season are estimated
at $3.2 billion in the U.S., Japan, and the five major EU markets (France, Germany, Italy, Spain, and the UK), and are expected
to reach $5.3 billion in the 2021/2022 influenza season. Specifically, sales in the U.S. alone in the 2012/2013 influenza season
are estimated at $1.4 billion, with 140 million doses administered during this season. According to this report, U.S. sales of
seasonal influenza vaccines in the 2021/2022 influenza season are expected to reach $2.6 billion.



Our
Product Candidate M-001



Our
current product candidate, M-001, is comprised of nine peptides that activate the entire immune system (including both a humoral
reaction, an immune reaction causing the body to create antibodies against a pathogen or parts thereof, and a cellular immune
reaction, and immune reaction causing the body to kill or assist in killing pathogens), to prevent the spread of the influenza
disease within the body and shorten the duration of the illness. The selected peptides are from the HA, NP and M1 proteins of
both influenza Type A and Type B virus, and each peptide comprises up to 22 amino-acids. These peptides are common in the vast
majority of influenza virus strains and are combined into a single protein used in M-001.



In
order to produce M-001, we use an expression system that consists of bacteria and a DNA plasmid encoding for M-001. The DNA plasmid
encoding is inserted into a proprietary E. coli bacteria specifically designed for the production of peptide-based products. The
bacteria express M-001 synthetic protein from the DNA, and once expressed, M-001 is further purified from other non-related bacterial
proteins. M-001 is then formulated and filled into sterile vials that are kept in cooled storage until used.



The
following graph demonstrates the selection of certain peptides common in the influenza virus and the formulation of M-001:









31







M-001
is intended to be intramuscularly injected into the body. Once administered, M-001 is designed to be recognized by white blood
cells in the body, causing both humoral and cellular immune reactions. This process is expected to result in the creation of new
memory cells which, upon influenza infection, secrete antibodies to fight the influenza virus. The graph below describes the different
stages of how M-001 works:







Our
Competitive Strengths



We
believe our product candidate can potentially improve influenza protection by providing several distinct advantages, including:



| | ● | Multi-strain
    flu protection. We believe that the peptide-based structure of M-001 will allow our product to be effective against
    many existing and future strains of the influenza virus and to remain effective in protecting against new strains without
    required updates and alterations. To test this hypothesis, in January and July 2014, we conducted a sequence examination and
    when possible, animal studies in our laboratories, to compare the structure of M-001 with new flu strains (H7N7, H6N1, H5N8,
    H7N9 and H10N8) discovered in humans in recent years similarly to the H5N1 strain. Although these strains have not yet been
    classified as pandemic, they are dangerous for humans and have caused morbidity and death in the past. The results of such
    examination and studies demonstrated that M-001 was compatible against these strains. This data supports our claim of the
    universality of M-001 for existing and future influenza virus strains.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Long-lasting
    flu protection. M-001 is designed to activate both humoral and cellular reactions of the immune system. We therefore
    believe that M-001, if approved for commercial sale, will be more effective and long-lasting compared to currently commercially
    available vaccines that stimulate only one type of immune response (either humoral or cellular).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Continuous
    sales cycle not affected by seasonality. Because M-001 is designed to provide a multi-strain flu protection that
    is long lasting and is not expected to require updates for future virus strains or mutations, we do not expect future sales
    of M-001 as a universal standalone vaccine or as a pandemic primer to be affected by the influenza season. Unlike traditional
    influenza vaccines, which are sold and administered in western countries primarily during the period from September through
    November, we believe that M-001 for these indications can be sold and administered or sold and stored throughout the entire
    year. However, we expect that most sales of M-001 as a universal seasonal primer for elderly intended to be administered in
    combination with the existing seasonal vaccine will be conducted during the influenza season.                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Shorter
    production times. We believe that the production time for M-001 will be only 6 to 8 weeks, as opposed to the 16 to
    24 weeks (on average) required to produce seasonal influenza vaccines. We expect that shorter production times will give manufacturers
    greater flexibility in their production planning, as well as the ability to execute large orders of vaccine doses in a short
    timeframe in response to pandemics.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Absence
    of allergy inducing egg proteins. Most influenza vaccines are produced in hen eggs and may therefore cause an allergic
    reaction to those allergic to certain egg proteins. An epidemiological study performed by the European Food Safety Authority
    (EFSA) in 2011 found that eggs are some of the most common allergens in the population. In contrast, M-001 is not produced
    using eggs and does not cause egg protein allergies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



32







We
also believe the following key strengths provide us with competitive advantages relative to other companies seeking to develop
novel treatments for the prevention of influenza:



| | ● | M-001
    is currently in advanced clinical stage (Phase 2) for all three indications. We have completed two Phase 1/2 clinical
    trials and three Phase 2 clinical trials in Israel pursuant to clinical trial protocols approved by the Israeli Ministry of
    Health, and anan additional Phase 2 clinical trial Europe. Our Phase 1/2 and Phase 2 clinical trial results indicated that
    M-001 was well tolerated and safe across all treatment groups within the trial population and was effective in causing an
    immune reaction in clinical trial participants administered with M-001.                                                                                                                                                                                                                                                                                       
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ● | Extensive
    knowledge and expertise in the use of peptide-based vaccines. We have extensive experience researching and developing
    peptide-based compounds, including M-001. Our product candidate is based on years of research, including the research headed
    by Professor Arnon at the Weizmann Institute during the 10 years prior to our inception. Over the course of that 10 year period,
    the scientific concept of a peptide-based influenza vaccine was established and confirmed in numerous preclinical and clinical
    trials for various influenza virus strains. We believe that this knowledge and expertise gives us a competitive advantage
    over other universal influenza vaccine developers with less significant experience and knowledge of these fields of study.                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ● | In-house cGMP production
    capacity for Phase 2 clinical trials. Our facility consists of our offices and laboratories, in addition to a warehouse
    for equipment and chemicals. Our laboratory facilities include an analytical lab, production rooms and a virology laboratory
    approved by the Ministry of Labor in Israel. Our facility was audited and approved for production according to Good Manufacturing
    Practice standards, or cGMP, by a European qualified person. We believe that our production facility has the capacity to produce
    sufficient volumes of M-001 for use in our current and planned Phase 2 clinical trials. We plan, following the receipt of
    a grant by Israel’s Ministry of Economy and Industry, to build the mid-sized factory in Jerusalem, with potential capacity
    to annually produce up to tens of millions of doses of M-001.



Indications
for our Product Candidate



M-001
is currently in advanced stages of Phase 2 clinical trials for three indications, the Universal Standalone Indication, the Universal
Seasonal Primer for Elderly Indication and the Universal Pandemic Primer Indication.



M-001
for the Universal Seasonal Primer for Elderly Indication and the Universal Pandemic Primer Indication will be administered in
two doses. The first dose, referred to as a primer, will be administered immediately upon the outbreak of an influenza pandemic
or the beginning of an influenza season, as applicable. The second dose, referred to as a boost, will be administered with a seasonal
vaccine or when a pandemic vaccine is developed against the specific new strain of influenza. We believe that M-001, approved
for either of these indications, will thus allow health authorities to more quickly and effectively protect the general population
or targeted groups from seasonal influenza and/or pandemic outbreaks.



Universal
Standalone Indication



The
use of M-001 as a standalone vaccine for the general population is intended to provide prolonged protection against existing and
future influenza strains for a period of at least one year, and may be extended to periods of three to five years, subject to
future regulatory approval. According to Datamonitor Healthcare, approximately 50% of the general population and 66% of the elderly
population in the U.S. (ages 65 and up) is annually vaccinated against the influenza virus. Subject to competitive risks (including
the risk that our competitors may develop vaccines that are or are perceived by doctors to be more effective, longer lasting or
less expensive), we expect that M-001, if approved for commercial sale, will achieve a high penetration rate within its intended
markets.



Universal
Seasonal Primer for Elderly Indication



The
Universal Seasonal for Elderly indication is designated for the elderly ages 65 and up, which are a risk group more prone to suffer
from seasonal influenza complications. We estimate that 80% of the elderly across the world also suffer from co-morbidities. Moreover,
according to a publication by the CDC, existing seasonal influenza vaccines were estimated to be effective only 32% of the time
among adults over the age of 65. According to the worldwide scientific journal Vaccine (Molinari et al. 2007) the estimated
economic burden (including economic cost) of the influenza virus in the U.S. in the elderly amounts to $56 billion each year.



According
to the U.S. Department of Health and Human Services, the elderly population in the United States comprises 48 million, or approximately
12% of the overall U.S. population. In addition, We estimate that the different subpopulations of elderly persons over the age
of 65 in the U.S. with co-morbidities, such as obesity, cardio vascular disease, type 2 diabetes and chronic obstructive pulmonary
disease, range from approximately 7 to 34 million.



33







Universal
Pandemic Primer Indication



The
Universal Pandemic Primer Indication is designated to provide improved protection against flu pandemics to all populations. M-001
for this indication is designed to provide improved preparedness for the general population in the event of a pandemic outbreak.
Such a pandemic outbreak is caused by an unknown virus, at unknown timing and location, and may cause high mortality and morbidity
rates among the population. During the 20th century there were four main pandemic outbursts of the influenza virus,
the latest of which was the “Swine Flu” in April 2009. A specific strain vaccine against the “Swine Flu”
pandemic was only available from September 2009, approximately five months after the outbreak of this pandemic. The pandemic with
the highest clinical attack rates, ranging from 25%-35%, was the A/H1N1, known as the “Spanish Flu”, which occurred
in the 1918/1919 season, and caused the death of between 50 to 100 million worldwide. It is estimated that the mortality rate
amounted to 3%-5% of the world’s population at that time, and that this pandemic caused the global gross domestic product,
or GDP to decrease by 4.8%. Furthermore, it is estimated that a deadly pandemic may cause up to 8% decrease of the world-wide
GDP in addition to high mortality and morbidity rates.



The
following graph demonstrates our pandemic preparedness plan according to this indication:







Our
Business Strategy



Our
strategy is to complete development of, and, thereafter, manufacture and commercialize M-001 for use as a global influenza prevention
therapy. Key elements of our current strategy include the following:



| | ● | Receive
    all required regulatory approvals for the commercialization of M-001 as a preventative therapy for influenza.  We
    have completed Phase 2 clinical trial in Europe and plan to conduct a Phase 2 clinical trial in collaboration with the NIAID
    prior to conducting Phase 3 clinical trials in the U.S., (either with one or more future collaborators, or, subject to available
    funding, on our own), to test the efficacy of M-001 on thousands of participants for the following three indications: (i)
    the Universal Standalone Indication; (ii) the Universal Seasonal Primer for Elderly Indication; and (iii) the Universal Pandemic
    Primer Indication.                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ● | Seek
    attractive partnership opportunities. We believe that the proprietary rights provided by M-001, together with the
    clinical and compliance benefits, will create attractive partnership opportunities for large pharmaceutical companies or health
    authorities in different countries around the world. We intend to seek to build a portfolio of commercially attractive partnerships
    consisting of co-developments and licenses, which will allow us to perform advanced trials (including Phase 3 clinical trials)
    and, following applicable regulatory approval, which we provide no assurance we will receive, to globally commercialize M-001
    for all three planned indications.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ● | Further
    develop our production line.  Our production facility has been Phase 1 and 2 clinical trial audited and approved
    for production according to cGMP. In October 2015 we entered into a Development and Manufacturing Agreement for the production
    of clinical batches of M-001. We plan, following the receipt of a grant by Israel’s Ministry of Economy and Industry,
    to build the mid-sized factory in Jerusalem, with potential capacity to annually produce up to tens of millions of doses of
    M-001.                                                                                                                                                                              



34







Results
of Our Clinical and Preclinical Trials



General



All
clinical trial protocols and their results, including preceding safety and efficacy data, are submitted to the regulatory authorities
in the country where the trial is being conducted. The regulatory authority may demand additional preliminary tests before approving
the clinical trial as well as changes to the submitted outline of the clinical trial. These changes may affect the planned timetables,
costs and method of performance of our trials. Furthermore, regulatory authorities in different countries may have different requirements.



The
course of the clinical trials and performance of the different stages of the trials is a process normally required in order to
receive approval for marketing pharmaceutical products in countries where the clinical trials are performed. Generally, it is
possible to market the product in a country only if such product was approved by that specific country, however in some countries
it is possible to market the product even if the trials were not performed in that territory.



To
date, we have conducted our clinical trials in Israel, and received preliminary results indicating M-001 was safe, well tolerated
and induced humoral immune responses, successfully meeting the primary safety and secondary immunogenicity endpoints. we have
also completed one clinical trial in Budapest, Hungary, as part of our membership in the UNISEC consortium, and are planning to
participate in an additional Phase 2 clinical trial in the United States conducted by NIAID, part of the U.S. National Institutes
of Health (NIH) within the Department of Health and Human Services (HHS). We are assisted by professional advisers in examining
the possibilities of performing clinical trials in additional countries, taking into consideration the costs of the trials, speed
of receiving the approvals, and manner of performing the trials. We consider this information, together with marketing information
regarding future products in each country and whether each country regulatory authority consents to relying on prior approvals
and research performed in other countries, in choosing clinical trial sites.



Failure
of clinical trials at any stage may cause us to perform an additional trial or to cease the development of the product candidate
entirely for a specific indication. We make such decisions based on the nature of the results of the trials. In order to receive
the various approvals required in different countries, we set timetables, taking into account the seasonality of the influenza
disease. Commencing with our initiation of Phase 3 trials (if this occurs), we intend to examine the effectiveness of our product
candidate using laboratory parameters and according to the percentage of vaccinated subjects naturally infected and/or the severity
of the disease. Therefore, Phase 3 trials of the Universal Pandemic Primer Indication, will not be limited to a certain season
and will be based on laboratory parameters only.



Safety
and Efficacy Preclinical Trials



We
have conducted safety and efficacy preclinical trials in rats and mice. These preclinical trials as described below have demonstrated
that M-001 provides an effective flu protection, and an immune reaction against different flu virus strains. During these preclinical
trials both humoral and cellular immune reactions were recorded. The preclinical trials provided a proof of concept for all three
indications: Universal Standalone Indication, Universal Seasonal Primer for Elderly Indication and Universal Pandemic Primer
Indication. While these results are encouraging, we cannot determine the safety and efficacy of M-001 in human patients based
on such preclinical trials.



The
following is a summary of safety, including Good Laboratory Practice (GLP) toxicology studies and efficacy trials of M-001 conducted
on animals:



The
humoral immune reaction in mice



M-001
was administered to genetically identical mice (inbred) as well as outbred mice. The results showed a significant antibody reaction
against different strains of viruses covered by M-001. The injection of M-001 together with an adjuvant, a stimulating substance
added to the vaccine which enhances the reaction thereto in a non-specific manner, significantly raised the amount of antibodies
measured in the sample group.



The
cellular immune reaction in mice



These
trials performed in mice were intended to examine the cellular immune reaction to M-001. Results of the trials showed that the
white blood cells of the mice multiplied and secreted Interferon Gamma, a protein secreted as part of the body immune response
in reaction to the penetration of the virus. The amount of Interferon Gamma secreted was significantly higher in the experimental
group as compared to the control (non-immunized) group.



Influence
of the dose on the level of the immune reaction



Trials
were performed in mice in order to examine the most effective dose for the vaccine. For this purpose, the mice were vaccinated
with different doses of M-001 ranging from 50 to 500 micrograms (mcg) and were then infected with a fatal dose of the virus. This
trial showed a dose dependent immune reaction to M-001; the higher the dose given, the more antibodies were measured in the subject
population.



35







Protection
against infection with the virus in mice



As
part of the experiment, M-001 was administered three times to mice which were then infected with a fatal dose of the virus. High
survival rates of the immunized mice were recorded five days after the date of lethal infection compared with the non-immunized
control group. In addition, a minimal amount of virus was found in the vaccinated mice’s lungs compared with a very large
amount of virus in the control group.



Toxicology
in three administrations of the vaccine in rats



Following
the recommendation of the FDA, a GLP toxicology trial was performed in which the maximal vaccine dose intended for humans with
and without an adjuvant was administered to rats. The trial was performed by a certified service provider under GLP conditions.
Three injections of the vaccine were given to rats. The results indicated that M-001 was safe for use in animals, at doses of
250 and 500 microgram with and without the adjuvant, with minor local and transient reactions at the site of injection were recorded.
A similar trial showed that a dose of 1,000 micrograms without the adjuvant is safe for use in animals with similar local transient
reactions.



Experiments
performed on mice to examine the effectiveness of M-001 against swine flu



In
August 2009 we reported that following an examination of vaccinated mice blood cells, we located antibodies which specifically
identify the A/H1N1 virus, or the Swine Flu. We later found that M-001 as a Primer was able to induce antibodies in the mice at
a level that is considered protective against this specific flu strain.



Experiments
on mice to examine the effectiveness of M-001 against avian influenza



In
December 2012 we announced our success in preclinical trials performed on mice with H5 avian influenza strains. Our preclinical
trials showed that administering M-001 as a primer significantly raised the amount of antibodies to a level that is considered
protective against this potentially H5 pandemic flu strain.



In
addition, in August 2013 we announced that we received additional H7 avian influenza strain in order to perform similarly designed
preclinical trials on mice. Following the analysis of these preclinical trial results, we found that M-001 as a primer significantly
raised the amount of antibodies to a level that is considered protective against this potentially H7 pandemic flu strain as well.



At
a pre-IND meeting held with the FDA in 2012, the FDA indicated that our preclinical trials conducted to that date were sufficient
to continue our Phase 2 and Phase 3 clinical trials.



Results
of our Clinical Trials



We
have completed two Phase 1/2 clinical trials and three Phase 2 clinical trials conducted in Israel pursuant to clinical trial
protocols approved by the Israeli Ministry of Health. These clinical trials were designed for adults between the ages of 18 and
49, 55 to 75 and 50 to 64, and included an aggregate of 479 participants. We have also completed a Phase 2 clinical trial conducted
in Europe. During all completed clinical trials, M-001 and other vaccines were intramuscularly administered. All completed clinical
trials were random, placebo controlled. Phase 1/2 clinical trials were single-blind, and Phase 2 clinical trials were double-blind.



Because
our product candidate is a vaccine, we conducted our Phase 1/2 clinical trials on healthy participants to test the safety of M-001
as our primary endpoint and the immunogenicity of M-001 as our secondary endpoint. Results from our Phase 1/2 and Phase 2 clinical
trials results indicated that M-001 was well tolerated and safe across all treatment groups within the trial population and that
M-001 was effective in causing an immune reaction in clinical trial participants administered with M-001.



36









The
following table summarizes the structure, design and purpose of our completed Phase 2 clinical trials conducted in Israel and
Hungry, subject to the relevant regulatory approvals for each clinical trial:



|Clinical trial number |  | Phase |  | Trial Design                                                                         |  | Trial Purpose                                               |  | Population                      |  | Number of Subjects |  | Results                                                                          
|--------------------- |  | ----- |  | ------------------------------------------------------------------------------------ |  | ----------------------------------------------------------- |  | ------------------------------- |  | ------------------ |  | ---------------------------------------------------------------------------------
|BVX-002               |  | 1/2   |  | randomized, single-centered, single-blind, placebo-controlled escalating double-dose |  |                                                             |  | Adults  (ages 18 to 49)         |  | 63                 |  |                                                                                  
|BVX-003               |  | 1/2   |  | randomized, single-blind, placebo-controlled escalating double-dose                  |  |                                                             |  | Elderly  (ages 55 to 75)        |  | 60                 |  |                                                                                  
|BVX-004               |  | 2     |  | randomized, two centered, two stage, double-blind, placebo controlled double-dose    |  | Primary Endpoint: Safety                                    |  | Adults  (ages 18 to 49)         |  | 200                |  | M-001 was well tolerated and a humoral and cellular immune reaction was revealed.
|BVX-005               |  | 2     |  | multicenter, randomized, placebo-controlled                                          |  | Secondary Endpoint: immunogenicity                          |  | Elderly  (ages 65+)             |  | 120                |  |                                                                                  
|BVX-006               |  | 2     |  | Randomized, Placebo-Controlled, Double-Blind                                         |  | Primary Endpoint: Safety Secondary Endpoint: immunogenicity |  | adults between ages of 50 to 64 |  | 36                 |  |                                                                                  
|BVX-007               |  | 2     |  | Randomized, Placebo-Controlled, Double-Blind                                         |  | Primary Endpoint: Safety and cell mediated immunity         |  | adults between ages of 18 to 60 |  | 222                |  | Safety of M-001 confirmed.                                                       



BVX-002



We
completed our BVX-002 Phase 1/2 clinical trial during the third quarter of 2009. This Phase 1/2 study was a single-center, single-blind,
placebo-controlled, first-in-man trial, intended to test the safety of M-001 as our primary endpoint and the immunogenicity of
M-001 as our secondary endpoint. More specifically, the study was aimed at assessing the safety of repeated intramuscular administration
of two different doses of the influenza-targeted M-001 vaccine prepared with or without an adjuvant. Three subjects designated
as “pre-pioneer”, were vaccinated once with a low dose (125 mcg) of M-001 and monitored for 7–9 days thereafter
to ensure the vaccine’s relative safety before exposing further subjects to higher doses. Only after evaluation of the responses
of these three subjects, and a minimum 72-hour observation window after release of the third subject, were further vaccinations
and doses authorized. In the remaining cohorts, three subjects of each cohort were always treated before the remainder of the
cohort to ensure basic vaccine safety. In addition, a dose escalation was only allowed after a 10-day observation period between
the last dosing of the lower dose cohorts and the first vaccination of the higher dose cohorts. The appropriate dosage of M-001
was intramuscularly administered on days 0 and 21 of the clinical trial. Blood was drawn on vaccination days and on day 42 to
assess safety and immune parameters. Follow-up and recording of any adverse events extended up to three weeks after administration
of the second vaccine dose.



The
broadest immune response was recorded among subjects vaccinated with two doses of 250mcg or 500mcg of M-001 with or without an
adjuvant formulation. M-001 exhibited a positive safety profile, in that no serious or severe adverse events were reported and
no adverse events were defined as probably or definitely related to treatment. The fewest number of adverse events were reported
for the experimental group administered with the 500mcg of M-001 with an adjuvant. Of the adverse events described as possibly-related
to treatment regimen, 92.6% were graded mild and 61% were overcome within one day of appearance. Only four participants suffered
from fever above 100.4°F.



37







BVX-003



We
completed our BVX-003 Phase 1/2 clinical trial in April 2010. This study was a single-center, single-blind, placebo-controlled
trial, intended for further testing the safety of M-001 as our primary endpoint and the immunogenicity of M-001 as our secondary
endpoint. More specifically, the study was aimed at assessing the safety and tolerability of two successive intramuscular administrations
of M-001, prepared with or without an adjuvant, in elderly volunteers (ages 55 to 75). Subjects were randomly allocated to one
of two dosing cohorts, with 30 subjects per cohort, and treated with either 250mcg or 500 mcg active vaccines. An optional third
vaccination with the commercial trivalent seasonal influenza 2009/10 vaccine (TIV) (Vaxigrip, Sanofi-Pasteur or equivalent product)
was supplied to those interested subjects not immunized prior to the study.



The
strongest immune reactions, both humoral and cellular, were detected among subjects receiving the M-001-based vaccines in 250
or 500 mcg doses with or without an adjuvant, compared to those receiving placebo with an adjuvant. Humoral responses to M-001
were most significant among subjects primed with either of the adjuvanted or non adjuvanted M-001-based formulations and subsequently
boosted with the TIV, when compared to the combined control groups that were not previously primed with M-001. All variations
of M-001 administration (with an adjuvant or in different doses) proved safe and tolerable among the participants. The number
of subjects reporting adverse events after treatment with active vaccines was similar to their respective placebo cohorts, showing
that the M-001 was well tolerated and safe.



BVX-004



We
completed our BVX-004 Phase 2 clinical trial in June 2011. This Phase 2 study was a multi-center, randomized, two stage, double-blind,
placebo-controlled, double-dosed administration study, intended for further testing the safety of M-001 as our primary endpoint
and the immunogenicity of M-001 as our secondary endpoint. More specifically, the study was aimed at assessing the safety and
tolerability of intramuscular administration of 500 mcg M-001, prepared with an adjuvant, in younger adult volunteers. 200 subjects
of the study were randomized to receive either: (i) two doses of adjuvanted 500 mcg M-001 vaccine (ii) two doses of the placebo
(iii) two doses of the adjuvanted placebo, and (iv) a single co-administration of adjuvanted M-001. The groups were then treated
with a third administration of TIV in different doses approximately 60 days from the second administration.



The
results showed increased humoral and cellular responses after two immunizations with adjuvanted M-001 as compared to after immunization
with adjuvanted placebo. In addition, increased humoral and cellular responses were detected after co-administration of adjuvanted
M-001 with TIV as compared to after co-administration of placebo and TIV. M-001 was found to be well tolerated and safe in all
treatment groups and no relation was found between adverse events and the administration of M-001.



BVX-005



We
completed our BVX-005 Phase 2 clinical trial in February 2012. This Phase 2 clinical trial was intended for further testing the
safety of M-001 as our primary endpoint and the immunogenicity of M-001 as our secondary endpoint. Within the framework of this
BVX-005 Phase 2 clinical trial, 120 subjects received two injections of 500 mcg M-001, with or without an adjuvant, or placebo
followed by TIV. Accordingly, subjects were randomly allocated to the following treatment groups: (i) two administrations of M-001
followed by a third administration of TIV (ii) one administration of M-001 followed by TIV (iii) one administration of adjuvanted
M-001 followed by TIV, and (iv) one administration of placebo followed by TIV.



Results
revealed a significant increase in the proportions of Interferon Gamma secreting cells and influenza infection-fighting antibodies,
or influenza antigens, which indicated an anti-viral immune response that was not observed in the placebo groups. A humoral immunity
reaction was strongest in participants treated with M-001 as a primer and boosted with TIV compared to the placebo group. In addition,
all formulations of M-001 were well tolerated and safe across all treatment groups.



38







We
exposed the blood plasma samples from the BVX-005 participants (taken following the completion of the trial in 2012) to the current
influenza flu epidemic H3N2, which in 2012 did not yet exist, and examined the immunogenicity (HAI) antibodies in each blood plasma
sample. We found significantly increased level of protective antibodies against the H3N2 strain in the samples taken from participants
that received the M-001 vaccine in comparison to the control group. An average of 50% or greater of the participants in the experimental
group receiving M-001 showed immunogenicity against this new strain versus only 10% on average in the control group, a result
which has statistically high significance. This concurs with the similar results found in our recent BVX-006 phase 2 trial showing
increased antibody response to the H3N2 epidemic flu strain in those that received our universal vaccine, although it was not
included in the commercially available seasonal flu vaccine of the 2014/15 season. We believe this data confirms the universal
nature of M-001, effective against all types of flu strains.



BVX-006



We
completed our BVX-006 Phase 2 clinical trial in June 2015. This Phase 2 clinical trial was intended for further testing the safety
and immunogenicity of M-001 at regular and higher doses (0.5 mg and 1 mg, respectively) and after three consecutive administrations.
Within the framework of this BVX-006 Phase 2 clinical trial, 36 subjects between the ages of 50-65, divided into three groups,
were intramuscularly injected three times with M-001 or placebo, followed by an administration of the 2014/2015 season trivalent
influenza vaccine (TIV) 3 weeks later. Accordingly, subjects were randomly allocated to the following treatment groups: (i) three
administrations of 0.5mg of M-001 followed by an administration of TIV (ii) three administrations of 1.0 mg of M-001 followed
by an administration of TIV (iii) three administrations of placebo followed by TIV.



Clinical
trial results indicated that the administration of M-001 is safe and efficient against many strains of the influenza virus when
administered at 1mg for participants at the age of 50-65. M-001 in 1mg dose primed for immune responses in a manner consistent
with previous data in this age group. M-001 also elevated the immune response to other strains that were not included in the current
influenza seasonal vaccine, including against the drifted H3N2 strain of influenza that has caused 2014/2015 season’s epidemic
in the United States. In addition, cell mediated immunity which is specific to different pandemic strains (bird-flu strains) was
elicited after immunization with M-001 alone. These results support our claim that M-001 provides a broadened and improved protection
against multiple influenza type A and B virus strains.



39









BVX-007



We
completed our BVX-007 Phase 2 clinical trial in September 2016. This Phase 2 clinical trial was conducted in Budapest, Hungry,
as part of our membership in the UNISEC Consortium. Prior to commencement, we received the requisite regulatory approvals for
the clinical trial from the EMA and the relevant Hungarian Regulatory Authority. BVX-007 was designed to evaluate the safety and
immunogenicity of M-001 when used ahead of H5N1, an avian influenza vaccine, and we have contracted with a supplier for the delivery
of H5N1 vaccine necessary for the performance of the clinical trial. BVX-007 was conducted in adults between the ages 18 to 60,
initially including 222 participants. Following the withdrawal of three patients, the clinical trial was completed with the participation
of 219 patients. In November 2016 we received positive preliminary safety results from our BVX-007 clinical trial, with no related
severe adverse events and only three moderate adverse events possibly or probably related to the treatment. We expect to receive
immunogenicity results in the second quarter of 2017.



Planned
Phase 2 Clinical Trials



We
plan to conduct an additional Phase 2 clinical trial in the U.S. prior to any future Phase 3 clinical trials.



We
intend to participate in a phase 2 clinical trial to be held in the United States, conducted by NIAID. This clinical trial will
assess the ability of M-001 in humans to serve as a pandemic primer to the H7N9 avian pandemic vaccine by enhancing protective
immunity to these highly pathogenic avian influenza H7 strains. It will also look to strengthen previous clinical and pre-clinical
findings on M-001 priming capacity to other seasonal and pandemic strains. We expect NIAID will launch this clinical trial during
2017.



The
following table summarizes the structure, design and purpose of our planned Phase 2 clinical trials, to be completed in accordance
with the applicable regulation in the relevant location:



|Clinical trial number |  | Phase |  | Location      |  | Regulatory Authority |  | Trial Design                                                                            |  | Trial Purpose                                               |  | Population                |  | Number of Subjects
|--------------------- |  | ----- |  | ------------- |  | -------------------- |  | --------------------------------------------------------------------------------------- |  | ----------------------------------------------------------- |  | ------------------------- |  | ------------------
|BVX-008               |  | 2     |  | United States |  | FDA                  |  | A randomized, double-blind, active-controlled phase 2 trial in collaboration with NIAID |  | Primary Endpoint: Safety Secondary Endpoint: immunogenicity |  | Adults between ages 18-45 |  | 150               



Future
Phase 3 Clinical trials



We do not currently have
sufficient financial resources to conduct Phase 3 clinical trials of M-001 on our own. Subject to the completion of our current
Phase 2 clinical trials and the receipt of all necessary regulatory approvals for Phase 3 clinical trials, we intend to seek to
establish collaborations with large multinational pharmaceutical companies and/or national health authorities to finance Phase
3 clinical trials of M-001. However, to the extent that we have sufficient capital to do so (whether through non-dilutive funds,
sales of debt or equity securities or otherwise), we may seek to conduct Phase 3 clinical trials of M-001 for some or all of our
indications without such collaborations.





40









Upon
completion of Phase 3 clinical trials for some or all our indications, we may initiate Phase 4 post-marketing clinical trials
to validate the clinical efficacy of our product candidate. We also intend to use future revenues accrued from the commercialization
of M-001 (if approved for commercial sale) for a specific indication to finance Phase 3 clinical trials for our remaining indications.



Subject
to receiving all applicable regulatory approvals, we intend to perform Phase 3 clinical trials which will include two groups of
participants, each consisting of thousands of participants, in order to prove the safety and efficacy of M-001; the experimental
group will receive M-001, and the control group will receive placebo or an existing seasonal or pandemic vaccine.



We
intend to initiate Phase 3 clinical trials of M-001 for all of our indications; however, if we determine that we do not have sufficient
funds to perform Phase 3 clinical trials for all indications, we intend to prioritize performing Phase 3 clinical trials of M-001
for the Universal Seasonal Primer for Elderly Indication and the Universal Pandemic Primer Indication, and thereafter, to the
extent possible, the Universal Standalone Indication.



The
planned Phase 3 clinical trials for each indication are as specified in the table below:



|Indication                                       |  | Participants in Phase 3 clinical trials |  | Administration to Control Group                                 |  | Expected Results                                                                       
|------------------------------------------------ |  | --------------------------------------- |  | --------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------
|Universal Standalone Indication                  |  | Adults                                  |  | Placebo                                                         |  | Statistically, a higher level of antibodies found in experimental group                
|Universal Seasonal Primer for Elderly Indication |  | Elderly population with
co-Morbidity    |  | Placebo instead of Primer, seasonal influenza vaccine as Boost. |  | Statistically, a non-inferior or higher level of antibodies found in experimental group
|Universal Pandemic Primer Indication             |  | Adults                                  |  | Placebo instead of Primer, pandemic influenza vaccine as Boost. |  | Statistically, a higher level of antibodies found in experimental group                



Competition



Currently
marketed flu vaccines are strain-specific. There are many vaccine candidates in development that feature either improved production
processes and/or broadened coverage against drifted vaccine strains. BiondVax’s M-001 is unique in that it is (1) A single
formulation designed to be effective against seasonal and pandemic influenza strains, and (2) Most advanced universal flu candidate
(in late Phase 2 clinical trials), and (3) Manufactured in E.coli, resulting in significantly shorter production times and cost
efficiency, and finally (4) about 3 years shelf-life in frozen conditions and about 2 years in refrigerated conditions (ongoing),
enabling stockpiling for proactive preparedness.



Currently
marketed Influenza Vaccines



Current
influenza vaccines are produced and marketed by large fully integrated pharmaceutical companies such as Sanofi Pasteur (FluZone
and FluZone High-dose), GlaxoSmithKline (Fluarix, FluLaval), Seqirus (Afluria, Fluvirin, Fluad, Flucelvax), AstraZeneca (FluMist),
and Abbott (Influvac). Protein Sciences markets Flublok, a recombinant protein strain-based influenza vaccine. All currently marketed
influenza vaccines are strain-specific.



Influenza
Vaccine Candidates in Development



To
our knowledge, there are a number of companies and academic labs attempting to develop new influenza vaccines. Our information
as to the identity of our competitors, the nature of the competing product candidate and the development stage of such competing
product candidates relies solely on publicly available information that we are aware of. The following is a summary of known competitors
and competing product candidates:



SEEK,
a privately held UK-based company, is developing a vaccine based on six specific peptides to induce cellular immunity. In 2011
SEEK published Phase 2 challenge clinical trial results in 28 people which indicated that its vaccine stimulated the immune system
and was found to be safe. In April 2016, it was reported that SEEK and hVIVO invested approximately $20 million to create Imutex,
a startup with a “Phase 2a ready” universal flu vaccine candidate. AltImmune’s NasoVax is an intransally delivered
broad seasonal and pandemic T-cell booster recombinant candidate. A Phase 2 trial is reportedly expected to commence in 2017.
Inovio is developing synthetic DNA vaccines. In May 2012 Inovio reported that in Phase 1 clinical trial the avian influenza vaccine
SynCon caused a protective antibody reaction against six strains of H5N1. FluGen is developing REDEE, a vaccine based on a live
virus which cannot multiply or cause illness. A Phase 1 trial was initiated in 2016. The U.S. based company has raised $22m from
investors and received $13m in federal funds. Medicago, majority owned by Mitsubishi Tanabe Pharma, is in Phase 2 trials, manufactures
strain-specific vaccines in tobacco, which enables high capacity production compared to current egg-based vaccines. Vivaldi Biosciences
reported two completed Phase 1 and one Phase 1/2 clinical trial of their deltaFLU LAIV vaccine. Vivaldi reports deltaFLU has been
shown to stimulate coverage against non-vaccine strains. Vaccitech expects to begin a Phase 2b trial in late 2017. The technology
is described as a viral vector prime-boost regimen. Vaxart reported a Phase 2 trial in 2016 for its oral adenovirus-based influenza
vaccine. Finally, a number of academic laboratories across the world are in the early stages of research of additional potential
influenza vaccines including a “chimeric” vaccine at the Icahn School of Medicine at Mount Sinai, New York.



41







Marketing
and Sales



We
do not currently have any marketing or sales capabilities. We intend to license to, or enter into strategic alliances, with governments,
health systems or companies in the pharmaceutical business, which are equipped to market and/or sell our products, if any. We
may seek to establish marketing and/or sales forces in the future in addition to any such licensing arrangements or strategic
alliances.



Seasonal
Effect



Generally,
influenza vaccines sales mostly occur during the months of September through November of each year. However, because M-001 is
designed to provide long-lasting (multi-year) protection and not just seasonal protection, we believe that M-001 as a universal
standalone vaccine or as a pandemic primer, if approved, will not be subject to the seasonality experienced by current (seasonal)
influenza vaccines on the market.



However,
we expect that most sales of M-001 as a universal seasonal primer for elderly, intended to be administered in combination with
the existing seasonal vaccine, will be conducted during the influenza season.



Manufacturing



M-001
is produced using modified, non-pathogenic, bacteria. We produce M-001 in a standard, robust and low cost manufacturing process
according to cGMP standard in our facilities. We intend to seek collaboration programs with leading international pharmaceutical
companies for the commercializing and marketing of M-001. The cost of producing M-001 for commercial sale will be dependent on
the nature of such collaboration. Our experimental manufacturing facility currently possesses the capacity to manufacture up to
1,000 doses per batch using a 20 liter fermenter.



In
October 2015, we entered into a Development and Manufacturing Agreement for the production of clinical batches of M-001, with
Cytovance Biologics Inc., or Cytovance, a CMO based in Oklahoma, USA. Under the terms of the Agreement, Cytovance will scale up
and optimize the small-scale cGMP manufacturing process of M-001. The technology transfer and up scaling is on-going as planned,
with the initial clinical batches expected to be manufactured in 2017/2018 in accordance with the Phase 3 clinical trial preparations.
We plan to construct at manufacturing facility in Jerusalem. The facility will manufacture the vaccine in accordance with the
up-scaling process performed by Cytovance pursuant to the Development and Manufacturing Agreement.



Our
Main Laboratory



We
completed the construction of our current laboratory facility at the beginning of 2012. Our laboratory was audited and approved
according to the Good Manufacturing Practice standard pursuant to the European QP directive. Our main laboratory consists of three
departments, in addition to a cGMP warehouse for equipment and chemicals. These departments are: (i) an analytical lab, which
conducts quality tests on our products using our designated analytical methods; (ii) production rooms, defined as “clean
rooms”, which include a fermentation room, a protein cleaning and formulation room, dressing rooms, and a lobby; and (iii)
a virology laboratory approved by the Ministry of Labor in Israel.



The
analytical lab is equipped with advanced equipment and machinery including computerized analytical devices for qualitatively and
quantitatively determining proteins and peptides, as well as their encoded nucleic acids, equipment for measuring light absorption
properties for identifying substances, equipment for measuring weight, acidity and temperature, and equipment for identifying
replication of DNA sequences.



Our
laboratory also includes a separate technician room which contains our computers and software used to collect the data received
from our different devices for the purpose of analyzing it. The lab also contains refrigerators and freezers which are consistently
monitored and that are connected to a computerized control system. The production rooms are equipped with a fermentation facility,
machinery for filtering and concentrating protein, a computerized system for the characterization and separation of proteins,
as well as equipment allowing us to work under sterile conditions.



The
virology lab is equipped with microscopes, incubators for growing bacteria, animal cells and viruses, and equipment enabling us
to work under sterile conditions. The work performed at the virology lab involves various virus strains and therefore mandates
strict safety conditions, and is subject to Israeli environmental regulation. A designated wash room with advanced water filtering
and purification systems and sterilization equipment services the departments.



To
date, our facility allowed us to produce the necessary quantity of M-001 for our clinical trials that we completed, as well as
the planned Phase 2 BVX-008 clinical trial.



42







Research
and other Grants



Grants
under the Israeli Encouragement of Industrial and Development Law



On
July 29, 2015, the Israeli parliament amended the Research Law to establish IIA, which replaced the OCS. IIA is intended to have
greater power and freedom than the OCS in launching creative funding tracks and instituting new guidelines that will govern the
transferability and licensing of the resulting technology. IIA was formed as of January 1, 2016, and new grant tracks and guidelines
will be published from time to time. Under the amendment, the IIA was granted vast authority to regulate rules and procedures
pertaining to obligations of recipients towards the IIA especially in the matters listed in this memorandum. Moreover, the amendment
states that one year after the appointment of all members of the IIA council many of the arrangements listed below including those
pertaining to royalty payment and transfer of know-how and manufacturing rights overseers shall be canceled and be replaced with
new regulations to be regulated by the IIA’s new council. As the IIA council was appointed on June 2016 new arrangements
pertaining the relationship with the IIA are expected to be adopted in June 2017 and there is no certainty whatsoever what such
arrangements will be or that such arrangements will be identical or similar to the arrangements set forth herein. We cannot assess
at this time how the amended Research Law will affect our obligations to the OCS and any future grants received, if at all from
the IIA. The following is a summary of OCS regulations that apply to us following the receipt of grants since 2006:



Under
the Research Law, research and development programs which meet specified criteria and are approved by a committee of IIA, formerly
known as the OCS, are eligible for grants. The grants awarded are typically for up to 50% of the project’s expenditures,
as determined by the research committee. The grantee is required to pay royalties to the State of Israel on income generated from
the sale of products (and related services associated with such products), whether received by the grantee or any affiliated entity
(as defined in the Royalty Regulations), developed, in whole or in part, within the framework of an OCS-funded project or deriving
therefrom. In accordance with the provisions of the Royalty Regulations, royalties are paid beginning from the date of the sale
of the first product developed according to an OCS-funded project at rates between 3% to 6% of sales of the product, depending
on the situation and applicable criteria, and are payable until the repayment of the full amount of the total OCS funding and
accrued interest (LIBOR).The terms of the Israeli government participation also require that products developed using government
grants be manufactured in Israel and that the technology developed thereunder may not be transferred outside of Israel, unless
approval is received from the OCS (such approval is not required for the transfer of a portion of the manufacturing capacity which
does not exceed, in the aggregate, 10% of the portion declared to be manufactured abroad in the applications for funding, in which
case only notification is required) and additional payments are made to the State of Israel. However, this does not restrict the
export of products that incorporate the funded technology. Should the Research Committee of the OCS approve the transfer of manufacturing
rights outside of Israel, the royalty payments will be subject to an increase of up to a cap of 120%, 150% or 300% of the total
OCS funding and accrued interest (LIBOR) (depending upon the portion of manufacture outside of Israel), and the royalty rates
will be subject to an increase as well.



Ordinarily,
as a condition to obtaining approval to manufacture outside Israel, we would be required to pay increased royalties, as set forth
in the Research Law. The total amount to be repaid to the OCS would also be adjusted to between 120% and 300% of the grants, depending
on the manufacturing volume that is performed outside Israel. We note that a company also has the option of declaring in an OCS
grant application that it intends to exercise a portion of the manufacturing capacity abroad, thus avoiding the need to obtain
additional approval after approval of such application by the OCS. However, even if OCS approval is granted for the manufacture
of products outside Israel or if the transfer of manufacturing abroad is at a rate that does not require such approval (i.e.,
at a rate of up to 10% in excess of the portion declared to be manufactured abroad in the applications), the obligation with regard
to payment of increased royalties still applies with respect to, and to the extent of, such transfer of manufacturing outside
of Israel. The Research Law restricts the ability to transfer know-how funded by the OCS outside of Israel. Transfer of OCS-funded
know-how outside of Israel requires prior OCS approval and is subject to certain payments to the OCS calculated according to formulae
provided under the Research Law. A transfer for the purpose of the Research Law means an actual sale of the OCS-funded know-how,
any license to develop the OCS-funded know-how or the products resulting from the OCS-funded know-how or any other transaction,
which, in essence, constitutes a transfer of the OCS-funded know-how. A mere license solely to market products resulting from
the OCS-funded know-how would not be deemed a transfer for the purpose of the Research Law. It should be noted that specific regulations
regarding licensing of OCS-funded intellectual property are under preparation but are not yet public.



If
we wish to transfer OCS-funded know-how, the terms for approval will be determined according to the character of the transaction
and the consideration paid to us for such transfer. The OCS approval to transfer know-how created, in whole or in part, in connection
with an OCS-funded project to a third party outside Israel where the transferring company remains an operating Israeli entity
is subject to payment of a redemption fee to the OCS calculated according to a formula provided under the Research Law that is
based, in general, on the ratio between the aggregate OCS grants to the company’s aggregate investments in the project that
was funded by these OCS grants, multiplied by the transaction consideration. The transfer of such know-how to a party outside
Israel where the transferring company ceases to exist as an Israeli entity is subject to a new redemption fee formula that is
based, in general, on the ratio between the aggregate amount of OCS grants received by the company and the company’s aggregate
research expenses, multiplied by the transaction consideration. Such new formula enacted in the framework of the amendment to
the Research Law passed on January 6, 2011 by the Israeli Knesset came into effect on November 5, 2012, when the new Regulations
for the Encouragement of Research and Development in the Industry (the Maximum Payment for the Transfer of Know-How in Accordance
with Section 19B(b)(1) and (2)), 5777-2012, or the Cap Regulations, were promulgated. The Cap Regulations establish a maximum
payment of the redemption fee paid to the OCS under the above mentioned formulas and differentiates between two situations: (i)
in the event that the company sells its OCS-funded know-how, in whole or in part, or is sold as part of certain merger and acquisition
transactions, and subsequently ceases to conduct business in Israel, the maximum redemption fee under the above mentioned formulas
will be no more than six times the amount received (plus annual interest) for the applicable know-how being transferred, or the
entire amount received, as applicable; (ii) in the event that following the transactions described above (i.e., asset sale of
OCS-funded know-how or transfer as part of certain merger and acquisition transactions), the company continues to conduct its
research activity in Israel (for at least three years following such transfer and keeps on staff at least 75% of the number of
research employees it had for the six months before the know-how was transferred), then the company is eligible for a reduced
cap of the redemption fee of no more than three times the amounts received (plus annual interest) for the applicable know-how
being transferred, or the entire amount received, as applicable.



43







Subject
to prior consent of the OCS, the company may transfer the OCS-funded know-how to another Israeli company. If the OCS-funded know-how
is transferred to another Israeli entity, the transfer would still require OCS approval but will not be subject to the payment
of the redemption fee (we note that there will be an obligation to pay royalties to the OCS from the income of such sale transaction
as part of the royalty payment obligation). In such case, the acquiring company would have to assume all of the selling company’s
responsibilities towards the OCS as a condition to OCS approval.



Our
research and development efforts have been financed, partially, through grants that we have received from the OCS. We therefore
must comply with the requirements of the Research Law and related regulations. As of December 31, 2016, we have received a total
of $5.2 million in OCS grants.  In February 2016 the IIA agreed to fund up to 40% of a NIS 3.6 million (US$920,000)
project towards ongoing development of the Company’s M-001.



We
did not receive additional OCS grants from December 31, 2016 through the date of this annual report.



Grant
from the European Union



We
are a member of the UNISEC Consortium. The UNISEC Consortium has received a grant in the amount of €6 million from the European
Union, of which we expect to receive approximately €0.5 million (approximately $0.6 million) to finance our BVX-007 clinical
trial. In June 2013, we entered into a framework agreement with the Department of Pharmaceutical Technology and Biopharmacy of
Groningen University, or the Coordinator, and the 11 other members of the Consortium. The framework agreement, which has a term
of four years, defines the rules of conduct of the Consortium as well as the conditions of our grant, based upon Regulation (EC)
No 1906/2006 of the European Parliament and the council of 18 December 2006. Pursuant to the framework agreement, we undertook
to lead and coordinate the research of cellular immune reaction as a possible indicator for the effectiveness of a universal influenza
vaccine. Results, including information, whether or not they can be protected, that are generated under the project, and including
rights related to copyright, design rights, plant variety rights or similar forms of protection, or Foreground, shall be owned
by the party carrying the work under the framework agreement. The Foreground shall be transferrable or published only by the owner
with a written prior notice to the parties of the framework agreement. Where Foreground is capable of industrial or commercial
application, its owner must provide for adequate and effective protection. If the owner does not intend to proceed with filing
the necessary intellectual property protections, it must provide notice to the European Commission, who then may file the protection
itself. According to the framework agreement, we may enter into a subcontract agreement with a third party; however, we will remain
solely responsible for the implementation and compliance under the framework agreement. In addition, we are solely liable for
the use of any proprietary rights of third parties. We will not be responsible to any other party to this framework agreement
for any indirect or consequential loss or similar damage, provided such act was not caused by a willful act or by a breach of
confidentiality. We will not be considered in breach of the framework agreement in the event that the breach is caused by Force
Majeure, defined as any unforeseeable and exceptional event affecting the fulfillment of any obligation under this framework agreement
by the parties, which is beyond their control and cannot be overcome despite their reasonable endeavors. The framework agreement
sets the terms and conditions by which the parties may make joint decisions, and, under certain provisions, allows us to cast
veto vote on a specific decision. All payments shall be paid to us by the Coordinator according to a payment schedule and following
the submission of a financial management report. Should we spend less than the grant we received, we shall be funded according
to our actual expenditures. If we terminate the framework agreement, we will be obligated to return all payments received and
bear any reasonable and justifiable additional costs occurring to the other Parties in order to perform its and their tasks, except
the amount of contribution accepted by the European Commission or another contributor. The framework agreement is subject to European
Union Law and the laws of Belgium, and the Court of Justice of the European Union shall have sole jurisdiction.



44







Grant
for the Construction of a Manufacturing Facility in Jerusalem



On
March 28, 2017, we received an approval from the Investment Center of the Ministry of Economy and Industry of the State of Israel,
for a grant representing 20% of NIS 20 million budget, to be utilized towards the construction for the production of Phase 3 and
commercial batches of the Company product candidate, M-001.



The
receipt of the Grant is subject to certain terms and conditions, including those outlined under the Israeli Encouragement of Capital
Investment Law, 1959. The terms and conditions include, inter alia, the following: (a) at least 24% of the investments in the
planned manufacturing facility’s fixed assets will be financed by additional share capital; (b) the Company will maintain
its intellectual property and manufacturing facility in Israel for a period of at least 10 years following receipt of the grant.



Raw
Materials and Supplies



Our
suppliers provide us with equipment, materials and services used for the research and development of M-001. The main raw materials
required for producing M-001 are standard bacteria culture mediums. The equipment, materials and services we use for research
varies in accordance with the specific research and development we perform. We believe that the raw materials that we require
to manufacture M-001, as well as the raw materials that we require for our research and development operations relating to M-001,
are widely available from numerous suppliers and are generally considered to be generic pharmaceutical materials and supplies.
We do not rely on a single supplier for the current production of M-001 or for our research and development operations.



Government
Regulation



United
States



FDA
Regulations



In
the United States, the FDA regulates pharmaceuticals and biologics under the Food, Drug & Cosmetics Act, and the Public Health
Service Act, and their implementing regulations. These products are also subject to other federal, state, and local statutes and
regulations, including federal and state consumer protection laws, laws protecting the privacy of health-related information,
and laws prohibiting unfair and deceptive acts and trade practices.



The
process required by the FDA before a new drug product may be marketed in the United States generally involves the following: completion
of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s Good
Laboratory Practice, or GLP, regulations; submission to the FDA of an IND, which the FDA must allow to become effective before
human clinical trials may begin and must be updated annually; performance of adequate and well-controlled human clinical trials
to establish the safety and efficacy of the product candidate for each proposed indication; and submission to the FDA of an NDA
for a drug, and Biologic License Application, or BLA, for biological product, after completion of all pivotal clinical trials.



An
IND application is a request for authorization from the FDA to administer an investigational drug product to humans. Although
none of our clinical trials protocols were conducted pursuant to an FDA approval, we have had two pre-IND meetings in 2008 and
2012 with FDA representatives on various aspects of M-001 and the clinical development program. The 2012 meeting served as the
basis for our IND application submission in June 2013. In June 2013 we submitted an IND application to the FDA for a contemplated
Phase 2 clinical trial intended to be conducted in the U.S. This Phase 2 clinical trial was designed to test the safety and efficacy
of M-001 when administered as a primer for the H5N1 Avian flu pandemic vaccine, by administering M-001 to participants prior to
the administration of the H5N1 vaccine. This IND application included data, reports and summaries from our previously conducted
Israeli preclinical and clinical trials. The FDA reviewed and commented on our IND application and requested, among other things,
that we provide to the FDA, prior to the commencement of the proposed clinical trial, information regarding the H5N1 vaccine selected
for use in this proposed clinical trial and a summary of the toxicological effect of M-001. We provided the information regarding
the toxicology of M-001 as requested; however, we were unable to locate a source for or otherwise acquire the H5N1 vaccine (which
was not publicly available) from a manufacturer approved for the purpose of performing clinical trials in the U.S. As a result,
we were not able to satisfy the FDA’s request for information regarding such vaccine (including information as to manufacturing,
dosage, formulation, etc.). Without such information, we could not complete our IND application and the FDA placed a clinical
hold on the trial. In light of these events, we elected to convert our IND application into a Drug Master File.



45









In
June 2015, the FDA has accepted our IND application for a phase 2 clinical trial in the U.S., and we were informed by our regulatory
advisors that the “study may proceed”. We have submitted this IND in order to comply with the requirements of BARDA,
for a grant application we had previously submitted to BARDA, which unfortunately has been recently annulled by BARDA all together
to all potential grant candidates, including our company. Following such IND acceptance, which can be used by us as a reference
for other U.S. based trials, we intend to participate in a Phase 2 clinical trial to be held in the U.S. by the NIAID, and we
expect NIAID will launch this clinical trial during 2017.



In
the future, we intend to seek all necessary FDA regulatory approvals for initiating Phase 3 clinical trials in the U.S., either
with one or more future collaborators, or, subject to available funds, on our own, in support of FDA approval to market M-001
in the U.S.



Clinical
trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators
in accordance with current Good Clinical Practices, or GCP, which include the requirement that all research subjects provide their
informed consent for their participation in any clinical trial. A protocol for each clinical trial and any subsequent protocol
amendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial
site’s IRB, before the trials may be initiated, and the IRB must monitor the trial until completed. There are also requirements
governing the reporting of ongoing clinical trials and clinical trial results to public registries.



Clinical
trials are usually conducted in three Phases. Phase 1 clinical trials are normally conducted in small groups of healthy volunteers
to assess safety and find the potential dosing range. After a safe dose has been established, the drug is administered to small
populations of sick patients (Phase 2) to look for initial signs of efficacy in treating the targeted disease or condition and
to continue to assess safety. In the case of vaccines, the participants are healthy and the signs of efficacy can be obtained
in early Phase 1, therefore this Phase is defined as Phase 1/2. Phase 3 clinical trials are usually multi-center, double-blind
controlled trials in hundreds or even thousands of subjects at various sites to assess as fully as possible both the safety and
effectiveness of the drug.



The
FDA, the IRB, or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including
a finding that the research subjects are being exposed to an unacceptable health risk. Additionally, some clinical trials are
overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring
board or committee. This group reviews unblinded data from clinical trials and provides authorization for whether or not a trial
may move forward at designated check points based on access to certain data from the trial. We may also suspend or terminate a
clinical trial based on evolving business objectives and/or the competitive climate.



Assuming
successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational
drug product information is submitted to the FDA in the form of a BLA requesting approval to market the product for one or more
indications. The application includes all relevant data available from pertinent preclinical and clinical trials, including negative
or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry,
manufacturing, controls and proposed labeling, among other things.



Once
the BLA submission has been accepted for filing, the FDA’s goal is to review applications within 10 months of filing. However,
the review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer
the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved.
The FDA is not bound by the recommendation of an advisory committee, but it typically follows such recommendations.



After
the FDA evaluates the BLA and conducts inspections of manufacturing facilities where the drug product will be formulated and where
the drug will be produced, it may issue an approval letter or, instead, a Complete Response Letter. An approval letter authorizes
commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates
that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter
may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive
and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. Even if such additional information
is submitted, the FDA may ultimately decide that the BLA does not satisfy the criteria for approval. The FDA could also approve
the BLA with a risk evaluation and mitigation strategy to mitigate risks, which could include medication guides, physician communication
plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization
tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls
and specifications, or a commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may
include Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after
commercialization.



46







After
regulatory approval of a drug product is obtained, the drug producer is required to comply with a number of post-approval regulations.
As a holder of an approved BLA, we would be required to report, among other things, certain adverse reactions and production problems
to the FDA, to provide updated safety and efficacy information, and to comply with requirements concerning advertising and promotional
labeling for any of our products. These promotion and advertising requirements include, among others, standards for direct-to-consumer
advertising, prohibitions against promoting drugs for uses or in patient populations that are not described in the drug’s
approved labeling (known as “off-label use”), rules for conducting industry-sponsored scientific and educational activities
and other promotional activities. Failure to comply with FDA requirements can have negative consequences, including the immediate
discontinuation of noncomplying materials, adverse publicity, enforcement letters from the FDA, mandated corrective advertising
or communications with doctors, and civil or criminal penalties. Such enforcement may also lead to scrutiny and enforcement by
other government and regulatory bodies. Although physicians may prescribe legally available drugs for off-label uses, manufacturers
may not market or promote such off-label uses.



Also,
quality control and manufacturing procedures must continue to conform to cGMP after approval to ensure and preserve the long term
stability of the drug product. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes
extensive procedural, substantive, and record keeping requirements. In addition, changes to the manufacturing process are strictly
regulated and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations
also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon
us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.



We
produce, and expect to continue to produce, the quantities of our product candidate required for our Phase 2 clinical trials.
In October 2015, we entered into a Development and Manufacturing Agreement for the production of clinical batches of M-001, with
Cytovance Biologics Inc., a CMO, based in Oklahoma, USA. Under the terms of the Agreement, Cytovance Biologics will scale up and
optimize the small-scale cGMP manufacturing process of M-001. The technology transfer has already commenced. The clinical grade
M-001 batch is intended to be used for Phase 3 clinical trial, planned for the 2018 timeframe, as we expect to conduct an end
of Phase 2 meeting with the FDA by 2018 which is a critical step towards commercialization of M-001 in the US, Europe and the
rest of the world. Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our
CMOs or licensees that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery
of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions
on a product, manufacturer or holder of an approved BLA, including withdrawal or recall of the product from the market or other
voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing. Newly discovered or developed safety
or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications,
and also may require the implementation of other risk management measures. Also, new government requirements, including those
resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory
approval of our current product candidate or any product candidate we may develop in the future (if any).



The
FDA also may require post-marketing testing, or Phase 4 testing, as well as risk minimization action plans and surveillance to
monitor the effects of an approved product or place conditions on an approval that could otherwise restrict the distribution or
use of the product.



Other
U.S. Healthcare Laws and Compliance Requirements



For
products distributed in the United States, we will also be subject to additional healthcare regulation and enforcement by the
federal government and the states in which we conduct our business. Applicable federal and state healthcare laws and regulations
include the following:



| | ● | The
    federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering,
    receiving, or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral
    of an individual for, or the purchase, order, or recommendation of, any good or service, for which payment may be made under
    federal healthcare programs such as Medicare and Medicaid.                                                                                                                                               
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | The
    Ethics in Patient Referrals Act, commonly referred to as the Stark Law, and its corresponding regulations, prohibit physicians
    from referring patients for designated health services (including outpatient drugs) reimbursed under the Medicare or Medicaid
    programs to entities with which the physicians or their immediate family members have a financial relationship or an ownership
    interest, subject to narrow regulatory exceptions, and prohibits those entities from submitting claims to Medicare or Medicaid
    for payment of items or services provided to a referred beneficiary.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | The
    federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals
    or entities for knowingly presenting, or causing to be presented, to the federal government claims for payment that are false
    or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government.                                                                                                                                                                                                      



47









| | ● | Health
    Insurance Portability and Accountability Act of 1996, imposes criminal and civil liability for executing a scheme to defraud
    any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding
    the privacy, security and transmission of individually identifiable health information.                                                                                                                            
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ● | The
    federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or
    making any materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services.                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ● | Analogous
    state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements
    and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers,
    and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
    guidelines and the relevant compliance guidance promulgated by the federal government.



Efforts
to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations could be costly.
Although we believe our business practices are structured to be compliant with applicable laws, it is possible that governmental
authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law
involving applicable fraud and abuse or other healthcare laws and regulations. If our future operations are found to be in violation
of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal
and administrative penalties, damages, fines, exclusion from third party payor programs, such as Medicare and Medicaid, and the
curtailment or restructuring of our operations. If any of the physicians, providers or entities with whom we may do business with
will be found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,
including exclusion from government funded healthcare programs.



Many
aspects of these laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions
are open to a variety of subjective interpretations which increases the risk of potential violations. In addition, these laws
and their interpretations are subject to change. Any action against us for violation of these laws, even if we successfully defend
against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of
our business, and damage our reputation.



In
addition, from time to time in the future, we may become subject to additional laws or regulations administered by the FDA, the
Federal Trade Commission, or by other federal, state, local or foreign regulatory authorities, to the repeal of laws or regulations
that we generally consider favorable, or to more stringent interpretations of current laws or regulations. We are not able to
predict the nature of such future laws, regulations, repeals or interpretations, and we cannot predict what effect additional
governmental regulation, if and when it occurs, would have on our business in the future. Such developments could, however, require
reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated,
additional record-keeping requirements, increased documentation of the properties of certain products, additional or different
labeling, additional scientific substantiation, additional personnel, or other new requirements. Any such developments could have
a material adverse effect on our business.



Israel



Israeli
regulations regarding clinical trials



Before
an entity or person can conduct clinical testing on humans in Israel, such entity or person must receive special authorization
from the ethics committee and general manager of the institution in which such entity or person intends to conduct its study,
as required under the Guidelines for Clinical Trials in Human Subjects implemented pursuant to the Israeli Public Health Regulations
(Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation. These regulations also require
authorization from the Israeli Ministry of Health, except in certain circumstances, and in the case of genetic trials, special
fertility trials and similar trials, an additional authorization of the overseeing institutional ethics committee. The institutional
ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project to
determine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that
adequate protection exists for the rights and safety of the participants as well as the accuracy of the information gathered in
the course of the clinical testing. Since we intend to perform a portion of our clinical studies on certain of our therapeutic
candidates in Israel, we will be required to obtain authorization from the ethics committee and general manager of each institution
in which we intend to conduct our clinical trials, and in most cases, from the Israeli Ministry of Health.



To
date, our preclinical and all but one of our completed clinical trials were conducted in Israel.



48







Europe/Rest
of World



Whether
or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of
foreign countries before we can commence clinical trials or marketing of the product in those countries. For example, in the European
Union, a clinical trial application, or CTA, must be submitted to each member state’s national health authority and an independent
ethics committee. The CTA must be approved by both the national health authority and the independent ethics committee prior to
the commencement of a clinical trial in the member state. The approval process varies from country to country and the time frame
may be longer or shorter than that required for FDA approval. In addition, the requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary greatly from country to country. In all cases, clinical trials are conducted
in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Helsinki
Declaration. We are currently conducting BVX-007 in Budapest, Hungry, following the receipt of the regulatory approval of the
EMA, and the relevant Hungarian Regulatory Authority.



To
obtain marketing approval of a drug under European Union regulatory systems, we may submit marketing authorization applications
under a centralized procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid
for all European Union member states. The centralized procedure is compulsory for medicines produced by certain biotechnological
processes, products designated as orphan medicinal products, and products with a new active substance indicated for the treatment
of certain diseases, and optional for those products that are highly innovative or for which a centralized process is in the interest
of patients. Under the centralized procedure in the European Union, the maximum time frame for the evaluation of a marketing authorization
application is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant
in response to questions asked by the Scientific Advice Working Party of the Committee of Medicinal Products for Human Use, or
CHMP). Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of
a major public health interest, defined by three cumulative criteria: the seriousness of the disease, such as heavy disabling
or life-threatening diseases, to be treated; the absence or insufficiency of an appropriate alternative therapeutic approach;
and anticipation of high therapeutic benefit. In this circumstance, the EMA ensures that the opinion of the CHMP is given within
150 days.



The
decentralized procedure provides for approval by one or more other, or concerned, member states of an assessment of an application
performed by one member state, known as the reference member state. Under this procedure, an applicant submits an application,
or dossier, and related materials, including a draft summary of product characteristics, and draft labeling and package leaflet,
to the reference member state and concerned member states. The reference member state prepares a draft assessment and drafts of
the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference member state’s
assessment report, each concerned member state must decide whether to approve the assessment report and related materials. If
a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health,
the disputed points may eventually be referred to the European Commission, whose decision is binding on all member states.



For
other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing
the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again,
the clinical trials are conducted in accordance with GCPs and the applicable regulatory requirements and the ethical principles
that have their origin in the Helsinki Declaration.



If
we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension
or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.



For
information regarding our clinical trial held in Europe, BVX-007, see Item 4B. “Business Overview – Results
of our Clinical Trials”.



Intellectual
Property



Our
success depends, at least in part, on our ability to protect our proprietary technology and intellectual property, and to operate
without infringing or violating the proprietary rights of others. We have rights pertaining to registered patents and patent applications
awaiting acceptance, which cover our know-how and product candidate. The patents portfolio covers patents and applications owned
and developed by us, as well patents and applications owned by Yeda, for which we have exclusive rights of usage. Our management,
in consultation with our professional advisors, periodically determines our intellectual property policy protection.



Patents



As
of December 31, 2016, we exclusively licensed two families of patents and own three additional families to use within our field
of business. Such patents were granted in various countries, including the United States, Israel, China, Canada, Australia, New
Zealand, Mexico, South Korea, Hong Kong, France, Germany, Spain, Switzerland, Ireland, the United Kingdom, Russia, Japan and other
countries. There are also pending patent applications relating to these patent families in various jurisdictions, including India
and Brazil, all of which are active applications that have yet to be approved. The international patent application that was filed
on April 1, 2015, claiming priority from a provisional application filed on April 3, 2014, entered national phase in October 2016.
Our patents and patent applications generally relate to influenza vaccines, particularly M-001, and to their manufacture and use.
Our patents and patent applications are expected to expire in Europe between 2019 and 2035 and in United States between 2020 and
2035.



49







The
tables below summarize material information regarding our patent families, including expected expiration date by territory:



Title: PEPTIDE-BASED
VACCINE FOR INFLUENZA

Assignee:
YEDA RESEARCH AND DEVELOPMENT CO. LTD.

Priority:
Israel 127331 filed: 30-Nov-1998

PCT:
WO 00/032228 filed 28-Nov-1999



|Country     |  | Application No.  |  | Filing Date |  | Patent No. |            |  | Expiration Date |              | Status | 
|----------- |  | ---------------- |  | ----------- |  | ---------- | ---------- |  | --------------- | ------------ | ------ | 
|Australia   |  | 200014066        |  | 28-Nov-1999 |  |            | 766883     |  |                 | 28-Nov-2019  |        | 
|Belgium     |  | 10003160.8       |  | 28-Nov-1999 |  |            | 2204187    |  |                 | 28-Nov-2019  |        | 
|Canada      |  | 2352454          |  | 28-Nov-1999 |  |            | 2352454    |  |                 | 28-Nov-2019  |        | 
|Europe      |  | 10003160.8       |  | 28-Nov-1999 |  |            | 2204187    |  |                 |              |        | 
|France      |  | 10003160.8       |  | 28-Nov-1999 |  |            | 2204187    |  |                 | 28-Nov-2019  |        | 
|Germany     |  | 10003160.8       |  | 28-Nov-1999 |  |            | 69944207.9 |  |                 | 28-Nov-2019  |        | 
|Hong Kong   |  | 10111907.7       |  | 28-Nov-1999 |  |            | 1145448    |  |                 | 28-Nov-2019  |        | 
|Israel      |  | 143367           |  | 28-Nov-1999 |  |            | 143367     |  |                 | 28-Nov-2019  |        | 
|Italy       |  | 10003160.8       |  | 28-Nov-1999 |  |            | 2204187    |  |                 | 28-Nov-2019  |        | 
|Korea       |  | 10-2001-7006639  |  | 28-Nov-1999 |  |            | 0703571    |  |                 | 28-Nov-2019  |        | 
|Mexico      |  | PA/A/2001/005398 |  | 28-Nov-1999 |  |            | 262260     |  |                 | 28-Nov-2019  |        | 
|Netherlands |  | 10003160.8       |  | 28-Nov-1999 |  |            | 2204187    |  |                 | 28-Nov-2019  |        | 
|New Zealand |  | 511918           |  | 28-Nov-1999 |  |            | 511918     |  |                 | 28-Nov-2019  |        | 
|Spain       |  | 10003160.8       |  | 28-Nov-1999 |  |            | 2204187    |  |                 | 28-Nov-2019  |        | 
|Switzerland |  | 10003160.8       |  | 28-Nov-1999 |  |            | 2204187    |  |                 | 28-Nov-2019  |        | 
|UK          |  | 10003160.8       |  | 28-Nov-1999 |  |            | 2204187    |  |                 | 28-Nov-2019  |        | 
|USA         |  | 09/856920        |  | 28-Nov-1999 |  |            | 6740325    |  |                 | 28-Nov-2019  |        | 
|USA-1 Div.  |  | 10/846548        |  | 28-Nov-1999 |  |            | 7192595    |  |                 | 31-Aug-2020* |        | 



*        Due to patent term adjustment of 277 days





Title:
IMPROVED INFLUENZA VACCINE

Assignee:
YEDA RESEARCH AND DEVELOPMENT CO. LTD.

Priority:
US Prov. 60/742574 filed: 06-Dec-2005

PCT:
WO2007/066334 filed 06-Dec-2006



|Country     |  | Application No. |  | Filing Date |  | Patent No. |            |  | Expiration Date |               | Status | 
|----------- |  | --------------- |  | ----------- |  | ---------- | ---------- |  | --------------- | ------------- | ------ | 
|Australia   |  | 2006322907      |  | 06-Dec-2006 |  |            | 2006322907 |  |                 | 06-Dec-2026   |        | 
|Austria     |  | 06821622.5      |  | 06-Dec-2006 |  |            | 552846     |  |                 | 06-Dec-2026   |        | 
|Belgium     |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Canada      |  | 2632483         |  | 06-Dec-2006 |  |            | 2632483    |  |                 | 06-Dec-2026   |        | 
|Denmark     |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Europe      |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 |               |        | 
|France      |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Germany     |  | 602006028848.4  |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Greece      |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Ireland     |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Israel      |  | 191977          |  | 06-Dec-2006 |  |            | 191977     |  |                 | 06-Dec-2026   |        | 
|Italy       |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1962632    |  |                 | 06-Dec-2026   |        | 
|Luxembourg  |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Netherlands |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Portugal    |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Spain       |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Sweden      |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|Switzerland |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|UK          |  | 06821622.5      |  | 06-Dec-2006 |  |            | 1968632    |  |                 | 06-Dec-2026   |        | 
|USA         |  | 12/096322       |  | 06-Dec-2006 |  |            | 7914797    |  |                 | 22-Jan-2027** |        | 



**      Due to patent term adjustment of 47 days



50







Title:
MULTIMERIC MULTIEPITOPE INFLUENZA VACCINES

Assignee:
BiondVax Pharmaceuticals Ltd.

Priority:
US Prov. 60/953498 filed 02-Aug-2007

PCT
WO2009/016639 filed: 03-Aug-2008



|Country                                                                                                                                                                                           |  | Application No.  |  | Filing Date |  | Patent/Publication No. |                    |  | Expiration Date |                | Status | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- |  | ----------- |  | ---------------------- | ------------------ |  | --------------- | -------------- | ------ | 
|Australia                                                                                                                                                                                         |  | 2008281384       |  | 03-Aug-2008 |  |                        | 2008281384         |  |                 | 03-Aug-2028    |        | 
|Brazil                                                                                                                                                                                            |  | PI 0815008-7     |  | 03-Aug-2008 |  |                        |                    |  |                 | 03-Aug-2028    |        | 
|Canada                                                                                                                                                                                            |  | 2695399          |  | 03-Aug-2008 |  |                        |                    |  |                 | 03-Aug-2028    |        | 
|China                                                                                                                                                                                             |  | 200880101581.0   |  | 03-Aug-2008 |  |                        | ZL200880101581.017 |  |                 | 03-Aug-2028    |        | 
|EURASIA (RUSSIA)                                                                                                                                                                                  |  | 201070219        |  | 03-Aug-2008 |  |                        | 017887             |  |                 | 03-Aug-2028    |        | 
|Europe                                                                                                                                                                                            |  | 08789738.5       |  | 03-Aug-2008 |  |                        | 2173376            |  |                 | 03-Aug-2028    |        | 
|Austria  Belgium  Croatia  Czech Republic  Denmark  Finland  France  Germany  Hungary  Ireland  Italy  Luxembourg  Netherlands  Poland  Portugal  Romania  Spain  Sweden  Switzerland  Turkey  UK |  |                  |  |             |  |                        |                    |  |                 |                |        | 
|Hong Kong                                                                                                                                                                                         |  | 10109239.0       |  | 03-Aug-2008 |  |                        | 1142809            |  |                 | 03-Aug-2028    |        | 
|India                                                                                                                                                                                             |  | 670/DELNP/2010   |  | 03-Aug-2008 |  |                        |                    |  |                 | 03-Aug-2028    |        | 
|Israel                                                                                                                                                                                            |  | 203508           |  | 03-Aug-2008 |  |                        | 203508             |  |                 | 03-Aug-2028    |        | 
|Japan                                                                                                                                                                                             |  | 2010-518815      |  | 03-Aug-2008 |  |                        | 5654345            |  |                 | 03-Aug-2028    |        | 
|Korea                                                                                                                                                                                             |  | 10-2010-7003351  |  | 03-Aug-2008 |  |                        |                    |  |                 | 03-Aug-2028    |        | 
|Mexico                                                                                                                                                                                            |  | MX/A/2010/001284 |  | 03-Aug-2008 |  |                        | 302245             |  |                 | 03-Aug-2028    |        | 
|USA                                                                                                                                                                                               |  | 12/671617        |  | 03-Aug-2008 |  |                        | 8747861            |  |                 | 18-Aug-2031*** |        | 
|USA                                                                                                                                                                                               |  | 14/263359        |  | 03-Aug-2008 |  |                        | US2014/02886982    |  |                 | 03-Aug-2028    |        | 



***    Due to patent term adjustment of 1110 days





51







Title:
MULTIMERIC MULTIEPITOPE POLYPEPTIDES AS ENHANCERS FOR SEASONAL AND

PANDEMIC INFLUENZA VACCINES

Assignee:
BiondVax Pharmaceuticals Ltd.

PCT
WO2012/114323 filed: 22-Feb-2011



|Country   |  | Application No. |  | Filing Date |  | Publication No. |  | Expiration Date |  | Status |        
|--------- |  | --------------- |  | ----------- |  | --------------- |  | --------------- |  | ------ | -------
|Australia |  | 2011360572      |  | 22-Feb-2011 |  |                 |  | 22-Feb-2031     |  |        | allowed
|Canada    |  | 2828068         |  | 22-Feb-2011 |  |                 |  | 22-Feb-2031     |  |        | filed  
|USA       |  | 14/000815       |  | 22-Feb-2011 |  | US2014/0227306  |  | 22-Feb-2031     |  |        | granted



Title:
VACCINE COMPOSITIONS OF MULTIMERIC-MULTIEPITOPE INFLUENZA POLYPEPTIDES

AND THEIR PRODUCTION



Assignee:
BiondVax Pharmaceuticals Ltd.



|Country   |  | Application No. |  | Filing Date |  | Publication No. |  |  | Expiration Date |             | Status | 
|--------- |  | --------------- |  | ----------- |  | --------------- |  |  | --------------- | ----------- | ------ | 
|          |  |                 |  |             |  |                 |  |  |                 |             |        | 
|Australia |  | 2015242154      |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 
|Canada    |  | 2944768         |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 
|China     |  | 201580017121X   |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 
|Europe    |  | 15773045.8      |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 
|Hong Kong |  | 17101579.8      |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 
|India     |  | 201627032852    |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 
|Israel    |  | 248055          |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 
|Japan     |  | 2016-559415     |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 
|USA       |  | 15/300529       |  | 01-Apr-2015 |  |                 |  |  |                 | 01-Apr-2035 |        | 



We
do not know of any oppositions filed, difficulties or delays in connection with applications submitted by us for the registration
of the above-mentioned material patents, including claims submitted against the aforementioned patents that may adversely affect
the registration of the patent.



We
do not know whether any of our pending patent applications will result in the issuance of any future patents. Our issued patents
and those that may be issued in the future, or patents that we exclusively license, may be challenged, narrowed, circumvented
or found to be invalid or unenforceable, which could limit our ability to stop competitors from marketing related products or
the length of term of patent protection that we may have for our products. We cannot be certain that we were the first to invent
the inventions claimed in patents or patent applications owned by or assigned to us, nor can we be certain that the scientists
of the Weizmann Institute were the first to invent the invention claimed in the patents that we exclusively license from Yeda.
In addition, our competitors may independently develop similar technologies or duplicate any technology developed by us, and the
rights granted under any issued patents may not provide us with any meaningful competitive advantages against these competitors.
Furthermore, because of the extensive time required for development, testing and regulatory review of a potential product, it
is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only
a short period following commercialization, thereby reducing any advantage of the patent.



Yeda
License Agreement



At
present, among other patents, we have an exclusive worldwide license to two families of patents from Yeda pursuant to a license
agreement entered into with Yeda in 2003, as amended in 2005.



Pursuant
to the license agreement, Yeda granted us an exclusive worldwide license for the development, manufacturing, marketing, sale,
distribution and importing of products based, directly or indirectly, on patents and patent applications to be approved or submitted
pursuant to the invention titled “Peptide Based Vaccine for Influenza” and the invention titled “Improved Influenza
Vaccine”, developed by research headed by Prof. Ruth Arnon.



Unless
terminated earlier in accordance with the terms described below, the license granted will remain in effect in each county and
for each product developed based on the invention until the earliest of: (i) if a patent was granted in a specific county, the
patent expiration date in such country of the last of the patents; (ii) 15 years from the date of first commercial sale of a product,
by us or a sublicenses, in either the U.S or Europe, after obtainment of FDA New Drug Approval or equivalent approval in any European
country, if there is no patent covering such product in such country but there is however know how that is identifiable as a secret
and is not in the public domain which relates to such product, provided that such know how remains secret and of value.



In
exchange for the license grant, we or our future sub licensers will be obligated to pay royalties equaling 3% of the total amount
invoiced by us or a sub licensee in connection with the sale of products based on Yeda’s patents, or 2% of such amounts
if they originated from a country which did not grant a patent in connection with such products. All sales of products in connection
with the license agreement for any purpose other than for the purpose of clinical trials are required to be made for monetary
consideration.



52







We
are not permitted to assign the license agreement to third parties without Yeda’s prior consent, unless in the framework
of our merger with another entity, as a result of which we are not the surviving entity, subject to certain conditions and requirements
under the license agreement. We are however entitled to grant sublicenses under the license agreement, subject to Yeda’s
prior written approval, provided, among other things, that any sublicense shall expire upon termination of the license agreement
and that the sub licensee(s) shall be bound by confidentiality obligations similar to our confidentiality obligations under the
license agreement. The sublicense shall not be transferable or sub licensable. To date we have yet to enter such sublicense agreement.
If we sublicense our products we will be obligated to pay Yeda the following royalties: (i) 45% of consideration received (whether
monetary or otherwise) by us for the grant of or pursuant to sublicenses or in connection with sublicense options executed prior
to the completion of Phase 1 clinical trials; (ii) 35% of consideration received by us up to the first $20 million and 25% of
any consideration received by us exceeding such first $20 million, for the grant of or pursuant to sublicenses or in connection
with sublicense options executed after the completion of Phase 1 clinical trials and prior to the completion of Phase 2 clinical
trials; (iii) 20% of consideration received by us up to the first $20 million and 15% of any consideration received by us exceeding
such first $20 million, for the grant of or pursuant to sublicenses or in connection with sublicense options executed after the
completion of Phase 2 clinical trials. We are not obligated to pay Yeda any royalties or other payments with respect to (a) the
use or disposal of a product, without consideration, for the sole purpose of conducting clinical trials in respect of such product;
or (b) any product in any country after the expiry of the license in such country with respect to the product.



We
maintain the patents and patent applications licensed from Yeda, and we are obligated to submit to Yeda a development plan for
each potential product.



The
license agreement will terminate upon the later of: (i) the expiration date of the last patent licensed under the license agreement;
(ii) in the event only one product will be developed and/or commercialized by utilizing the licensed intellectual property, 15
years from the date of first commercial sale of such product in either the U.S or Europe, following receipt of New Drug Approval
from the FDA or equivalent approval in any European country for such product; (iii) in the event that more than one product will
be developed and/or commercialized by utilizing the licensed intellectual property, following the receipt of New Drug Approval
from the FDA or equivalent approval in any European country for such product the expiry of a 20 year period during which there
shall not have been a sale of any such products in either the U.S. or Europe. However, Yeda shall be entitled, at its option and
without our consent, to modify the license so that it is non-exclusive or to terminate the license with 30 days prior written
notice to us, if any of the following occurs: (1) we fail to commence the commercial sale of at least one product based on the
licenses intellectual property, in at least one country, within six months following receipt of after receipt of an FDA or similar
foreign regulatory approval for commercial marketing of such product and taking into account the seasonal nature of the products;
or (2) we fail to sell any product based on the licenses intellectual property, during a period of one year after commercial sale
of a product has commenced, during which no sales of the product take place (in both cases, except as a result of force majeure
or other factors beyond our control). In addition, Yeda is permitted to terminate our license agreement by written notice (a)
in the event we materially breach any of our obligations under the license agreement, provided that such material breach is un-curable
or, if curable, is not cured by us within thirty days (or in the case of failure by us to make payments due to Yeda in connection
with the license agreement, ten days) from receipt of notice of such breach; or (b) in the event of the appointment of a temporary
or permanent liquidator to our Company or a resolution is passed to voluntary wind up our Company, or if an order or act is granted
for the winding up of our Company, provided that if such order or act was initiated by any third party, such order or act is not
cancelled within 120 days; or (c) if we contest the validity of one of the patents registered by Yeda. Upon termination of the
license agreement, other than pursuant to (i) through (iii) above, all rights and documents will be returned to Yeda, and we will
grant Yeda an exclusive world-wide irrevocable license to our know-how and products which are based on the intellectual property
licensed from Yeda or that were discovered or occur or arise from the performance of our development work pursuant to the license
agreement. In the event that Yeda terminates the license agreement due to any reason other than termination in accordance with
(1), (2) and (a) through (c) above, we will be entitled to receive royalty payments equal to 25% of net proceeds received by Yeda
from the grant to third parties, within the five years following the termination of the license agreement, of a license or other
rights, which include our developments, up to the aggregate amount of research funds actually expended by us for development.



Environmental
Matters



We
are subject to various environmental, health and safety laws and regulations, including those governing the use, management and
disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites. We believe that
our business, operations and facilities are being operated in compliance in all material respects with applicable environmental
and health and safety laws and regulations. Our laboratory personnel have ongoing communication with the Israeli Ministry of Environmental
Protection in order to verify compliance with relevant instructions and regulations. In addition, all of our laboratory personnel
participate in instruction on the proper handling of chemicals, including hazardous substances before commencing employment, and
during the course of their employment, with us. In addition, all information with respect to any chemical substance that we use
is filed and stored as a Material Safety Data Sheet, as required by applicable environmental regulations. Based on information
currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect on us. The
operation of our facilities, however, entails risks in these areas. Significant expenditures could be required in the future if
we are required to comply with new or more stringent environmental or health and safety laws, regulations or requirements.



53







| | C. | Organizational
    Structure
| | -- | ----------------------------



We
do not have any subsidiaries and do not hold any investments in other entities.



| | D. | Property, Plants
    and Equipment
| | -- | ----------------------------------



Our principal executive
offices and main laboratory are located at the Science Park, 14 Einstein Street, Nes Ziona, Israel. We lease this space, which
presently consists of a total area of approximately 4,575 square feet, from an unaffiliated third party pursuant to a lease that
expired on January 31, 2017, that was extended by 24 months.



For the year ended December 31,
2016, our office and laboratory leasing costs amounted to 372,000 NIS. We believe this existing property is sufficient for our
needs in the foreseeable future, for our planned Phase 2 clinical trial, and that we have the ability to renew our lease at market
terms and expand if required.



We plan to construct a manufacturing
facility in Jerusalem for the production of Phase 3 and commercial batches of M-001



Our
fixed assets are comprised of laboratory equipment, furniture, software and improvements in the leased property. The accumulated
depreciation as stated in our financial reports is deducted from the fixed assets value. Our fixed assets, less deduction for
the accumulated depreciation, were estimated at NIS 1.4 million ($0.375 million) for the period ended on December 31, 2016 and
at NIS 2.0 million ($0.53 million) for the period ended on December 31, 2015.



For
a description of our current laboratory see Item 4B.”Business Overview – Manufacturing”.



|Item 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------



Not
applicable.



|Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- | --------------------------------------------



| | A. | Operating Results
| | -- | -----------------



The
information contained in this section should be read in conjunction with our consolidated financial statements for the year ended
December 31, 2016 and related notes and the information contained elsewhere in this annual report. Our financial statements have
been prepared in accordance with IFRS, as issued by the IASB.



Company
Overview



We
are a clinical stage biopharmaceutical company focused on developing and, ultimately, commercializing immunomodulation therapies
for infectious diseases. Our current product candidate, M-001, is a synthetic peptide-based protein targeting both seasonal and
pandemic strains of the influenza virus. Unlike existing influenza vaccines, which offer only strain specific seasonal protection
or pandemic prevention, M-001 is designed to provide long-lasting protection against multiple existing and future influenza strains.
As a result, we believe that M-001 has the potential to become an attractive alternative to existing influenza vaccines.



M-001
is based on research initially conducted at the Weizmann Institute over a period of approximately 10 years prior to our inception
in 2003. In 2003, we acquired from Yeda an exclusive worldwide license for the development, manufacture, use, marketing, sale,
distribution and importation of products based, directly or indirectly, on patents and patent applications filed pursuant to the
invention titled “Peptide Based Vaccine for Influenza”, developed on the basis of the research conducted by Professor
Ruth Arnon and her team at the Weizmann Institute. Since 2003, we have continued the research and development of M-001 under the
supervision of our Chief Scientific Officer, Dr. Tamar Ben-Yedidia and, at present, we own or license five families of patents
filed in a large number of jurisdictions, the latest of which is expected to be in force until 2035.



According
to a report by the CDC, annual seasonal influenza vaccines in the US were found to be effective in preventing the onset of the
influenza virus in between 8% and 48% of healthy adults during the influenza seasons from 2004 to 2008 (depending on the particular
season and the statistical significance of the sample). In addition, studies conducted by universities and hospitals in cooperation
with the CDC from 2004 and until today measured the effectiveness of the influenza vaccine at preventing outpatient medical visits
due to laboratory-confirmed influenza. These studies estimated the adjusted influenza vaccine effectiveness to be between 10%
during the 2004/2005 season and 60% during the 2010/2011 season, and only 19% effective during the 2014/2015 season. Most existing
influenza vaccines are formulated based on weakened or dead strains of the influenza virus that are predicted to be the most common
during the then upcoming influenza season or that are predicted to be most likely to cause a pandemic outbreak in the then upcoming
influenza season. Furthermore, as seasonal and pandemic influenza vaccines are strain-specific, most existing vaccines only target
those specific strains and do not cope with the ever-changing nature of the influenza virus. In addition, according to BARDA,
which is responsible for the advanced development and procurement of medical countermeasures for pandemic influenza in the United
States, the production cycle of existing influenza vaccines is long (approximately 6 months), considerably limiting the ability
to timely immunize the non-affected population in case of a pandemic outbreak.



54









We
intend to seek regulatory approvals to market M-001 for all three indications, the Universal Standalone Indication, the Universal
Seasonal Primer for Elderly Indication and the Universal Pandemic Primer Indication.



Since
our incorporation, we have primarily focused our efforts on research and development and clinical trials of our product candidate,
M-001. We are not profitable and have incurred losses since inception, principally as a result of research and development, clinical
trials and general administrative expenses in support of our operations. We have not generated any revenue, expect to incur substantial
losses for the foreseeable future and may never become profitable. For the years ended December 31, 2014, 2015 and 2016, we had
net losses of $1,990,000, $2,613,000 and $2,389,000, respectively, and we expect such losses to continue for the foreseeable future.
In addition, as of December 31, 2016, we had an accumulated deficit of approximately $23,112 thousands and we expect to experience
negative cash flow for the foreseeable future.



On
May 15, 2015, we consummated an initial public offering of 1,910,000 ADSs, each ADS representing 40 of our ordinary shares, and
warrants to purchase up to an aggregate of 1,910,000 ADSs at an offering price of $5.00 per ADS and $0.01 per warrant. The ADS
warrants have a per ADS exercise price of $6.25, are exercisable immediately and are scheduled to expire on May 15, 2020. We granted
the underwriters in the initial public offering 95,500 warrants, exercisable from May 11, 2016 and until May 11, 2020, to purchase
up to an aggregate of 95,500 ADSs at a per ADS exercise price of $6.25. We also granted the underwriter an option, exercisable
within 45 days from the initial public offering, to purchase up to an aggregate of 286,500 additional ADSs and/or additional warrants
to purchase up to an aggregate amount of 286,500 ADSs solely to cover over-allotments, if any. The underwriter has partially exercised
his option to purchase an additional 110,000 ADSs and 128,000 ADS Warrants. Gross proceeds from our initial public offering were
approximately $10.12 million. The total expenses of the offering, including underwriting discounts and commission, were approximately
$1.58 million. The net proceeds we received from the initial public offering were approximately $8.54 million.



On November 4, 2016, we
entered into an At The Market Issuance Sales Agreement, or ATM Agreement, with FBR Capital Markets & Co., or FBR, pursuant
to which FBR, may, at our discretion and at such times as it shall determine from time to time, sell our ADSs, or the Placement
Shares, through an “at the market offering” program, or the ATM Program, pursuant to Instruction I.B.5. of the Registration
Statement on Form F-3. In addition, we have published a registration statement on form F-3 and a prospectus for the purpose of
utilizing the ATM program, which was declared effective on December 15, 2016.



In
January 2017, Angels High Tech Investments Ltd., or Angels, has agreed to invest NIS 10.9 million approximately $US 2.83 million,
in exchange for 33,760,832 million of our ordinary shares (equivalent to 844,000 ADSs), calculated in accordance with the December
29, 2016, TASE closing share price. Angels Investments is a company fully owned by Marius Nacht, Co-founder and Chairman of Check
Point (NASDAQ: CHKP). Angels’ healthcare and life science portfolio is managed by aMoon Partners which is co-led by Dr.
Yair Schindel and Marius Nacht. The issued shares shall be restricted for trade on TASE in accordance with Section 15C of the
Israeli Securities Law-1968-5,728, have not been registered under the Securities Act of 1933, and shall contain a legend indicating
that the transfer is prohibited except in accordance with the provisions of Regulation S or pursuant to registration under the
Securities Act or an available exemption therefrom, and hedging transaction involving the Shares may not be conducted unless in
compliance with the Securities Act.



Key
Components of Statements of Operations



Revenues



Sources
of revenues.Since our inception, we have generated significant losses in connection with our research and development,
and, to date, have not to generated revenues.



To
date, we have funded our operations primarily through the sale of equity securities (both in private placements, in public offerings
on the TASE and the NASDAQ Capital Market) and funding received from the IIA (the successor to the OCS). From our inception until
our initial public offering in Israel in June 2007, we raised approximately NIS 20.1 million (approximately $5.3 million) in various
private placements. We received approximately NIS 10.12 million in net proceeds from our initial public offering in Israel and
have raised an additional NIS 49.6 million (approximately $13.2 million) from various public offerings since June 2007. We received
gross proceeds of approximately $10.12 million from our initial public offering in the U.S. in May 2015, and approximately $8.54
in net proceeds. We have received gross proceeds of approximately $2.83 million from a private placement transaction with Angels,
and $1.2 million from ADS issuance under our ATM program. Our expenses for the initial public offering in the U.S. amounted to
$1.49 million, in addition to the grant of options to our underwriter valued at $ 90,000, for no consideration. As of December
31, 2016, we had approximately NIS 27.4 million (approximately $7.1 million), of cash and cash equivalents, short-term deposits
and marketable securities. We expect that we will incur additional losses soon as a result of our research and development activities.
Such research and development activities will require us to obtain and expend further resources if we are to be successful. As
a result, we expect to continue to incur operating losses, and we may be required to obtain additional funds in during 2017, to
further develop our research and development programs and our product candidate. As a result of, among other things, our research
and development activities, as well as our failure to generate revenues since our inception, for the year ended December 31, 2016,
our net loss was approximately NIS 9.2 million (approximately $2.4 million), respectively.





55







Cost
of Revenues



Our
total cost of revenues includes expenses for the manufacturing M-001, including the cost of raw materials, employee-related expenses
including salaries, equity based-compensation and other benefits and related expenses, rental fees, utilities and depreciation.
We expect that our cost of revenues will continue to increase.



Operating
Expenses



Research
and development expenses.Our research and development expenses consist primarily of salaries and related personnel
expenses, fees paid to consultants, patent-related legal fees, costs of preclinical studies and clinical studies, drug and laboratory
supplies, and costs for facilities and equipment. We charge all research and development expenses to operations as they are incurred.
We expect our research and development expense to remain our primary expense in the near future as we continue to develop M-001.
Increases or decreases in research and development expenditures are attributable to the number and/or duration of the clinical
studies that we conduct.



We
expect that a large percentage of our research and development expense in the future will be incurred in support of our current
and future clinical development projects. Due to the inherently unpredictable nature of clinical development processes, we are
unable to estimate with any certainty the costs we will incur in the continued development of M-001 for potential commercialization.
Clinical development timelines, the probability of success and development costs can differ materially from expectations. We expect
to continue to conduct additional clinical trials for M-001.



While
we are currently focused on advancing our product development, our future research and development expenses will depend on the
clinical success of M-001, as well as ongoing assessments of M-001’s, and any future product candidates’ commercial
potential. As we obtain results from clinical studies, we may elect to discontinue or delay clinical studies for M-001 and any
future product candidate in certain indications in order to focus our resources on more promising product candidates. Completion
of clinical studies may take several years or more, but the length of time generally varies according to the type, complexity,
novelty and intended use of a product candidate.



We
expect our research and development expenses to increase in the future from current levels as we continue the advancement of our
clinical product development. The lengthy process of completing clinical studies and seeking regulatory approval for M-001 requires
the expenditure of substantial resources. Any failure or delay in completing clinical studies, or in obtaining regulatory approvals,
could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have
a material adverse effect on our operations. Because of the factors set forth above, we are not able to estimate with any certainty
when we would recognize any net cash inflows from our projects.



Developing
drugs, conducting clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive and
we will need to raise substantial additional funds to achieve our strategic objectives. Although we believe that our existing
cash resources will be sufficient to fund our projected cash requirements for at least the next 15 months, we will require significant
additional financing in the future to fund our operations, including if and when we progress into additional clinical trials of
our product candidate, obtain regulatory approval for M-001, obtain commercial manufacturing capabilities and commercialize our
product candidate. Our future capital requirements will depend on many factors, including:



| | ● | the
    progress and costs of our clinical trials and other research and development activities;                                                                                         
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                          
| | ● | the
    scope, prioritization and number of our clinical trials and other research and development programs;                                                                             
| |   |                                                                                                                                                                                          
| | ● | the
    amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements
    with respect to our product candidates;
| |   |                                                                                                                                                                                          
| | ● | the
    costs of the development and expansion of our operational infrastructure;                                                                                                        
| |   |                                                                                                                                                                                          
| | ● | the
    costs and timing of obtaining regulatory approval for our product candidate;                                                                                                     
| |   |                                                                                                                                                                                          
| | ● | the
    ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments
    under our potential future licensing agreements; 
| |   |                                                                                                                                                                                          
| | ● | the
    costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;                                                                      
| |   |                                                                                                                                                                                          
| | ● | the
    costs and timing of securing manufacturing arrangements for clinical or commercial production;                                                                                   
| |   |                                                                                                                                                                                          
| | ● | the
    costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities
    ourselves;                                      
| |   |                                                                                                                                                                                          
| | ● | the
    costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or
    platforms;                                        
| |   |                                                                                                                                                                                          
| | ● | the
    magnitude of our general and administrative expenses; and                                                                                                                        
| |   |                                                                                                                                                                                          
| | ● | any
    cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates.                                                        





56







Until we can generate significant
recurring revenues, we expect to satisfy our future cash needs through the net proceeds received from our initial public offering
in the U.S., future private or public equity raising, grants from governmental agencies such as the IIA, debt or equity or other
non-dilutive financings. We cannot be certain that additional funding will be available to us on acceptable terms, if at all.
If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or
commercialization efforts with respect to, M-001 or any future product candidate.



Since
2006 and through December 31, 2016, we have received $5.2 million in OCS grants.



Marketing,
General and Administrative Expenses:



Our
general and administrative expenses consist primarily of salaries and expenses related to employee benefits, including share-based
compensation, for our general and administrative employees, which includes employees in executive and operational roles, including
finance and human resources, as well as consulting, legal and professional services related to our general and administrative
operations.



We
expect our general and administrative expenses, such as accounting and legal fees, to increase after we become a public company
in the United States.



Financial
Income and Expenses



Financial
income consists primarily of interest income on our cash and cash equivalents and foreign currency exchange income. Financial
expenses consist primarily of expenses related to bank charges and foreign currency exchange expense.



Participation
by Third Parties



Our
research and development expenses are net of the following participations by third parties.



Participation
by the Office of the Chief Scientist.



Research
and development grants received from the OCS are recognized upon receipt as a liability if future economic benefits are expected
from the project that will result in royalty-bearing sales. The amount of the liability for the loan is first measured at fair
value using a discount rate that reflects a market rate of interest that reflects the appropriate degree of risks inherent in
our business. If no economic benefits are expected from the research activity, the grant receipts are recognized as a reduction
of the related research and development expenses. In that event, the royalty obligation is treated as a contingent liability in
accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets.”



At
the end of each reporting period, we evaluate whether there is reasonable assurance that the received grants will not be repaid
based on its best estimate of future sales and, if so, no liability is recognized and the grants are recorded against a corresponding
reduction in research and development expenses.



Since
our development projects are currently in Phase 2 clinical trials and there is no assurance about the future economic benefits
of the project, no liability was recorded to date with respect to the OCS grants.



Research
and development grants received from the European Union are recorded against a corresponding reduction in research and development
expenses.



Taxes
on Income



Israeli
resident companies, such as the Company, are generally subject to corporate tax at the rate of 23% as of 2017.



Capital
gains derived by an Israeli resident company are generally subject to tax at the same rate as the corporate tax rate. Under Israeli
tax legislation, a corporation will be considered as an “Israeli Resident” if it meets one of the following: (a) it
was incorporated in Israel; or (b) the control and management of its business are exercised in Israel.



57







Comparison
of Period to Period Results of Operations



The
table below provides our results of operations for the year ended December 31, 2016 as compared to the years ended December 31,
2015 and 2014, 2013 and 2012:



|                                                                                                              |  | Year ended December 31, |       
|------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------
|                                                                                                              |  | 2012                    |       
|                                                                                                              |  | NIS in thousands        |       
|Statements of comprehensive loss data:(1)                                                                     |  |                         |       
|Research and development expenses                                                                             |  |                         | 8,616 
|Participation by the OCS                                                                                      |  |                         | (1,839
|Research and development, net of participations expenses                                                      |  |                         | 6,777 
|Marketing, general and administrative expenses                                                                |  |                         | 2,357 
|Operating loss                                                                                                |  |                         | 9,134 
|Financial income                                                                                              |  |                         | (321  
|Financial expenses                                                                                            |  |                         | 518   
|Financial income (expenses), net                                                                              |  |                         | (197  
|Net loss                                                                                                      |  |                         | 9,331 
|Loss (gain) from available-for-sale financial assets                                                          |  |                         | (11   
|Total comprehensive loss                                                                                      |  |                         | 9,320 
|Basic and Diluted net loss per share (NIS)                                                                    |  |                         | 0.22  
|Weighted average number of shares outstanding used to compute basic and diluted loss per share (in thousands) |  |                         | 41,530



|                                   |  | December 31,     |       
|---------------------------------- |  | ---------------- | ------
|                                   |  | 2014             |       
|                                   |  | NIS in thousands |       
|Statement of financial position    |  |                  |       
|Cash and cash equivalents          |  |                  | 9,612 
|Short-term deposits                |  |                  | -     
|Marketable securities – short term |  |                  | 2,016 
|Other receivables                  |  |                  | 1,081 
|Marketable securities – long term  |  |                  | 2,049 
|Property, plant and equipment      |  |                  | 2,638 
|Other long term assets             |  |                  | 1,066 
|Total assets                       |  |                  | 18,462
|Trade payables                     |  |                  | 524   
|Other payables                     |  |                  | 1,289 
|options                            |  |                  | -     
|Severance pay liability, net       |  |                  | 62    
|Total liabilities                  |  |                  | 1,875 
|Total shareholders’ equity         |  |                  | 16,587



|(1) | Diluted loss per share data is not presented because
the effect of the exercise of our outstanding options is anti-dilutive.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(2) | Calculated using the exchange rate reported by the Bank
of Israel for December 30, 2016, at the rate of one U.S. dollar per NIS 3.845.
|--- | --------------------------------------------------------------------------------------------------------------------------------------





58







Year
Ended December 31, 2016 Compared to Year Ended December 31, 2015



Research
and Development Expenses



Our
research and development expenses for the year ended December 31, 2016 amounted to NIS 9.4 million (approximately $2.4 million)
compared to NIS 10.7 million ($2.7 million) for the year ended December 31, 2015. The decrease in 2016 compared to 2015 was primarily
a result of a decrease in subcontractor expenses, which were lower in 2016 as a result of our preparation for the cGMP audit of
our production facility by the European qualified person during 2015, Less the participation from the OCS grants the research
and development expenses, net amounted to NIS 7.8 million ($2.1 million) for the year ended December 31, 2016, compared to NIS
7.9 million 2.1 million) for the year ended December 31, 2015.



Marketing,
General and Administrative Expenses



Our
marketing, general and administrative expenses for the year ended December 31, 2016 amounted to NIS 4.1 million (approximately
1.1 million) compared to NIS 3.4 million ($0.9 million) for the year ended December 31, 2015. The increase primarily results from
higher professional services and salaries expenses.



Financial
Expense (Income), Ne



Our
financial income, net for the year ended December 31, 2016 amounted to NIS 2.7 million ($0.7 million) primarily from exchange
differences on cash and cash equivalent and revaluation of the options. Our financial expenses, net for the year ended December
31, 2015 amounted to NIS 1.1 million ($0.3 million).



Net
Loss



As
a result of the foregoing research and development, marketing general and administrative expenses, and as we have not yet generated
revenues since our inception, our net loss for the year ended December 31, 2016 was NIS 9.1 million ($2.3 million), compared to
our net loss for the year ended December 31, 2015 of NIS 10.2 million ($2.6 million). The increase in 2016 compared to 2015 primarily
resulted from our research and development expenses and marketing, general and administrative expenses as described above.



Year
Ended December 31, 2015 Compared to Year Ended December 31, 2014



Research
and Development Expenses



Our
research and development expenses for the year ended December 31, 2015, amounted to NIS 10.7 million (approximately $2.7 million)
compared to NIS 6.4 million ($1.6 million) for the year ended December 31, 2014. The increase in 2015 compared to 2014 was primarily
a result of an increase in subcontractor expenses, which were higher in 2015 as a result of our preparation for the cGMP audit
of our production facility by the European qualified person during such time. Less the participation from the IIA grants the research
and development expenses, net amounted to NIS 7.9 million ($2.0 million) for the year ended December 31, 2015 compared to NIS
5.5 million ($1.4 million) for the year ended December 31, 2014.



Marketing,
General and Administrative Expenses



Our
marketing, general and administrative expenses for the year ended December 31, 2015 amounted to NIS 3.4 million (approximately
$0.9 million) compared to NIS 2.6 million ($0.7 million) for the year ended December 31, 2014. The increase primarily results
from higher professional services and salaries expenses.



Financial
Expense (Income), Net



Our
financial income, net for the year ended December 31, 2015 amounted to NIS 1.1 million ($0.3 million) primarily from exchange
differences on cash and cash equivalent and revaluation of the options. Our financial expenses, net for the year ended December
31, 2014 amounted to NIS 0.4 million ($0.1 million).



Net
Loss



As
a result of the foregoing research and development, marketing general and administrative expenses, and as we have not yet generated
revenues since our inception, our net loss for the year ended December 31, 2015 was NIS 10.2 million ($2.6 million), compared
to our net loss for the year ended December 31, 2014 of NIS 7.8 million ($2.0 million). The increase in 2015 compared to 2014
primarily resulted from our research and development expenses and marketing, general and administrative expenses as described
above.



59







Quarterly
Results of Operations



The
following tables show our unaudited quarterly statements of operations for the periods indicated. We have prepared this quarterly
information on a basis consistent with our audited consolidated financial statements and we believe it includes all adjustments,
consisting of normal recurring adjustments necessary for a fair presentation of the information shown. Operating results for any
quarter are not necessarily indicative of results for a full fiscal year.



|                                                                            |  | Three Months Ended |      
|--------------------------------------------------------------------------- |  | ------------------ | -----
|                                                                            |  | March 31           |      
|                                                                            |  | 2015               |      
|Research and development, net of participations (in thousand NIS)           |  |                    | 1,172
|Research and development, net of participations (in thousand US dollars)(1) |  |                    | 300  
|marketing, general and administrative (in thousand NIS)(1)                  |  |                    | 650  
|marketing, general and administrative (in thousand US dollars)              |  |                    | 167  
|Operating loss (in thousand NIS)                                            |  |                    | 1,822
|Operating loss (in thousand US dollars) (1)                                 |  |                    | 467  
|Financial expenses (income), net (in thousand NIS)                          |  |                    | 42   
|Financial expenses (income), net (in thousand US dollars) (1)               |  |                    | 11   
|Net loss (in thousand NIS)                                                  |  |                    | 1,864
|Net loss (in thousand US dollars) (1)                                       |  |                    | 478  



|(1) | Calculated using the exchange rate reported by the Bank of Israel for December
31, 2016, at the rate of one U.S. dollar per NIS 3.845.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



Our
quarterly revenues and operating results of operations have varied in the past and can be expected to vary in the future due to
numerous factors. We believe that period to period comparisons of our operating results are not necessarily meaningful and should
not be relied upon as indications of future performance.



|Liquidity and Capital
    Resources
|-----------------------------------



Since our inception, we
have funded our operations primarily through public and private offerings of our equity securities in Israel and the U.S. and
grants from the OCS. On November 4, 2016, we entered into an At The Market Issuance Sales Agreement, or ATM Agreement, with FBR.



As of December 31, 2016, had cash
and cash equivalents, short-term deposits and marketable securities of NIS 27.4 million ($7.1 million) as compared to NIS 37.5
million as of December 31, 2015 ($9.6 million). This decrease is attributable to utilization of available cash resources to fund
our operations.



Net
cash used in operating activities was NIS 9.6 million ($2.5 million) for the year ended December 31, 2016, compared with net cash
used in operating activities of NIS 10.3 million ($2.6 million) for the year ended December 31, 2015.



Net
cash used to invest activities for the year ended December 31, 2016, was NIS 7.8 million ($2 million) compared with net cash used
to investing activities of NIS 0.04 million ($0.01 million) for the year ended December 31, 2015, and primarily reflects purchase
of fixed assets and change in short term deposits.



We had no cash flow from
financing activities for the year ended December 31, 2016 compared to NIS 33.75 million ($8.65 million) for the year ended December
31, 2015 derived from issuance of shares and warrants to the public as part of the public offering of securities in the United
States.





60







At
December 31, 2016, our accumulated deficit amounted to $23.1 million. We had working capital of $6.4 million as of December 31,
2016. In the future, we may raise additional capital from external sources in order to continue the longer term efforts contemplated
under our business plan. We expect to continue incurring losses for the foreseeable future and may need to raise additional capital
to pursue our product development initiatives, to penetrate markets for the sale of our product candidates and continue operations
as presently maintained. We cannot provide any assurance that we will raise additional capital. Management believes that we have
access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or
other means; however, we have not secured any commitment for new financing at this time nor can we provide any assurance that
new financing will be available on commercially acceptable terms, if at all. If the economic climate in the U.S. deteriorates,
our ability to raise additional capital could be negatively impacted. If we are unable to secure additional capital, we may be
required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve
its cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in
our efforts to commercialize our products, which is critical to the realization of our business plan and our future operations.



Assuming
exercise of all ADS warrants held by the public investors for cash, we will receive gross proceeds of $12.74 million. Assuming
the exercise of all of the representative’s warrants for cash, we will receive gross proceeds of $0.4 million.



Trend
Information



We
are a development stage company with no revenues to date. Accordingly, it is not possible for us to predict with any degree of
accuracy the outcome of our research, development or commercialization efforts, or identify any significant trends, uncertainties,
demands, commitments or events that are reasonably likely to have a material effect in the future on our net sales or revenues,
income from continuing operations, profitability, liquidity or capital resources. However, to the extent possible, certain trends,
uncertainties, demands, commitments and events are identified in the preceding subsections of this Item 5.



|Application
    of Critical Accounting Policies and Estimates
|-------------------------------------------------------------



We
describe our significant accounting policies in Note 2 to our financial statements for the year ended December 31, 2016.



The
discussion and the analysis of our financial results of operation are based on our financial statements, which we prepare in accordance
with IFRS as issued by the IASB.



Off-Balance
Sheet Arrangements



We
have no off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.



Contractual
Obligations



Our
significant contractual obligations as of December 31, 2016 included the following (in thousands):



|                                   |  | Total |    |  | Less than 1 Year |  |    | 1 – 3 Years |  |  | 3 – 5 Years |  |  | More than 5 Years |  
|---------------------------------- |  | ----- | -- |  | ---------------- |  | -- | ----------- |  |  | ----------- |  |  | ----------------- | -
|Operating Lease Obligations in NIS |  |       | 26 |  |                  |  | 26 |             |  |  | -           |  |  |                   | -
|Operating Lease Obligations in $   |  |       | 7  |  |                  |  | 7  |             |  |  | -           |  |  |                   | -



We
did not have any material commitments for capital expenditures, including any anticipated material acquisition of plant and equipment,
as of December 31, 2016.



|Item 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | ------------------------------------------



| | A. | Directors and Senior
    Management
| | -- | -----------------------------------



Executive
Officers and Directors



We
are managed by a board of directors, which is currently comprised of nine members, and our executive officers. Each of our executive
officers is appointed by our board of directors. The table below sets forth the name, age and position of each of our directors
and executive officers. The business address for each of our executive officers and directors is c/o BiondVax Pharmaceuticals
Ltd., 14 Einstein Street, Nes Ziona, Israel 74036.





61











(1)     
Member of the Audit Committee and of the Compensation Committee.



Executive
Officers



Dr.
Ron Babecoff co-founded us in 2003, and has served as our President and Chief Executive Officer since our inception. Prior
to our founding, Dr. Babecoff served as Marketing Manager at Omrix Biopharmaceuticals Ltd. from 2000 to 2003. Dr. Babecoff holds
a D.V.M. degree from the University of Liège (ULg), Belgium and a Master of Entrepreneurship and Innovation (MEI) from
the Swinburne University of Technology of Melbourne, Australia. We believe that Dr. Babecoff is qualified to serve on our board
of directors based on his many years of service as our President and CEO, his extensive knowledge of our company and his intimate
knowledge of our business plans and strategies as a co-founder of our business, and his experience within our industry.



Dr.
Tamar Ben Yedidia has served as our Chief Scientist since 2004. Dr. Ben-Yedidia began her career at Biotechnology General
(Israel) Ltd., BTG (Rehovot), where she was employed as lab manager from 1991 to 1994. Dr. Ben-Yedidia joined the Department of
Immunology at the Weizmann Institute of Science from 1994 – 2004. Dr. Ben-Yedidia was involved in two European Consortium
projects related to the evaluation of different approaches for vaccination, has been invited to address conferences worldwide
and is published in various scientific journals. Dr. Ben-Yedidia received her Ph.D. in immunology from the Weizmann Institute
after completion of her doctoral thesis titled “A Peptide-Based Vaccine Against Influenza”.



Mr.
Uri Ben Or has served as our Chief Financial Officer since 2007. In January, 2007, Mr. Ben Or founded CFO Direct, in which
he has served as the Chief Executive Officer and through which he provides his services to our company. Mr. Ben-Or holds a B.A.
degree in Business from the College of Administration, and a M.B.A degree from the Bar Ilan University and is a certified public
accountant in Israel.



Directors



Professor
Avner Rotman has been Chairman of our board of directors since 2005. Prof. Rotman founded in 2000, and has served since then
and continues to serve as the Chief Executive Officer and Chairman of the Board of Directors of Rodar Technologies Ltd. Prof.
Rotman also founded Bio-Dar Ltd. in 1984, and served as its President and CEO from 1985 until 2000. Prof. Rotman was also the
chairman of the I-Tech incubator at Kyriat Weizmann. Prof. Rotman is the Founder and Chairman of the Foundation of Cardiovascular
Research in Israel. Prof. Rotman holds a PhD in chemistry from the Weizmann Institute of Science, Israel, and an M.Sc and B.Sc
in chemistry from the Hebrew University of Jerusalem, Israel. We believe that Prof. Rotman is qualified to serve on our board
of directors based on his extensive experience and knowledge in the field of biotechnology and as an executive officer and director
of multiple biotechnology companies.



Ms.
Michal Marom Brikman is a certified public accountant in Israel since 1994. She holds an M.A. degree in business from the
Israeli College of Business in Rishon Letziyon, Israel, and a M.S.F from the Baruch College of Business in New York City, NY.
Since 2011, Ms. Brikman has been serving as the Chief Financial Officer of Linkury Ltd., an Israeli private company. In addition,
Ms. Brikman serves as an external director, as defined under Israeli Companies law, in a number of Israeli public companies, including:
Union Bank of Israel Ltd. (TLV:UNON), Ado Group Ltd. (TLV:ADO), Arko Holdings, Ltd. (TLV:ARKO), Spectronix Ltd. (TLV:SPCT), Algomizer
Ltd. (TLV:ALMO), Naaman Vardinon Ltd. (TLV:NAMN) and Dan Hotels Ltd. (TLV: DANH).







62







Prof.
George H. Lowell, M.D. has served as a member of our board of directors since 2008. Prior to joining our company, Prof. Lowell
served as Chief Scientific Officer for BioDefense at GlaxoSmithkline Biologicals (GSK) from 2006 to 2007 and CSO of ID Biomedical
Corp. (IDB) from 2001 to 2006. Prof. Lowell served as President and CSO of the vaccine R&D companies he founded, Intellivax,
Inc. in Baltimore and Intellivax International Inc. in Montreal from 1995 until 2001. From 1974, Prof. Lowell served on active
duty in the US Army Medical R&D Command, retiring in 1994 with the rank of Colonel. During this period he served as consultant
in pediatric infectious diseases at The Walter Reed Army Medical Center and director of his laboratories at The Walter Reed Army
Institute of Research in Washington, D.C. Prof. Lowell has held a number of academic posts, including Visiting Scientist at the
Weizmann Institute of Science (Israel) and Visiting Professor, Hebrew University-Hadassah Medical Center (Israel). Prof. Lowell
holds a B.A. from Yeshiva University, NY, NY, and an M.D. from the Albert Einstein College of Medicine of Yeshiva University,
NY, NY. Prof. Lowell performed three years of post-doctoral training in pediatrics and pediatric infectious diseases and immunology
at NYU-Bellevue Medical Center, NY, NY and The Mount Sinai Medical Center, NY, NY. We believe that Prof. Lowell is qualified to
serve on our board of directors based on his extensive experience and knowledge in the field of health care and years of executive
leadership in the biomedical industry.



Mr.
Jack Rosen has served as a member of our Board since 2013. Mr. Rosen has served as Chairman from 2005 to 2012 and President
from 1996 to 2005 of the American Jewish Congress. He has been serving as President of the American Jewish Congress since 2012.
Mr. Rosen has also served as Chairman of the American Council for World Jewry, Inc. since 2004. In 2002, Mr. Rosen founded the
real estate development firm, Rosen Partners LLC, where he serves as Chief Executive Officer. In addition, Mr. Rosen currently
serves as a Director at Fusion Telecommunications International, Inc. (NASDAQ:FSNN). From 2005 to 2013, Mr. Rosen served on the
Board of Directors of NextWave Wireless Inc. (OTC:Wave), and from 2007 to 2013 he also served on the Advisory Board of Altimo,
a leading investment company in Russia, the CIS and Turkey. Mr. Rosen is currently a member of the Council on Foreign Relations.
Mr. Rosen has received various appointments including membership on the NASA Advisory Council. Mr. Rosen holds a B.A. in mathematics
from the City University of New York. We believe that Mr. Rosen is qualified to serve on our board of directors based on his professional
experience as a member of boards of directors of various companies.



Irit
Ben Ami, Adv., has served as a member of our board of directors since 2008. Adv. Ben Ami is a founding partner of Pitaro-Ben
Ami Attorneys, and is a member of The Institute of Certified Public Accountants in Israel as well as of the Israel Bar Association.
Adv. Ben Ami serves as member of the board of directors of several companies traded on the TASE, including the respective board
of directors of the Hagag Group Real Estate Entrepreneurship Ltd. (TLV:HGG), Nadlans Ltd. (TLV:NDLS), Netz United States HY Ltd.
(TLV:NEZU), Nano Dimension Ltd. (TLV:ZBI) and Medivie Therapeutic Ltd. (TLV:MDVI). Adv. Ben Ami holds a Bachelor’s degree
(cum laude) in Law (LL.B.) from Sha’arei Mishpat College, a B.A. (with honors) in Economics and Accounting from Haifa University
and an M.A. in Health Systems Management (M.H.A) from Ben Gurion University, and was engaged in the past in academic aspects of
labor law and corporate law as a practitioner at Bar Ilan University, Ben Gurion University and at the Sha’arei Mishpat
College. We believe that Adv. Ben Ami is qualified to serve on our board of directors based on her professional experience as
a member of boards of directors of various public companies.



Dr.
Ruth Ben Yakar, PhD. is currently CEO and member of the Board of Directors at BioSight Ltd., a private biopharmaceutical company
focused on research and development of innovative cancer targeted pro-drugs. She has over 20 years of experience in the biomedical
fi eld, including 15 years of management in the biotech industry, leading diverse corporate, business, operational, fi nancial,
clinical and regulatory activities. Dr. Ben Yakar also serves as a Director at SHL Telemedicine and Cellect Biomed boards of directors.
Dr. Ben Yakar formerly served as the CEO of Procognia, a public biotech company, a Director at IATI, the CEO of Thrombotech, where
she led a multi-center clinical trial and led the company towards acquisition, the Chief Business Offi cer of YEDA, the technology
transfer company of the Weizmann Institute of Science, and a Vice President in several Biotech companies. Dr. Ben Yakar holds
a PhD Cum Laude in molecular cell biology from the Weizmann Institute of Science.



Mr.
Ori Mor is the founder of Emil Mor — Business and Financial Consulting Ltd., and Israeli corporation specializing in
consulting companies on matters involving the capital markets, with a specifi c emphasis on bio-med companies. Between the years
2009 and until 2014, Mr. Mor has served as the Chief Financial Offi cer of Medical Compression System Ltd., an Israeli public
company focusing on developing medical devices. Mr. Mor serves as an external director at Birman Wood and Hardware Ltd. (TASE:BRIM),
Alcobra Ltd. (NASDAQ:ADHD), Excellence Nesua Gemel Ltd. Mr. Mor holds a M.A. degree in Economics, as well as a B.A. in Economics
and Business Administration from the Ben Gurion University in Be’er Sheva, Israel.



Mr.
Isaac Devash is a business and social entrepreneur with over twenty years of experience in venture capital and private equity
investments, and several years of experience as an investment banker in mergers and acquisitions at Credit Suisse First Boston
in New York, London, and Tokyo. Mr. Devash established a number of private equity funds and assisted a variety of Israeli companies
in their international development and a number of leading international investors in their investments in Israel. Mr. Devash
was a member of the Goshen Committee for formulating the standards of corporate governance for Israeli public companies. Mr. Devash
founded and serves as the Chairman and President, respectively, of the Wharton and Harvard Business School alumni clubs of Israel.
Mr. Devash holds a bachelor’s degree, summa cum laude, from the Wharton School of the University of Pennsylvania and an
MBA from Harvard University.





63







On September 29, 2016,
we announced the results of the annual general shareholders meeting, which included the election of Ms. Brikman, Dr. Ruth Ben
Yakar and Mr. Ori Mor as directors of the Company for a term of three years and until the 2019 annual general meeting. The appointment
of Mr. Ori Mor was approved following the receipt of a request from one of its shareholders exercising such shareholder’s
right under Section 80 of the Company’s Articles of Association to nominate Mr. Ori Mor to stand for election at the 2016
annual general meeting as a director of the Company for a term of three years.



In
addition to the reelection of Ms. Brikman, election of Dr. Ben Yakar and Mr. Mor in our annual general shareholders meeting, on
January 1, 2017, the Board of Directors agreed to appoint Mr. Isaac Devash as a director of the Company, to begin his service
in the Company commencing on January 11, 2017, subject to the closing of the investment agreement with Angels High Tech Investments
Ltd. Mr. Devash shall replace the vacancy resulting from the end of term of Professor Liora Katzenstein. Following the closing
of this investment transaction, Mr. Isaac Devash was appointed as a director of the Company, commencing on February 14, 2017.



Under
the Companies Law 1999, or the Companies Law, we are required to include at least two members who qualify as external directors,
one of which has accounting and financial expertise, unless we apply the recent amendment to the Israeli law according to which
we will be exempt from appointing two external directors subject to the following conditions: (i) none of our shareholders is
a controlling shareholder; (ii) we comply with NASDAQ rules and regulations with respect to the composition of our audit and compensation
committees; (iii) we comply with NASDAQ rules and regulations with respect to the requirements of independent directors. For so
long as we meet the requisite requirements, we intend to apply the exemption from appointing at least two external directors under
the Companies Law. As of the date of this Annual Report, Ms. Irit Ben Ami serves as an external director, as defined in the Israeli
Companies Law.



Our
Scientific Advisory Team



Our
Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious
diseases and medical research. Our Scientific Advisory Team plays an active role in advising us with respect to our products,
technology development, clinical trials and safety. Pursuant to their respective appointment letters, our advisory team members
are entitled to receive the following compensation: (i) a per diem cash payment of $1,000 plus VAT (aside from Professor Ruth
Arnon who is entitled to receive $1,400 plus VAT), for Scientific Advisory Team meetings attended in Israel or consultation services
provided during a period longer than 4 consecutive hours, or a proportion of such amount for a partial day of less than 4 consecutive
hours (aside from Professor Ruth Arnon, who shall be entitled to a full day amount or any proportion of such full day amount based
on a full day being 8 hours); (ii) a per diem cash payment of $2,000 plus VAT (aside from Professor Ruth Arnon who is entitled
to receive $2,400 plus VAT), per full day of Scientific Advisory Team meetings or full session consultation attended outside of
Israel, provided, that, in the event travel time exceeds 48 hours, additional compensation will be provided at a rate of $1,000
per each 24 hours; and (iii) with respect to Professor Michel Revel, for occasional consultations (less than 4 consecutive
hours per each consultation) which do not fall under any of the above categories, the compensation shall be calculated based on
a fee of $250 per full hour of consultation. In addition, Prof. Arnon is also employed by us on a part time (5%) basis in exchange
for a monthly salary of $1,800. Each member of our Scientific Advisory Team was granted options to purchase ordinary shares of
our Company pursuant to their respective appointment letters. According to the appointment letters, we granted a total of 666,050
options that expired during November and December 2015.



In
September 2016 Professor Shai Ashkenazi was appointed to serve as a member of our Scientific Advisory Board. Professor Ashkenazi
will receive a compensation for his services under similar terms and conditions to those granted to previous members appointed
to serve in the Advisory Board in the past, as follows: as compensation for his services, Professor Ashkenazi will be paid US$
1,000 per day (or part thereof) on which he provides consultation services to the Company. Professor Ashkenazi will be reimbursed
for all out-of-pocket expenses. In addition, Professor Ashkenazi will receive unregistered options exercisable for up to 54,000
ordinary shares, par value NIS 0.0000001 each, representing 1,350 ADSs, under the Company’s option plan, intended to be
approved at the upcoming annual general shareholders meeting, at a per share exercise price of $0.12. The Options are scheduled
to vest in four equal installments, 13,500 shares, commencing on the first anniversary date of the appointment and on each anniversary
thereafter until all Options are vested at the fourth anniversary.





64







The
following table sets forth certain biographical information with respect to our Scientific Advisory Team members:



Professor
Ruth Arnon is the inventor of the new synthetic influenza vaccine and head of BiondVax’s Scientific Advisory Board.
Formerly Vice-President of the Weizmann Institute of Science (1988-1997), Professor Arnon is an internationally acclaimed immunologist.
Along with Prof. Michael Sela, she conceptualized and developed Copaxone®, a drug for the treatment of multiple sclerosis
which was approved by the U.S. Food and Drug Administration and is presently marketed worldwide. Prior to her appointment as Vice-President,
Prof. Arnon served as Head of the Department of Chemical Immunology and as Dean of the Faculty of Biology. From 1985 to 1994,
Prof. Arnon was Director of the Institute’s McArthur Center for Molecular Biology of Tropical Diseases. Prof. Arnon has
made significant contributions in the fields of vaccine development, cancer research and to the study of parasitic diseases. She
has served as President of the European Federation of Immunological Societies (EFIS), and as Secretary-General of the International
Union of Immunological Societies (IUIS). Dr. Arnon is the recipient of numerous international and Israeli awards including the
prestigious Israel Prize. Prof. Arnon is also the Advisor for Science to the President of Israel and a member of the Israel Academy
of Sciences, where she presently chairs its Science Division. Prof. Arnon is the incumbent of the Paul Ehrlich Chair in Immunochemistry
at the Weizmann Institute. Prof. Arnon is also employed by us on a part time (5%) basis in exchange for a monthly salary of $1,800.



Prof.
Michel Revel, Professor of Biochemistry and Molecular Genetics at the Weizmann Institute of Science is well known for his
contributions to the field of immunology. Prof. Revel’s research on Interferon, its mechanisms of action and the isolation
of the human Interferon-beta gene, have led to the biotechnological development of Interferon-beta and its application in medicine.
Prof. Revel also discovered the human gene for the cytokine Interleukin-6 which was developed at his laboratory and at InterPharm-Serono
based on its activity for protecting nerve cells and the nerve myelin coating.



Alongside
his research and development activity, Prof. Revel is deeply involved in the ethics of science and biotechnology, and serves as
chairman of the Bioethics Advisory Committee of the Israel Academy of Sciences and as a member of the International Bioethics
Committee of UNESCO. He integrates his work in science with traditional Judaism and Jewish philosophy in addressing bioethical
issues such as use of human embryo stem cells, genetic intervention in man and cloning. Prof. Revel was the recipient of the Israel
Prize for medical research and the Michael Landau Prize for biotechnology. He has been a member of Israel’s National Committee
for Biotechnology since its establishment, serving for three years as its chairman.



Professor
Shai Ashkenazi, is a clinical and regulatory vaccine expert, with significant contributions to flu and other infectious disease
vaccine research and development. He has served on the clinical trial advisory boards for the development of a pediatric flu vaccine,
vaccines for enteric infections, as well as other infectious diseases. Also, Professor Ashkenazi has a deep understanding and
experience with the Company’s universal flu vaccine as he served as the head of the data and safety monitoring board (DSMB)
in all of the Company’s clinical trials in Israel and abroad. In addition, Professor Ashkenazi is an editorial board member
of several international medical journals, has served on numerous national and international committees, authored over 200 medical
publications and is editor of the Israeli Textbook of Pediatrics.



| | B. | Compensation
| | -- | ------------



Compensation
of Directors and Executive Officers



Compensation
to Directors



Our
external directors are entitled to remuneration subject to the provisions and limitations set forth in regulations promulgated
under the Israeli Companies Law. We currently pay our external director who is a financial expert under the Companies Law, Ms.
Irit Ben Ami, and our independent directors, as defined in the Israeli Companies Law, Dr. Ruth Ben Yakar and Ms. Michal Marom
Brikman , an annual fee of NIS 24,436 ($6,355 ); a fee of NIS 1,631 ($424 ) for each board or committee meeting attended in person;
a fee of NIS 979 ($254 ) for each board or committee meeting attended via telephone or videoconference; and a fee of NIS 815 ($212)
for participation by written consent.





65







Professor
Avner Rotman has been the chairman of our board of directors since 2005. In May 2010 our general shareholders meeting approved
a gross monthly payment of NIS 6,000 plus VAT ($1,538 plus VAT) to Professor Rotman as compensation for his service as the chairman
of the board, to be paid by us to Rodar Technologies Ltd., a private company controlled by Prof. Rotman. On February 12, 2015,
our shareholders approved the extension of Prof. Rotman’s term and compensation for an additional period of two years. Our
board of director did not yet approve new compensation terms to Prof. Rotman following the end of the compensation period.



In
addition, in August 2012 our general shareholders meeting approved the grant of the following conditioned bonuses to all our directors
serving at the time of such approval, except the external directors, during the term of their service: in the event that we duly
enter into one or more material agreement, defined as an agreement or a series of agreements, pertaining to a transaction with
us (or any other entity designated by us for the transaction by us) in connection with the sale of all or substantially all of
our assets or a commercialization of one of our products in the field of business, with aggregate proceeds received resultant
of such agreement are no less than a sum of $10,000,000 with any third party during their term, such directors shall each be entitled
to receive a one-time bonus per material agreement equal to 0.5% of the proceeds received by us as a result of the material agreement.
According to our compensation policy as amended and approved by our shareholders on March 1, 2015, this bonus shall be limited
to an aggregate amount of NIS 50 million ($12.75 million).



The
following table presents in the aggregate all compensation we paid to all of our directors and senior management as a group for
the year ended December 31, 2016. The table does not include any amounts we paid to reimburse any of such persons for costs incurred
in providing us with services during this period.



|                                                                            |  | Salaries, fees, commissions and bonuses (thousand NIS) |       |  | Salaries, fees, commissions and bonuses (thousand USD)(1) |  |     | Pension, retirement, options and other similar benefits (thousand NIS) |  |  | Pension, retirement, options and other similar benefits (thousand USD) | 
|--------------------------------------------------------------------------- |  | ------------------------------------------------------ | ----- |  | --------------------------------------------------------- |  | --- | ---------------------------------------------------------------------- |  |  | ---------------------------------------------------------------------- | 
|All directors and senior management as a group, consisting of 7 persons (2) |  |                                                        | 1,518 |  |                                                           |  | 404 |                                                                        |  |  | 1,142                                                                  | 



|(1) | Calculated
                                         using the exchange rate reported by the Bank of Israel for December 30, 2016, at the
                                         rate of one U.S. dollar per NIS 3.845.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes
                                         compensation paid to Professor Liora Katzenstein who served as an external Director until
                                         January 2017 in accordance with the Companies Law and Regulations promulgated hereof.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
accordance with the Companies Law, the following table presents information regarding compensation actually received by our five
most highly paid executive officers during the year ended December 31, 2016.





|Name and Position                                   |  | Salary
    (thousand
NIS) |     |  | Social
    benefits(1) (thousand
 NIS) |  |     | Bonuses
    (thousand
NIS) |  |  | Value
    of Options Granted(2) (thousand
 NIS) |  |  | All
    Other Compensation(3)
(thousand
NIS) |     |  | Total
    (thousand
NIS) |  |    | Total
    in thousand US dollar(4) | 
|--------------------------------------------------- |  | ------------------------- | --- |  | -------------------------------------- |  | --- | -------------------------- |  |  | ----------------------------------------------- |  |  | -------------------------------------------- | --- |  | ------------------------ |  | -- | ---------------------------------- | 
|Dr. Ron Babecoff,
    CEO and director              |  |                           | 960 |  |                                        |  | -   |                            |  |  | -                                               |  |  |                                              | 787 |  |                          |  | 44 |                                    | 
|Dr. Tamar Ben Yedidia, Chief
    Scientific Officer |  |                           | 367 |  |                                        |  | 108 |                            |  |  | -                                               |  |  |                                              | 62  |  |                          |  | 46 |                                    | 
|Mr. Uri Ben Or, Chief Financial
    Officer         |  |                           | 323 |  |                                        |  | 33  |                            |  |  | -                                               |  |  |                                              | 62  |  |                          |  | -  |                                    | 
|Michal Marom Brikman                                |  |                           | 41  |  |                                        |  | -   |                            |  |  | -                                               |  |  |                                              | -   |  |                          |  | -  |                                    | 
|Professor Avner Rotman,
    Chairman of the Board   |  |                           | 72  |  |                                        |  | -   |                            |  |  | -                                               |  |  |                                              | -   |  |                          |  | -  |                                    | 



|(1) | “Social
    Benefits” include payments to the National Insurance Institute, advanced education funds, managers’ insurance and pension
    funds; vacation pay; and recuperations pay as mandated by Israeli law.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







66







|(2) | Consists
    of amounts recognized as share-based compensation expense on the Company’s statement of comprehensive loss for the year ended
    December 31, 2016.                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                    
|(3) | “All
    Other Compensation” includes automobile-related expenses pursuant to the Company’s automobile leasing program, telephone,
    basic health insurance and holiday presents.
|    |                                                                                                                                                                                    
|(4) | Calculated
    using the exchange rate reported by the Bank of Israel for December 30, 2016, at the rate of one U.S. dollar per NIS 3.845.                                         



Employment
and Services Agreements



Our
employees are employed under the terms prescribed in their respective personal contracts, in accordance with the decisions of
our management. Under these employment contracts, the employees are entitled to the social benefits prescribed by law and as otherwise
provided in their personal contracts. These employment contracts each contain provisions standard for a company in our industry
regarding non-competition, confidentiality of information and assignment of inventions. Under current applicable employment laws,
we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting
from the expertise of some of our former employees. We also provide certain of our employees with a company car, which is leased
from a leasing company, and a mobile phone and additional benefits.



Our
executive officers are also employed under the terms and conditions prescribed in personal contracts. These personal contracts
provide for notice periods of varying duration for termination of the agreement by us or by the relevant executive officer, during
which time the executive officer will continue to receive base salary and benefits. These agreements also contain customary provisions
regarding non-competition, confidentiality of information and assignment of inventions.



Services
and Employment Agreements with Our Chief Executive Officer



Ron
Babecoff



Dr.
Babecoff is one of our founders and has served as the CEO and a member of our board of directors since 2005. We retained Dr. Babecoff’s
services through Ron Executive Ltd., a company solely owned by him, with which we entered into a management services agreement
on April 1, 2007, as later amended on April 18, 2012. Under the agreement and until May 28, 2015, Dr. Babecoff received a current
monthly salary of NIS 52,500 plus VAT. We also provide Dr. Babecoff with a leased company car. In addition, in the event that
we duly enter into one or more material agreement(s) (i.e. an agreement or a series of agreements, pertaining to a transaction
with us (or any other entity designated by us for the transaction by us) in connection with the sale of all or substantially all
of our assets or a commercialization of one of our products in the field of business, with aggregate proceeds received resultant
of such agreement are no less than a sum of US$10,000,000) with any third party during the term of Dr. Babecoff’s engagement
with us or during a period of three years commencing on the date of the termination of the management services agreement by us,
Dr. Babecoff shall be entitled to receive a one-time bonus per material agreement equal to 1.75% of the proceeds received by us
as a result of the material agreement. The term of Dr. Babecoff’s agreement expires on April 1, 2015, unless earlier terminated.
Dr. Babecoff’s service agreement may be terminated by us upon nine months prior written notice or immediately if terminated
for cause (i.e., termination due to a material breach by Ron Executive Ltd. of its obligations under the employment agreement,
a breach of trust, malfeasance or gross negligence by Ron Executive Ltd. and/or Dr. Babecoff; or the conviction of Ron Executive
Ltd. and/or Dr. Babecoff of any felony). Ron Executive Ltd. may also terminate the service agreement upon 90 days’ prior
written notice.



Following
the approval of our compensation committee and our board of directors, on December 9, 2014, on January 18, 2015, our shareholders
meeting approved an extension of Dr. Babecoff’s agreement, under the same terms and conditions, for an additional period
of five years. Dr. Babecoff also serves as a director in our company, for which he received unregistered options as compensation.







67







Following
the approval of our compensation committee and our board of directors, on May 26 and 28, 2015, respectively, on July 28, 2015,
our shareholders meeting approved increasing Dr. Babecoff’s monthly salary from NIS 52,500 to NIS 80,000 (20,393$), and
a grant of unregistered options in accordance with our 2005 Israeli Share Option Plan in an amount equal to 2.5% of the Company
issued and outstanding capital on a fully diluted basis, as of May 28, 2015, exercisable to up to 5,929,503 ordinary shares of
the Company NIS 0.0000001 par value at an exercise price of NIS 0.74607 per ordinary share. The options are scheduled to vest
over a period of 3 years and shall expire 10 years from the grant date. As of the date of this annual report, Dr. Babecoff held
options to purchase 6,009,503 ordinary shares, of which 2,056,501 are fully vested.



Services
and Employment Agreements with Our Chief Scientific Officer



Tamar
Ben Yedidia



Pursuant
to her employment agreement entered into with us on March 15, 2005, as amended on April 2012, Dr. Ben Yedidia is employed on a
full time basis and is currently entitled to a monthly salary of NIS 27,300 which also includes monthly contributions equal to
7.5% of her monthly salary to an Education Fund (“Keren Hishtalmut”, a short term savings plan available in Israel
which is tax free to the employee up to a cap determined by law). In addition, we provide Dr. Ben Yedidia with a leased company
car and a mobile phone. Dr. Ben Yedidia is entitled to 22 annual paid vacation days.



Dr.
Ben Yedidia’s employment agreement may be terminated by either us or Dr. Ben Yedidia upon 120 days’ prior written
notice or by us immediately for cause (i.e., termination due to embezzlement of our funds, or the material breach of the terms
and conditions of the employment agreement, or if Dr. Ben Yedidia is involved in an act which constitutes a breach of trust between
her and us or constitutes a severe breach of discipline, or conduct causing grave injury to us any, monetarily or otherwise, or
Dr. Ben Yedidia’s inability to carry out her duties for a period exceeding 120 consecutive days, provided that the her resumption
of her duties for a period of less than 15 consecutive days shall not be deemed to have broken the continuity of the aforementioned
120 days). Under her employment agreement, Dr. Ben Yedidia received options to purchase 25,000 ordinary shares.



In
addition, in February 2012 our board of directors approved the grant of the following conditioned bonus to Tamar Ben Yedidia:
in the event that we duly enter into one or more material agreement(s) (i.e. an agreement or a series of agreements, pertaining
to a transaction with us (or any other entity designated by us for the transaction by us) in connection with the sale of all or
substantially all of our assets or a commercialization of one of our products in the field of business, with aggregate proceeds
received resultant of such agreement are no less than a sum of US$10,000,000) with any third party during the term of Dr. Ben
Yedidia’s engagement with us or during a period of three years commencing on the date of the termination of the employment
agreement by us, Dr. Ben Yedidia shall be entitled to receive a one-time bonus per material agreement equal to 1.25% of the proceeds
received by us as a result of the material agreement.



On
May 26 and 28, 2015, our compensation committee and the Board of Directors, respectively, approved increasing Ms. Tamar Ben Yedida’s
monthly salary from NIS 27,300 to NIS 39,700 in compliance with our compensation plan. On the same dates, our compensation committee
and the Board of Directors also approved granting Ms. Tamar Ben Yedida additional 500,000 unregistered options in accordance with
our 2005 Israeli Share Option plan. The options are scheduled to vest over a period of three (3) years and shall expire 10 years
from the grant date. Each option shall be exercisable at an exercise price equal to 130% of the average sale share price on TASE
during the thirty (30) trading days prior to the options’ grant date. As of the date of this annual report, Dr. Ben Yedidia
held options to purchase 970,000 ordinary shares, of which 636,667 are fully vested.



Services
and Employment Agreement with Our Chief Financial Officer



Uri
Ben Or



Pursuant to the service
agreement entered into on June 20, 2007, between us, Mr. Ben Or and CFO Direct, an Israeli company solely owned by him through
which he provides his services to us, as amended on August 31, 2014, CFO Direct is entitled to a monthly fee of NIS 2,500. The
service agreement will remain in effect for a period of five years from the amendment date and shall expire on August 31, 2019,
unless earlier terminated by either us or CFO Direct with 60 days prior written notice. We may terminate our service agreement
with CFO Direct at any time and effective immediately, without need for prior written notice, and without derogating from any
other remedy to which we may be entitled, for cause (i.e., termination due to the conviction of CFO Direct and/or Uri Ben Or of
any felony, the liability of CFO Direct by a court of competent jurisdiction for fraud against us, any conduct that has a material
adverse effect or is materially detrimental to us, including but not limited to, a breach of contract or any claim by CFO direct
or any one connect thereto that CFO Direct is our employee. In addition, pursuant to the provisions of the service agreement,
for services provided in connection with the preparation the initial public offering in the U.S., CFO Direct was entitled to receive
NIS 192,500 in four equal installments on the first of each month commencing on September 1, 2014. Furthermore, following the
consummation of the initial public offering in the U.S., CFO Direct are entitled to receive a one-time cash payment of NIS 87,500,
and from such date the monthly compensation under the services agreement will be increased to NIS 15,000.







68







In
addition, pursuant to a separate employment agreement entered into between us and Mr. Ben Or on August 31, 2014, as of such date,
Mr. Ben Or is also employed by us in a 60% employment capacity, for which he is entitled to a monthly salary of NIS 10,000. Mr.
Ben Or is entitled to 60% of the annual paid vacation days prescribed under applicable law, and we shall obtain and maintain with
Mr. Ben Or a pension insurance to Mr. Ben Or, in a Managers Insurance and/or a pension fund, according to Mr. Ben Or’s discretion.
Mr. Ben Or’s employment agreement will remain in effect for a period of five years and shall expire on August 31, 2019,
unless earlier terminated by either us or Mr. Ben Or with 60 days prior written notice, or by us immediately for cause (i.e.,
if he is convicted of a felony or is held liable by a court of competent jurisdiction for fraud against us, a breach of trust
due to theft or embezzlement by him, any conduct which has a material adverse effect or is materially detrimental to us, any breach
of his fiduciary duties or duties of care to us, including without limitation, any material conflict of interest for the promotion
of his benefit, fraud, felonious conduct, dishonesty or insubordination, and any circumstances in which Israeli law or his employment
agreement deny the right for severance payment, in whole or in part). In August 2016, our compensation committee and board of
directors approved the payment of NIS 25,000 for his efforts in preparing a registration statement on Form F-3 and an ATM prospectus
filed in November 2016.



On
May 26 and 28, 2015, our compensation committee and the Board of Directors, respectively, approved the grant of 500,000 unregistered
option in accordance with our 2005 Israeli Share Option plan. The options are scheduled to vest over a period of three (3) years
and shall expire 10 years from the grant date. Each option shall be exercisable at an exercise price equal to 130% of the average
sale share price on TASE during the thirty (30) trading days prior to the options’ grant date. As of as of the date of this
annual report, Mr. Uri Ben Or held options to purchase 670,000 ordinary shares, of which 236,667 are fully vested.



Equity
Compensation Plan



We
maintained our 2005 Israeli Share Option Plan, which was adopted by our board of directors in July 2005 and expired in July 2015.
The 2005 Plan provided for the grant of options to our directors, officers, employees, consultants, advisers and service providers.
To date, an aggregate amount of 15,732,503 options to purchase 15,732,503 ordinary shares were granted. Of such outstanding options,
options to purchase 5,793,501 ordinary shares were vested as of December 31, 2016 with a weighted average exercise price of NIS
0.76 ($0.20) per share, and will expire 10 years from the date of grant, during the years 2016 – 2025.



On April 24, 2017, our
board of directors approved a new Israeli Share Option Plan under similar terms and conditions. Under Israeli law, an adoption
of an option plan requires the board of director’s approval. The following description of the 2005 Plan applies to the New
Plan as well: Pursuant to the 2005 Plan we may award options to Participants (as such term is defined in the 2005 Plan) pursuant
to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section 3(I) of the Ordinance, based on entitlement
and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinance provides
to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our
share capital, or to be entitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents,
favorable tax treatment for compensation in the form of shares or options issued or granted, as applicable, to a trustee under
the “capital gains track” for the benefit of the applicable employee, director or officer and are (or were) to be
held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance
will be deposited with a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations
and guidelines, and will be granted in the employee income track or the capital gains track. The 2005 Plan was managed by our
board of directors or any other committee or person that the board of directors authorizes for this purpose.



Options
granted under the 2005 Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.



Upon
the termination of a Participant’s engagement with us for any reason other than death, retirement, disability or due cause,
all unvested options allocated shall automatically expire and all vested options allocated will automatically expire 90 days after
the termination, unless expired earlier due to their term. If the Participant’s engagement was terminated for cause (as
defined in the 2005 Plan), the Participant’s right to exercise any unexercised options, awarded and allocated in favor of
such Participant, whether vested or not, will immediately cease and expire as of the date of such termination. If the Participant
dies, retires or is disabled, any vested but unexercised options will automatically expire 12 months from the termination of the
engagement, unless expired earlier due to their term.







69







In
the event that options allocated under the 2005 Plan expire or otherwise terminate in accordance with the provisions of the 2005
Plan, such expired or terminated options will become available for future grant awards and allocations under the 2005 Plan.



In
the event of (i) the sale of all or substantially all of our assets; (ii) a sale (including an exchange) of all or substantially
all of our share capital; or (iii) a merger, consolidation or like transaction of ours with or into another corporation, then,
subject to obtaining the applicable approvals of the Israeli tax authorities, the board of directors in its sole discretion, will
resolve: (a) if and how any unvested options will be cancelled, replaced or accelerated; (b) if and how any vested options (including
options with respect to which the vesting period has been accelerated according to the foregoing), will be exercised, replaced
and/or sold by a trustee or us (as the case may be) on the behalf of the respective Israeli Participants; and (c) how any underlying
shares issued upon exercise of the options and held by a trustee on behalf any Israeli Participants will be replaced and/or sold
by such trustee on behalf of the Israeli Participants.



| | C. | Board
    Practices
| | -- | -------------------



Board
of Directors



Under
the Companies Law and our articles of association, our board of directors shall direct the Company’s policy and shall supervise
the performance of the Company’s Chief Executive Officer. Our board of directors may exercise all powers and may take all
actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our
day-to-day management and have individual responsibilities established by our board of directors. Our Chief Executive Officer
is appointed by, and serves at the discretion of, our board of directors, subject to a services agreement entered into with Ron
Executive Ltd., a company solely owned Dr. Ron Babecoff, our Chief Executive Officer. All other executive officers are also appointed
by our board of directors, and are subject to the terms of any applicable employment or services agreements that we may enter
into with them or with certain entities through which we receive their services. Other than Dr. Babecoff, who is entitled to certain
termination payments under his employment agreement with us, none of our directors are entitled to benefits upon termination of
their service.



Our
board of directors has affirmatively determined that a majority of our directors are independent, in compliance with the NASDAQ
Capital Market rules. The definition of independent director under the NASDAQ Capital Market rules and external director under
the Companies Law overlap to a significant degree such that we would generally expect the two directors serving as external directors
to satisfy the requirements to be independent under the NASDAQ Capital Market rules. The definition of external director includes
a set of statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would
impair the ability of the external director to exercise independent judgment. The definition of independent director specifies
similar, if slightly less stringent, requirements in addition to the requirement that the board consider any factor which would
impair the ability of the independent director to exercise independent judgment. In addition, our external directors each serve
for a period of three years. However, external directors must be elected by a special majority of shareholders while independent
directors may be elected by an ordinary majority. See “— External Directors” below for a description of the
requirements under the Companies Law for a director to serve as an external director.



Under
our articles of association, our board of directors must consist of at least three and not more than nine directors, including
at least two external directors required to be appointed under the Companies Law. Our board of directors currently consists of
seven members, including our non-executive Chairman of the board of directors. Other than our two external directors, for whom
special election requirements apply under the Israeli Companies Law, as detailed below, our directors may be divided into three
classes with staggered three-year terms. Class I, Class II and Class III shall each consist of two directors, constituting our
entire board of directors (other than the external directors). On February 12, 2015, our annual general shareholders meeting approved
the staggering and extension the term of our board members in accordance with the Company’s articles of association and
divided the members of our board of directors among the three classes, so that the term of office of only one class of directors
will expire in each upcoming annual shareholders meeting. From the date of such annual general meeting during which we divide
the members of our board of directors among the three classes, each year the term of office of only one class of directors will
expire, commencing with term of office of the Class III directors which will expire one year after such annual general meeting,
followed by the term of office of the Class II directors and by the term of office of the Class I directors which will expire
two years and three years after such annual general meeting, respectively. Thereafter, at each annual general meeting of our shareholders,
the election or re-election of directors following the expiration of the term of office of the directors of that class of directors
will be for a term of office that expires on the third annual general meeting following such election or re-election. Each director
will hold office until the annual general meeting of our shareholders for the year in which his or her term expires, unless they
are removed by a vote of 75% of the voting power of our board of directors and a vote of 75% of the voting power of our shareholders
at a general meeting of our shareholders, or upon the occurrence of certain events, in accordance with the Israeli Companies Law
and our articles of association. However, the holders of a majority of the voting power represented at a shareholders meeting
have the power to elect a director to replace any such director removed from office in accordance with the preceding sentence.
We have held elections for each of our non-external directors at each annual meeting of our shareholders since our initial public
offering in Israel.







70







In
addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors,
for a term of office ending on the earlier of the next annual general meeting of our shareholders, or the conclusion of the term
of office in accordance with our articles or any applicable law, subject to the maximum number of directors allowed under the
articles of association. External directors are elected for an initial term of three years and may be elected for up to two additional
three-year terms, provided that, for Israeli companies traded on NASDAQ Capital Market and certain other international exchanges,
such term may be extended indefinitely in increments of additional three-year terms. External directors may be removed from office
only under the limited circumstances set forth in the Companies Law.



Under
the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and
financial expertise. In determining the number of directors required to have such expertise, our board of directors must consider,
among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has
determined that the minimum number of directors of our company who are required to have accounting and financial expertise is
two. Our board of directors has determined that Michael Marom Brikman and Ms. Irit Ben Ami have accounting and financial expertise
and possess professional qualifications as required under the Companies Law.



Chairman
of the Board



Our
articles of association provide that the chairman of the board is appointed by the members of the board of directors and serves
as chairman of the board throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies
Law, the chief executive officer or a relative of the chief executive officer may not serve as the chairman of the board of directors,
and the chairman or a relative of the chairman may not be vested with authorities of the chief executive officer without shareholder
approval by special majority and for periods of time not exceeding three years each.



In
addition, a person subordinated, directly or indirectly, to the chief executive officer may not serve as the chairman of the board
of directors; the chairman of the board may not be vested with authorities that are granted to those subordinated to the chief
executive officer; and the chairman of the board may not serve in any other position in the company or a controlled company, except
as a director or chairman of a controlled company.



External
Directors



Under
the Companies Law, we are required to include at least two members who qualify as external directors, one of which has accounting
and financial expertise, unless we apply the recent amendment to the Israeli law according to which we will be exempt from appointing
two external directors subject to the following conditions: (i) none of our shareholders is a controlling shareholder; (ii) we
comply with NASDAQ rules and regulations with respect to the composition of our audit and compensation committees; (iii) we comply
with NASDAQ rules and regulations with respect to the requirements of independent directors. For so long as we meet the requisite
requirements, we intend to apply the exemption from appointing at least two external directors under the Companies Law.



Ms.
Irit Ben Ami has served as our external director since 2008 and possesses the requisite accounting and financial expertise. Prof.
Liora Katzenstein served as our external director until her end of term on January 10, 2017. Ms. Irit Ben Ami was re-elected to
serve additional terms from June 2014 and until June 2017.



The
provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors
must be elected by a majority vote of the shares present and voting at a shareholders meeting, provided that either:



| | ● | such
    majority includes at least a majority of the shares held by all shareholders who are non-controlling shareholders and do not
    have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship
    with a controlling shareholder) that are voted at the meeting, excluding abstentions, to which we refer as a disinterested
    majority; or
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | the
    total number of shares voted by non-controlling shareholders and by shareholders who do not have a personal interest in the
    election of the external director, against the election of the external director, does not exceed 2% of the aggregate voting
    rights in the company.                                                                                                                             







71







The
term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the
company, excluding such ability deriving solely from his or her position as a director of the company or from any other position
with the company. A shareholder is presumed to be a controlling shareholder if the shareholder holds 45% or more of the voting
rights in a company or has the right to appoint the majority of the directors of the company or its general manager. With respect
to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the voting rights in
a public company if no other shareholder holds more than 45% of the voting rights in the company.



The
initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve
in that capacity for up to two additional three-year terms, except as provided below, provided that either:



| | (i) | his
    or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s
    voting rights and is approved at a shareholders’ meeting by a disinterested majority, where the total number of shares
    held by non-controlling, disinterested shareholders voting for such re-election exceeds 2% of the aggregate voting rights
    in the company. In such event, the external director so reappointed may not be a Related or Competing Shareholder, or a relative
    of such shareholder, at the time of the appointment, and is not and has not had any affiliation with a Related or Competing
    Shareholder, at such time or during the two years preceding such person’s reappointment to serve an additional term
    as external director. The term “Related or Competing Shareholder” means a shareholder proposing the reappointment
    or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time
    of the reappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder,
    have a business relationship with the company or are competitors of the company.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Additionally,
the Israeli Minister of Justice, in consultation with the Israeli Securities Authority, may determine matters that under certain
conditions will not constitute a business relationship or competition with the company; or



| | (ii) | his
    or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting
    by the same majority required for the initial election of an external director (as described above).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including the NASDAQ Capital
Market, may be extended indefinitely in increments of additional three-year terms, in each case provided that the audit committee
and the board of directors of the company confirm that, in light of the external director’s expertise and special contribution
to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficial to the company,
and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first
time (as described above). Prior to the approval of the reelection of the external director at a general shareholders meeting,
the company’s shareholders must be informed of the term previously served by him or her and of the reasons why the board
of directors and audit committee recommended the extension of his or her term.



External
directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves
such dismissal by the same shareholder vote percentage required for their election, after receiving the board of directors arguments
for such removal, or by a court, in each case, only under limited circumstances, including ceasing to meet the statutory qualifications
for appointment, or violating their duty of loyalty to the company. If an external directorship becomes vacant and there are fewer
than two external directors on the board of directors at the time, then the board of directors is required under the Companies
Law to call a shareholders’ meeting as soon as practicable to appoint a replacement external director.



Each
committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least
one external director, except that the audit committee and the compensation committee must include all external directors then
serving on the board of directors. Under the Companies Law, external directors of a company are prohibited from receiving, directly
or indirectly, any compensation from the company other than compensation and reimbursement of expenses amounts for their services
as external directors prescribed under the Companies Law and the regulations promulgated thereunder. Compensation of an external
director is determined prior to his or her appointment and may not be changed during his or her term subject to certain exceptions.



The
Companies Law provides that a person is not qualified to serve as an external director if (i) the person is a relative of a controlling
shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she
was directly or indirectly subordinate, or any entity under the person’s control, has or had, during the two years preceding
the date of appointment as an external director: (a) any affiliation with the company, with any person or entity controlling the
company or a relative of such person on the date of appointment, or with any entity controlled by or under common control with
the company; or (b) in the case of a company with no shareholder holding 25% or more of its voting rights, had at the date of
appointment as an external director, any affiliation with a person then serving as chairman of the board or chief executive officer,
a holder of 5% or more of the issued share capital or voting power in the company or the most senior financial officer.







72







The
term relative is defined as a spouse, sibling, parent, grandparent or descendant; spouse’s sibling, parent or descendant;
and the spouse of each of the foregoing persons.



The
term affiliation includes (subject to certain exceptions):



| | ● | an
    employment relationship;                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                      
| | ● | a
    business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships);                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                      
| | ● | control;
    and                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                      
| | ● | service
    as an office holder, excluding service as a director in a private company prior to the initial public offering of its shares
    if such director was appointed as a director of the private company in order to serve as an external director following the
    initial public offering.



The
Israeli Minister of Justice, in consultation with the Israeli Securities Authority, is authorized to determine that certain matters
will not constitute an affiliation.



The
term “office holder” is defined under the Companies Law as a general manager, chief business manager, deputy general
manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s
title, a director and any other manager directly subordinate to the general manager.



In
addition, no person may serve as an external director of a company if: (i) that person’s position or professional or other
activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise
interfere with that person’s ability to serve as an external director; or (ii) at the time of appointment, such person serves
as a director of another company and an external director of the other company is also a director of the company; or (iii) the
person is an employee of the Israel Securities Authority or of an Israeli stock exchange; or (iv) such person received direct
or indirect compensation from the company in connection with such person’s services as an external director, other than
as permitted by the Companies Law and the regulations promulgated thereunder.



Following
the termination of an external director’s service on a board of directors, such former external director and his or her
spouse and children may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity
under its controlling shareholder’s control. This includes engagement as an office holder or director of the company or
a company controlled by its controlling shareholder or employment by, or provision of services to, any such company for consideration,
either directly or indirectly, including through a corporation controlled by the former external director. This restriction extends
for a period of two years with regard to the former external director and his or her spouse or child and for one year with respect
to other relatives of the former external director.



If
at the time at which an external director is appointed all members of the board of directors who are not controlling shareholders
or relatives of controlling shareholders of the company are of the same gender, the external director to be appointed must be
of the other gender.



According
to regulations promulgated under the Companies Law, a person may be appointed as an external director only if he or she has professional
qualifications. In addition, at least one of the external directors must be determined by our board of directors to have accounting
and financial expertise. However, if at least one of our other directors (i) meets the independence requirements under the Exchange
Act, (ii) meets the standards of the NASDAQ Capital Market listing rules for membership on the audit committee and (iii) has accounting
and financial expertise as defined under Companies Law, then neither of our external directors is required to possess accounting
and financial expertise as long as each possesses the requisite professional qualifications.



A
director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses
an expertise in, and an understanding of, financial and accounting matters and financial statements, such that he or she is able
to understand the financial statements of the company and initiate a discussion about the presentation of financial data. In determining
whether the director has financial and accounting expertise the board of directors shall consider education, experience and the
knowledge in the following subjects: (i) accounting issues and internal auditing issues typical to the company’s industry
and to companies of the same size and complexity as the company; (ii) the nature of the Internal Auditor’s position in the
company and his or her duties; and (iii) the preparation of financial statements and their approval subject to the Companies Law
and the Israeli Securities Law.



A director is deemed to have professional qualifications if he or she has any of (i) an
academic degree in economics, business management, accounting, law or public administration, (ii) an academic degree or has completed
another form of higher education in the primary field of business of the company or in a field which is relevant to his/her position
in the company, or (iii) at least five years of experience serving in one of the following capacities, or at least five years
of cumulative experience serving in two or more of the following capacities: (a) a senior business management position in a company
with a significant volume of business; (b) a senior position in the company’s primary field of business; or (c) a senior
position in public administration or service. The board of directors is charged with determining whether a director possesses
financial and accounting expertise or professional qualifications.



73







Audit
Committee



Our
audit committee consists of Ms. Michal Brikman, Mr. Jack Rosen and our external director Ms. Irit Ben Ami, who also serves as
the Chairman of the audit committee.



Under
the NASDAQ Capital Market corporate governance rules, we are required to maintain an audit committee consisting of at least three
independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise.



All members of our audit
committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ Capital
Market corporate governance rules. Our board of directors has affirmatively determined that Ms. Irit Ben Ami is an audit committee
financial expert as defined by the SEC rules and has the requisite financial experience as defined by the NASDAQ Capital Market
corporate governance rules.



Each
of the members of the audit committee are deemed “independent” as such term is defined in Rule 10A-3(b)(1) under the
Exchange Act, which is different from the general test for independence of board and committee members.



Audit
Committee Role



Our
board of directors adopted an audit committee charter effective upon the listing of our ADSs and warrants on the NASDAQ Capital
Market that set forth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of
the NASDAQ Capital Market, as well as the requirements for such committee under the Companies Law, including the following:



| | ● | oversight
    of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement
    of our independent registered public accounting firm to the board of directors in accordance with Israeli law;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                 
| | ● | recommending
    the engagement or termination of the person filling the office of our internal auditor; and                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                 
| | ● | recommending
    the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by
    our board of directors.                                                                                        



Our
audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving
our accounting, auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed
by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control
over financial reporting. Our audit committee also oversees the audit efforts of our independent accountants and takes those actions
that it deems necessary to satisfy itself that the accountants are independent of management.



Under
the Companies Law, our audit committee is responsible for:



| | (i)   | determining
    whether there are deficiencies in the business management practices of our company, including in consultation with our internal
    auditor or the independent auditor, and making recommendations to the board of directors to improve such practices;                                                                                                                                                                                                         
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (ii)  | determining
    the approval process for transactions that are ‘non-negligible’ (i.e., transactions with a controlling shareholder
    that are classified by the audit committee as non-negligible, even though they are not deemed extraordinary transactions),
    as well as determining which types of transactions would require the approval of the audit committee, optionally based on
    criteria which may be determined annually in advance by the audit committee.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (iii) | determining
    whether to approve certain related party transactions (including transactions in which an office holder has a personal interest
    and whether such transaction is extraordinary or material under Companies Law) (see “Approval of Related Party Transactions
    under Israeli Law”);                                                                                                                                                                        
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (iv)  | where
    the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission
    to our board of directors and proposing amendments thereto;                                                                                                                                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (v)   | examining
    our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources
    and tools to dispose of its responsibilities;                                                                                                                                                                                                                                                                                       
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (vi)  | examining
    the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of
    directors or shareholders, depending on which of them is considering the appointment of our auditor; and                                                                                                                                                                                                                                
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (vii) | establishing
    procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided
    to such employees.                                                                                                                                                                                                                                                                                                             





74







Under
the Companies Law, an audit committee may not approve any actions requiring its approval (see “Approval of Related Party
Transactions under Israeli Law”), unless at the time of the approval a majority of the committee’s members are present,
which majority consists of unaffiliated directors including at least one external director.



Compensation
Committee and Compensation Policy



Our
compensation committee currently consists of Ms. Michal Brikman, Mr. Jack Rosen and our external directors, Ms. Irit Ben Ami who
serves as the Chairman of the compensation committee. The duties of the compensation committee include the recommendation to the
company’s board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation
policy. That policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation
committee, and will need to be brought for approval by the company’s shareholders, which approval requires a special approval
for Compensation as described below under “Approval of Related Party Transactions Under Israeli Law — Fiduciary Duties
of Directors and Executive Officers”.





Under
the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy.



The
Compensation Policy must be based on certain considerations, must include certain provisions and needs to reference certain matters
as set forth in the Companies Law. The Compensation Policy must be approved by the company’s board of directors after considering
the recommendations of the compensation committee. In addition, the Compensation Policy needs to be approved by the company’s
shareholders by a simple majority, provided that (i) such majority includes a majority of the votes cast by the shareholders who
are not controlling shareholders and who do not have a personal interest in the matter, present and voting (abstentions are disregarded)
or (ii) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter
who were present and voted against the Compensation Policy, constitute two percent or less of the voting power of the company.
Such majority determined in accordance with clause (i) or (ii) is hereinafter referred to as the Compensation Majority.



To
the extent a Compensation Policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors
of a company may override the resolution of the shareholders following a re-discussion of the matter by the board of directors
and the compensation committee and for specified reasons, and after determining that despite the rejection by the shareholders,
the adoption of the Compensation Policy is for the benefit of the company.



A
Compensation Policy that is for a period of more than three years must be approved in accordance with the above procedure every
three years.



Notwithstanding
the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholders
and their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee
determines that the amendment is not material in relation to its existing terms.



Pursuant
to the Companies Law amendment, following the recommendation of our compensation committee, our board of directors approved our
Compensation Policy, and our shareholders, in turn, approved the Compensation Policy at our annual general meeting of shareholders
that was held in January 2014. On March 1, 2015, following the approval of the compensation committee and our board of directors,
our general shareholders meeting approved an amendment to the compensation policy increasing the maximum amounts of bonuses and
the scope of liability insurance policies permitted under such compensation policy in connection with our directors and officers.



The
Compensation Policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office
holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment
or engagement. The Compensation Policy must relate to certain factors, including advancement of the Company’s objectives,
the Company’s business plan and its long-term strategy, and creation of appropriate incentives for office holders. It must
also consider, among other things, the Company’s risk management, size and the nature of its operations. The Compensation
Policy must furthermore consider the following additional factors:



| | ● | the
    knowledge, skills, expertise and accomplishments of the relevant office holder;                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ● | the
    office holder’s roles and responsibilities and prior compensation agreements with him or her;                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ● | the
    ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees
    of the company, including those employed through manpower companies, in particular the ratio between such cost and the average
    and median compensation of the other employees of the company, as well as the impact such disparities may have on the work
    relationships in the company;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ● | the
    possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of
    setting a limit on the exercise value of non-cash variable equity-based compensation; and                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ● | as
    to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during
    such service period, the company’s performance during that period of service, the person’s contribution towards
    the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person
    is leaving the company.                           







75







The
Compensation Policy must also include:



| | ● | a
    link between variable compensation and long-term performance and measurable criteria;                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                    
| | ● | the
    relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                    
| | ● | the
    conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that
    the data upon which such compensation was based was inaccurate and was required to be restated in the company’s financial
    statements;
| |   |                                                                                                                                                                                                                                                                                    
| | ● | the
    minimum holding or vesting period for variable, equity-based compensation; and                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                    
| | ● | maximum
    limits for severance compensation.                                                                                                                                                                                                                                     



The
compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for
its approval (and subsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation
of a company’s office holders as well as functions previously fulfilled by a company’s audit committee with respect
to matters related to approval of the terms of engagement of office holders, including:



| | ● | recommending
    whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years
    (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur
    every three years);
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                    
| | ● | recommending
    to the board of directors periodic updates to the compensation policy;                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                    
| | ● | assessing
    implementation of the compensation policy; and                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                    
| | ● | determining
    whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders.                                                                                                                                                  



Compensation
Committee Role



Our
compensation committee’s responsibilities include:



| | ● | reviewing
    and recommending overall compensation policies with respect to our Chief Executive Officers and other executive officers;                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                       
| | ● | reviewing
    and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officers and other executive
    officers including evaluating their performance in light of such goals and objectives;
| |   |                                                                                                                                                                                                                                       
| | ● | reviewing
    and approving the granting of options and other incentive awards; and                                                                                                                                                   
| |   |                                                                                                                                                                                                                                       
| | ● | reviewing,
    evaluating and making recommendations regarding the compensation and benefits for our non-employee directors.                                                                                                          



Internal
Auditor



Under
the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the
recommendation of the audit committee. An internal auditor may not be:



| | ● | a
    person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;  
| | - | -----------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                        
| | ● | a
    person (or a relative of a person) who has the power to appoint a director or the general manager of the company;
| |   |                                                                                                                        
| | ● | an
    office holder (including a director) of the company (or a relative thereof); or                                 
| |   |                                                                                                                        
| | ● | a
    member of the company’s independent accounting firm, or anyone on his or her behalf.                             







76







| | ● | The
    role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures.
    The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as
    to review the internal auditor’s work plan. On October 22, 2014, we appointed Mr. Gewirtz Yisrael as our internal auditor.
    Mr. Gewirtz Yisrael is a certified internal auditor and a partner at Fahn Kanne & Co. Grant Thornton Israel, a certified
    public accounting firm in Israel.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | The
    board of directors shall determine the direct supervisor of the internal auditor. The internal auditor is required to submit
    his findings to the audit committee, unless specified otherwise by the board of directors.                                                                                                                                                                                                                                                                                                                                         



Approval
of Related Party Transactions under Israeli Law



Fiduciary
Duties of Directors and Executive Officers



The
Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Executive
Officers and Directors” is an office holder under the Companies Law.



An
office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder
to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances.
The duty of loyalty requires that an office holder act in good faith and in the best interests of the company.



The
duty of care includes a duty to use reasonable means to obtain:



| | ● | information
    on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                         
| | ● | all
    other important information pertaining to any such action.                                                                      



The
duty of loyalty includes a duty to:



| | ● | refrain
    from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal
    affairs;                             
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                        
| | ● | refrain
    from any activity that is competitive with the company;                                                                                                                    
| |   |                                                                                                                                                                                        
| | ● | refrain
    from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and                                                   
| |   |                                                                                                                                                                                        
| | ● | disclose
    to the company any information or documents relating to the company’s affairs which the office holder received as a
    result of his or her position as an office holder.



Disclosure
of Personal Interests of an Office Holder and Approval of Certain Transactions



The
Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she
may be aware of and all related material information or documents concerning any existing or proposed transaction with the company.
An interested office holder’s disclosure must be made promptly and in any event no later than the first meeting of the board
of directors at which the transaction is considered. A personal interest includes an interest of any person in an act or transaction
of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative
of such person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least
one director or the general manager, but excluding a personal interest stemming from one’s ownership of shares in the company.
A personal interest furthermore includes the personal interest of a person for whom the office holder holds a voting proxy or
the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or she holds a proxy
even if such shareholder has no personal interest in the matter. An office holder is not however, obligated to disclose a personal
interest if it derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary
transaction. Under the Companies Law, an extraordinary transaction is defined as any of the following:



| | ● | a
    transaction other than in the ordinary course of business;                                      
| | - | ------------------------------------------------------------------------------------------------------
| |   |                                                                                                       
| | ● | a
    transaction that is not on market terms; or                                                     
| |   |                                                                                                       
| | ● | a
    transaction that may have a material impact on a company’s profitability, assets or liabilities.







77







If
it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required
for the transaction, unless the company’s articles of association provide for a different method of approval. Our articles
of association do not provide otherwise. Further, so long as an office holder has disclosed his or her personal interest in a
transaction, the board of directors may approve an action by the office holder that would otherwise be deemed a breach of the
duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or
that is not performed by the office holder in good faith. An extraordinary transaction in which an office holder has a personal
interest requires approval first by the company’s audit committee and subsequently by the board of directors. The compensation
of, or an undertaking to indemnify or insure, an office holder who is not a director requires approval first by the company’s
compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking
to indemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief
Executive Officer (apart from a number of specific exceptions), then such arrangement is subject to the approval of a majority
vote of the shares present and voting at a shareholders meeting, provided that either: (a) such majority includes at least a majority
of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such compensation
arrangement (excluding abstaining shareholders); or (b) the total number of shares of non-controlling shareholders and shareholders
who do not have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of
the company’s aggregate voting rights. We refer to this as the Special Approval for Compensation. Arrangements regarding
the compensation, indemnification or insurance of a director require the approval of the compensation committee, board of directors
and shareholders by ordinary majority, in that order, and under certain circumstances, a Special Approval for Compensation.



Generally,
a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee
may not be present at such a meeting or vote on that matter unless the chairman of the relevant committee or board of directors,
as applicable, determines that he or she should be present in order to present the transaction that is subject to approval. Generally,
if a majority of the members of the audit committee or the board of directors, as applicable, have a personal interest in the
approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,
as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a
transaction, then the approval thereof shall also require the approval of the shareholders.



Disclosure
of Personal Interests of Controlling Shareholders and Approval of Certain Transactions



Pursuant
to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply
to a controlling shareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling
shareholder also includes a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds
more than 45% of the voting rights in the company. For this purpose, the holdings of all shareholders who have a personal interest
in the same transaction will be aggregated. The approval of the audit committee or the compensation committee, as the case may
be, the board of directors and the shareholders of the company, in that order is required for (a) extraordinary transactions with
a controlling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling
shareholder or his or her relative, directly or indirectly, for the provision of services to the company, (c) the terms of engagement
and compensation of a controlling shareholder or his or her relative who is not an office holder or (d) the employment of a controlling
shareholder or his or her relative by the company, other than as an office holder (collectively referred as Transaction with a
Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special
Majority:



| | ● | at
    least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are
    present and voting at the meeting approving the transaction, excluding abstentions; or
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                             
| | ● | the
    shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present
    and voting at the meeting do not exceed 2% of the voting rights in the company.       



To
the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is
required once every three years, unless, with respect to certain transactions, the audit committee determines that the duration
of the transaction is reasonable given the circumstances related thereto.



Arrangements
regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder
require the approval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof
may not be inconsistent with the company’s stated compensation policy.



Pursuant
to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling
shareholder, or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder
approval upon certain determinations of the audit committee and board of directors.







78







Shareholder
Duties



Pursuant
to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders
and to refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and
at shareholder class meetings with respect to the following matters:



| | ● | an
    amendment to the company’s articles of association;                                                  
| | - | ------------------------------------------------------------------------------------------------------------
| |   |                                                                                                             
| | ● | an
    increase of the company’s authorized share capital;                                                  
| |   |                                                                                                             
| | ● | a
    merger; or                                                                                            
| |   |                                                                                                             
| | ● | the
    approval of related party transactions and acts of office holders that require shareholder approval.



In
addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.



Certain
shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder
who knows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class
meeting and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other
power towards the company. The Companies Law does not define the substance of the duty of fairness, except to state that the remedies
generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.



Exculpation,
Insurance and Indemnification of Directors and Officers



Under
the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli
company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the
company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles
of association. Our articles of association include such a provision. The company may not exculpate in advance a director from
liability arising out of a prohibited dividend or distribution to shareholders.



Under
the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for
acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an
event, provided its articles of association include a provision authorizing such indemnification:



| | ● | financial
    liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s
    award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided
    in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be reasonably
    foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according
    to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail
    the abovementioned foreseen events and amount or criteria;                                        
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | reasonable
    litigation expenses, including attorneys’ fees, incurred by the office holder (i) as a result of an investigation or
    proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided
    that (A) no indictment was filed against such office holder as a result of such investigation or proceeding; and (B) no financial
    liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result
    of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense
    that does not require proof of criminal intent; and (ii) in connection with a monetary sanction; and
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | reasonable
    litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted
    against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which
    the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.                                                                                                                                                                                                                                                                                                                                                                







79







Under
the Companies Law and the Israeli Securities Law 5728-1968, or the Israeli Securities Law, a company may insure an office holder
against the following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided
in the company’s articles of association:



| | ● | a
    breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis
    to believe that the act would not harm the company;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                           
| | ● | a
    breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct
    of the office holder; and                            
| |   |                                                                                                                                                                                           
| | ● | a
    financial liability imposed on the office holder in favor of a third party.                                                                                                         



Under
our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:



| | ● | a
    breach of duty of care to the company or to a third party.                                                                                                                                                                                                                                                                                                                                                                               
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ● | any
    other action against which we are permitted by law to insure an office holder;                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ● | expenses
    incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable
    law including the Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 5771-2011
    and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigation
    expenses and attorney fees; and
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ● | a
    financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.                                                                                                                                                                                                                                                                                                                             



Under
the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:



| | ● | a
    breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company
    to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm
    the company;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                 
| | ● | a
    breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct
    of the office holder;                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                 
| | ● | an
    act or omission committed with intent to derive illegal personal benefit; or                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                 
| | ● | a
    fine, civil fine, administrative fine or ransom or levied against the office holder.                                                                                                                                                                                      



Under
the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation
committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.
See “— Approval of Related Party Transactions under Israeli Law.”



Our
articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to
be permitted by the Companies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder
in connection with an Administrative Enforcement Procedure.



We
have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted
by law and our articles of association, and undertaking to indemnify them to the fullest extent permitted by law and our articles
of association. This indemnification is limited to events determined as foreseeable by the board of directors based on our activities,
and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.



The
maximum indemnification amount set forth in such agreements is limited to an amount which shall not exceed 25% of our net assets
based on our most recently audited or reviewed financial statements prior to actual payment of the indemnification amount. Such
maximum amount is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification
arrangement



In
the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act of 1933,
however, is against public policy and therefore unenforceable.



We have obtained directors’
and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage
and pay all premiums thereunder to the fullest extent permitted by the Companies Law. In addition, we entered into agreements
with each of our office holders undertaking to indemnify them to the fullest extent permitted by the Companies Law, including
with respect to liabilities resulting from the initial public offering in the U.S., to the extent that these liabilities are not
covered by insurance.





80







| | D. | Employees
| | -- | ---------



As
of December 31, 2016, we have 14 employees, 5 of whom employed in finance and administration and 9 of whom were employed in research
and development. These employees are in Israel.



Israeli
labor laws principally govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees,
determination of severance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti-discrimination
laws and other conditions of employment. Subject to certain exceptions, Israeli law generally requires severance pay upon the
retirement, death or dismissal of an employee, and requires us and our employees to make payments to the National Insurance Institute,
which is similar to the U.S. Social Security Administration. Our employees have defined benefit pension plans that comply with
applicable Israeli legal requirements, which also include the mandatory pension payments required by applicable law and allocations
for severance pay.



While
none of our employees are party to any collective bargaining agreements, certain provisions of the collective bargaining agreements
between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including
the Industrialists’ Associations) are applicable to our employees by extension orders issued by the Israel Ministry of Economy
(previously the Israeli Ministry of Trade, Industry and Labor). These provisions primarily concern the length of the workweek,
pension fund benefits for all employees and for employees in the industry section, insurance for work-related accidents, travel
expenses reimbursement, holiday leave, convalescent payments and entitlement for vacation days. We generally provide our employees
with benefits and working conditions beyond the required minimums. We have never experienced any employment-related work stoppages
and believe our relationship with our employees is good.



| | E. | Share
    Ownership
| | -- | -------------------



For
information regarding the share ownership of our directors and executive officers, see “Item 7.A. Major Shareholders.”



|Item
7. | MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



| | A. | Major
    Shareholders
| | -- | ----------------------



The
following table and notes set forth information, as of December 31, 2016, concerning the beneficial ownership of our securities
by:



| | ● | each
    of our directors and executive officers;                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                
| | ● | all
    of our executive officers and directors as a group; and                                                                                
| |   |                                                                                                                                                
| | ● | each
    person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary
    shares.





81







Beneficial ownership is
determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares or
Ordinary shares represented by our ADSs. Ordinary shares issuable under share options, warrants or other conversion rights currently
exercisable or that are exercisable within 60 after April 28, 2017, are deemed outstanding for the purpose of computing the percentage
ownership of the person holding the options, warrants or other conversion rights but are not deemed outstanding for the purpose
of computing the percentage ownership of any other person.



None
of our shareholders has different voting rights from other shareholders. To the best of our knowledge, we are not owned or controlled,
directly or indirectly, by another corporation or by any foreign government. We are not aware of any arrangement that may, at
a subsequent date, result in a change of control of our company.



Except
as otherwise indicated in the footnotes to this table, we believe the persons named in this table have sole voting and investment
power with respect to all the ordinary shares indicated.



|                                                           |  | Ordinary Shares |            |     | Percent of Class% | 
|---------------------------------------------------------- |  | --------------- | ---------- | --- | ----------------- | 
|Directors and Executive Officers                           |  |                 |            |     |                   | 
|Ron Babecoff                                               |  |                 | 7,584,501  | (1) |                   | 
|Avner Rotman                                               |  |                 | 238,900    | (2) |                   | 
|George H. Lowell                                           |  |                 | 635,000    | (3) |                   | 
|Jack Rosen                                                 |  |                 | 500,000    | (4) |                   | 
|Uri Ben Or                                                 |  |                 | 753,334    | (5) |                   | 
|Tamar Ben Yedidya                                          |  |                 | 1,153,334  | (6) |                   | 
|Irit Ben Ami                                               |  |                 | 53,000     | (7) |                   | 
|All executive officers and directors as a group (7 people) |  |                 | 10,918,069 |     |                   | 
|                                                           |  |                 |            |     |                   | 
|Angels Investments in Hi Tech Ltd.                         |  |                 | 33,760,832 | (8) |                   | 



|*   | Less
than 1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(1) | Consists
of 5,528,000 ordinary shares ,80,000 ordinary shares issuable upon exercise of options at an exercise price of NIS 0.81 per share
and with an expiration date of October 31, 2021 and 1,976,501 ordinary shares issuable upon exercise of options at an exercise
price of NIS 0.7461 per share and with an expiration date of August 3, 2025.                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(2) | Consists
of 158,900 ordinary shares and 80,000 ordinary shares issuable upon exercise of options at an exercise price of NIS 0.81 per share
and with an expiration date of October 31, 2021.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(3) | Consists
of 355,000 ordinary shares and 80,000 ordinary shares issuable upon exercise of options at an exercise price of NIS 0.81 per share
and with an expiration date of October 31, 2021, and 200,000 ordinary shares issuable upon exercise of options at an exercise
price of NIS 0.546 per share and with an expiration date of July 1, 2018.                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(4) | Consists
of 500,000 ordinary shares issuable upon exercise of options at an exercise price of NIS 0.942 per share and with an expiration
date of July 10, 2023.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(5) | Consists
of 5,000 ADSs, representing 200,000 ordinary shares, 70,000 ordinary shares issuable upon exercise of options at an exercise price
of NIS 1.325 per share and with an expiration date of November 26, 2022, 50,000 ordinary shares issuable upon exercise of options
at an exercise price of NIS 0.45 per share and with an expiration date of August 7, 2020, 100,000 ordinary shares issuable upon
exercise of options at an exercise price of NIS 0.546 per share and with an expiration date of July 1, 2018 and 333,334 ordinary
shares issuable upon exercise of options at an exercise price of NIS 0.7461 per share and with an expiration date of October 15,
2025.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(6) | Consists
of 5,000 ADSs, representing 200,000 ordinary shares, 150,000 ordinary shares, 120,000 ordinary shares issuable upon exercise of
options at an exercise price of NIS 0.45 per share and with an expiration date of November 26, 2022, 300,000 ordinary shares issuable
upon exercise of options at an exercise price of NIS 1.325 per share and with an expiration date of July 8, 2020, and 50,000 ordinary
shares issuable upon exercise of options at an exercise price of NIS 0.546 per share and with an expiration date of July 1, 2018.                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(7) | Consists
of 53,000 ordinary shares issuable upon exercise of options at an exercise price of NIS 0.96 per share and with an expiration
date of August 24, 2024.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(8) | Consists
of 33,760,832 ordinary shares purchase by Angels Investments in Hi Tech Ltd. On February 8, 2017 at a price per share of NIS 0.323
that is the closing price of the Company’s share on the TASE on December 29, 2016 in aggregate purchase price of NIS 10,904,749
(US$2,856,142).                                                                                                                                                                                                                                                                                                                                                                                          







82







| | B. | Related
    Party Transactions
| | -- | ------------------------------



The
following is a description of some of the transactions with related parties to which we are a party to, and which were in effect
within the past three fiscal years. The descriptions provided below are summaries of the terms of such agreements and do not purport
to be complete and are qualified in their entirety by the complete agreements.



We
believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could
have obtained from unaffiliated third parties. See “Approval of Related Party Transactions under Israeli Law.”



Payment
to Dr. Rob Babecoff



On
March 29, 2016, and in connection with an investigation conducted by the Israeli Securities Authority (“ISA”) regarding
certain shareholders of the Company, not including among them Dr. Babecoff, alleged use of inside information, Dr. Ron Babecoff,
CEO, director and President, was investigated by the ISA under warning. After fully cooperating with the ISA investigators, Dr.
Babecoff was released subject to certain restrictions, including an obligation to make a cash deposit as collateral. Dr. Babecoff
continues to fulfill all his duties to the Company. The Company is not a party to the investigation.



On
April 10, 2016, the Audit Committee and the Board of Directors unanimously resolved to approve the payment of two hundred thousand
NIS (NIS 200,000), to be increased by an additional amount of up to NIS 200,000 as needed, for the benefit of CEO and director
Dr. Ron Babecoff, for the purpose of placing the bond required in connection with an investigation conducted by the Israeli Securities
Authority (“ISA”), regarding certain shareholders of the Company, not including among them Dr. Babecoff, alleged use
of inside information.



The
resolution was adopted, inter alia, in accordance with the exemption and indemnification letter between the Company and
Dr. Babecoff presently in effect, and in accordance with the Israeli applicable law. The approval of the bond is considered a
Related Party Transaction, as defined in the Israeli Companies Law, and thus required the approval of the Audit Committee, in
addition to the approval of the Board of Directors.



Indemnification
Agreements



Our
articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted
by the Companies Law. We have obtained directors’ and officers’ insurance for each of our officers and directors and
have entered into indemnification agreements with all of our current officers and directors.



We have entered into indemnification
and exculpation agreements with each of our current office holders and directors exculpating them to the fullest extent permitted
by the law and our articles of association and undertaking to indemnify them to the fullest extent permitted by the law and our
articles of association, including with respect to liabilities resulting from the initial public offering in the U.S., to the
extent such liabilities are not covered by insurance. On March 1, 2015, our general shareholders meeting approved the grant of
an indemnification and exculpation agreement under the same terms and conditions for each of our current office holders and directors.



Employment
and Service Agreements



We
have or have had employment, service or related agreements with each member of our senior management. See Item 6.



Family
Relationships



There
are no family relationships between any members of our executive management and our directors.



| | C. | Interests
    of Experts and Counsel
| | -- | ------------------------------------



Not
applicable.



|Item
                            8. | FINANCIAL
INFORMATION
|----------------------------------- | ---------------------



| | A. | Consolidated
    Statements and Other Financial Information
| | -- | -----------------------------------------------------------



Consolidated
Financial Statements



We
have appended our consolidated financial statements at the end of this annual report, starting at page F-2, as part of this annual
report.







83







Legal
Proceedings



From
time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.
Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that
may harm our business.



On
March 2, 2015, we unilaterally cancelled a Consulting Services Agreement. As a result of the cancellation of the Consulting Services
Agreement all options previously granted to the consultant, vested or unvested, expired. The cancellation notice also provided
that all rights and benefits previously granted to the consultant pursuant to the Consulting Services Agreement are invalid. On
September 9, 2015, the consultant brought a suit against us in the Israeli court, claiming that we wrongfully terminated his Consulting
Services Agreement and requesting monetary compensation in the amount of approximately NIS 1.5 million ($0.38 million). On November
11, 2015, we filed our defense with the court wherein we contended that the Consulting Services Agreement was lawfully cancelled
and that the consultant’s suit has no legal basis.



The
parties submitted affidavits and legal expert opinions to the court. An additional pre-trial meeting was held on February 13,
2017. The parties await the court’s decision on the appointment of an expert to provide legal opinion on the case, and an additional
hearing was scheduled for September 25, 2017. We intend to vigorously defend against this lawsuit. However, litigation is unpredictable,
and we cannot make any representations as to what the actual outcome would be due to the many intangibles presented in all litigations.
We believe this monetary compensation and the reinstatement of the cancelled options will not pose a material financial burden
on us in the event that the Israeli court rules in favor of the consultant.



For
information regarding an investigation of Dr. Babecoff conducted by the Israeli Securities Authority, or ISA, regarding certain
shareholders of the Company, not including among them Dr. Babecoff, alleged use of inside information, see Item 7B. It is hereby
clarified that the Company is not a party to the investigation.



Dividend
Policy



We
have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to
reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will
be at the discretion of our board of directors and will depend on a number of factors, including future earnings, our financial
condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other
factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, which
permits the distribution of dividends only out of distributable profits. In addition, if we pay a dividend out of income attributed
to our Benefited Enterprise during the tax exemption period, we may be subject to tax on the grossed-up amount of such income
at the corporate tax rate which would have been applied to such Benefited Enterprise’s income had we not enjoyed the exemption.



If
we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares,
subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary
shares, if any, will be paid to ADS holders in U.S. dollars.



| | B. | Significant
    Changes
| | -- | -----------------------



No
significant changes have occurred since December 31, 2016, except as otherwise disclosed in this annual report.





84







|Item 9. | THE
    OFFER AND LISTING
|------- | -------------------------



| | A. | Listing Details
| | -- | ---------------



Price Range of our ADSs



Our ADSs have been trading
on the Nasdaq Capital Market under the symbols “BVXV” and “BVXVW”, respectively. Prior to that date, there
was no public trading market for our securities on NASDAQ. The following tables set forth for the periods indicated the high and
low sales prices per ADS and ADS warrants as reported on the NASDAQ Capital Market:



|BVXV                                    |  |      |       |  |     |  
|--------------------------------------- |  | ---- | ----- |  | --- | -
|Month Ended                             |  | High |       |  | Low |  
|Annual:                                 |  |      |       |  |     |  
|2016                                    |  | $    | 4.05  |  |     | $
|Quarterly:                              |  |      |       |  |     |  
|Fourth Quarter 2016                     |  | $    | 3.935 |  |     | $
|Third Quarter 2016                      |  | $    | 3.94  |  |     | $
|Second Quarter 2016 (from May 12, 2016) |  | $    | 4.01  |  |     | $
|Most Recent Six Months:                 |  |      |       |  |     |  
|March 2017                              |  | $    | 6.21  |  |     | $
|February 2017                           |  | $    | 6     |  |     | $
|January 2017                            |  | $    | 5.25  |  |     | $
|December 31, 2016                       |  | $    | 3.85  |  |     | $
|November 30, 2016                       |  | $    | 3.90  |  |     | $
|October 30, 2016                        |  | $    | 3.94  |  |     | $



|BVXVW                                   |  |      |       |  |     |  
|--------------------------------------- |  | ---- | ----- |  | --- | -
|Month Ended                             |  | High |       |  | Low |  
|Annual:                                 |  |      |       |  |     |  
|2016                                    |  | $    | 0.99  |  |     | $
|Quarterly:                              |  |      |       |  |     |  
|Fourth Quarter 2016                     |  | $    | 0.99  |  |     | $
|Third Quarter 2016                      |  | $    | 0.699 |  |     | $
|Second Quarter 2016 (from May 12, 2016) |  | $    | 0.8   |  |     | $
|Most Recent Six Months:                 |  |      |       |  |     |  
|March 2017                              |  | $    | 1.45  |  |     | $
|February 2017                           |  | $    | 0.96  |  |     | $
|January 2017                            |  | $    | 0.89  |  |     | $
|December 31, 2016                       |  | $    | 0.39  |  |     | $
|November 30, 2016                       |  | $    | 0.47  |  |     | $
|October 30, 2016                        |  | $    | 0.60  |  |     | $



On April 27, 2017, the
last reported sale price of our ADS and the ADS warrants on the Nasdaq Capital Market was $6.37 and $1.00, respectively.



Our ordinary shares have been trading
on the TASE under the symbol “BNDX” since June 18, 2007 and under the symbol “BVXV” since May 18, 2015.
No trading market currently exists for our ordinary shares in the United States. Following the completion of the initial public
offering in the U.S., we listed ADSs and ADS warrants on the NASDAQ Capital Market under the symbol “BVXV” and “BVXVW”,
respectively.





85







The following table sets
forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the TASE in NIS and U.S.
dollars



|                        |  | NIS                      |       |  | U.S. dollar ($)            | 
|----------------------- |  | ------------------------ | ----- |  | -------------------------- | 
|                        |  | Price Per Ordinary Share |       |  | Price Per OrdinaryShare(1) | 
|                        |  | High                     |       |  | Low                        | 
|Annual:                 |  |                          |       |  |                            | 
|2016                    |  |                          | 0.389 |  |                            | 
|2015                    |  |                          | 0.769 |  |                            | 
|2014                    |  |                          | 0.796 |  |                            | 
|2013                    |  |                          | 1.052 |  |                            | 
|2012                    |  |                          | 1.712 |  |                            | 
|2011                    |  |                          | 3.139 |  |                            | 
|2010                    |  |                          | 4.005 |  |                            | 
|Quarterly:              |  |                          |       |  |                            | 
|First Quarter 2017      |  |                          | 0.491 |  |                            | 
|Fourth Quarter 2016     |  |                          | 0.373 |  |                            | 
|Third Quarter 2016      |  |                          | 0.369 |  |                            | 
|Second Quarter 2016     |  |                          | 0.389 |  |                            | 
|First Quarter 2016      |  |                          | 0.389 |  |                            | 
|Fourth Quarter 2015     |  |                          | 0.405 |  |                            | 
|Third Quarter 2015      |  |                          | 0.462 |  |                            | 
|Second Quarter 2015     |  |                          | 0.728 |  |                            | 
|First Quarter 2015      |  |                          | 0.769 |  |                            | 
|Fourth Quarter 2014     |  |                          | 0.759 |  |                            | 
|Third Quarter 2014      |  |                          | 0.788 |  |                            | 
|Second Quarter 2014     |  |                          | 0.79  |  |                            | 
|First Quarter 2014      |  |                          | 0.796 |  |                            | 
|Fourth Quarter 2013     |  |                          | 0.817 |  |                            | 
|Third Quarter 2013      |  |                          | 0.822 |  |                            | 
|Second Quarter 2013     |  |                          | 0.751 |  |                            | 
|Most Recent Six Months: |  |                          |       |  |                            | 
|Mar 2017                |  |                          | 0.57  |  |                            | 
|Feb 2017                |  |                          | 0.543 |  |                            | 
|Jan 2017                |  |                          | 0.491 |  |                            | 
|Dec 2016                |  |                          | 0.353 |  |                            | 
|Nov 2016                |  |                          | 0.367 |  |                            | 
|Oct 2016                |  |                          | 0.373 |  |                            | 
|Sep 2016                |  |                          | 0.366 |  |                            | 



|(1) | Calculated using the exchange rate reported by the Bank of Israel for December 30, 2016, at the rate of one U.S. dollar per NIS 3.845.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



On April 27, 2017, the
last reported sale price of our ordinary shares on the TASE was NIS 0.592 per share, or $0.1623 per share (based on the exchange
rate reported by the Bank of Israel for such date). On April 27, 2017, the exchange rate of the NIS to the dollar was $1.00=3.643,
as reported by the Bank of Israel. As of April 28, 2017, there were two shareholders of record of our ordinary shares. The number
of record holders is not representative of the number of beneficial holders of our ordinary shares.



| | B. | Plan of Distribution
| | -- | --------------------



Not applicable.



| | C. | Markets
| | -- | -------



See “Listing
Details” above.



| | D. | Selling Shareholders
| | -- | --------------------



Not applicable.



| | E. | Dilution
| | -- | --------



Not applicable.



| | F. | Expenses of the Issue
| | -- | ---------------------



Not applicable.





86







|Item 10. | ADDITIONAL INFORMATION
|-------- | ----------------------



| | A. | Share Capital
| | -- | -------------



Not
applicable.



| | B. | Articles of Association
| | -- | -----------------------



Our number with the Israeli
Registrar of Companies is 513436105. Our purpose is set forth in Section 4 of our Articles of Association and include every lawful
purpose in the Biotechnology field.



Our authorized share capital
consists of 391,000,000 ordinary shares, par value NIS 0.0000001 per share. As of December 31, 2016, there were 135,097,367 ordinary
shares issued and outstanding (including those represented by ADSs). As of April 28, 2017, there were 175,715,799 ordinary shares
issued and outstanding (including those represented by ADSs). All of our outstanding ordinary shares are validly issued, fully
paid and non-assessable. Our ordinary shares are not redeemable and do not have any preemptive rights.



Pursuant to Israeli securities
laws, a company whose shares are traded on the TASE may not have more than one class of shares for a period of one year following
its registration, after which it is permitted to issue preferred shares (which shall bear a dividend preference and shall not have
any voting rights), and all outstanding shares must be validly issued and fully paid. All outstanding shares must be registered
for trading on the TASE which currently prohibits the issuance of more than one class of shares.



Voting Rights



Holders of our ordinary
shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholder meeting.
Shareholders may vote at shareholder meetings either in person, by proxy or by written ballot. Israeli law does not allow public
companies to adopt shareholder resolutions by means of written consent in lieu of a shareholder meeting. The board of directors
shall determine and provide a record date for each shareholders meeting and all shareholders at such record date may vote. Unless
stipulated differently in the Companies Law or in the articles of association, all shareholders’ resolutions shall be approved
by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the prior
approval of the holders of at least 75% of our shares, represented and voting at a general meeting.



Transfer of Shares



Our ordinary shares that
are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer
is restricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. The ownership or
voting of our ordinary shares by non-residents of Israel is not restricted in any way by our articles of association or Israeli
law, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.



The Powers of the Directors



Our board of directors
shall direct the Company’s policy and shall supervise the performance of the Company’s Chief Executive Officer. Pursuant
to the Companies Law and our articles of association, our board of directors may exercise all powers and take all actions that
are not required under law or under our articles of association to be exercised or taken by our shareholders, including the power
to borrow money for company purposes.



Amendment of share capital



Our articles of association
enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must
be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital.
In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence
of sufficient retained earnings and profits and an issuance of shares for less than their nominal value, require a resolution of
our board of directors and court approval.



Dividends



Under Israeli law, we may
declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that the distribution
will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies
Law, the distribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent
years legally available for distribution according to our then last reviewed or audited financial statements, provided that the
date of the financial statements is not more than six months prior to the date of distribution. In the event that we do not have
retained earnings or earnings generated over the two most recent years legally available for distribution, we may seek the approval
of the court in order to distribute a dividend. The court may approve our request if it is determines that there is no reasonable
concern that the payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become
due.





87







Shareholder Meetings



Under Israeli law, we are
required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 months
after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred
to as special meetings. Our board of directors may call special meetings whenever it sees fit, at such time and place, within or
outside of Israel, as it may determine. In addition, the Companies Law and our articles of association provide that our board of
directors is required to convene a special meeting upon the written request of (i) any two of our directors or one quarter of the
directors then in office; or (ii) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital
and 1% of our outstanding voting power, or (b) 5% of our outstanding voting power.



Subject to the provisions
of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings
are the shareholders of record on a date to be decided by the board of directors. Furthermore, the Companies Law and our articles
of association require that resolutions regarding the following matters must be passed at a general meeting of our shareholders:



| | ● | amendments to our articles of association;                                                                                                                                                                                                                                                    
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                               
| | ● | appointment or termination of our auditors;                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                               
| | ● | appointment of directors and appointment and dismissal of external directors;                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                               
| | ● | approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                               
| | ● | director compensation, indemnification and change of the principal executive officer;                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                               
| | ● | increases or reductions of our authorized share capital;                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                               
| | ● | a merger;                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                               
| | ● | the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management; and                                                                              
| |   |                                                                                                                                                                                                                                                                                               
| | ● | authorizing the chairman of the board of directors or his relative to act as the company’s chief executive officer or act with such authority; or authorize the company’s chief executive officer or his relative to act as the chairman of the board of directors or act with such authority.



The Companies Law requires
that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting and if the agenda
of the meeting includes the appointment or removal of directors, the approval of transactions with office holders or interested
or related parties, or an approval of a merger, notice must be provided at least 35 days prior to the meeting.



The Companies Law does
not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articles
of association do not allow shareholders to approve corporate matters by written consent.



Pursuant to our articles
of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before
the shareholders at a general meeting.



Quorum



The quorum required for
our general meetings of shareholders consists of one or more shareholders present in person, by proxy or by other voting instrument
in accordance with the Companies Law who hold or represent, in the aggregate, at least 10% of the total outstanding voting rights,
within half an hour from the appointed time.



A meeting adjourned for
lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified
in the summons or notice of the meeting. At the reconvened meeting, any number of our shareholders present in person or by proxy
shall constitute a lawful quorum.





88







Resolutions



Our articles of association
provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law or
by another provision of the articles of association.



Israeli law provides that
a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which the shareholder
indicates how he or she votes on resolutions relating to the following matters:



| | ● | an appointment or removal of directors;                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                               
| | ● | an approval of transactions with office holders or interested or related parties, that require shareholder approval;                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                               
| | ● | an approval of a merger;                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                               
| | ● | authorizing the chairman of the board of directors or his relative to act as the company’s chief executive officer or act with such authority; or authorize the company’s chief executive officer or his relative to act as the chairman of the board of directors or act with such authority;
| |   |                                                                                                                                                                                                                                                                                               
| | ● | any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate any additional matters; and                                                                                                        
| |   |                                                                                                                                                                                                                                                                                               
| | ● | other matters which may be prescribed by Israel’s Minister of Justice.                                                                                                                                                                                                                        



The provision allowing
the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the
vote.



The Companies Law provides
that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its other shareholders,
must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings
on matters such as changes to the articles of association, increasing the company’s registered capital, mergers and approval
of certain interested or related party transactions. A shareholder also has a general duty to refrain from depriving any other
shareholder of its rights as a shareholder. In addition, any controlling shareholder, any shareholder who knows that its vote can
determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, can appoint
or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the
company. The Companies Law does not describe the substance of this duty except that the remedies generally available upon a breach
of contract will also apply to a breach of the duty to act with fairness, and, to the best of our knowledge, there is no binding
case law that addresses this subject directly.



Under the Companies Law,
unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval
by a simple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the
resolution. Generally, a resolution for the voluntary winding up of the company requires the approval of holders of 75% of the
voting rights represented at the meeting, in person, by proxy or by written ballot and voting on the resolution.



In the event of our liquidation,
after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion
to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend
or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.



Access to Corporate Records



Under the Companies Law,
all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholders
register and principal shareholders register, articles of association, financial statements and any document it is required by
law to file publicly with the Israeli Companies Registrar and the ISA. Any of our shareholders may request to review any document
in our possession that relates to any action or transaction with a related party, interested party or office holder that requires
shareholder approval under the Companies Law. We may deny a request to review a document if we determine that the request was not
made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwise
prejudice our interests.





89







Acquisitions under Israeli
Law



Full Tender Offer



A person wishing to acquire
shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstanding
share capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase
of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli company and
who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make
a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of the issued and outstanding
shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share
capital of the company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred
to the acquirer by operation of law (provided that a majority of the offerees that do not have a personal interest in such tender
offer shall have approved the tender offer except that if the total votes to reject the tender offer represent less than 2% of
the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not
have a personal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its
shares so transferred may petition the court within six months from the date of acceptance of the full tender offer, whether or
not such shareholder agreed to the tender or not, to determine whether the tender offer was for less than fair value and whether
the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that a shareholder
that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer
and the company disclosed the information required by law in connection with the full tender offer. If the shareholders who did
not accept the tender offer hold 5% or more of the issued and outstanding share capital of the company or of the applicable class,
the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued
and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.



Special Tender Offer



The Companies Law provides
that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of the
acquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions
in the Companies Law is met. This rule does not apply if there is already another holder of at least 25% of the voting rights in
the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a
tender offer if as a result of the acquisition the purchaser would become a holder of 45% or more of the voting rights in the company,
if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one of the exemptions
in the Companies Law is met.



A special tender offer
must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5%
of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders.
A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding
shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders
objected to the offer.



If a special tender offer
is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling
person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into
a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity
undertook to effect such an offer or merger in the initial special tender offer.



Under regulations enacted
pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares are listed for
trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include
provisions limiting the percentage of control which may be acquired or that the purchaser is required to make a tender offer to
the public. However, the Israeli Securities Authority’s opinion is that such leniency does not apply with respect to companies
whose shares are listed for trading on stock exchanges in the United States, including the NASDAQ Capital Market, which do not
provide for sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore
the special tender offer requirements shall apply to such companies.





90







Merger



The Companies Law permits
merger transactions if approved by each party’s board of directors and, unless certain requirements described under the Companies
Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders’ meeting called with
at least 35 days’ prior notice.



For purposes of the shareholder
vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at the shareholders
meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding
shares or the right to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would
have been approved but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided
above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the
court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration
offered to the shareholders.



Upon the request of a creditor
of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable
concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties
to the merger, and may further give instructions to secure the rights of creditors.



In addition, a merger may
not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by each
party with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders
of each party.



Antitakeover Measures



The Companies Law allows
us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain
preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this annual report, we
do not have any authorized or issued shares other than our ordinary shares. In the future, if we do create and issue a class of
shares other than ordinary shares, such class of shares, depending on the specific rights that may be attached to them, may delay
or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary
shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the
prior approval of the holders of at least 75% of our shares at a general meeting. In addition, the rules and regulations of the
TASE also limit the terms permitted with respect to a new class of shares and prohibit any such new class of shares from having
voting rights. Shareholders voting in such meeting will be subject to the restrictions provided in the Companies Law as described
above.



| | C. | Material Contracts
| | -- | ------------------



Other than the license
agreement with Yeda, the collaboration with the UNISEC consortium, both referred to elsewhere in this Annual Report, the ATM Agreement
and the investment agreement described below, we have not entered into any other material agreements (other than agreements entered
into in the ordinary course of business) in the two years immediately preceding the date of this annual report.





91







Investment Agreement



On January 1, 2017, we entered into an Investment
Agreement with Angles Investments in Hi Tech Ltd., or the Investor, a private Israeli company controlled by Mr. Marius Nacht, an
Israeli Investor, for the issuance of ordinary shares of the Company. Pursuant to the terms of the Agreement, the Investor invested
in the Company amount equal to NIS 10,904,749 (approximately US$2.83 million), or the Investment Amount. In consideration for the
Investment Amount, the Company issued to the Investor 33,760,832 ordinary shares of the Company, NIS 0.0000001 par value (equivalent
to approximately 844,000 ADSs). The Investment Amount represents a price per share that is equal to the closing share price on
TASE as of December 29, 2016, which was NIS 0.323 per share. To date, the issued Shares represent 19.99% of the Company’s
issued and outstanding capital, and 12.08% of the Company’s issued and outstanding capital on a fully diluted basis.



The issued shares will be restricted for trade
on TASE in accordance with Section 15C of the Israeli Securities Law,1968-5,728, as follows: (i) the Investor shall be prohibited
from offering the Shares for sale on TASE during a period of six months from the date of issuance; (ii) At the end of the aforementioned
six month period and during six calendar quarters, Investor may offer to sell the Shares on TASE in a limited amount, not exceeding
the average daily trade volume of the Shares on TASE during an 8 week period prior to the date of such sale offer, and so long
as the total amount of the Shares sold during one calendar quarter does not exceed 1% of the issued and outstanding capital of
the Company.



The issued shares have not been registered
under the Securities Act of 1933 and may not be offered or sold in the United States or to a U.S. Persons (other than distributors)
unless registered under the Securities Act or an exemption therefrom is available. The issued shares shall contained a legend indicating
that the transfer is prohibited except in accordance with the provisions of Regulation S or pursuant to registration under the
Securities Act or an available exemption therefrom, and hedging transaction involving the Shares may not be conducted unless in
compliance with the Securities Act.



The Investment Amount is expected to be utilized
by us for working capital, operating expenses and other general corporate purposes.



In addition, following the closing of this
investment transaction, Mr. Isaac Devash was appointed as a director of the Company, commencing on February 14, 2017.



ATM Agreement



On November 4, 2016,
we entered into an ATM Agreement with FBR, pursuant to which FBR, may, at our discretion and at such times as it shall determine
from time to time, sell our ADSs, or the Placement Shares, through an “at the market offering” program, or the ATM
Program, pursuant to Instruction I.B.5. of the Registration Statement on Form F-3.



Any sales of Placement Shares pursuant to
the ATM Agreement will be made under the Registration Statement on Form F-3 filed by us and declared effective on December 15,
2016, or the Registration Statement. Under the ATM Agreement, we may sell Placement Shares through FBR by any method permitted
that is deemed an “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended, or
the Securities Act, including sales made directly on or through the NASDAQ, the existing trading market for our ADSs, sales made
to or through a market maker other than on an exchange or otherwise, in negotiated transactions at market prices prevailing at
the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law.



We will pay FBR a commission equal to 3.0%
of the gross sales price of the Placement Shares sold pursuant to the ATM Agreement and reimburse FBR for its reasonable out-of-pocket
expenses, in connection with the offering. We have provided FBR with customary representations and warranties, and indemnification
rights. In addition, the Company has agreed to pay Aegis Capital Corp., or Aegis, a fee equal to up to 2.0% of the gross sales
price of the Placement Shares sold on our behalf by FBR through and including May 11, 2017, for Aegis’ waiver of its right
of first refusal in accordance with the underwriting agreement entered by us and Aegis on May 11, 2015 in connection with our initial
public offering.



The ATM Agreement will terminate upon the
earliest of: (1) the sale of all of the Placement Shares subject to the ATM Agreement or (2) the termination of the ATM Agreement
in accordance with its terms.



| | D. | Exchange Controls
| | -- | -----------------



In
1998, Israeli currency control regulations were liberalized significantly, so that Israeli residents generally may freely deal
in foreign currency and foreign assets, and non-residents may freely deal in Israeli currency and Israeli assets. There are currently
no Israeli currency control restrictions on remittances of dividends on the ordinary shares or the proceeds from the sale of the
shares provided that all taxes were paid or withheld; however, legislation remains in effect pursuant to which currency controls
can be imposed by administrative action at any time.



Non-residents
of Israel may freely hold and trade our securities. Neither our articles of association nor the laws of the State of Israel restrict
in any way the ownership or voting of ordinary shares by non-residents, except that such restrictions may exist with respect to
citizens of countries which are in a state of war with Israel. Israeli residents are allowed to purchase our ordinary shares.





92







| | E. | Taxation
| | -- | --------



The following description
is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our ordinary
shares or ADSs (both referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences
of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including
Israeli, or other taxing jurisdiction.



Israeli Tax Considerations and Government
Programs



The following is a summary
of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income tax
consequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income
tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types
of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel or traders
in securities who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based
on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the
appropriate tax authorities or the courts will accept the views expressed in this discussion. This summary is based on laws and
regulations in effect as of the date of this annual report and does not take into account possible future amendments which may
be under consideration.



General corporate tax structure in Israel



Israeli
residentcompanies, such as the Company, are generally subject
to corporate tax at the rate of25%
as of 2016. As of January 1, 2017 the corporate tax rate was reduced to 23%. However, during the period between January 1, 2017
until December 31, 2017 the tax rate will be 24%.



Capital gains derived by
an Israeli resident company are generally subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation,
a corporation will be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated
in Israel; or (b) the control and management of its business are exercised in Israel.



Taxation of our Israeli individual shareholders
on receipt of dividends



Israeli residents who
are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or share
dividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below)
at the time of distribution or at any time during the preceding 12-month period.



As of January 1, 2013, an additional income tax
at a rate of 2% is imposed on high earners whose annual income or gain (“Income Celling”) exceeds NIS 811,560.
As of January 1, 2017 the rate was increased to 3% and the Income Celling was dropped to a sum of NIS 640,000.



A “substantial Shareholder”
is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,
holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control”
generally include the right to vote, receive profits, nominate a director or an officer, receive assets upon liquidation, or instruct
someone who holds any of the aforesaid rights regarding the manner in which he or she is to exercise such right(s), and all regardless
of the source of such right.



The term “Israeli
Resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life
is in Israel. The Israeli Tax Ordinance New Version, 1961 provides that in order to determine the center of life of an individual,
account will be taken of the individual’s family, economic and social connections, including: (a) place of permanent home;
(b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s
regular or permanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial
economic interests; (e) place of the individual’s activities in organizations, associations and other institutions. The center
of life of an individual will be presumed to be in Israel if: (a) the individual was present in Israel for 183 days or more in
the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’s
presence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be
rebutted either by the individual or by the assessing officer.



Taxation of Israeli Resident Corporations
on Receipt of Dividends



Israeli resident corporations
are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.



Capital Gains Taxes Applicable to Israeli
Resident Shareholders



The income tax rate applicable
to Real Capital Gain derived by an Israeli individual from the sale of shares which had been purchased after January 1, 2012, whether
listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (as
defined above) at the time of sale or at any time during the preceding 12-month period, such gain will be taxed at the rate of
30%. As of January 1, 2017, an additional tax at a rate of 3% is imposed on high earners whose annual income or gains exceed NIS
640,000.



Moreover, capital gains
derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary business
income, are taxed in Israel at ordinary income rates (23% as of April 2017 for corporations and up to 50% for individuals).





93







Taxation of Non-Israeli Shareholders
on Receipt of Dividends



Non-Israeli residents are
generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient
is a “substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date.
If the Shares are held by a nominee company, the nominee company or the financial institution will withhold at the source a tax
of 23% whether the recipient is a substantial shareholder or not. Otherwise, the withholding at the source will be 23% or 30% in
accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’s country
of residence.



A non-Israeli resident
who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of such
income; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other
taxable sources of income in Israel.



For
example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect
to Taxes on Income, as amended (the “U.S.-Israel Tax Treaty”), Israeli withholding tax on dividends paid to a U.S.
resident for treaty purposes may not, in general, exceed 25%. Where the recipient is a U.S. corporation owning 10% or more of
the voting shares of the paying corporation during the part of the paying corporation’s taxable year which precedes the
date of payment of the dividend and during the whole of its prior taxable year (if any) and the dividend is not paid from the
profits of a Benefited Enterprise, and not more than 25% of the gross income of the paying corporation consists of interest or
dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received from
subsidiary corporations, 50% or more of the outstanding shares
of the voting stock of which is owned by the paying corporation at the time such dividends or interest is received) the Israeli
tax withheld may not exceed 12.5%. When a corporation is the recipient of a dividend from a paying corporation of income derived
during any period for which the paying corporation is entitled to the reduced tax rate applicable to Benefited Enterprise, the
Israeli tax withheld may not exceed 15%, subject to the conditions mentioned above.



Capital gains income taxes applicable
to non-Israeli shareholders.



Non-Israeli resident shareholders
are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of our Shares,
provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However,
non-Israeli corporations will not be entitled to the foregoing exemptions if Israeli residents (i) jointly have a controlling interest
of more than 25% in such non-Israeli corporation or (ii) are the beneficiaries of or are entitled to 25% or more of the revenues
or profits of such non-Israeli corporation, whether directly or indirectly.



Regardless of whether shareholders
may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject to withholding
of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital
gains in order to avoid withholding at source at the time of sale.



Estate and gift tax



Israeli law presently does
not impose estate or gift taxes.



EACH PROSPECTIVE INVESTOR
SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF OUR
SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.



U.S. Federal Income Tax Consequences



The following is limited
to a general summary of what we believe to be material U.S. federal income tax consequences relating to the purchase, ownership
and disposition of our Shares by U.S. Investors (as defined below) that are initial purchasers of such Shares and that hold such
Shares as capital assets. This summary is based on the Code, the regulations of the U.S. Department of the Treasury issued pursuant
to the Code, or the Treasury Regulations, the income tax treaty between the United States and Israel, or the U.S.-Israel Tax Treaty,
and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change,
possibly with retroactive effect, or to different interpretation. No ruling has been sought from the IRS with respect to any U.S.
federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary
position. This summary does not address all of the tax considerations that may be relevant to specific U.S. Investors in light
of their particular circumstances or to U.S. Investors subject to special treatment under U.S. federal income tax law (including,
without limitation, banks, financial institutions, insurance companies, tax-exempt entities, retirement plans, tax-deferred accounts,
regulated investment companies, “S corporations,” grantor trusts, partnerships, dealers or traders in securities or
currencies, brokers, governments or agencies or instrumentalities thereof, real estate investment trusts, certain former citizens
or residents of the United States, persons who acquire our Shares as part of a straddle, hedge, conversion transaction or other
integrated investment, persons subject to the alternative minimum tax, persons who acquire our Shares through the exercise or cancellation
of employee stock options, in connection with employee incentive plans, or otherwise as compensation for their services, persons
that have a “functional currency” other than the U.S. dollar, persons that own (or are deemed to own, indirectly or
by attribution) Shares representing 10% or more of the voting power or value of our ordinary shares, or persons that mark their
securities to market for U.S. federal income tax purposes). This summary does not address any U.S. state or local or non-U.S. tax
considerations or any U.S. federal estate, gift, generation skipping or alternative minimum tax considerations or any U.S. federal
tax consequences other than U.S. federal income tax consequences.





94







As used in this summary,
the term “U.S. Investor” means a beneficial owner of our Shares that is, for U.S. federal income tax purposes, (i)
an individual citizen or resident of the United States, (ii) a corporation, or other entity taxable as a corporation for U.S. federal
income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia,
(iii) an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust with respect
to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S.
persons have the authority to control all of its substantial decisions, or that has a valid election in effect under applicable
Treasury Regulations to be treated as a “United States person.”



If an entity treated as
a partnership for U.S. federal income tax purposes holds our Shares, the tax treatment of such partnership and each partner thereof
will generally depend upon the status and activities of the partnership and such partner. A holder that is treated as a partnership
for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal income tax considerations applicable
to it and its partners of the purchase, ownership and disposition of its Shares.



Prospective investors should
be aware that this summary does not address the tax consequences to investors who are not U.S. Investors. Prospective investors
should consult their own tax advisors as to the particular tax considerations applicable to them relating to the purchase, ownership
and disposition of their Shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.



Taxation of U.S. Investors



The discussions under “Distributions”
and under “Sale, Exchange or Other Disposition of Shares” below assumes that we will not be treated as a PFIC for U.S.
federal income tax purposes. However, we have not determined whether we will be a PFIC in 2014 or any subsequent year, and it is
possible that we will be a PFIC in 2014 or in one or more subsequent years. For a discussion of the rules that would apply if we
are treated as a PFIC, see the discussion under “Passive Foreign Investment Company.”



Distributions. We
have no current plans to pay dividends. To the extent we pay any dividends, a U.S. Investor will be required to include in gross
income as a taxable dividend (without reduction for any Israeli tax withheld from such distribution) the amount of any distributions
made on the Shares to the extent that those distributions are paid out of our current or accumulated earnings and profits as determined
for U.S. federal income tax purposes. Any distributions in excess of our earnings and profits will be applied against and will
reduce (but not below zero) the U.S. Investor’s tax basis in its Shares (thereby increasing the amount of gain, or decreasing
the amount of loss, to be recognized by the U.S. Investor on a subsequent disposition of the Shares), and, to the extent they exceed
that tax basis, will be treated as gain from the sale or exchange of those Shares. We do not expect to maintain calculations of
our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Investor should expect that the entire amount
of any distribution generally may be treated as dividend income.



If we were to pay dividends,
we expect to pay such dividends in NIS. A dividend paid in NIS, including the amount of any Israeli taxes withheld, will be includible
in a U.S. Investor’s income as a U.S. dollar amount calculated by reference to the exchange rate in effect on the date such
dividend is received, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted to
U.S. dollars on the date of receipt, a U.S. Investor generally will not recognize a foreign currency gain or loss. However, if
the U.S. Investor converts the NIS into U.S. dollars on a later date, the U.S. Investor must include, in computing its income,
any gain or loss resulting from any exchange rate fluctuations. The gain or loss will be equal to the difference between (i) the
U.S. dollar value of the amount included in income when the dividend was received and (ii) the amount received on the conversion
of the NIS into U.S. dollars. Such gain or loss will generally be ordinary income or loss and United States source for U.S. foreign
tax credit purposes. U.S. Investors should consult their own tax advisors regarding the tax consequences to them if we pay dividends
in NIS or any other non-U.S. currency.



Subject to certain significant
conditions and limitations, including potential limitations under the U.S.—Israel Tax Treaty, any Israeli income taxes paid
on or withheld from distributions from us and not refundable to a U.S. Investor may be credited against the investor’s U.S.
federal income tax liability or, alternatively, may be deducted from the investor’s taxable income. The election to deduct,
rather than credit, foreign taxes, is made on a year-by-year basis and applies to all foreign taxes paid by a U.S. Investor or
withheld from a U.S. Investor that year. Dividends paid on the Shares generally will constitute income from sources outside the
United States, which may be relevant in calculating a U.S. Investor’s foreign tax credit limitation. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends paid
on our Shares should generally be categorized as “passive category income” or, in the case of some U.S. Investors,
as “general category income” for U.S. foreign tax credit purposes. Because the rules governing foreign tax credits
are complex, U.S. Investors should consult their own tax advisors regarding the availability of foreign tax credits in their particular
circumstances.



Dividends paid on the Shares
will not be eligible for the “dividends-received” deduction generally allowed to corporate U.S. Investors with respect
to dividends received from U.S. corporations.





95







Certain distributions treated
as dividends that are received by an individual U.S. Investor from “qualified foreign corporations” generally qualify
for a reduced tax rate (currently a maximum of 20%) so long as certain holding period and other requirements are met. A non-U.S.
corporation (other than a corporation that is treated as a PFIC for the taxable year in which the dividend is paid or the preceding
taxable year) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive
tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes
of this provision and which includes an exchange of information program, or (ii) with respect to any dividend it pays on stock
which is readily tradable on an established securities market in the United States. Dividends paid by us in a taxable year in which
we are not a PFIC and with respect to which we were not a PFIC in the preceding taxable year are expected to be eligible for the
20% reduced maximum tax rate, although we can offer no assurances in this regard. However, any dividend paid by us in a taxable
year in which we are a PFIC or were a PFIC in the preceding taxable year will be subject to tax at regular ordinary income rates
(along with any applicable additional PFIC tax liability, as discussed below). As noted above, we have not determined whether we
are currently a PFIC or not or whether we will be a PFIC or not. In addition, a non-corporate U.S. Investor will not be eligible
for reduced U.S. federal income tax rate with respect to dividend distributions on Shares if (a) such U.S. Investor has not held
the Shares for at least 61 days during the 121-day period starting on the date which is 60 days before, and ending 60 days after
the ex-dividend date, (b) to the extent the U.S. Investor is under an obligation to make related payments on substantially similar
or related property or (c) with respect to any portion of a dividend that is taken into account by the U.S. Investor as investment
income under Section 163(d)(4)(B) of the Code. Any days during which the U.S. Investor has diminished its risk of loss with respect
to Shares (for example, by holding an option to sell the Shares) are not counted towards meeting the 61-day holding period. Non-corporate
U.S. Investors should consult their own tax advisors concerning whether dividends received by them qualify for the reduced rate
of tax.



The additional 3.8% net
investment income tax (described below) may apply to dividends received by certain U.S. Investors who meet the modified adjusted
gross income thresholds.



Sale, Exchange or Other
Disposition of Shares. Subject to the discussion under “Passive Foreign Investment Company” below, a U.S.
Investor generally will recognize capital gain or loss upon the sale, exchange or other disposition of our Shares in an amount
equal to the difference between the amount realized on the sale, exchange or other disposition and the U.S. Investor’s adjusted
tax basis in such Shares. The adjusted tax basis in an ordinary share generally will be equal to the cost basis of such ordinary
share. This capital gain or loss will be long-term capital gain or loss if the U.S. Investor’s holding period in our Shares
exceeds one year. Preferential tax rates for long-term capital gain (currently, with a maximum rate of 20%) will apply to individual
U.S. Investors. The deductibility of capital losses is subject to limitations. The gain or loss will generally be income or loss
from sources within the United States for U.S. foreign tax credit purposes, possibly subject to certain exceptions in U.S.-Israel
Tax Treaty. Additionally, certain losses may be treated as foreign source to the extent certain dividends were received by the
U.S. Investor within the 24-month period preceding the date on which the U.S. holder recognized the loss. The additional 3.8% net
investment income tax (described below) may apply to gains recognized upon the sale, exchange or other taxable disposition of our
Shares by certain U.S. Investors who meet the modified adjusted gross income thresholds.



U.S. Investors should consult
their own tax advisors regarding the U.S. federal income tax consequences of receiving currency other than U.S. dollars upon the
disposition of their Shares.



Passive Foreign Investment Company



In general, a corporation
organized outside the United States will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which
either (i) at least 75% of its gross income is “passive income” or (ii) 50% or more of the average quarterly value
of its gross assets consists of assets that produce, or are held for the production of, passive income. Passive income for this
purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities
transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts
derived by reason of the temporary investment of funds, including those raised in offerings of our Shares. Assets that produce
or are held for the production of passive income include, among other things, cash, even if held as working capital or raised in
a public offering, marketable securities and other assets that may produce passive income. In determining whether a non-U.S. corporation
is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least
a 25% interest (by value) is taken into account.



A foreign corporation’s
PFIC status is an annual determination that is based on tests that are factual in nature and our status for any year will depend
on our income, assets, and activities for such year, including, without limitation, how quickly we use the cash proceeds from the
offering in our business. In addition, because the value of our gross assets may be determined in part by reference to our market
capitalization, a decline in the value of our Shares may result in our becoming a PFIC. We have not determined whether we will
be a PFIC in the year in which the offering is completed or in future years. Because the PFIC determination is highly fact-intensive,
there can be no assurance that we will not be a PFIC in the year in which the offering is completed or any subsequent year.





96







U.S. Investors should be
aware of certain tax consequences of investing directly or indirectly in us if we are a PFIC. A U.S. Investor is subject to different
rules depending on whether the U.S. Investor makes an election to treat us as a “qualified electing fund,” known as
a QEF election, makes a “mark-to-market” election with respect to the Shares, or makes neither election. A QEF election
will not be available if we do not provide the information necessary to make such an election. It is not expected that a U.S. Investor
will be able to make a QEF election because we do not intend to provide U.S. Investors with the information necessary to make a
QEF election.



QEF Election. One
way in which certain of the adverse consequences of PFIC status can be mitigated is for a U.S. Investor to make a QEF election.
Generally, a shareholder making the QEF election is required for each taxable year to include in income a pro rata share of the
ordinary earnings and net capital gain of the QEF, subject to a separate election to defer payment of taxes, which deferral is
subject to an interest charge. An election to treat us as a QEF will not be available if we do not provide the information necessary
to make such an election. We do not expect that a U.S. Investor will be able to make a QEF election because we do not intend to
provide U.S. Investors with the information necessary to make a QEF election. As discussed below, however, a mark-to-market election
that may alleviate some of the adverse consequences of PFIC status may be available to a U.S. Holder.



Mark-to-Market Election. Alternatively,
if our Shares are treated as “marketable stock,” a U.S. Investor would be allowed to make a “mark-to-market”
election with respect to our Shares, provided the U.S. Investor completes and files IRS Form 8621 in accordance with the relevant
instructions and related Treasury Regulations. If that election is made, the U.S. Investor generally would include as ordinary
income in each taxable year the excess, if any, of the fair market value of our Shares at the end of the taxable year over such
holder’s adjusted tax basis in such Shares. Thus, the U.S. Holder may recognize taxable income without receiving any cash
to pay its tax liability with respect to such income. The U.S. Investor would also be permitted an ordinary loss in respect of
the excess, if any, of the U.S. Investor’s adjusted tax basis in our Shares over their fair market value at the end of the
taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election.
A U.S. Investor’s tax basis in our Shares would be adjusted to reflect any such income or loss amount. Gain realized on the
sale, exchange or other disposition of our Shares would be treated as ordinary income, and any loss realized on the sale, exchange
or other disposition of our Shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market
gains previously included in income by the U.S. Investor, and any loss in excess of such amount will be treated as capital loss.
Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or
long-term capital gains.



Generally, stock will be
considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of
applicable Treasury Regulations. A class of stock is regularly traded on an exchange during any calendar year during which such
class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. To be marketable
stock, our Shares must be regularly traded on a qualifying exchange (i) in the United States that is registered with the SEC or
a national market system established pursuant to the Exchange Act or (ii) outside the United States that is properly regulated
and meets certain trading, listing, financial disclosure and other requirements. Our Shares are expected to constitute “marketable
stock” as long as they remain listed on the NASDAQ Capital Market and are regularly traded. Although we have received approval
to list the ADSs on the NASDAQ Capital Market, we cannot guarantee that the ADSs will continue to be listed on the NASDAQ Capital
Market.



A mark-to-market election
will not apply to our Shares held by a U.S. Investor for any taxable year during which we are not a PFIC, but will remain in effect
with respect to any subsequent taxable year in which we become a PFIC. The election will not remain in effect if the Shares are
no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. A mark-to-market election
will not apply to any PFIC subsidiary that we own. Each U.S. Investor is encouraged to consult its own tax advisor with respect
to the availability and tax consequences of a mark-to-market election with respect to our Shares.



Each U.S. investor should
consult its own tax adviser with respect to the applicability of the “net investment income tax” (discussed below)
where a mark-to-market election is in effect.



Default PFIC Rules. A
U.S. Investor who does not make a timely QEF election or a mark-to-market election, referred to in this disclosure as a “Non-Electing
U.S. Investor,” will be subject to special rules with respect to (i) any “excess distribution” (generally, the
portion of any distributions received by the Non-Electing U.S. Investor on the Shares in a taxable year in excess of 125% of the
average annual distributions received by the Non-Electing U.S. Investor in the three preceding taxable years, or, if shorter, the
Non-Electing U.S. Investor’s holding period for the Shares), and (ii) any gain realized on the sale or other disposition
of such Shares. Under these rules:



| | ● | the excess distribution or gain would be allocated ratably over the Non-Electing U.S. Investor’s holding period for such Shares;                                                                                                                                                                                                
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                 
| | ● | the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                 
| | ● | the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.





97







If a Non-Electing U.S.
Investor who is an individual dies while owning our Shares, the Non-Electing U.S. Investor’s successor would be ineligible
to receive a step-up in tax basis of such Shares. Non-Electing U.S. Investors should consult their tax advisors regarding the application
of the “net investment income tax” (described below) to their specific situation.



To the extent a distribution
on our Shares does not constitute an excess distribution to a Non-Electing U.S. Investor, such Non-Electing U.S. Investor generally
will be required to include the amount of such distribution in gross income as a dividend to the extent of our current or accumulated
earnings and profits (as determined for U.S. federal income tax purposes) that are not allocated to excess distributions. The tax
consequences of such distributions are discussed above under “Taxation of U.S. Investors — Distributions.” Each
U.S. Holder is encouraged to consult its own tax advisor with respect to the appropriate U.S. federal income tax treatment of any
distribution on our Shares.



If we are treated as a
PFIC for any taxable year during the holding period of a Non-Electing U.S. Investor, we will continue to be treated as a PFIC for
all succeeding years during which the Non-Electing U.S. Investor is treated as a direct or indirect Non-Electing U.S. Investor
even if we are not a PFIC for such years. A U.S. Investor is encouraged to consult its tax advisor with respect to any available
elections that may be applicable in such a situation, including the “deemed sale” election of Section 1298(b)(1) of
the Code (which will be taxed under the adverse tax rules described above).



We may invest in the equity
of foreign corporations that are PFICs or may own subsidiaries that own PFICs. If we are classified as a PFIC, under attribution
rules U.S. Investors will be subject to the PFIC rules with respect to their indirect ownership interests in such PFICs, such that
a disposition of the Shares of the PFIC or receipt by us of a distribution from the PFIC generally will be treated as a deemed
disposition of such Shares or the deemed receipt of such distribution by the U.S. Investor, subject to taxation under the PFIC
rules. There can be no assurance that a U.S. Investor will be able to make a QEF election with respect to PFICs in which we invest,
and a U.S. Investor may not make a mark-to-market election with respect to a PFIC in which we invest. Each U.S. Investor is encouraged
to consult its own tax advisor with respect to tax consequences of an investment by us in a corporation that is a PFIC.



In addition, U.S. Investors
should consult their tax advisors regarding the IRS information reporting and filing obligations that may arise as a result of
the ownership of Shares in a PFIC, including IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment
Company or Qualified Electing Fund).



The U.S. federal income
tax rules relating to PFICs, QEF elections, and mark-to market elections are complex. U.S. Investors are urged to consult their
own tax advisors with respect to the purchase, ownership and disposition of our Shares, any elections available with respect to
such Shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of our Shares.



Certain Reporting Requirements



Certain U.S. Investors
are required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation, and certain U.S. Investors may
be required to file IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, reporting transfers
of cash or other property to us and information relating to the U.S. Investor and us. Substantial penalties may be imposed upon
a U.S. Investor that fails to comply.



In addition, recently enacted
legislation requires certain U.S. Investors to report information on IRS Form 8938 with respect to their investments in certain
“foreign financial assets,” which would include an investment in our Shares, to the IRS.



Investors who fail to report
required information could become subject to substantial civil and criminal penalties. U.S. Investors should consult their tax
advisors regarding the possible implications of these reporting requirements on their investment in our Shares.





98







Disclosure of Reportable Transactions



If a U.S. Investor sells
or disposes of the Shares at a loss or otherwise incurs certain losses that meet certain thresholds, such U.S. Investor may be
required to file a disclosure statement with the IRS. Failure to comply with these and other reporting requirements could result
in the imposition of significant penalties.



Backup Withholding Tax and Information Reporting
Requirements



Generally, information
reporting requirements will apply to distributions on our Shares or proceeds on the disposition of our Shares paid within the United
States (and, in certain cases, outside the United States) to U.S. Investors other than certain exempt recipients, such as corporations.
Furthermore, backup withholding (currently at 28%) may apply to such amounts if the U.S. Investor fails to (i) provide a correct
taxpayer identification number, (ii) report interest and dividends required to be shown on its U.S. federal income tax return,
or (iii) make other appropriate certifications in the required manner. U.S. Investors who are required to establish their exempt
status generally must provide such certification on IRS Form W-9.



Backup withholding is not
an additional tax. Amounts withheld as backup withholding from a payment may be credited against a U.S. Investor’s U.S. federal
income tax liability and such U.S. Investor may obtain a refund of any excess amounts withheld by filing the appropriate claim
for refund with the IRS and furnishing any required information in a timely manner.



Medicare Tax on Investment Income



Certain U.S. persons, including
individuals, estates and trusts, will be subject to an additional 3.8% Medicare tax, or “net investment income tax,”
on unearned income. For individuals, the additional net investment income tax applies to the lesser of (i) “net investment
income” or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married and filing
jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s
gross investment income reduced by the deductions that are allocable to such income. Investment income generally includes passive
income such as interest, dividends, annuities, royalties, rents, and capital gains. U.S. Investors are urged to consult their own
tax advisors regarding the implications of the additional net investment income tax resulting from their ownership and disposition
of our Shares.



THE DISCUSSION ABOVE
IS A GENERAL SUMMARY. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF RELATING
TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.



| | F. | Dividends and Paying Agents
| | -- | ---------------------------



Not applicable.



| | G. | Statement by Experts
| | -- | --------------------



Not applicable.



| | H. | Documents on Display
| | -- | --------------------



We are subject to the information
reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements will file
reports with the SEC through its electronic data gathering, analysis and retrieval (EDGAR) system. Our securities filings, including
this Annual Report and the exhibits thereto, are available for inspection and copying at thepublic reference facilities of the
SEC located at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. The SEC also maintains a website at http://www.sec.gov from which
certain filings may be accessed.



As a foreign private issuer,
we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,
directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation
FD (Fair Disclosure) promulgated under the Exchange Act. In addition, we will not be required under the Exchange Act to file annual
or other reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered
under the Exchange Act.





99







We also intend to furnish
certain other material information to the SEC under cover of Form 6-K and to furnish to the SEC under cover of Form 6-K English
translations or summaries (in certain instances where applicable), in accordance with the provisions of Exchange Act Rule 12b-12(d),
of such Hebrew language immediate reports or information furnished to the TASE and the ISA, as well as other material agreements
that we may enter into that are written in the Hebrew language.



In addition, because our
ordinary shares are traded on the TASE, we have filed Hebrew language periodic and immediate reports with, and furnish information
to, the TASE and the ISA, as required under Chapter Six of the Israel Securities Law, 1968. Copies of our filings with the ISA
can be retrieved electronically through the MAGNA distribution site of the ISA (www.magna.isa.gov.il) and the TASE website
(www.maya.tase.co.il).



We maintain a corporate
website at www.biondvax.com. Information contained on, or that can be accessed through, our website does not constitute
a part of this annual report. We have included our website address in this annual report solely as an inactive textual reference.



| | I. | Subsidiary Information
| | -- | ----------------------



Not applicable.



|Item 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



We are exposed to market
risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, results
of operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange
rates, of financial instruments. Our market risk exposure is primarily a result of interest rates and foreign currency exchange
rates.



Interest Rate Risk



Following the date of this
annual report, we do not anticipate undertaking any significant long-term borrowings. At present, our investments consist primarily
of cash and cash equivalents and financial assets at fair value.



Following the date of this
annual report, we may invest in investment-grade marketable securities with maturities of up to three years, including commercial
paper, money market funds, and government/non-government debt securities. The primary objective of our investment activities is
to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and
loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and
the fair market value of our investments, if any. We manage this exposure by performing ongoing evaluations of our investments.
Due to the short-term maturities, if any, of our investments to date, their carrying value has always approximated their fair value.
If we decide to invest in investments other than cash and cash equivalents, it will be our policy to hold such investments to maturity
in order to limit our exposure to interest rate fluctuations.



Foreign Currency Exchange Risk



Our foreign currency exposures
give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainly against
the U.S. dollar and the Euro. Although the NIS is our functional currency, a small portion of our expenses are denominated in both
U.S. dollar and Euro. Our U.S. dollar and Euro expenses consist principally of payments made to sub-contractors and consultants
for clinical trials and other research and development activities as well as payments made to purchase new equipment. We anticipate
that a sizable portion of our expenses will continue to be denominated in currencies other than the NIS. If the NIS fluctuates
significantly against either the U.S. dollar or the Euro, it may have a negative impact on our results of operations. To date,
fluctuations in the exchange rates have not materially affected our results of operations or financial condition for the periods
under review.



To date, we entered into
currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal
operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.





100







|Item 12. | DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ----------------------------------------------------------



| | A. | Debt
                                         Securities
| | -- | --------------------------------------------------------



Not
applicable.



| | B. | Warrants
                                         and Rights
| | -- | ------------------------------------------------------------



For
a description of the ADS warrants, see Item 12D.



| | C. | Other
                                         Securities
| | -- | ---------------------------------------------------------



Not
applicable.



| | D. | American
                                         Depositary Shares
| | -- | -------------------------------------------------------------------



American
Depositary Shares



The
Bank of New York Mellon, as depositary, registered and delivered American Depositary Shares, also referred to as ADSs. Each ADS
represents forty (40) ordinary shares (or a right to receive forty (40) ordinary shares) deposited with the principal Tel Aviv
office of either of Bank Leumi or Bank Hapoalim, as custodian for the depositary. Each ADS also represents any other securities,
cash or other property which may be held by the depositary. The depositary’s office at which the ADSs are administered is
located at 101 Barclay Street, New York, New York 10286. The Bank of New York Mellon’s principal executive office is located
at One Wall Street, New York, New York 10286.



You may hold ADSs either
(A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific
number of ADSs, registered in your name, or (ii) by having ADSs registered in your name in the Direct Registration System, or DRS,
or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution. If you hold ADSs
directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If
you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights
of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures
are.



The DRS is a system administered
by The Depository Trust Company, or DTC, under which the depositary may register the ownership of uncertificated ADSs, which ownership
is confirmed by periodic statements sent by the depositary to the registered holders of uncertificated ADSs.



As an ADS holder, we will
not treat you as one of our shareholders and you will not have shareholder rights. Israeli law governs shareholder rights. The
depositary will be the holder of the ordinary shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder
rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs
sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement
and the ADSs.



The following is a summary
of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement
and the form of ADR. For directions on how to obtain copies of those documents see “Where You Can Find More Information”.



Dividends and Other
Distributions



How will you receive dividends
and other distributions on the shares?



The depositary has agreed
to pay to ADS holders the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited
securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary
shares your ADSs represent.



Cash. The depositary
will convert any cash dividend or other cash distribution we pay on the ordinary shares into U.S. dollars, if it can do so on a
reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval
is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those
ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders
who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.



Before making a distribution,
the depositary will deduct any withholding taxes, or other required governmental charges. The depositary will distribute only whole
U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time
when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.





101







Shares. The
depositary may distribute additional ADSs representing any ordinary shares we distribute as a dividend or free distribution. The
depositary will only distribute whole ADSs. It may sell ordinary shares which would require it to deliver a fraction of an ADS
and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the
outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed ordinary shares sufficient
to pay its fees and expenses in connection with that distribution.



Rights to purchase additional
shares. If we offer holders of our securities any rights to subscribe for additional ordinary shares or any other
rights, the depositary may make these rights available to ADS holders. If the depositary decides it is not legal and practical
to make the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the
rights and distribute the proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed
or sold to lapse. In that case, you will receive no value for them.



If the depositary makes
rights available to ADS holders, it will exercise the rights and purchase the ordinary shares on your behalf. The depositary will
then deposit the ordinary shares and deliver ADSs to the persons entitled to them. It will only exercise rights if you pay it the
exercise price and any other charges the rights require you to pay.



U.S. securities laws may
restrict transfers and cancellation of the ADSs represented by ordinary shares purchased upon exercise of rights. For example,
you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary
shares that have the same terms as the ADSs described in this section except for changes needed to put the necessary restrictions
in place.



Other Distributions. The
depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and
practical. If it cannot make the distribution in that way, the depositary will have a choice. It may decide to sell what we distributed
and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which
case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities
(other than ADSs) to ADS holders unless it receives reasonably satisfactory evidence from us that it is legal to make that distribution.
The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection
with that distribution



The depositary is not responsible
if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to
register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action
to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the
distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available
to you.



Deposit, Withdrawal
and Cancellation



How are ADSs issued?



The depositary will deliver
ADSs if you or your broker deposits ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment
of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will
register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or
persons that made the deposit.



How can ADS holders withdraw
the deposited securities?



You may surrender your
ADSs at the depositary’s office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or
stock transfer taxes or fees, the depositary will deliver the ordinary shares and any other deposited securities underlying the
ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense,
the depositary will deliver the deposited securities at its office, if feasible.



How do ADS holders interchange
between certificated ADSs and uncertificated ADSs?



You may surrender your
ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will
send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Alternatively,
upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange
of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those
ADSs.





102







Voting Rights



How do you vote?



ADS holders may instruct
the depositary how to vote the number of deposited ordinary shares their ADSs represent. Otherwise, you won’t be able
to exercise your right to vote unless you withdraw the shares. However, you may not know about the meeting sufficiently in advance
to withdraw the shares.



The depositary will notify
ADS holders of shareholders’ meetings and arrange to deliver our voting materials to them if we ask it to. Those materials
will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions
to be valid, they much reach the depositary by a date set by the depositary.



The depositary will try,
as far as practical, subject to the laws of Israel and of our articles of association or similar documents, to vote or to have
its agents vote the ordinary shares or other deposited securities as instructed by ADS holders. The depositary will only vote or
attempt to vote as instructed or as described in the following sentence. If we ask the depositary to solicit your instructions
at least 30 days before the meeting date but the depositary does not receive voting instructions from you by the specified date,
it will consider you to have authorized and directed it to give a discretionary proxy to a person designated by us to vote the
number of deposited securities represented by your ADSs. The depositary will give a discretionary proxy in those circumstances
to vote on all questions at to be voted upon unless we notify the depositary that:



| | ● | we do not wish to receive a discretionary proxy;
| | - | ------------------------------------------------



| | ● | there is substantial shareholder opposition to the particular question; or
| | - | --------------------------------------------------------------------------



| | ● | the particular question would have an adverse impact on our shareholders.
| | - | -------------------------------------------------------------------------



We are required to notify
the depositary if one of the conditions specified above exists.



We cannot assure you that
you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition,
the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out
voting instructions. This means that you may not be able to exercise your right to vote and there may be nothing you can do
if your ordinary shares are not voted as you requested.



In order to give you a
reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Deposited Securities, if we request
the Depositary to act, we agree to give the Depositary notice of any such meeting and details concerning the matters to be voted
upon at least 30 days in advance of the meeting date.



Fees and Expenses



|Persons depositing or withdrawing ordinary shares or ADS holders must pay:                                                                                                                    |  | For:                                                                                                                                                                                                                
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)                                                                                                                                         |  | Issuance of ADSs, including issuances resulting from a distribution of ordinary shares or rights or other property Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
|$.05 (or less) per ADS                                                                                                                                                                        |  | Any cash distribution to ADS holders                                                                                                                                                                                
|A fee equivalent to the fee that would be payable if securities distributed to you had been ordinary shares and the ordinary shares had been deposited for issuance of ADSs                   |  | Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders                                                                                    
|$.05 (or less) per ADS per calendar year                                                                                                                                                      |  | Depositary services                                                                                                                                                                                                 
|Registration or transfer fees                                                                                                                                                                 |  | Transfer and registration of ordinary shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw ordinary shares                                                  
|Expenses of the depositary                                                                                                                                                                    |  | Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) converting foreign currency to U.S. dollars                                                                             
|Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes |  | As necessary                                                                                                                                                                                                        
|Any charges incurred by the depositary or its agents for servicing the deposited securities                                                                                                   |  | As necessary                                                                                                                                                                                                        





103







The depositary collects
its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for the purpose
of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting
those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect
its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the
book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash
distribution payable to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting
services until its fees for those services are paid.



From time to time, the
depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders, or waive fees and
expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADS
program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers
that are affiliates of the depositary and that may earn or share fees or commissions.



Payment of Taxes



You will be responsible
for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs.
The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by
your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented
by your American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells
deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds,
or send to ADS holders any property, remaining after it has paid the taxes.



Reclassifications, Recapitalizations
and Mergers



|If we:                                                                                                                                                                                                                             |  | Then:                                                                                                                                                                                            
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|●    Change
        the nominal or par value of our shares
        ●     Reclassify,
        split up or consolidate any of the deposited securities                                                                               |  | The cash, ordinary shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited securities.
|●    Distribute
        securities on the ordinary shares that are not distributed to you
        ●    Recapitalize,
        reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action |  | The depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities.



Amendment and Termination



How may the deposit
agreement be amended?



We may agree with the depositary
to amend the deposit agreement and the ADSs without your consent for any reason. If an amendment adds or increases fees or charges,
except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery
charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until
30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered,
by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.



How may the deposit
agreement be terminated?



The depositary will terminate
the deposit agreement at our direction by mailing notice of termination to the ADS holders at least 30 days prior to the date fixed
in such notice for such termination. The depositary may also terminate the deposit agreement by mailing notice of termination to
us and the ADS holders if 60 days have passed from the date on which the depositary told us it wants to resign but a successor
depositary has not been appointed and accepted its appointment.



After termination, the
depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the deposited
securities, sell rights and other property, and deliver ordinary shares and other deposited securities upon cancellation of ADSs.
Four months after termination, the depositary may sell any remaining deposited securities by public or private sale. After that,
the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement
for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability
for interest. The depositary’s only obligations will be to account for the money and other cash. After termination our only
obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.



104







Limitations on Obligations
and Liability



Limits on our Obligations
and the Obligations of the Depositary; Limits on Liability to Holders of ADSs



The deposit agreement expressly
limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary.
We and the depositary:



| | ● | are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | ● | are not liable if we are or it are prevented or delayed by law or circumstances beyond our or its control from performing our or its obligations under the deposit agreement;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | are not liable if we or it exercise discretion permitted under the deposit agreement;
| | - | -------------------------------------------------------------------------------------



| | ● | are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | are not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and
| | - | ----------------------------------------------------------------------------------------------------------------



| | ● | may rely upon any documents we believe or it believe in good faith to be genuine and to have been signed or presented by the proper person.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



In the deposit agreement,
we and the depositary agree to indemnify each other under certain circumstances.



Requirements for Depositary Actions



Before the depositary will
deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:



| | ● | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any ordinary shares or other deposited securities;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
| | - | ----------------------------------------------------------------------------------------------------------------



| | ● | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



The depositary may refuse
to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at
any time if the depositary or we think it advisable to do so.



Your Right to Receive
the Ordinary Shares Underlying your ADSs



ADS holders have the right
to cancel their ADSs and withdraw the underlying ordinary shares at any time except:



| | ● | when temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our shares;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | when you owe money to pay fees, taxes and similar charges; or
| | - | -------------------------------------------------------------



| | ● | when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This right of withdrawal
may not be limited by any other provision of the deposit agreement.





105







Pre-release of ADSs



The deposit agreement permits
the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the ADSs. The depositary
may also deliver ordinary shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction
has been closed out). A pre-release is closed out as soon as the underlying ordinary shares are delivered to the depositary. The
depositary may receive ADSs instead of ordinary shares to close out a pre-release. The depositary may pre-release ADSs only under
the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents
to the depositary in writing that it or its customer owns the ordinary shares or ADSs to be deposited; (2) the pre-release is fully
collateralized with cash or other collateral that the depositary considers appropriate; and (3) the depositary must be able to
close out the pre-release on not more than five business days’ notice. In addition, the depositary will limit the number
of ADSs that may be outstanding at any time as a result of pre-release, although the depositary may disregard the limit from time
to time if it thinks it is appropriate to do so.



Direct Registration
System



In the deposit agreement,
all parties to the deposit agreement acknowledge that DRS and the Profile Modification System, or Profile, will apply to uncertificated
ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC under which the depositary may register the ownership
of uncertificated ADSs, which ownership will be confirmed by periodic statements sent by the depositary to the registered holders
of uncertificated ADSs. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of a registered
holder of ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to
the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register
that transfer.



In connection with and
in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that
the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting
registration of transfer and delivery described in the paragraph above has the actual authority to act on behalf of the ADS holder
(notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s
reliance on and compliance with instructions received by the depositary through the DRS/Profile System and in accordance with the
deposit agreement will not constitute negligence or bad faith on the part of the depositary.



Shareholder communications;
inspection of register of holders of ADSs



The depositary will make
available for your inspection at its office all communications that it receives from us as a holder of deposited securities that
we make generally available to holders of deposited securities. The depositary will send you copies of those communications if
we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders
about a matter unrelated to our business or the ADSs.



ADS warrants



The following summary
of certain terms and provisions of the ADS warrants offered as part of the initial public offering in the U.S. is not complete
and is subject to, and qualified in its entirety by the provisions of the ADS warrant Agent Agreement and form of Warrant Certificate,
which were filed as exhibits to the registration statement of which this post-effective amendment is a part. Prospective investors
should carefully review the terms and provisions set forth in the ADS Warrant Agent Agreement and form of Warrant Certificate.
ADS warrants issued in connection with the initial public offering in the U.S. are administered by The Bank of New York Mellon.



Exercisability. The
warrants are exercisable immediately upon issuance and at any time up to the date that is five years from the date of issuance.
The warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise
notice accompanied by payment in full for the number of ADSs purchased upon such exercise (except in the case of a cashless exercise
as discussed below), together with the ADS issuance fee of $0.05 per ADS and other applicable charges and taxes. Unless otherwise
specified in the warrant, the holder does not have the right to exercise the warrants, in whole or in part, if the holder (together
with its affiliates) would beneficially own in excess of 4.99% of the number of our ordinary shares outstanding immediately after
giving effect to the exercise, as such percentage is determined in accordance with the terms of the warrants.





106







Cashless Exercise. In
the event that a registration statement covering ADSs underlying the warrants is not effective, and an exemption from registration
is not available for the resale of such shares of ordinary shares underlying the warrants, the holder may, in its sole discretion,
exercise warrants and, in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment
of the aggregate exercise price, elect instead to receive upon such exercise the net number of shares of ordinary shares determined
according to the formula set forth in the warrant agreement. The issuance fee of $0.05 per ADS, as well as other applicable charges
and taxes, are due and payable upon any cashless exercise.



Exercise Price. The
initial exercise price per share of ADSs purchasable upon exercise of the warrants is $6.25 per ADS. In addition to the exercise
price per share of ADS, a $0.05 issuance fee per ADS and other applicable charges and taxes are due and payable upon exercise.



Anti-Dilution Provisions.The
exercise price is subject to adjustment in the event of sales of our ADSs or equivalent number of ordinary shares during the one-year
period following the closing at a price per share less than the exercise price then in effect (or securities convertible or exercisable
into ADSs or equivalent number of ordinary shares at a conversion or exercise price less than the exercise price then in effect
subject to customary exceptions). In addition, the exercise price and the number of shares issuable upon exercise are subject to
appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock subdivisions and combinations,
reclassifications or similar events affecting our ADSs or ordinary shares.



Transferability. Subject
to applicable laws, the warrants may be transferred at the option of the holders upon surrender of the warrants to us together
with the appropriate instruments of transfer.



Warrant Agent and Exchange
Listing. The warrants are issued in registered form under an ADS Warrant Agent Agreement between The Bank of New York
Mellon, as warrant agent and us.



Fundamental Transaction. If,
at any time while the warrants are outstanding, (1) we consolidate or merge with or into another corporation and we are not the
surviving corporation, (2) we sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of
our assets, (3) any purchase offer, tender offer or exchange offer (whether by us or another individual or entity) is completed
pursuant to which holders of our shares of ordinary shares are permitted to sell, tender or exchange their shares of ordinary shares
for other securities, cash or property and has been accepted by the holders of 50% or more of our outstanding shares of ordinary
shares, (4) we effect any reclassification or recapitalization of our shares of ordinary shares or any compulsory share exchange
pursuant to which our ordinary shares are converted into or exchanged for other securities, cash or property, or (5) we consummate
a stock or share purchase agreement or other business combination with another person or entity whereby such other person or entity
acquires more than 50% of our outstanding ordinary shares, each, a “Fundamental Transaction”, then upon any subsequent
exercise of the warrants, the holders thereof will have the right to receive the same amount and kind of securities, cash or property
as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior
to such Fundamental Transaction, the holder of the number of warrant shares then issuable upon exercise of the warrant, and any
additional consideration payable as part of the Fundamental Transaction.



Rights as a Stockholder. Except as otherwise provided in the warrant agreement or by virtue of such holder’s ownership of ADSs or ordinary
shares, the holder of warrants does not have rights or privileges of a holder of ADSs or ordinary shares, including any voting
rights, until the holder exercises the warrant.





107







PART
II



|Item
    13. | DEFAULTS, DIVIDEND
    ARREARAGES AND DELINQUENCIES
|------------ | ---------------------------------------------------



None.



|Item
    14. | MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|------------ | --------------------------------------------------------------------------------



Not
applicable



|Item
    15. | CONTROLS
    AND PROCEDURES
|------------ | ---------------------------



Disclosure
Controls and Procedures



Our
management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as
of December 31, 2016, or the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation
Date, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis,
information required to be included in periodic filings under the Exchange Act and that such information is accumulated and communicated
to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding
required disclosure.



Management
Annual Report on Internal Control over Financial Reporting



Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Rule 13a-15(f) promulgated under the Exchange Act. Our internal control system was designed to provide reasonable assurance
to our management and board of directors regarding the reliability of financial reporting and the preparation and fair presentation
of published financial statements for external purposes in accordance with generally accepted accounting principles. All internal
control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.





108







Our
management, including the CEO and CFO, conducted an evaluation, pursuant to Rule 13a-15(c) promulgated under the Exchange Act,
of the effectiveness, as of the end of the period covered by this Annual Report, of its internal control over financial reporting
based on the framework in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013). Based on the results of this evaluation, management concluded that our internal control over
financial reporting was effective as of December 31, 2015.



Changes
in Internal Control over Financial Reporting



There
were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) that occurred during the period covered by this annual report that have materially affected, or that are reasonably
likely to materially affect, our internal control over financial reporting.



Attestation
Report of the Registered Public Accounting Firm



This
annual report does not include an attestation report of our registered public accounting firm because we are a non-accelerated
filer and an emerging growth company.



|Item
    16. | [Reserved]
|------------ | ----------



|Item
    16A. | AUDIT
    COMMITTEE FINANCIAL EXPERT
|------------- | ------------------------------------



Our
Board of Directors has determined that Ms. Irit Ben Ami, a member of our Audit Committee, is an audit committee financial expert,
as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and NASDAQ
rules.



|Item
    16B. | CODE
    OF ETHICS
|------------- | ------------------



We
have adopted a written code of ethics that applies to our officers and employees, including our principal executive officer, principal
financial officer, principal controller and persons performing similar functions as well as our directors. Our Code of Business
Conduct and Ethics is posted on our website at www.biondvax.com. Information contained on, or that can be accessed through,
our website does not constitute a part of this annual report on Form 20-F and is not incorporated by reference herein. If we make
any amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit waiver, from a provision
of the code, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations
of the SEC including the instructions to Item 16B of Form 20-F. We have not granted any waivers under our Code of Business Conduct
and Ethics.



|Item16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------



Principal
Accountant Fees and Services



We
paid the following fees for professional services rendered by Kost Forer Gabbay & Kasierer, a member of Ernst & Young
Global, an independent registered public accounting firm, for the years ended December 31, 2016 and 2015:



|                   |  | 2015                           |     |  | 2016 |  
|------------------ |  | ------------------------------ | --- |  | ---- | -
|                   |  | (in thousands of U.S. dollars) |    
|Audit Fees         |  | $                              | 60  |  |      | $
|Audit-Related Fees |  |                                | 55  |  |      |  
|Additional fees    |  |                                | 8   |  |      |  
|Total              |  | $                              | 123 |  |      | $





109







“Audit
fees” are the aggregate fees paid for the audit of our annual financial statements. This category also includes
services that generally the independent accountant provides, such as consents and assistance with and review of documents filed
with the SEC.



“Audit-related
fees” are the aggregate fees paid for assurance and related services that are reasonably related to the performance
of the audit and are not reported under audit fees. These fees primarily include accounting consultations regarding the accounting
treatment of matters that occur in the regular course of business, implications of new accounting pronouncements and other accounting
issues that occur from time to time.



“Additional
fees” include fees for professional services rendered by our independent registered public accounting firm for tax compliance,
transfer pricing, tax advice on actual or contemplated transactions and Israel innovation authority advisory.



Audit
Committee’s Pre-approval Policies and Procedures



Our
audit committee has a pre-approval policy for the engagement of our independent accountant to perform certain audit and non-audit
services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors,
the audit committee pre-approves annually a catalog of specific audit and non-audit services in the categories of audit service,
audit-related service and tax services that may be performed by our independent accountants.



|Item 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|--------- | ----------------------------------------------------------



Not
applicable.



|Item 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|--------- | ----------------------------------------------------------------------



Not
applicable.



|Item 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
|--------- | --------------------------------------------



Not
applicable.



|Item 16G. | CORPORATE GOVERNANCE
|--------- | --------------------



Companies incorporated
under the laws of the State of Israel whose shares are publicly traded, including companies with shares listed on the NASDAQ Capital
Market, are considered public companies under Israeli law and are required to comply with various corporate governance requirements
under Israeli law relating to such matters as external directors, the audit committee, the compensation committee and an internal
auditor. These requirements are in addition to the corporate governance requirements imposed by the listing rules of the NASDAQ
Capital Market and other applicable provisions of U.S. securities laws to which we are subject to (as a foreign private issuer)
since the closing of the offering in the U.S. and the listing of the ADSs and warrants on the NASDAQ Capital Market. Under the
listing rules of the NASDAQ Capital Market, a foreign private issuer, such as us, may generally follow its home country rules
of corporate governance in lieu of the comparable requirements of the listing rules of the NASDAQ Capital Market, except for certain
matters including (among others) the composition and responsibilities of the audit committee and the independence of its members
within the meaning of the rules and regulations of the SEC.





110







NASDAQ
Capital Market listing rules and Home Country Practices



In
accordance with Israeli law and practice, and subject to the exemption set forth in Rule 5615 of the listing rules of the NASDAQ
Capital Market, we intend to follow the provisions of the Companies Law, rather than the listing rules of the NASDAQ Capital Market,
with respect to the following requirements:



Distribution
of certain reports to shareholders. As opposed to the listing rules of the NASDAQ Capital Market, which require listed
issuers to make certain reports, such as annual reports, interim reports and quarterly reports, available to shareholders in one
of a number of specific manners, Israeli law does not require us to distribute periodic reports directly to shareholders, and
the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make such reports
available through a public website. In addition to making such reports available on a public website, we plan to make our audited
financial statements available to our shareholders at our offices and will only mail such reports to shareholders upon request.
As a foreign private issuer, we are generally exempt from the SEC’s proxy solicitation rules. See “Where You Can Find
More Information” for a description of our Exchange Act reporting obligations.



Nomination
of directors.With the exception of our external directors and directors elected by our board of directors due to vacancy,
our directors are elected by an annual meeting of our shareholders to hold office until the next annual meeting following his
or her election. On February 12, 2015, our annual general shareholders meeting approved the staggering and extension of the term
of our board members in accordance with the Company’s articles of association and divided the members of our board of directors
among the three classes, so that the term of office of only one class of directors will expire in each upcoming annual shareholders
meeting. See “Management — Board Practices.” The nominations for directors, which are presented to our shareholders
by our board of directors, are generally made by the board of directors itself, in accordance with the provisions of our articles
of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the company
may nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating
committee of our board of directors consisting solely of independent directors or by independent directors constituting a majority
of independent directors, as required under the listing rules of the NASDAQ Capital Market.



Compensation
of officers.We follow the provisions of the Companies Law with respect to matters in connection with the composition
and responsibilities of our compensation committee, office holder compensation and any required approval by the shareholders of
such compensation. Israeli law and our articles of association do not require that the independent members of our board of directors,
or a compensation committee composed solely of independent members of our board of directors, determine an executive officer’s
compensation, as is generally required under the listing rules of the NASDAQ Capital Market with respect to the Chief Executive
Officer and all other executive officers of a company. However, generally, Israeli law and our articles of association do require
that our audit and compensation committee each contain two external directors (as defined in the Companies Law. A recent
amendment to the Israeli law waives such requirement if there is no controlling shareholder in the company, as define in the Companies
Law, and if such company complies with the NASDAQ Capital Market. We intend to apply such waiver, subject to the aforementioned
conditions. (See “Management — Board Practices — External Directors.”). In addition, Israeli law requires
that additional members of the compensation committee and the external directors be compensated equally. Our compensation committee
has been established and conducts itself in accordance with the provisions governing the composition of and the responsibilities
of a compensation committee as set forth in the Companies Law. Furthermore, compensation of office holders is determined and approved
by our compensation committee, and in general, by our board of directors as well, and in certain circumstances by our shareholders,
as detailed below under the caption “—Shareholder Approval.” Thus, we will seek shareholder approval for all
corporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief
Executive Officer) requiring such approval under the requirements of the Companies Law, including seeking prior approval of the
shareholders for the compensation policy and for certain office holder compensation, rather than seeking approval for such corporate
actions in accordance with listing rules of the NASDAQ Capital Market. See “— Compensation Committee and Compensation
Policy” below.



Compensation
Committee. Pursuant to the Companies Law, we established a compensation committee as detailed below. Since the consummation
of the offering, our board of directors has affirmatively determined that each member of our compensation committee qualifies
as “independent” under applicable NASDAQ Capital Market and SEC rules.





111







Shareholder
approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements
of the Companies Law, rather than seeking approval for corporate actions in accordance with NASDAQ Capital Market Listing Rule
5635. In particular, under this NASDAQ Capital Market rule, shareholder approval is generally required for: (i) an acquisition
of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rights
or if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received;
(ii) the issuance of shares leading to a change of control; (iii) adoption or amendment of equity compensation arrangements; and
(iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity)
of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) if such equity is issued
(or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval
is required for, among other things: (a) transactions with directors concerning the terms of their service or indemnification,
exemption and insurance for their service (or for any other position that they may hold at a company), for which approvals of
the compensation committee, board of directors and shareholders are all required, (b) extraordinary transactions with controlling
shareholders of publicly held companies, which require the special approval described below under “Disclosure of personal
interests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other
engagement of our controlling shareholder, if any, or such controlling shareholder’s relative, which require the special
approval described below under “Disclosure of personal interests of controlling shareholders and approval of certain transactions,
(d) approval of transactions with Company’s Chief Executive Officer with respect to his or hers compensation, whether in
accordance with the approved compensation policy of the Company or not in accordance with the approved compensation policy of
the Company, or transactions with officers of the Company not in accordance with the approved compensation policy, and (e) approval
of the compensation policy of the Company for office holders. In addition, under the Companies Law, a merger requires approval
of the shareholders of each of the merging companies. See also “Description of Share Capital — Acquisitions under
Israeli Law — Merger” below.



Quorum
for shareholder meetings. As permitted under the Companies Law, pursuant to our articles of association, the quorum required
for an ordinary meeting of shareholders will consist of one or more shareholders present in person, by proxy or by other voting
instrument in accordance with the Companies Law, who hold, in the aggregate, at least 10% of the voting power of our shares (and
in an adjourned meeting, any number of shareholders), instead of 33 1/3% of the issued share capital required under the NASDAQ
Capital Market corporate governance rules.



Other
than the foregoing home country practices, we otherwise intend to comply with the rules generally applicable to U.S. domestic
companies listed on the NASDAQ Capital Market. We may in the future decide to use the foreign private issuer exemption with respect
to some or all of the other NASDAQ Capital Market corporate governance rules. Following our home country corporate governance
practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Capital Market may
provide less protection to you than what is accorded to investors under the listing rules of the NASDAQ Capital Market applicable
to domestic U.S. issuers.



|Item 16H. | MINE SAFETY DISCLOSURE
|--------- | ----------------------



Not
applicable.





112







PART
III



|Item
    17. | FINANCIAL
    STATEMENTS
|------------ | ------------------------



The
Registrant has responded to Item 18 in lieu of responding to this Item.



|Item
    18. | FINANCIAL
    STATEMENTS
|------------ | ------------------------



See
the financial statements beginning on page F-1. The following financial statements and financial statement schedules are filed
as part of this Annual Report on Form 20-F together with the report of the independent registered public accounting firm:



|Item
    19. | EXHIBITS
|------------ | --------



EXHIBIT
INDEX



|Exhibit
    No. |  | Exhibit
    Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|1.1             |  | Articles of Association of BiondVax Pharmaceuticals Ltd. (unofficial English translation from Hebrew original), incorporated by reference to exhibit 3.1 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.2             |  | Form of Deposit Agreement between BiondVax Pharmaceuticals Ltd., The Bank of New York Mellon as Depositary, and owners and holders from time to time of ADSs issued thereunder, incorporated by reference to exhibit 4.1 to the Registration Statement on Form F-1 filed with the SEC on April 6, 2015.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.3             |  | Specimen American Depositary Receipt (included in Exhibit 2.2).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.1             |  | License Agreement, entered  into on March 16, 2005  and effective as of  July 31, 2003, by and between Yeda of the Weizman Institute and BiondVax Pharmaceuticals Ltd, incorporated by reference to exhibit 10.1 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.2             |  | Consortium Agreement effective as of October 1, 2013, between Rijksuniversiteit Groningen,  Department of Pharmacoepidemiology & Pharmacoeconomics, Academisch Ziekenhuis Groningen, Department of Medical Microbiology, Molecular Virology Section, Academisch Ziekenhuis Groningen, Trial Coordination Center, PepTcell Ltd,  United Kingdom, BiondVax Pharmaceuticals Ltd, Nes Ziona, Retroscreen Virology LtD., Medicines and Healthcare products Regulatory Agency, Statens Serum Institut, SSI-Adjuvant, Statens Serum Institut, SSI-DNA Vac, Copenhagen, Országos Epidemiológiai Központ, NASJONALT FOLKEHELSEINSTITUTT, Div. Infectious Disease Control, Robert Koch Institute RKI, Goeteborgs Universitet, Mucosal Immunobiology and Vaccine Centre, and Isconova AB, incorporated by reference to exhibit 10.3 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.3             |  | Management Services Agreement dated April 1, 2007, between BiondVax Pharmaceuticals Ltd. and Ron Executive Ltd., together with the amendment thereto dated May 20, 2012, incorporated by reference to exhibit 10.5 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.4             |  | Employment Agreement dated March 15, 2005, between BiondVax Pharmaceuticals Ltd. and Dr. Tamar Ben Yedidia, incorporated by reference to exhibit 10.6 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   





113







|4.5   |  | Service Agreement dated June 20, 2007, between BiondVax Pharmaceuticals Ltd., CFO Direct and Uri Ben Or, incorporated by reference to exhibit 10.7 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                                  
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.6   |  | Form of negotiable Option (unofficial English translation from Hebrew original), incorporated by reference to exhibit 10.8 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.7   |  | Form of Indemnification Letter (unofficial English translation from Hebrew original), incorporated by reference to exhibit 10.9 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.8   |  | Summary of the Lease Agreement dated November 1, 2005, together with the addendums thereto dated November 27, 2009, August 18, 2010, July 3, 2011 and January 2012 (unofficial English translation from Hebrew original), incorporated by reference to exhibit 10.10 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.9   |  | Addendum to Employment Agreement dated April 1, 2012, between BiondVax Pharmaceuticals Ltd. and Dr. Tamar Ben Yedidia, incorporated by reference to exhibit 10.11 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.10  |  | Addendum to Service Agreement dated August 31, 2014, between BiondVax Pharmaceuticals Ltd., CFO Direct and Uri Ben Or, incorporated by reference to exhibit 10.12 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.11  |  | Employment Agreement dated August 31, 2014, between BiondVax Pharmaceuticals Ltd. and Uri Ben Or, incorporated by reference to exhibit 10.13 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.12  |  | Letter of appointment of Prof. Michel Revel to BiondVax Pharmaceuticals Ltd.’s Scientific Advisory Board dated February 14, 2005, incorporated by reference to exhibit 10.15 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.13  |  | Letter of appointment of Prof. Ruth Arnon to BiondVax Pharmaceuticals Ltd.’s Scientific Advisory Board dated February 7, 2005, together with the amendment thereto dated December 29, 2005, incorporated by reference to exhibit 10.16 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.                              
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.14  |  | Summary of 2016 addendum to the Lease Agreement dated November 1, 2005, as amended (unofficial English translation from Hebrew original), incorporated by reference to exhibit 10.17 to the Registration Statement on Form F-1 filed with the SEC on January 26, 2017.                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.15  |  | Form of indemnification and exculpation agreement to directors and office holders approved by the general shareholders meeting on March 1, 2015, incorporated by reference to exhibit 10.18 to the Registration Statement on Form F-1 filed with the SEC on April 6, 2015.                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.16  |  | Investment Agreement between BiondVax Pharmaceuticals Ltd. and Angles Investments in Hi Tech Ltd. dated January 1, 2017, incorporated by reference to exhibit 10.17 to the Registration Statement on Form F-1 filed with the SEC on January 26, 2017.                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|4.17  |  | At Market Issuance Sales Agreement with FBR Capital Markets & Co., incorporated by reference to exhibit 1.2 to the Registration Statement on Form F-3 filed with the SEC on November 4, 2016.                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|*12.1 |  | Certification of the Chief Executive Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934.                                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|*12.2 |  | Certification of the Chief Financial Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934.                                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|*13.1 |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith                                                                                                                                                                                                                                                            
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|*13.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith                                                                                                                                                                                                                                                            
|      |  |                                                                                                                                                                                                                                                                                                                                                        
|*15.1 |  | Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel, independent registered public accounting firm for the Registrant                                                                                                                                                                        



*Filed herewith.





114







SIGNATURES



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



|                         | BiondVax
    Pharmaceuticals Ltd.
|------------------------ | ---------------------------------
|                         |                                  
|Date:
    April 28, 2017 | By:                              
|                         |                                  
|                         |                                  





115







BIONDVAX
PHARMACEUTICALS LTD.



FINANCIAL
STATEMENTS



DECEMBER
31, 2016



INDEX



|                                                            | Page         
|----------------------------------------------------------- | -------------
|                                                            |              
|Report
    of Independent Registered Public Accounting Firm | F-2          
|                                                            |              
|Balance
    Sheets                                          | F-3          
|                                                            |              
|Statements
    of Comprehensive Income                      | F-4          
|                                                            |              
|Statements
    of Changes in Equity                         | F-5          
|                                                            |              
|Statements
    of Cash Flows                                | F-6
    - F-7
|                                                            |              
|Notes
    to Financial Statements                           | F-8 - F-36   





F-1








| | Kost
                                         Forer Gabbay & Kasierer
        3
        Aminadav St.
        Tel-Aviv
        6706703, Israel |  | Tel:
                                         +972-3-6232525
        Fax:
        +972-3-5622555
        ey.com
| | --------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------



REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To
the Shareholders and



Board
of Directors of



BIONDVAX
PHARMACEUTICALS LTD.



We
have audited the accompanying balance sheets of Biondvax Pharmaceuticals Ltd. (the "Company") as of December 31,
2015 and 2016 and the related statements of comprehensive income, changes in equity and cash flows for each of the three years
in the period ended December 31, 2016. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.



We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.



In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2015 and 2016 and the results of its operations, changes in equity and its cash flows for each
of the three years in the period ended December 31, 2016, in conformity with International Financial Reporting Standards
as issued by the International Accounting Standards Board.



|                     | /s/
    KOST FORER GABBAY & KASIERER
|-------------------- | ------------------------------------
|Tel-Aviv,
    Israel | KOST
    FORER GABBAY & KASIERER    
|April
    28, 2017   | A
    Member of Ernst & Young Global





F-2






BIONDVAX
PHARMACEUTICALS LTD.



BALANCE
SHEETS

In
thousands, except share and per share data



|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         | Convenience   | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- |  | ---------------- | ------- | - | ---------------- |  | ------- | ------------- | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         | translation   | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         | (Note
    2c) | 
|                                                                                                                                                    |  |           |  | December
    31, |         |   | December 31,     | 
|                                                                                                                                                    |  |           |  | 2015             |         |   | 2016             |  |         | 2016          | 
|                                                                                                                                                    |  | Note      |  | N
    I S        |         |   | U.S.
    dollars | 
|                                                                                                                                                    |  |           |  |                  |        
|CURRENT
    ASSETS:                                                                                                                                 |  |           |  |                  |         |   |                  |  |         |               | 
|Cash
    and cash equivalents                                                                                                                       |  | 5         |  |                  | 33,470  |   |                  |  | 15,705  |               | 
|Marketable
    securities                                                                                                                           |  | 11        |  |                  | 2,016   |   |                  |  | 2,017   |               | 
|Short-term
    deposits                                                                                                                             |  | 6         |  |                  | -       |   |                  |  | 7,602   |               | 
|Other
    receivables                                                                                                                               |  | 7         |  |                  | 1,442   |   |                  |  | 815     |               | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         |               | 
|                                                                                                                                                    |  |           |  |                  | 36,928  |   |                  |  | 26,139  |               | 
|LONG-TERM
    ASSETS:                                                                                                                               |  |           |  |                  |         |   |                  |  |         |               | 
|Marketable
    securities                                                                                                                           |  | 11        |  |                  | 2,048   |   |                  |  | 2,050   |               | 
|Property,
    plant and equipment                                                                                                                   |  | 8         |  |                  | 2,044   |   |                  |  | 1,443   |               | 
|Other
    long term assets                                                                                                                          |  | 9         |  |                  | 287     |   |                  |  | 478     |               | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         |               | 
|                                                                                                                                                    |  |           |  |                  | 4,379   |   |                  |  | 3,971   |               | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         |               | 
|                                                                                                                                                    |  |           |  |                  | 41,307  |   |                  |  | 30,110  |               | 
|CURRENT
    LIABILITIES:                                                                                                                            |  |           |  |                  |         |   |                  |  |         |               | 
|Trade
    payables                                                                                                                                  |  |           |  |                  | 931     |   |                  |  | 686     |               | 
|Other
    payables                                                                                                                                  |  | 10        |  |                  | 768     |   |                  |  | 689     |               | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         |               | 
|                                                                                                                                                    |  |           |  |                  | 1,699   |   |                  |  | 1,375   |               | 
|LONG-TERM
    LIABILITIES:                                                                                                                          |  |           |  |                  |         |   |                  |  |         |               | 
|Warrants                                                                                                                                            |  | 11, 14(e) |  |                  | 5,994   |   |                  |  | 3,043   |               | 
|Severance
    pay liability, net                                                                                                                    |  | 12        |  |                  | 69      |   |                  |  | 76      |               | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         |               | 
|                                                                                                                                                    |  |           |  |                  | 6,063   |   |                  |  | 3,119   |               | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         |               | 
|SHAREHOLDERS'
    EQUITY :-                                                                                                                         |  | 14        |  |                  |         |   |                  |  |         |               | 
|Ordinary
    shares of NIS 0.0000001 par value:                                                                                                     |  |           |  |                  |         |   |                  |  |         |               | 
|Authorized:
    391,000,000 shares as of December 31, 2015 and 2016; Issued and Outstanding 135,097,367 shares as of December 31,
    2015 and 2016 |  |           |  |                  | *)-     |   |                  |  | *)-     |               | 
|Share
    premium                                                                                                                                   |  |           |  |                  | 110,679 |   |                  |  | 113,041 |               | 
|Options                                                                                                                                             |  |           |  |                  | 2,536   |   |                  |  | 1,435   |               | 
|Other
    comprehensive income                                                                                                                      |  |           |  |                  | 12      |   |                  |  | 6       |               | 
|Accumulated
    deficit                                                                                                                             |  |           |  |                  | (79,682 | ) |                  |  | (88,866 | )             | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         |               | 
|                                                                                                                                                    |  |           |  |                  | 33,545  |   |                  |  | 25,616  |               | 
|                                                                                                                                                    |  |           |  |                  |         |   |                  |  |         |               | 
|                                                                                                                                                    |  |           |  |                  | 41,307  |   |                  |  | 30,110  |               | 



|*) | Represents
                                         an amount lower than NIS 1.
|-- | -------------------------------------------------------------------------------



The
accompanying notes are an integral part of the financial statements.





F-3






BIONDVAX
PHARMACEUTICALS LTD.



STATEMENTS
OF COMPREHENSIVE INCOME

In
thousands, except share and per share data



|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  | Convenience
                                         translation (Note
                                         2c) |  
|-------------------------------------------------------------------------------------------------- |  | ---- |  | --------------------------------------------------------------------------------------------------------- | ---------- | - | ---------------------------------------------------------------- |  | ----------- | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | -
|                                                                                                   |  |      |  | Year
                                         ended December
                                         31, |            |   | Year
                                         ended December 31, | 
|                                                                                                   |  |      |  | 2014                                                                                                      |            |   | 2015                                                             |  |             | 2016 |  |  | 2016                                                                                                                |  
|                                                                                                   |  | Note |  | N
    I S                                                                                                 |            |   | U.S.
    dollars                                                 | 
|                                                                                                   |  |      |  |                                                                                                           |           
|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Operating
    expenses:                                                                            |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Research
    and development, net of participations                                                |  | 16a  |  |                                                                                                           | 5,492      |   |                                                                  |  | 7,906       |      |  |  | 7,794                                                                                                               |  
|Marketing,
    general and administrative                                                          |  | 16b  |  |                                                                                                           | 2,650      |   |                                                                  |  | 3,397       |      |  |  | 4,106                                                                                                               |  
|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Total
    operating expenses                                                                       |  |      |  |                                                                                                           | 8,142      |   |                                                                  |  | 11,303      |      |  |  | 11,900                                                                                                              |  
|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Operating
    loss                                                                                 |  |      |  |                                                                                                           | (8,142     | ) |                                                                  |  | (11,303     | )    |  |  | (11,900                                                                                                             | )
|Financial
    income                                                                               |  | 16c  |  |                                                                                                           | 394        |   |                                                                  |  | 1,128       |      |  |  | 3,019                                                                                                               |  
|Financial
    expense                                                                              |  | 16c  |  |                                                                                                           | (16        | ) |                                                                  |  | (24         | )    |  |  | (303                                                                                                                | )
|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Net
    loss                                                                                       |  |      |  |                                                                                                           | (7,764     | ) |                                                                  |  | (10,199     | )    |  |  | (9,184                                                                                                              | )
|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Other
    comprehensive income (loss):                                                             |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Items
    to be reclassified to profit or loss in subsequent periods:                              |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Gain
    (loss) from available-for-sale marketable securities                                      |  |      |  |                                                                                                           | (4         | ) |                                                                  |  | (5          | )    |  |  | (6                                                                                                                  | )
|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Total
    comprehensive loss                                                                       |  |      |  |                                                                                                           | (7,768     | ) |                                                                  |  | (10,204     | )    |  |  | (9,190                                                                                                              | )
|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Basic
    and diluted loss per share                                                               |  |      |  |                                                                                                           | (0.14      | ) |                                                                  |  | (0.10       | )    |  |  | (0.07                                                                                                               | )
|                                                                                                   |  |      |  |                                                                                                           |            |   |                                                                  |  |             |      |  |  |                                                                                                                     |  
|Weighted
    average number of shares outstanding used to compute basic and diluted loss per share |  |      |  |                                                                                                           | 54,286,227 |   |                                                                  |  | 105,522,642 |      |  |  | 135,097,367                                                                                                         |  



The
accompanying notes are an integral part of the financial statements.





F-4






BIONDVAX
PHARMACEUTICALS LTD.



STATEMENTS
OF CHANGES IN EQUITY

In
thousands, except share and per share data



|                                                             |  | Share
    capital |     |  | Share
    premium |   |         | Options |  |  | Unrealized
    gain (loss) on available-for-sale financial assets |   |  | Accumulated deficit |    |   | Total Equity | 
|------------------------------------------------------------ |  | ----------------- | --- |  | ----------------- | - | ------- | ------- |  |  | ----------------------------------------------------------------- | - |  | ------------------- | -- | - | ------------ | 
|                                                             |  | NIS               |    
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Balance
    as of January 1, 2014                            |  |                   | *)- |  |                   |   | 83,148  |         |  |  | 2,536                                                             |   |  |                     | 21 |   |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Loss                                                         |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | -  |   |              | 
|Other
    comprehensive income                               |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | (4 | ) |              | 
|Total
    comprehensive income                               |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | (4 | ) |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Exercise
    of employee options                             |  |                   | *)- |  |                   |   | 6       |         |  |  | -                                                                 |   |  |                     | -  |   |              | 
|Share-based
    compensation                                 |  |                   | -   |  |                   |   | 363     |         |  |  | -                                                                 |   |  |                     | -  |   |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Balance
    as of December 31, 2014                          |  |                   | -   |  |                   |   | 83,517  |         |  |  | 2,536                                                             |   |  |                     | 17 |   |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Loss                                                         |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | -  |   |              | 
|Other
    comprehensive loss                                 |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | (5 | ) |              | 
|Total
    comprehensive loss                                 |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | (5 | ) |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Issue
    of shares, net                                     |  |                   | *)- |  |                   |   | 26,417  |         |  |  | -                                                                 |   |  |                     | -  |   |              | 
|Share-based
    compensation                                 |  |                   | -   |  |                   |   | 745     |         |  |  | -                                                                 |   |  |                     | -  |   |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Balance
    as of December 31, 2015                          |  |                   | *)- |  |                   |   | 110,679 |         |  |  | 2,536                                                             |   |  |                     | 12 |   |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Loss                                                         |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | -  |   |              | 
|Other
    comprehensive loss                                 |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | (6 | ) |              | 
|Total
    comprehensive loss                                 |  |                   | -   |  |                   |   | -       |         |  |  | -                                                                 |   |  |                     | (6 | ) |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Expiration
    of Options series 3                           |  |                   | -   |  |                   |   | 1,101   |         |  |  | (1,101                                                            | ) |  |                     | -  |   |              | 
|Share-based
    compensation                                 |  |                   | -   |  |                   |   | 1,261   |         |  |  | -                                                                 |   |  |                     | -  |   |              | 
|                                                             |  |                   |     |  |                   |   |         |         |  |  |                                                                   |   |  |                     |    |   |              | 
|Balance
    as of December 31, 2016                          |  |                   | *)- |  |                   |   | 113,041 |         |  |  | 1,435                                                             |   |  |                     | 6  |   |              | 
|(convenience
    translation into U.S. dollars (see Note 2c) |  |                   | *)- |  |                   | $ | 29,399  |         |  |  | 373                                                               |   |  |                     | 2  |   |              | 



|*) | Represents
                                         an amount lower than NIS\USD 1.
|-- | -----------------------------------------------------------------------------------



The
accompanying notes are an integral part of the financial statements.





F-5






BIONDVAX
PHARMACEUTICALS LTD.





STATEMENTS
OF CASH FLOWS

In
thousands, except share and per share data



|                                                                                |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  | Convenience
                                         translation (Note
                                         2c) |  
|------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | ------ | - | ---------------------------------------------------------------- |  | ------- | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | -
|                                                                                |  | Year
                                         ended December
                                         31, |        |   | Year
                                         ended December 31, | 
|                                                                                |  | 2014                                                                                                      |        |   | 2015                                                             |  |         | 2016 |  |  | 2016                                                                                                                |  
|                                                                                |  | N
    I S                                                                                                 |        |   | U.S.
    dollars                                                 | 
|                                                                                |  |                                                                                                           |       
|Cash
    Flows from Operating Activities:                                       |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|Net
    loss                                                                    |  |                                                                                                           | (7,764 | ) |                                                                  |  | (10,199 | )    |  |  | (9,184                                                                                                              | )
|                                                                                |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|Adjustments
    to reconcile net loss to net cash used in operating activities: |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|                                                                                |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|Adjustments
    to profit and loss items:                                       |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|Depreciation
    and amortization                                               |  |                                                                                                           | 677    |   |                                                                  |  | 628     |      |  |  | 621                                                                                                                 |  
|Net
    financial income                                                        |  |                                                                                                           | (378   | ) |                                                                  |  | (1,104  | )    |  |  | (2,716                                                                                                              | )
|Share-based
    compensation                                                    |  |                                                                                                           | 363    |   |                                                                  |  | 745     |      |  |  | 1,261                                                                                                               |  
|Change
    in employee benefit liabilities, net                                 |  |                                                                                                           | 7      |   |                                                                  |  | 7       |      |  |  | 7                                                                                                                   |  
|                                                                                |  |                                                                                                           | 669    |   |                                                                  |  | 276     |      |  |  | (827                                                                                                                | )
|Changes
    in asset and liability items:                                       |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|Decrease
    (increase) in other receivables                                    |  |                                                                                                           | (592   | ) |                                                                  |  | (744    | )    |  |  | 640                                                                                                                 |  
|Increase
    (decrease) in trade payables                                       |  |                                                                                                           | 132    |   |                                                                  |  | 415     |      |  |  | (238                                                                                                                | )
|Increase
    (decrease) in other payables                                       |  |                                                                                                           | (69    | ) |                                                                  |  | 10      |      |  |  | (79                                                                                                                 | )
|                                                                                |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|                                                                                |  |                                                                                                           | (529   | ) |                                                                  |  | (339    | )    |  |  | 323                                                                                                                 |  
|                                                                                |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|Cash
    paid and received during the year for:                                 |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|Interest
    paid                                                               |  |                                                                                                           | (16    | ) |                                                                  |  | (23     | )    |  |  | (27                                                                                                                 | )
|Interest
    received                                                           |  |                                                                                                           | 68     |   |                                                                  |  | 18      |      |  |  | 62                                                                                                                  |  
|                                                                                |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|                                                                                |  |                                                                                                           | 52     |   |                                                                  |  | (5      | )    |  |  | 35                                                                                                                  |  
|                                                                                |  |                                                                                                           |        |   |                                                                  |  |         |      |  |  |                                                                                                                     |  
|Net
    cash used in operating activities                                       |  |                                                                                                           | (7,572 | ) |                                                                  |  | (10,267 | )    |  |  | (9,653                                                                                                              | )



The
accompanying notes are an integral part of the financial statements.





F-6






BIONDVAX
PHARMACEUTICALS LTD.



STATEMENTS
OF CASH FLOWS

In
thousands, except share and per share data



|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  | Convenience
                                         translation (Note
                                         2c) |  
|--------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | ------ | - | ---------------------------------------------------------------- |  | ------ | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | -
|                                                                      |  | Year
                                         ended December
                                         31, |        |   | Year
                                         ended December 31, | 
|                                                                      |  | 2014                                                                                                      |        |   | 2015                                                             |  |        | 2016 |  |  | 2016                                                                                                                |  
|                                                                      |  | N
    I S                                                                                                 |        |   | U.S.
    dollars                                                 | 
|                                                                      |  |                                                                                                           |       
|Cash
    Flows from Investing Activities:                             |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Increase
    in short-term deposits                                   |  |                                                                                                           | -      |   |                                                                  |  | -      |      |  |  | (7,602                                                                                                              | )
|Purchase
    of property and equipment                                |  |                                                                                                           | (30    | ) |                                                                  |  | (34    | )    |  |  | (20                                                                                                                 | )
|Increase
    in other long term assets                                |  |                                                                                                           | (150   | ) |                                                                  |  | (9     | )    |  |  | (191                                                                                                                | )
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Net
    cash used in investing activities                             |  |                                                                                                           | (180   | ) |                                                                  |  | (43    | )    |  |  | (7,813                                                                                                              | )
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Cash
    Flows from Financing Activities:                             |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Deferred
    offering costs                                           |  |                                                                                                           | (788   | ) |                                                                  |  | -      |      |  |  | -                                                                                                                   |  
|Proceeds
    from issuance of shares and options                      |  |                                                                                                           | -      |   |                                                                  |  | 27,323 |      |  |  | -                                                                                                                   |  
|Proceeds
    from exercise of options                                 |  |                                                                                                           | 6      |   |                                                                  |  | -      |      |  |  | -                                                                                                                   |  
|Proceeds
    from issuance of options to public                       |  |                                                                                                           | -      |   |                                                                  |  | 6,430  |      |  |  | -                                                                                                                   |  
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Net
    cash provided by (used in) financing activities               |  |                                                                                                           | (782   | ) |                                                                  |  | 33,753 |      |  |  | -                                                                                                                   |  
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Exchange
    differences on balances of cash and cash equivalents     |  |                                                                                                           | 283    |   |                                                                  |  | 415    |      |  |  | (299                                                                                                                | )
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Increase
    (decrease) in cash and cash equivalents                  |  |                                                                                                           | (8,251 | ) |                                                                  |  | 23,858 |      |  |  | (17,765                                                                                                             | )
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Balance
    of cash and cash equivalents at the beginning of the year |  |                                                                                                           | 17,863 |   |                                                                  |  | 9,612  |      |  |  | 33,470                                                                                                              |  
|                                                                      |  |                                                                                                           |        |   |                                                                  |  |        |      |  |  |                                                                                                                     |  
|Balance
    of cash and cash equivalents at the end of the year       |  |                                                                                                           | 9,612  |   |                                                                  |  | 33,470 |      |  |  | 15,705                                                                                                              |  



|*) | Represents
                                         an amount lower than NIS 1.
|-- | -------------------------------------------------------------------------------



The
accompanying notes are an integral part of the financial statements.







F-7








BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data







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





| | a. | BiondVax
                                         Pharmaceuticals Ltd. (“the Company”) is focused on developing and ultimately,
                                         commercializing immunomodulation therapies for infectious diseases. The Company was incorporated
                                         on July 21, 2003 and started its activity on March 31, 2005.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | On
                                         June 7, 2007, the Company issued ordinary shares and options on the TASE.
| | -- | ---------------------------------------------------------------------------------------------------------------------



| | c. | On
                                         May 15, 2015, the Company completed a public offering of securities in the United States.The Company allocated
                                         1,910,000 American Depositary Shares (“ADS”) and warrants to purchase up
                                         to an aggragate of 2,038,000 ADSs. The immediate gross consideration for the offering
                                         amounted to a total of NIS 36,607 ($ 9,382). The offering expenses amounted to a total
                                         of NIS 5,576. On June 24, 2015, the Company issued an additional 110,000 ADS to the underwriters
                                         in consideration of a total gross amount of NIS 2,069 ($ 530). Issuance expenses amounted
                                         to NIS 134 (see Note 14e).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d. | During
                                         year ended December 31, 2016, the Company incurred a loss of NIS 9,184 ($2,389)
                                         and negative cash flows from operating activities of NIS 9,653 ($ 2,511) and it
                                         has an accumulated deficit of NIS 88,866 ($ 23,112) as of that date.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                       
| |    | To
                                         date the Company has not generated any revenues yet and will need additional funds to
                                         finance its Phase 3 clinical trials in the future.                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                       
| |    | To
                                         date the Company has not generate revenues yet and will need additional funds to finance
                                         its Phase 3 clinical trials in the future.                                                                                                                                              









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





The
following accounting policies have been applied consistently in the financial statements for all periods presented, unless otherwise
stated.



| | a. | Basis
                                         of presentation of the financial statements:
| | -- | -------------------------------------------------------------------------------------------



These
financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (“IASB”).



The
Company’s financial statements have been prepared on a cost basis, except for: financial instruments which are measured
at fair value through profit or loss and investments in available-for-sale financial assets.



The
Company has elected to present profit or loss items using the “function of expense” method.



| | b. | Functional
                                         currency, reporting currency and foreign currency:
| | -- | ------------------------------------------------------------------------------------------------------



| | 1. | Functional
                                         currency and reporting currency:
| | -- | ------------------------------------------------------------------------------------



The
reporting currency of the financial statements is the NIS.





F-8








BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data





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







The
functional currency is the currency that best reflects the economic environment in which the Company operates and conducts its
transactions. Most of the Company costs are incurred in NIS. In addition, the Company financing activities are incurred in NIS.
The Company’s management believes that the functional currency of the Company is the NIS.



| | 2. | Transactions,
                                         assets and liabilities in foreign currency:
| | -- | --------------------------------------------------------------------------------------------------



Transactions
denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. After
initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting
period into the functional currency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.



| | c. | Convenience
                                         translation into U.S. dollars:
| | -- | -----------------------------------------------------------------------------------



The
financial statements as of December 31, 2016 and for the year then ended have been translated into U.S. dollars using the exchange
rate of the U.S. dollar as of December 31, 2016 (U.S. $ 1.00 = NIS 3.845). The translation was made solely for convenience
purposes.



The
dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or
payable in dollars or convertible into dollars, unless otherwise indicated.



| | d. | Cash
                                         equivalents:
| | -- | ----------------------------------------------------------



Cash
equivalents are considered as highly liquid investments, including unrestricted short-term bank deposits with an original maturity
of three months or less from the date of acquisition.





| | e. | Short-term
    deposits:
| | -- | ------------------------





Short-term
bank deposits are deposits with an original maturity of more than three months from the date of investment and which do not meet
the definition of cash equivalents. The deposits are presented according to their terms of deposit.



| | f. | Property
                                         and equipment:
| | -- | ----------------------------------------------------------------



Property,
plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment
losses and excluding day-to-day servicing expenses.



Depreciation
is calculated on a straight-line basis over the useful life of the assets at annual rates as follows:



| |                                    |  | % |                                                
| | ---------------------------------- |  | - | -----------------------------------------------
| | Laboratory
    equipment           |  |   | 15                                             
| | Office
    furniture and equipment |  |   | 6
                                         - 33
| | Computers                          |  |   | 33                                             
| | Leasehold
    improvements         |  |   | (*)                                            





| | (*) | Leasehold
                                         improvements are depreciated on a straight-line basis over the shorter of the lease term
                                         (including the extension option held by the Company and intended to be exercised) and
                                         the expected life of the improvement.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-9










BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data





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













The
useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted
for prospectively as a change in accounting estimate.



An
item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or
disposal.



| | g. | Research
                                         and development expenses, net of participations:
| | -- | --------------------------------------------------------------------------------------------------



Research
and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project
or from the development phase of an internal project is recognized if the Company can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or sale; the Company’s intention to complete the intangible
asset and use or sell it; the Company’s ability to use or sell the intangible asset; how the intangible asset will generate
future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset;
and the Company’s ability to measure reliably the expenditure attributable to the intangible asset during its development.
Since the Company’s research and development projects are often subject to regulatory approval procedures and other uncertainties,
the conditions for the capitalization of costs incurred before receipt of approvals are not normally satisfied and, therefore,
development expenditures are recognized in profit or loss when incurred.



| | h. | Government
                                         investment grants:
| | -- | ----------------------------------------------------------------------



Government
grants are recognized when there is reasonable assurance that the grants will be received and the Company will comply with the
attendant conditions.



Research
and development grants received from the Israeli Innovation Authority (“IIA”) are recognized upon receipt as a liability
only if future economic benefits are expected from the project that will result in royalty-bearing sales. A liability for the
grant is first measured at fair value using a discount rate that reflects a market interest rate. The difference between the amount
of the grant received and the fair value of the liability is accounted for as a government grant and recognized as a reduction
of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective
interest method.



Future
Royalty payments will be treated as a reduction of the liability. In that event, the royalty obligation is treated as a contingent
liability in accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets” (“IAS 37").



At
the end of each reporting period, the Company evaluates whether there is reasonable assurance that the received grants will not
be repaid based on its best estimate of future sales and, if so, no liability is recognized and the grants are recorded against
a corresponding reduction in research and development expenses.





F-10






BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data









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







Since
the Company's development projects are currently in Phase 2 clinical trials and there is no assurance about the future economic
benefits of the project, no liability was recorded to date with respect to the IIA grants,and the funds recorded against a corresponding reduction in research and development expenses.



Research
and development grants received from theEuropean Union are recorded
against a corresponding reduction in research and development expenses. Since they are non-refundable and do not depend on the
generation of future sales.



| | i. | Impairment
                                         of non-financial assets:
| | -- | ----------------------------------------------------------------------------



The
Company evaluates the need to record an impairment of the carrying amount of non-financial assets whenever events or changes in
circumstances indicate that the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their
recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount of an asset that does not generate
independent cash flows is determined for the cash-generating unit to which the asset belongs and is calculated based on the projected
cash flows that will be generated by the cash generated unit. Impairment losses are recognized in profit or loss.



An
impairment loss of an asset is reversed only if there have been changes in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the
lower of the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been
recognized for the asset in prior years, and its recoverable amount.



The
Company did not recognize any impairment of non-financial assets for any of the periods presented.



| | j. | Financial
                                         instruments:
| | -- | ---------------------------------------------------------------



| | 1. | Financial
                                         assets:
| | -- | ----------------------------------------------------------



Financial
assets within the scope of IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")
are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair
value through profit or loss in respect of which transaction costs are recorded in profit or loss.





F-11








BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data





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



After
initial recognition, the accounting treatment of financial assets is based on their classification as follows:



Financial
assets at fair value through profit or loss



This
category includes financial assets designated upon initial recognition as at fair value through profit or loss.



Loans
and receivables



The
Company has receivables that are financial assets with fixed or determinable payments that are not quoted in an active market.



Available-for-sale
financial assets



Available-for-sale
financial assets are (non-derivative) financial assets that are designated as available for sale or are not classified in any
of the three preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value.
Gains or losses from fair value adjustments, except for interest, exchange rate differences that relate to debt instruments and
dividends from an equity instrument, are recognized in other comprehensive income. When the investment is disposed of or in case
of impairment, the other comprehensive income (loss) is transferred to profit or loss.



| | 2. | Financial
                                         liabilities:
| | -- | ---------------------------------------------------------------



Financial
liabilities within the scope of IAS 39 are initially measured at fair value.



After
initial recognition, the accounting treatment of financial liabilities is based on their classification as follows:



Financial
liabilities measured at amortized cost:



Loans
and other liabilities are measured at amortized cost using the effective interest method taking into account directly attributable
transaction costs.



Financial
liabilities at fair value through profit or loss:



Financial
liabilities at fair value through profit or loss include financial liabilities classified as held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss.



| | 3. | De-recognition
                                         of financial instruments:
| | -- | ---------------------------------------------------------------------------------



| | a) | Financial
                                         assets:
| | -- | ----------------------------------------------------------



A
financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Company has
transferred its contractual rights to receive cash flows from the financial asset or assumes an obligation to pay the cash flows
in full without material delay to a third party and has transferred substantially all the risks and rewards of the asset, or has
neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.





F-12








BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data







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







| | b) | Financial
                                         liabilities:
| | -- | ---------------------------------------------------------------



A
financial liability is derecognized when it is extinguished, that is when the obligation is discharged or cancelled or expires.
A financial liability is extinguished when the debtor (the Company) discharges the liability by paying in cash, other financial
assets, goods or services; or is legally released from the liability.



| | 4. | Issue
                                         of a unit of securities:
| | -- | -----------------------------------------------------------------------



The
issue of a unit of securities involves the allocation of the proceeds received (before issuance expenses) to the components of
the securities issued in the unit based on the following order: financial derivatives and other financial instruments measured
at fair value in each period. Then fair value is determined for financial liabilities and compound instruments that are presented
at amortized cost. The proceeds allocated to equity instruments are the residual amount. Issue costs are allocated to each component
pro rata to the amounts determined for each component in the unit.



| | 5. | Impairment
                                         of financial assets:
| | -- | ------------------------------------------------------------------------



The
Company assesses at the end of each reporting period whether there is any objective evidence of impairment of a financial asset
or group of financial assets as follows:



Available-for-sale
financial assets



For
equity instruments classified as available-for-sale financial assets, evidence of impairment includes a significant or prolonged
decline in the fair value of the asset below its cost and evaluation of changes in the technological, economic or legal environment
or in the market in which the issuer of the instrument operates. The determination of a significant or prolonged impairment depends
on the circumstances at each reporting date. In making such a determination, historical volatility in fair value is considered,
as well as a decline in fair value of 20% or more, or a decline in fair value whose duration is six months or more. Where there
is evidence of impairment, the cumulative loss recorded in other comprehensive income is reclassified to profit or loss. In subsequent
periods, any reversal of the impairment loss is recognized in other comprehensive income.



| | k. | Provisions:
| | -- | -----------



A
provision in accordance with IAS 37 is recognized when the Company has a present obligation (legal or constructive) as a result
of a past event, it is expected to require the use of economic resources to settle the obligation and a reliable estimate can
be made of it.





F-13








BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data



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







| | l. | Operating
                                         leases:
| | -- | ----------------------------------------------------------



Lease
agreements are classified as an operating lease if they do not transfer substantially all the risks and benefits incidental to
ownership of the leased asset. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis
over the lease term.



| | m. | Employee
                                         benefit liabilities:
| | -- | ----------------------------------------------------------------------



The
Group has several employee benefit plans:



| | 1. | Short-term
                                         employee benefits:
| | -- | ----------------------------------------------------------------------



Short-term
employee benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized
as expenses as the services are rendered.



| | 2. | Post-employment
                                         benefits:
| | -- | ------------------------------------------------------------------



Post-employment
benefit plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as
defined benefit plans.



The
Company has defined contribution plans pursuant to Section 14 of the Severance Pay Law into which the Company pays fixed
contributions and has no legal or constructive obligation to pay further contributions on account of severance pay if the fund
does not hold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.



Contributions
to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed concurrently
with performance of the employee's services.



| | n. | Share-based
                                         payment transactions:
| | -- | --------------------------------------------------------------------------



From
time to time, the Company grants to its employees and other service providers remuneration in the form of equity-settled share-based
instruments, such as options to purchase ordinary shares.



Equity-settled
transactions:



The
cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date.
The fair value is determined using an acceptable option pricing model.



With
respect to other service providers, the cost of the transactions is measured at the fair value of the goods or services received
as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equity
instruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.





F-14








BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data



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







The
cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during
the period which the performance or service conditions are to be satisfied, ending on the date on which the relevant employees
become fully entitled to the award (the "Vesting Period").



No
expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition,
which are treated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions
are satisfied.



| | o. | Loss
                                         per share:
| | -- | --------------------------------------------------------



Loss
per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary
shares during the period. Potential Ordinary shares are only included in the computation of diluted loss per share when their
conversion increases loss per share or decreases income per share. Potential Ordinary shares that are converted during the period
are included in diluted loss per share only until the conversion date.





|NOTE
    3:- | SIGNIFICANT
    ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUPMTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
|------------ | -------------------------------------------------------------------------------------------------------------------



The
preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application
of the accounting policies and on the reported amounts of assets, liabilities and expenses.



Discussed
below are the key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and
the critical estimates computed by the Company that may result in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.



| | ● | Determining
                                         the fair value of share based compensation to employees and directors:
| | - | ---------------------------------------------------------------------------------------------------------------------------



The
fair value of share based compensation to employees and directors is determined using acceptable option pricing models.



The
assumptions used in the models include the expected volatility, expected life, expected dividend and risk-free interest rate.



| | ● | Chief
                                         Scientist government grants:
| | - | ---------------------------------------------------------------------------



Government
grants received from the IIA are recognized as a liability if future economic benefits are expected from the research and development
activity that will result in royalty-bearing sales. There is uncertainty regarding the estimated future economic benefits.





F-15






BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data



|NOTE
    3:- | SIGNIFICANT
    ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (Cont.)
|------------ | ---------------------------------------------------------------------------------------------------------------------------





| | ● | Impairment
                                         of available-for-sale financial assets:
| | - | -------------------------------------------------------------------------------------------



The
Company assesses at each reporting date whether there is objective evidence that the asset has been impaired and an impairment
loss has been incurred. In evaluating impairment, the Company makes judgments as to indicators of objective evidence relating
to the extent of the percentage of decline in fair value and of the duration of the period of the decline in fair value.





|NOTE
    4:- | DISCLOSURE
    OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION
|------------ | ---------------------------------------------------------------------



| | a. | IFRS 9-Financial
                                         Instruments:
| | -- | ----------------------------------------------------------------------



In
July 2014, the IASB issued the final and complete version of IFRS 9, “Financial Instruments” (“IFRS 9”),
which replaces IAS 39, “Financial Instruments: Recognition and Measurement”. IFRS 9 mainly focuses on the classification
and measurement of financial assets and it applies to all assets in the scope of IAS 39.



IFRS
9 also includes a new model for measurement of impairment of financial assets.



According
to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value
option has not been elected.



IFRS
9 is to be applied for annual periods beginning on January 1, 2018. Early adoption is permitted.



The
Company believes that the adoption of IFRS 9 is not expected to have a material impact on the financial statements.



| | b. | IFRS
                                         16, “Leases”:
| | -- | -----------------------------------------------------------



In
January 2016, the IASB issued IFRS 16, “Leases” (“the new Standard”). According to then new Standard, a
lease is a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration.



According
to the new Standard:



| | ● | Lessees
                                         are required to recognize an asset and a corresponding liability in the statement of
                                         financial position in respect of all leases (except in certain cases) similar to the
                                         accounting treatment of finance leases according to the existing IAS 17, “Leases”.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
new Standard is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted provided
that IFRS 15, “Revenue from Contracts with Customers”, is applied concurrently.



For
leases existing at the date of transition, the new Standard permits lessees to use either a full retrospective approach, or a
modified retrospective approach, with certain transition relief whereby restatement of comparative data is not required.



The
Company is evaluating the possible effects of the new Standard. At this stage, the Company is unable to quantify the impact on
the financial statements.





F-16






BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data



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







Cash
and cash equivalents:



| |                       |  |                  |        |  |                  |  |        | Convenience               | 
| | --------------------- |  | ---------------- | ------ |  | ---------------- |  | ------ | ------------------------- | 
| |                       |  |                  |        |  |                  |  |        | Translation
    (Note 2c) | 
| |                       |  | December
    31, |        |  | December 31,     | 
| |                       |  | 2015             |        |  | 2016             |  |        | 2016                      | 
| |                       |  | N
    I S        |        |  | U.S.
    dollars | 
| |                       |  |                  |        |  |                  |  |        |                           | 
| | Cash
    in NIS       |  |                  | 2,093  |  |                  |  | 4,001  |                           | 
| | Cash
    in USD       |  |                  | 20     |  |                  |  | 10,645 |                           | 
| | Cash
    in EURO      |  |                  | 1,506  |  |                  |  | 1,059  |                           | 
| | Bank
    deposits (*) |  |                  | 29,851 |  |                  |  | -      |                           | 
| |                       |  |                  |        |  |                  |  |        |                           | 
| |                       |  |                  | 33,470 |  |                  |  | 15,705 |                           | 





| | *) | Bank
                                         deposits bore an average interest of 0.33% as of December 31, 2015.
| | -- | -----------------------------------------------------------------------------------------------------------------





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







Short-term
deposits bore an interest between 0.24%-0.33% as of December 31, 2016 and will withdraw until June 2017.



F-17








BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data



|NOTE
    7:- | OTHER
    RECEIVABLES
|------------ | ---------------------







| |                                |  |                  |       |  |                  |  |     | Convenience               | 
| | ------------------------------ |  | ---------------- | ----- |  | ---------------- |  | --- | ------------------------- | 
| |                                |  |                  |       |  |                  |  |     | Translation
    (Note 2c) | 
| |                                |  | December
    31, |       |  | December
    31, | 
| |                                |  | 2015             |       |  | 2016             |  |     | 2016                      | 
| |                                |  | N
    I S        |       |  | U.S.
    dollars | 
| |                                |  |                  |      
| |                                |  |                  |       |  |                  |  |     |                           | 
| | Grants
    receivable          |  |                  | 1,241 |  |                  |  | 623 |                           | 
| | Government
    authorities     |  |                  | 162   |  |                  |  | 141 |                           | 
| | Prepaid
    expenses and other |  |                  | 39    |  |                  |  | 51  |                           | 
| |                                |  |                  |       |  |                  |  |     |                           | 
| |                                |  |                  | 1,442 |  |                  |  | 815 |                           | 









|NOTE 8:- | PROPERTY,
    PLANT AND EQUIPMENT, NET
|-------- | --------------------------------------







Balance
as of December 31, 2016:



| |                                                                                                                                                                                  |  | Laboratory
    equipment |       |  | Office
    furniture and equipment |  |     | Computers |  |  | Leasehold Improvements |  |  | Total |      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----- |  | ---------------------------------- |  | --- | --------- |  |  | ---------------------- |  |  | ----- | -----
| | Cost                                                                                                                                                                             |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Balance
    as of January 1, 2016                                                                                                                                                |  |                          | 3,410 |  |                                    |  | 293 |           |  |  | 299                    |  |  |       | 2,652
| | Additions                                                                                                                                                                        |  |                          | 1     |  |                                    |  | -   |           |  |  | 19                     |  |  |       | -    
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Balance
    as of December 31, 2016                                                                                                                                              |  |                          | 3,411 |  |                                    |  | 293 |           |  |  | 318                    |  |  |       | 2,652
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Accumulated
    Depreciation                                                                                                                                                     |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Balance
    as of January 1, 2016                                                                                                                                                |  |                          | 2,751 |  |                                    |  | 142 |           |  |  | 270                    |  |  |       | 1,447
| | Additions                                                                                                                                                                        |  |                          | 365   |  |                                    |  | 18  |           |  |  | 17                     |  |  |       | 221  
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Balance
    as of December 31, 2016                                                                                                                                              |  |                          | 3,116 |  |                                    |  | 160 |           |  |  | 287                    |  |  |       | 1,668
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Depreciated
    cost as of December 31, 2016                                                                                                                                     |  |                          | 295   |  |                                    |  | 133 |           |  |  | 31                     |  |  |       | 984  
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Depreciated
                                         cost as of December 31, 2016 (convenience
                                         translation into U.S. dollars) (Note 2c) |  |                          | 76    |  |                                    |  | 35  |           |  |  | 8                      |  |  |       | 256  





F-18








BIONDVAX
PHARMACEUTICALS LTD.



NOTES
TO FINANCIAL STATEMENTS






In
thousands, except per share data



|NOTE 8:- | PROPERTY,
    PLANT AND EQUIPMENT, NET (cont.)
|-------- | ----------------------------------------------





Balance
as of December 31, 2015:



| |                                                                                                                                                                                  |  | Laboratory
    equipment |       |  | Office
    furniture and equipment |  |     | Computers |  |  | Leasehold Improvements |  |  | Total |      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----- |  | ---------------------------------- |  | --- | --------- |  |  | ---------------------- |  |  | ----- | -----
| | Cost                                                                                                                                                                             |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Balance
    as of January 1, 2015                                                                                                                                                |  |                          | 3,410 |  |                                    |  | 293 |           |  |  | 265                    |  |  |       | 2,652
| | Additions                                                                                                                                                                        |  |                          | -     |  |                                    |  | -   |           |  |  | 34                     |  |  |       | -    
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Balance
    as of December 31, 2015                                                                                                                                              |  |                          | 3,410 |  |                                    |  | 293 |           |  |  | 299                    |  |  |       | 2,652
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Accumulated
    Depreciation                                                                                                                                                     |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Balance
    as of January 1, 2015                                                                                                                                                |  |                          | 2,373 |  |                                    |  | 125 |           |  |  | 260                    |  |  |       | 1,224
| | Additions                                                                                                                                                                        |  |                          | 378   |  |                                    |  | 17  |           |  |  | 10                     |  |  |       | 223  
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Balance
    as of December 31, 2015                                                                                                                                              |  |                          | 2,751 |  |                                    |  | 142 |           |  |  | 270                    |  |  |       | 1,447
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Depreciated
    cost as of December 31, 2015                                                                                                                                     |  |                          | 659   |  |                                    |  | 151 |           |  |  | 29                     |  |  |       | 1,205
| |                                                                                                                                                                                  |  |                          |       |  |                                    |  |     |           |  |  |                        |  |  |       |      
| | Depreciated
                                         cost as of December 31, 2015 (convenience
                                         translation into U.S. dollars) (Note 2c) |  |                          | 169   |  |                                    |  | 39  |           |  |  | 7                      |  |  |       | 309  









|NOTE 9:- | OTHER
    LONG TERM ASSETS
|-------- | --------------------------





|                     |  |                  |     |  |                  |  |     | Convenience               | 
|-------------------- |  | ---------------- | --- |  | ---------------- |  | --- | ------------------------- | 
|                     |  |                  |     |  |                  |  |     | Translation
    (Note 2c) | 
|                     |  | December
    31, |     |  | December
    31, | 
|                     |  | 2015             |     |  | 2016             |  |     | 2016                      | 
|                     |  | N
    I S        |     |  | U.S.
    dollars | 
|                     |  |                  |     |  |                  |  |     |                           | 
|Restricted
    cash  |  |                  | 270 |  |                  |  | 461 |                           | 
|Leasing
    deposits |  |                  | 17  |  |                  |  | 17  |                           | 
|                     |  |                  |     |  |                  |  |     |                           | 
|                     |  |                  | 287 |  |                  |  | 478 |                           | 





F-19






BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data





|NOTE 10:- | OTHER PAYABLES
|--------- | --------------



|                                   |  |                  |     |  |                  |  |     | Convenience               | 
|---------------------------------- |  | ---------------- | --- |  | ---------------- |  | --- | ------------------------- | 
|                                   |  |                  |     |  |                  |  |     | Translation
    (Note 2c) | 
|                                   |  | December
    31, |     |  | December
    31, | 
|                                   |  | 2015             |     |  | 2016             |  |     | 2016                      | 
|                                   |  | N
    I S        |     |  | U.S.
    dollars | 
|                                   |  |                  |     |  |                  |  |     |                           | 
|Employees
    and payroll accruals |  |                  | 679 |  |                  |  | 657 |                           | 
|Accrued
    expenses               |  |                  | 89  |  |                  |  | 32  |                           | 
|                                   |  |                  |     |  |                  |  |     |                           | 
|                                   |  |                  | 768 |  |                  |  | 689 |                           | 



|NOTE 11:- | FINANCIAL INSTRUMENTS
|--------- | ---------------------



| | a. | Classification
                                         of financial assets and liabilities measured at fair value:
| | -- | -------------------------------------------------------------------------------------------------------------------



| |                                                            |  |                  |       |  |                  |  |       | Convenience               | 
| | ---------------------------------------------------------- |  | ---------------- | ----- |  | ---------------- |  | ----- | ------------------------- | 
| |                                                            |  |                  |       |  |                  |  |       | Translation
    (Note 2c) | 
| |                                                            |  | December
    31, |       |  | December
    31, | 
| |                                                            |  | 2015             |       |  | 2016             |  |       | 2016                      | 
| |                                                            |  | N
    I S        |       |  | U.S.
    dollars | 
| |                                                            |  |                  |      
| | Financial
    assets:                                      |  |                  |       |  |                  |  |       |                           | 
| | Financial
    assets at fair value through profit or loss: |  |                  |       |  |                  |  |       |                           | 
| | Government
    bonds                                       |  |                  | 2,016 |  |                  |  | 2,017 |                           | 
| | Available-for-sale
    financial assets:                   |  |                  |       |  |                  |  |       |                           | 
| | Government
    bonds                                       |  |                  | 2,048 |  |                  |  | 2,050 |                           | 
| |                                                            |  |                  |       |  |                  |  |       |                           | 
| |                                                            |  |                  | 4,064 |  |                  |  | 4,067 |                           | 



| |                           |  |                  |       |  |                  |  |       | Convenience               | 
| | ------------------------- |  | ---------------- | ----- |  | ---------------- |  | ----- | ------------------------- | 
| |                           |  |                  |       |  |                  |  |       | Translation
    (Note 2c) | 
| |                           |  | December
    31, |       |  | December
    31, | 
| |                           |  | 2015             |       |  | 2016             |  |       | 2015                      | 
| |                           |  | N
    I S        |       |  | U.S.
    dollars | 
| |                           |  |                  |      
| | Financial
    liabilities |  |                  |       |  |                  |  |       |                           | 
| |                           |  |                  |       |  |                  |  |       |                           | 
| | Warrants                  |  |                  | 5,994 |  |                  |  | 3,043 |                           | 
| |                           |  |                  |       |  |                  |  |       |                           | 
| |                           |  |                  | 5,994 |  |                  |  | 3,043 |                           | 



F-20








BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 11:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------



| | b. | Financial
                                         risk factors:
| | -- | ----------------------------------------------------------------



The
Company's activities expose it to various market risks (foreign currency risk, Israeli CPI risk and interest rate risk) and credit
risk. The Company's comprehensive risk management plan focuses on activities that reduce to a minimum any possible adverse effects
on the Company's financial performance.



Risk
management is performed by the Company's Board. The Board identifies, measures and manages financial risks in collaboration with
the Company's operating units. The Board establishes documented objectives for the overall risk management activities as well
as specific policies with respect to certain exposures to risks such as exchange rate risk, interest rate risk, credit risk, the
use of non-derivative financial instruments and the investments of excess liquid positions.



Foreign
currency risk



The
Company has cash that is exposed to possible fluctuations in the U.S. dollar and Euro exchange rates. The currency exposure arising
from current accounts and deposits is partly managed in dollars and in Euro. As of December 31, 2016, the carrying amounts
of USD and EURO were NIS 10,645 and NIS 1,059, respectively.



Credit
risk



The
Company has no significant concentrations of credit risk. All deposits are invested in financial institutions that are considred
to be financially sound.



Price
risk



The
Company has investments in financial instruments that are traded on a securities exchange (governmental debentures for up to three
years) and that are classified as available-for-sale financial assets and financial assets at fair value through profit or loss
in respect of which the Company is exposed to risk of fluctuations in the security price that is determined by reference to the
quoted market price. As of December 31, 2016, the carrying amount of these investments was NIS 4,067 ($ 1,058) (December 31,
2015 - NIS 4,064).



F-21








BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 11:- | FINANCIAL INSTRUMENTS (Cont.)
|--------- | -----------------------------





| | c. | Fair
                                         value:
| | -- | ----------------------------------------------------



Regarding
the fair value of marketable securities and liability for warrants (see Note 11 (a) above). The carrying amount of cash and cash
equivalents, other receivable, other assets, trade payables and other payable approximates their fair value due to the short-term
maturities of such instruments.



| | d. | Fair
                                         value measurement:
| | -- | ----------------------------------------------------------------



Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market
participantswould use when pricing the asset or liability, assuming
that market participants act in their economic best interest.



The
Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure
fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.



All
assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the following
fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole:



| | Level
    1 | - | quoted
    prices (unadjusted) in active markets for identical assets or liabilities                                                            
| | ----------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |             |   |                                                                                                                                                 
| | Level
    2 | - | inputs
    other than quoted prices included within level 1 that are observable either directly or indirectly                                   
| |             |   |                                                                                                                                                 
| | Level
    3 | - | inputs
    that are not based on observable market data (valuation techniques which use inputs that are not based on observable market
    data)



As
of December 31, 2016, all assets and liabilities measured at fair value are classified as Level 1.



During
2016 there were no transfers in respect of fair value measurement of any financial instrument between Level 1 and Level 2, and
there were no transfers into or out of Level 3 fair value measurements of any financial instrument.



|NOTE 12:- | EMPLOYEE BENEFIT LIABILITIES
|--------- | ----------------------------



| | a. | Post-employment
                                         benefits:
| | -- | ------------------------------------------------------------------



According
to the labor laws and Severance Pay Law in Israel, the Company is required to pay compensation to an employee upon dismissal or
retirement or to make current contributions in defined contribution plans pursuant to section 14 to the Severance Pay Law, as
specified below. The Company's liability is accounted for as a post-employment benefit. The computation of the Company's employee
benefit liability is made according to the current employment contract based on the employee's salary and employment term which
establish the entitlement to receive the compensation.



F-22






BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data





|NOTE 12:- | EMPLOYEE BENEFIT LIABILITIES (Cont.)
|--------- | ------------------------------------



The
post-employment employee benefits are normally financed by contributions classified as defined benefit plan or as defined contribution
plan, as detailed below.



| | b. | Defined
                                         contribution plans:
| | -- | --------------------------------------------------------------------



Section
14 to the Severance Pay Law, 1963 applies to part of the compensation payments, pursuant to which the fixed contributions paid
by the Group into pension funds and/or policies of insurance companies release the Group from any additional liability to employees
for whom said contributions were made. These contributions and contributions for benefits represent defined contribution plans.



| |                                        |  |                                                                                                           |     |  |                                                                                                           |  |     |      |  |  | Convenience
                                         translation (Note
                                         2c) | 
| | -------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | --- |  | --------------------------------------------------------------------------------------------------------- |  | --- | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | 
| |                                        |  | Year
                                         ended December
                                         31, |     |  | Year
                                         ended December
                                         31, | 
| |                                        |  | 2014                                                                                                      |     |  | 2015                                                                                                      |  |     | 2016 |  |  | 2016                                                                                                                | 
| |                                        |  | N
    I S                                                                                                 |     |  | U.S.
    dollars                                                                                          | 
| |                                        |  |                                                                                                           |     |  |                                                                                                           |  |     |      |  |  |                                                                                                                     | 
| | Expenses-defined
    contribution plan |  |                                                                                                           | 177 |  |                                                                                                           |  | 198 |      |  |  | 204                                                                                                                 | 



|NOTE 13:- | CONTINGENT LIABILITIES AND COMMITMENTS
|--------- | --------------------------------------



| | a. | On
                                         July 31, 2003, the Company signed a license agreement with Yeda Research and
| | -- | ------------------------------------------------------------------------------------------------------------------------



Development
Company Ltd. ("Yeda") according to which the Company acquired an exclusive worldwide license for the development, manufacturing,
use, marketing, sale, distribution and importing of products based, directly or indirectly, on patents and patent applications
to be approved or submitted pursuant to the invention titled “Peptide Based Vaccine for Influenza”, developed on the
basis of the research conducted by Professor Ruth Arnon and her team at the Weizmann Institute. This agreement was amended in
2005. In exchange for the license grant, the Company or its future sublicensees will be obligated to pay royalties equaling 3%
of the total amount invoiced by the Company or by a sublicensee in connection with the sale of products based on Yeda’s
patents, or 2% of such amounts if they originated from a country which did not grant a patent in connection with such products.
All sales of products in connection with the license agreement for any purpose other than for the purpose of clinical trials are
required to be made for monetary consideration.



The
Company has the option to enter into a sublicense agreement provided that Yeda gives its consent in writing and, in such case,
the royalties to be paid by the Company to Yeda from the sublicense or from the option to sublicense will be (a) before the completion
ofPhase 1 clinical trials - 45% (b) after Phase 1 but before
Phase 2 trials - 35% of amounts up to the first $ 20,000 receivable from a sublicense or a sublicense option, or 25% of amounts
exceeding such first $ 20,000 receivable from the sublicense or from a sublicense option; (c)
after the completion of Phase 2 clinical trials the royalties will be 20% of amounts up to the first $ 20,000 receivable
from a sublicense or a sublicense option or 15% of amounts exceeding such first $ 20,000 receivable from a sublicense or
a sublicense option.



F-23














BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 13:- | CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
|--------- | ----------------------------------------------





This
agreement terminates at the latest of (i) the expiration of the last patent licensed under the license agreement; or (ii) if only
one product is developed or is commercialized by utilizing the licensed intellectual property, 15 years after of first commercial
sale of such product in either the U.S or Europe, following receipt of New Drug Approval from the FDA or equivalent approval in
any European country for such product; or (iii)if more than one product is being developed or is commercialized by utilizing the
licensed intellectual property, following the receipt of New Drug Approval from the FDA or equivalent approval in any European
country for such product, the expiry of a 20 year period during which no sales are made in the U.S. or Europe.



Yeda
shall be entitled, at its option and without the Company's consent, to modify the license so that it is non-exclusive or to terminate
the license with 30 days prior written notice to the Company, if any of the following occurs:



| | (1) | the
                                         Company fails to commence the commercial sale of at least one product based on the licenses
                                         intellectual property, in at least one country, within six months following receipt of
                                         after receipt of an FDA or similar foreign regulatory approval for commercial marketing
                                         of such product and taking into account the seasonal nature of the products (except as
                                         a result of force majeure or other factors beyond the Company's control); or
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | the
                                         Company fails to sell any product based on the licenses intellectual property, during
                                         a period of one year after commercial sale of a product has commenced, during which no
                                         sales of the product take place (except as a result of force majeure or other factors
                                         beyond the Company's control).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
addition, Yeda is permitted to terminate the license agreement by written notice:



| | (a) | in
                                         the event the Company materially breaches any of its obligations under the license agreement,
                                         provided that such material breach is un-curable or, if curable, is not cured by the
                                         Company within thirty days (or in the case of failure by the Company to make payments
                                         due to Yeda in connection with the license agreement, ten days) from receipt of notice
                                         of such breach; or
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| | (b) | in
                                         the event of the appointment of a temporary or permanent liquidator to the Company or
                                         a resolution is passed to voluntary wind up the Company, or if an order or act is granted
                                         for the winding up of the Company, provided that if such order or act was initiated by
                                         any third party, such order or act is not cancelled within 120 days; or
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| | (c) | if
                                         the Company contests the validity of one of the patents registered by Yeda.
| | --- | -----------------------------------------------------------------------------------------------------------------------



F-24














BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 13:- | CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
|--------- | ----------------------------------------------





In
the event that Yeda terminates the license agreement due to any reason other than termination in accordance with (1), (2) or (a)
through (c) in the preceding two paragraphs above, the Company will be entitled to receive royalty payments equal to 25% of net
proceeds received by Yeda from the grant to third parties, within the five years following the termination of the license agreement,
of a license or other rights, which include the Company's developments, up to the aggregate amount of research funds actually
expended by the Company for development.



| | b. | The
                                         Company obtained grants from the Government of Israel for the participation in research
                                         and development and, in return, undertook to pay royalties amounting to 3%-5% on the
                                         revenues derived from sales of products or services developed in whole or in part using
                                         these grants. The maximum aggregate royalties paid generally cannot exceed 100% of the
                                         grants received by the Company, plus annual interest generally equal to the 12-monthLIBOR applicable to dollar
                                         deposits, as published on the first business day of each calendar year. The maximum royalty
                                         amount payable by the Company as of December 31, 2016 is approximately
                                         $ 5,374 (NIS 20,663), which represents the total gross amount of grants actually
                                         received by the Company from the IIA including accrued interest. As of December 31,m
                                         2016, the Company had not paid any royalties to the IIA.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | In
                                         October 2013, the Company signed an agreement for obtaining funding in an amount of €
                                         536 ($ 583) out of a total grant of approximately € 6,000 ($ 6,530) from the European
                                         Union which was approved for the UNISEC consortium of which the Company is a member for
                                         a period of three years. In October 2013, the Company received an advance of € 206
                                         ($ 224) and in October 2015 received € 247 ($ 269). The Company's expenses in respect
                                         of this project in 2013-2016 totaled € 1,028 ($ 1,079) which supported by the less
                                         then 75% or € 771 ($ 811). The outstanding amount € 79 ($ 84) was recorded
                                         as grants receivables. The grant is non-refundable providing the Company meets the conditions
                                         of the consortium and are recorded as a reduction of research and development expenses.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | Commitments:
| | -- | ------------



Operating
leases:



| | 1. | The
                                         Company entered into operating lease agreements on commercial vehicles which end in May
                                         2018. The leases have an average life of three years with no renewal option included
                                         in the contract.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                             
| |    | Future
                                         minimum monthly lease payable under the operating lease contracts as of December 31,
                                         2016 amount to NIS 7 ($ 2).                                                                                                                   



| | 2. | In
                                         January 2012, the Company entered into a lease agreement on its offices for a period
                                         of three years starting February 1, 2012. During 2012, the Company leased another area
                                         under the same terms. The total monthly payment for this rental is NIS 26 ($ 7). In January
                                         2015, the Company extended the lease agreement for an additional two years under the
                                         same terms, starting February 2015.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-25


















BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 13:- | CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
|--------- | ----------------------------------------------





In
January 2017, the Company extended the lease for an additional three years under the same terms starting February 2017. The Company
provided a bank guarantee of NIS 266 ($ 68) to secure its lease obligation. Bank deposits in the amount of NIS 270 ($
69) were pledged to secure the guarantee (see Note 9).



Future
minimum lease commitments under non-cancellable operating lease agreements as of December 31, 2016 are as follows (NIS):



| | 2017 |  |  |  | 26 | 
| | ---- |  |  |  | -- | 



| | 3. | On
                                         March 2, 2015, the Company unilaterally announced a cancellation of a consultant agreement
                                         with one of the Company's consultants (see Note 15c). The cancellation notice provided
                                         that all options, rights and benefits previously granted to the consultant pursuant to
                                         the Consulting Services Agreement are invalid. On September 9, 2015, the consultant brought
                                         a suit against the Company in the Israeli magistrate court in Tel Aviv, claiming that
                                         the Company wrongfully terminated the Consulting Services Agreement and requesting monetary
                                         compensation in the amount of approximately NIS 1.5 million (approximately $380,000)
                                         and the reinstatement of the previously cancelled options. On November 11, 2015, the
                                         Company filed defense with the court wherein contented that the Consulting Services Agreement
                                         was lawfully cancelled and that the consultant’s suit has no legal basis.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
parties submitted affidavits and legal expert opinions to the court. An additional pre-trial meeting was held on February 13,
2017. The parties await the court's decision on the appointment of an expert to provide legal opinion on the case, and an additional
hearing was scheduled for September 25, 2017.



Based
on advice from its external legal counsels, the Company believes that it has substansive defenses against the claim. Accordingly,
no provision was recorded in respect of this claim.



|NOTE 14:- | EQUITY
|--------- | ------



| | a. | Rights
                                         attached to shares:
| | -- | -------------------------------------------------------------------



An
ordinary share confers upon its holder(s) a right to vote at the general meeting, a right to participate in distribution of dividends,
and a right to participate in the distribution of surplus assets upon liquidation of the Company.



| | b. | Options
    (series 3):
| | -- | -----------------------



On
November 7, 2012, the Company issued 5,750,000 options (series 3) in consideration of NIS 1,148. The options are exercisable
into 5,750,000 ordinary shares at an exercise price of NIS 0.8 ($ 0.21) per share until December 31, 2012, and NIS 1.8 ($
0.46) per share from January 1, 2013 to November 6, 2016.



F-26






















BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 14:- | EQUITY (Cont.)
|--------- | --------------





During
2012, 100,000 options (series 3) were exercised into 100,000 shares in consideration of NIS 80.



On
November 7, 2016, the Company's options (series 3) expired.



| | c. | Options
                                         (series 4):
| | -- | ------------------------------------------------------------



In
February 2013, the Company issued 5,685,000 ordinary shares and 5,685,000 options (series 4) in consideration of NIS 4,836 ($
1,239), which were split into the option component in a total of NIS 902 ($ 231) and the share premium component in a total
of NIS 3,934 ($ 1,008) based on the fair market value on the TASE following the issuance.



The
options are exercisable until February 27, 2017 at an exercise price of NIS 1.5 ($ 0.38) per share. On February 28, 2017,
the Company's options (series 4) expired.



| | d. | Options
                                         (series 5):
| | -- | ------------------------------------------------------------



In
October 2013, the Company issued 6,302,000 ordinary shares and 6,302,000 options (series 5) in consideration of NIS 4,413 ($ 1,131),
which were split into the option component in a total of NIS 625 ($ 160) and the share premium component in a total of NIS 3,788
($ 971) based on the fair market value on the TASE following the issuance.



The
options are exercisable at an exercise price of NIS 0.9 ($ 0.23) per share until July 31,2014
or NIS 1.5 ($ 0.38) per share from August 1, 2014 through October 29, 2017.



| | e. | On
                                         May 15, 2015, the Company completed a public offering of securities in the United States.
                                         The trading of the Company's securities, ADS, and investor's warrants in the NASDAQ began
                                         as of May 12, 2015. Each ADS represents 40 ordinary shares of the Company.Accordingly,
                                         on May 12, 2015, the Company allocated 76,400,000 ordinary shares of the Company to the
                                         U.S. public. The Company also allocated 2,038,000 tradable warrants in the U.S., which
                                         may be exercised into ADS for a five year period, until May 15, 2020, in return for
                                         an exercise price of 6.25 USD for each warrant. The immediate gross consideration forthe offering amounted to a total of NIS 36,607 (9,382 USD). The offering expenses
                                         amounted to a total of NIS 5,576. In addition, in accordance with the underwriting agreement,
                                         the Company granted the underwriters 95,500 warrants, under the same terms and conditions
                                         for warrants offered to the public. At the time of the offering, the Company recorded
                                         an increase in equity in respect of shares, totaling NIS
                                         26,417 net (after deduction of offering expenses totaling NIS 4,860) and an obligation
                                         for public warrants at the amount of NIS 7,398 thousand(offering expenses for
                                         warrants totaling NIS 1,197 were recorded as financial expenses). The warrants
                                         are presented at their fair value in stock exchange at any time. On June 24, 2015, theCompany issued an additional 110,000 ADS to the underwriters in consideration
                                         of a total gross amount of NIS 2,069 (USD 530). Issuance
                                         expenses amounted to NIS 134.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Company recorded financial income at the amount NIS 554 and 2,951 in 2015 and 2016,respectively,
for revaluation of these warrants.



F-27


























BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data





|NOTE 15:- | SHARE-BASED COMPENSATION
|--------- | ------------------------



| | a. | Expense
                                         recognized in the financial statements:
| | -- | ----------------------------------------------------------------------------------------



The
expense that was recognized for services received from employees, directors and service providers is as follows:



| |                                           |  |                                                                                                           |     |  |                                                                                                           |  |     |      |  |  | Convenience
                                         translation (Note
                                         2c) | 
| | ----------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | --- |  | --------------------------------------------------------------------------------------------------------- |  | --- | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | 
| |                                           |  | Year
                                         ended December
                                         31, |     |  | Year
                                         ended December
                                         31, | 
| |                                           |  | 2014                                                                                                      |     |  | 2015                                                                                                      |  |     | 2016 |  |  | 2016                                                                                                                | 
| |                                           |  | N
    I S                                                                                                 |     |  | U.S.
    dollars                                                                                          | 
| |                                           |  |                                                                                                           |    
| |                                           |  |                                                                                                           |     |  |                                                                                                           |  |     |      |  |  |                                                                                                                     | 
| | Research
    and development              |  |                                                                                                           | 110 |  |                                                                                                           |  | 588 |      |  |  | 903                                                                                                                 | 
| | Marketing,
    general and administrative |  |                                                                                                           | 253 |  |                                                                                                           |  | 157 |      |  |  | 358                                                                                                                 | 
| |                                           |  |                                                                                                           |     |  |                                                                                                           |  |     |      |  |  |                                                                                                                     | 
| | Total
    share-based compensation        |  |                                                                                                           | 363 |  |                                                                                                           |  | 745 |      |  |  | 1,261                                                                                                               | 



| | b. | Share-based
                                         payment plan for employees and directors:
| | -- | ----------------------------------------------------------------------------------------------



Options
granted under the Company's 2005 Israeli Share Option Plan ("Plan") are exercisable in accordance with the terms of
the Plan, within 10 years from the date of grant, against payment of an exercise price. The options generally vest over a
period of three or four years.



Option
grants:



In
February 2014, the Company granted 80,000 options to an external director. The 	options vest over a period of three years at
an exercise price of NIS 0.869 ($ 0.22) per share. The fair value of the options as of the date of grant totaled approximately
NIS 42 ($ 11).



F-28






























BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 15:- | SHARE-BASED COMPENSATION (Cont.)
|--------- | --------------------------------





On
August 10, 2014, an additional director was appointed at the Company’s general meeting. In consideration for his services,
the director will be entitled to receive 1,500,000 options for the Company's shares. The vesting period of the options is three
years and they are exercisable at an exercise price equal to 130% of the average closing rate of the Company's ordinary shares
on the TASE at the end of the 30 trading days that preceded the date of grant of the options. 500,000 of the options will be granted
without any conditions and the other 1,000,000 options will be granted if the director is elected as Chairman of the Board. On
August 24, 2014, 500,000 options were issued at an exercise price of NIS 0.96 ($ 0.25) per share. On January 8, 2015, the
director resigned and all of his options were forfeited.



On
August 24, 2014, the Company also granted 80,000 options to an external director that vest over a period of three years at an
exercise price of NIS 0.96 ($ 0.25) per share. The fair value of the options as of the date of grant totaled approximately
NIS 39 ($ 10).



On
May 28, 2015, the Company's Board of Directors approved an update of the terms and conditions of the Company's CEO, so that the
monthly remuneration will be a total of NIS 80. In addition, it was decided to grant unregistered options to the CEO, in the scope
of 5% of the Company's issued and paid up capital on a fully diluted basis, as of May 28, 2015, with an exercise price of 130%
beyond the average rate of the Company's share price in the 30 days of trading that preceded the Company's Board of Directors'
resolution regarding the said grant. Notwithstanding the above, following a discussion with the Company's shareholders, it was
agreed that Dr. Babecoff shall be granted options at a rate of 2.5% of the Company's issued and paid up capital on a fully diluted
basis. The options are exercisable for ten years and vest over a period of three years from the date of grant. On July 27, 2015,
the Shareholders' meeting approved the grant of options as previously mentioned, and on August 4, 2015, the CEO was grant 5,929,503
options.



The
fair value of each option is approximately NIS 0.28 and the total value of the options granted was NIS 1,671.



On
Februay 2016, the Company granted 350,000 options to 4 external advisors that vest over a period of three years at an exercise
price of NIS 0.746 ($ 0.19) per share. The fair value of the options as of the date of grant totaled approximately NIS 84 ($ 22).



On
March 10, 2016, the Company granted 100,000 options to an external advisor that fully vested at an exercise price of NIS 0.746
($ 0.19) per share. The fair value of the options as of the date of grant totaled approximately NIS 22 ($ 6).



F-29






























BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data





|NOTE 15:- | SHARE-BASED COMPENSATION (Cont.)
|--------- | --------------------------------



In
addition, the Company's Board of Directors approved the granted of 3,780,000 unregistered options to the Company's officers and
employees, which may be exercised into 3,780,000 ordinary shares of NIS 0.0000001 par value each, according to the Company's option
plan. The options are exercisable for ten years and vest over a period of three years from the date of grant. The exercise price
shall be 130% of the average rate of the Company's share price in the 30 days of trading that preceded the Company's Board of
Directors' resolution regarding the grant of options. On July 31, 2015, the Company published an employee scheme regarding the
aforementioned options.



The
fair value of each option is approximately NIS 0.298 and the total value of the options granted was NIS 1,127.



The
following table presents the number of share options, the weighted average exercise prices of share options and changes that were
made in the option plan to employees and directors:



| |                                      |  | 2014                                                       |           |   | 2015                                                                     |  |      | 2016                                                       | 
| | ------------------------------------ |  | ---------------------------------------------------------- | --------- | - | ------------------------------------------------------------------------ |  | ---- | ---------------------------------------------------------- | 
| |                                      |  | Number
                                         of options |           |   | Weighted Average Exercise
                                         price |  |      | Number
                                         of options | 
| |                                      |  |                                                            |           |   |                                                                          |  |      |                                                            | 
| |                                      |  |                                                            |           |   |                                                                          |  |      |                                                            | 
| | Outstanding
    at beginning of year |  |                                                            | 3,448,535 |   |                                                                          |  | 0.56 |                                                            | 
| | Granted                              |  |                                                            | 660,000   |   |                                                                          |  | 0.75 |                                                            | 
| | Exercised                            |  |                                                            | (13,000   | ) |                                                                          |  | 0.45 |                                                            | 
| | Forfeited                            |  |                                                            | (77,000   | ) |                                                                          |  | 0.45 |                                                            | 
| |                                      |  |                                                            |           |   |                                                                          |  |      |                                                            | 
| | Outstanding
    at end of year       |  |                                                            | 4,018,535 |   |                                                                          |  | 0.68 |                                                            | 
| |                                      |  |                                                            |           |   |                                                                          |  |      |                                                            | 
| | Exercisable
    at end of year       |  |                                                            | 2,845,769 |   |                                                                          |  | 0.67 |                                                            | 



The
weighted average remaining contractual life for the share options outstanding as of December 31, 2016 was 7.86 years (as
of December 31, 2015 – 8.80 years).



| | c. | Share-based
                                         payment for service providers:
| | -- | -----------------------------------------------------------------------------------



On
May 29, 2014, the Company's Board approved, according to a consultant agreement with a third party and in consideration for services
in the capital market and finding investors, granting the consultant 1,000,000 options exercisable into 1,000,000 ordinary shares
of the Company for a period of 5 years beginning on the date of the agreement. The vesting period of the options is two years,
500,000 of which are exercisable at an exercise price of NIS 1 ($ 0.26) per share and 500,000 options for an exercise price
of NIS 2.5 ($ 0.64) per share. On March 2, 2015, the Company unilaterally announced the cancellation of the agreement rightfully,
and on March 3, 2015, the Company announced that such options expired (see Note 13(d)(3)).



F-30


































BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data





|NOTE 15:- | SHARE-BASED COMPENSATION (Cont.)
|--------- | --------------------------------



| | d. | The
                                         fair value of the Company's share options granted to employees, directors and service
                                         providers for the years ended December 31, 2014, 2015 and 2016 was estimated using
                                         an acceptable option pricing model using the following assumptions:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| |                                                 |  | December 31, |          
| | ----------------------------------------------- |  | ------------ | ---------
| |                                                 |  | 2014         |          
| |                                                 |  |              |          
| | Dividend
    yield (%)                          |  |              | -        
| | Expected
    volatility of the share prices (%) |  |              | 50-92    
| | Risk-free
    interest rate (%)                 |  |              | 1.36-3.9 
| | Expected
    life of share options (years)      |  |              | 4-10     
| | Share
    price (NIS)                           |  |              | 0.71-0.75



The
expected life of the share options is based on the midpoints between the available exercise dates (the end of the vesting periods)
and the last available exercise date (the contracted expiry date), as adequate historical experience is still not available to
provide a reasonable estimate. The expected volatility of the share prices reflects the assumption that the historical volatility
of the share prices is reasonably indicative of expected future trends.



|NOTE 16:- | SUPPLEMENTARY INFORMATION TO THE STATEMENTS OF COMPREHENSIVE
INCOME
|--------- | -------------------------------------------------------------------



| | a. | Research
                                         and development expenses, net of participations:
| | -- | --------------------------------------------------------------------------------------------------



| |                                           |  |                                                                                                           |       |   |                                                                                                           |  |        |      |  |  | Convenience
                                         translation (Note
                                         2c) |  
| | ----------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | ----- | - | --------------------------------------------------------------------------------------------------------- |  | ------ | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | -
| |                                           |  | Year
                                         ended December
                                         31, |       |   | Year
                                         ended December
                                         31, | 
| |                                           |  | 2014                                                                                                      |       |   | 2015                                                                                                      |  |        | 2016 |  |  | 2016                                                                                                                |  
| |                                           |  | N
    I S                                                                                                 |       |   | U.S.
    dollars                                                                                          | 
| |                                           |  |                                                                                                           |      
| |                                           |  |                                                                                                           |       |   |                                                                                                           |  |        |      |  |  |                                                                                                                     |  
| | Salaries
    and related expenses         |  |                                                                                                           | 3,395 |   |                                                                                                           |  | 3,796  |      |  |  | 3,808                                                                                                               |  
| | Share-based
    payment                   |  |                                                                                                           | 110   |   |                                                                                                           |  | 588    |      |  |  | 903                                                                                                                 |  
| | Patent
    registration fees              |  |                                                                                                           | 393   |   |                                                                                                           |  | 617    |      |  |  | 358                                                                                                                 |  
| | Rentals
    and maintenance of laboratory |  |                                                                                                           | 674   |   |                                                                                                           |  | 607    |      |  |  | 610                                                                                                                 |  
| | Materials
    and subcontractors          |  |                                                                                                           | 1,326 |   |                                                                                                           |  | 4,633  |      |  |  | 3,145                                                                                                               |  
| | Depreciation                              |  |                                                                                                           | 543   |   |                                                                                                           |  | 495    |      |  |  | 573                                                                                                                 |  
| |                                           |  |                                                                                                           |       |   |                                                                                                           |  |        |      |  |  |                                                                                                                     |  
| |                                           |  |                                                                                                           | 6,441 |   |                                                                                                           |  | 10,736 |      |  |  | 9,397                                                                                                               |  
| |                                           |  |                                                                                                           |       |   |                                                                                                           |  |        |      |  |  |                                                                                                                     |  
| | Participation
    by IIA and UNISEC       |  |                                                                                                           | (949  | ) |                                                                                                           |  | (2,830 | )    |  |  | (1,603                                                                                                              | )
| |                                           |  |                                                                                                           |       |   |                                                                                                           |  |        |      |  |  |                                                                                                                     |  
| |                                           |  |                                                                                                           | 5,492 |   |                                                                                                           |  | 7,906  |      |  |  | 7,794                                                                                                               |  



F-31


































BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data





|NOTE 16:- | SUPPLEMENTARY INFORMATION TO THE STATEMENTS OF COMPREHENSIVE
INCOME (Cont.)
|--------- | ---------------------------------------------------------------------------



| | b. | Marketing
                                         ,General and administrative expenses:
| | -- | ----------------------------------------------------------------------------------------
| |    |                                                                                         

| |                                              |  |                                                                                                           |       |  |                                                                                                           |  |       |      |  |  | Convenience
                                         translation (Note
                                         2c) | 
| | -------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | ----- |  | --------------------------------------------------------------------------------------------------------- |  | ----- | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | 
| |                                              |  | Year
                                         ended December
                                         31, |       |  | Year
                                         ended December
                                         31, | 
| |                                              |  | 2014                                                                                                      |       |  | 2015                                                                                                      |  |       | 2016 |  |  | 2016                                                                                                                | 
| |                                              |  | N
    I S                                                                                                 |       |  | U.S.
    dollars                                                                                          | 
| |                                              |  |                                                                                                           |      
| |                                              |  |                                                                                                           |       |  |                                                                                                           |  |       |      |  |  |                                                                                                                     | 
| | Salaries
    and related expenses            |  |                                                                                                           | 379   |  |                                                                                                           |  | 519   |      |  |  | 587                                                                                                                 | 
| | Share-based
    payment                      |  |                                                                                                           | 253   |  |                                                                                                           |  | 157   |      |  |  | 358                                                                                                                 | 
| | Professional
    services                    |  |                                                                                                           | 1,421 |  |                                                                                                           |  | 1,952 |      |  |  | 2,595                                                                                                               | 
| | Rentals,
    office expenses and maintenance |  |                                                                                                           | 238   |  |                                                                                                           |  | 212   |      |  |  | 201                                                                                                                 | 
| | Depreciation                                 |  |                                                                                                           | 134   |  |                                                                                                           |  | 133   |      |  |  | 48                                                                                                                  | 
| | Other                                        |  |                                                                                                           | 225   |  |                                                                                                           |  | 424   |      |  |  | 317                                                                                                                 | 
| |                                              |  |                                                                                                           |       |  |                                                                                                           |  |       |      |  |  |                                                                                                                     | 
| |                                              |  |                                                                                                           | 2,650 |  |                                                                                                           |  | 3,397 |      |  |  | 4,106                                                                                                               | 



| | c. | Financial
                                         income and expense:
| | -- | ----------------------------------------------------------------------



| |                                                   |  |                                                                                                           |     |  |                                                                                                           |  |       |      |  |  | Convenience
                                         translation (Note
                                         2c) | 
| | ------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | --- |  | --------------------------------------------------------------------------------------------------------- |  | ----- | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | 
| |                                                   |  | Year
                                         ended December
                                         31, |     |  | Year
                                         ended December
                                         31, | 
| |                                                   |  | 2014                                                                                                      |     |  | 2015                                                                                                      |  |       | 2016 |  |  | 2016                                                                                                                | 
| |                                                   |  | N
    I S                                                                                                 |     |  | U.S.
    dollars                                                                                          | 
| |                                                   |  |                                                                                                           |    
| | Financial
    income:                             |  |                                                                                                           |     |  |                                                                                                           |  |       |      |  |  |                                                                                                                     | 
| | Interest
    income on deposits                   |  |                                                                                                           | 76  |  |                                                                                                           |  | 11    |      |  |  | 55                                                                                                                  | 
| | Exchange
    differences, net                     |  |                                                                                                           | 314 |  |                                                                                                           |  | 553   |      |  |  | -                                                                                                                   | 
| | Revaluation
    of warrants                       |  |                                                                                                           | -   |  |                                                                                                           |  | 554   |      |  |  | 2,951                                                                                                               | 
| | Revaluation
    of marketable securities          |  |                                                                                                           | 4   |  |                                                                                                           |  | 10    |      |  |  | 13                                                                                                                  | 
| |                                                   |  |                                                                                                           |     |  |                                                                                                           |  |       |      |  |  |                                                                                                                     | 
| |                                                   |  |                                                                                                           | 394 |  |                                                                                                           |  | 1,128 |      |  |  | 3,019                                                                                                               | 
| | Financial
    expenses:                           |  |                                                                                                           |     |  |                                                                                                           |  |       |      |  |  |                                                                                                                     | 
| | Exchange
    differences, net                     |  |                                                                                                           | -   |  |                                                                                                           |  | -     |      |  |  | 276                                                                                                                 | 
| | Bank
    commissions and other financial expenses |  |                                                                                                           | 16  |  |                                                                                                           |  | 24    |      |  |  | 27                                                                                                                  | 
| |                                                   |  |                                                                                                           |     |  |                                                                                                           |  |       |      |  |  |                                                                                                                     | 
| |                                                   |  |                                                                                                           | 16  |  |                                                                                                           |  | 24    |      |  |  | 303                                                                                                                 | 





F-32




















BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE17:- | TAXES ON INCOME
|-------- | ---------------



| | a. | Corporate
                                         tax rates in Israel:
| | -- | -----------------------------------------------------------------------



Taxable
income of the Company is subject to the Israeli corporate tax at the rate as follows: 2014 and 2015- 26.5%. On January 5, 2016,
the Israeli Parliament officially published the Law for the Amendment of the Israeli Tax Ordinance (Amendment 216), that reduces
the standard corporate income tax rate from 26.5% to 25%. Therefore, the applicable corporate tax rates on 2016 was 25%. In December
2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for
the 2017 and 2018 Budget Years), 2016 which futther reduces the corporate income tax rate to 24% (instead of 25%) effective from
January 1, 2017 and to 23% effective from January 1, 2018.



| | b. | Final
                                         tax assessments:
| | -- | ---------------------------------------------------------------



The
Company received final tax assessments through 2012.



| | c. | Net
                                         operating carryforwards losses for tax purposes and other temporary differences:
| | -- | -----------------------------------------------------------------------------------------------------------------------------



as
of December 31, 2016, the Company had carryforwards losses and other temporary differences amounting to approximately NIS 70,700
($ 18,388).



| | d. | Deferred
                                         taxes:
| | -- | --------------------------------------------------------



The
Company did not recognize deferred tax assets for carryforwards losses and other temporary differences because their utilization
in the foreseeable future is not probable.



| | e. | Current
                                         taxes:
| | -- | -------------------------------------------------------



The
Company did not record any current taxes for the years ended December 31, 2014, 2015 and 2016 as it is still incurring losses
on an ongoing basis.



| | f. | Theoretical
                                         tax:
| | -- | ---------------------------------------------------------



The
reconciliation between the tax expense, assuming that all the income and expenses, gains and losses in the statement of income
were taxed at the statutory tax rate and the taxes on income recorded in profit or loss (0%), relates to the creation of carryforward
tax losses and other temporary differences for which deferred tax assets were not recorded.





F-33




















BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 18:- | BALANCES AND TRANSACTIONS WITH RELATED PARTIES
|--------- | ----------------------------------------------



| | a. | Related
                                         parties consist of nine directors (including the CEO, who is also a shareholder) serving
                                         on the Company's board of directors and two key officers.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Transactions
                                         with related parties:
| | -- | ---------------------------------------------------------------------------



| | 1) | In
                                         February 2012, the Company's audit committee and Board approved an amendment and extension
                                         of the agreement with the Company's CEO, dated April 2007. Pursuant to the amendment,
                                         the monthly salary of the Company's CEO will increase by 5% in each of the three years
                                         of the extension of the engagement to NIS 52.5 a month starting January 2012. The
                                         agreement was extended by an additional period through April 1, 2015. In April 2012,
                                         the Company's shareholders approved the agreement at a shareholders’ meeting. On
                                         January 18, 2015, the Company's shareholders extended the agreement under the same terms
                                         for an additional five years.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
addition, if a material agreement is signed between the Company and a third party during the term of the engagement or during
a period of three years after the termination on the Company's part of the engagement between the Company's CEO and the Company,
the Company's CEO will be entitled to receive a bonus amounting to 1.75% of the monetary compensation payable to the Company under
the material agreement.



On
May 28, 2015, the Company's Board of Directors approved an update of the terms and conditions in office of the Company's CEO,
so that the monthly remuneration will be a total of NIS 80, and to grant options at a rate of 2.5% of the Company's issued and
paid up capital on a fully diluted basis (see Note 15b).



| | 2) | In
                                         August 2014, the Company signed an employment agreement with the CFO for a period of
                                         5 years, according to which the CFO shall be entitled to a monthly salary of NIS 10,
                                         and accordingly updated the management agreement to fees at the amount of NIS 2.5 for
                                         a period of five years. In addition, the CFO is entitled to receive a one-time cash payment
                                         of NIS 192.5 for the services provided in connection with the preparation and submission
                                         of the prospectus in the US, and, in the event that the Company should complete a successful
                                         capital raise in the U.S. market, the CFO shall be entitled to receive a one-time payment
                                         of NIS 87.5. Furthermore, from the consummation of the offering, the monthly compensation
                                         under the services agreement will be increased to NIS 15,000. In addition, pursuant to
                                         a separate employment agreement entered into between the Company and the CFO on August
                                         31, 2014, as of such date, the CFO is also employed by the Company in a 60% employment
                                         capacity, for which he is entitled to a monthly salary of NIS 10,000.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | 3) | In
                                         August 2012, the Company approved the grant of future remuneration to four directors
                                         in the Company. The remuneration will be granted provided that a material agreement is
                                         signed between the Company and a third party during the director's term with the Company
                                         that will entitle each of the four directors to receive a bonus of 0.5% of the monetary
                                         compensation that will be paid to the Company in the context of such material agreement.
                                         The bonus is not limited in amount and is not restricted to one material agreement.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







F-34




















BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 18:- | BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



| | 4) | On
                                         April 10, 2016, the Audit Committee and the Board of Directors unanimously resolved to
                                         approve the payment of NIS 200, to be increased by an additional amount of up to NIS
                                         200 as needed, for the benefit of the Company's CEO, for the purpose of placing the bond
                                         required in connection with an investigation conducted by the Israeli Securities Authority
                                         ("ISA"), regarding certain shareholders of the Company (not including among
                                         them the Company's CEO) alleged use of inside information.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | c. | Balances
                                         with related parties:
| | -- | -----------------------------------------------------------------------



| |                                                                            |  | Payables |    
| | -------------------------------------------------------------------------- |  | -------- | ---
| |                                                                            |  |          |    
| | Key
    management personnel:                                              |  |          |    
| |                                                                            |  |          |    
| | December 31,
    2015                                                      |  |          | 279
| | December 31,
    2016                                                      |  |          | 309
| | December
    31,  2016 (convenience translation to U.S. dollars) (Note 2c) |  | $        | 80 





| | d. | Transactions
                                         with related parties:
| | -- | ---------------------------------------------------------------------------



| |                                                              |  | Research
    and development |       |  | Marketing,
    general and administrative |  
| | ------------------------------------------------------------ |  | ---------------------------- | ----- |  | ----------------------------------------- | -
| | Key
    management personnel:                                |  |                              |       |  |                                           |  
| |                                                              |  |                              |       |  |                                           |  
| | 2014                                                         |  |                              | 1,024 |  |                                           |  
| | 2015                                                         |  |                              | 1,539 |  |                                           |  
| | 2016                                                         |  |                              | 1,072 |  |                                           |  
| | 2016
    (convenience translation to U.S. dollars) (Note 2c) |  | $                            | 279   |  |                                           | $



| | e. | Compensation
                                         of key officers:
| | -- | ----------------------------------------------------------------------



The
following amounts disclosed in the table are recognized as an expense during the reporting period related to key officers:





F-35




















BIONDVAX
PHARMACEUTICALS LTD.

NOTES
TO FINANCIAL STATEMENTS

In
thousands, except share and per share data



|NOTE 18:- | BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
|--------- | ------------------------------------------------------



Key
officers employed by the Company:



| |                                  |  |                                                                                                           |       |  |                                                                                                           |  |       |      |  |  | Convenience
                                         translation (Note
                                         2c) | 
| | -------------------------------- |  | --------------------------------------------------------------------------------------------------------- | ----- |  | --------------------------------------------------------------------------------------------------------- |  | ----- | ---- |  |  | ------------------------------------------------------------------------------------------------------------------- | 
| |                                  |  | Year
                                         ended December
                                         31, |       |  | Year
                                         ended December
                                         31, | 
| |                                  |  | 2014                                                                                                      |       |  | 2015                                                                                                      |  |       | 2016 |  |  | 2016                                                                                                                | 
| |                                  |  | N
    I S                                                                                                 |       |  | U.S.
    dollars                                                                                          | 
| |                                  |  |                                                                                                           |      
| | Fees                             |  |                                                                                                           | 265   |  |                                                                                                           |  | 209   |      |  |  | 190                                                                                                                 | 
| | Short-term
    employee benefits |  |                                                                                                           | 1,393 |  |                                                                                                           |  | 1,732 |      |  |  | 1,740                                                                                                               | 
| | Post-employment
    benefits     |  |                                                                                                           | 54    |  |                                                                                                           |  | 64    |      |  |  | 106                                                                                                                 | 
| | Share-based
    compensation     |  |                                                                                                           | 180   |  |                                                                                                           |  | 567   |      |  |  | 934                                                                                                                 | 
| |                                  |  |                                                                                                           |       |  |                                                                                                           |  |       |      |  |  |                                                                                                                     | 
| |                                  |  |                                                                                                           | 1,892 |  |                                                                                                           |  | 2,572 |      |  |  | 2,970                                                                                                               | 
| |                                  |  |                                                                                                           |       |  |                                                                                                           |  |       |      |  |  |                                                                                                                     | 
| | Number
    of key officers       |  |                                                                                                           | 10    |  |                                                                                                           |  | 9     |      |  |  | 11                                                                                                                  | 



|NOTE 19: | SUBSEQUENT EVENTS
|-------- | -----------------



| | a. | On
    February, 2017 the Company issued to a private investor ("the Investor") 33.8 million ordinary shares (equivalent
    to 844,000 NASDAQ listed ADS) in consideration of NIS 10,905 (approximately $ 2,830). Following the transaction the Investor
    will hold 19.21% of all issued and outstanding share capital of the Company.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | In
                                         March 28, 2017 the Company received an approval from the Investment Center of the Ministry
                                         of Economy and Industry of the State of Israel, for a grant representing 20% of NIS 20,000
                                         budget to be utilized towards the construction of a factory for the production of Phase
                                         3 and commercial batches of the Company is product ("the Grant"). The receipt
                                         of the Grant is subject to certain terms and conditions, including those outlined under
                                         the Israeli Encouragement of Capital Investment Law,1959. The terms and conditions include,
                                         inter alia, the following: (a) at least 24% of the investments in the planned manufacturing
                                         facility’s fixed assets will be financed by additional share capital; (b) the Company
                                         will maintain its intellectual property and manufacturing facility in Israel for a period
                                         of at least 10 years.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-36